The next day, you receive a pleasant letter from your soon-to-be lawyer. He thanks you for your confidence in him, and asks you to sign and return the enclosed retainer agreement. The agreement is a page and a half long. It specifies the lawyer’s present hourly billing rate but notes that his rate “may change from time to time.” It also says that unnamed attorneys or paralegals at unspecified billing rates “may be called upon to perform tasks in this case.” It requires mandatory arbitration of any dispute between you and the firm, and a waiver of your right to a jury trial. It contains no description of the case, no budget, and no recital of your goals, much less an indication of how these goals are to be pursued or obtained. There is language that allows the attorney to withdraw from the case at any time if you fail to make a payment.
Unfortunately, these terse, one-sided agreements are the rule rather than the exception. Lawyers typically have form retainer agreements on their computer systems that serve to maximize a lawyer’s protection in the event of an attorney-client dispute. Conversely, most clients have neither the time nor experience to identify the potential issues that should be addressed in the retainer agreement. The result is the height of irony – attorneys hired to protect a client’s legal rights start off the relationship with a retainer agreement specifically designed to curtail those rights.
This article identifies ten issues clients should consider while negotiating their retainer agreement. Not every retention will require each issue be addressed. A simple will being drafted for a flat fee of $3,000 can be governed by a short written retainer agreement that ignores many of these points. For large and expensive engagements, however, the retainer agreement should address all or most of these points. Do not wait for a lawyer to bring these issues up, though it is a good sign if he or she does so without prodding. Retainer agreements should:
- Always be in writing. Oral agreements are common, even though ethical rules in many jurisdictions prohibit or discourage them. Like other oral agreements, oral retainer agreements can lead to a “he said, she said” dispute. Sometimes a lawyer will deny the existence of an attorney-client relationship if there is no formal written retainer agreement. Without a written agreement you risk having no attorney and no recourse for an attorney error, even if you already paid.
- Contain a statement that the firm has conducted a search for conflicts of interest and either (1) there are no conflicts, or (2) appropriate parties, including the client, have been advised of potential conflicts and waived them. For large engagements, it is prudent to have the retainer agreement or some other writing specify the steps taken to ensure a conflict-free representation.
- Define the scope of the engagement. If the lawyer is being hired to prosecute a civil case, specify whether the engagement covers appellate work, or legal work to enforce the judgment. This is especially important in work undertaken for a fixed fee, where attorneys will have an interest in limiting the scope of the engagement, while clients will have an interest in expanding the scope.
- Identify precisely who will work on the case, what these people will do, and at what rates. The agreement should note that subsequent staffing changes will only occur with client consent.
- Specify the goals of the engagement. If a lawyer is providing tax advice, the goal may be to limit the client’s tax liability while minimizing audit exposure. If the subject of a retainer agreement is litigation, the goal may be an early, favorable settlement, or victory by summary judgment. The agreement should make clear that the goals are not guaranteed.
- Contain an estimation of all fees necessary to undertake the engagement. In fixed fee cases, this provision should specify the terms and timing of compensation. For hourly fees, the agreement should estimate fees and identify any external factors which may increase or decrease the estimated amount. If there is a separate budget for the case, the retainer agreement should refer to and incorporate the budget.
- Note that any disputes between attorney and client should be referred in the first instance to non-binding mediation or arbitration. Do not sign an agreement that extinguishes your right to go to court or to have a jury trial. Court may sound like the last place you want to go in the event of a dispute with your lawyer, but with binding arbitration you risk having your dispute settled by a panel that is dominated by the local bar.
- State that the client controls the matter and must be consulted on all major decisions going forward. You can define “major decisions” as specifically as you wish. In the litigation context, clients should require informed consent for all substantial motions, legal research projects, additions to staff, out-of-town travel, settlement offers, and engagements of experts or consultants. (Note: Since clients have the right to provide lawful instructions to their counsel at any time during the course of the representation, you can always amend your instructions after the retainer agreement has been signed).
- Identify favored methods of communication. Since failures in communication are arguably the most common source of attorney-client friction, it makes sense to address effective communication at the inception of the attorney-client relationship. Phone calls are still the number one way to communicate, but these days many prefer e-mail for day-to-day communications.
- Specify the client’s right to terminate the attorney, and detail the attorney’s obligations after termination. These obligations should include retaining the file for a number of years, and offering to copy the file (at the client’s expense) for the client and/or incoming counsel.
The wise client will not only consider these issues before signing on to a retainer agreement, but will reject an attorney’s self-serving statements that the one-sided form retainer agreement is “non-negotiable” or “firm policy.” Clients have a tremendous amount of leverage in hiring competent counsel in a nation with over a million lawyers. If a lawyer wants your business, he or she will negotiate key provisions in the retainer agreement. If a lawyer does not want your business, chances are you will find somebody just as good (or better) that does.