92-F-128(a) - Retainer fees, flat fees, advanced fees, advanced costs and expenses, pre-paid fees, nonrefundable retainer fees

Formal Ethics Opinion 92-F-128(a)


Inquiry is made concerning the ethical/fiduciary responsibilities relating to retainer fees, advanced fees, advanced costs and expenses, flat fees, pre-paid fees, and nonrefundable retainer fees.

Ethical Consideration 2-19 of the Code of Professional Responsibility states:


EC 2-19

As soon as feasible after a lawyer has been employed, it is
desirable
that he reach a clear agreement with his client as to the basis of the
fee charges to be made. Such a course will not only prevent later
misunderstanding but will also work for good relations between
the lawyer and the client. It is usually beneficial to reduce to
writing the understanding of the parties regarding the fee, particularly
when it is contingent. A lawyer should be mindful that many persons
who desire to employ him may have had little or no experience with fee
charges of lawyers, and for this reason he should explain fully to such
persons the reasons for the particular fee arrangement he proposes.

Disciplinary Rule 9-102(A) of the Code states, in part:


DR 9-102 - Preserving Identity of Funds and Property Of A Client
(A) All funds of clients paid to a lawyer or law firm, including advances
for costs and expenses, shall be deposited in one or more identifiable
insured depository institutions maintained in the state in which the law
office is situated.

...No funds belonging to the lawyer or law firm shall be deposited
therein except as follows:

(1) Funds reasonably sufficient to pay services charges may be
deposited therein:

(2) Funds belonging in part to a client and in part presently or
potentially to the lawyer or law firm must be deposited therein, but
the portion belonging to the lawyer or law firm may be withdrawn
when due unless the right of the lawyer or law firm to receive it is
disputed by the client, in which event the disputed portion shall not
be withdrawn until the dispute is finally resolved.

(B) A lawyer shall:

(1) Promptly notify a client of the receipt of his funds, securities, or
other properties.

(2) Identify and label securities and properties of a client promptly
upon receipt and place them in a safety deposit box or other place
of safekeeping as soon as practical.

(3) Maintain complete records of all funds, securities and other
properties of a client coming into the possession of the lawyer and
render appropriate accounts to his client regarding them.

(4) Promptly pay or deliver to the client as requested by a client the
funds, securities or other properties in the possession of the lawyer
which the client is entitled to receive.


Advanced fees or flat fees may be earned fees or unearned fees, depending upon the circumstances.

All unearned attorney fees of any kind or nature paid by or on behalf of a client to an attorney are funds which belong in part to the client. These unearned attorney fees include retainer fees, unearned advanced fees, general retainers, special retainers, flat fees, pre-paid fees, etc. These funds must be deposited in a trust account to be withdrawn only when due, unless the right of the attorney or other payee to receive funds is disputed by the client. In the event of a dispute, the disputed portion shall not be withdrawn until the dispute is resolved. The same fiduciary duties described above are applicable to non-monetary property delivered to an attorney as security for unearned fees. Such security deposits are required to be placed in trust and safekeeping.
All earned fees belong solely to the attorney and need not be placed in a trust account. An attorney may receive an advanced earned fee in the nature of an unrefundable retainer fee in the following limited instances: (1) to compensate the attorney for being available to represent a client, (2) to compensate the attorney for committing time for representation precluding acceptance of other employment, (3) to compensate the attorney for being precluded from taking an adversary interest or position because of conflicting interests or because of the receipt of privileged information. Advanced fees or flat fees involving criminal law, domestic or family law or juvenile law ay be earned fees. Fees for routine legal services completed and fully delivered to the client within a reasonable period of time may be earned fees. Routine legal services may include wills, trusts, contracts, notes, deeds, tax returns, opinion letters or other such matters. Earned fees of this kind and nature do not have to be placed in trust accounts and are subject to the strict limitations of Disciplinary Rules 2-106(A) and (B) of the Code; and, pursuant to DR 2-110(A)(3), 2-110(B)(4) and other applicable legal authorities may be subject to accountability and refunding in certain instances.

In all instances where advanced or flat fees are deemed to be earned fees there must be a clear understanding with the client that the fees are earned fees and unrefundable.


This 11th day of December , 1992.


ETHICS COMMITTEE:

W. J. Michael Cody
Walker T. Tipton
Thomas H. Rainey


APPROVED AND ADOPTED BY THE BOARD