Sorted by Commenter - Ethics - State of California
Sorted by Commenter - Ethics - State of California
Sorted by Commenter - Ethics - State of California
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RRC – Rule 1.5 [4-200]<br />
E-mails, etc. – Revised (6/1/2010)<br />
While your crystal ball is as good as mine, I doubt if your proposal will be deemed to address<br />
"the concerns <strong>of</strong> the opposition comments" any better than what I propose. At least what I<br />
propose can be defended on the bases I set forth in my email since it relies upon something that<br />
the opposition comments indicate is currently "widely used."<br />
May 26, 2010 Difuntorum E-mail to Sondheim, cc RRC:<br />
To me, trying to key <strong>of</strong>f Mr. Tarlow's approach is inherently flawed because it is a magic words<br />
approach. The Supreme Court's letter can fairly be read as a criticism <strong>of</strong> any magic words<br />
approach to regulating advance fees. As Mark points out, "no advance fee paid <strong>by</strong> a client is<br />
the lawyer's property unless and until the fee is earned and that includes fixed or flat fees."<br />
Using contract terms that say "earned on receipt" do not make the fee actually earned and will<br />
involve, as Raul emphasizes, issues such as a failure <strong>of</strong> consideration. It is fact dependent.<br />
For example, a failure <strong>of</strong> consideration could occur in circumstances not covered <strong>by</strong> your<br />
proposed language for (iii). A lawyer may fully perform and not withdraw before services are<br />
completed but the client may discover subsequently that a serious violation <strong>of</strong> ethics occurred<br />
(ala Pringle v. La Chappell), such as a fee split or a conflict, and that may void some or all <strong>of</strong> the<br />
lawyer's entitlement to the fee. It is problematic to try to craft a rule that comprehensively<br />
captures all possible situations where a purported "earned on receipt" fee must be refunded.<br />
Instead, a rule on flat fees paid in advance could avoid the magic words approach and attempt<br />
to add client protection <strong>by</strong>: (1) taking the term "nonrefundable" out <strong>of</strong> the fee agreement lexicon;<br />
(2) requiring a writing (under penalty discipline unlike the <strong>State</strong> Bar Act provisions); and (3)<br />
requiring notice to clients that a flat fee paid in advance does not alter the client's right to<br />
terminate a representation and does alter the client's right to claim a refund (with the issue <strong>of</strong><br />
whether a refund actually is warranted to be determined <strong>by</strong> the facts <strong>of</strong> the particular situation).<br />
My redraft attempts to redirect the rule to this type <strong>of</strong> client protection and steer away from the<br />
challenge <strong>of</strong> explicating the difficult oxymoron <strong>of</strong> the refundable earned on receipt fee. My<br />
approach will not satisfy Mr. Tarlow but it will undercut his complaint that a rule <strong>of</strong> discipline is<br />
tackling the legal issue <strong>of</strong> fee entitlement in an incomplete and confusing manner.<br />
By the way, the sample written fee agreements are not a held out <strong>by</strong> the <strong>State</strong> Bar as a "gold<br />
standard." To the contrary, there is an express disclaimer stating that: "This sample written fee<br />
agreement form is intended to satisfy the basic requirements <strong>of</strong> Business & Pr<strong>of</strong>essions Code<br />
Section 6147 but may not address varying contractual obligations which may be present in a<br />
particular case. The <strong>State</strong> Bar makes no representation <strong>of</strong> any kind, express or implied,<br />
concerning the use <strong>of</strong> these forms." Mr. Talow, however, cites the Bar's sample fee agreement<br />
language because it fits his magic words approach to flat fees paid in advance.<br />
Lastly, if there is no Commission consensus on revising the current proposed rule, then I<br />
recommend that the Commission reconsider the ABA approach <strong>of</strong> requiring all advance fees to<br />
be placed in a client trust account until earned, including fixed/flat fees consistent with the<br />
interpretation in some jurisdictions.<br />
May 26, 2010 KEM E-mail to RRC:<br />
A few points and questions in response to Randy's fine work:<br />
1. I generally agree with Randy's approach but wanted to point out that it will fall flat in<br />
addressing the policy issue the criminal defense bar has raised, i.e., that if the fees are not<br />
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -144-<br />
Printed: May 26, 2010<br />
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