Are You Really Taking a “Retainer”?

12/12/2016

Using the Right Terms
By: Claude Ducloux
Board Certified, Civil Trial Law and Civil Appellate Law
Texas Board of Legal Specialization
Director of Education, LawPay

Many, if not most, lawyers take an advanced deposit of money before they start working on a new matter.  Even in my own attorney fee agreement, I use words to the effect that “you will pay a retainer of $______ to be billed against my fees at the rate of $___ per hour.” Thus, these advanced fee retainer payments ALWAYS go into the lawyer’s trust account.  Why?  Because it remains the client’s money until it is earned by me.

And in most states, including Texas and California, that is a correct use of the term “Retainer.”

However, in the world of the big firms, a “retainer” means the same as “entry fee:” it is a sum that a client pays JUST to guarantee that client can walk through the door and the firm will handle their legal business at their agreed upon rates, above and beyond that “entry fee” called retainer.  It’s akin to dues at a private club: just because you paid your dues doesn’t entitle you to free meals or free merchandise.  It just gets you in the door.  Thus, a true retainer paid to get you in the door is a flat-fee, non-refundable to the client, and should NOT be deposited in a trust account.  It’s the FIRM’s money.

feeagreement

Why am I harping on this? Because using the correct definition is important, and may have significance in your home jurisdiction. For example, the state of Florida now stresses that “retainer” should ONLY have the original meaning described above:  it is ONLY a lump sum payment, non-refundable, which is simply a guarantee that the firm will handle your legal business WHEN you need the firm.  It is earned upon payment. The commentary to Florida Bar Rule 5-1.1 specifically instructs:

“Retainers are not funds against which future services are billed. Retainers are funds paid to guarantee the future availability of the lawyer’s legal services and are earned by the lawyer upon receipt. Retainers, being funds of the lawyer, may not be placed in the client’s trust account.”

In my survey of some other states, they often handle this “retainer” conundrum with some flexibility, allowing lawyers to modify that label:  you either pay a “retainer,” which is flat fee, or an “Advance Payment Retainer,” which does go into a lawyer’s trust account. Florida is staunchly advising lawyers that retainer should only be used to describe the flat, prepaid fee to ensure the firm’s availability, and thus does not go into a lawyer’s trust account.

What does that mean for you?

1) Unless you know what your jurisdiction requires, start using the term “attorney fee agreement” instead of “retainer” when discussing how payments are handled, or use “Advance Payment Retainer” to indicate the purpose of the client’s deposit.
2) Here at LawPay, our staff is trained to advise lawyers who may be unsure to check and see if their state or local rules have a specific definition for “retainer.”
3) Further, LawPay has changed the language we’re using in our support center to acknowledge this special definition. (eg. Our standard “Frequently Asked Question” about adding retainer payments has been modified to say “How do I add credit card payments to my attorney fee agreements?”

All of our lawyer merchants are advised to review their local and state rules on how “retainer” is defined. Always try to use the right term in your agreements to avoid confusion and misunderstanding. Remember, when lawyers have a bad contract, they generally lose the battle with the client over what it means.

Do you still need to update your attorney-client paperwork for the digital age? Download our free e-kit, 5 Forms to Modernize Your Attorney-Client Agreements, which contains templates to get you started.

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