Must ALL Attorney Retainer Agreements be Reduced to Writing?

shutterstock_30768121While attorneys are not always required to enter into written retainer agreements, best practices dictate reducing the terms of ALL agreements with clients to written form. While Model Rule of Professional Conduct (MRPC) 1.5(b) states that a lawyer shall communicate the “the scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible”, written form is not mandatory, merely “preferable”. The RPC of a lawyer’s jurisdiction of practice should be consulted to determine the applicable rule. Many have adopted the Model Rule while others impose a stricter standard.

For example, RPC 1.5 (b), as adopted in New Jersey, requires the agreement to be in writing only when the lawyer has not regularly represented the client. As of January 1, 2013, Connecticut changed from the more liberal MRPC “preferable” standard to a mandatory rule. In these states, It appears that an attorney who fails to enter into written retainer agreements (unless an exception applies), has committed a “per se” violations of RPC 1.5 (b). What do you think?

In any event, it makes sense to reduce the agreement to writing every time. Don’t you advise your clients to put their contracts in written form, signed, sealed and delivered? Remember that retainer agreements not only set forth the fee but also define the scope of the relationship and outline the respective responsibilities of the attorney and the client. Clear writings will go a long way toward preventing potential misunderstandings. Written agreements offer protection to potentially vulnerable clients. By the same token, they can serve the purpose of protecting attorneys from clients who may have an inaccurate recollection as to the terms of an oral contract for services.

Even if an agreement is not in writing, relief may be available. The New Jersey Appellate Division awarded a quantum meruit fee against individual clients who benefitted from corporate retention of an attorney via a written contract. Cole Schotz et als. v. Kleiman et als. Superior Court Appellate Division A-5255-08T2 Decided March 17, 2010 (Not Approved for Publication) Cole Schotz represented four individuals as well as their corporate entities in a litigation matter. When the law firm sued for its fee, the individuals. defense was lack of personal liability because the retainer letter did not specify that the law firm was representing the interests of the individuals as well as corporate entities. While the Court found that there was no valid written contract obligating the individual defendants to pay the fee, it applied the Doctrine of Quantum Meruit to allow an award against the corporate entities. Furthermore, since the four individual defendants individually benefited from the legal services rendered, the Court imposed judgment against the four individual defendants, jointly and severally.

Not only must the agreement be in writing but the attorney is also required to explain the agreement. Alpert, Goldberg, Butler, Norton & Weiss v. Quinn, 410 N.J. Super. 510 (App. Div.), certif. den. 203 N.J. 93 (2010) involved a firm whose retainer agreements made reference to the firm.s “Master Retainer” which contained in part “standard billing practices and firm policies”. For example, clients were required to pay twelve percent interest on late charges, all collection fees, all fees for the firm to withdraw from representation (if that occurs), as well as secretarial overtime. The court found that the firm’s failure to explain the full terms of the retention to the client “impermissibly shifted its fiduciary duty to the client and undermined the intent and purpose of R.P.C. 1.5(b)”. The court found that all fees, charges and obligations imposed on a client must be thoroughly explained so that the client can make an informed decision about the representation.

One Last Point - Most attorneys start with a “boilerplate form” but hopefully don’t stop there. Be sure to parse through every clause and customize where appropriate.

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