WISBAR March 23, 2015

Can a Wisconsin lawyer label an advance fee or an availability retainer 'nonrefundable'?

Short answer: No. The revised opinion concludes that because both advanced fees and availability retainers must be earned and may have to be refunded under SCR 20:1.16(d), calling either one 'nonrefundable' is a misleading communication that violates SCR 20:7.1(a).

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This page answers the general question as of 2015. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Disclaimer: Advisory only. Not binding precedent.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.

View original ethics opinion (PDF)

Plain-English summary

Opinion E-93-4 was issued in 1993 and amended March 23, 2015 after Wisconsin's 2007 rule amendments significantly changed the rules governing lawyers' fees. The original opinion had said nonrefundable fees were not per se unethical, distinguishing a "true nonrefundable retainer" (which became the lawyer's property on receipt) from an "advance" earned only as services are performed. The 2015 revision revisits that conclusion under the current Rules.

The revised opinion works from the definitions in SCR 20:1.0. An "advanced fee" (SCR 20:1.0(ag)) is an amount paid in contemplation of future services, earned on an agreed basis, and any such payment is an advanced fee regardless of whether it is labeled a "minimum fee" or "nonrefundable fee"; it is subject to SCR 20:1.5 and 20:1.16(d). A "retainer" (SCR 20:1.0(mm)) is an amount paid solely to secure the lawyer's availability, does not constitute payment for any specific services, may not be billed against, and although it becomes the lawyer's property on receipt, it remains subject to SCR 20:1.5 and 20:1.16(d).

Because SCR 20:1.16(d) requires the refund of any advance payment of fee that has not been earned, the opinion reasons that both kinds of fee are contingent on future events: a lawyer earns an advanced fee by performing the services, and earns an availability retainer by actually remaining available. Unforeseen circumstances such as a conflict, loss of license, or death or incapacity can prevent the lawyer from earning either. The committee gives the example of a lawyer who takes an availability retainer but then discovers a disqualifying conflict; the lawyer has not earned the retainer and must refund it. Coupling this with the duties of truthfulness in SCR 20:8.4(c) and the bar on misleading communications in SCR 20:7.1(a), the committee concludes that a reasonable person would read "nonrefundable" to mean no refund under any circumstances, which is inaccurate, so using that term for either an advanced fee or a retainer is a prohibited misleading communication.

In practice

The opinion holds that, under Wisconsin's current Rules, neither an availability retainer nor an advanced fee may be characterized as "nonrefundable" in communications with clients, including fee agreements. Under the opinion, the controlling point is that SCR 20:1.16(d) makes the lawyer's right to keep either payment contingent on earning it, so the "nonrefundable" label misstates the client's actual entitlement and violates SCR 20:7.1(a). The opinion also reflects that a payment's label does not control its character: any payment in contemplation of future services is an advanced fee under SCR 20:1.0(ag) whatever it is called.

Common questions

Q: Can a Wisconsin lawyer call an advance fee 'nonrefundable'?

A: No. The opinion concludes an advanced fee must be earned by performing the services and refunded if not earned under SCR 20:1.16(d), so labeling it nonrefundable is misleading and violates SCR 20:7.1(a).

Q: What about a 'true' availability retainer that becomes the lawyer's property on receipt?

A: It still may not be called nonrefundable. The opinion concludes the retainer is earned only by the lawyer actually remaining available, and must be refunded if the lawyer cannot be available (for example, due to a conflict).

Q: Does calling a fee a 'minimum fee' or 'nonrefundable fee' change how it is treated?

A: No. Under SCR 20:1.0(ag), any amount paid in contemplation of future services is an advanced fee regardless of the label, and is subject to SCR 20:1.5 and 20:1.16(d).

Q: Can a lawyer apply an availability retainer toward the later advanced fee?

A: No. The opinion notes that SCR 20:1.0(mm) prohibits billing a retainer against fees or costs, so the retainer cannot be applied to the advanced fee charged when services begin.

Background and rules framework

The opinion interprets the fee-definition rules in SCR 20:1.0(ag) and 20:1.0(mm), the reasonableness and writing requirements of SCR 20:1.5 / Model Rule 1.5, and the refund duty in SCR 20:1.16(d) / Model Rule 1.16. It ties the labeling question to SCR 20:7.1(a) / Model Rule 7.1 (misleading communications about a lawyer's services) and SCR 20:8.4(c) / Model Rule 8.4(c) (dishonesty, deceit, or misrepresentation).

Citations and references

Rules of Professional Conduct:

Model Rule 1.5 / SCR 20:1.5 (fees); SCR 20:1.0(ag), 20:1.0(mm) (definitions of advanced fee and retainer)
Model Rule 1.16 / SCR 20:1.16(d) (refund of unearned fees on termination)
Model Rule 7.1 / SCR 20:7.1(a) (misleading communications); Model Rule 8.4 / SCR 20:8.4(c)

Other opinions cited:

Wisconsin Ethics Opinion E-86-9 (distinguishing retainers from advances)

Source

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