3 thoughts on “Trust Account Tuesday: Nonrefundable fees.

  1. How do the new rules propose to handle a situation where the attorney gets the fee in advance, the client agrees it is non refundable, and the client then decides to tell the lawyer not to finish the work and demands that the attorney pay back an amount proportionate to the portion of the work that was not done? Or, in other words, tell the lawyer, keep what you have earned so far, but give me back the rest? Most jurisdictions say the attorney is obligated to refund that part of the fee which has not been earned. If the rules you cite are interpreted strictly, the attorney does not have to refund anything, and can keep the full amount even if the client decides the services are no longer needed.

    If, on the other hand, the rule is that under those circumstances, the lawyer has to refund the unearned portion, that means the fee is earned and unearned at the same time and the lawyer has committed commingling regardless of where the lawyer places it.

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    • Fair points. As I understand VT’s rule, fees labeled “nonrefundable” or “earned upon receipt” remain subject to the reasonableness standard of Rule 1.5(a). That is, the rule doesn’t allow a lawyer to determine whether the lawyer’s own fee is reasonable. If deemed unreasonable by one of our hearing panels or the Supreme Court, a lawyer would be required to refund any unearned portion. I think, but cannot guarantee, that to the extent the rule “approves” labels like “nonrefundable” and “earned upon receipt,” compliance with those provisions presumes that the fee meets the overarching standard of “reasonable.”

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  2. […] The language comes directly from Rule 1.8(b). It’s not clear to me what would lead a client to provide such informed consent. Also, special kudos to Penny Benelli.  Penny correctly pointed out that, with former clients, a lawyer shall not use information relating to the representation except as required or permitted by other rules, or, when the information has become generally known.  See, Rule 1.9(c)(1). […]

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