Attorneys Not Allowed to collect Attorneys’ Fees from Clients

Thankfully, a New York court has held that the following provision in a retainer agreement is unenforceable:

"If client fails to pay for charges due under this
agreement and the law firm takes legal action and is awarded such
charges, client shall owe to law firm costs, expenses and attorneys’
fees (including but not limited to the reasonable value of the law
firm’s own work) attributable to law firm’s collection proceedings
and/or action."

The court found the provision "to be fundamentally unfair and unreasonable."

"Aside from its lack of mutuality, the clause, even if not so designed,
has the distinct potential for silencing a client’s complaint about
fees for fear of retaliation for the nonpayment of even unreasonable
fees"

Well, I couldn’t agree more.  If you see that kind of language in your retainer agreement, walk away from that attorney or law firm.

A little background knowledge to take away:

In New York,  attorneys are required to enter into a written agreement with their clients setting forth the important points of the attorney – client relationship, a so called Retainer Agreement or Letter of Engagement.  That is good a good thing, because your attorney is the last person you want to engage in a "he said, she said" kind of argument.  (There are exceptions: fees expected to be less than $3000; client already hired attorney on similar matter; for more info on the rule look here.)  But, outrageous provisions like the one above should not be part of a retainer agreement.

For more commentary on the case look here.

About Imke Ratschko


Imke Ratschko is a New York Attorney helping small businesses, business owners and entrepreneurs with all things "Small Business Law," such as litigation, contracts, business owner disputes, shareholder and operating agreements, sale or purchase of a business, investors, and starting a business. You can reach her at 212.253.1027.

One comment

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