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Lack of A Retainer Can Cost Lawyers’ Their Fee

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Next time you find yourself thinking about letting the retainer agreement requirement slide (“I trust the client,” or “There’s no time,” are some excuses that might run through your mind), think again.  Lack of a retainer agreement one can cost you your entire fee.  That’s what happened in the case desribed in this New York Lawyer article,  No Retainer = NY Firm: $0; Client: $205,000 (2/15/05).

According to the article, client Bazerjian filed a pro se claim to the September 11th Victims Compensation Fund.   Disappointed with the amount he received, he subsequently decided to retain attorney Santucci to pursue an appeal.  A week after the initial meeting, Santucci represented Bazerjian at a hearing and recovered $205,000, $140,000 more than Bazerjian initially was given (as an aside to those who wonder whether lawyers actually add value, this is a perfect example that they do).   Subsequently, Santucci sought to collect from his client 25 percent of the increase or roughly $35,000.

When his client would not pay, claiming that he was never given a retainer or told what the case would cost, Santucci sued.  The judge sided with the client, writing that: “Plaintiff’s failure to provide a letter of engagement or a signed retainer was deliberate, and not a result of being ‘impracticable,’…”Clearly, plaintiff has not complied with [the New York Codes, Rules and Regulations].” (Klein, Calderoni & Santucci v. Bazerjian, 22351/04.)  Santucci had argued that the short time between the initial client meeting and the hearing precluded a retainer, but the client stated that he never retained the attorney and “was uncomfortable” with his presence at a hearing.  In the absence of the retainer, the judge denied Santucci any recovery.

Personally, I find this result overly harsh.  I can certainly understand the judge denying a contingency recovery in the absence of a fee agreement.  A contingency arrangement needs to be explained in detail to clients.  And when clients don’t understand all of the risks and alternatives, they may feel cheated down the line – as did this client.   Had Santucci committed the terms of the contingency to writing – that recovery would be based on the difference between what the client had recovered on his own and the appeal, that he would take 25 percent rather than the standard third, etc…the agreement would undoubtedly have been found reasonable.

But at the same time, I wonder what the client was thinking.  Did he really believe that an attorney would show up fully prepared for a hearing such that he could triple the award the client received pro se and not expect anything in return?  I would have liked to see the judge ask the client what he expected to pay.  And if the client claimed that he did not want the attorney at the hearing, I would have asked him why he didn’t say so instead of letting the attorney represent him.  At the very least, I think the client ought to pay an hourly fee because retainer agreement or not, the attorney’s participation in the case did confer a substantial benefit to the client.

The reason that there are retainer agreement requirements is to protect clients from overreaching attorneys.  But attorneys can’t forget – retainers also protect us from overreaching clients.  My gut here (and again, it’s not supported by any facts; I can’t even find the court’s opinion) is that this client was in fact advised of the terms of the contingency and conveniently “forgot them” when he saw how quickly the attorney dispatched his case.  The reason for my speculation?  First, the client had initially filed a pro se claim and thus, may have been more sophisticated than other attorneys.  Also, the language that the client used in his response to the court – “I never actually retained Mr. Santucci or his firm to represent me.”  The term “actually” is a wiggly phrase – why didn’t the client simply deny outright that he never hired the firm?

Sure, there are many bad lawyers who’ll claim clients agreed to terms that they didn’t.  But we shouldn’t forget that there are also bad clients who’ll do the same.  And that reinforces the importance of the retainer:  because in one writing, it guards both groups, lawyers and clients, from the darker sides of each other.

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