Sorted by Commenter - Ethics - State of California

RRC – Rule 1.5 [4-200]
E-mails, etc. – Revised (6/1/2010)
should be able to redefine what should be placed into trust so that both the lawyer and the client
are protected.
Criminal defense lawyers and some others will grumble that this deprives them of having the
money to spend, but that is no different from submitting a bill to the court at the end of a court
appointment and being paid then.
June 1, 2010 Difuntorum E-mail to Sondheim, cc RRC:
I've revised the comments to Rule 1.5. I have also made some changes to the rule text in
response to feedback from you, Raul, Mark and Bob Kehr. I am not sending this latest draft to
the entire Commission because I believe this can await Friday's discussion. However, I have
copied some of the Commission members who have been closely tracking this issue in case
they have input.
The main change to the comments is Comment [6A]. The clean version is pasted below.
REVISED COMMENT [6A]:
"Prohibited Designation of Fees as Nonrefundable
[6A] Paragraph (e) prohibits the designation of a fee as nonrefundable because
such fee arrangements pose a risk of confusing both lawyers and clients about a
lawyer's duty to refund a fee. A statement in a fee agreement that fees paid are
"nonrefundable" under any circumstance does not abrogate a lawyer's potential
obligation to refund all or a portion of a fee to a client. See Matthew v. State Bar (1989)
49 Cal.3d 784 [[263 Cal.Rptr. 660]. Paragraph (e) does not prevent a lawyer from
making an agreement for a fee which is earned upon receipt. Depending on the terms of
the specific fee arrangement and other facts, a fee characterized as earned upon receipt
may become the property of the lawyer upon receipt. As indicated by case law,
however, a client may be entitled to refund notwithstanding the characterization of the
fees paid. Paragraph (e) does not predetermine the result of a dispute over the issue of
ownership of a fee or a client's claim for a refund. While discipline may result from a
failure to refund fees, a primary forum for the resolution of fee dispute issues is
mandatory fee arbitration under the State Bar Act (see Bus. & Prof. Code §6200 et. seq.)
Nothing in this rule is intended to prejudge the outcome of fee arbitration proceedings as
this rule, like any law, must be applied to the facts of a particular matter. As a disciplinary
standard, paragraph (e) narrowly prohibits the designation of a fee as nonrefundable
because that characterization oversimplifies potentially complex fact bound issues that
are not resolved by mere reference to the terminology used in a fee agreement."
My objective in rewriting the comment was to clarify the limited scope of the prohibition on the
use of the designation "nonrefundable." I wanted to distinguish the legal issue of ownership and
refund rights. In addition, I assume that concerned lawyers will read the Supreme Court's
decision in Matthew. Your comments and edits are welcomed and appreciated. I do realize
that the criminal defense commenters will object because this comment undermines the power
of the magic phrase "earned on receipt" but I believe that advance fee payments presently are a
trap for lawyers due to excessive reliance on the terms used in fee agreements and inadequate
attention to client understanding of the fee arrangement.
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -157-
Printed: June 2, 2010