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Was mismanagement of a retainer actually legal malpractice?

On Behalf of | Jul 12, 2023 | Legal Malpractice

Professionals operating in an industry where they can do major harm to an individual’s life often require state licensing and professional insurance before they can practice lawfully. Discussions about malpractice often focus on medical professionals, but those in the legal industry can also commit acts of malpractice. When a professional fails to meet basic standards for their industry, the people affected by their failures or incompetence might be in a strong position to take legal action.

Sometimes, the inspiration for a legal malpractice lawsuit is very obvious. A lawyer may have made major mistakes while representing someone, such as showing up to court while under the influence of alcohol. They may have given bad advice contrary to state law or failed to disclose a conflict of interest that affected the guidance they provided a client. However, sometimes malpractice in the legal profession relates to a failure to adhere to certain rules. For example, the mismanagement of a client’s retainer can sometimes constitute legal malpractice.

What are the rules for client retainers?

Given that lawyers typically charge hundreds of dollars per hour for their services and that their final billing statements are often thousands of dollars, it is common to request a large retainer when taking on a case based on the anticipated total cost of their representation. Usually, a retainer will be at least several thousand dollars.

The client will pay the lawyer, and the lawyer will then bill against the retainer. When they have exhausted the retainer funds, they can then request additional compensation from the client. There are a few forms of retainer mismanagement that could lead to legal malpractice claims.

For example, questionable billing practices wherein someone drastically inflates the amount of time they spend on a case or where they fail to provide an in-depth breakdown of the time that they’ve billed against the retainer could lead to malpractice claims. So could the commingling of retainer funds with business or personal assets.

Retainers typically belong in a separate bank account, such as an escrow account, that is separate from the lawyer’s or their law firm’s financial accounts. Failing to maintain a separate account could lead to a claim against the attorney, especially if they’ve inappropriately diminished the retainer and are unable to return the balance to the client at the end of their professional relationship.

For those who believe that their lawyer has mismanaged their retainer, legal recourse may be available. Pursuing a legal malpractice claim related to how an attorney has handled a retainer could force them to change their practices and compensate their dissatisfied clients.