Are non-refundable retainers allowed under Mississippi's ethics rules?

Plain-English summary

The Committee was asked whether Rule 1.5 of the Mississippi Rules of Professional Conduct, or any other rule or statute, prohibits the use of "nonrefundable retainers" in Mississippi. The opinion starts from Rule 1.5(a)'s requirement that "[a] lawyer's fee shall be reasonable," and notes the Rules draw no distinction between a "retainer" and a fee paid in advance and define neither term.

The opinion distinguishes two kinds of arrangement. A "general retainer" historically secured a lawyer's availability over a period regardless of services performed; it is earned when paid and is non-refundable by nature, billed separately from services actually rendered. A "special retainer" is an advance payment for some or all of the services the lawyer is expected to perform, applied against the lawyer's fee as work is done; such arrangements are permitted in Mississippi, but under Rule 1.16(d) and the bar's Opinion No. 219 the lawyer must refund any advance payment that has not been earned.

Applying these principles, the opinion concludes that Rule 1.5(a) does not per se prohibit non-refundable retainers as long as the retainer is reasonable. But if the client discharges the lawyer or the lawyer withdraws, Rule 1.16(d) requires the lawyer to refund "any advance payment that has not been earned," which would include any unreasonable portion of a "non-refundable retainer." Following Opinion No. 219, the opinion states the fee arrangement should be in writing and the written agreement should specify what part of the initial fee is non-refundable.

In practice

The opinion holds that, under the Mississippi rule as it stood at the time of the opinion, a non-refundable retainer is not categorically prohibited so long as the fee is reasonable, but the reasonableness limit of Rule 1.5(a) and the refund duty of Rule 1.16(d) continue to apply: any portion of the retainer that has not been earned, or that is unreasonable, must be refunded on discharge or withdrawal. The opinion states the arrangement should be reduced to writing identifying which part of the fee is non-refundable.

Common questions

Q: Can a Mississippi lawyer charge a non-refundable retainer?

A: The opinion concludes that Rule 1.5(a) does not per se prohibit non-refundable retainers, provided the retainer is reasonable.

Q: What happens to the retainer if the client fires the lawyer or the lawyer withdraws?

A: The opinion concludes that Rule 1.16(d) requires the lawyer to refund any advance payment that has not been earned, including any unreasonable portion of a non-refundable retainer.

Q: What is the difference between a "general retainer" and a "special retainer"?

A: Per the opinion, a general retainer pays for the lawyer's availability regardless of services and is earned when paid, so it is non-refundable by nature; a special retainer is an advance payment for expected services that is applied against the fee as work is performed, and any unearned part must be returned.

Q: Does the fee arrangement have to be in writing?

A: Following its Opinion No. 219, the opinion states the fee arrangement should be in writing and the written agreement should contain a provision specifically stating what part of the initial fee is non-refundable.

Background and rules framework

The opinion interprets Mississippi Rule of Professional Conduct 1.5(a) (a lawyer's fee shall be reasonable; cf. Model Rule 1.5) and Rule 1.16(d) (return of unearned advance payments on termination; cf. Model Rule 1.16). It relies on the Comment to Rule 1.5, the bar's Opinion No. 219, Black's Law Dictionary's definition of "retainer," and In re Viscount Furniture Corp.

Citations and references

Rules of Professional Conduct (Mississippi; cf. Model Rules):

• MRPC 1.5(a) (a lawyer's fee shall be reasonable) (cf. Model Rule 1.5)
• MRPC 1.16(d) (refund of unearned advance payments on termination) (cf. Model Rule 1.16)

Cases:

• In re Viscount Furniture Corp., 133 B.R. 360 (N.D. Miss. 1991), general retainer earned when paid

Other authorities cited:

• Mississippi Opinion No. 219 (advance fees; written fee agreement)
• Black's Law Dictionary (Revised 5th ed. 1979), definition of "retainer"

See also

• ABA Formal Op. 505: Fees Paid in Advance
• AL Op. 1992-17: Non-Refundable Retainers
• AK Op. 2009-1: Flat and Advance Fees

Source

• Landing page: https://www.msbar.org/ethics-discipline/ethics-opinions/formal-opinions/250/
• Original PDF: https://www.msbar.org/media/1485/35a_et_op_250.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

ETHICS OPINION NO. 250

OF THE MISSISSIPPI BAR

RENDERED June 25, 2002

FEES: Non-refundable retainers are prohibited to the extent the fee is not reasonable.

The Ethics Committee of The Mississippi Bar has been asked to render an opinion on the following question:

Does Rule 1.5 of the Mississippi Rules of Professional Conduct or any other rule of professional conduct or statute prohibit the use of "nonrefundable retainers" in Mississippi?

Rule 1.5(a) of the Mississippi Rules of Professional Conduct provides that "[a] lawyer's fee shall be reasonable." Furthermore, attorneys may require advance payment of a fee but are obligated to return any unearned portion thereof. Comment, M.R.P.C. Rule 1.5. The Rules of Professional Conduct do not make any distinction between a retainer and a fee paid in advance nor is there any definition in the rules for the term "retainer" and the term "fee".

Historically, the term "retainer", when used to describe payments to a lawyer, had nothing to do with compensation for services. Rather, a retainer was a sum of money paid to a lawyer to secure his availability to a client over a given period of time regardless of whether the lawyer actually performs any service for the client. See Black's Law Dictionary Revised 5th Edition (1979). Referred to as a "general retainer", the fee is earned when paid since the lawyer is entitled to the money regardless of whether he actually performs any services for the client. E.g., In Re: Viscount Furniture Corp., 133 B.R. 360, 364 (N.D. Miss 1991). The general retainer is paid for availability only and is not applied against the attorney's hourly rate; instead, there is an additional bill for services actually rendered. By its nature, a general retainer is "non-refundable".

Over time, a second class of "special retainer" arrangements has come into existence. In the typical "special retainer" arrangement, the client pays, in advance, for some or all of the services the attorney is expected to perform on the client's behalf. Such an arrangement is permitted in Mississippi. Comment, M.R.P.C. Rule 1.5. In the usual situation, the advance fee payment is applied against the attorney's hourly fee and the attorney spends down the advance payment as services are performed. Under Rule 1.16(d) of the Mississippi Rules of Professional Conduct and Opinion No. 219, an attorney must refund any advance fee payment that has not been earned.

The potential ethical dilemma arises when an attorney enters into a "special retainer" arrangement whereby an advance fee payment is required, some and/or all of which is categorized as a "non-refundable retainer". An analysis of M.R.P.C. Rule 1.5(a) does not per se prohibit "non-refundable retainers" provided the retainer is reasonable. However, should a client discharge the lawyer or the lawyer withdraws from representation, M.R.P.C. Rule 1.16(d) requires an attorney to refund "any advance payment that has not been earned" which would include any "unreasonable portion" of a "non-refundable retainer". As advised in Opinion No. 219, the fee arrangement should be in writing and the written agreement should contain a provision which specifically states what part of the initial fee is non-refundable.