Shop Talk: Are Ongoing Retainers Realistic for Every Practice Area?

Is an attorney’s ability to get a client to maintain an ongoing advance retainer driven largely by market conditions?

Law Firm Suites client and litigator, Frank Monteleone, mentions my recent article on client collections in his recent blog post, Stiffed!?! Solving the Problem of Non-Paying Clients.

In his article, Frank offers a 4-part plan to reduce client collection problems. Three of these I completely agree with and employ in my practice. However, in the fourth prong, Frank recommends that all attorneys maintain advance retainers and that attorneys not do work with clients who won’t. Frank also suggests that attorneys are more resistant to the idea of asking for an ongoing retainer than clients are to paying it.

On this point, our experience is fundamentally different.

Litigation Attorneys v. Transactional Attorneys: Divergent Experiences

Frank approaches the topic of ongoing retainers from the perspective of a litigator, me as a transactional attorney. His experience is that clients will pay ongoing retainers, mine is that they typically do not. Both of us have successful practices and I do not believe that either of us are wrong. It made me question the reason behind our divergent experiences.

I thought: perhaps an attorney’s ability to demand and receive advance retainers is driven largely by market conditions?

As Frank points out in his article, litigators in all practice areas cannot easily walk away from a client who does not pay. Often it requires seeking the permission of a judge, who may or may not let the firm out of a case. On the other hand, a transactional firm does not have to jump through the same hoops. It can simply resign.

Is the litigator’s ease in getting an ongoing retainer a function of their increased risk of not getting out of a case?

From a market perspective, is the increased risk that litigators face with a non-paying client factored into their ability to more easily demand and receive an ongoing retainer?

Perhaps because of this risk, more litigation attorneys demand ongoing retainers, making it more customary for clients to pay it (if the client shops around he will find the retainer will be a requirement at most firms)? By contrast, since a transactional attorney can more easily walk away from a client whose account becomes delinquent, does the reduced financial risk factor into their difficulty in getting a client to agree to an ongoing retainer?

An attorney’s services are required to litigate, making it easier to demand an ongoing retainer.

Another thing to consider is the “necessity” of the attorney’s services. A transactional attorney’s work is “preventative” in nature. We draft contracts with the aim that our clients never have to retain litigation services. Think of it like going to your dentist for a semi-annual cleaning.

A client engages in best practices by retaining the services of a transactional attorney. However, the reality is, it is entirely possible for a client to complete a complex business transaction with a contract written on a napkin in crayon…and never have a problem! The services of the attorney are not required to get the deal done.

Compare that to the litigator’s services. If a client is hiring a litigator, they’ve been sued, or need to sue. Where a client could get away with fudging their way through a corporate transaction pro se, they would have little or no ability to represent themselves effectively in court. Hiring a litigator becomes a necessity (and in the case of a corporate client, required by statute).

Why wouldn’t the necessity of the litigator’s services also be factored into the litigator’s ability to more easily obtain the ongoing retainer?

Transactional attorneys across all practice disciplines (from corporate to T&E) have lost a sizable portion of market share to non-attorney legal services. Every year, our work has become more-and-more commoditized.  The ability to collect an ongoing retainer against hourly time is almost impossible, particularly when few transactional attorneys require it.

A “one size fits all” approach to legal collections doesn’t work.

By comparison, the litigation attorney seems to be in better shape.  Though competition among lawyers has increased, the profession continues to retain a monopoly on litigation. In this regard, it seems the two practice areas operate within a very different set of economics.

As such, perhaps the “one size fits all” approach to legal collections no longer works (to the extent that it ever did).

Our firm, like many other transactional firms, has adapted by converting much of our work to fixed fees. Clients like knowing the extent of their legal bill in advance, and therefor are more willing to pay their bill up front. This has virtually eliminated collection problems.

Yet, fixed fees are not practical in every situation, particularly with respect to heavily negotiated, complex, multi-party transactions with opposing counsel. The reality of a transactional practice is, if a firm wants to take on more lucrative deal work, it must accept the risk that (once in a while) it will have to chase a client for fees.