Fee Arbitration: What is a “True Retainer”?

Author: Katy M. Young

Ad Astra Partner Katy Young represented pro bono client R. Martinez in a fee arbitration against her daughter’s former criminal defense attorney and reached a settlement whereby the attorney agreed to pay back every dime that Mrs. Martinez disputed at arbitration- and then some!

Mrs. Martinez’ daughter had been charged with murder in Alameda County. The Martinez family cobbled together nearly everything they had to write a check for the attorney’s $25,000 retainer. Mrs. Martinez alleged that she never signed any written agreement with the attorney, but that the attorney had said he would represent Mrs. Martinez’ daughter up to, but not including, trial. Over the course of the next year, Mrs. Martinez felt that this attorney was not an effective advocate for her daughter and made some crucial substantive and procedural errors.

Eventually, Mrs. Martinez retained The Worthington Law Centre, friends of Ad Astra and stellar criminal defense attorneys with offices in Salinas and San Francisco. When Tom Worthington took over Mrs. Martinez’s daughter’s defense, The Worthington Law Centre contacted Ad Astra for assistance in recovering the unused portion of Mrs. Martinez’ $25,000 retainer which was being held by the previous attorney who maintained that the $25,000 was non-refundable, which in ethics parlance means that he asserted that the $25,000 was a “true retainer.”

In response to Ad Astra’s inquiries, the attorney produced to us a document that he claimed was the written fee agreement between he and Mrs. Martinez, but which listed the $25,000 retainer as having been paid by credit card and non-refundable, but that he would represent the client up until the trial at which point a further retainer would be required. Upon questioning, the attorney eventually admitted that this purported fee agreement had not been signed by his actual client- Mrs. Martinez’ daughter- but nevertheless maintained his position that the agreement was valid and entitled him to keep all $25,000 in the face of Mrs. Martinez’ allegation that he owed her a $19,000+ refund. In the fee arbitration papers, Ad Astra’s Katy Young had argued that the attorney owed Mrs. Martinez over $19,000 for failure to have a signed fee agreement with his actual client (and not just the payor), producing a fraudulent document purporting to be a fee agreement between he and Mrs. Martinez, failing to keep contemporaneous time records, and for improperly characterizing the $25,000 as a true retainer when it did not meet the one criterion for true retainers: the retainer was for his time on the matter up to trial and not for his continued availability regardless of time billed. True retainers are actually quite rare since they simply ensure the attorney’s availability to work for the client and have no bearing on any actual work performed. In other words, if the retainer is payment for work then it is not a true retainer and must be refunded to the extent that the attorney’s work was worth less than the retained amount.

Finally, the parties went to fee arbitration through the State Bar of California. On the day of the arbitration, the appointed arbitrator encouraged the parties to try to settle before commencing the proceeding after expressing doubts about the attorney’s defenses. After 15 minutes of discussions with Katy Young, the attorney agreed to pay back all $19,000 that Mrs. Martinez had requested, plus the filing fee for the arbitration!

Attorneys: beware the “true retainer” and always keep contemporaneous time records, even if your case is flat-fee or contingency.

Clients: always get a written agreement with your attorney, be sure to read it and question it where you feel you need more information, and negotiate the terms if anything is unacceptable to you. Make sure you know what you are getting into!

By Scripta Ad Astra Staff

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