NINE HARD DON’TS FOR LAWYER RETAINER AGREEMENTS
Lawyers have reasonable discretion over what terms to include in a Retainer Agreement depending upon the type of case and applicable ethics rules. That said, there are some hard don’ts – i.e., terms that you never want to include or exclude – if you want to avoid a bar complaint or non-payment.
Here’s a quick sampling:
1. Don’t Overpromise to Clients – Avoid representations in your Retainer Agreement like “we employ top grade, unbreachable security” or “your case is exceptionally strong.” These representations create a heightened standard of care that will apply if case goes south and you face a malpractice action.
2. Don’t Exceed a Statutory Fee in Your Retainer Agreement In some jurisdictions, fees are governed by statute. For example, if your state caps contingency fees to 33 percent pre-lawsuit and your fee agreement charges 50 percent, that’s a huge red flag that can expose you to a grievance or result in forfeiting your fee. See e.g., In re Flint Water Cases, (E.D. Mich. Feb. 18, 2021)(dissolving retainer agreement which among other things contains fees in excess of statutory cap).
3. Don’t Prohibit Clients From Filing a Grievance – Any clause in a retainer agreement that overtly prohibits or even disincentivizes clients from grieving an attorney — for example, by charging them $2000 extra if they seek bar mediation of a fee dispute — is a huge don’t. See http://archives.starbulletin.com/2005/02/25/news/story4.html (reporting on disbarred Hawaii attorney whose fee agreement disincentivized clients from seeking fee dispute resolution).
4. Don’t Prohibit Clients From Filing Negative Online Reviews – There’s nothing unethical about requiring clients to agree not to file negative online reviews – but it’s the type of provision that may give clients’ pause. If you’re worried about clients leaving poor reviews, check out a more proactive way to address the concern in the Client Policy Guide in the ClauseIt.
5. Don’t Prohibit Chargebacks in Your Retainer Agreement– Lawyers believe they’re being clever by requiring clients to agree in the Retainer Agreement not to use chargebacks to their credit card. Truth is that federal law entitles consumers to exercise chargeback rights, at least within a defined time frame and parties can’t contract around it. So if you include a no chargeback clause, you’ll come across as a lawyer who doesn’t know the law.
6. Don’t Automate Your Retainer Agreement Without Filling in All the Terms
Automating your retainer agreement is a great idea – unless you forget to proof the document to ensure that you haven’t omitted critical terms. Consider the unfortunate experience of the attorney in Seiden Law Group v. Segal, 2021 Ill App 20877 (2021), whose retainer agreement stated that it would recover a “%” of the ultimate award, but failed to specify the numerical amount of the percentage. The firm successfully recovered client assets from the U.S. government confiscated to settle divorce claims and demanded payment of $98,000 which represented a 15 percent contingency fee. After the client refused to pay, citing an unenforceable agreement due to omission of the contingency amount, the firm sued. The court agreed that the contingency provisions were unenforceable but allowed the firm to proceed on a quantum meruit while emphasizing that the ruling did not mean the firm was necessarily entitled to any recovery. The lesson: automating agreements only work when you fill in all the blanks – particularly those related to fees.
7. Don’t Forget to Disclose Referral Fees in Your Retainer Agreement
Jurisdictions vary on whether referral fees are permitted or not. But most jurisdictions agree that lawyers must disclose to and obtain consent from clients for payment of referral fees – and there are numerous examples of a client voiding a retainer agreement, or a firm refusing to pay a referral fee due to non-disclosure to the client. So if you’re referring a case or you’ve received a referral and want to ensure that your fee agreement is enforceable, be sure your retainer agreement with the client discloses the fee.
8. Don’t Use Legalese Because You Think It Makes You Seem More Lawyerly – Retainer agreements are construed against the drafter, so if clients claim that they didn’t fully understand what they signed, that’s your bad, not theirs. So cleanse the what for’s and hereto’s from your Retainer Agreement, along with all the verbiage pertaining to billing. Compare this agreement that devotes four full pages to discussing every conceivable aspect of fees to this one that’s far less verbose. And run your Retainer Agreement through Readable.com which ranks the understandability of your prose. Bear in mind too that the average American has a reading level of around a 12-14 year old, so be prepared for more edits after you run a test.
9. Don’t Rely on That Bar or Vendor Template for Your Retainer Agreement –This last don’t is a bit meta – but don’t adopt a form Retainer Agreement template from your bar association or created by a vendor without first understanding what not to include. I’ve seen at least one of the don’ts above in a vast majority of the templates I found online.
If you enjoyed these Retainer Agreement DON’Ts, but want to learn more about the DO’s of drafting a Retainer, check out The Legal ClauseIt, a digital product comes with 30+ sample agreements, from client engagements to closing letters, of counsel and independent contractor agreements and more – all backed by a 90 page guide that offers the business rationale and ethical support for different retainer terms. Not sure you’re ready to purchase? Register here for 5 free clauses of the day that you can use right away in your agreements.
This post was originally published April 26, 2021 and updated March 16, 2022.
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