THE ETHICS OF REPRESENTING DEBTORS AND CREDITORS IN BANKRUPTCY

may agree that hourly fees are to be billed against the retainer; if hourly fees exceed the retainer amount the client must pay for the fees in excess, but if hourly fees never exceed the retainer amount the retainer is not refunded.³⁰⁵ The total fee‹including the minimum fee‹must be reasonable in amount, based on all the circumstances.³⁰⁶ One state's highest court has interpreted the ethics rules to preclude any non-refundable fee agreement, deeming them an unenforceable interference with a client's right to discharge an attorney and to limit the attorney's ethical duty to refund unearned fees upon discharge.³⁰⁷

1. A substantial retainer that is not treated as an advance against fees may be considered a fraudulent conveyance if the debtor was or became insolvent, and did not receive fair value for the mere agreement to represent without services actually having been rendered.³⁰⁸
2. It may be reasonable and appropriate for the security retainer to be "evergreen," i.e. not used to pay approved fees until approval of the final fee application.³⁰⁹ Counsel still may not be allowed to withdraw if the retainer is not replenished, however.³¹⁰ If the case is converted, the court may order payments from the retainer disgorged so all administrative professional fee claimants share equally.³¹¹
3. An alternative to a large prepetition retainer taken into income immediately has been used in several cases to meet the same concerns about the financial burden of DIP representation. Significant, complex Chapter 11 cases requiring extensive attorney services and the accrual of substantial fees have been held by some courts to warrant monthly payment of all or most of the fees incurred upon specified notice to interested parties, with regular but more infrequent court consideration of fee applications and authorization to pay any balance held due.³¹² Bankruptcy courts in some districts have adopted guidelines authorizing interim monthly fee payments upon similar reporting requirements.³¹³