Bar Counsel Notes: Refunding "Unearned Fees"
Attorney X questions whether he may return "unearned fees" to his pending OUI client. There is a written fee agreement referring to the client's $1,000.00 fee payment as an "advance". There is a remaining unearned balance, a portion of which - $500.00 - Attorney X would like to return to client to use for cash bail. Client has no other available money resources to use for bail.
Recent amendments (effective April 1, 2008) to Bar Rule 3.6(e)(1)(iii) reference a specific definition of "retainer" and an implied definition of "advance" should be consulted here. Under that Rule, a retainer is earned upon the attorney's engagement and is the property of the attorney upon receipt. An advance payment is credited towards fees for professional services as earned by the attorney. Therefore, since the fee agreement referred to the entire fee payment as an "advance" and it was placed by X into his IOLTA, he may withdraw any "unearned fees" from that account and return that money to the client. Of course, Attorney X should confirm in a letter to the client the fact and amount of this returned payment and the authority for his doing so. See also Maine Bar Rule 6(a)(2)(B)(6).
*Disclaimer: The Informal Ethics Advisory Notes from Bar Counsel are intended as outreach by the office of Bar Counsel for the use and benefit of the Maine bar. These scenarios are drawn from actual telephone calls received by the attorneys in the office of Bar Counsel in the course of providing informal advice on the Code of Professional Responsibility, known as Bar Counsel's "Ethics Hotline." The particular advice in each case is limited with reference to the particular factual situation related by the inquiring attorney who must be inquiring about his or her own conduct or the conduct of a member of his or her firm. We do not provide any advice to one attorney about the conduct of another attorney unless they are members of the same law firm. In the telephone opinions, we usually explore and discuss additional factual variables. However, I have attempted to pare down these factual scenarios to make the email newsletter more readable and useful in a general sense. Obviously, that creates the risk that slight variations on the facts, to a learned reader, may give rise to a different analysis and conclusion.