Legal Ethics Corner

Ethics Corner is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association for SDCBA members.

Be Wary the Flat Fee

While the concept of a flat fee for legal services is neither new nor novel, the popularity of this billing method may increase as clients seek to better predict and contain costs.  A flat fee for services may also prove attractive to practitioners for the simple fact that – under the proper circumstances – a flat fee may be deemed “earned when paid.”

Thus, unlike other legal fees paid in advance, an attorney need not deposit a flat fee into a client trust account or other segregated account, but may draw upon the entire amount when received.  In order to do so, the attorney must make certain written disclosures to the client in the parties’ fee agreement.

As with all fee agreements where it is reasonably foreseeable the total expenses contemplated – including attorney fees – will exceed $1,000.00, the fee agreement must be in writing. (Bus. & Prof. C. section 6148(a).)  All written fee agreements must also contain a description of “[a]ny basis of compensation including, but not limited to, hourly rates, statutory fees or flat fees, and other standard rates, fees and charges applicable to the case.”  (Bus. & Prof. C. section 6148(a)(1).)  A failure to comply with any provision of section 6148 renders a fee agreement voidable at the option of the client.  (Bus. & Prof. C. section 6148(c).) 

Flat fee agreements should include clear and unequivocal language that “fees are earned upon receipt …,” or equally straightforward terms easily understood by a layperson.  Although more than 30 years old, an Ethics Opinion of the San Francisco Bar Association described the situation this way: “[w]hen the client pays the attorney a fixed fee for services to be performed, the fee belongs to the attorney, and the attorney is obligated to render services to the client.”  (See, S.F. Bar Assoc. Op. No. 1980-1 at p. 3 of 6.)

Indicating in a flat fee agreement that “fees are earned upon receipt …” may serve to vitiate a claim that fees were collected before being earned, as well as a claim that attorney and client funds were commingled if deposited into a single account but before the services have been rendered or the attorney’s entitlement to a portion of the deposit is “fixed.”  (See, generally Rule of Prof. Cond. Rule 4-100(A)(2).)

Eric R. Deitz

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**