In re Mance

• Citation: 980 A.2d 1196
• Decision Date: 24 September 2009
• Docket Number: No. 06-BG-890.,06-BG-890.
• Parties: In re Robert W. MANCE, III. A Member of the Bar of the District of Columbia Court of Appeals (Bar Registration No. 285379).
• Court: Court of Appeals of Columbia District

980 A.2d 1196

In re Robert W. MANCE, III.

A Member of the Bar of the District of Columbia Court of Appeals (Bar Registration No. 285379).

No. 06-BG-890.

District of Columbia Court of Appeals.

Argued October 5, 2007.

Decided September 24, 2009.

As Amended and Reissued October 29, 2009.

Jacob A. Stein, Washington, with whom George A. Fisher was on the brief, for respondent, Robert W. Mance, III.

Elizabeth A. Herman, Deputy Bar Counsel, with whom Wallace E. Shipp, Jr., Bar Counsel, and Judith Hetherton, Senior Assistant Bar Counsel, were on the brief, for the Office of Bar Counsel.

Elizabeth J. Branda, Executive Attorney, filed a statement in lieu of brief, for the Board on Professional Responsibility.

Before RUIZ, BLACKBURNE-RIGSBY, and THOMPSON, Associate Judges.

RUIZ, Associate Judge:

This case presents us with the question whether a "flat fee" paid in advance for legal services is to be deemed an "advance[] of unearned fees" that is required to be treated as property of the client under Rule 1.15(d) of the D.C. Rules of Professional Conduct. The Board on Professional Responsibility ("Board") determined that a flat fee paid in advance of services being rendered becomes the attorney's property upon receipt, and, in the alternative, found that, even if the flat fee remains the client's property under Rule 1.15(d), the client in this case consented to having the fee treated as belonging to the attorney, as permitted by the rule. The Board recommends, however, that because respondent, Robert W. Mance, III, did commingle his funds (i.e., the flat fee) by placing part of it in a client trust fund, he should be sanctioned with a public censure. Respondent concurs with the Board's recommended sanction. Bar Counsel disagrees with the Board's interpretation of the rule and with its alternative finding of client consent, and urges the court to impose a harsher sanction of suspension on respondent than the public censure recommended by the Board. We agree with Bar Counsel, that for purposes of Rule 1.15(d), money paid by a client as a flat fee for legal services remains the client's property, and counsel may not treat any portion of the money otherwise until it is earned, unless the client has agreed otherwise. As we announce this interpretation of the rule for the first time in this case, however, we apply it prospectively, and we adopt the Board's recommendation that respondent receive a public censure for commingling funds.

I. Factual Summary

On December 2, 2003, William Saunders retained respondent to represent his son, who was a suspect in a homicide case. Respondent told Mr. Saunders that his fee would be $15,000—with the initial installment of $7,500 to be paid up-front—and possibly an additional $5,000 for investigative services "depending on what was involved." The second installment of $7,500 was to be paid after Saunders's son turned himself in to the police. Without any further discussion about the fee, Mr. Saunders agreed and paid respondent the initial $7,500. Although they did not discuss how the money would be kept, respondent placed most of it, $6,010, in a client escrow account, and the rest in his operating account.

After having talked to the son, who said that he would not be ready to turn himself in for another month (in January 2004), respondent decided to wait until that time to take any action. Mr. Saunders, however, became frustrated with respondent, who appeared to him to be doing nothing on his son's behalf, and terminated his services in early January 2004.¹ Respondent agreed to return the initial $7,500 payment, but did not do so until several months later because he did not have the funds readily available.

On May 27, 2004, Saunders filed a complaint with Bar Counsel claiming that respondent had failed to return the money as promised. After receiving the $7,500 from respondent a week later, however, Mr. Saunders told Bar Counsel that he wished to withdraw his complaint. It was not until Bar Counsel sent a letter to respondent two days later, on June 8, 2004, that he became aware that Mr. Saunders had filed a complaint against him.

Bar Counsel did not drop the case, as Mr. Saunders had requested. Instead, on July 27, 2005, Bar Counsel filed a Specification of Charges and Petition Instituting Formal Disciplinary Proceedings, which charged respondent with misappropriating client funds (Rule 1.15(a)); commingling his funds with client funds (Rule 1.15(a)); failing to maintain complete records of client funds (Rule 1.15(a) and D.C. Bar Rule XI § 19(f)); failing to treat an advance as client funds (Rule 1.15(d)); failing to take timely steps to surrender client funds (Rule 1.16(d)); and failing to deposit client funds in a specially-titled trust or escrow account (Rule 1.16(d)).²

The hearing committee found that Rule 1.15(d) did not apply to a flat fee because it is not an "advance" but the agreed-upon fee regardless of how much (or how little) legal work was required; and that, in any event, Mr. Saunders had agreed that the $7,500 belonged to respondent upon receipt.³ However, the hearing committee concluded that respondent had commingled funds, in violation of Rule 1.15(a) because "[r]espondent had placed a portion of the $7,500 in an escrow account containing client funds. ..."⁴ But, the hearing committee found respondent "did not fail to take timely steps to surrender client funds," noting that he "acted honorably, and after some delay, refunded his entire fee even though he had spent some time advising [the client] and [Mr.] Saunders." The hearing committee recommended a public censure.

Except as to the hearing committee's conclusion that respondent did not fail to promptly return the fee, the Board, with one member dissenting, adopted the committee's findings and conclusions, including the interpretation that Rule 1.15(a) does not require lawyers to treat "flat fees" as client funds. The Board accordingly dismissed four of the six charges, including the most serious one, misappropriation, and found that respondent had commingled funds, in violation of Rule 1.15(a), and that he failed to promptly return the fee, in violation of Rule 1.16(d).⁵ The Board agreed with the hearing committee's recommendation that respondent receive a public censure.

Before this court, Bar Counsel takes exception to the Board's interpretation of Rule 1.15(d) concerning advances on unearned fees, and to the Board's recommended sanction of public censure, arguing instead that respondent should be suspended for 60 days, with 30 days stayed in favor of one year of supervised probation.

Respondent agrees with the Board's interpretation of Rule 1.15(d) that a flat fee is not an advance on unearned fees. As to Rule 1.16(d), respondent argues that he "returned the fee as promptly as possible," and that "[t]here was no evidence of any purposeful intent to delay the return of the fee." He acknowledges that he commingled his fees in a client escrow account. Respondent does not take issue with the public censure recommended by the hearing committee and the Board, but argues that "suspension," as urged by Bar Counsel, "is not an appropriate sanction."

II. Rule 1.15 and Flat Fees

Rule 1.15 provides:

(a) A lawyer shall hold property of clients or third persons that is in the lawyer's possession in connection with a representation separate from the lawyer's own property. ...

(d) Advances of unearned fees and unincurred costs shall be treated as property of the client pursuant to paragraph (a) until earned or incurred unless the client gives informed consent[⁶] to a different arrangement. Regardless of whether such consent is provided, Rule 1.16(d) applies to require the return to the client of any unearned portion of advanced legal fees and unincurred costs at the termination of the lawyer's services in accordance with Rule 1.16(d).[⁷] We hold that when an attorney receives payment of a flat fee at the outset of a representation, the payment is an "advance[] of unearned fees" and "shall be treated as property of the client ... until earned unless the client consents to a different arrangement." Rule 1.15(d).

We begin our analysis by describing the nature of a flat fee. A flat fee is one that "embraces all work to be done, whether it be relatively simple and of short duration, or complex and protracted." Iowa Sup.Ct. Bd. of Prof'l Ethics and Conduct v. Apland, 577 N.W.2d 50, 55 (Iowa 1998) (quoting ABA Comm. on Ethics and Prof'l Responsibility, Informal Op. 1389 (1977)). A flat fee is different from an engagement retainer, which "is a fee paid, apart from any other compensation, to ensure that a lawyer will be available for the client if required." RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 34 cmt. e (2000); see In re Sather, 3 P.3d 403, 410 (Colo.2000) (en banc) ("In contrast to engagement retainers, a client may advance funds-often referred to as ... `flat fees'-to pay for specific legal services to be performed by the attorney and to cover future costs.") (citations omitted); see D.C. Legal Ethics Op. 264 (February 14, 2006) (an engagement retainer is a nonrefundable payment to assure the availability of the attorney whether services are performed or not). Engagement retainers are earned when received, but it may become necessary to refund even a portion of a retainer if the lawyer withdraws or is discharged prematurely. See RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 38 cmt. g (2000) ("A fee payment that does not cover services already rendered and that is not otherwise identified is presumed to be a deposit against future services.").

The primary rule concerning the amount of fees is that "[a] lawyer's fee shall be reasonable." Rule 1.5(a). We agree with the Colorado Supreme Court's holding in Sather that "an attorney earns fees only by conferring a benefit on or performing a legal service for the client." 3 P.3d at 410. "It simply makes no sense to permit lawyers to enter into fee...