Montana Lawyer April/May 2025

AMENDED ETHICS OPINION 080711 (2025) ETHICS Ethics Opinion 080711 noted that Montana Rule of

legal services or confers benefits on the client as provided for in the written statement of the basis of the fee, if a writ ten statement is required by Rule l.5(b). See also Restatement (Third) of the Law Governing Lawyers §§ 34, 38 (1998). Rule l.5 does not prevent a lawyer from entering into these types of arrangements. 4. To determine when an advance “fixed” or “flat” fee is earned, the written statement of the basis or rate of the fee should include a description of the benefit or service that justi fies the lawyer’s earning the fee, the amount of the advance unearned fee, as well as a statement describing when the fee is earned. Whether a lawyer has conferred a sufficient benefit to earn a portion of the advance fee will depend on the cir cumstances. Rule 1.5(b). The circumstances under which a fee is earned should be evaluated under an objective standard of reasonableness. Rule l.5(a). 5. A lawyer and client may agree that a “flat” or “fixed” fee or a portion of a “flat” or “fixed” fee is earned in various ways. See, e.g ., New Hampshire Bar Assoc. Ethics Committee Practical Ethics Article, Practical Suggestions for Flat Fees or Minimum Fees in Criminal Cases (Jan. 17, 2008). See also I n re Mance , 980 A.2d 1196, 1202, 1204-1205 (D.C. 2009), cit ing Alec Rothrock, T he Forgotten Flat Fee; Whose Money is it and Where Should it be Deposited? , 1 FLA. COSTAL L.J. 293, 323 (1999) for the proposition that some opinions “allow the lawyer to withdraw fees according to milestones ‘based upon passage of time, the completion of certain tasks, or any other basis mutually agreed upon between the lawyer and client.’” For example, the lawyer and client may agree to an advance flat fee that will be earned in whole or in part based upon the law yer’s completion of specific tasks or the occurrence of specific events, regardless of the precise amount of the lawyer’s time involved. For instance, in a criminal defense matter, a lawyer and client may agree that the lawyer earns portions of the flat fee upon client consultation, the lawyer’s entry of appearance, review of discovery, preliminary hearing, pretrial conference, disposition hearing, motions hearing, trial, and sentencing. Similarly, in trusts and estates matters, a lawyer and client may agree that the lawyer earns portions of the flat fee upon client consultation, legal research, completing the initial draft of testamentary documents, further client consultation, and completing the final documents. A sample fee agreement based upon a Colorado model form is attached for further guidance. See, e.g., Colo. Rules of Prof’l Conduct R. 1.5(h) (defining a flat fee, explaining proper handling, setting forth required contents of the agreement, and appending an authorized form agreement). 6. The portions of the advance “flat” or “fixed” fee earned as each such event occurs need not be in equal amounts. However, the fees attributed to each event should reflect a rea sonable estimate of the proportionate value of the legal services the lawyer provides in completing each designated event to the

Professional Conduct (MRPC) 1.5 permits a lawyer to charge a fixed or flat fee, provided that the agreement meets other obligations of professional conduct, including full disclosure to the client, reasonableness of fees, refund obligations, and de positing funds. The original Opinion 080711 indicated that the use of the terms “nonrefundable” and “earned on receipt” are “discouraged.” In 2023, the American Bar Association (ABA) issued Formal Opinion 505, indicating that a fee paid to a law yer in advance for services to be rendered in the future must be placed in a client trust account and may be withdrawn only as earned by the performance of the contemplated services. The Committee has reconsidered the original Opinion 080711 in light of this and other recent guidance, and now clarifies the following three points: 1) a fee paid to a lawyer in advance for services to be rendered in the future must be placed in a Rule 1.15-compliant trust account and may be withdrawn only as earned by the performance of the contemplated services; 2) it is not accurate to label a fee “nonrefundable” or “earned on receipt” before it actually has been earned, and labels do not dictate whether a fee has been earned; and 3) it is not possible for a lawyer to contract around the requirements that all fees must be reasonable and unearned fees must be returned to the client or the inherent unreasonableness of retaining a fee that has not been earned yet. These points are derived from the ap plication of MRPC 1.5(a), 1.5(b), 1.15(a), 1.15(c), 1.15(d), and 1.16(d). 1. Under the general anti-commingling rule, MRPC 1.15(a), client property, which includes unearned fees paid in advance, must be held in an account separate from the lawyer’s own property. Rule 1.15 was amended to address specifically the issue of advance fees in a new paragraph (c): “A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred.” Therefore, advances must be placed into a client trust account until those fees are earned. 2. If a “flat” or “fixed fee” is paid by the client in advance of the lawyer performing the legal work, the fees are an advance. Use of the term “flat fee” or “fixed fee” does not transform the arrangement into a fee that is “earned on receipt.” Lawyers may want to ensure payment and may, therefore, ask for a fee to be paid in advance before committing to the representation. If they do, then that fee must be placed in a Rule 1.15-compli ant trust account, to be disbursed to the lawyer only after the fee has been earned. 3. Advances of unearned fees, including advances of all or a portion of a “fixed” or “flat” fee, are funds the client pays for specified legal services that the lawyer has agreed to perform in the future. Pursuant to 1.15(c), the lawyer must deposit an ad vance of unearned fees in a Rule 1.15-compliant trust account. The funds may be earned only as the lawyer performs specified

APRIL-MAY 2025

15

WWW.MONTANABAR.ORG