Managing cash flow is a challenge for all businesses and, in particular smaller businesses. This probably explains the appeal of flat fees or the so-called “nonrefundable retainer,” i.e., lawyers propose money up-front in exchange for work to be performed over time, with the up-front agreement that the retainer is “non-refundable.” In exchange for the immediate access to cash, the lawyer may offer a reduced hourly rate for, say, the first 10-20 hours of work.
Of course, the notion of a “nonrefundable retainer” is arguably an oxymoron. It is also arguably unethical in that, depending on how things play out, it can result in payment for nothing.
On the other hand, in some circumstances, payment for nothing is fair compensation? Let’s say, for example, that a client asks that her lawyer be “on call” for a possible engagement. The lawyer must clear her calendar and keep it open; if the engagement does not happen, the lawyer has “spent” that time and may deserve compensation?
The latest amendment to the ethics rules seeks to balance these two scenarios so clients are not stuck paying for nothing but lawyers may recover the value of lost “opportunity costs.”