Washington Rules of Prof’l Conduct, Rules 1.5 and 1.15A (2008)

Brief Summary
In the State of Washington, so-called availability retainers and fixed fees paid in advance may be considered earned on receipt if the client so agrees in writing.

Complete Summary
The Washington Supreme Court has amended the Rules of Professional Conduct. The amendments to Rules 1.5 and 1.15A took effect November 18, 2008.

Rule 1.15A(c)(2) states as the general rule that fees and expenses paid in advance must be deposited into a trust account and withdrawn only when the lawyer earns fees or incurs expenses. Rule 1.5(f) provides two exceptions: one for availability retainers and one for flat fees. If, but only if, agreed to in a writing signed by the client, these payments are the property of the lawyer upon receipt and must not be deposited in a trust account, even if payment is made by credit card. Rule 1.15A, cmt. [8]. These agreements must also address the points noted infra.

A retainer for the purposes of securing the lawyer’s availability must be separate from, and in addition to, compensation for legal services performed. “[A] payment purportedly made to secure a lawyer's availability, but that will be applied to the client's account as the lawyer renders services, is not a retainer under [Rule 1.5](f)(1).”  Rule 1.5, cmt. [13]. The written agreement should highlight this fact and should also detail the time period and purpose of the lawyer’s availability. Id.

Flat fees are defined as “constitut[ing] complete payment for specified legal services, [which] do not vary with the amount of time or effort expended by the lawyer to perform or complete the specified services.” Rule 1.5, cmt. [14]. A flat fee agreement must detail the scope of services and terms of payment. It must also make clear that the client retains the right to terminate the relationship. The agreement must further state that if the agreed upon services are not completed, the client may or may not be subject to a partial refund. Rule 1.5(f)(2) contains sample language that addresses these requirements.

Advance fee arrangements under Rule 1.5(f) may be paired with other types of billing. When they are paired, the provisions of Rule 1.5 only apply to the advance fee portion of the agreement. If a client uses a single check or negotiable instrument to pay both an advance fee and another type of fee, the funds must be deposited in trust, and, as soon as possible, the advance fee portion of the funds belonging to the lawyer must be withdrawn. Rule 1.5, cmt. [16].

Significance of Rule
These amendments give Washington State lawyers more freedom in billing practices and provide safe harbors. Nonetheless, these provisions should be employed with care since misuse can lead to violations of these and other rules. Compare Rule 1.5, cmt. [5] (“a lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is foreseeable that more extensive services probably will be required”).


Notice
Due to the holidays, this will be our last Lawyers for the Profession Alert® of 2008. On December 30, look for our special, annual compilation of Lawyers for the Profession Alerts® for the past 12 months.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

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March 4-6, 2009

The Westin Chicago River North Hotel
320 North Dearborn
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• Statutory Causes of Action — Consumer Protection Statutes
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Keynote Address (March 5)
• The Debate Over the Billable Hour: A Rigorous Look at Competing Law Firm Profitability Models

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