PROPOSED FORMAL OPINION INTERIM NO. 20-0003
(Flat Fees and Termination)
PUBLIC COMMENT FORM
 
All information submitted is regarded as public record.

Deadline to submit comment is: January 13, 2025, 11:59 p.m.

Background

The State Bar Standing Committee on Professional Responsibility and Conduct (COPRAC) is charged with the task of issuing advisory opinions on the ethical propriety of hypothetical attorney conduct. In accordance with applicable State Bar policy and procedure, the committee shall publish proposed formal opinions for public comment (See, State Bar Board of Trustee Resolutions July 1979 and December 2004. See also, Board of Trustee Resolution November 2016).

On May 10, 2018, the California Supreme Court issued an order approving 69 new Rules of Professional Conduct, which went into effect on November 1, 2018. Information about the new rules is available here. Proposed Formal Opinion Interim No. 20-0003 interprets the new Rules of Professional Conduct.

Discussion/Proposal

Proposed Formal Opinion Interim No. 20-0003 considers:
What are the ethical obligations of attorneys representing clients pursuant to a flat fee agreement where the representation is terminated before the legal services specified in the agreement have been completed or where the scope or complexity of the matter turns out to be greater than the attorney and client contemplated?
The opinion interprets rules 1.5, 1.8.1, 1.15, and 1.16 of the Rules of Professional Conduct and Business and Professions Code section 6148.

The opinion digest states: An attorney may agree to charge a flat fee for legal services but must clearly state what services are covered by the fee and should clearly state when the fee or portion thereof is earned. If the flat fee is paid in advance of the services being rendered, the attorney may deposit the fee into the lawyer’s operating account if compliance with rule 1.15(b) is met. If the representation is terminated and any of the services for which the flat fee has been or will be paid are incomplete, then the lawyer must determine the appropriate amount to be charged and must refund any advanced unearned funds, even if deposited into the operating account. If a flat fee is renegotiated “midstream,” a lawyer should comply with rule 1.8.1 and such renegotiation is subject to ethical scrutiny for fairness and reasonableness.
 
There were several changes made to the interim opinion since the last version was posted for public comment. Most significantly, the opinion no longer addresses the risk of depositing a flat fee into an operating account, rather than maintaining the funds in the trust account until the fee is fully earned. Other changes are primarily focused on limiting the opinion to the current version of the Rules of Professional Conduct and restructuring some concepts.
 
At its October 18, 2024, meeting, and in accordance with their procedures, COPRAC tentatively approved Proposed Formal Opinion Interim No. 20-0003 for a 60-day public comment distribution.
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