Page 29 - Sharp-Hundley 2012

Sharp Thinking

No. 70 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. August 2012

Retainer Moneys May Be Diverted to Opponent

In Marriage Dissolution Actions, Court Holds

By Rebecca L. Reinhardt, Rreinhardt@lotsharp.com, 618-242-0246

An attorney may be forced to turn over to the opponent retainer moneys
received in a dissolution-of-marriage action, regardless of the fee structure
arranged with the client, a panel of the Illinois Appellate Court ruled last
month.

In a decision that is sending shock waves around the Illinois family law
bar, the Second District Appellate Court in Earlywine v. Earlywine, 2012 IL
App (2d) 110730, held that a court, in a dissolution-of-marriage action, can
order that funds held by one party’s attorney be turned over to opposing
counsel as interim attorney fees. This ruling not only applies to client trust
accounts, in which funds are owned by the client, but also to funds which
have been provided to the attorney as an “advance payment retainer” and
which have been placed in the attorney’s operating account as property of
the attorney. Reinhardt

As decreed in Dowling v. Chicago Options Assoc. Inc., 226 Ill.2d 277 (2007), Illinois law
recognizes three types of “retainers” paid by clients to attorneys: the classic or general
retainer; the security retainer; and the advance payment retainer. The classic
or general retainer is paid by a client to the lawyer to secure the attorney’s
availability during a specified period or for a specific matter. This type of
retainer is earned upon receipt and immediately becomes the property of the
attorney. This is often set as a flat fee and must be kept separate from the
client’s funds. The security retainer is an unearned retainer placed in a trust
account, where the client retains ownership interest. The attorney generally
bills against the separate account once the fee has been earned. Any unused portion of this retainer
is returned to the client. The advance payment retainer consists of a present
payment to the attorney in exchange for the commitment to provide legal
services in the future. Ownership of this retainer passes to the attorney
immediately upon payment. Because of the ethical obligation to segregate
client funds from that of the attorney, these funds are generally placed in the
attorney’s general operating account. The classification of the retainer
type is based in contract law and principle, the primary objective being
to give effect to the client and the attorney’s intent.

However, in stark contrast to principles of contract law and classification of the type of retainer an
attorney receives are the public policy concerns involving individuals in a dissolution-of-marriage

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Sharp Thinking is an occasional newsletter of The Sharp Law Firm, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp
Thinking shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein
constitute educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal
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