Calling the fee "nonrefundable" concisely and effectively conveys the message that the lawyer can earn the fee with relatively little work. My concern with it, as illustrated in the first scenario below, is that using the word nonrefundable can be misleading.
N athan Crystal recently drafted an insightful article for his SC Lawyer "Ethics Watch" column offering some good criticism of the recent ABA opinion on trust accounts: "The ABA Sets Tough (and Perhaps Unsound) Standards for Advance Payment of Legal Fees."
Perhaps I'll write more on this later, but for now I'll say that I agree with Nathan that the ABA Opinion 505 is too restrictive. That said, I am not a fan of "nonrefundable" fees.
I understand well the concepts of general and engagement retainers, but just as the ABA opinion points out, these fees might have to be refunded in certain circumstances. For example, the lawyer promises to be available for a certain task (but not to actually complete the task) in exchange for an engagement retainer. She ends up not being available for whatever reason. Reasonableness requires that the fee be refunded. Why not come up with a different name that avoids the risk of misleading the client?
H ere’s another scenario where the concept of the "nonrefundable" fee makes sense, (though again I think we should find a different word): I'll use the example of the great criminal defense lawyer, Gerry Spence, who as far as I know has never lost a criminal jury trial though he has had many. Assume for the purposes of this illustration that Gerry charges an nonrefundable fee of $50,000 on a criminal matter.
The charges are dropped before the prosecution is even aware that Gerry is on the case. In this situation, the fees should be refunded. I believe this is the position the Restatement Third of the Law Governing Lawyers takes. (See §34, Illustration 1 - That example uses a flat fee as opposed to a nonrefundable one.) So again, the word "nonrefundable" is not appropriate, though the concept of this kind of fee is perfectly reasonable.
Assume the prosecution drops the charges after learning that Gerry is on the case. Perhaps they had a weak case and were shocked to find that the client was able to hire Gerry. In this situation, Gerry keeps the fee. Of course, there would have to be a deeper analysis to determine that the fee is reasonable, but the idea is that the fee is earned because the client got the case resolved quickly and suffered far less stress and worry because Gerry's years of experience and reputation might have had an impact on the charges being dropped. Again, I think this is consistent with the Restatement Third's position.
I haven't read the legislative history, but my guess is that this is why South Carolina allows "nonrefundable" fees in criminal matters under state law. See SC Code § 40-5-390 (2022). Calling the fee "nonrefundable" concisely and effectively conveys the message that the lawyer can earn the fee with relatively little work. My concern with it, as illustrated in the first scenario above, is that using the word nonrefundable can be misleading.
Lawyers deserve to be paid appropriately for their work, the reservation of their time, and in some instances the power of their influence. Clients deserve fairness and transparency with fees. The ultimate goal of any fee arrangement is to accomplish this in alignment with the engagement agreement on file, the rules of the relevant jurisdictions, and the lawyer’s personal philosophy of lawyering. There is seemingly always a possible scenario where it is appropriate to refund a “nonrefundable” fee, so perhaps it’s time to rebrand it.