Washington Lawyer - July/August 2021 - 8

PRACTICE MANAGEMENT
Clarity & Precision
in Fee Agreements
By Dan Mills
T
he relationship between a
fee agreement and a law firm
bank account should be clear
and precise. When the link
between them is murky, it is a
problem that often results in disciplinary
action and always manifests
as a poorly managed law
firm, regardless of its size.
Therefore, it is vital that the relationship among
the scope of the work, the fee, the Interest on
Lawyer Trust Account (IOLTA), and the operating/business
account is properly managed so
the client is not confused about how the fee is
being earned.
Confused clients become unhappy clients,
especially when the client's problem is
not solved and expectations are not met.
Unhappiness generates bar complaints.
To bring clarity and precision to the fee agreement
and to the process of managing money
in the firm, the D.C. Bar Practice Management
Advisory Service has developed a new course,
Managing Money, offered quarterly in both a
small group setting and on an individual basis.
Managing Money focuses on how a lawyer
goes about problem solving for the client, how
that is described in the fee agreement, and
how this dynamic involves the IOLTA and operating
account. Some firms have a team of
people involved with this process; in others,
it may all be done by a single lawyer. Some
create paper to manage this process; others do
it all digitally, including the signatures on the
fee agreement and the transfers into and
between the bank accounts.
When there are problems with this crucial law
firm function, the Office of Disciplinary Counsel
8 WASHINGTON LAWYER * JULY/AUGUST 2021
often investigates and at times prosecutes
matters such as the following:
* Charging a flat fee for an unbundled or limited-scope
service in a case where it is not
clear what work will be done and how the
case will progress. For example, the client
agrees to pay an initial fee for a portion of
work. As the case progresses, additional flat
fees are requested without any explanation
of what the total fees could amount to. While
limited-scope or unbundled services are permitted
by D.C. Rule 1.2(c), there are limitations.
The rule states: " A lawyer may limit the
scope of the representation if the limitation
is reasonable under the circumstances and
the client gives informed consent. " Misunderstanding
can be avoided if the lawyer clearly
explains in the fee agreement the general
or common progression of a case and provides
an estimate of fees the client could be
charged if the client continues to have the
lawyer handle the matter on a limited-scope
basis.
* Charging a mixed fee when a flat advance fee
is required, or making a fee contingent on
the outcome without explaining how and
when the flat fee is earned. In some situations,
a failure to credit the advance fee
against the contingency fee could result in an
unreasonable fee being charged.
* Charging a flat advance fee in a civil matter
without a clear statement of the work to be
involved or accomplished, and then keeping
the fee based solely on time expended.
This could be considered " front-loading, " a
practice prohibited under In re Mance (980
A.2d 1196 (D.C. 2009)). Working on a flat-fee
basis requires a clear statement of how the
fee will be earned; when tied to stages of the
case, the fee agreement must state the work
to be performed.
* In a contingency fee case, where the amount
recovered is paid out over time, the legal fee
is often collected first. While this may not be
unreasonable per se, it can become unreasonable
if the payout is not secure. If the
client gets shortchanged by an insolvent
defendant, the client will be upset if only the
lawyer is compensated.
The Managing Money course is designed to
show the lawyer how to onboard a new client
by creating the appropriate fee agreement,
making the proper entries onto the client
ledger and trust account in the case of an
advance fee, tracking the earning mechanism
established in the fee agreement, and making
proper entries in the firm's operating account.
Discussion will cover agreements in these
specific situations: initial consultation, advance
flat fee representation in a criminal matter,
advance flat fee representation for an immigration
client, advance hourly fee representation
for a civil litigation client, advance flat fee representation
for an estate planning client, contingency
fee representation for an injured client,
and availability representation (the classic
engagement retainer referred to in In re Mance).
While availability is a rarely used attorney-
client relationship these days, it is referenced
in the opinion and permitted in the District.
Managing Money includes a 65-page manual
and will use the TrustBooks.com application to
demonstrate the management and accounting
for fees in the IOLTA and operating account.
Our goal is to bring clarity and precision to the
relationship between the fee agreement and
the IOLTA and operating account as the representation
unfolds.
Managing Money is free for D.C. Bar members
and their law firm staff. Register for the quarterly
session at dcbar.org. To register for the individual
session, email pmas@dcbar.org with Managing
Money in the subject line. Reach the Bar's practice
management advisors, Dan Mills and Rochelle
Washington, at 202-780-2762 and 202-780-2764,
respectively, or email pmas@dcbar.org.
http://www.TrustBooks.com http://www.dcbar.org
Washington Lawyer - July/August 2021

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