Supreme Court: Lawyer's "Retainer Fee" Includes Both Initial and Success Fees

Judgment in Lawsuit Over Remaining Estate Between Father-in-law and Daughter-in-law
Appellate Court: "Retainer Fee Means Only Initial Fee"... Supreme Court: "Misinterpretation of Legal Principle"

The Supreme Court has ruled that the retainer fee paid for hiring a lawyer should be understood as a concept that includes both the initial fee and the success fee paid after winning a case.

According to the legal community on May 5, the Supreme Court's Second Division (Presiding Justice Oh Kyungmi) overturned the lower court's partial ruling in favor of the plaintiff on April 15 in a contractual payment lawsuit filed by A against B, and remanded the case to the Seoul High Court.

A and B are mother-in-law and daughter-in-law. After A's son and B's husband died in a traffic accident in November 2019, they engaged in a legal dispute over the distribution of insurance payouts and other compensation. They signed a written agreement stating that after deducting "the amount used for B's debt repayment, litigation costs, and retainer fee" from "the insurance and compensation to be received due to the deceased's death," the remaining money would be split equally. Subsequently, B filed a lawsuit against the insurance company of the party responsible for the traffic accident and received 740 million won in damages, consolation money, and delayed damages.

Previously, B paid a lawyer an initial fee of 2.2 million won to handle the lawsuit and agreed to pay 20% of the awarded amount as a success fee. A filed a civil lawsuit against B, demanding payment according to the written agreement, and the dispute centered on whether the approximately 20% lawyer's success fee should be included in the deductible "retainer fee," and whether the consolation money B received as the spouse should also be subject to distribution.

The appellate court ruled that the consolation money should be included in the distribution, but only the initial fee, not the success fee, should be considered part of the retainer fee. In this case, B would have to pay the success fee out of her own share after splitting the money with A, resulting in B ultimately receiving less than A.

However, the Supreme Court reached a different conclusion. The Supreme Court stated, "Generally, the retainer fee refers to both the initial fee and the success fee, and it is difficult to interpret it as limited to only the initial fee." The Court further explained, "Given that the written agreement in this case mentions both litigation costs and retainer fee as deductible amounts, it is consistent with the parties' intent to interpret this as deducting all legal fees incurred in the related lawsuit."

Since B will share the burden of the lawyer's success fee with A, she will receive more money than under the appellate court's calculation. The Supreme Court also found it appropriate to include the consolation money in the distributable amount, as the appellate court had ruled.