Coach’s Corner: "Other" Monetary Issues: Refunds and Unearned Fees
By Ed Poll, Esq.
Principal, LawBiz® Management
When it comes to money and lawyering, there is more to billing and collecting fees than simply billing and collecting fees. There are codes of conduct that factor into how a lawyer can bill and for how much. Two particularly interesting monetary issues include refunds and unearned fees.
Flat Fees, Value Billing, and Refunds
Charging a flat fee can raise the issue of whether that fee canâor shouldâbe refundable. Consider the example of a lawyer who has an estate planning practice and provides for flat fees that are nonrefundable. In one instance, a client requested an estate plan. The lawyer completed the documents and sent them to the client for signature. The client then informed the lawyer that she had changed her mind and did not want the type of trust that the lawyer had created. Worse, at this point, she wanted the fee refunded. As a matter of professional courtesy, the lawyer made an adjustment that the client accepted. But months later, the same client filed a complaint with bar counsel. Bar counsel then called this lawyer to challenge the lawyerâs fee structure. Bar counsel went further and suggested that maintaining a record of hours billed is a requirement.
According to the ABA Model Rules of Professional Conduct, fees must be âreasonable.â Each jurisdiction has its own standards that define this term, but the important point is that you must be able to defend the fee and the fee structure. Using an hourly standard is only one method of doing so. No jurisdiction requires that fees be charged by the hour or that a record of hours be maintained. If a flat fee meets the standard of being âreasonableâ and the client knowingly accepts the fee in a written fee agreement, the lawyer charging it is within the rules.