Watch Those Fees

Despite the favorable press, value billing schemes (be they flat fees, fixed fees, minimum fees with change orders) may run into Rule 1.5(b) issues if not properly handled. The thing to remember is that not all forms of lump sum payments can be classified as non-refundable.

Non-refundable retainers (or engagement fees) are “paid, apart from any other compensation to ensure that a lawyer will be available for the client if required” (see: Restatement 3rd, The Law Governing Lawyers, sec. 34, Comment e). According to the Restatement, a fee can be non-refundable if and only if the attorney is to be additionally compensated for the actual work performed. The typical engagement fee should be designed to cover the reasonable costs needed to set up a client file and prepare for the particular matter. Basically an engagement fee is reasonable if it bears a reasonable relationship to the income sacrificed or expense incurred by the attorney’s accepting the client/client’s matter (e.g. cost of turning away other clients, hiring new associates, keeping up with the relevant law).

However, if the advanced payment is to cover the lawyer’s services to the client, making that payment non-refundable will be contrary to public policy because it will compromise the client’s ability to discharge the attorney and secure other counsel. Remember, the client can discharge an attorney at any time for any reason and the attorney is entitled only to the reasonable value of services performed.

When working with fixed fees, good practice would suggest that (a) the retainer agreement list landmarks and the portion of the fee that will be considered earned at those points in the matter and (b) the fee is deposited into the attorney’s trust account until it is earned.

What’s in a Name

Your firm name is important. It often provides the first impression your clients have of your firm. It is your corporate identity, your nom de guerre, and for some it can be an ethics violation. The ABA Journal is reporting that solos who add “and Associates” to their firm names may be in violation of ethics rules.

After reading the ABA Journal article, I called the Minnesota Lawyers Professional Responsibility Board and confirmed that they agree that were a solo to add “and Associates” to their firm name, they would not be making a truthful representation. This also applies to phrases such as “The Law Offices of …” if there is only one physical office, “and Associates” if there is only one associate, “and Associate” if the person referred to by the word associate is not an attorney (paralegals don’t count).