Can a lawyer deposit a retainer or advance fee for work not yet done into the firm's general operating account instead of a trust account?

Plain-English summary

The opinion answered whether a lawyer may deposit into a general operating account a retainer that represents payment of fees yet to be earned. The Board concluded that a lawyer need not place such fees in a trust account absent special circumstances necessary to protect the client's interest, identifying as examples the agreement of the parties, the size and amount of the fee, and the length of time contemplated for the undertaking.

The Board took care to distinguish terms. It explained that fees yet to be earned are prepaid fees, which include fixed or flat fees that are not earned until the task is completed, and that a retainer in the strict sense is the fee a client pays to engage the attorney and to keep the attorney from acting for the client's adversary. Drawing on Black's Law Dictionary and McNulty, George & Hall v. Pruden, 62 Ga. 135 (1878), the Board treated a true retainer as earned when the lawyer agrees to be on call and to decline adverse employment.

The Board emphasized that, whatever the label used for a fee arrangement, the lawyer is a fiduciary, so the lawyer's duties as to fees are uniform across arrangements. As later restated in Formal Advisory Opinion 03-1, those duties are to have a clear understanding with the client about the fee in advance, preferably in writing; to return any unearned portion of a fee; to accept the client's dismissal, with or without cause, without imposing a penalty; and to keep the fee reasonable under the reasonableness standard.

Currency note

This opinion was issued in 1991, before the State Bar of Georgia's 2001 adoption of the Georgia Rules of Professional Conduct, which replaced the former Standards of Conduct. Per the opinion's headnotes, Standard 31 corresponds to current Rule 1.5(a), and the cited Ethical Considerations bear on matters addressed by Comments 2 and 9 of Rule 1.5. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules, including the trust-account rules, before relying on any specific rule or requirement mentioned here.

Common questions

Q: Does a Georgia lawyer have to keep advance or flat fees in a trust account?

A: The opinion concluded a lawyer need not place fees in a trust account absent special circumstances necessary to protect the client, such as the parties' agreement, the size of the fee, or the length of the undertaking.

Q: What is the difference between a retainer and a prepaid fee under this opinion?

A: The opinion explained that prepaid fees are fees yet to be earned, including fixed or flat fees earned only when the task is completed, while a true retainer is the fee paid to engage the lawyer and keep the lawyer from acting for an adversary, which is earned by the lawyer's agreement to be on call.

Q: Did putting fees in an operating account change the lawyer's duties to the client?

A: No. The opinion treated the lawyer as a fiduciary whose fee duties are uniform regardless of the arrangement, including the duty to return any unearned portion of a fee and to keep the fee reasonable.

Background and rules framework

The opinion interpreted former Standard of Conduct 31 (reasonableness of fees), which the State Bar of Georgia's headnotes map to current Rule 1.5(a) (Model Rule 1.5), and relied on the Canons of Ethics (Ethical Considerations 2-19 and 2-23) bearing on matters addressed by Comments 2 and 9 of Rule 1.5. It cited Black's Law Dictionary and McNulty, George & Hall v. Pruden, 62 Ga. 135 (1878).

Citations and references

Rules of Professional Conduct:

• Former Standard 31 (reasonableness of fees), now Georgia RPC 1.5(a) / Model Rule 1.5

Cases:

• McNulty, George & Hall v. Pruden, 62 Ga. 135 (1878), nature of a retainer

See also

• GA Ethics Op. 03-1: Non-Refundable Retainers
• ABA Formal Op. 505: Fees Paid in Advance

Source

• Landing page: https://www.gabar.org/handbook?rule=rule521

Original opinion text

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

State Bar of Georgia

Issued by the Supreme Court of Georgia

On September 20, 1991

Formal Advisory Opinion No. 91-2

For references to Standard of Conduct 31, please see Rule 1.5(a) .

This opinion also relies on the Canons of Ethics, specifically Ethical Considerations EC 2-19 and 2-23, that bear upon matters directly addressed by Comments 2 and 9 of Rule 1.5 .

ADVANCE FEE PAYMENTS

A lawyer need not place any fees into a trust account absent special circumstances necessary to protect the interest of the client. Such circumstances may be the agreement of the parties, the size and amount of the fee, and the length of time contemplated for the undertaking.

QUESTION PRESENTED:

Whether a lawyer may deposit into a general operating account a retainer that represents payment of fees yet to be earned.

OPINION:

The question posed by correspondent is not clear. "Fees yet to be earned "are prepaid fees. "Prepaid fees "also include "fixed "or "flat fees,"which are not earned until the task is completed. The terms "retainer "and "prepaid fees "have different meanings. For purposes of clarity, the terms are defined as here used.

A retainer is "...the fee which the client pays when he retains the attorney to act for him, and thereby prevents him from acting for his adversary."Black's Law Dictionary (5th ed. 1979). Thus, retainer fees are earned by the attorney by agreeing to be "on call "for the client and by not accepting employment from the client's adversaries. McNulty, George &Hall v. Pruden , 62 Ga. 135, 141 (1878).

A "flat "or "fixed "fee is one charged by an attorney to perform a task to completion, for example, to draw a contract, prepare a will, or represent the client in court, as in an uncontested divorce or a criminal case. Such a fee may be paid before or after the task is completed.

A "prepaid fee "is a fee paid by the client with the understanding that the attorney will earn the fee as he or she performs the task agreed upon.

Under these various definitions, one can reasonably take the position that "retainers "and "flat fees "may be placed in the general operating account when paid. Prepaid fees may be placed in a trust account until earned.

Terminology as to the various types of fee arrangements does not alter the fact that the lawyer is a fiduciary. Therefore, the lawyer's duties as to fees should be uniform and governed by the same rules regardless of the particular fee arrangement. Those duties are as follows:

1. To have a clear understanding with the client as to the details of the fee arrangement prior to undertaking the representation, preferably in writing.

2. To return to the client any unearned portion of a fee.

3. To accept the client's dismissal of him or her (with or without cause) without imposing any penalty on the client for the dismissal.

4. Comply with the provisions of Standard 31 as to reasonableness of the fee.

The law is well settled that a client can dismiss a lawyer for any reason or for no reason, and the lawyer has a duty to return any unearned portion of the fee. In the Matter of Collins , 246 Ga. 325, 271 S.E.2d 473 (1980).

The exercise of the right to discharge an attorney with or without cause does not constitute a breach of contract because it is a basic term of the contract, implied by law into it by reason of the nature of the attorney-client relationship, that the client may terminate that contract at any time.

Henry, Walden &Davis v. Goodman , 294 Ark. 25, 741 S.W. 2d 233 (1987).

The client, of course, may not be penalized for exercising the right to dismiss the lawyer. Id . In view of these duties, a lawyer need not place any fees into a trust account absent special circumstances necessary to protect the interest of the client. Such circumstances may be the agreement of the parties, the size and amount of the fee, and the length of time contemplated for the undertaking. 1

1 A fee paid for retainer of the attorney, as narrowly defined in this opinion, illustrates the importance of an agreement or understanding in writing outlining, among other things: geographic area involved, duration, scope of proposed legal services, fees and expenses for legal services rendered, and due date of future retainer fees covered by the retainer agreement. The agreement should also contain specific terms as to refunds of any portion of the fee should the agreement be terminated prior to its expiration date. See Ethical Considerations 2-19 and 2-23.