Evergreen Retainers – What Clients Need to Know

Fee agreements outlining the scope of legal representation and compensation for the law firm, inter alia, are inked at the outset of every attorney-client relationship.  That contract governs the relationship from start to finish.  If the contract provides for a contingent fee, then the law firm is paid a portion of the award or settlement procured for the client.  If the contract is retainer-based, then the law firm is going to record its work and the increments of time each aspect of its work took to complete, and issue periodic invoices to the client.

The retainer is an amount paid to the firm upfront that the firm’s invoices are billed against.  So, if a client pays a $10,000 retainer, and the firm’s first three invoices are each $2,000, then the firm deducts $2,000 after the issuance of each invoice, and there is a balance of $4,000 remaining.  If the account carries a positive balance after all fees and costs are deducted, the remaining retainer funds are usually reimbursed to the client when the representation ends.

Most retainer agreements are “evergreen” retainers, which require a renewal of the retainer before it is exhausted.  So, if the retainer is $10,000, and the first three invoices are $4,000 each, the client is obligated to renew the retainer after the client receives the second invoice that almost completely depletes the retainer. The language in an evergreen retainer agreement will typically note that, if the client fails to replenish the retainer, the work on the file will cease, or the law firm will withdraw from the representation. This is important for the client to know and accept up front, in order to avoid the penalty fees associated with late payment or be forced to search for new counsel in the midst of litigation or the negotiation of an important transaction.

For these reasons, reading fee agreements provided by your law firm and asking questions about any unclear terms before signing is vital to avoiding surprises and disputes with your legal counsel. These types of disputes can engender mistrust, which no attorney-client relationship can withstand.