Monthly Retainers and The Solo Practitioner

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I am a big fan of monthly retainers. For six months to a year (depending on what was agreed to in our engagement letter) my firm is guaranteed income from that client. In exchange, that client is guaranteed whatever services it needs from our firm up to but not including litigation services. Need us for a new entity for your business? Send a letter to a non-paying customer? Draft a contract? Review a document? Help write your business plan? It’s all included.

Clients love it. They never worry about calling or emailing their lawyer because that’s already included in what they pay every month. They love the convenience. They love the predictability. If they anticipate having a lot of work to do over the coming year (as most start-ups do), it just plain makes sense to hire the attorney on a whatever-comes-up-you’ll-handle-it basis.

We love it. It evens out our cash flow, minimizes administrative work, and our retainer clients tend to be some of our happiest clients and the easiest to work with.

This is not a payment plan for work performed. This is a true retainer that our clients pay us in order to have their attorney available on demand. However, bar rules do not make writing a monthly retainer agreement easy.

A client is entitled to fire an attorney at any time for any reason; but the monthly retainer agreement presumes that unspecified work will be done over time. Sometimes that means that the attorney does a bunch of work early on in the relationship with the client and counts on the retainer payments over the rest of the year to compensate for that work. It takes careful drafting to ensure that you get paid for the work performed even if the client terminates the attorney under retainer.

Sometimes, the attorney turns down other work because he has a retainer agreement that requires him to be available to an extent that would prohibit taking on the new client. What happens if the retainer client then terminates the attorney after just a few months? Bar rules keep the attorney from requiring the client to pay out what is owed under the contract, only allowing the attorney to collect what he would have been owed for services actually performed.

What then happens to the client who terminates the attorney and then gets a bill for services performed that is higher than the fees under the retainer agreement? Can the attorney even do that? And how do you protect the client from an attorney whom the client hires on retainer but who then doesn’t perform as expected? What about the client who hires the attorney on a monthly retainer and then behaves like such a jerk that the attorney wants to fire the client? Does he have to fulfill the full year-long retainer? What duties are owed to that client? What about the client that needs so much hand-holding that the attorney is unable to make a living under the retainer agreement?

All of these things have to be considered when drafting a monthly retainer agreement.

How we have done it is to modify our existing flat-fee retainer agreement to include the following:

  1. Our firm expressly agrees to decline any subsequent employment if the exercise of independent professional judgment on behalf of the client would be impaired. We otherwise do not agree to decline subsequent employment from other clients, except to use our best judgment and promising to make ourselves available to our retainer clients as needed.
  2. Our firm agrees to continue and not to withdraw from employment until we have taken reasonable steps to avoid foreseeable prejudice to the rights of the client, including giving due notice to the client, allowing time for the employment of other counsel and delivering to the client all papers and property to which the client is entitled.
  3. All monthly retainers are considered earned on receipt and are non-refundable. However, the client can terminate our services at any time for any reason. However, if the client would have owed more under a flat-fee arrangement for work performed than it has paid in retainer payments that year, the client agrees that it will pay the full flat-fee amount.
  4. We include a detailed scope of work for every client enumerating the services we expect to perform during the year and what the flat fee for each service would have been. We also enumerate the additional services that are and are not included in the retainer (phone calls and email are included; depositions are not).
  5. We specify that additional work outside the scope of work will require an additional fee.
  6. If the client’s needs exceed what we reasonably anticipated for the year under the scope of work, we reserve the right to revisit the monthly retainer and increase our monthly fee as needed.

And that’s about it. We tried to find a good, solid, ethical middle ground for our clients. We also tried not to overthink it, though researching the bar rules on monthly retainers was a bit like a trip down the rabbit hole.

For example, the Florida Bar Rules of Professional Conduct Rule 4-1.5, Fees and Costs for Legal Services, does not mention monthly retainer arrangements. The most we get to go on is a note in the comments to Rule 5-1.1, Trust Accounts, that says, “Retainers are not funds against which future services are billed. Retainers are funds paid to guarantee the future availability of the lawyer’s legal services and are earned by the lawyer upon receipt. Retainers, being funds of the lawyer, may not be placed in the client’s trust account.” The ABA Model Rules are not  more helpful, honestly.

You know what was very helpful? Google. I Googled “Lawyer Monthly Retainer General Counsel” and found a number of very helpful sample agreements of my fellow retainer attorneys from all over the U.S. I was able to garner some best practices, which amount to disclose everything, be clear and thorough, and make sure the client understands what they are getting before they sign.

Do you work on monthly retainers?  Are you considering doing so?  Let’s talk in the comments.

All opinions, advice, and experiences of guest bloggers/columnists are those of the author and do not necessarily reflect the opinions, practices or experiences of Solo Practice University®.

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2 comments on “Monthly Retainers and The Solo Practitioner

  • Suzanne,

    How do you structure your monthly retainer in terms of pricing? This is something I have been struggling with as I just pitched a retainer agreement to a friend who is a chiropractor for what I thought was a very reasonable amount (read: low). And she said no. That has happened to me in other cases – one in which I definitely shot too high for a fire department and several others where I just don’t know what they were thinking.

    I suspect many think about the “legal insurance” plans that companies offer which are very low cost, but generally provide very little as well (in my opinion). What are your thoughts?

    Marc

  • The best way to structure the retainer is based on the work reasonably anticipated over the course of the retainer period. For example, if during your consult you identify $11,000 worth of work, you could suggest a one-year $1000/month retainer by pointing out that they are almost there anyway with what you’ve identified, and they would be guaranteed your availability for anything else that comes up. $1,000 is cheap insurance, especially once amortized over a year.

    For example, I offer a special retainer to brand new start ups based on the amount of legal services a typical start-up requires: $6,000/year for the first year at $500/month. It is easily within most start-up budgets, and my clients have really appreciated just being able to budget a small monthly amount rather than paying my flat fees up-front for unbundled services.

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