Opinion #211. Allowance of Nonrefundable Fee Agreements
Vacating Opinion #206

Issued by the Professional Ethics Commission

Date Issued: December 3, 2014

Opinion 206, which dealt with Nonrefundable Flat Fee Agreements, has been annulled by the Maine Supreme Judicial Court’s amendments to the Maine Rules of Professional Conduct namely, the Court added subdivisions (o) and (p) to Rule 1.0, subdivisions (a)(11), (h), (i), and (j) to Rule 1.5 and deleted the definition of “retainer” from Rule 1.15(b)(7)(iii). The Court further amended Rule 1.5(a)(2)(3),(d)(1), (f)(g) and Rule 1.15(b)(1).

Nonrefundable fees are now permissible, subject to compliance with those amendments to the Maine Rules of Professional Conduct.

By virtue of 2014 Me. Rules 04, effective September 1, 2014, the Court amended and adopted the above rules, and referenced the Advisory Notes to aid in the understanding of the amendments. Definitions have been added for “advance,” “advance payment of fees,” and “retainer” at Rule 1.0(o) and “nonrefundable fee” at Rule 1.0(p). A “stylistic change” has been made in the use of the term “retainer.”

The definition of “nonrefundable fee” clarifies that such fees, earned on receipt, are not limited to so-called “availability retainers.” Rather, a fee may be earned on receipt, even though the parties expect the lawyer to render future services, even at no additional charge. So long as the fee is reasonable, such an agreed upon fee is nonrefundable, even though the future services are not rendered. This broader definition displaces the narrower concept of a “general retainer” or “availability retainer” expressed in Opinion 206. A lawyer’s use and acceptance of a nonrefundable fee is subject to the specific requirements set forth in new Rule 1.5(h)(see below).

The amendments eliminate the requirement that the likelihood of the acceptance of the particular employment will preclude other employment by the lawyer be “apparent to the client” (M.R.P.C 1.5(a)(2)), and add the language “range of fee[s]” customarily charged in the locality for similar legal services (M.R.P.C. 1.5(a)(3)).

The amendments add the following to the factors to be considered in determining the reasonableness of a fee: “any other risks allocated by the fee agreement or potential benefits of the fee agreement, judged as of the time the fee agreement was made.” M.R.P.C. 1.5(a)(11).

The amendments clarify the rule allowing for acceptance of credit card payments in M.R.P.C 1.5(f).

New M.R.P.C. 1.5(h) provides as follows:

A lawyer may enter into an agreement for a client to pay a nonrefundable fee that is earned before any legal services are rendered. The amount of such an earned fee must be reasonable, like any fee, in light of all relevant circumstances. A lawyer cannot accept a nonrefundable fee, or characterize a fee as nonrefundable, unless the lawyer complies with the following conditions:

  1. The lawyer confirms to the client in writing before or within a reasonable time after commencing representation (a) that the funds will not be refundable and (b) the scope of availability and/or services the client is entitled to receive in exchange for the nonrefundable fee;

  2. A lawyer shall not solicit or make any agreement with a client that prospectively waives the client’s right to challenge the reasonableness of a nonrefundable fee, except that a lawyer can enter into an agreement with a client that resolves an existing dispute over the reasonableness of a nonrefundable fee, if the client is separately represented or if the lawyer advises the client in writing of the desirability of seeking independent counsel and the client is given a reasonable opportunity to seek such independent counsel.

  3. Where it accurately reflects the terms of the parties’ agreement, and where such an arrangement is reasonable under all of the relevant circumstances and otherwise complies with this Rule, a fee agreement may describe a fee as “nonrefundable,” “earned on receipt,” a “guaranteed minimum,” or other similar description indicating that the funds will be deemed earned regardless whether the client terminates the representation.

New Rule 1.5(i) provides as follows:

A nonrefundable fee that complies with the requirements of (h)(1)-(2) above constitutes property of the lawyer that should not be commingled with client funds in the lawyer’s trust account. Any funds received in advance of rendering services that do not meet the requirements of (h)(1)-(3) constitute an advance that must be deposited in the lawyers’ trust account in accordance with Rule 1.15(b)(1) until such funds are earned by rendering services.

New Rule 1.5(j) refers back to Rule 1.0 for definitions of “advance,” “retainer,” and “nonrefundable fee.”

The amendments to Rule 1.15 clarify how and where the lawyer is to deposit any advance payments of fees or retainers and any expenses that have been paid in advance. The Committee Notes reflect the intent to maintain a bright line separating earned fees from unearned fees, stating “[i]f the parties intend for the lawyer to treat funds as the lawyer’s own before services are rendered, the lawyer must make an agreement for a nonrefundable fee that complies with Rule 1.5(h).”

With the enactment of 2014 Me. Rules 04, the Commission recognizes Opinion No. 206 is now obsolete. Accordingly, the Commission hereby withdraws and vacates Opinion No. 206.


Enduring Ethics Opinion