DennisBeaverMay 27, 2006 (Original publish date) • By Dennis Beaver

There are more than 200,000 lawyers in California. It is a number vastly in excess of what’s needed, resulting in some clients becoming victims of their own attorney’s greed. As a great deal of the work lawyers perform is done out of the client’s presence, and attorney fees are in general confusing, it is easy to rapidly burn through the client’s money. Mark, a Fresno reader, sent me the following e-mail, and his complaint is one of many I have seen over the years showing the same kind of abuse.

I paid a Bakersfield attorney $4,500 one month ago to handle my divorce case, and now all the money is used up and he wants more. We had two court appearances, one of which he never showed up for, and the other, was an hour late, totally unprepared for the hearing and I lost visitation with my kids. I terminated his services that day.

He charges $295 an hour for his time and $145 for his paralegal. The bill he sent me seems to have been created just to eat up my initial payment, with over six hours alone in filling out OSC papers. Would you look at the contract and bill and tell me what you think?

No refund

My reader attached a copy of the attorney’s Retainer Agreement, documents filed in court and bill. My blood pressure must have attained new records, as it was all a real piece of work.

To begin with, the retainer agreement spoke of a “non-refundable deposit.” That is a huge red flag. There are very few attorney client relationships in which a retainer of that amount can be non-refundable. The contract read: Client has deposited $4,500 which is non-refundable and considered earned. There will be no refunds of this initial deposit which is in exchange for our agreement to represent you.

When you see “No Refund” language in an attorney fee agreement, as Captain Kirk, Esq. would say, have your Shields Up and Fazers on Stun. There is no possible justification, in my opinion, for “No Refund – All Earned” language in any divorce case. I have yet to get a reasonable explanation from the lawyers who use this language in family law matters, but when the subject comes up, you should see the looks that I get. There is no greater “No No” in the profession than exposing another lawyer’s bill as excessive, unless it is to suggest that malpractice has occurred. On both counts, that’s what happened to my reader.

You might wonder if a “No Refund – Fee Deemed Earned” agreement is legal. “Only under very specific circumstances,” according to the State Bar of California. “Such language in a written fee agreement is suspect,” I have been told by a number of State Bar employees. When you speak with their Complaint Desk, you will find that this area is a leading source of complaints about lawyers.

If you are about to hire an attorney, or have already done so and paid a significant retainer, get out that fee contract now and read it. “Merely because the agreement specifies the deposit is deemed earned or non-refundable does not make it so,” a State Bar employee told me. “If the contract states that attorney fees are billed at a certain hourly rate and deducted from the money on deposit, then the lawyer can’t have a no-refund policy. Unused money must be returned to the client,” I was told.

A number of years ago, the State Bar established a method of keeping lawyers and clients out of court over attorney fees. It is called Mandatory Fee Arbitration. If you go online and pull up Arbitration Advisory 01-02, the problem of “No Refund” contracts is discussed in great detail, as well as another important issue: Unconscionability.

If you have a dispute with an attorney over fees that seem to be unfair, this legal concept may well apply, as it means that the fee charged “must not shock the conscience. It must represent reasonable compensation for the work done.”

So, in the case where a DUI defendant pays $7,500 to retain a lawyer, and that lawyer makes two brief court appearances and pleads the client guilty, an argument could be made that the fee is unconscionable and a portion should be refunded. I must point out that Retainers in the area of Criminal Law are complicated, and it is common for a lawyer to quote a flat fee, as the client may not be paying per hour, but for the entire case.

Read and question the contract

A client is always free to negotiate an hourly rate. Find out in advance – by going online or asking friends who have hired an attorney – what the going rate is for the legal services you need. That said, few people are comfortable in negotiating, especially if your back is up against the wall and you desperately need help. “That’s one of the reasons Fee Arbitration was created, giving a client the chance to have that attorney fee examined after the case is over, should there be a suspicion of excessive charges,” my State Bar contact told me.

Hourly fees charged for support staff

There was something else that really upset me in Mark’s fee agreement. While the attorney’s hourly rate was in the range of what other family lawyers charge, $145 for a paralegal in a divorce case is outrageous, in my opinion. The average, in the San Joaquin Valley is around $65 to $85 an hour. There are a few, but very few, in the $125 an hour category, but in highly technical, corporate litigation support areas.

No malpractice insurance

Written fee agreements must disclose if the lawyer has malpractice insurance. I can’t imagine running a law practice and not having malpractice insurance. Lawyers do on occasion make mistakes – we all do, some that have real consequences for the client, and others that do not. But there are a lot of things a lawyer can do wrong that will hurt a client, such as failing to correctly value a pension in a divorce case, or simply forgetting to file a lawsuit on time. It could cost you a fortune, and I have seen it happen. That’s why malpractice insurance exists, to protect the public from a lawyer’s mistake.

Mark’s lawyer proudly announces, “I have no malpractice insurance,” in his fee agreement. Why? The answer is that it is easier to deal with an insurance company than an uninsured lawyer, and having no insurance just might discourage malpractice suits from being filed. That may be true, but it is a poor commentary on the concern such lawyers have for the public.

Money – all gone

The bill Mark received showed an impossible amount of time spent on paperwork. His lawyer charged for six and a half hours filling out simple forms, on a day that he was in court on other cases. He billed huge amounts of time for paralegal work and it was an obvious scam. When I saw that, I picked up the phone and called his former lawyer.

Our chat – with Mark conferenced in – was brief. “If this goes before Fee Arbitration, you are going to lose, big time,” I said. “Your bill has been re-calculated using credible hourly rates. You owe him a refund of $2,500, and he needs the money immediately so that he can hire a new attorney,” I said.

Within minutes, a settlement agreement was faxed to my office and that day Mark received his refund – $2,500. He hired a new lawyer – at fair hourly rates – and the case is moving toward settlement.

One final note. In an effort to keep Mark silent, the “Settlement Agreement” had a confidentiality clause, forcing Mark to keep quiet about the refund. “To even attempt that is illegal in California, and could easily result in his former lawyer having real trouble with the State Bar,” one of their ethics experts told me. “It does not matter what is signed, as the client always has a right to bring a matter to the attention of the Bar.”

Which is just what Mark is thinking over right now.

Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.