Nonrefundable Fees Permitted In Michigan

In a rare reversal of an order imposing discipline by the Attorney Discipline Board, the Michigan Supreme Court reinstated a hearing panel order of dismissal in a case involving a nonrefundable fee. The court concluded that there was no misconduct: "As written, the [fee] agreement clearly and unambigously provided that the [attorney] was retained to represent the client and that the minimum fee was incurred upon execution of the agreement, regardless of whether the representation was terminated by the client before billings at the stated hourly rate exceeded the minimum. So understood, neither the agreement nor the [attorney's] retention of the minimum fee after the client terminated the representation violated [the charged ethics rules]."

A concurring opinion advises that lawyers would be wise to follow a recommendation "that the [fee]agreement explicitly designate the fee the attorney charges for being hired and state that the fee is nonrefundable under any circumstances."

The board had recommended no discipline "under the circumstances" with restitution to the client. The board's thoughtful and carefully researched analysis is worth a read. The board distinguishes between a general "availability " retainer and an advanced fee and concludes that the failure to return an unearned fee violates ethics rules. In contrast, the court offers virtually no analysis but a great deal of comfort to lawyers. It is worthy of note when a court rejects the interpretation of its regulatory arm that favors the protection of the client, as opposed to parochial self-interest of the profession. (Mike Frisch)