Are non-refundable fees subject to the reasonableness requirement, and when is reasonableness measured?

Plain-English summary

The committee addressed two questions about non-refundable fees: whether they are subject to the reasonableness requirement of RPC 1.5 and the refund requirements of RPC 1.15, and, if so, when reasonableness is to be determined, at the time the agreement is made or on completion of the representation.

On the first question, the committee answered yes: non-refundable fees are subject both to the reasonableness requirement of RPC 1.5 and to the refund requirements of RPC 1.15. On the second, the committee said reasonableness is ordinarily determined when the agreement between client and lawyer is made. In some circumstances, however, the reasonableness of a fee agreement must be re-evaluated, because subsequent unforeseen events have so altered the relationship between lawyer and client that an agreement that was reasonable when made is no longer reasonable. The committee gave non-exclusive examples: the death of the client or lawyer, the lawyer's loss of license, or the lawyer's failure to perform the contracted services.

Currency note

This opinion was issued in 2004, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. RPC 1.5 (fees) kept its number, but the opinion's "RPC 1.15" refers to Washington's pre-2006 rule on declining or terminating representation (including the duty to refund any advance payment of a fee that has not been earned), which corresponds to Model Rule 1.16 and was renumbered RPC 1.16 in 2006. Washington later also addressed flat and "nonrefundable" fees through rule and opinion developments. 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 Treat this page as historical context, not current guidance.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 mentioned here.

In practice

Under the Washington rules as they stood at the time of the opinion, the committee treated a "non-refundable" label as not insulating a fee from review: such fees remain subject to RPC 1.5's reasonableness requirement and to the refund obligations of the termination rule (then RPC 1.15, now RPC 1.16). The committee made the timing of the reasonableness inquiry primarily front-loaded, at the moment of agreement, but built in a back-end check: when unforeseen events (the committee listed the death of the client or lawyer, loss of license, or failure to perform) make a once-reasonable agreement no longer reasonable, reasonableness must be re-evaluated.

Common questions

Q: Can a fee labeled "non-refundable" avoid the reasonableness requirement?

A: No. The committee said non-refundable fees are subject to the reasonableness requirement of RPC 1.5 and the refund requirements of the termination rule (then RPC 1.15, now RPC 1.16).

Q: When is the reasonableness of a non-refundable fee judged?

A: Ordinarily when the agreement is made, the committee said, but it must be re-evaluated when subsequent unforeseen events have so altered the lawyer-client relationship that an agreement reasonable at the outset is no longer reasonable.

Q: What kinds of events trigger a re-evaluation?

A: The committee gave non-exclusive examples: the death of the client or the lawyer, the lawyer's loss of his or her license, or the lawyer's failure to perform the contracted services.

Background and rules framework

The opinion interprets two Washington rules. RPC 1.5 (Model Rule 1.5) requires that a lawyer's fee be reasonable. The opinion's "RPC 1.15" is Washington's pre-2006 rule on declining or terminating representation, which carried the duty to refund any advance payment of a fee that had not been earned; that rule corresponds to Model Rule 1.16 (and 1.16(d)) and was renumbered RPC 1.16 in Washington's 2006 revisions. The committee read these rules together to hold that a non-refundable fee remains subject to ongoing reasonableness review and to the refund duty on termination, with reasonableness measured at agreement and re-measured after disrupting events.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 / Washington RPC 1.5 (a lawyer's fee shall be reasonable)
• Model Rule 1.16 / Washington RPC 1.15 (pre-2006 numbering) (declining or terminating representation; refund of any unearned advance fee)

See also

• WA Ethics Op. 1347: Nonrefundable Retainers
• WA Ethics Op. 2024: Non-Refundable Cost Fee
• WA Ethics Op. 1366: Contingent Fee Hourly Recital

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1282

Original opinion text

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

Advisory Opinion: 2034
Year Issued: 2004
RPC(s): RPC 1.5, 1.15
Subject: Reasonableness of non-refundable fees

Questions Presented:

1. Are non-refundable fees subject to the reasonableness requirement of RPC 1.5 and/or the refund requirements of RPC 1.15?

2. If so, at what time is reasonableness to be determined – when the agreement is made, or on completion of the representation, either by client termination of the attorney-client relationship, the lawyer’s inability to perform, or the fulfillment of all services the client expected of the attorney?

Answers:

1. Yes. Non-refundable fees are subject to the reasonableness requirement of RPC 1.5 and the refund requirements of RPC 1.15.

2. Reasonableness is ordinarily determined when the agreement between the client and the lawyer is made. In some circumstances, the reasonableness of a fee agreement must be re-evaluated because subsequent unforeseen events have so altered the relationship between the lawyer and the client that a fee agreement that was reasonable at the time the agreement was made is no longer reasonable. Examples of such subsequent events may include, but are not limited to, death of the client or lawyer, lawyer’s loss of his license, or failure of lawyer to perform the contracted services.