A Street Smart Guide to Negotiating a Lawyer’s Retainer Agreement

Image So you’ve done your research and have decided to retain a lawyer.  Now what? As a first step, an attorney should provide you with an agreement so you clearly understand the scope of the services, costs and the terms for payment. In California, a retainer agreement is required when the work to be performed is expected to exceed $1000 whereas, in New York, the amount is $3000. Other states require attorneys to provide a fee agreement regardless of the amount. In any event, it is always a good idea to obtain a “retainer agreement” or “letter of engagement” (both are designed to accomplish the same purpose) and then read the fine print.

A client recently asked me to review a retainer agreement for a matrimonial matter. I made a few edits — as there were terms in there that actually violated the Rules of Professional Conduct — and I told her to forward my comments to her attorney.

Attorney to Client: I am unwilling to make the changes you have suggested; some don’t make sense and some are simply not acceptable. I will return your deposit less the time I spent reviewing all of the pleadings and drafting the initial documents.

Client to Me: I should have spoken to you BEFORE I dropped off the deposit without a signed agreement — I guess I learned an expensive lesson.”

Me to Client: Without a retainer agreement and an understanding of her terms of representation, she should not have started work on your case and she knows it. Let her know you expect a full refund otherwise, if not, I will contact her directly.

Client to Me: Attorney says I can come and pick up my deposit.

This is a good example of why it makes sense to have a legal professional review a retainer agreement.  I’m also wary of any lawyer who gives you their agreement and expects you to sign or hand over a check on the spot.  Here are a few main points I’d like to draw your attention to when reviewing these type of agreements:

1) Billing Increments. Rules of Professional Conduct provide that a lawyer who “has not regularly represented the client” shall give written advice of the “basis or rate” the client will be charged. It is most reasonable to bill in increments of 6 minutes (1/10th of an hour, rounded up).  However, I have reviewed engagement letters that are as high as 1/4 of an hour, (rounded up that would be 15 min) so, even if your lawyer only spent 4 minutes, say, drafting a quick email, you’d pay for 15 min. To this end, this is an EXTREMELY important point of negotiation. At the same time, it would be advisable to negotiate a project-fee basis (as I do), particularly if the matter is somewhat standard (e.g., corporate set up, trademark or provisional patent filing).

2) Non-refundable Retainers. Believe it or not, some lawyers don’t refund their client’s deposits and if an agreement is vague on this point or states “non-refundable” or “minimum fee”, they are allowed to do this, So, be sure your agreement has a refund provision.

3) Third party costs. One provision I frequently push back on is usually labeled as “Other Expenses and Costs” and requires you to agree to pay them.  To this end, I would request the inclusion of language that requires “(a) those costs to be reasonable and (b) that you are advised in advance of third party costs to determine the reasonableness of such costs.”

4) Record keeping. Many states have no requirements that an attorney maintain for records for a specific period of time.  It is a good idea to have your attorney keep them for at least 2 years – particularly if you don’t back up your computer or prone to losing files.  Otherwise, your attorney is free to destroy your files upon conclusion of her representation.

5) Interest for Late Payments.  A reasonable rate of interest for late payments ranges from 0.5-1.5% per month. I have seen attorneys ask for as much as 10% and find this unconscionable particularly when payment is demanded upon receipt (which you should also try to negotiate to at least 10 days from receipt).

6) Arbitration.  Arbitration clauses should be limited to bill disputes only, and not, “any and all disputes arising out of the attorney/client relationship.” All State Bars have a complaint process to report an attorney’s alleged misconduct/unethical behavior.  While your agreement may not carve out this point, this will not prevent you from filing a complaint where the attorney is licensed.

If a lawyer is not willing to negotiate their retainer agreement and, if requested, give you a ballpark budget for handling a non-litigation legal matter, it’s a good sign that person is not a good fit for you (particularly if cost is an issue, as is the case for most start-ups).

Lastly, when at all possible, try to get a personal recommendation for an attorney rather than finding one on the Internet. I’d also avoid relying on Avvo.com (a privately owned marketer that pulls attorney profiles and posts them on the website with little substance, until an attorney claims their profile). Then, don’t make up your mind about whether to retain someone until you’ve discussed your needs and feel fairly comfortable working with him/her; then read the fine print.

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