MONTH-IN-BRIEF (Jun 2023)
Ethics and Professional Responsibility
New ABA Ethics Opinion Weighs in on Retainers and Advance Fee Payments
Question: Is there any longer such a thing as a nonrefundable legal fee? Not according to a recent ABA ethics opinion, Formal Opinion 505.
Beginning with a taxonomy of various labels used to characterize advance fee payments, the opinion asserts that when such payments are made, “the lawyer takes possession—but not ownership—of the funds to secure payment for the services the lawyer will render to the client in the future.”
In general, the opinion takes issue with characterizing a payment as a “retainer” and prefers to use the term “advance.” Even a fixed fee or a flat fee, if paid by the client upfront, is deemed an “advance.” Advances are “unearned,” because they constitute—in stark contrast to Wimpy gladly paying next Tuesday for a hamburger today—payment today for work to be performed in the future. According to the opinion, such fees are unearned upon receipt and remain unearned until the work is performed.