Ethics and the Law: Is it ethical to charge a non-refundable retainer?

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The answer from the State Bar’s Texas Center for Legal Ethics is a definite “maybe”. There are several Rules of Professional conduct that cover attorney’s fees. From the State Bar’s point of view, the most important one, is that an attorney must return any unearned fee. Rule 1.15(d) of the Texas Rules of Professional Conduct. The problem for the attorney in charging a non-refundable retainer, is that the burden is on the attorney to prove that the fee has been earned.

Some jurisdictions have outlawed the practice of charging non-refundable retainers because it deprives the client of the right to change lawyers without suffering monetary penalties.

If the attorney withdraws from the case or is terminated, the amount of the fee retained must be related to the services performed, and if not, the fee may be found to be unreasonable, in violation of Rule 1.04(a) of the Texas Rules of Professional Conduct.

Criminal Defense attorneys have a particularly difficult time in drafting contracts that will allow them to get paid for the work that they perform.  Experienced attorneys know that it is virtually impossible for an attorney in our field to be paid after the case is completed. Thus, the attorney will want to be paid prior to the end of the representation. We cannot terminate out representation without approval of the court and therefore are at the whim of the judge assigned to the case.   Once we designate as attorney of record, we can be required to complete the criminal case through a jury trial and the 1st appeal of any sentence, even if unpaid by the client, if a judge refuses to approve our motion to withdraw. Rule 1.15(c)Texas Rules of Professional Conduct.

This is probably the hardest concept for most civil lawyers to understand about our profession. If they are unpaid, they can simply notify the client that they will longer do work for them. We do not have that luxury. Most of the attorneys who volunteer to serve on grievance committees come from the civil side and the concept of being paid prior to work being completed, is foreign to them.

Because of the very real possibility of having to complete a case without getting paid for our services, utilizing a contract that includes a non-refundable retainer becomes tantalizing to the criminal defense bar. But there are serious issues that can land the lawyer in trouble with the grievance system.

Opinion 391 sets out the difference between a true retainer and an advance fee. A true retainer belongs to the attorney at the time it is received because it is a fee to secure the lawyer’s services and remunerate him/her for loss of the opportunity to accept other employment. Opinion 431 says that the lawyer must substantiate that other employment will probably be lost by representing the client. Thus the burden is on the lawyer to prove it is a retainer fee. Even then, Opinion 431 goes on to say that if the client discharges the attorney before any opportunities have been lost, or the attorney voluntarily withdraws, then the attorney must refund an equitable portion of the retainer. Opinion 431 specifically says that a fee is not earned simply because it is designated as non-refundable. Cluck v. Commission for Lawyer Discipline, 214 S.W.3d 736 (Tex. App. Austin 2007) came to the same conclusion.

The most recent opinion concerning non-refundable retainers is Opinion 611.  The question presented was whether an attorney could charge a non-refundable retainer that included payment for services up to the time of trial and then charge an additional fee for trial. The answer was a clear “NO”. This type of contract violates the Rules of Professional Conduct.  It is in fact an advance fee. That is, it is a fee for services not yet performed. That means, that the fee has not been earned by the attorney at the time it was received, and because it belongs to the client it must be deposited into a trust account, Rule 1.14(a).

The Ethics committee went on to say that there is no prohibition in the Rules from an attorney requiring a payment of a fixed fee at the beginning of the representation. The advance fee must be separated from the attorney’s and placed in a trust account and only transferred to the operating account when it is earned.

After serving 6 years on the State Bar’s Commission for Lawyer Discipline, and 5 years as the Chair, I do not recommend that criminal defense attorneys use the words non-refundable in their fee agreements. It is simply a red flag for the state bar and not worth the headache of going through the grievance process.

TCDLA
TCDLA
Betty Blackwell
Betty Blackwell
A graduate of the University of Texas Law School, Betty Blackwell has been in private practice in Austin for 30 years, limiting her practice to the defense of criminal cases. Betty has served as the chair of the Criminal Justice Section of the State Bar of Texas and of the Austin Criminal Defense Lawyers Association. She is co-author with Judge Mike McCormick of the West Publishing Texas Practice Series Volumes 7 & 8. In 2000 she was elected the first woman President of the Texas Criminal Defense Lawyers Association in conjunction with its 30-year anniversary. Among her many other honors, Betty served as Chair of the Commission for Lawyer Discipline from 2006 to 2011, the first woman and criminal defense attorney so honored, as well as being its longest-serving chair.

A graduate of the University of Texas Law School, Betty Blackwell has been in private practice in Austin for 30 years, limiting her practice to the defense of criminal cases. Betty has served as the chair of the Criminal Justice Section of the State Bar of Texas and of the Austin Criminal Defense Lawyers Association. She is co-author with Judge Mike McCormick of the West Publishing Texas Practice Series Volumes 7 & 8. In 2000 she was elected the first woman President of the Texas Criminal Defense Lawyers Association in conjunction with its 30-year anniversary. Among her many other honors, Betty served as Chair of the Commission for Lawyer Discipline from 2006 to 2011, the first woman and criminal defense attorney so honored, as well as being its longest-serving chair.

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