2012-2.

• Court: Alaska

Alaska Ethics Opinions 2012. 2012-2. ALASKA BAR ASSOCIATION ETHICS OPINION NO. 2012-2 Deposit of Advanced Fee Retainers in Client Trust AccountQuestion Presented How Should a Flat or Fixed Fee be Treated by a Lawyer during the Representation of a Client? Conclusion All "flat fees", "fixed fees" or similar fee arrangements, however denominated, should be placed into a client trust account until earned, unless after consultation, the lawyer and client agree in writing: (1)that the funds will become the property of the lawyer when paid, (2)that they will not be held in a client trust account; (3) that the lawyer and client acknowledge the special purpose of the retainer arrangement; (4) that the client has been advised of the potential consequences of the retainer agreement; and (5) that the fees become earned for purposes of a potential refund on a specified and reasonable basis that will not result in an unreasonably high fee for legal services actually rendered. Applicable Rules and Analysis Alaska Bar Association Ethics Opinion 87-1 approved the use of "non-refundable fee deposit or retainer agreements" so long as the "nature of the retainer as non-refundable is fully and clearly explained to the client, orally and in the written fee agreement, and if the fee is not excessive." Fee agreements of this type, also denominated "prepaid fees" or "advance fee retainers" typically provide that the client pays the attorney in advance for some or all of the legal services which the attorney is expected to provide on behalf of the client.(fn1) These arrangements are different from "security retainers" in which the attorney holds client funds solely to secure the ability of the client to pay for the attorney's expected services.(fn2) Alaska Bar Association Ethics Opinion 2009-1 adopted the conclusion of Ethics Opinion 87-1 that flat fees and similar arrangements are permissible, but further concluded that a lawyer may not characterize them as "non-refundable, because a lawyer must refund the unearned portion of such a retainer if the representation is terminated prematurely. See, ARPC 1.16(d) ("Upon termination of the representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interest, such as refunding any advance payment of fee or expense that has not been earned or incurred.") The issue...