Sorted by Commenter - Ethics - State of California

RRC – Rule 1.5 [4-200]
E-mails, etc. – Revised (6/1/2010)
examination of leading authority reveals that only "true retainers" are nonrefundable—and
these are very, very rare.
Governing Rule
When a client discharges an attorney, the Rules of Professional Conduct require the
attorney to "[p]romptly refund any part of a fee paid in advance that has not been earned."
The rules also state that a refund is unnecessary if the money is "a true retainer fee ... paid
solely for the purpose of ensuring the availability of the member for the matter." (Rule 3-
700(D)(2).) That is, money advanced by a client but not earned by the lawyer must be
refunded, unless it constitutes a true retainer.
Why is it crucial to understand the difference? Improper retention of client funds can result
in discipline, even disbarment. Moreover, an attorney may face civil liability for breach of
fiduciary duty, which may be determined as a matter of law based on a breach of the rules
of professional conduct which "help define the duty component of the fiduciary duty which
an attorney owes to his [or her] client." (Stanley v. Richmond, 35 Cal. App. 4th 1070, 1086
(1995).) Avoiding these consequences depends on accurately structuring the attorney-client
relationship.
Retainer Problems
The State Bar addressed the issue of retainers in Arbitration Advisory Opinion 01-02
(calbar.ca. gov/state/calbar/calbar_generic.jsp?cid =11337&id=6493). The opinion states
that "unless the attorney and client have contracted for a 'true retainer' (also known as a
'classic retainer'), the attorney must refund any portion of the advance fee that the attorney
has not yet earned."
The key characteristic of a true retainer is that it is paid solely to secure the availability of
the attorney over a given period of time and is not paid for the performance of any other
services. When a valid true retainer exists, if the attorney's services are eventually needed,
those services are billed and paid for separately, and no part of the retainer is applied to
pay for them. Thus, any fee arrangement in which the attorney bills against the retainer is
not a true retainer.
As explained in Advisory Opinion 01-02, a true retainer may be nonrefundable because it
takes the attorney out of the marketplace and precludes him or her from undertaking other
work. Such an arrangement requires that the attorney be generally available for
consultation and legal services to the client. A true retainer may be a single, up-front
payment to guarantee that the attorney will be available for a specified period of time, or it
may be a recurring payment, where, for example, the client pays a monthly fee solely to
ensure the attorney's availability to represent the client for that month.
Scarcer than Hen's Teeth
Although true retainers once were common, the State Bar does not contemplate many
appropriate situations for them today. In fact, Opinion 01-02 speculates that there are
probably only a handful of situations in which a client would want to pay a true retainer.
Such an arrangement may be appropriate to secure the availability of an attorney whose
reputation could cause a threatened lawsuit to vanish. In addition, a true retainer may be a
reasonable way to ensure that an especially talented attorney is available to handle a
matter; it may also be used to prevent the attorney from representing an adverse party. The
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -126-
Printed: May 26, 2010
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