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RRC – Rule 1.5 [4-200] E-mails, etc. – Revised (6/1/2010) 2. An "advance payment" would typically be applied toward the client's bill at the end of the current billing period. A "security deposit" is one held by the lawyer throughout the representation and refunded to the client once all services are completed and the attorney has been paid. For convenience, a security deposit is sometimes applied to the final invoice. 3. Note that all advances for costs and expenses must be placed in a client trust account because they are funds held for the benefit of the client [Stevens v. State Bar (1990) 51 Cal.3d 283]. See also: RRC - 4-200 [1-5] - 11-30-09 Cooperstein (Minn) Memo re Flat Fees, etc. RRC - 4-200 [1-5] - D.C. Bar Counsel re Flat Fees (12-2009).doc May 19, 2010 Sondheim E-mail to RRC: I have been reviewing the many adverse comments received regarding this rule and offer the following thoughts: 1. This is the easy one. The Dashboard refers to the Washington rule, but it is not listed in the State Variations. Shouldn't we include it so those reading the Dashboard know what we relied upon? In addition, in light of Randy's link to a Minnesota memorandum, should we also include some rules of other states listed in that memorandum which prohibit a fee from being called "non-refundable"? 2. One of the commentaters appears to think that the flat fee goes into the trust account. I suggest we make it clear that not only is it the lawyer's property on receipt, but also that it should not be placed into the trust account. 3. I perceive that one of the major problems with subparagraph (e) that is of concern to commentaters is item (v). Perhaps it could be removed from (e) and a comment be added stating that a flat fee may also be subject to other rules relating to legal services. For example, the fee may become unconscionable or the fee agreement may be modified if the lawyer decides to credit the flat fee against hourly work. By putting this principle in the comment we help eliminate the sting which many commentaters feel from its placement in the rule and, in any event, we are not changing the principle under which flat fees currently operate. May 21, 2010 KEM E-mail to RRC: Greetings: 1. In response to Harry's point #1, below, I've attached a recently-issued Missouri Formal Opinion 128 (5/18/10) concerning non-refundable fees. The link for the opinion is: http://www.mo-legalethics.org/modules.php?name=News&action=view&id=64&PHPSESSID=f96c1be7f56dc76 17efd7c2555ce6517 2. Also, here's an interesting exchange from December that appears on lawyers.com: RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -135- Printed: June 2, 2010
http://community.lawyers.com/forums/t/92422.aspx This is precisely the kind of situation that paragraph (e) is intended to avoid. RRC – Rule 1.5 [4-200] E-mails, etc. – Revised (6/1/2010) 3. As to Harry's item #3, I recommend against moving (e)(2)(v) into the Comment. Paragraph (e)(2) provides: (2) a lawyer may charge a flat fee for specified legal services, which constitutes complete payment for those services and may be paid in whole or in part in advance of the lawyer providing the services. If agreed to in advance in a writing signed by the client, a flat fee is the lawyer’s property on receipt. The written fee agreement shall, in a manner that can easily be understood by the client, include the following: (i) the scope of the services to be provided; (ii) the total amount of the fee and the terms of payment; (iii) that the fee is the lawyer’s property immediately on receipt; (iv) that the fee agreement does not alter the client’s right to terminate the client-lawyer relationship; and (v) that the client may be entitled to a refund of a portion of the fee if the agreed-upon legal services have not been completed. (Emphasis added). There is no reason to remove (e)(2)(v), which is at the heart of the protection afforded clients under the provision, except as an attempt to offer an olive branch to the criminal defense bar. However, it will have as much effect on their opposition to the provision as the Commission's attempt to revise the notice requirement in 1.11(e)(2) had on the position of George Cardona's office. Our whole point is that the fee is not non-refundable until it is earned. Requiring lawyers to state in the fee agreement that the client might be entitled to a refund is the only provision that will catch a client's attention. The other four subparagraphs are fine, but the only one that will have any meaning to the client is item (v). More important, I don't think that moving (v) into the Comment will have any effect on the opposition; they don't want to be regulated in this regard, period. We've been told by the public commenters that honorable criminal defense lawyers will naturally return any part of a fee that is not earned. However, it is not the honorable lawyers for whom the rules are written. Attached: RRC - [1-5] - Missouri Formal Ethics Op. 128 (Nonrefund Fees) (05-18-10).doc May 21, 2010 Sondheim E-mail to KEM, cc RRC: The problem with the Missouri Opinion is that it goes to far. It requires the fee to be placed in the trust account, a requirement that the Commission rejected. We need language used in states where the fee cannot be called "non-refundable," but need not be placed in the trust account. With regard to your reference to 1.11(e)(2), as I recall RAC removed this provision entirely. I would not want to have the same thing happen to 1.5 (e)(2)(v). I think one of the concerns with (e)(2)(v) is that the language permits an argument that the fee is subject to seizure for bankruptcy and by IRS because it may be deemed to still be property of the client. We need to deal with this issue in some way to make it clear that we are not changing the status of such fees under current law and current rules, other than prohibiting them being called "nonrefundable." RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -136- Printed: June 2, 2010
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Sorted by Commenter - Ethics - State of California

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