By Jason Castillo, Director of Legal Education
The Iowa Supreme Court recently suspended a retired Iowa attorney for 30 days after ruling that a fee agreement with a criminal defendant was unethical. According to the opinion, “the amount of the fee charged and collected by Vilmont for performing the limited and insignificant services in representing his client was, without question, unreasonable.” The court then stated that a reasonable fee would have been about $600 under the circumstances of the case. To read the opinion, click here.
The charges arose from attorney Bill Vilmont’s representation of a client on a state charge of enticement of a minor. According to the Iowa Supreme Court opinion, the agreement provided for charges of $225 an hour, with a minimum fee of $2,500 to be paid with a retainer. The $2,500 retainer was placed in a trust.
When the state charges were dropped in leiu of federal charges, the client dropped Vilmont and retained a different attorney to represent him in federal court, according to court documents. Five days after the state charge was dismissed, Vilmont withdrew the $2,500 from the trust account without notifying his former client, according to the opinion. Vilmont then ignored several requests to return the retainer.
Vilmont provided an accounting to the Iowa Supreme Court Disciplinary Board showing that he worked 3.7 hours on the client’s case – including one hour to provide the accounting. The court, however, ruled that the minimum fee contract was “clearly unethical” and that Vilmont had failed to provide a timely accounting.
After scanning some of the comments on the ABA website, it’s clear that a number of attorneys did not agree with the Iowa Supreme Court ruling. However, in the words of attorney fee expert James King, there is no such thing as a non-refundable retainer. All unearned fees must be returned to the client. Under California Rule 3-700(D)(2), unless the attorney and client have contracted for a “true retainer,” the attorney must refund any portion of an advance fee that the attorney has not yet earned.
And an examination of authority reveals that only “true retainers” are nonrefundable – and these are extremely rare. When a client discharges an attorney, the Rules of Professional Conduct require the attorney to “[p]romptly refund any part of a fee paid in advance that has not been earned.” In California and other states there are also Ethics Opinions that address the subject.
What are your thoughts?
For more information, we have a few resources available for you:
- Fee Agreements: Get Paid for Your Time and Advice – Blog
- Fee Agreements: Ethics & Reasonableness – CLE Course
- Fee Agreements – Ethics & Reasonableness – Video Blog
 Baranowski v. State Bar (1979) 24 Cal.3d 153.
 The California Rules also state that a refund is unnecessary if the money is “a true retainer fee … paid solely for the purpose of ensuring the availability of the member for the matter” (see Rule 3-700(D)(2). However, in the words of the California Supreme Court, true retainers are very rare these days.
 See California Ethics Opinion 01-02 which speculates that there are probably only a handful of situations in which a client would want to pay a true retainer.