Disgorgement of an Advance Payment Retainer as Interim Fees in a Divorce Case?

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In the closing days of the Illinois Supreme Court's November term, the Court allowed petitions for leave to appeal in six civil cases. Our previews of the new grants begin with In re Marriage of Earlywine [pdf]. Although Earlywine arises from a divorce, it presents an interesting intersection of domestic relations law and attorney retainers.

In conjunction with divorce proceedings, the husband entered into an attorney-client agreement with his attorney, agreeing to pay an advance payment retainer. An affidavit from the husband's mother explained that she, her fiancé, the husband's father and the husband's father's wife financed the retainer. During the dissolution proceedings, the evidence showed that the husband was working only sporadically and the wife was unemployed.

The wife's attorney filed a petition for an award of $5,000 in interim attorney's fees pursuant to 750 ILCS 5/501(c-1), the Illinois Marriage and Dissolution of Marriage Act. The attorney asked the court, if necessary, to order the husband's attorney to disgorge amounts already paid to him.

The Circuit Court granted the motion, finding that the wife was unable to pay her attorney's fees, and an interim award was appropriate. The husband's attorney moved to reconsider, attaching a copy of the attorney-client agreement and arguing that, as an advance payment retainer, the funds had become his property at the moment of payment, and therefore were not subject to disgorgement.

The Circuit Court denied reconsideration, holding that the public policy in favor of placing the parties to a divorce in substantial parity overrode any considerations about the nature of the retainer. Counsel refused to pay, asking that he be held in friendly contempt to facilitate an appeal.

The Second District of the Appellate Court affirmed. The Court began by distinguishing a true, classic or general retainer -- which is intended to ensure the attorney's availability for a specific matter, or during a specific period -- from a security retainer. A true retainer becomes the attorney's property immediately, while a security retainer continues to be the client's property until it is earned.

Ultimately, however, the Court held that the distinction didn't make a difference. Advance payment retainers -- a form of true retainer -- are to be used sparingly, and only to accomplish a specific purpose that some other form of retainer would frustrate. Permitting an advance payment retainer to defeat a claim for interim fees would frustrate the primary purpose of section 501(c-1), which is to ensure that the parties are in substantial financial parity during the divorce proceedings, the Court held.

Besides, the Appellate Court found, Section 501(c-1) specifically listed "retainers . . . previously paid" as a source for disgorgement. Given that the Legislature didn't choose to distinguish between the types of retainers, the terms of the statute should be given their broadest possible construction. The Court acknowledged in closing that the husband had borrowed the money to finance the retainer from his own family, but held that this fact should not change the result.

Earlywine will likely be decided within four to six months.

 

Topics:  Attorney's Fees, Divorce, Retainers

Published In: Civil Remedies Updates, Family Law Updates, Professional Practice Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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