Washington Lawyer - March/April 2021 - 8

PR AC TICE MANAGEMENT

Earning Mechanisms
for an Advance Fee
By Dan Mills

O

ld habits die hard. If you
were a street crime lawyer in
the District of Columbia
before 2009, you most likely
charged a flat fee up front, deemed
it earned on receipt and nonrefundable, put it in your pocket
(operating account), and went to
work defending your client.

And if that had been your business model for
years, your world got rocked by In re Mance.
Mance.1
In 2009 the D.C. Court of Appeals deemed the
widespread practice of earned on receipt, nonrefundable a serious violation of the D.C. Rules
of Professional Conduct. Per Mance
Mance,, all flat
fees paid up front must go directly into a trust
account. What's more, earning the client's
money (moving it from the trust account to
an operating account) must be tied to a reasonable earning mechanism.
Any D.C. Bar member charging a flat fee up
front must comply with Mance
Mance.. So, what are the
proper earning mechanism possibilities and
where are lawyers getting in trouble? As the
expression goes, the devil is in the details.
The basic principle reflected in Mance is that
the lawyer must confer a benefit or perform a
legal service for the client in order to earn the
advance fee. " [A] lawyer 'cannot earn a fee for
doing nothing,' " the court said, quoting In re
Sather..2 Given these circumstances, the fee
Sather
agreement should define how and when the
advance fee is earned. Mance offers suggestions based upon milestones such as the
passage of time, completion of tasks, or any
other mutually agreed-upon earning mechanism, provided it is reasonable. The client must
understand how and when the fee is being
earned because Mance says the client has a
right to the return of any unearned fees.

8

WASHINGTON LAWYER

*

MARCH/APRIL 2021

Completion. The lawyer and client could
agree that the flat fee paid up front is earned
at the conclusion of the case, whether the
case ends by plea agreement, trial, or dismissal
(assuming that the lawyer's effort gave rise
to the dismissal). But the problem with this
earning mechanism is that the lawyer may
have cash flow needs during the case. Also,
an agreement to " wait until the end " does not
address what happens with an early end to the
case, whether by dismissal after some work is
done by the lawyer or by client termination.
Hourly Rate. A precise earning mechanism
that allows the lawyer to earn a fee while work
is performed is to use a reasonable hourly rate
agreed upon by both lawyer and client. The
lawyer keeps track of time devoted to work
on the case - sending monthly invoices, for
example - and is paid from the advance fee
for work performed. The client never pays more
than the agreed-upon flat fee, even if the case
is tried and the time expended exceeds the flat
fee. And if the case ends early, the portion of
the fee that has not been earned can easily be
determined and returned to the client.
Lawyers not accustomed to keeping track of
their time often resist using this as an earning
mechanism. Careful drafting is necessary to
address what happens when a favorable result
is obtained by plea agreement or dismissal. A
good result is eligible for compensation, but it
needs to be defined to avoid a fee dispute.
Time. Another option for earning the advance
fee is by passage of time, a practical choice
when the representation will take place on
a regular basis over a certain time period. In
such an example, the flat fee is earned in equal
amounts over a 12-month period, notwithstanding that some months may require more
legal work than others.
Stage of the Case. Tying the earning mechanism to stage of the case seems to be fairly
common when distinct events exist, such as

entry of the lawyer's appearance, a preliminary
hearing, a status hearing, a period of investigation and research, a final status hearing or final
pretrial, the close of discovery, and the conclusion of the case whether by plea agreement,
dismissal, or trial.
Mance prohibits front-loading, the practice
of quickly earning a significant portion of an
advance fee early in the case. An example of
front-loading is the practice of earning a large
part of the flat fee simply for being engaged
by the client. Advance flat fee agreements that
allocate significant funds for an " engagement
fee " confuse the concept of the classic engagement retainer for availability, referenced in
Mance,, with a task-based representation. Most
Mance
attorney-client representations, especially in
practice areas such as criminal defense, family
law, estate planning, immigration, and commercial work, are task-based in that the client
comes to the lawyer with a problem. When the
relationship is formalized in a fee agreement,
the lawyer goes to work solving the problem.
Mance acknowledges that the District also
allows for the classic engagement retainer
for availability, but it is rare and cannot be
combined with a task-based representation.
In an availability representation, there is
nothing for the lawyer to do but be available.
If the situation that gives rise to the availability
arrangement occurs, then the lawyer begins
a new and separate task-based representation
with a new fee. Such representation cannot
involve availability, and therefore charging
for engagement is essentially front-loading
and prohibited by Mance
Mance..3
Contact the Bar's practice management advisors
at pmas@dcbar.org.
NOTES

1 980 A.2d 1196 (D.C. 2009).
2 3 P.3d at 414.
3 See also D.C. Bar Legal Ethics Opinion 355.



Washington Lawyer - March/April 2021

Table of Contents for the Digital Edition of Washington Lawyer - March/April 2021

Digital Extras
From Our President
Calendar of Events
Practice Management
Toward Well-Being
Staying Put in Big Law feature
A Sisterhood of Latina Lawyers Sidebar
Increasing Diversity & Inclusion the the Legal Profession feature
Cultivate Mentorships sidebar
A Tribute to Judge June L. Green feature
Delicate Balance for Black Women Attorneys in Government Feature
Falling Short on Disability Inclusion feature
Elusive Justice in Violence Against Native Women feature
Worth Reading
On Further Review
The Learning Curve
Member Spotlight - Marcia Madsen
Member Spotlight - Simon Zinger
ABA Delegates Corner
Attorney Briefs
Speaking of Ethics
Disciplinary Summaries
The Pro Bono Effecy
A Slice of Wry
Washington Lawyer - March/April 2021 - Cover1
Washington Lawyer - March/April 2021 - Cover2
Washington Lawyer - March/April 2021 - 1
Washington Lawyer - March/April 2021 - 2
Washington Lawyer - March/April 2021 - 3
Washington Lawyer - March/April 2021 - Digital Extras
Washington Lawyer - March/April 2021 - 5
Washington Lawyer - March/April 2021 - From Our President
Washington Lawyer - March/April 2021 - Calendar of Events
Washington Lawyer - March/April 2021 - Practice Management
Washington Lawyer - March/April 2021 - Toward Well-Being
Washington Lawyer - March/April 2021 - Staying Put in Big Law feature
Washington Lawyer - March/April 2021 - 11
Washington Lawyer - March/April 2021 - A Sisterhood of Latina Lawyers Sidebar
Washington Lawyer - March/April 2021 - 13
Washington Lawyer - March/April 2021 - Increasing Diversity & Inclusion the the Legal Profession feature
Washington Lawyer - March/April 2021 - 15
Washington Lawyer - March/April 2021 - Cultivate Mentorships sidebar
Washington Lawyer - March/April 2021 - 17
Washington Lawyer - March/April 2021 - A Tribute to Judge June L. Green feature
Washington Lawyer - March/April 2021 - 19
Washington Lawyer - March/April 2021 - 20
Washington Lawyer - March/April 2021 - 21
Washington Lawyer - March/April 2021 - Delicate Balance for Black Women Attorneys in Government Feature
Washington Lawyer - March/April 2021 - 23
Washington Lawyer - March/April 2021 - 24
Washington Lawyer - March/April 2021 - 25
Washington Lawyer - March/April 2021 - Falling Short on Disability Inclusion feature
Washington Lawyer - March/April 2021 - 27
Washington Lawyer - March/April 2021 - 28
Washington Lawyer - March/April 2021 - 29
Washington Lawyer - March/April 2021 - Elusive Justice in Violence Against Native Women feature
Washington Lawyer - March/April 2021 - 31
Washington Lawyer - March/April 2021 - 32
Washington Lawyer - March/April 2021 - Worth Reading
Washington Lawyer - March/April 2021 - 34
Washington Lawyer - March/April 2021 - 35
Washington Lawyer - March/April 2021 - On Further Review
Washington Lawyer - March/April 2021 - The Learning Curve
Washington Lawyer - March/April 2021 - Member Spotlight - Marcia Madsen
Washington Lawyer - March/April 2021 - Member Spotlight - Simon Zinger
Washington Lawyer - March/April 2021 - 40
Washington Lawyer - March/April 2021 - 41
Washington Lawyer - March/April 2021 - ABA Delegates Corner
Washington Lawyer - March/April 2021 - Attorney Briefs
Washington Lawyer - March/April 2021 - Speaking of Ethics
Washington Lawyer - March/April 2021 - 45
Washington Lawyer - March/April 2021 - Disciplinary Summaries
Washington Lawyer - March/April 2021 - 47
Washington Lawyer - March/April 2021 - The Pro Bono Effecy
Washington Lawyer - March/April 2021 - 49
Washington Lawyer - March/April 2021 - 50
Washington Lawyer - March/April 2021 - 51
Washington Lawyer - March/April 2021 - A Slice of Wry
Washington Lawyer - March/April 2021 - Cover3
Washington Lawyer - March/April 2021 - Cover4
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