Untangling Attorney Retainers from Creditor Claims

Clients will often use a retainer to secure an attorney’s representation. But clients in economic distress may have creditors that are eager to access the client’s funds in the attorney’s hands. Attorneys, clients, courts, and regulators have struggled to understand who has the best claim to such retainer funds. In this Article, we attempt to untangle the most common areas of confusion.

We conclude that Article 9 of the Uniform Commercial Code (UCC) offers strong protection for an attorney’s interest in client retainers through security interests, even though some courts have misapplied the UCC in this context. Further, we recommend that regulatory bodies create educational programs to help attorneys and courts understand how to apply Article 9 to security interest and also recommend that attorneys help clients understand the benefits and drawbacks of granting a security interest in retainer funds.