In talking shop with attorneys, one of the topics that frequently comes up is setting and collecting an appropriate retainer. Attorneys often struggle with the tension inherent in collecting a sizable-enough retainer to feel reasonably certain to be paid for their initial tasks on a file versus setting a retainer that is too high for the client to have any realistic chance of retaining their services.
As I have gained a few years in practice, there are a few factors that I consider in determining a retainer.
Do I even need to charge a retainer at all?
Some readers may be able to stop right here and head to another article (but thank you for the page click). Your practice may lend itself to contingency fees. Or the matter at hand may lend itself to flat fees. At my firm, most of our estate planning and most of our corporate entity formation work is billed on a flat-fee basis. We are able to predict with reasonable certainty the amount of time that will be required for these tasks and we will a commensurate flat rate. I am certainly not the first to suggest that flat fees are gaining popularity amongst legal consumers. While flat fees can be a powerful tool, I also believe that there are certain types of matters for which hourly billing will always be necessary.
How much time should I reasonably expect to spend on this file?
Does this matter involve active ongoing litigation? If so, what do I know about opposing counsel? Is he/she known for taking a scorched-earth approach with constant filings and discovery requests? Is this a jurisdiction that has somewhat onerous motions practice requirements (District of Columbia Superior Court Civil Division) or a terrifying “rocket docket” that will compress litigation into a few months (Eastern District of Virginia)?
Alternatively, does this matter involve pre-suit demand letters and an attempt to resolve a dispute outside of court? Is this a matter that is likely to be resolved within a matter of weeks as opposed to a matter of months with significantly less legal time spent than a matter pursued in court?
Where a dispute is in a pre-suit phase, even if there is the possibility of later litigation if the matter cannot be resolved, I will often collect a smaller “non-litigation retainer” from the client. This involves the client signing a retainer agreement explicitly stating that the scope of the representation does not include representation in litigation. It also involves the client depositing a substantially smaller retainer amount. If the matter is not resolved and blossoms (or explodes) into full-blown litigation, a later retainer agreement can always expand the scope of representation to include representation in litigation (with a commensurate higher retainer amount).
I have found that approaching retainers in this matter: (i) improves access to a lawyer because a dispute can be resolved pre-suit at a much lower retainer amount; and (ii) promotes reasonableness in settlement because clients see just how expensive an exercise in litigation may be.
How much exposure do I have if I need to terminate representation for not being paid?
This coincides with the above point. Under the applicable rules of nearly every state and federal jurisdiction, if a client will not consent to your withdrawal of representation, you must move the court to permit your withdrawal. If the matter is in active litigation and you are nearing trial, even if you have language in your retainer agreement authorizing you to withdraw if your client does not pay you, the will of the court trumps that language.
I have spoken to many lawyers who have not been permitted to withdraw from a matter even where the client owes thousands of dollars in unpaid fees (and there is no realistic hope of collecting any additional fees) because the matter is close to trial. As such, for matters involving active litigation, an “evergreen” retainer may help in this regard. An “evergreen” retainer involves the client agreeing that all or part of a retainer may remain in escrow until the close of representation, at which time the retainer will be applied to the final bill with any remaining balance refunded.
Is this a repeat client?
This is self-explanatory. If I have worked with this client before; have established personal rapport with this client; and/or have minimal concern the client will stay current on his or her bills, then I am pleased to stay that person’s “consiglieri” and often will reduce the retainer amount appropriately and significantly.
I do not suggest these are an exclusive list of factors that I consider, but these are the most frequent factors I consider.
As with any post regarding collection of fees, consult the Maryland Lawyers Rules of Professional Conduct to ensure that your retainer agreements and retainer policies are kosher.
Readers, what other factors do you consider when setting a retainer amount?