Sorted by Commenter - Ethics - State of California

May 23, 2010 Sondheim E-mail to KEM, cc RRC:
In an effort to clarify my views, I offer these additional comments.
RRC – Rule 1.5 [4-200]
E-mails, etc. – Revised (6/1/2010)
1. For me the basic reason for 1.5(e) was to (a) clarify what constitutes a true retainer and (b)
prohibit clients from being deceived by an attorney stating that a fee is "non-refundable."
Attorneys should not be permitted to do the latter. Thus the lawyer cannot term a fee as "nonrefundable,"
but can call it a flat fee which becomes the lawyer's property upon receipt. This
purpose is accomplished by the first two sentence of (e)(2) regardless of what is required in
(e)(2), items i-v. Thus, contrary to what you deem the "heart of the protection afforded to
clients," I deem the "heart of the protection" to be prohibiting a deceptive designation of the fee.
Indeed, some parts of i-v might be appropriate for all written fee agreements, whether for a flat
fee or other type of fee, but they are not essential. Items i-v may, in the view of some, be
additional protections which it might be nice to have, but are not necessary to what needs to be
accomplished, any more than having screening in a number of our confidentiality rules.
Screening might be helpful, but, in the view of some persons, was not essential to the
underlying principle of imputation. While I can live with items i-iv, I believe v needs to be
removed.
2. My suggestion to remove item v is not to offer "an olive branch to the criminal defense bar,"
which is how you view it. Indeed the comments received regarding this rule do not just come
from the criminal defense bar, but also include comments from bar associations (L.A. and San
Diego County bar associations). Rather than offering an olive branch, I think we need to assess
whether this item has either inherent flaws or creates issues which need to be avoided.
3. As pointed out in the comment received from Charles Sevilla, (e) (2) "adds uncertainty to the
rules." On the one hand, this provision says the flat fee is the property of the lawyer and, on the
other hand, it may not be the property of the lawyer if, as indicated by Mr. Sevilla's comment, it
may be "subject to a client right of refund." There is a tension between these two concepts
which I think should be avoided in the rule itself because it does not tell the client the whole
story which is dependent upon the applicability of other rules. Leaving out the aspect of refund
makes the rule neutral on this issue and leaves the client in the same position as he or she
would be in under the current rules, except that the client would not have been told that the fee
is non-refundable. It may or may not be refundable and there is no need to raise this possibility
at the outset of an attorney-client relationship because it can lead to other serious problems
which I discuss below. Indeed, the Sample Fee Agreement provision set forth by the State Bar
(see Tarlow, p. 6, fn. 3 for the cite) suggests that, instead of being neutral, the fee agreement
might provide that "unless the attorney withdraws before the completion of the services or
otherwise fails to perform services contemplated under this Agreement, the fee will be earned in
full and no portion of it will be refunded once the agreed-upon legal services have been
performed." (Slight changes made to the provision to reflect our language.)
4. Although you seem comfortable with the idea that " 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," I do not have the same
comfort level. By putting v in the rule we are raising the level of controversy between lawyers
and the IRS, the SEC, bankruptcy proceedings, etc. (Incidentally, I did not raise the issue of
bankruptcy because of a concern that the bankruptcy bar would find the provision objectionable,
but because the fee paid to a non-bankruptcy lawyer may be impacted in bankruptcy
proceedings by being deemed assets of the client who ends up in bankruptcy.) The language of
v raises the risk of the fee being subject to arguments for its seizure or forfeiture, irrespective of
whether these arguments will ultimately prevail. (See the comments of Mr. Gordon regarding
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -139-
Printed: May 26, 2010
78