Sorted by Commenter - Ethics - State of California

RRC – Rule 1.5 [4-200]
E-mails, etc. – Revised (6/1/2010)
opinion goes on to note that "[o]ther than these examples ... true retainers would seem to
be of little use to clients in everyday legal matters."
Cases have also helped to define the true retainer. Consistent with the State Bar opinion,
cases identify two main characteristics of a true retainer: the money is (1) paid to reserve
the availability of a specific attorney and (2) not used to pay hourly fees. Note also that the
language of Rule 3-700 (D)(2) and the cases interpreting it indicate that a true retainer
reserves the time of only a specific attorney at a firm, and not the firm in general.
In one case, the court defined a true retainer, as "a sum of money paid by a client to secure
an attorney's availability over a given period of time. Thus, such a fee is earned by the
attorney when paid since the attorney is entitled to the money regardless of whether he
actually performs any services for the client." (Baranowski v. State Bar, 24 Cal. 3d 153, 164
n. 4 (1979).)
Another court discussed the circumstances under which a law firm may retain client funds,
identifying three types of payment arrangements: (1) the classic/true retainer, (2) the
security retainer, and (3) the advance payment retainer. The court concluded that only a
true retainer is earned upon receipt by the attorney; all other retainers must be placed in a
client trust account and refunded to the client if unearned. (See T & R Foods v. Rose, 47
Cal. App. 4th Supp. 1, 7 (1996).)
Securing Availability
In T & R Foods, the court identified a true retainer as the payment of a sum of money to
secure availability over a period of time, finding that the attorney is entitled to the fee
whether or not services are ever rendered (T & R Foods, 47 Cal. App. 4th Supp. at 6).
The court went on to observe that a "security" retainer, in contrast, is a sum of money held
by the attorney to secure payment of fees for future services that the attorney is expected to
render. It is important to note that a security retainer remains property of the client until the
attorney applies it to fees and costs for services actually rendered, and that any portion of
the funds that are not earned must be returned to the client.
An "advance payment" retainer occurs when the client pays in advance for some or all of
the services that the attorney is expected to perform. In such a case, the court said,
"ownership of the funds is intended to pass to the attorney at the time of payment." (47 Cal.
App. 4th Supp. at 7.) However, the court also found the law unsettled as to whether funds
can be retained by the attorney if unearned. Ultimately, the court concluded that there was
an intent expressed in the State Bar rules that funds "retain an ownership identity with the
client until earned." (See T & R Foods, 47 Cal. App. 4th Supp. at 7.)
The fee agreement in the T & R Foods case did not create a true retainer because it stated
that the attorneys would charge their services against the retainer, which was to be
replenished by the client each month to assure that the attorneys were always holding
$25,000 on their books to cover ongoing fees. The court properly found that the $25,000
deposit was in fact "an advance payment retainer." The court required the attorneys to
segregate the funds until they had been earned (T & R Foods, 47 Cal. App. 4th Supp. at 6).
In cases where counsel has not properly structured a true retainer, the State Bar repeatedly
finds that clients are due a refund of unearned fees, even if a payment is denominated as
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -127-
Printed: May 26, 2010
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