Risk Management Tip: Retainer Agreements Manage Client Expectations

By Jennifer A. Becker Long & Levit

In the competition to land a case it is tempting to overstate the value of a claim, or understate the cost of litigation, setting client expectations at an unrealistic level. Some attorneys fear that being up front about potential case difficulties could cause the client to choose other counsel.

This causes problems both during the case and in dealing with a claim if the result is not within client expectations.

Business & Professions Code §§ 6147 and 6148 requires attorneys to have written fee agreements in any contingent fee matter, or any matter in which the expense to the client could foreseeably exceed $1,000.. Failure to have a proper fee agreement could further complicate a claim by a disappointed client.

Although violating a Rule of Professional Conduct cannot itself be the basis of a claim, it can be the basis of a jury instruction to explain the fiduciary duties of attorneys. CA Rules of Professional Conduct, rule 1-100; Mirabito v. Liccardo (1992) 4 Cal.App.4th 41, 47. In legal malpractice cases or fee disputes, Plaintiff’s counsel makes great effort to include evidence of failure to follow the Rules of Professional Conduct, reasoning that juries respond in the client’s favor on doubtful issues if the attorney is perceived to have violated ethical obligations.

A retainer agreement is an opportunity to manage client expectations. In contingency cases, if the attorney’s fee increases closer to trial, provide settlement illustrations in the retainer agreement to demonstrate to the client the bottom line of settlement at different times and settlement amounts. A client is hard pressed to claim he or she did not understand the settlement process or risks when the disclosures are in the initial fee agreement.

Take time to explain the reality of litigation costs and, in a meritorious case of modest value, how the combination of costs and attorney’s fees can exceed the amount the client recovers. Illustrate by example how an early settlement for less money can mean more in the client’s pocket if the client can avoid litigation expenses and increased attorneys’ fees.

In hourly cases, explain the factors that drive the cost of litigation, such as unreasonable demands by the opponent, and failure to cooperate in discovery. If the retainer agreement promises monthly invoicing, and it should, bill monthly. This keeps the client constantly informed about case economics, and better decisions result.

All clients dislike surprises. Retainer agreements are one tool to educate the client about case value, risk, expense, and the settlement process.

Jennifer Becker is certified by the State Bar of California, Board of Legal Specialization in Legal Malpractice, and is chair of BASF’s Legal Malpractice Section.  She is a partner at Long & Levit, and the Editor-in-Chief of Long & Levit’s Lawyers and Judge’s Blog, www.longlevit.com/blog/, which is searchable by topic and case name.