This essay argues the value proposition of the traditional law firm retainer, particularly for complex litigation that requires sophisticated counsel. When we hear the word “retainer”, we most often understand that concept in the modern, conventional sense: a deposit or advance against fees. That is the most common, modern understanding of a retainer. A party becomes involved in litigation. The party engages counsel. And, as part of that engagement, the law firm requires a retainer of X dollars. The firm then bills against that retainer for work performed. In some instances, firms require evergreen retainers, where the retainer must be replenished as litigation progresses. But there is another, entirely separate concept of a retainer. The traditional retainer: Client A pays Firm B a periodic (e.g. monthly) retainer. That purpose of that payment is to secure the Firm (1) is available to attend to relevant matters that arise for Client A and (2) makes Client A’s matter(s) a priority. The traditional retainer is not paying for any actual legal services. That’s right: Whatever money is paid for this retainer is paid solely for (1) and (2), nothing further. If Firm B is on retainer to provide advice regarding, e.g., non-compete and trade secret matters and such a matter arises, Firm B is on stand-by to provide guidance/representation. That guidance/representation is provided under whatever fee arrangement exists between the parties— but that money is separate and apart from the monthly retainer. I now will explain how this type of engagement should be structured and why this type of arrangement can be incredibly beneficial to the client.
- Structure. This guidance generally is not intended for individuals. Instead, it is intended primarily for corporate entities. Where applicable to individuals, it is applicable only only for those individuals who have a specific reason to need specialized counsel on retainer. Simply stated: Individuals who fall into that category already know exactly who they are. So let’s address how this should be structured. A hypothetical is helpful: Client A is a rapidly growing start-up company that has raised $50 million in investments. Because Client A is rapidly growing (and rapidly hiring employees), it occasionally encounters static from competitors regarding non-compete and trade secret issues. Knowing this, Client A engages Firm B. Client A pays a monthly rate of, e.g., $5,000. This is purely as a retainer. When any issues arise in the relevant wheelhouse, Firm B is available and can prioritize the matter. The arrangement also provides for discounted rates. If Firm B would normally charge $5,000 to advise on X type of problem/issue, clients on retainer pay half that, or $2,500. And, if Firm B has good business sense, they welcome calls from Client A and charge them nothing for a routine phone call, touch base, quick question, etc.
- Value. This model has value in numerous ways. Most significantly: (1) Client A knows that if stuff hits the fan in this wheelhouse, it has go-to counsel. (2) Client A establishes a relationship with Firm B, such that it does not (should not) have to worry about Firm B pushing unnecessary litigation, creating unnecessary work, or improperly attempting to monetize every potential litigation situation. (3) As long as Firm B has good business sense and is not dumb, that means Client A has an open line to this problem solver and will not get billed for short calls/emails and things of that nature. Sometimes, particularly when confronted with complex, high-stakes problems, having a trusted, strategic advisor and partner to bounce ideas around with even for 20 or 30 minutes can be extremely valuable. If Firm B is on retainer at $5,000 a month just to secure their availability/priority, they would be crazy to bill clients for that 30 minutes or hour. Basically, this creates an open flow of communication and a true sense of partnership. (4) Having some of the best lawyers on retainer ensures that the other side cannot hire them. Ruthless, perhaps, but true.
Jonathan Pollard is a competition lawyer based in Fort Lauderdale, Florida. He has extensive experience litigating complex, high-stakes non-compete, trade secret, and unfair competition cases. His office can be reached at 954-332-2380.
