When a client's spouse pays the fees and later wants a refund, who controls the money and what stays in trust?

Plain-English summary

A lawyer represented Husband on a U.S. citizenship petition for which Wife was the sponsoring petitioner. Wife paid the $1,500 flat fee and $250 toward filing fees and copy costs (the $250 deposited in trust), and was advised that Husband is the client and that any privileges belong only to him. Wife later said she no longer wanted to support Husband and wanted a full refund; Husband, the client, asked the lawyer to hold the funds in case Wife changed her mind. The committee accepted the premise that there was no attorney-client relationship with Wife, while cautioning that the existence of such a relationship often depends on the putative client's subjective perception (citing Bohn v. Cody), and that if a relationship with Wife existed, RPC 1.7 and possibly 2.2 could be pertinent.

On the rules, the committee said RPC 1.5 requires a reasonable fee and clear communication of the fee terms, but treated whether the $1,500 was reasonable and whether the lawyer had done "substantially most" of the work as beyond its scope, and treated the contract terms of the retainer as governed by general contract law. RPC 1.8(f) permits third-party payment only with the client's consent and without compromising the lawyer's independence, conditions the committee said appeared satisfied but could not finally determine. Under RPC 1.14, the $250 in costs clearly belongs in an IOLTA trust account; the $1,500's status is less clear, because if it was a flat fee due on signing it became the lawyer's funds on payment, but if it was a deposit for fees to be earned it could be withdrawn only as earned, with notice, and not while the client contests withdrawal. As to the third question, the committee said RPC 3.1 and 3.3 bar frivolous or false statements to a tribunal and require disclosure necessary to avoid assisting a fraud, RPC 4.1 similarly bars false statements to third parties, and RPC 8.4(c) bars dishonesty, fraud, deceit, or misrepresentation; whether INS is a "tribunal" or a "third party," the lawyer must not prepare or submit documents containing statements the lawyer knows to be false or misleading.

Currency note

This opinion was issued in 1999, before the Washington State Bar Association's adoption of the 2006 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. Washington's trust-account rule was numbered RPC 1.14 at the time and corresponds to ABA Model Rule 1.15; the 2006 revisions renumbered and revised it and several other rules cited here, so verify the current rules before relying on them.

Common questions

Q: When a client's spouse pays the fees, whose wishes control a refund request?

A: The committee treated Husband as the client and accepted that there was no attorney-client relationship with Wife; on that premise the client, not the paying spouse, controls the funds, though the committee said the refund terms turn on the retainer contract and general contract law.

Q: Does the $250 paid for costs have to stay in the trust account?

A: Yes. The committee said RPC 1.14 clearly requires the $250 paid for expenses to be deposited in an IOLTA trust account.

Q: Is the $1,500 flat fee trust money?

A: It depends. If the flat fee was due on signing, it became the lawyer's funds on payment and need not be in trust; if it was a deposit for fees to be earned, it could be withdrawn only as earned and not while the client contests withdrawal.

Q: Could the lawyer file an immigration petition stating the marriage is valid?

A: The committee said RPC 3.1, 3.3, 4.1, and 8.4(c) require candor and honesty, so the lawyer must not prepare or submit documents containing statements the lawyer knows to be false or misleading, whether INS is treated as a tribunal or a third party.

Background and rules framework

The opinion applied Washington RPC 1.5 (fees), RPC 1.8(f) (compensation from one other than the client), RPC 1.14 (safekeeping of client funds; the IOLTA trust rule, corresponding to ABA Model Rule 1.15), RPC 3.1 (meritorious claims), RPC 3.3 (candor toward the tribunal), RPC 3.4 (fairness to opposing party and counsel), RPC 4.1 (truthfulness in statements to others), and RPC 8.4(c) (dishonesty, fraud, deceit, or misrepresentation), corresponding to ABA Model Rules 1.5, 1.8, 1.15, 3.1, 3.3, 3.4, 4.1, and 8.4. The committee resolved the threshold trust-account question under RPC 1.14 and deferred the fee-reasonableness, contract, and factual questions as beyond its scope.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.5 (fees); Washington RPC 1.5
• ABA Model Rule 1.8 (current clients: specific rules); Washington RPC 1.8(f)
• ABA Model Rule 1.15 (safekeeping property); Washington RPC 1.14
• ABA Model Rule 3.1 (meritorious claims and contentions); Washington RPC 3.1
• ABA Model Rule 3.3 (candor toward the tribunal); Washington RPC 3.3
• ABA Model Rule 3.4 (fairness to opposing party and counsel); Washington RPC 3.4
• ABA Model Rule 4.1 (truthfulness in statements to others); Washington RPC 4.1
• ABA Model Rule 8.4 (misconduct); Washington RPC 8.4(c)

Cases:

• Bohn v. Cody, 119 Wn.2d 357, 832 P.2d 71 (1992), on when an attorney-client relationship exists

See also

• WA Ethics Op. 1838: Nonrefundable Flat Fees
• WA Ethics Op. 1852: Client Won't Accept Settlement
• WA Ethics Op. 1347: Nonrefundable Retainers

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1056

Original opinion text

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

Advisory Opinion: 1863
Year Issued: 1999
RPC(s): RPC 1.5; 1.8(f); 1.14; 3.1; 3.3; 3.4; 4.1; 8.4(c)
Subject: Trust account; fees paid by third party; client's spouse pays fees and costs and later requests refund

I have been instructed by the Rules of Professional Conduct Committee to respond to your ethics inquiry #1863 concerning monies held in trust account at conclusion of services.

The Committee has reviewed your inquiry and determined the following:

Facts:

You were retained to represent Husband in connection with his application for U. S. citizenship. Husband and Wife were recently married, and Wife was to be the sponsoring petitioner for Husband’s citizenship petition. Your flat fee of $1,500 was paid by wife, and wife also paid $250 toward filing fees and copy costs, the latter amount having been deposited into your trust account. Wife was advised that Husband is your client and that any privileges belong only to him. There is a retainer agreement that says, inter alia, that upon conclusion of services, whether by withdrawal or otherwise, any funds other than earned fees will be returned to "Client."

Wife has subsequently advised you that she no longer wants to support Husband and also wants a full refund of amounts paid to date. You reminded Wife that Husband was the client, and indicated that you would speak with Husband about the funds. Client asked you to give him some time to work things out with Wife, and to hold all funds in the meantime, since the money could still be used towards the case if Wife changes her mind.

Questions:

1. How do you handle the $250 in the trust account? If Wife requests refund of unexpended funds, and Husband objects, whose desires control?

2. Are you obligated to return any of the flat fee that was paid up front if you have done substantially most of the work?

3. If Husband and Wife reconcile, do you have an ethical problem filing petition with INS indicating a valid marriage because you have personal knowledge that marriage was not stable to begin with?

Analysis:

Rules implicated: RPCs 1.5, 1.8(f), 1.14, 3.1, 3.3, 4.1 and 8.4(c).

At the outset, we note that your description of the problem implies that there is no attorney-client relationship between you and Wife, and we have accepted this premise for purposes of this analysis. Given that the existence of such a relationship often depends upon the subjective perception of the putative client, this assumption may not be accurate as a factual matter. See, Bohn v. Cody, 119 Wn.2d 357, 832 P.2d 71 (1992). If there were an attorney-client relationship with wife, and Husband and Wife continue to disagree on the desired outcome, RPC 1.7 (conflict with current client) and possibly 2.2 (intermediary) may be pertinent as well.

RPC 1.5 requires that your fee be reasonable, and sets forth several factors to be considered in determining reasonability. Determining whether a flat fee of $1,500 for filing and pursuing a citizenship petition is reasonable, and whether the work performed by you prior to being advised that the petition may not proceed constituted "substantially most" of the work contemplated, is beyond the scope of this Committee.

RPC 1.5 also requires that the terms of the fee arrangement be clearly communicated to the client, preferably in writing. It appears that there was a written retainer agreement that presumably satisfied this requirement. It appears that both Husband and Wife signed the agreement. Subject to the reasonability requirement, the precise nature of the arrangement between you, Husband and Wife is not regulated by the RPCs, and any questions arising under that retainer agreement would be resolved by the application of general contract law, and those questions would be beyond the scope of this Committee.

RPC 1.8(f) prohibits accepting payment of fees from a third party unless the client consents and your independence is not thereby compromised. Although it appears from your representation that these conditions have been satisfied, a final determination would require a factual inquiry that is beyond the scope of this Committee. Your inquiry letter posits that the fees were paid by Wife and implies that these were her separate funds rather than community property under her control. Again whether that is accurate is beyond our ability to determine.

RPC 1.14 requires that funds belonging to the client must be deposited into an IOLTA trust account. Clearly this applies to the $250.00 paid for expenses. The status of the $1,500 is less clear. If it is indeed a flat fee that was due upon signing the retaining agreement, it became your funds upon payment and need not be deposited into the trust account. On the other hand, if it was in the form of a deposit for fees to be earned in the future, it could only be withdrawn as those fees are earned, with notice to the client, and could not be withdrawn so long as the client contests the right to withdraw. Again, how these general rules apply in this situation would require a factual determination that the committee is not in a position to make.

The third question that you posed requires us to speculate that Husband and Wife will report a reconciliation and request that you initiate the citizenship petition, and further to speculate about your state of knowledge at that time about the stability of the marriage and its implications for federal immigration law. Obviously, there are too many variables to determine exactly how this scenario might play out, but the following observations may be of assistance to you.

RPC 3.1 and 3.3 prohibit an attorney from making legal or factual arguments to a tribunal that are frivolous or false, and require that you disclose any previously undisclosed information the nondisclosure of which is necessary to avoid assisting a fraudulent action. RPC 4.1 similarly prohibits making statements to a third party that are false, and requires disclosure of facts the nondisclosure of which is necessary to avoid assisting a fraudulent or criminal act. Which rule is applicable depends on whether one views the Immigration and Naturalization Service as a "tribunal" or a "third party," but either way you must not prepare or submit documents that include statements that you knows to be false or misleading. Finally, RPC 8.4(c) prohibits you from engaging in conduct involving dishonesty, fraud, deceit or misrepresentation. Should Husband and Wife request that you initiate citizenship petitions in the future, your conduct should be guided by these general rules.