New Hampshire Bar Association
About the Bar
For Members
For the Public
Legal Links
Online Store
Vendor Directory
NH Bar Foundation
Judicial Branch

Everything you need to purchase a court bond is just a click away.

Order with big business buying power.
New Hampshire Bar Association
Lawyer Referral Service Law Related Education NHBA CLE NHBA Insurance Agency
Member Login
Member Portal

Bar News - December 16, 2011

Ethics Corner: Flat Fees: What if Client Terminates?

QUESTION: I am an attorney concentrating my practice in estate planning and probate administration. Recently I entered into a written agreement with my clients (a husband and wife) for an agreed flat fee amount, to prepare their appropriate estate planning documents. I met with the clients, thoroughly reviewed their detailed client questionnaire, and following a lengthy meeting, prepared and forwarded appropriate documents (clearly marked "draft") to meet their estate planning needs. After forwarding these documents to my clients, I received a letter, signed by both clients, requesting I terminate my representation and return to them any unused portion of the flat fee amount received. Do I need to refund any portion of the agreed flat fee my firm received?

ANSWER: Probably. The answer lies within your actual fee agreement (preferably in writing signed by your clients), and a careful analysis of New Hampshire Professional Conduct Rule ("Rule")1.15(d). This is a new Rule that went into effect January 1, 2008, following the latest overall Rule revisions. The extensive Ethics Committee Comment ("Comment") provides helpful guidance and practical suggestions in properly handling flat fees. This Rule clearly provides that client paid fees and expenses paid in advance, shall be deposited by the lawyer into a client trust account, and can be withdrawn by the lawyer "only as fees are earned or expenses incurred [emphasis supplied]." What amounts are "earned" may be articulated in your fee agreement, in order to provide "reasonable mileposts for withdrawal" as described in the Comment. For example, your flat fee agreement could provide that a certain percentage of this flat fee is earned following your initial conference, another percentage earned upon your drafting and forwarding draft estate planning documents, and the balance earned upon the clients signing those documents. Even if these mileposts are clearly stated in the fee agreement, they must be reasonable and comply with Rule 1.5(a). The Comment states that the reasonableness of the fee is "the overarching principal governing all fee issues." Furthermore, upon termination of the representation, Rule 1.16(d) requires the lawyer to refund "any advance payment of fee or expense that has not been earned or incurred."

A flat fee received from your client, therefore, cannot be deposited into your general operating account, but instead must be deposited into your client trust account, and can then be paid out to your operating account only when it is earned; when and how much is earned should be provided in your flat fee agreement. If your agreement provides no mileposts for withdrawal, the Comment provides that you may make periodic withdrawals "only upon a determination that the value of services provided is in reasonable proportion to the percentage of the total fee withdrawn." While not required under Rule 1.15(d), it is advisable to also maintain contemporaneously accurate records of the time spent on the clients’ matter, detailing the time and nature of the work performed. Therefore, if the fee agreement is not clear or a dispute arises, your decision as to what amount can ethically be withdrawn, could be based, at least in part, upon those accountings, based upon your normal hourly rate you charge for such similar services if not handled under a flat fee arrangement.

For further reference, see New Hampshire Ethics Committee Practical Ethics "Practical Suggestions for Flat Fees or Minimum Fees in Criminal Cases" found pertaining to the criminal bar practice.

The Ethics Committee provides general guidance on the NH Rules of Professional Conduct with regard to a lawyer’s own prospective conduct. New Hampshire lawyers may contact the Ethics Committee for confidential and informal guidance by emailing Robin E. Knippers. Brief ethics commentaries based upon member inquiries and suggestions will be published monthly in the NH Bar News.

Your New Hampshire resource for professional investigative services since 2005.

Home | About the Bar | For Members | For the Public | Legal Links | Publications | Online Store
Lawyer Referral Service | Law-Related Education | NHBA•CLE | NHBA Insurance Agency | NHMCLE
Search | Calendar

New Hampshire Bar Association
2 Pillsbury Street, Suite 300, Concord NH 03301
phone: (603) 224-6942 fax: (603) 224-2910
© NH Bar Association Disclaimer