North Dakota Court: Attorney must return unearned portion of a “nonrefundable minimum fee”

Posted on January 8th, 2014 by Legal Fee Advisors

A July, 2013 decision by the Supreme Court of North Dakota, in the case of In re Disciplinary Action Against Hoffman, 2013 ND 137, 2013 WL 3804043 (N.D., 2013), ordered an attorney to return the unearned portion of a “nonrefundable minimum fee” defined in a written legal services contract, executed by the parties.

In July, 2010 Attorney Hoffman was retained to represent a Client in a criminal matter, involving several felony charges.  The language of the written retainer stated that the Client will pay $30,000 as a “nonrefundable minimum fee,” and that the Client will be billed additionally for any fee due over this minimum fee.  In exchange for such fees, the Attorney agreed that he would defend the Client until a dismissal or sentence, including a potential jury trial.  After the Client terminated the Attorney’s employment a few months later, the Attorney refused to return the “unearned portion” of the $30,000 “nonrefundable minimum fee.”  A Hearing Panel of the Supreme Court recommended Attorney’s reprimand, and ordered return of $25,460 to the Client, as well as the costs of the disciplinary proceeding.  The Court held that even though a nonrefundable minimum fee was reasonable under the circumstances, the Attorney violated rules of professional conduct by failing to refund the unearned portion of the fee.

In deciding on the matter, the Court stated that “all fees are subject to an analysis of reasonableness.”  Therefore, even though nonrefundable retainers are not prohibited, a retainer should not prevent the client from discharging his attorney, or create a windfall for an attorney.  Therefore, only those fees that are actually earned are considered reasonable, regardless of the wording of the retainer agreement, because lawyers “owe their clients greater duties than are owed under general contract law.” In re Disciplinary Action Against Hellerud, 714 NW2d 38 (N.D., 2006).

Enisa Tutovic

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