rules on flat fees

Emerging Developments in Flat Fees

Since this last post summarizing 15 states’ ethics opinions on flat fees as of September 2022, there have been some new developments on the flat fee front.

None of these rulings are particularly helpful.

If anything, they further complicate flat fee billing.

Fortunately, there are workarounds to solve the problem, one of which you can download at the end of this post.

But the point is that flat fee billing shouldn’t be so darn hard.  

New Ethics Actions on Flat Fees

DC Bar Proposes To Tighten Rules on Flat Fees

In December 2022, the DC Bar proposed to amend Rule 1.15(e) to 

 expressly state: (1) that a flat or fixed fee is an advance fee that must be placed in a trust account and (2) that informed consent to waive entrustment of advance fees must be confirmed in writing following a confusing and onerous five part disclosure.

The D.C. Bar’s proposal prompted me to pen these comments.  My beef with the D.C. Bar’s rule is that it makes flat fee billing more complicated, and thus deter lawyers from implementing flat fees when we should be encouraging their use. And while workarounds exist as I discuss below (for example, a lawyer can set milestones for disbursement of the fees from trust instead of having to wait until the matter is concluded to deem them “earned.”  But why make it more complicated to charge flat fees than hourly fees? Moreover, there’s no indication that those states that treat flat fees as earned on receipt (and thus can be deposited  directly into the operating account) experience more client complaints.

ABA Formal Opinion 505

In May 2023, the ABA dropped Formal Opinion 505 which I criticized on a Linked In post. As I wrote:

ABA Formal Opinion 505 requires advance flat fees to go directly into a trust account subject to narrow exceptions. The Opinion also focuses on the refundability of flat fees – in obvious cases like a $6000 retainer in a divorce case where the spouses change their mind the next day (obviously refund would be required). But what the Opinion doesn’t discuss or expressly condone is the situation where a client pays a $10,000 flat fee for a DUI that the lawyer is able to resolve a week later with a few phone calls. In that circumstance, the lawyer is fully entitled to the full fee having produced the deliverable the client sought – but faster and more effectively than anticipated.   

Flat Fee Solutions
A well-drafted engagement agreement can address some of the obstacles to charging flat fees.  You can find these agreements if you purchase the Legal ClauseIt – on sale through July 15 for just $99.  Or you can download the excerpt on flat fees by signing up below.

If you haven’t yet, be sure to read Part I and Part II.