If a client deliberately stops paying and the retainer says nothing about interest, can a lawyer require the client to agree to interest as a condition of continuing?
Apply this to your situation
This page answers the general question as of 2005. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.
Plain-English summary
The committee was asked whether, when a client deliberately disregards the agreement to pay fees and the engagement letter or retainer is silent about interest on delinquent balances, a lawyer may condition continued representation on the client's agreement to pay interest prospectively on the past-due balance.
The committee starts from N.Y. State 399 (1975), which held that to charge interest on delinquent accounts a lawyer must tell the client before performing services that interest will be charged, define the delinquency period, and obtain the client's consent, with the delinquency period, the interest rate, and the fee all reasonable. Where interest was not addressed at the outset and the client deliberately refuses to pay, DR 2-110(C)(1)(f) lets the lawyer withdraw (or seek a tribunal's permission to withdraw). But the committee concludes withdrawal is not the lawyer's only recourse. The lawyer may instead negotiate an amended agreement under which, in consideration of the lawyer not withdrawing, the deliberately delinquent client agrees to pay reasonable interest prospectively on the past-due balance for services already rendered or to be rendered.
The committee reasons this avoids disrupting the attorney-client relationship and gives the lawyer an alternative to withdrawing and suing for pre-judgment interest under CPLR 5001. It notes New York's engagement-letter rules (22 NYCRR Part 1215) appear to require an updated letter of engagement reflecting the new interest arrangement, though that is a question of law outside the committee's jurisdiction. The committee expresses no opinion on whether a lawyer may unilaterally impose interest where the agreement is silent. It also notes the opinion assumes the client is able to pay (so nonpayment is "deliberate"), distinguishing the situation from a client financially unable to pay, and that any amended fee arrangement remains subject to DR 2-106(A)'s bar on excessive fees.
In practice
Under the New York Code as it stood at the time, the opinion holds that a lawyer facing a deliberately delinquent client, where the engagement agreement was silent on interest, has an option short of withdrawal: negotiating the client's prospective agreement to pay reasonable interest on the past-due balance in exchange for the lawyer continuing. The committee conditions this on the client being able to pay (so the nonpayment is deliberate, not an inability), on the interest and fee being reasonable under DR 2-106(A), and it flags the apparent need for an updated engagement letter. It expressly declines to address unilateral imposition of interest.
Common questions
Q: If my retainer never mentioned interest, can I still charge a non-paying client interest?
A: The committee concludes you may negotiate the client's agreement to pay reasonable interest prospectively on the past-due balance, as a condition of continuing, where the client is deliberately delinquent.
Q: Is the lawyer's only option to withdraw?
A: No. The committee holds that although DR 2-110(C)(1)(f) permits withdrawal for deliberate nonpayment, the lawyer may instead negotiate an amended agreement adding prospective interest.
Q: Does this require updating the engagement letter?
A: The committee notes New York's engagement-letter rules appear to require an updated letter reflecting the new interest arrangement, but treats that as a question of law beyond its jurisdiction.
Q: Can a lawyer just impose interest unilaterally when the agreement is silent?
A: The committee expressly declines to opine on whether unilaterally imposing reasonable interest would be ethical.
Background and rules framework
The opinion applies New York's former Code of Professional Responsibility. DR 2-106(A) bars illegal or excessive fees (analogous to Model Rule 1.5). DR 2-110(C)(1)(f) and DR 2-110(A)(1) govern permissive withdrawal for deliberate nonpayment and the manner of withdrawal (analogous to Model Rule 1.16). The opinion builds on N.Y. State 399 (1975) and references the engagement-letter rules at 22 NYCRR Part 1215.
Citations and references
Rules of Professional Conduct:
- MR 1.5 (fees; reasonableness); NY DR 2-106(A)
- MR 1.16 (withdrawal); NY DR 2-110(C)(1)(f), DR 2-110(A)(1)
Statutes and rules:
- 22 NYCRR Part 1215 (written letter of engagement)
- CPLR 5001 (pre-judgment interest)
Other opinions cited:
- N.Y. State 399 (1975): conditions for charging interest on delinquent accounts
- N.Y. State 729 (2000): interest on disbursements in contingent-fee cases
- N.Y. City 2000-2: unilaterally imposed interest with notice and opportunity to pay
See also
- NY State Bar Op. 816: Advance payment retainer in the lawyer's own account
- NY State Bar Op. 1050: Up-charging credit card processing fees on a retainer
- NY State Bar Op. 1202: Flat fees, advance payments, and a satisfaction discount
Source
- Landing page: https://nysba.org/ethics-opinion-783/
Get today's answer for your situation
You just read a 2005 opinion on this question. Ezel checks the current New York Rules of Professional Conduct and answers your specific situation, with citations.
Opens in Ezel Pro. Every answer cites the rules it relies on.