That approximately fifteen (15) years ago on a suggestion from Wendy Morgan, my partner at the time, Louis Capozzoli, and I decided to take payments from clients through credit cards.  This allowed our clients to pay their bills by using a credit card.  This did enhance our firm’s revenue. The only  drawback is the discount rate charged by the various credit card companies for using their credit cards.  The discount rates can go as high as 3 ½ % based on the credit card used.  As an example, a Visa Platinum Card that was used for payment came out at a discount rate of 3.31 because of the fact that it not only had airline miles on the card but also a point system that allowed the cardholder to redeem points for merchandise.  These perks, on the high-end cards, are paid for by the merchants. An additional problem results when a retainer is paid for by a credit card.  The customer retains the right, within a reasonable period of time to use a chargeback.  This becomes a very hard problem in divorce cases where the retainers that we collect from our clients are what are known as a security retainer.  A security retainer is where a client pays to the attorney a fund for future services.  The retainer remains the property of the client until the attorney applies it to charges for services that are actually rendered.  Any unearned funds are to be refunded to the client.  The purpose of a security retainer is to secure payment of fees for any future services that the attorney is expected to perform. A chargeback on a credit card for a retainer does not take into effect that the attorney may actually have rendered legal services that are now being withdrawn from the attorney’s account.  The only alternative open to the attorney is to challenge the chargeback.  However, instead of a judge deciding whether or not you receive adequate compensation for legal services rendered, it is some unnamed banker/financial clerk who will make that decision. An even more frightening situation is in the case of a retainer on a criminal case.  Generally speaking, a retainer on a criminal case is what is often referred to as a “true”, “general”, or “classic” retainer.  This type of retainer is paid by the client to the attorney to secure the attorney’s availability for a specific matter or for a specific period of time.  This type of retainer is earned when paid and immediately becomes the property of the attorney, regardless of whether the attorney ever actually performs any services for the client (See Dowling v. Chicago Options Associates, Inc., 226 Ill. 2d. 277, 875 N.E. 1012 (2007)). The situation can become financially disastrous when the attorney is retained by a credit card on a criminal matter.  Suppose that sometime within thirty (30) days of payment of the retainer or a criminal case the attorney is able to work out a satisfactory result for the client.  However, the client, always looking to play the angles, decides to file a chargeback stating that either the attorney did not have authorization to charge the card or the services were defective in some way.  The financial clerk on the other end does not have any experience in knowing whether the attorney did a good or a bad job but has to obey the dictates of the credit card company in removing the retainer from the attorney’s funds.  The only alternative for the attorney is to go through the Chargeback Review and hope that the person on the other end realizes that they have violated Illinois Laws expressed in the above mentioned Dowling, case and return the money to the account of the attorney. In Dowling the Plaintiff commenced proceedings to collect on two (2) Judgments that he obtained against the Defendants.  In the process, the Plaintiff learned that one of the Defendants had paid retainers to his attorneys, DLA Piper, in connection with efforts to protect his assets from the Plaintiff’s Judgments.  The Plaintiff then sought turnover orders on those retainers from DLA Piper.  Initially, the Circuit Court of Cook County ruled in the Plaintiff’s favor and ordered DLA Piper to pay over to the Plaintiff the amount of the retainers.  The Appellate Court affirmed.   The Illinois Supreme Court in Dowling v. Chicago Options Associates, Inc. supra, reversed the Trial Court and the Appellate Court.  The key to the case was the Court’s interpretation of the parties’ written agreement by which the Judgment Creditors agreed to pay the retainer.  It was the Court’s Judgment that this retainer was an “advanced payment retainer” and became the property of the attorney immediately upon payment.  The Illinois Supreme Court stated the following:

“There is yet a third type of retainer, called the “advance payment retainer”.  This type of retainer consists of a present payment to the lawyer in exchange for the commitment to provide legal services in the future.  Ownership of this retainer passes to the lawyer immediately upon payment (citation omitted).  Accordingly, the lawyer deposits a retainer into his or her general account; in fact, an advance payment retainer may not be deposited into a trust account, since a lawyer may not commingle property of a client with the lawyer’s own property 188 Ill. 2d. R.1.15(a)”. 226 Ill. 2d. 287.

The lessons gleaned from the Dowling case are as follows:

1.      Always have a written retainer whether it is a Criminal Case or a Domestic Relations Case or any type of litigation.

2.      Specify in your Criminal Cases, so that it is clear, that this is a General Retainer and that the funds immediately pass and become the property of the attorney for the purpose of working on the specified matter.

3.      In the case of a Family Law Case, which is a security retainer, it must be spelled out that you are receiving a retainer for costs and attorneys fees; the charge per hour; whether there are any minimum charges for telephone calls, letters, emails, voicemails, faxes or text messages; and that any unused funds will be returned to the client.

4.      That all security retainers must be kept in the Client’s Fund Account.  Those attorneys who do not have a Client’s Fund Account that practice Family Law are asking for trouble because the cite above 188 Ill. 2d R.1.15(a) is found in the Code of Professional Responsibility.  The commingling of funds of an attorney with the client’s funds is the number one reason that attorneys get suspended and/or disbarred.

5.      That the Client Trust Account Handbook, put out by the Attorney Registration and Disciplinary Commission of the Illinois Supreme Court recommends on a general retainer that there should be an agreement where the client and the attorney agree that the prepayment is immediate compensation for the attorney’s commitment to perform future services, such as a flat fee agreement, and that said funds are the property of the attorney and may be deposited in the attorney’s operating or business account.  This will ensure that you will not have a problem later on down the line if your client decides to attempt a chargeback and recover all of the fees.

Finally, I have asked the Illinois Attorney General to look into the situation where a client of mine paid the retainer on October 28, 2009 by credit card, for a criminal case scheduled on November 16, 2009.  The case was disposed of to the client’s satisfaction on November 16, 2009.  Unknown to the author, the client had requested a chargeback on November 6, 2009 with the credit card company.  On November 30, 2009 that credit card company took the money out of my general account.  At present I am attempting to get that money back from the credit card company.  I have also written to Attorney General Lisa Madigan as I believe that the credit card company, whether knowingly, or unwittingly aided and abetted my former client in a theft of services.  I could use as much support from Members of the Bar on this issue as possible.  I think that we have to start defending our interests with the credit card companies or we will have to abandon utilizing charge cards for retainers.  If you will support me in this, I would appreciate it if you would email me so that I could present an Electronic Filing Petition to the Attorney General.