Retainer Agreement, Section 1717: Law Firm Suing For Breach Of Oral Agreement To Provide Legal Services, Based On Continued Applicability Of Retainer Agreement, Resulted In Law Firm Exposure Under Retainer Fees Clause

Ex-Clients Won $38,841 In Section 1717 Fees After Prevailing On A Summary Judgment Motion.

            Many California retainer agreements between lawyers and clients have attorney’s fees provisions and provisions indicating that any further requested work, even if oral, will proceed under the terms of the written retainer agreements. When both of these features are present, the next case shows that law firms can face exposure for losing under these terms, even under an oral breach of contract theory for continued work, based on the written retainer fees clause and Civil Code section 1717.

            What happened in Kinkle, Rodiger & Spriggs v. Graffam, Case No. E067370 (4^th Dist., Div. 2 June 27, 2018) (unpublished) is that the law firm represented defendants in multiple litigation cases under a retainer agreement with the corporate defendant having a fees clause and a provision that any requested further oral services would proceed under the written retainer agreement terms—very standard provisions in many retainers. Although defendants thought they had satisfied any receivable with the firm, 14 months later they received an invoice for asserted fees. When it was not paid, law firm sued, asserting breach of oral contract and common counts. The trial judge, based on a summary judgment filed by defendants, decided the individual defendant had no retainer agreement with law firm and that the corporate defendant had satisfied any outstanding receivables through payments or other arrangements.

Defendants moved to recover $42,883 in fees based on the retainer fees clause, with the lower court granting them $38,841.

            Law firm appealed the fee award, not contesting the summary judgment on the merits. However, the appellate court decided that law firm was relying on the retainer agreement based on it binding both sides as far as any future services provided even without the signing of a new written agreement. Given that law firm would have recovered had they won on this theory, section 1717 also entitled defendants to fees as the prevailing parties.

            BLOG OBSERVATION—This result may make some firms reconsider whether a fees clause is a good idea in retainer agreements. There are pros and cons on both sides, but the fees clause here did give rise to exposure.