When Your Lawyer Quits: Returning Unearned Legal Fees

This post is part of an ongoing series about the obligations lawyers have when terminating (quitting) representation of a client. To start from the original post, click here (the post will open in a new window).

WHEN A LAWYER QUITS OR IS FIRED, UNEARNED FEES MUST BE RETURNED TO THE FORMER CLIENT 

When an attorney-client relationship ends, the lawyer must refund any prepaid fees (which have not been earned) to the client. The refund must be made in full, and must be made promptly–meaning within a short but reasonable time after either the client or the lawyer terminates the attorney-client relationship.

It’s important to note that “unearned fees” means sums prepaid toward a lawyer’s billable fees. This may or may not include “retainers” – which also are sums of money paid in advance, but which may or may not qualify as prepayments for fees. It’s important to ensure that the attorney-client retainer agreement explains in detail whether any “retainer” amounts paid are (a) prepayments for billable fees, or (b) lump-sum, non-refundable amounts paid to ensure the lawyer’s availability to work on a matter. The former may be refundable; however, in many cases, the latter type of retainer is non-refundable from the moment the client pays it.

In addition, it has been held that any fees prepaid by a third party (on the client’s behalf) should be repaid to the original payor, instead of the client.

HOW FAST DOES THE LAWYER HAVE TO REFUND UNEARNED FEES?

Aside from “promptly,” California law does not have a “bright line” rule for the date by which unearned fees must be repaid. However, a California lawyer who failed to refund unearned fees to the client for 2.5 months after the end of the attorney-client relationship was disciplined by the Bar, on grounds that 2.5 months was too long to wait to return the client’s money. (Matter of Lais (Rev.Dept. 1998) 3 Cal. State Bar Ct.Rptr. 907, 912-914, 918)

However, if the amount of prepaid fees earned by or owed to the lawyer is in dispute (i.e., if the lawyer and the client disagree about how much of the prepayment should be returned), the lawyer is supposed to retain the disputed amount in the lawyer’s (or his or her law firm’s) client trust account until the dispute is resolved; at that point, the lawyer must make the refund promptly.

Lawyers have other ongoing obligations after the end of representation, too.

If you believe a lawyer failed to return prepaid fees to which you were entitled, or failed to comply with his or her legal duties after your attorney-client relationship ended (or did not represent you professionally and properly while (s)he was acting as your legal counsel), contact an experienced lawyer immediately for an evaluation of your legal rights.

***

Disclaimer: THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY, AND DOES NOT CONSTITUTE LEGAL ADVICE OR CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN THE AUTHOR OR ROSS LAW AND ANY PERSON.

Your legal rights and experiences may vary. Never use an online article (including this one) to evaluate your legal rights or claims. Consult an experienced attorney promptly to obtain a personalized evaluation of your claims, potential damages, and the various legal rights and options available to you.

You may lose or compromise your rights if you delay in consulting legal counsel. Most legal claims (and defenses), as well as legal and court procedures, are complicated and fact-dependent. If you believe you have a claim against someone who injured you, a lawyer who represented you in a previous lawsuit, or any other legal claim, consult an experienced lawyer immediately for an evaluation of your individual rights and claims.