Washington Lawyer - November/December 2022 - 8

PRACTICE MANAGEMENT
The Risks of Waiver
of Entrustment
By Dan Mills
A
three-judge panel of the
D.C. Court of Appeals
handed down an opinion
in August clarifying what
is required for a lawyer to obtain
informed consent from a client
to place an advance fee, including
a prepaid flat fee, into a lawyer's
operating account instead of the
otherwise required trust account.
Attorneys receiving advance fees should look
for ethical guidance in D.C. Rule of Professional
Conduct 1.15, which states that an advance fee
for hourly work is required to be deposited in
a lawyer's IOLTA trust account. That rule also requires
a prepaid flat fee to be entrusted. However,
prior to 2009, it was common practice
for lawyers handling advance flat fees in the
District to consider the fee earned upon receipt
and nonrefundable. The lawyer would deposit
the prepaid flat fee into the firm's operating
account.
In re Mance, 980 A.2d 1196 (D.C. 2009), declared
the end of the practice. Mance held that flat
fees are a type of advance fee covered by Rule
1.15(a) because they consist of " money paid
up-front for legal services that are yet to be
performed. "
Since Mance, many lawyers have been surprised
to learn that the once-common practice
of depositing prepaid flat fees into their firm's
operating account is no longer allowed. Some
lawyers have tried to obtain informed consent
from their clients to waive the requirement of
entrusting advance fees.
On August 4, 2022, the D.C. Court of Appeals
issued a decision in In re Billy L. Ponds, setting
out the requirements for obtaining informed
consent from a client to waive entrustment of
an otherwise IOLTA-eligible advance fee.1
Under D.C. Rule 1.15(e), if you are a lawyer who
prefers to deposit an advance fee in your operating
account rather than your IOLTA, you must
discuss the material risks of and reasonably
available alternatives to the proposed course
of conduct. Under Ponds, notwithstanding the
plain language of Rule 1.15(e), the court clarified
that informed consent for waiver of entrustment
requires attorneys to explain to the client
orally and in writing that:
* The lawyer intends to treat the IOLTA-eligible
advance fee as the lawyer's property upon
receipt;
* The lawyer can keep this fee only by providing
a benefit or providing a service for
which the client has hired the lawyer;
* The fee agreement must spell out the terms
of the benefit to be conferred upon the
client;
* The client must be aware of the lawyer's
obligation to refund any amount of the
advance funds to the extent the amount is
unreasonable or unearned if the representation
is ended by the client; and
* Unless there is agreement to waive entrustment,
the lawyer must hold the fee in the
lawyer's IOLTA until it is earned by the lawyer's
provision of legal services.
Mr. Ponds failed to do the above in a criminal
representation, and the court determined
that he recklessly misappropriated client
funds, leading to his disbarment.
It has been the recommended practice from
this office since In re Mance that any lawyer
who desires to waive entrustment of an
advance fee under D.C. Rule 1.15(e) should
explain to the client, orally and in writing,
that:
8 WASHINGTON LAWYER * NOVEMBER/DECEMBER 2022
* Normally, as required by Rules 1.15(a) and (b),
advance fees, including prepaid flat fees, are
held in a lawyer's IOLTA until earned;
* The lawyer wishes to treat the advance fee as
the lawyer's property by placing it in the law
firm's operating or business account;
* When in the operating or business account,
where the lawyer could spend the fee on
overhead, the fee is subject to the lawyer's
creditors, whereas in the IOLTA it would be
safe from such creditors;
* The lawyer must still earn the fee by performing
the agreed-upon service and must
refund to the client any unearned fee; and
* If the client does not agree to waiver of
entrustment after being informed of the risks,
the prepaid fee must be placed in the IOLTA.
This discussion between the lawyer and client
usually takes place at the initial consultation
when the advance fee is being negotiated, and
it can be problematic for the anxious client
who may not understand the implications of
waiver of entrustment and may be inclined to
consent simply to satisfy the lawyer.
In re Ponds generated a Hearing Committee
Report in 2018, a Report and Recommendation
from the Board on Professional Responsibility
in 2019, and the D.C. Court of Appeals decision
this past August. From this disciplinary history,
it is clear there is no benefit to waiver of entrustment
for the client, and the lawyer incurs
significant risk for little reward.
D.C. Bar practice management advisors Dan Mills
and Kaitlin Forster can be reached at 202-780-2762
and 202-780-2764, respectively, or at pmas@dcbar.
org.
NOTE
1 On September 1, 2022, the respondent, Mr. Ponds,
filed a Petition for Rehearing or Rehearing en banc
in the D.C. Court of Appeals.

Washington Lawyer - November/December 2022

Table of Contents for the Digital Edition of Washington Lawyer - November/December 2022

Your Voice
From Our President
Practice Management
Toward Well-Being
Planting the Seeds: Pro Bono Helps Nonprofits Flourish
A Primer on D.C.’s New Debt Collection Law
Eviction Writ Quashing: Last Line of Defense for Tenants
Employment Law Implications of Dobbs
How Immigration Can Help Solve the U.S. Pilot Shortage
Ten Things You Might Have Forgotten Since the Pandemic
SPECIAL SECTION Young Lawyers Bring Passion to Public Interest Work
Attorney Briefs
Taking the Stand
Disciplinary Summaries
On Further Review
Member Spotlight
Worth Reading
Speaking of Ethics
The Learning Curve
The Pro Bono Effect
A Slice of Wry
Washington Lawyer - November/December 2022 - Cover1
Washington Lawyer - November/December 2022 - Cover2
Washington Lawyer - November/December 2022 - 1
Washington Lawyer - November/December 2022 - 2
Washington Lawyer - November/December 2022 - 3
Washington Lawyer - November/December 2022 - 4
Washington Lawyer - November/December 2022 - Your Voice
Washington Lawyer - November/December 2022 - 6
Washington Lawyer - November/December 2022 - From Our President
Washington Lawyer - November/December 2022 - Practice Management
Washington Lawyer - November/December 2022 - Toward Well-Being
Washington Lawyer - November/December 2022 - Planting the Seeds: Pro Bono Helps Nonprofits Flourish
Washington Lawyer - November/December 2022 - 11
Washington Lawyer - November/December 2022 - 12
Washington Lawyer - November/December 2022 - 13
Washington Lawyer - November/December 2022 - A Primer on D.C.’s New Debt Collection Law
Washington Lawyer - November/December 2022 - 15
Washington Lawyer - November/December 2022 - 16
Washington Lawyer - November/December 2022 - 17
Washington Lawyer - November/December 2022 - Eviction Writ Quashing: Last Line of Defense for Tenants
Washington Lawyer - November/December 2022 - 19
Washington Lawyer - November/December 2022 - Employment Law Implications of Dobbs
Washington Lawyer - November/December 2022 - 21
Washington Lawyer - November/December 2022 - How Immigration Can Help Solve the U.S. Pilot Shortage
Washington Lawyer - November/December 2022 - 23
Washington Lawyer - November/December 2022 - 24
Washington Lawyer - November/December 2022 - 25
Washington Lawyer - November/December 2022 - Ten Things You Might Have Forgotten Since the Pandemic
Washington Lawyer - November/December 2022 - 27
Washington Lawyer - November/December 2022 - 28
Washington Lawyer - November/December 2022 - 29
Washington Lawyer - November/December 2022 - SPECIAL SECTION Young Lawyers Bring Passion to Public Interest Work
Washington Lawyer - November/December 2022 - 31
Washington Lawyer - November/December 2022 - 32
Washington Lawyer - November/December 2022 - Attorney Briefs
Washington Lawyer - November/December 2022 - Taking the Stand
Washington Lawyer - November/December 2022 - 35
Washington Lawyer - November/December 2022 - Disciplinary Summaries
Washington Lawyer - November/December 2022 - 37
Washington Lawyer - November/December 2022 - On Further Review
Washington Lawyer - November/December 2022 - 39
Washington Lawyer - November/December 2022 - Member Spotlight
Washington Lawyer - November/December 2022 - 41
Washington Lawyer - November/December 2022 - Worth Reading
Washington Lawyer - November/December 2022 - 43
Washington Lawyer - November/December 2022 - Speaking of Ethics
Washington Lawyer - November/December 2022 - 45
Washington Lawyer - November/December 2022 - The Learning Curve
Washington Lawyer - November/December 2022 - The Pro Bono Effect
Washington Lawyer - November/December 2022 - 48
Washington Lawyer - November/December 2022 - 49
Washington Lawyer - November/December 2022 - 50
Washington Lawyer - November/December 2022 - 51
Washington Lawyer - November/December 2022 - A Slice of Wry
Washington Lawyer - November/December 2022 - Cover3
Washington Lawyer - November/December 2022 - Cover4
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