When can you put flat fees into a general account?
Question: When can a flat fee or a retainer be placed into a general account or withdrawn from a client’s trust account?
The answer generally is not found in the Rules of Professional Conduct, though some ethics opinions of local bar associations come close to helping us. The answer generally is found in your engagement agreement.
What do you provide in your agreement? Almost anything (except unconscionable or unreasonable fees) can be negotiated and approved, even with 20/20 hindsight judicial review.
Thus, if you charge a flat fee and agree that it is earned on receipt, it will probably be accepted. I think the better practice, however, would be to deposit the flat fee into a clients’ trust account and then withdraw it on the happening of an event such as a date certain, the filing of a complaint, the signing of a settlement or merger agreement or some other event specific.
Even retainer fees can be deposited into a general account if the agreement says that the retainer is not for work to be done in the future but for the lawyer being engaged (and therefore not available to another party, either an adversary or a third party unrelated to the current situation — because of the attorney’s lack of time …). In other words, there is a valid charge for engagement and therefore not being available to others. Opinions I’ve seen on the subject suggest that the retainer for this purpose must be “reasonable” …. If you were Edward Bennett Williams, famous Washington, D.C. lawyer who could get things done in the Halls of Congress with one phone call, the amount could be higher than if you were Edward Poll … Again, however, this is a matter of negotiation and detailing in the engagement agreement.
If you were to receive a retainer for future work, the better practice would seem to be to put this into your client’s trust account. However, I would suggest that the engagement agreement provides for transfer of funds to the general account on the happening of a specific event, such as the filing of a complaint, or 10 days subsequent to the date of a monthly billing statement or other event or date certain.
As with many things concerning fees, the answers are not clear. There is i) common sense; ii) open and clear negotiation with the client; and then iii) after-the-fact review. Hopefully, you don’t reach the third stage!Tags: Cash Flow - Finances
Categorized in: Cash Flow - Finances