Non-refundable Retainers Do Not Violate the Ethics Rules
The Supreme Court issued an order on the long-awaited non-refundable retainer case pending before it in Cooper v Attorney Grievance Commission. In that case, the client hired an attorney to represent her in a divorce action. The attorney charged a $4,000 nonrefundable retainer and her fee agreement with the client stated that the $4,000 was a “minimum fee.” In exchange for the minimum fee, the attorney would work on the client’s case according to her standard hourly rates without any additional fee. Once the attorney’s work exceeded the minimum fee, then the client would be obligated to pay for those additional hours. The fee agreement also stated that “Client understands that NO portion of the MINIMUM FEE referred to above is REFUNDABLE to the client, under any circumstances.”
When the client decided against going through with her divorce before her attorney had worked $4,000 worth of hours, the client demanded a refund. Although the attorney gave her a partial refund (contrary to the terms of the fee agreement), the client filed a grievance against the attorney. The hearing panel of the attorney discipline board dismissed the grievance complaint, but the Attorney Grievance Commission pursued the case and issued an order sanctioning the attorney for charging a nonrefundable retainer. The Grievance Commission ruled that the nonrefundable retainer agreement violated MRPC 1.5 (reasonable fees) and MRPC 1.16 (safekeeping of client property).
The Supreme Court’s order stated that the attorney’s fee agreement “unambiguously provided that the [attorney] was retained to represent the client and that the minimum fee was incurred upon execution of the agreement, regardless of whether the representation was terminated by the client before billings at the stated hourly rate exceeded the minimum.” Accordingly, the Supreme Court held that the non-refundable retainer in this case did not violate the ethics rules. Justice Kelly concurred with the Court’s decision but wrote separately to note that fewer grievances might be filed if an attorney’s nonrefundable fee agreement “designate[s] the number of hours the attorney will work without additional charge, and specify an hourly rate to be charged thereafter.”
