Sorted by Commenter - Ethics - State of California

May 21, 2010 KEM E-mail to Sondheim, cc RRC:
RRC – Rule 1.5 [4-200]
E-mails, etc. – Revised (6/1/2010)
1. As far as I know, California is the only state that does not require that an advance fee be
placed in the trust account, so I don't think we will find any authority in other jurisdictions similar
to the California approach. Ellen will have a better read on that but when I looked at this a few
years ago, that was my conclusion.
2. As to the other point, if we take (v) out of 1.5(e)(2), then the key component of that
provision is gone. First, I was part of a panel on bankruptcy when I noted the California
position on advance fees being placed in a trust account. The BK judge on the panel took
exception when I pointed out that the Cal. Rule does not require that advance fees be placed in
a trust account. He said that his approach (and from what I gathered, also the approach of the
75+ lawyers in the room who viewed me with something bordering on contempt) was that any
advance fees, regardless of how denominated, were to be placed in the trust account. I'm not
sure that we should look to the BK cases from the 1990's as a reflection of what is actually
occurring in the BK field. If members of the Commission are aware of different practices
elsewhere (i.e., outside of Orange County), please let me know. However, I note that we
haven't heard any complaints from the BK bar to date. The only criticisms have come from the
criminal defense bar. I'm not sure this is an issue for BK lawyers and, unless we know with
certainty that it is, we should not be including this in our arguments.
3. Second, as to the criminal defense bar, my point is that deleting subparagraph (v) will not
convince the criminal defense bar to withdraw their criticisms (just as our revisions of 1.11(e)(2)
did not convince the U.S. Atty to withdraw its criticisms of 1.11(e)). I also think that removing
subparagraph (v) -- which requires criminal defense lawyers to place in their fee agreements a
statement that if the services are not completed, then the client MAY be entitled to a refund -- is
the only part of 1.5(e)(2) that has meat on its bones. In effect, it let's the client know up front
that if the lawyer doesn't do the work that was agreed to at the outset of the relationship, that's
unconscionable, and the client should get something back. Putting the provision in the fee
agreement up front is disclosure, and will enable the client to make an informed decision as to
whether the client wants to go the route of a large up front fee to cover everything, or a smaller
fee with add ons that might arise down the road. The members of the criminal defense bar in
their public comments repeatedly state that the client is permitted to make a decision to go w/
the flat fee or not. This disclosure ensures it is an informed decision. Instead of our proposed
revision, however, the public commenters argue that Rule 4-200, which prohibits charging an
unconscionable fee, is the solution. But how will the client know about Rule 4-200 (or 1.5)?
Requiring up front disclosure will at least give the client a heads up that he or she has a remedy
against the lawyer if the lawyer expends little or no effort, notwithstanding the lawyer's
statement that the fee belongs to the lawyer upon receipt.
a. As to the public commenters' argument that 1.5(e)(2) will permit seizure of the fee,
the money is earned on receipt UNLESS an eventuality occurs (e.g., charges dropped or
an early plea deal) that would render the fee received unconscionable because the
lawyer provided only a fraction of the services contemplated at the beginning of the
representation. The client is paying consideration. It is still the lawyer's money and not
subject to seizure unless and until it can be shown that the lawyer's services fell short of
what the client and lawyer agreed to at the beginning of the representation. We are not
changing the law by prohibiting non-refundable fees. The key point is that it is earned on
receipt -- and is thus the lawyer's money -- unless an event occurs afterwards that might
require a refund. Call it a condition subsequent (even if the Restatement (2d) Contracts
struck that term).
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -137-
Printed: May 26, 2010
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