Flat Fee--Earned or Unearned? That is now the question.

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AILA Leadership Has Just Posted the Following:


Immigration Lawyers for years have been regarded as pioneers in the area of flat fees. Virtually every case we take as attorneys is done on a "flat fee" basis. For some the flat fee was a refuge from the hourly billing nightmare many of us fled from at big firms. For others the flat fee was simply the easiest way to ensure that our client understood exactly what they were paying for the service sought, something that the hourly rate typically does not promise.

Most immigration lawyers I know have gotten into the habit of securing part of their flat fee at the initiation phase of the representation process, and then placing that money in their operating account. The theory is that the money is fully earned upon payment, to secure the lawyer's services. However, the D.C. Court of Appeals recently decided a case that may make you rethink how you handle flat fees, and whether that money should be placed first into a trust account until the work on the case is performed.


In In Re Robert W. Mance III, 2009 D.C. App. LEXIS 473 (2009), the D.C. Court of Appeals stated as follows:

We agree with Bar Counsel, that for purposes of Rule 1.15 (d),money paid by a client as a flat fee for legal services remains the client’s property, and counsel may not treat any portion of the money otherwise until it is earned, unless the client has agreed otherwise.

Of course, the decision applies only to DC bar members (there are at least 500 members of AILA that are DC bar member, and likely many more given that bar's loose reciprocity requirements). The facts of the Mance decision are NOT immigration related, are somewhat strange, and are, thus distinguishable from our practices, while relevant, are beside the point. The language quoted above also contains the parenthetical "unless the client has agreed otherwise," which is a loophole a lawyer (but perhaps not Bar Counsel) can drive a semi-truck through. However, even given these two factors, the decision bears reading because it will at least cause you to do what we all should do every now and then--analyze why we do what we do.
The Court went on in its decision to give a background of flat fees, and distinguished them from "engagement retainers," which are given to ensure the attorney's availability to the client. Those can be placed directly into an operating account. The court also talked about the D.C. Rule of Professional Code at issue in the case, which may be different from you State Bar's particular rule on fees. What is clear from the decision, and what is particularly important for all of us to recognize, is that we should have clear understanding of what rules we are required to abide by, we need to educate our clients about how fees are paid, and, in addition, that we should have a written engagement retainer agreement or flat fee agreement with each and every one of our clients. Not having a written agreement for specific services and not explaining in that letter exactly how the "flat fee" payment will be handled are recipes for disaster for the attorney.


Sometimes things happen that remind us of the actual practice of law, as opposed to the law we practice. Don't neglect the little things, or they might turn into the big things.




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