A New Century Needs a New Retainer Arrangement

I was involved with managing a litigation file not too long ago. The client had a budget that required its large law firm to be tightly controlled and had asked me to assist in this regard.

Things went off the rails very quickly when the lawyer in charge became angered by the client’s desire to control how he ran the file.

“I’ve heard about you,” he said to me. “And I’ve read some of your stuff. You have a low opinion of lawyers.” It was clear that he was taking the client’s attempt to decide how the file would be managed as a personal affront.

And he was dead wrong about me. I don’t have a low opinion of lawyers. I’m simply disappointed with those who do not embrace positive change that benefits both clients and firms.

While he ranted on, all I kept thinking was, “Wait a minute. I’m the client! I’m paying you to do work on a file that you want to litigate. What’s wrong with me driving the bus on this?”

After our testosterone levels subsided, we kissed and made up. Yet, he did little to change his firm’s standard retainer letter which did a wonderful job of setting out that the file would be managed and staffed exactly how the firm wanted it to managed and staffed.

The client’s role in all this? Pay the bills on time and provide some guidance from time to time.

Sadly that is precisely how we as lawyers have been trained to prepare our retainer letters – to protect ourselves from the client. They are designed with the lawyer in mind, not the client.

And most clients blindly sign retainer letters – much to their later chagrin.

I suggest that it is now time for clients and lawyers to create retainer agreements that are fully negotiated and address the goals of both parties. Clients should not be afraid to challenge the “this is the way we always do things so get out of the way” approach of most retainer letters.

For example, imagine a retainer agreement that includes the following statement of principles from the client’s perspective:

Legal services are expensive, reflecting the skills of the professionals involved and the quality of the work delivered. We respect your knowledge and expertise, and we genuinely hope to be a profitable client of your Firm. At the same time, we must ensure that we receive good value for the money we spend on law firms. In our view, the best way to achieve both fair payment and good value is to manage every matter closely, emphasizing communication and shared responsibility. We look forward to working in partnership with the Firm’s lawyers. Together, we can provide excellent legal work that meets our needs and that adds value to us and your Firm.

To achieve this goal, it is essential you understand the issue behind our legal project and the financial impact of that issue. This means, for example, that we expect the Firm to avoid overstaffing a matter, premature or peripheral legal or factual research, and discovery requests or other projects that are “what we always do” instead of what is appropriate for the particular matter. We will evaluate outside counsel on effective control of costs, as well as on the quality and effectiveness of your advice and work product.

We will not be obligated to pay for legal fees or expenses related to work or activities that do not comply with these rules and policies. The Firm is responsible for ensuring that every professional who does work for us complies with these rules and policies.

And shouldn’t the client get something from all the money it spends on the work product created?:

We expect to receive the benefit of all work product produced at our expense. We have the right to use the Firm’s work product for any purpose without seeking permission.

Now, there is that issue of properly staffing the file:

It is critically important that every lawyer and other professional who does work for us understands and follows the rules in this section. If we determine that there has been a material violation, we will not be required to pay for the services.

Advise us in advance (and receive our consent) of the name, background and hourly rate of each lawyer, paralegal and student whom you intend to involve in our work. It is not acceptable to charge us for any professional who has not been approved by us. If a name appears on a bill and we have not approved that person’s assignment to the matter, we will not be obligated to pay for that person’s time.

Do not assign work that is appropriate for paralegals to lawyers, or work that is appropriate for secretarial staff to paralegals. For example, filing, copying and assembling documents are secretarial tasks that are part of the Firm’s overhead. We will not be obligated to pay for work done at an inappropriate rate. If a student’s, paralegal’s or lawyer’s participation in a matter, or in a particular meeting, is more for the Firm’s training purposes than for our benefit, the appropriate rate is zero. Similarly, an inter-office meeting may be very productive for the client, or may be more for internal training or information. We expect you to bill us in a fair way for these activities.

And about those disbursements?:

We consider the following items to be part of the Firm’s overhead, and therefore we will not pay them as separate charges:

1. Secretarial or staff time or overtime (unless an extraordinary request by us for unusually expeditious service created the need);

2. Library staff time (unless such time is more economical to us as a substitute for time that would otherwise be billed by a lawyer or paralegal);

3. Transportation between home and office;

4. Meals for Firm lawyers, paralegals, students and staff;

5. Telephone charges within a country, including cell phone charges, and any charges for calls from or to airplanes;

6. Fax charges;

7. Charges for communication or deliveries between the Firm’s offices;

8. Firm office supplies (including tabs, binders, dividers, CDs/DVDs, etc.);

9. Postage;

10. Charges for scanning documents, CD/DVD duplication or “mastering,” word processing or any internal charge for document production, printing or photocopying;

11. Any mark-up or surcharge on any disbursement, or any charge that does not take account of any discount that you received from your supplier;

12. Time spent on conflict checks, preparing bills, or responding to questions about bills;

13. Firm charges for “document retrieval” or “filing;” and

14. Other “office” or “overhead” charges.

Forward-thinking 21^st Century firms will re-jig how they do business to take into consideration the above points in order to foster a team approach with the client and thereby maintain a happy solicitor/client relationships.

Oh, and what happened with the angry lawyer at the beginning of this article? I’ll leave that to your imagination….

P.S. The wording in my new age retainer agreement was taken from one in use by a major multi-national corporation. It is not fantasy.