In Re Mance
980 A.2d 1196 (2009)
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Rule of Law:
A flat fee paid to an attorney in advance for legal services is an 'advance of unearned fees' under Rule 1.15(d) of the D.C. Rules of Professional Conduct. Such funds must be treated as client property and held in a separate trust or escrow account until earned, unless the client provides informed consent to a different arrangement.
Facts:
- On December 2, 2003, William Saunders retained attorney Robert W. Manee, III to represent his son, a homicide suspect.
- Manee quoted a flat fee of $15,000, requiring an initial installment of $7,500 to be paid upfront.
- Saunders paid the initial $7,500 without any discussion as to how the funds would be held or treated.
- Manee placed the majority of the fee ($6,010) into a client escrow account and the remainder into his operating account.
- After being hired, Manee decided to wait a month before taking any action on the case.
- In early January 2004, Saunders became frustrated with Manee's perceived lack of progress and terminated the representation.
- Manee agreed to refund the $7,500 payment but delayed doing so for several months, stating he did not have the funds readily available.
Procedural Posture:
- William Saunders filed a complaint against attorney Robert W. Manee, III, with the D.C. Bar Counsel.
- Bar Counsel filed a Specification of Charges against Manee in a formal disciplinary proceeding.
- A hearing committee concluded that Rule 1.15(d) did not apply to flat fees but found Manee committed a 'commingling' violation by placing his own funds into a client trust account, and recommended a public censure.
- The Board on Professional Responsibility (the intermediate review body) adopted the hearing committee's interpretation of Rule 1.15(d) but also found Manee failed to promptly return the unearned fee, and likewise recommended a public censure.
- Bar Counsel, as the appellant, took exception to the Board's interpretation of Rule 1.15(d) and appealed to the District of Columbia Court of Appeals (the highest court), arguing for a harsher sanction against Manee, the appellee.
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Issue:
Does a flat fee paid in advance for legal services constitute an 'advance of unearned fees' that must be held in a client trust account as client property under Rule 1.15(d) until earned, absent informed client consent to a different arrangement?
Opinions:
Majority - Ruiz, Associate Judge
Yes. A flat fee paid at the outset of a representation is an 'advance of unearned fees' and must be treated as property of the client until it is earned. The court reasoned that a fee is earned only when an attorney confers a benefit or performs a legal service for the client; a payment made for services yet to be performed is, by definition, unearned. This rule protects client funds from the lawyer's creditors or potential misappropriation and preserves the client's unfettered right to discharge their attorney without the economic coercion of forfeiting a fee for work not yet done. While attorneys and clients can agree to a different arrangement, such an agreement requires the client's informed consent. Because this interpretation clarifies a previously ambiguous rule, the court held that it would apply prospectively.
Analysis:
This decision establishes a significant and clear precedent in the District of Columbia regarding the ethical handling of flat fees, resolving a common point of confusion for practitioners. By classifying flat fees as client property until earned, the court shifts the financial risk from the client to the lawyer and reinforces the fiduciary nature of the attorney-client relationship. The ruling forces attorneys who use flat-fee arrangements, particularly solo and small-firm practitioners, to change their accounting practices to strictly comply with trust account rules. Furthermore, it sets a high standard for what constitutes 'informed consent' for any alternative fee-handling arrangement, demanding explicit and thorough communication with the client.
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