No, under Louisiana Rule of Professional Conduct 1.5(f)(2), a lawyer earns a fixed fee when the lawyer agrees to handle the client’s matter through completion. As a result, the rule permits the lawyer to deposit the fixed fee into the lawyer’s operating account upon receipt:
(2) When the client pays the lawyer all or part of a fixed fee or of a minimum fee for particular representation with services to be rendered in the future, the funds become the property of the lawyer when paid, subject to the provisions of Rule 1.5(f)(5). Such funds need not be placed in the lawyer’s trust account, but may be placed in the lawyer’s operating account.
That does not mean, however, that a fixed fee is “nonrefundable.” If a client discharges a lawyer or the lawyer otherwise terminates the representation, the lawyer must return any unearned portion of the fixed fee. After all, keeping an unearned fee would violate Louisiana Rule 1.5(a), which prohibits a lawyer from charging or collecting an “unreasonable fee.”
Other Jurisdictions Handle This Issue Differently
Other jurisdictions require lawyers to place in trust up-front fixed fees. For example, the District of Columbia Bar imposes the following obligations on a lawyer who receives a fixed fee:
Absent a contrary agreement, a lawyer must deposit a flat or fixed fee paid in advance of legal services in the lawyer’s trust account. Such funds must remain in the lawyer’s trust account until earned. The lawyer and client may agree concerning how and when the attorney is deemed to have earned some, or all, of the flat fee. Such an agreement must bear a reasonable relationship to the anticipated course of the representation and must avoid excessive “front-loading.”
Likewise, Utah Rule of Professional Conduct 1.15(c) requires the following:
A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred.
See Utah R. Pro. Conduct 1.15(c). Under this rule, lawyers practicing in Utah must keep fees that are paid in advance in a client trust account until the attorney earns them. At that point, the attorney may transfer the fees to his operating account. The Utah Supreme Court recently reaffirmed that lawyers in Utah cannot treat funds accepted as flat fees as earned on receipt. See OPC v. Bowen, 2021 UT 53 (Utah 2021). In Bowan, the lawyer entered into fee agreements in which his clients agreed to give Bowen a flat fee that would be treated as earned the moment it was paid. Bowen deposited these fees directly into his operating account. The Utah State Bar‘s Office of Professional Conduct (OPC) brought a disciplinary action against Bowen alleging that his practices violated Utah Rule of Professional Conduct 1.15(c). In his defense, Bowen argued that, if he had violated the rule, he was entitled to safe harbor from prosecution. This was because, according to Bowen, his lawyer-client contract fully complied with Utah ethics advisory opinions opining that, under appropriate conditions, a nonrefundable retainer may be considered earned when paid and, therefore, may be deposited into the attorney‘s operating account rather than his trust account.
The Utah Supreme Court concluded that Bowen’s agreements violated rule 1.15 because he could not treat his client‘s flat fee as earned when paid just because the client had consented to the arrangement. This “earned when paid” approach ran afoul to Rule 1.15(c). According to the Utah Supreme Court:
[a] fee must always be reasonable at the time that it is purportedly earned. Only extraordinary circumstances would justify deeming an entire fee to be earned prior to the beginning of legal work. And those extraordinary circumstances must benefit the client, not the attorney.See Bowan, 2021 UT at 13.
The Utah Supreme Court did find that Bowen was entitled to safe harbor from prosecution as to one of the contracts. The court remanded the matter for further proceedings.
In 2015, the LSBA Rules of Professional Conduct Committee proposed a rule change to require a lawyer (1) to deposit a fixed fee into trust, and (2) to withdraw payments only as the lawyer’s work progresses or is completed. The Louisiana Supreme Court, however, declined to amend Rule 1.15. Therefore, under Louisiana Rule 1.5(f)(2) “when the client pays the lawyer all or part of a fixed fee . . . with services to be rendered in the future, the funds become the property of the lawyer when paid . . . . Such funds need not be placed in the lawyer’s trust account, but may be placed in the lawyer’s operating account.” Note, however, if a dispute arises as to a fixed fee, the lawyer must place the amount of the disputed portion in trust until the dispute is resolved. See Louisiana Rule 1.5(f)(5). Also, to the extent any of the fees are “unearned,” the lawyer must return them. Id.