Sorted by Commenter - Ethics - State of California

RRC – Rule 1.5 [4-200]
E-mails, etc. – Revised (6/1/2010)
Attached:
RRC - 4-200 [1-5] - Rule - DFT12.1 (05-26-10)RD - Cf. to DFT11 (12-14-09).doc
May 26, 2010 KEM E-mail to RRC:
A few points and questions in response to Randy's fine work:
1. I generally agree with Randy's approach but wanted to point out that it will fall flat in
addressing the policy issue the criminal defense bar has raised, i.e., that if the fees are not
viewed as earned upon receipt, then they will be subject to seizure. The "earned upon receipt,"
while magic words and meaningless if the facts don't support it, nevertheless provides the
criminal defense lawyers with some comfort and a defense against the government's attempt to
seize the client funds that were used to pay the fee.
a. I'm not sure how to deal with this in light of the S.Ct.'s 5/11/1995 letter. In essence, we
have been saying in former (e)(2) (i.e., pre-Randy's proposed modifications) that the fee is
earned on receipt, . . . unless it is not. We don't say it quite that way; rather we achieve that by
expressly stating that the flat fee is earned on receipt but then caution that the lawyer must
explain in the fee K that the client might be entitled to refund if it turns out the agreed upon legal
services were not completed. The "earned upon receipt" language addresses the seizure issue;
the refund language -- and a refund can only be measured after the services have been
provided or not -- addresses the client protection issue and S.Ct. concerns that a fee is not the
lawyer's until earned.
b. Here is how Arizona has addressed the issue. Perhaps that is an approach we can take:
(d) A lawyer shall not enter into an arrangement for, charge, or collect:
* * *
(3) a fee denominated as "earned upon receipt," "nonrefundable" or in similar
terms unless the client is simultaneously advised in writing that the client may
nevertheless discharge the lawyer at any time and in that event may be entitled
to a refund of all or part of the fee based upon the value of the representation
pursuant to paragraph (a).
I think an important point in the Arizona language is the client's right to discharge the lawyer.
One of the key rationales in New York's Cooperman opinion that rejected the concept of a nonrefundable
fee was that it interfered with the client's absolute right to discharge the lawyer
(sure, the client can discharge the lawyer, but if the client has already paid a multi-K nonrefundable
fee, can the client afford to do so?) Accordingly, I also think that the "unless the
lawyer withdraws" language in the form fee agreement and cited to by the criminal defense bar
is wrong. The issue is not whether the lawyer "withdraws," the issue is the client's right to
discharge the lawyer. The client should be entitled to a refund whether the lawyer withdraws or
the client fires the lawyer before the lawyer has completed the agreed upon services.
c. As I mentioned in an earlier e-mail, we seem to be dealing with a condition subsequent, an
event that might occur to discharge a previously-incurred obligation (e.g., no work done
discharges the client's obligation to pay). We seem to contemplate this concept in the second
sentence of our paragraph (b), which provides:
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -145-
Printed: June 2, 2010