Using a retainer agreement to set client expectations

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Maryland Rule 19-301.5 provides the basic requirements for fee agreements between attorneys and clients. At a high level, the only requirements are that fees must be reasonable and that some agreements must be in writing. Thus, a fee agreement can be quite simple. While the agreement can be simple, fee agreements represent an excellent opportunity for a lawyer to provide important information and lay out key expectations for clients.

By way of background, Md. Rule 19-301.5 provides generally that fees must be reasonable and that fee agreements should be in writing. The rule requires written engagements in contingency fee matters and prohibits contingency fees in criminal and domestic relations matters. Rule 1.5 also requires written confirmation from a client when lawyers in different firms are splitting the fee, and an accounting of funds in contingency cases.

That’s it.  Nothing more, nothing less.

Given the minimal requirements of the rule, attorneys need not overcomplicate fee agreements. However, when an attorney chooses not to include more, the lawyer misses an opportunity to provide key information to a client. Therefore, the fee agreement represents a wonderful chance to let the client know what he or she may expect about other important aspects of a case.

Among the items I have seen included in fee agreements are information about the firm’s billing policies such as the timing of bills, how retainer payments are applied, fee dispute resolution information and how costs are handled. Some firms provide clients with the firm’s document retention policies in the engagement letter or with information provided to the client along with the retainer agreement. More recently, and consistent with changes in Rule 1.15, engagement letters provide for staging of payments in flat fee matters.

In another relatively recent development, Maryland permits limited-scope retainers. (See Md. Rules 2-131, 3-131 and 19-301.2 (c).) Limited scope engagements, of course, should clearly set forth in writing the scope of the engagement and should only be used after the lawyer advises the clients of the risks and benefits of the limited engagement and then fully and fairly informs the client of the extent and limits of the lawyer’s obligations. They are, however, quite useful in the appropriate case, such as an initial appearance in a criminal case, assistance with an initial response letter in a licensing case or other similarly situated matter.

Even more recently, some fee agreements have addressed the use of generative artificial intelligence. Some lawyers have chosen to advise clients of the confidentiality issues inherent in the use of open source AI platforms in the absence of proper confidentiality agreements. In other cases, institutional clients have precluded the use of generative AI or limited a firm’s ability to bill for legal services generated through AI platforms.

The MSBA has not yet issued any ethics opinions on AI and fees. My best guess is that Maryland will likely follow what Virginia has espoused in LEO 1901 — meaning that a lawyer need not “surrender any benefit from the efficiency gains” from AI as long as the fee is adequately explained and disclosed to the client. Because we do not have formal direction from the Maryland Supreme Court or the Rules Committee, I do not believe lawyers are required to mention AI in fee agreements.

Regardless of what a lawyer may ultimately decide to include in a fee agreement, at the end of the day, fee agreements become part of the record in nearly every case that involves a lawyer and a law firm. Fee agreements form the basis for payouts when lawyers change firms, in fee disputes between clients and lawyers, in disciplinary matters, and in legal malpractice cases. A good fee agreement is a strong source of protection. If it has not been updated recently, perhaps a review is in order.

Craig Brodsky is a partner with Goodell, DeVries, Leech & Dann LLP in Baltimore. His legal ethics column appears monthly. He can be reached at [email protected].