Enterprise Table of Contents

FORM: Model Lawyer Retention Agreement

by John Toothman, Esq.

Background: I suggest that clients never sign the standard retention or billing agreements offered by many law firms. Too often these are lop-sided in favor of the firm and, without another lawyer to review the agreement, the client may not know what he or she is getting into. These onerous agreements are hard to reconcile with the lawyer's fiduciary and professional duties to the client, which may therefore come back to haunt the firm if a dispute later arises. (One way for the firm to minimize ethical and legal restrictions on dealing with clients is to insist that their agreement be signed before they are retained--any changes after that would be scrutinized more closely by courts and bar authorities.) This phenomenon is part of a larger pattern in which many lawyers effectively segregate their relationship with the client as customer (the business aspect) from their relationship with the client as client (the professional aspect).

As a fee arbitrator as well as a consultant to clients, I have seen, for example, terms attempting to waive in advance future conflicts of interest, terms specifying that the firm may add any staff it wants (at whatever rates it wants), no limitations or details regarding hourly rates and expenses (including law firm expenses that may truly be overhead), terms limiting the client's ability to contest a bill to a very short period of time, and terms designed to allow the firm to withdraw with no advance notice, even in the midst of trial. Some of these terms, rather than giving the firm more comfort, could actually be unethical per se or as enforced. It seems that the firms, however, make these agreements even more aggressive each time they have a major write- off or problem with some other client.

Because some ethical protections can be waived by the client, especially if the waiver is obtained in writing, at the threshold of the representation, some firms seem to be overreaching at the very moment when the client is typically most vulnerable. At the threshold, clients are vulnerable because they are focussed not on the business relationship with the lawyer and whatever problems they may have down the road, but on the problem that sent them to the attorney in the first place. Often the lop-sided retention agreement gets the relationship off to a bad start. Even if the client signs the agreement without voicing any objection and the firm never has to enforce it, it sends the client the signal that this is just another relationship in which he or she may be taken advantage of--the client's ability to trust the lawyer is the immediate victim.

Our standard agreement is thus designed to create a more level relationship, one in which neither side is securing waivers or imposing terms that would seem unfair. Yet, because the attorney is the professional, subject to ethical duties, and bound to have the best ability to control fees and know what is going on day-to-day as the matter progresses, the arrangement is designed to give the client the upper hand in the event of a billing dispute. Subject to ethical restrictions, the attorney's option is to withdraw to cut his or her losses. No matter how one writes the agreement, there is no written substitute for attorneys screening their clients (and clients their attorneys) in the first place, including doing some "due diligence" on the matter itself, and in deciding at the first sign of trouble (not the day before trial) that it is time to withdraw.

The agreement can be modified, e.g., to provide for fixed or contingent fees. This agreement is merely a sample--you should seek appropriate legal advice to insure that this agreement meets all your needs, in whatever jurisdiction you may be.

We welcome your comments and suggestions on this draft. Our number is 703/684-6996.

Legal Services Agreement (Hourly-Litigation)

_________________________ ("Client") and _______________ ("Attorney") hereby enter into this agreement regarding the retention of Attorney by Client to provide legal advice and services:

A. Client: The client is ___________________. To the extent ethically permissible, its officers, directors, employees, and agents should also be treated as clients, unless Client advises Attorney otherwise. In the event that Attorney cannot ethically represent individuals in addition to Client, Attorney shall advise Client of that fact immediately.

B. Attorney: The Attorney is ___________________, who is licensed to practice law in all jurisdictions relevant to this matter. If Attorney practices with others who may also provide services to Client, he or she understands that Client expects that Attorney will be responsible for managing the representation, assuring compliance of others with the terms of this agreement and ethical requirements, preparing and substantiating all bills, and communicating with Client.

C. Matter: Attorney has been retained by Client in connection with: _____________________ [description of matter]. Attorney represents that he or she is competent and available to handle that matter. In the event that additional matters are assigned by Client to Attorney, this agreement shall apply to those matters as well.

  1. Review of ethical obligations before initiating representation: Attorney has conducted a thorough investigation and determined that neither Attorney nor his or her firm has any ethical impediment, real or potential, to representing Client. (For conflict of interest purposes, "Client" shall include all existing and future affiliates of Client. To effectuate this provision, Attorney should keep apprised of all changes in Client's corporate family.) To the extent that any ethical impediment, real or potential, ever arises, Attorney shall immediately inform Client of the impediment (regardless of whether Attorney believes he or she has taken all steps necessary to avoid the impediment and regardless of whether Attorney believes that the impediment is insubstantial or questionable), make full disclosure of the situation to Client, obtain Client's consent to continue the later representation, and take all steps requested by Client to avoid or mitigate the impediment. In particular, for example, Attorney has informed Client of all past contact between Attorney and Client's competitors, opposing counsel, potential opposing parties, and any relevant court or tribunal, regardless of whether that contact might be considered a conflict of interest. Attorney understands that, if a direct or indirect conflict of interest arises, e.g., under Model Rule of Professional Conduct 1.7(a) or (b), Client may, in its discretion, obtain reimbursement from Attorney for all fees and expenses paid to Attorney in this matter, cancellation of all amounts allegedly owed by Client to Attorney, and reimbursement for consequential expenses incurred by Client, including the cost of replacement counsel.
  2. Limitations to scope of representation: [Include any limitations on scope of the representation, e.g., local counsel only, co-counsel, portion of case being handled in-house.]
  3. Term of representation: This representation is effective _________ [Insert date--need not be date agreement is signed.] The representation shall continue until terminated by either party in accordance with ethical requirements.
  4. Client expectations and goals: [In some instances you may wish to specify the purpose or goal of the matter, e.g., to draft a particular agreement, secure a license, or whatever. This is a good way to spell out from the start such things, for example, as the client's desire to resolve a matter quickly by settlement, if reasonable, rather than litigating it at all costs or, conversely, to emphasize how important the principle behind a case may be.]

D. Attorney Fee (Hourly): Attorney will be paid for his or her services based on the number of hours expended on behalf of Client (rounded to the nearest tenth hour for each time entry), not to include time billable to or compensated by other clients, multiplied by the Attorney's hourly rate of $ _______. Details regarding bills, documentation, and time-keeping are provided below and are a condition precedent to payment by the Client.

  • [Note: Alternative fees, such as fixed fees, contingent fees, and so on may be substituted where appropriate. Those arrangements generally reduce the administrative burden and some requirements below, e.g., with respect to bills, would become irrelevant.]
  1. Non-billable time: Attorney will bill client only for time reasonably and necessarily incurred to render professional services on client's behalf in accordance with this Agreement. Time attributable to billing questions is not billable, for example. Time expended by time-keepers who have not been approved by Client is also not billable.
  2. Changes to hourly rates: Attorney will charge no more than the hourly rate quoted above throughout the duration of the matter, unless otherwise agreed in a writing signed by Client.
  3. Discounts to other clients: The rates Attorney will charge Client represent the lowest rates charged for the same persons to other clients. In the event that lower rates or discounts are provided to other clients, Attorney will also provide them on the same basis to Client. [This is a so-called most favored nations clause, providing that a client should be given the "best rates" especially where the firm provides discounts to other clients. This may be reserved for only a few clients, but the firm should then be careful not to misrepresent to other clients that they are receiving its only or best rates.]
  4. Additional time-keepers: Additional billing staff may not be added to the matter without advance approval from Client. In the event that additional time-keepers are added to the staff, with Client approval, then their hourly rates shall be provided to Client in advance, and their rates and billing practices shall comply with the requirements of this Agreement.
  5. Existing work product: To the extent the Attorney makes use of existing work product, e.g., in the form of research previously performed for another client, then Attorney may bill only that time expended in using that work product for Client. In other words, no premium, markup, or other adjustment may be made to bill Client for time spent on work already performed.
  6. Travel: Travel restrictions, including restrictions on billing time during travel, are discussed below.

E. Billing of Fees and Expenses: Attorney shall comply with the following requirements as to billing fees and expenses as a condition precedent to Client's obligation to pay each bill:

  1. Monthly bills: Unless otherwise agreed in a writing signed by the Client, bills shall be issued monthly by Attorney within 15 days after the close of each month. Attorney understands that Client requires prompt bills in part to facilitate effective management of the representation and fees.
  2. Bill format: Attorney shall provide detailed, itemized bills which, at a minimum:
    • clearly identify each person performing services (i.e., time-keepers) in conjunction with each entry,
    • record the time expended by each time-keeper separately,
    • state the amount of time expended by each time-keeper daily (and, within each day, broken down by task where more than one project or task was worked upon within the same day),
    • describe within each itemized daily task entry, in sufficient detail to readily allow the Client to determine the necessity for and reasonableness of the time expended, the services performed, the project or task each service relates to, the subject and purpose of each service, and the names of others who were present or communicated with in the course of performing the service,
    • in a summary at the beginning or end of the bill, provide the current hourly rate for each time-keeper, the total time billed by each time- keeper in that bill, the product of the total time and hourly rate for each time-keeper, the total fees charged, and a reconciliation between the amount charged and any applicable estimated or budgeted amount, by task.
    • [This should cause the firm to generate so-called task-based bills. For more information, and a list of standard codes, consult the ABA's recent Uniform Task-Based Management System, available by calling 312/988-5522.]
  3. Expenses: Client will pay the actual, reasonable cost of the following expense items if incurred in accordance with the guidelines below and promptly itemized in Attorney's monthly bill:
    • Reimbursable expenses: Actual cost for necessary long distance telephone calls, telecopying (___¢/outgoing page), overnight or expedited delivery, couriers, photocopying (___¢/page), postage, court fees, and other expenses approved in advance by Client or as listed below:
      • Expedited or emergency services: Attorney is expected to avoid using expedited or emergency services, such as express delivery services, couriers, telecopying, overtime, and so on, unless necessary because of unexpected developments or extremely short deadlines. Client may refuse to pay for any such expenses when incurred routinely or because of Attorney's failure to manage the matter efficiently.
      • Computerized research: Attorney is expected to use computerized research services cost-effectively to reduce time spent on research, for example, while closely- monitoring computerized research to insure that the charges are reasonable and necessary. Attorney is expected to pass through to Client any discounts or other arrangements that reduce the cost of computerized services.
      • Photocopying: Attorney is encouraged to use outside copying services to reduce the cost of copying, provided that these expenses are incurred and billed in accordance with this Agreement. Attorney is responsible for insuring that all copying complies with copyright obligations.
      • Transcripts: Transcripts should not be ordered without prior approval from Client. Transcripts should not be ordered on an expedited basis unless necessary and approved in advance by Client. Attorney should obtain computerized copies of transcripts when available at a reasonable cost to avoid charging for time spent digesting or indexing transcripts.
      • Travel: Travel expenses within the firm's local or metropolitan area will not be reimbursed if the time spent in transit is billed. Travel outside the metropolitan area may only be reimbursed if the travel was approved in advance by Client. Time spent in transit, locally or otherwise, may be billed only if (a) Attorney is unable to avoid travelling by using other forms of communication and (b) Attorney is unable to bill time in transit to other clients. Travel by more than one person at the same time to the same destination is not allowed without prior approval from Client. Reimbursable travel expenses, if approved in advance, are the cost of transportation by the least expensive practicable means (e.g., coach class air travel, rail travel to nearby destinations), the cost of reasonable hotel accommodations, and the cost of transportation while out of town (e.g., by cab or rental car, whichever seems reasonable, at the lowest available rate).
    • Non-reimbursable expenses: The following expenses will in no event be reimbursable, unless specifically agreed to in advance in a writing signed by Client:
      • Meals, overtime, word processing or computer charges, personal expenses, expenses that benefitted other clients, expenses for books, temporary employees, periodicals or other library materials, filing or other document handling charges, clerical expenses, stationery and other supply expenses, utilities, and any other expense that is either unreasonable or unnecessary. (The fact that the firm charges other clients or that other firms charge their clients for an expense does not make it reasonable or necessary.)
      • Experts, consultants, support services, etc.: Attorney is not authorized to retain experts, additional counsel, consultants, support services, or the like without prior written approval signed by Client. Attorney will be responsible for selecting and managing the services of others so that their services and expenses will be rendered in accordance with the terms of this Agreement, including terms applicable to Attorney. Attorney will manage others to obtain cost-effective services for Client. Unless otherwise agreed in writing, Attorney shall obtain a written retainer agreement, in a form specified by Client, from each service provider, with bills from each provider being sent to both Attorney (for management purposes) and Client (for review and payment).
      • Expenses passed through at actual cost: Client will not pay any markup for expenses. Client will only reimburse the Attorney for their actual out-of-pocket cost.
      • Overhead not charged to Client: Client will not pay for any "expense" items that are in fact part of Attorney's overhead which should be included within Attorney's fee.
      • Advance approval of expenses: In addition to the items noted above, Attorney shall obtain advance approval from Client before incurring any expense in excess of $ ________ if Attorney expects to be reimbursed for that expense. Client may refuse to pay any expense for which advance approval is not obtained by Attorney.
      • Copies of receipts for expenses: Attorney shall include copies of receipts for all expenses in excess of $ _______ with the itemized monthly bill. Client may refuse to pay any expense item for which documentation is not provided by Attorney.
      • Expenses (and fees) after termination: Upon termination of the representation, Attorney shall promptly bill Client for any remaining reimbursable expenses and fees. Client may refuse to pay any fees or expenses not billed within 45 days of termination of the representation. Attorney is also expected to cooperate promptly with all aspects of termination and transition to other counsel. Payment for fees and expenses is contingent upon prompt, full cooperation.
  4. Bill and expense documentation: Attorney understands that he or she must have documentation to support all aspects of each bill, including fees and expenses, and must maintain that documentation until at least one year after the termination of the representation. This documentation shall be made promptly available by Attorney to Client (or Client's designated representative, including an accountant or legal bill auditor) upon Client's written request. Attorney agrees to cooperate with any examination of this documentation and Attorney's fees and expenses, e.g., by responding promptly and completely to any questions Client or its designated representative may have. Attorney shall notify Client in writing at least 60 days in advance of destroying any such records and, in the event that Client requests that they be preserved, shall preserve them at least one additional year (with Client responsible for paying the actual cost of storage). This documentation shall include, for example, original time records, expense receipts, and documentation supporting the amount charged by Attorney for expense items generated by the Attorney or his or her firm. Client reserves the right not to pay any fee or expense item for which sufficient documentation is not available to determine whether the item was necessary and reasonable.
  5. Billing system requirements: Attorney should discuss the capabilities of his or her billing system with Client before rendering the first bill. Client should receive a computerized version of each bill, together with a paper copy, to facilitate bill review.

F. Payment terms: Attorney bills complying with this Agreement are due and payable upon receipt. If the bill materially fails to comply with the requirements of this Agreement, then it is not due and payable until its deficiencies are remedied by Attorney. Client is entitled to a 1% prompt payment discount if a bill is paid within 15 days of receipt by Client or correction of deficiencies by Attorney, whichever is later, (or if the bill is satisfied by funds held by Attorney, e.g., in a trust account). Client shall not be liable for interest or other late charges unless specifically agreed to in advance in a writing signed by Client.

G. Advance fee (so-called retainer) payment: [Retainers are often abused, but because they are so common, a standard term is included here.] An advance payment against fees (sometimes called a "retainer") of $_________ has been paid by Client to Attorney. The retainer is to be held in Attorney's trust account and applied to Attorney's bills, both fees and expenses, as earned by Attorney in accordance with this Agreement. Payment of the retainer does not, for example, release Attorney from the obligation to provide detailed bills and itemized expenses, which Client may dispute, or to obtain advance Client approval as required by this agreement. In the event of a dispute as to any amount paid from the retainer, Attorney shall retain the disputed amount in trust until the dispute is finally resolved.

H. Budgets: Attorney has (or will by __________ [date or number of days]) prepared an estimate or budget of the likely cost, by task, of this matter, including fees and expenses, and a plan for handling the matter. Attorney will update the budget and plan at least once every three months. In the event that Attorney obtains information indicating that the budget (or any line item) may be exceeded by more than five percent, he or she will notify Client of that immediately. In a written statement accompanying each bill, preferably in tabular form, Attorney will reconcile the budget with each month's bill, e.g., by explaining whether the billed amounts, by task, are more or less than the amounts budgeted therefore. Client shall have the right not to pay any amounts that are over budget or not included within the budget.

I. Staffing and matter management: Attorney has been retained specifically because he or she, personally, is understood by Client to be able to handle this matter. Employment of additional individuals, whether attorneys, paralegals, or others, who will bill time to Client is not permitted without the advance written approval of Client.

  1. Staff changes: Changes in staff, e.g., replacement of an attorney as well as increases or decreases in the size of the staff, must have the advance written approval of Client. Client expects to receive discounts or other concessions so that any increases or changes in staff will not result in unnecessary or unreasonable charges to client, e.g., for training, internal conferences, and management.
  2. Duplication of effort: Unless advance Client approval is obtained, Attorney will not have more than one time-keeper bill for court appearances, attendance at depositions and meetings, including meetings with clients, and internal conferences. In the event that more than one person attends, only the time of the person with the lowest rate will be billable. Attorney is not permitted to use this matter to provide on the job training for personnel without Client's advance approval.
  3. Matter management: Attorney is responsible for managing the matter cost- effectively and competently, e.g., by insuring that additional personnel are competent, properly supervised, efficient, and in compliance with the terms of this Agreement as well as ethical obligations.
  4. Communications: Client will expect that all communications between Attorney and Client will be reviewed by Attorney and that Attorney will serve as the point of contact for this matter, including billing questions. The point of contact for this matter at Client is __________________________ [name].
  5. Case monitoring: Client will be advised promptly by Attorney of all significant facts and developments in the matter so that Client may manage the matter effectively and make informed decisions about strategy, tactics, settlement, scheduling, and so forth. Client will promptly receive from Attorney copies of all orders, opinions, pleadings, briefs, memoranda (internal and external), correspondence, and any other document material to this matter. As to discovery materials or exhibits that are lengthy, Attorney should discuss them with Client before providing a copy. Documents available in computerized form should be provided in that form as well as on paper.
  6. Case control: Attorney shall discuss all significant issues of strategy and tactics, including motions, discovery, pleadings, briefs, trial preparation, experts, and settlement, with Client before implementation. Attorney is expected to exercise independent professional judgment, but to implement the decisions of Client.
  7. Attorney cooperation: Attorney will cooperate with Client or Client's representatives to provide promptly all information Client requests or needs about the matter or Attorney's bills.
  8. Client cooperation: Attorney should consult with Client about all opportunities for Client to save money or make use of Client's expertise to assist in, e.g., responding to discovery, preparing for trial, locating experts, and the like. Client may also have personnel and facilities available to reduce the expense of litigation.

J. Confidentiality and public relations: Attorney is not authorized to waive or release any privilege or other protection of information, confidential, secret, or otherwise, obtained from or on behalf Client. Attorney is to keep all confidential, privileged, or secret information confidential. This requirement is perpetual, i.e., it will continue even after the termination of the relationship and this Agreement. This requirement is also intended to prohibit Attorney from using information obtained from or on behalf of Client, including work product prepared at Client's expense, for other clients of Attorney or his or her firm, without Client's advance written approval. Attorney is not authorized to identify Client as a client, e.g., for purposes of marketing or advertising, without Client's prior approval. Upon termination of the representation, Attorney agrees to return promptly all information obtained from or on behalf of Client to Client. Attorney is not authorized to communicate with the public, including the press, about Client or this matter without the advance approval of Client.

K. Ownership of Attorney work product: Attorney understands that all work product prepared by Attorney or his or her firm at the expense of Client (or for which Client is otherwise billed) is the property of Client. This work product may not be used by Attorney or his or her firm nor disclosed by Attorney or his or her firm to others, except in the normal course of Attorney's representation of Client in this matter, without Client's prior written approval. Attorney agrees that Client owns all rights, including copyrights, to materials prepared by Client or by Attorney on behalf of Client.

L. Dispute resolution: Attorney and Client agree that all disputes regarding Attorney's fees or expenses are to be resolved by binding arbitration, pursuant to the commercial rules of the American Arbitration Association, by a single arbitrator appointed in accordance with those rules, located in _______________. [Whether you want to use this term may depend upon your feeling about binding arbitration. Firms should also be aware that in some jurisdictions, including the District of Columbia, certain disclosures must be made or there are other ethical restrictions on mandating fee arbitration for clients. Some bar authorities offer fee and other types of arbitration that may cost less than AAA or other commercial arbitration options.]

M. Governing law, modification of this Agreement, entire agreement: This Agreement is to be interpreted in accordance with the laws of _____________ and with the ethical requirements of that jurisdiction. The Agreement may not be modified in any way without the express, written agreement of both parties. This represents the entire agreement of the parties.

[Make provision for authorized signatures on behalf of Attorney and Client. For particularly large engagements, consider having a managing partner sign for the Firm, so that the Firm may not later claim that Attorney acted without authority.]

Barrister Square, 108-A South Columbus Street, Alexandria, Virginia 22314
(703) 684-6996 * (703) 684-6998 (fax) * DvlAdvc8 @ AOL.COM (e-mail)


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