Hiring an attorney can be very expensive. The majority of attorneys require an individual to pay a lump sum upfront, which they draw from as they work on the individual’s case.
If an individual’s legal issue resolves itself quickly and there are funds left over, attorneys are required to refund any unearned legal fees. Each state has a bar association that has enacted its own rules of professional conduct.
Most of these rules of professional conduct are based on the Model Rules of Professional Conduct of the American Bar Association (ABA). Lawyers in every state are required to refund any unearned legal fees.
An attorney who fails to comply with this requirement may face disciplinary measures, including sanctions, suspension, and disbarment.
It is important to note that these rules may vary by state. Depending on the fee agreement that was entered into, there are some states, such as Georgia, that allow certain legal fees to be classified as non-refundable.
Prior to hiring a lawyer, it is important for an individual to fully understand their fee structure and their legal fee refund policy.
What Do I Need to Know About the Lawyer Retainer Fee Refund?
When an individual hires an attorney, they are typically required to pay a lump sum upfront, called a retainer. The lawyer will bill their hourly rate, and they will use the money in the retainer to pay it instead of sending the client a bill.
The majority of legal fees are collected by ethical lawyers who provide valuable and efficient services to their clients. However, in some cases, fees are paid for:
- Incompetent lawyering;
- Purposeful padding of bills;
- Ethical violations;
- The improper coercion of collections.
Having a dispute with an attorney over their fees may seem overwhelming. An individual’s attorney most likely represents their interests in ongoing matters.
As an individual’s attorney is likely the last person they want as an adversary in litigation, they may feel obligated to pay outstanding bills, even if they seem outrageous. If a billing dispute does arise, an individual will recognize that their attorney possesses a superior knowledge of the legal system.
The concept of paying another attorney, assuming an individual can find one who is willing to oppose another lawyer’s fee request, most likely is not appealing. In addition, an individual may feel that the legal system will protect its own and will uphold the fee regardless of the facts of the case.
A client who receives an accessible bill because of incompetence, waste, or unethical lawyering can overcome these concerns with a managed and sensible approach. Communicating with an individual’s attorney is possible both during and after the engagement.
The lawyer-client relationship may actually be strengthened by appropriately questioning bills and the lawyer refund policy, which can result in mutually agreed reductions.
What Happens if I Paid More Than My Lawyer Earned?
There are some situations in which the total amount that an individual’s attorney billed does not exhaust the retainer fee. This may occur if the individual decides to stop pursuing legal action or their case ends unexpectedly through a settlement or other means.
The good news in these situations is that the individual should be able to receive a refund on the funds that remained after covering all of their legal fees. It is always important for an individual to request a final accounting and a refund of unearned legal fees.
What Should I Do if My Attorney Does Not Return the Unearned Fees?
There may be situations in which an individual’s lawyer does not return the unearned fees. As discussed above, this can be an intimidating experience.
It may be possible for an individual to report the lawyer to their local bar association for disciplinary action. An individual may also be able to locate another lawyer who can help with the issue and provide them with advice on how to proceed.
If an individual is not able to negotiate a return of the unearned fees, fee dispute litigation can provide them with a possible refund. This process can help protect clients from common attorney overbilling issues while still protecting a lawyer’s right to be paid a reasonable fee.
Avoid Overpaying Legal Fees
One way to avoid issues with refunding legal fees is to avoid overpaying. A lawyer’s fee structure should be in writing and provided to the client.
The client should fully understand the fees that are being charged and try to eliminate any possibility of miscommunication. As noted above, lawyers who mishandle client funds will face disciplinary action by their state bar associations.
Earned Fees: How Lawyers Should Handle Them
Earned fees should not be deposited into a trust account, as they do not belong to the client. Since they have been earned, they belong to the attorney.
Trust accounts are to be used for money that belongs to clients. A law firm’s operating account receives a check that is exclusively for earned fees.
The deposit of an attorney’s personal funds into trust beyond those reasonably necessary to pay bank fees is prohibited under the rules against commingling and depositing personal funds.
Fees for Advanced Payments
Depending on the location, any advanced or not-yet-earned fees have to be placed in a trust. However, this is not required in the state of California, but attorneys can choose to do so.
Many attorneys believe this is the best route to take. However, a lawyer may not violate any ethical rules if they deposit advanced fees into the operating account, depending on the state. Unless otherwise agreed between the client and the attorney, in Washington D.C., advanced fees have to be placed in trust.
In Florida, as well as many other states, advanced fees must be placed in trust.
Mixed Checks
As noted above, fees that are earned do not go into trust accounts. Therefore, a lawyer can deposit the entire check into the firm’s operating account in states that do not require advanced fees to be held in a trust.
Fees that are not yet earned have to be earmarked in the books as still being subject to a refund to the client if they are not earned in the future. Another acceptable action is to put the entire check into the trust and then write a check from the trust to the operating account. It is permissible to put the advanced fees in trust, even though this may not be required.
The check from the client should contain both advanced costs, which must be held in trust, and the non-refundable retainer, which belongs to the attorney and should not be held in trust. There are some state bars that may address these issues in detail.
For example, the State Bar of California’s Handbook on Client Trust Accounting for California Attorneys addresses the issue. The State Bar of California instructs attorneys to deposit the check in a trust and withdraw the non-refundable retainer amount from the trust as soon as the check clears and the funds are available.
Do I Need an Attorney?
You may have some issues, questions, or concerns regarding the refund of attorney legal fees or how they should be handled in your state. If so, it is important to consult with a liability lawyer. Your lawyer can explain how fees work in your state, what you should find out from your current attorney, and what is considered reasonable fees in your area.
If you have a fee dispute with your lawyer, your liability lawyer can advise you on how to best resolve the issue. It may be possible to bring your former lawyer to court to recover the money you have already paid.
In addition, you may also be able to call the state bar in your area, explain your concerns, and ask them if there are any specific rules that govern legal fees in your state. They may also be able to direct you to an attorney who can provide you with more information.
