Site Login

Site Login

Your Center For TBA News


Posted by: Joseph Dawson on Apr 6, 2021

 

Recent disciplinary cases have underscored and differentiated what seemed like a hyper-technical Advisory Opinion regarding how to treat “flat fees”. The opinion, 2016-1, and the Vagotis decision are attached.

A technical reading of these documents sets out that if your fee agreement references “flat fee”, the fee should be deposited in your trust account. If your fee agreement references “earned upon receipt”, the fee should be deposited in operations.

BOTH AGREEMENTS, require the language from 1.5(d)(3) that “if the lawyer does not complete the representation for any reason, the client may be entitled to a refund of all or part of the fee based upon the value of the representation pursuant to division (a) of this rule.” BOTH AGREEMENTS therefore must be in writing.

Note that the Advisory Opinion recognized that a flat fee can be deemed to be “earned upon receipt” - presumably for how it is deposited. However, another recent decision, Petracci, also attached, found that a flat fee of $75 – a one&done – that was not deposited in trust was a 1.15 violation, requiring deposit in the trust account. Given the caselaw, the Advisory Opinion will not be much of a defense to depositing a flat fee directly into operations.

The safest practice is to deposit the flat fee in trust, and pay yourself upon completion – which may be as soon as the next day after payment/completion of representation. Again, if you want to continue with the flat fee concept, deposit it in trust going forward. If you want to continue with direct deposit into operations, limit it to “earned upon receipt” fee agreements. DO NOT use “earned upon receipt” agreements for fees paid in payments.

Please note that the grievance in Vagotis was filed by the client because the attorney failed to communicate. Had Attorney Vagotis maintained communications, she could have learned of these distinctions in a CLE program. Just sayin’.

 

 

FRIENDS OF TOLEDO BAR

See All Sponsors