When a retainer is paid by someone other than the client, who is entitled to a refund of unearned fees?

My client’s mother put up the $1,000 retainer I required to take the case.  The client has now terminated me and wants me to pay him the unearned portion of the retainer, about $500.  May I do that?

There is nothing wrong with having your fees paid by someone other than your client, so long as there will be no interference with your independent professional judgment and the client gives informed consent to permit the arrangement.  See Rule 1.8(f).

When entering into such arrangements, it is critical that you reach a clear understanding with your client that the third-party payer (here, the client’s mother) regarding ownership of the retainer at the outset of the representation.  Since the funds are unearned, they should be deposited in your trust account and disbursed as they are earned by you pursuant to Rule 1.15(d).  If the need arises for a partial refund of the retainer pursuant to Rule 1.16(d), you will have a clear agreement to guide you as to who should receive the refund.  If both the client and the third-party payer assert a right to the money and you did not reach a prior understanding as to who is entitled to the refund, you are obligated under Rule 1.15(f) to hold those funds in your trust account until the dispute is resolved.

Mark W. Gifford
Bar Counsel
(307) 432-2106

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