In D.C., can a lawyer treat a prepaid flat fee or subscription fee as earned on receipt and deposit it in the operating account?

Plain-English summary

Opinion 389 (Revised) (published August 2025, revised January 2026) addresses how Rule 1.15(e) applies to prepaid flat fees, including fees common in criminal, immigration, and subscription practices. The Committee explains that under Rule 1.15(e) the default is that advances of unearned fees and unincurred costs are the client's property and must be held in trust until earned, unless the client gives informed consent to a different arrangement; and that regardless of consent, any unearned portion must be refunded at the end of the representation under Rule 1.16(d).

The opinion organizes its analysis around a trilogy of D.C. Court of Appeals cases. In re Mance (2009) held that a prepaid flat fee is an advance of unearned fees that belongs in trust until earned, and that labels like "retainer," "nonrefundable," or "earned on receipt" do not change that; the opinion also distinguishes a true "availability fee," which is fully earned on receipt but, the opinion notes, is now rare. In re Ponds (2022) sets out the specific disclosures (verbal and written) a lawyer must make before a client can validly consent to operating-account treatment, and disbarred a lawyer whose nonrefundable-fee agreement fell short of them. In re Alexei (2024) adopts a default rule that a lawyer earns the flat fee only when all the legal services covered by the fee are complete, unless the engagement agreement provides a different, written method for earning portions of the fee.

The opinion ties these requirements to disciplinary exposure: commingling (typically a censure), negligent misappropriation (a presumptive six-month suspension), and reckless or intentional misappropriation (presumptive disbarment under In re Addams). It explains that Disciplinary Counsel routinely requests the engagement agreement in any disciplinary investigation, so a fee-handling problem can surface even when the original complaint had nothing to do with fees. The opinion also addresses monthly recurring and subscription fees (which it treats as not earned until the relevant period passes) and the lawyer's right under Rule 1.15(d) to hold a disputed amount in trust pending a quantum meruit resolution rather than refunding it first.

In practice

Under this opinion, a D.C. lawyer who takes a prepaid flat fee should treat it as the client's property in a trust account until it is earned, unless the lawyer has obtained the trilogy's informed consent. The opinion concludes that valid consent under Ponds requires the lawyer to communicate, verbally and in writing, that the fee will be treated as the lawyer's property on receipt, that the lawyer keeps it only by providing the contracted benefit or service, that the agreement spells out the benefit to be conferred, that any unreasonable or unearned amount will be refunded if the client terminates, and that absent agreement otherwise the fee stays in escrow until earned.

The opinion concludes that, absent a written formula in the engagement agreement, a flat fee is earned only when all the covered work is complete (Alexei), so interim draws require an express written method such as an hourly rate capped at the flat fee, per-service pricing, or stated milestone percentages, each still subject to the Rule 1.5(a) reasonableness requirement. Where the representation ends before the matter does and the client objects, the opinion concludes the lawyer may not pay herself from trust until the dispute is resolved by agreement, arbitration, or litigation, but may hold in trust the amount she reasonably believes she can prove in quantum meruit under Rule 1.15(d). The opinion recommends giving the client notice as each agreed milestone is reached, unless the client otherwise knows.

Common questions

Q: Can I treat a prepaid flat fee as "earned on receipt" if my engagement letter says so?

A: No. The opinion concludes, following Mance, that a prepaid flat fee is an advance of unearned fees that belongs in trust until earned, and that labels such as "retainer," "nonrefundable," or "earned on receipt," or front-loading, do not make it earned on receipt.

Q: What does it take for a client to validly consent to my keeping the fee in my operating account?

A: The opinion concludes that under Ponds the lawyer must expressly tell the client, verbally and in writing, that the fee is treated as the lawyer's property on receipt, that the lawyer keeps it only by providing the contracted service, that the agreement spells out the benefit, that unreasonable or unearned amounts will be refunded on termination, and that absent other agreement the fee stays in escrow until earned.

Q: When is a flat fee "earned" if my agreement is silent?

A: The opinion concludes that under Alexei the default rule is that the lawyer earns the flat fee only when all the legal services covered by the fee are complete; to earn portions earlier, the engagement agreement must set out a written method, such as a capped hourly rate, per-service pricing, or milestone percentages.

Q: If the client fires me mid-matter and disputes the fee, do I have to refund everything first?

A: The opinion concludes the lawyer need not refund first; under Rule 1.15(d) the lawyer may hold in trust the amount she reasonably believes she can prove in quantum meruit, may not draw it over the client's objection until the dispute is resolved, and must promptly return any excess.

Q: Do these rules reach monthly subscription or recurring-fee plans?

A: Yes. The opinion concludes that to the extent such plans require payment in advance for future legal services, they are subject to Mance, Ponds, and Alexei; the monthly fee is generally not earned until the period passes, and an unsophisticated client who uses no services may be entitled to a refund.

Background and rules framework

The opinion interprets Rule 1.15 (safekeeping property), centering on Rule 1.15(a) (keeping client property separate, money in a trust account), Rule 1.15(d) (holding disputed funds in trust), and Rule 1.15(e) (advances of unearned fees as client property absent informed consent). It reads these against Rule 1.5 (fees), which requires the fee to be reasonable (Rule 1.5(a)) and a writing stating the basis of the fee for a client the lawyer has not regularly represented (Rule 1.5(b)), and Rule 1.16(d) (returning unearned advances on termination).

The opinion also draws on Rule 1.0(e) (the definition of informed consent), Rule 1.8(i) (lawyer liens, and the limit on imposing a lien on a client's files), and Rule 1.7 (a client's broad discretion to discharge a lawyer). Its analysis rests on the D.C. Court of Appeals trilogy of Mance, Ponds, and Alexei and the misappropriation-sanction line of cases.

Citations and references

Rules of Professional Conduct:

• D.C. RPC 1.15(a), (d), (e) / Model Rule 1.15 (safekeeping property)
• D.C. RPC 1.5(a), (b) / Model Rule 1.5 (fees; reasonableness; writing)
• D.C. RPC 1.16(d) / Model Rule 1.16 (returning unearned advances on termination)
• D.C. RPC 1.8(i) / Model Rule 1.8 (lawyer liens; limit on liens against client files)
• D.C. RPC 1.7 / Model Rule 1.7 (client's discretion to discharge counsel)
• D.C. RPC 1.0(e) / Model Rule 1.0 (terminology; informed consent)

Cases:

• In re Mance, 980 A.2d 1196 (D.C. 2009), a prepaid flat fee is an advance of unearned fees that belongs in trust until earned
• In re Ponds, 279 A.3d 357 (D.C. 2022), disclosures required for a client to consent to operating-account treatment of a flat fee
• In re Alexei, 319 A.3d 404 (D.C. 2024), default rule that a flat fee is earned only when all covered work is complete
• In re Addams, 579 A.2d 190 (D.C. 1990) (en banc), disbarment as the presumptive sanction for misappropriation
• In re Sather, 3 P.3d 403 (Colo. 2000), a fee is earned only by conferring a benefit or performing a service

Other opinions cited:

• ABA Formal Op. 505 (2023): fees paid in advance for contemplated services
• D.C. Bar Ethics Ops. 264 (1996), 355 (2010, withdrawn 2022), and 379 (2020): availability fees, milestone arrangements, and retention liens

See also

• ABA Formal Op. 505: Fees Paid in Advance
• CA COPRAC Op. 2026-210: Flat Fees and Refunds
• Alaska Ethics Op. 2012-2: Flat or Fixed Fees and the Client Trust Account
• Alabama Ethics Op. 2008-03: Trust Account Obligations for Retainers and Flat Fees

Source

• Landing page: https://www.dcbar.org/for-lawyers/legal-ethics/ethics-opinions-210-present/ethics-opinion-389-%28revised%29