How must a Minnesota lawyer handle advance fees and non-refundable availability retainers?

Plain-English summary

The opinion distinguished two kinds of up-front payments. Advance fee payments are funds paid for specific services to be undertaken; the opinion presumed that all fees paid at the beginning of a representation were advance fee payments unless a written fee agreement signed by the client said otherwise. Availability or non-refundable retainers are funds paid to secure a lawyer's general availability or representation over a period or for a specific matter.

For advance fee payments, the opinion required deposit into an interest-bearing trust account under Rules 1.15(a)(2) and (f). A lawyer could withdraw fees when earned only after giving the client written notice of the time, amount, and purpose of the withdrawal, and an accounting of the client's trust funds, citing In re Lochow, 469 N.W.2d 91 (Minn. 1991).

For availability or non-refundable retainers, the opinion stated those funds need not be deposited in or held in trust. But every such agreement had to be in writing and signed by the client, and had to include a final paragraph immediately above the client's signature line informing the client that the funds would not be held in a trust account and that the client might not receive a refund if the client later chose not to hire the lawyer or terminated the lawyer's services. All such fees had to be reasonable, with reasonableness assessed under the factors in Rule 1.5(a).

Currency note

The Board flagged this opinion as Repealed effective January 26, 2006; it is retained here for historical research only.

This opinion was issued in 1991, before the Minnesota Supreme Court's adoption of the 2005 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 Treat this page as historical context, not current guidance.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: Where did advance fee payments have to be held?

A: In an interest-bearing trust account under Rules 1.15(a)(2) and (f). The opinion presumed all fees paid at the start of a representation were advance fees unless a signed written agreement said otherwise.

Q: When could a lawyer withdraw earned fees from trust?

A: When earned, after giving the client written notice of the time, amount, and purpose of the withdrawal and an accounting of the client's trust funds, citing In re Lochow.

Q: Did a non-refundable availability retainer have to be held in trust?

A: No. The opinion stated such funds need not be deposited in or held in trust, but the agreement had to be in a signed writing.

Q: What did a non-refundable retainer agreement have to disclose?

A: A final paragraph immediately above the client's signature stating the funds would not be held in trust and that the client might not get a refund if the client later chose not to hire or to terminate the lawyer.

Background and rules framework

The opinion applied Rule 1.15 of the Minnesota Rules of Professional Conduct (the analog of Model Rule 1.15 on safekeeping property), specifically subsections (a)(2) and (f) on interest-bearing trust accounts, and Rule 1.5(a) (the analog of Model Rule 1.5 on fees) for reasonableness. It relied on the Minnesota Supreme Court's decision in In re Lochow. Adopted in 1991, amended in 1999, and repealed in 2006.

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees); MR 1.15 (safekeeping property)
• Minnesota RPC 1.5(a) (reasonableness factors); 1.15(a)(2) and 1.15(f) (interest-bearing trust accounts)

Cases:

• In re Lochow, 469 N.W.2d 91 (Minn. 1991), handling of advance fees and non-refundable retainers

See also

• ABA Ethics Op. 505: Fees Paid in Advance
• ABA Ethics Op. 02-427: Security Interest to Secure a Fee

Source

• Landing page: https://lprb.mncourts.gov/lawyers-professional-responsibility-board-opinions/
• Original PDF: https://lprb.mncourts.gov/wp-content/uploads/2024/10/Opinion-15_compressed.pdf

Original opinion text

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

LAWYERS PROFESSIONAL RESPONSIBILITY BOARD
Repealed: January 26, 2006
OPINION NO. 15
ADVANCE FEE PAYMENTS AND AVAILABILITY OR
NON-REFUNDABLE RETAINERS
Definitions
(1)
Advance Fee Payments: Funds paid by a client or a prospective client to a lawyer for specific services to be undertaken. All fees paid at the beginning of the representation shall be presumed to be advance fee payments unless a written fee agreement signed by the client states otherwise. (2) Availability or Non-Refundable Retainers: Funds paid by a client or a prospective client to secure a lawyer's general availability to, or representation of, that client over a specified period of time or for a specific legal matter. (3) An Accounting: An itemized statement issued to a client which lists all trust fund withdrawals (e.g., fees, costs or expenses) for that client since the last statement and which states the balance of that client's funds remaining in the trust account after the withdrawals have been made. Opinion All advance fee payments must be deposited into an interest bearing trust account in accordance with Rules 1.15(a)(2) and (f), Minnesota Rules of Professional Conduct. A lawyer may withdraw fees from the trust account when earned provided the client is given: (l) written notice of the time, amount and the purpose of the withdrawal; and (2) an accounting of the client's funds in the trust account. See In re Lochow, 469 N.W.2d 91 (Minn. 1991). Funds paid to a lawyer pursuant to an availability or non-refundable retainer agreement are not required to be deposited into a trust account or held in trust. All availability or non-refundable retainer agreements must be in writing and signed by the client. Lochow, 469 N.W.2d at 98. All availability or non-refundable retainer agreements must include a final paragraph immediately above the client signature line which informs the client that: (l) the funds will not be held in a trust account; and (2) the client may not receive a refund of the fees if the client later chooses not to hire the lawyer or chooses to terminate the lawyer's services. All fees paid pursuant to an availability or non-refundable retainer agreement shall be reasonable in amount. The factors to be considered in determining the reasonableness of a lawyer's fee include those set forth in Rule 1.5(a), Minnesota Rules of Professional Conduct. Adopted: September 13, 1991. Amended: August 1, 1999. Repealed: January 26, 2006.