Legal fee retainers paid to Texas Lawyers--are non-refundable retainers really non-refundable?

Many attorneys in all areas of the country, including San Antonio, Texas family-law attorneys, require their clients to sign employment contracts before commencing work on a case. Included among those attorneys are many Texas family law attorneys who practice in the areas of divorce, child custody, child support, enforcement, modification, and adoption. 

Many of those contracts include language stating that the retainer the client pays (the money he or she pays to the attorney up front), will not be refunded for any reason.  Typically what happens is, say in a divorce case, that a client comes in and hires the attorney who commences work on the case after the attorney and client both sign a contract where the language is clear that the retainer is non-refundable.  Then, after the attorney has done some work on the case (but not nearly enough to justify keeping the entire retainer), the client calls and cancels the divorce (usually because the parties reconciled).  Is the client then entitled to a refund of the unused retainer?

A number of disputes have arisen over this issue and it turns out that, according to the State Bar  of Texas Grievance Committee--the body that investigates allegations of unethical behavior by Texas lawyers--"non-refundable" retainers usually ARE in fact refundable, at least partially.  There is a big difference between an "advance fee" and a retainer.  A true retainer is given as compensation to the attorney for his or her availability and lost opportunities, and those terms must be included in the contract if the attorney expects to keep the whole retainer no matter what.  If the contract talks about the attorney's hourly fees being first applied against the retainer, then the contract is really talking about an "advance fee", which is required by law to be placed in a trust or escrow account until the attorney has actually earned the fee (applied his or her actual fees and expenses against the retainer).  If it is an "advance fee," then the attorney is required to return any unearned portion of the advance fee if the client terminates representation.

The point of this lesson:  If your attorney's employment contract has language about "non-refundable" retainers, ask him or her about it.  If he or she tells you it is completely non-refundable, no matter what, ask him or her what the courts have said about it.  The most recent court case on the issue is Cluck v. Commission for Lawyer Discipline 2007 Tex. App. LEXIS 355(Jan. 2007, no pet. h.).  In that case, an attorney got a total of $20,000 in "non-refundable" retainers, and was then fired by the client who requested a refund of the unearned retainer fees.  The attorney refused, based on the "non-refundable" langauge in the contract.  The Commission for Lawyer Discipline (which oversees Texas attorneys) decided the attorney had acted unethically, and suspended him from the practice of law (fully probated) for 2 years.  He appealed, and the Austin Court of Appeals found in favor of the Commission.

Although this information is really better suited as a warning to attorneys, a client should be familiar with what attorneys can and cannot do when it comes to fees--don't be afraid to ask your lawyer about your contract if you don't understand it!

San Antonio divorce and family-law attorney J. Michael Clay focuses exclusively on family-law issues such as child custody, child-support modification, divorce, adoption, child-custody modification, child-support enforcement, child-custody enforcement, spousal maintenance (including enforcement and modification), wage withholding, adoption and termination issues.  J. Michael Clay is licensed to practice all types of law in the state of Texas, including federal district courts in the Western District of Texas, San Antonio Division.  He is not certified by the State Board of Legal Specialization to practice in any particulararea.

The material in this article is not intended as legal advice, and should not be construed as such.  The intention of the article and others like it in this blog is to discuss common legal issues in Texas family law cases and how Texas law applies to them.  Any statements regarding the state of the law and how it applies to particular situations is simply the opinion of the author, and should never be relied upon in place of the advice of a retained attorney.