Flat percentage fee shifting provision in a Maryland Retainer Agreement is Unenforceable

Most Retainer Agreements (also known as Engagement Agreements) contain a fee shifting provision, which provides that the client will be responsible for any legal fees and costs incurred if the law firm sues the client to collect its fees.  Typically, the fee shifting provision will state that the client is responsible for the law firm’s reasonable legal fees and costs.  Reasonableness of the law firm’s legal fees and costs incurred in prosecuting its collection case is determined by a judge.

However, there are a few Maryland law firms that still use the outdated language that the law firm is entitled to an award of attorney’s fees in the amount of 15% of the outstanding balanced owed by the client.   The provision for an award of attorney’s fees based upon a flat 15% of the outstanding balance owed by the client is unenforceable.  In Monmouth Meadows Homeowners Association, Inc. v. Hamilton 416 Md. 325, fn.14 (2010), the court of appeals held that “where an attorney is entitled to reasonable fees under the terms of a contract, that attorney is not permitted to define that amount by use of a percentage of a judgment”.






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