Sorted by Commenter - Ethics - State of California

RRC – Rule 1.5 [4-200]
E-mails, etc. – Revised (6/1/2010)
allowing the lawyer to claim that it was "nonrefundable or "earned on receipt." The
disincentive to change counsel under this proposed rule is no different. Besides, Arizona
and Washington's rules are intended to create an exception to the requirement in those
jurisdictions that all advance fees must be placed in a client trust account. This rule has a
different objective and one that is without precedent.
3. The second notice affords no better protection. Currently, lawyers have an affirmative duty
to promptly refund all unearned fees. This rule changes this fundamental duty by telling
clients they have the right to "claim a refund" or "is entitled to claim a refund" of some or all
of the fee paid under a contract that says the fee was "earned on receipt." A client who
elects to chance counsel under this rule, particularly if it is without cause, will be in a fee
fight. I agree with Raul that clients have a right to a refund of unearned fees and this rule
compromises that right.
4. We have come full circle, as Raul suggests, and we end up with an inherently inconsistent
rule that weighs heavily in favor of lawyers. If adopted, the rule would be used by all
lawyers, and not just those who may have a legitimate concern about the threat of fee
forfeiture in a particular case. The legal profession is moving away from the standard
billable hour and fee arrangements with flat or fix fee components are becoming more the
norm. It would be very easy for any lawyer to claim that all flat fees components paid
before work is done are "earned on receipt."
June 1, 2010 Melchior E-mail to RRC List:
Rule 1.5, fees for legal services: I assume that the objections of the criminal bar will be the
subject of significant discussion at our meeting. I dissented from the adoption of this rule
previously; but the current discussion from the bar, including internal correspondence within the
Commission in consequence, has crystallized the issues for me; and I will ask you to indulge
me.
There clearly is a disconnect here between our concerns – essentially what we call “client
protection,” and those of our correspondents who are worried that any qualification of the
concept of the fee being “fully earned” at the time of payment will put the fee at risk of seizure by
various government entities. The writers do not take much note of the client protection
concerns; and with all respect for my colleagues, I didn’t see much concern in our internal
exchanges for the fears of seizure which have been expressed, at times with the support of
extensive research and briefing, by our commentators.
I believe that both points are valid, and that there has as yet been no real effort by the
Commission to consider and to accommodate the concerns of the protesters. (Placing the
payment in the lawyer’s trust account or general account is a secondary issue: the critical
question is whether the front end fee* “belongs” to the lawyer on receipt, or whether it is only a
deposit against future earnings. If we can resolve that issue, the question where to place the
money will largely solve itself.)
• I will use the term “front end fee” to avoid the definitions which have attached to other
labels and which are causing us legitimate concerns.
There is a logical fallacy in believing that money can both be fully earned and not fully earned at
the same time. It is of course possible for a payment to have some characteristics of both; but
here, definitions matter strongly. In particular, I understand that there is no question that to the
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -154-
Printed: June 2, 2010