Some lawyers may try to limit their downside if a client decides to exercise his or her right to discharge the attorney. One might try to insert into the engagement letter a liquidated damages clause requiring the client to pay some amount of damages for terminating the engagement.
Such provisions are likely not enforceable. One Georgia case has so held.
In AFLAC, Inc. v. Williams, the engagement agreement at issue was a long-term retainer contract whereby the attorney was to be paid a monthly retainer for a seven-year period with an automatic five-year renewal period. The contract provided that if the client terminated the contract, even for good cause, the attorney was entitled to damages in “an amount equal to 50 percent of the sums due under the remaining terms, plus renewal of this agreement.”
The provision required the client to pay an unreasonably high sum as damages, required payment without considering the duty to mitigate damages, and obligated the client to pay the attorney even if he was discharged for cause. The Court noted that the provision would even require the client to pay the attorney if he was terminated for embezzling client funds.
Ultimately, the Court held the liquidated damages provision was an unenforceable liquidated damages clause, because it was not a reasonable estimate of the attorney’s damages and because the parties intended to deter the client from discharging the attorney and to punish the client if it did.