Is a non-refundable fee earned upon receipt unethical in a criminal defense matter?

Plain-English summary

The committee was asked whether a fee arrangement common in criminal defense practice, providing for a fee "earned upon receipt," was unethical and warranted discipline. Such an agreement results in a non-refundable fee that is not specifically tied to the amount of work performed.

The opinion concluded there is no per se rule making "earned upon receipt" fee contracts unethical. It pointed to ER 1.5(a)(8), which expressly recognizes that a fee may be fixed rather than contingent. The reasonableness of any particular fee, the opinion held, must be measured against the ER 1.5 factors and the specific facts of each case, rather than condemned categorically.

Currency note

This opinion was issued in 1986, before the State Bar of Arizona's adoption of the 2003 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Are non-refundable "earned upon receipt" fees automatically unethical?

A: No. The opinion concluded there is no per se rule against them, because ER 1.5(a)(8) recognizes fixed fees; each fee is judged for reasonableness on its own facts.

Q: How is the reasonableness of such a fee measured?

A: Under the ER 1.5 factors, including the time and labor required, the customary fee in the locality, the results obtained, the lawyer's experience, and whether the fee is fixed or contingent.

Background and rules framework

The opinion applied ER 1.5 (Model Rule 1.5), which requires that a lawyer's fee be reasonable and lists the factors for assessing reasonableness, and ER 1.5(a)(8), which counts whether the fee is fixed or contingent among those factors. The committee noted that ER 1.5 carried forward the substance of former AR 2-106 under the prior Code, which barred illegal or clearly excessive fees and prohibited contingent fees in criminal cases.

Citations and references

Rules of Professional Conduct:

• ER 1.5 / Model Rule 1.5 (fees; reasonableness factors; fixed or contingent)

See also

• AZ Ethics Op. 86-09: Fees
• AZ Ethics Op. 04-02: Referral Fees and Division of Fees
• AZ Ethics Op. 05-06: Limited-Scope Representation and Fees

Source

• Landing page: https://tools.dev.azbar.org/RulesofProfessionalConduct/ViewEthicsOpinion.aspx?id=541

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

5/1986

"Earned upon receipt" fee arrangement not per se unethical. Reasonableness of such agreement determined under ER 1.5 guidelines.

FACTS

A common practice of attorneys in criminal defense is to enter into fee arrangements which provide for a fee "earned upon receipt.” These agreements result in a non-refundable fee, not specifically dependent upon the amount of work performed for the client.

QUESTION

Are fee arrangements providing for fee “earned upon receipt” unethical so as to require disciplinary action by the Arizona Bar Association?

CODE PROVISIONS INVOLVED

ER 1.5 Fees

(a) A lawyer’s fee shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawer;

(3) the fee customarily charged in the locality for similar legal services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or the circumstances;

(6) the nature and length of the professional relationship with the client;

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent.

(d) A lawyer shall not enter into an arrangement for, charge or collect:

(2) a contingent fee for representing a defendant in a criminal case.

Formerly AR 2-106 which stated that:

(A) A lawyer should net enter into an agreement for, charge, or collect an illegal or clearly excessive fee.

(B) A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.

Factors to be considered. . . in determining reasonableness. . . include . . .: (same as in ER 1.5).

(C) “a contingent fee in a criminal case” is prohibited.

OPINION

The Comnittee is of the opinion that there is no per se rule holding “earned upon receipt” fee contracts unethical. In fact, ER 1.5(a)(8) specifically recognizes fixed fee contracts. Therefere, each fee contract must be held to be reasonable or unreasonable in light of the guidelines set forth in ER 1.5 and the specific facts of each case.

Formal opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceeding. This opinion is based on the Ethical Rules in effect on the date the opinion was published. If the rules change, a different conclusion may be appropriate.

© State Bar of Arizona 1986