Opinion date: Aug. 8, 2003
Ethics issue presented:
When an attorney has been terminated and is required to withdraw from representation, what right does the attorney have to payment, particularly from funds posted as a retainer?
Facts as presented by Inquirer:
Lawyer represented client in several independent litigated matters. In each such matter, the client had posted a retainer or advance payment toward fees which was held in the lawyer's IOLTA account and then transferred from that account as fees were earned and billed on each of the matters. Lawyer was terminated and was withdrawing from representation in each of the litigated matters. Lawyer questions whether he could bill the client for time spent in withdrawing as counsel in each of the matters and whether he could apply unearned portions of advanced retainers paid in one matter to unpaid fees due and owing on one of the other matters. Lawyer advises that the fee agreement does not address either issue.
On the question of whether the lawyer could be paid for time spent in withdrawing, that matter would normally be governed by the fee agreement. In absence of a provision in the fee agreement addressing the disposition of retainer upon termination, Rule 1.5 would govern, which prohibits an attorney from charging a fee which is illegal or clearly excessive. Inquirer was advised that charging a fee for withdrawing from representation is clearly not illegal and the question of whether it would be considered reasonable or clearly excessive is one of judgment. Inquirer was instructed to consider whether the relatively small amount of time was worth raising the issue. The preferred method of dealing with this issue is to include a provision regarding disposition of retainer fees on termination in the fee agreement.
On the second question, Rule 1.15 indicates that sums held by a lawyer on behalf of the client remain the client's property and inquirer was advised that he should not transfer funds to the inquirer's account until fees were earned. Accordingly, he should not apply the unearned portion of the retainer from one case to unpaid fees owing on another case. Inquirer was also advised however that he could reasonably hold, as segregated property, unearned retainer as security for payment of the unpaid fee. Inquirer was advised as follows:
a. The amount, if any, of unpaid retainer that exceeded unpaid fees should be immediately refunded to the client;
b. Client should be informed that the Inquirer intended to apply the balance of unearned retainer to payment of unpaid fees unless the client made a valid objection thereto;
c. Unless Inquirer heard from client to the contrary in writing within a stated period of time (such as 30 or 60 days), Inquirer would then assume/conclude that client had no such objection;
d. That if the client raised an objection, Inquirer should continue to hold the funds in a segregated account until the dispute was resolved by an appropriate authority; and
e. If the client had any question about the procedure, the client should seek advice from other counsel.
This procedure is parallel to the procedures set forth in Rule 1.15 relating to a lawyer's obligation for receipt of client funds from a third party from which attorneys' fees are to be paid.
The foregoing is advisory only and is not binding on the Disciplinary Board of the Supreme Court of Pennsylvania nor in court. It carries only such weight as an appropriate reviewing authority may choose to give it.