Lawyer Money Stuff: Retainer Fees and Fee Agreements
Money. It’s the reason a lot of lawyers become lawyers in the first place (because they want a lot of it). We all grew up watching Perry Mason, Matlock or LA Law and thought…those guys make good money, I should do that! But how is it that lawyers get paid? And why does paying their lawyer make most clients jittery, sick and/or angry enough to wield a gun?
A Fee Agreement is a required (as in, required by most states in their code of professional conduct for attorneys) contract between an attorney and a client. The Fee Agreement, also known as an Engagement Agreement or Retainer Agreement, represents the understanding between the attorney and the client. For example, “I will defend you from that unfortunate animal cruelty and public indecency indictment from beginning to end, and you will pay me $500 per hour for every hour that I work on your case.” This would be a very basic Fee Agreement. It spells out what the lawyer will do for the client, and what he/she will charge.
A Retainer Fee is a necessary part of the Fee Agreement and payment arrangement among the client and the attorney. Often, an attorney takes on a client for a single, one-off representation. Because of this, and because of the way in which legal representation is front-loaded with costs (the attorney usually expends the most time, and thus bills the most hours, on the front-end of the engagement), the attorney usually requires a Retainer Fee.
This is an up-front deposit by the client which shows that the client is serious enough to put down a significant sum of cash, and assures the attorney that he/she will be paid at least for initial work done for the client. The attorney takes the retainer fee, and starts working. Until the attorney has expended hours working on the client’s matter, he/she is not entitled to keep the retainer (it remains the property of the client and the attorney must keep the retainer fee separate and apart from his own funds). Once the attorney has billed hours to the client, the attorney credits the retainer fee over to his own account. This is the easiest payment an attorney will ever receive (because to get the money, all the attorney has to do is make an accounting entry…way better than arguing with clients).
So there it is…how attorneys get paid…the easy way.
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This is probably the most random pingback I’ve ever had, but thanks for the mention via Perry Mason!