Why Should I Have to Pay a Retainer Fee?

Pro-Retainer Fees

There are a number of very reasonable reasons an attorney might want to request the upfront payment of a retainer fee? It compensates an attorney for the use of his or her name, reputation, and expertise, even if only because the attorney's name gains leverage for the client and allows the case to settle more quickly. In fact, having the right attorney can sometimes achieve a settlement after only a phone call or a letter. There is obviously value to this benefit, and from a fairness standpoint, it only seems appropriate that the attorney should be compensated for use of his or her reputation.

Similarly, the fee compensates the attorney for agreeing to be on standby for the case. By doing so, regardless of the course of events in the case, the attorney is potentially foregoing other gainful employment and business opportunities in order to remain available when needed for the lawsuit.

Of course, retainer fees also protect an attorney after the work has begun. For example, if the case proceeds and work is required of the attorney, the attorney can use the retainer fee to defray costs as s/he performs necessary work on the file. Similarly, should a disagreement arise or some other unforeseen circumstance that would make it impossible for the client to pay the attorney as originally agreed, the retainer fee ensures that the attorney receives at least some compensation for the time devoted to the matter.

Anti-retainer Fees

Of course, there are a number of arguments against collecting an upfront retainer fee, as well. For example, some clients might be put off by the idea of prepaying for someone's services, and look elsewhere for another attorney who does not charge a retainer fee. Naturally, that means the best instance in which to charge a retainer fee is when the attorney is specialized in a hard-to-find discipline, the number of attorneys in that field/location is very low, or the attorney is exceptional in some other way (board certification, particularly well-known in the community, etc.). Just as in economics, scarcity often creates value, and this gives exceptional attorneys an advantage when negotiating retainer fees.

Another argument against retainer fees is that some clients fear that if little or no work is done by the attorney before the case settles, the client will have effectively paid for nothing. Of course, as noted above, the counter-argument is that the party is buying the opportunity to work with the attorney and utilize his or her reputation. Failing to pay the retainer fee for fear of paying for “nothing” is a one-sided view that does not take into account the attorney's sacrifices in agreeing to forgo other work in order to take on the case and, of course, the attorney's reputation value. Indeed, the opportunity cost of not paying the retainer fee to retain an attorney may be much higher than the fee itself! Nevertheless, many attorneys are willing to forgo a retainer fee or refund it if little or no work is done on the case prior to settlement.

The final argument against retainer fees is that some clients, when presented with two similarly qualified attorneys, may tend to choose the one who does not charge a retainer fee. Not collecting a retainer fee may actually serve as a way for newer attorneys to get into the marketplace and compete against more seasoned attorney lawyers with well-developed reputations.

Common Practices for retainer Fee

If an attorney does decide to charge a retainer fee, there are some common practices that may be wise to observe. For example, the retainer fee is often based on a multiple of the attorney's hourly rates and the number of hours the attorney reasonably believes could be expended in a set period of time. Alternatively, the fee could simply be an arbitrarily selected number, but must usually have some relation to the matter at issue and will often be regulated by the bar association of that state.

Remember, actual time spent on the case is usually tacked on in addition to the retainer fee, and the retainer is merely a deposit. Nevertheless, many attorneys will use the retainer fees to pay off the initial charges on a matter until the fee is depleted. At that point, the attorney will usually switch to a standard hourly billing arrangement, or may request the payment of another deposit before work can continue (a replenishable retainer).

Conclusion

The choice to charge a retainer fee or not is ultimately the attorney's preference in most cases. While the bar association or other governing bodies may occasionally mandate certain deposits and fees, this is the exception, not the rule. An attorney's choice of whether to charge a retainer fee, and how much that fee should be, may have certain pro's and con's, so it is important for the attorney and anyone evaluating an attorney, to determine whether that individual is sufficiently qualified, experienced, and well-known to warrant charging such a fee and how much a reasonable amount is. Naturally, most attorneys are willing to work with a client to figure out the best approach that will be fair to both the lawyer and the client, but understanding the attorney's relative value and scarcity in the marketplace can give each side additional leverage in any resulting negotiation.

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Disclaimer: Every effort has been made to ensure the accuracy of this publication at the time it was written. It is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. Readers considering legal action should consult with an experienced lawyer to understand current laws and.how they may affect a case.

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