Are 10,000 Texas Criminal-Defense Lawyers Wrong on Flat Fees?

 Posted on January 16, 2011 in Uncategorized

Current Disciplinary Rule 1.14 requires a Texas lawyer to hold property "belonging in whole or in part to clients" separate from her own property. Current Disciplinary Rule 1.05(d) requires her to "refund[] any advance payments of fee that has not been earned" when discharged. The State Bar's position is that each of these lawyers in each of her cases-more than ten thousand lawyers, millions upon millions of cases-has violated Rule 1.14, and that in every case in which a lawyer was discharged before the case was complete and refunded nothing-probably millions of cases-the lawyer has violated Rule 1.05(d).

Yet I know of no case (there is no court decision, and the State Bar does not make decisions of grievance committees searchable) in which a Texas criminal-defense lawyer has been disciplined for charging a conscionable contractual flat fee and either failing to keep it separate from her own property or failing to refund a portion of it when discharged.

For as long as there has been a criminal-defense bar in Texas, Texas lawyers have been charging flat fees in criminal cases and not placing them in trust, and not refunding any money if they are discharged before the case is complete. (Smart criminal-defense lawyers, when discharged, will sometimes refund reasonable portions of fees, but this is a matter of prudence and personal ethics rather than law.) Why the disconnect between what the State Bar wants the law to be, and the longstanding practice of thousands of highly ethical criminal-defense lawyers?

The State Bar's position-or, more accurately (as I shall discuss tomorrow) the position of some nonpracticing ethics experts, which they haven't yet managed to get any court to sign off on-is that a) until representation is complete, a fee may be refundable; b) if a fee may be refundable, it is unearned; and c) if a fee is unearned or may be refundable, it belongs to the client.

In order for the State Bar to be right about generations of Texas criminal-defense lawyers acting unethically, they must be right on all three propositions. If any of the three is untrue, the State Bar's position fails. They are wrong on all three propositions.

Saying that a fee is refundable if representation is incomplete begs the question. If the parties contract for a nonrefundable fee, there has to be good reason to consider it otherwise. Under current Texas disciplinary law, if a fee is unconscionable; if there was fraud in the inducement; or if the lawyer somehow breached her contract, the fee is refundable. None of these situations depends on whether representation is complete; incomplete representation is neither sufficient nor necessary to a fund's refundability. If the parties agree (as in Cluck, and as the State Bar sneakily suggests in its A Lawyer's Guide to Client Trust Accounts booklet) that the fee is in fact an advance fee to be billed against, rather than a contract fee, then the fee is refundable until earned even if it is called "refundable." Why? Because it can't be both and the ambiguity should be resolved in the client's interest.

Where the parties agree that a fee is earned upon receipt, does the fact that it may be refundable make it unearned? No, of course not. Again, contract principles apply unless there is good reason to ignore them. There is, at least until the statute of limitations expires, the possibility that a fee will be refundable. That has nothing to do with whether it is earned or not.

The State Bar's first two propositions are nonsense. With the third, they are on a little bit firmer footing, but are still wrong. They say that the changed disciplinary rule will not affect Texas lawyers because it says the same thing-if a fee belongs to the client, they suggest, it must be held separately, and "belonging to the client" means the same as "refundable." But a fee could be refundable, and not belong to the client.

Those in the State Bar who think that flat fees are unethical want people to be able to change lawyers; that's a worthy aim, but if a defendant can't afford to hire a lawyer in the first place, it doesn't do him any good to be able to change lawyers-the defendant whose resources have been exhausted with the first lawyer can't change lawyers freely. Neither, though, can the indigent defendant who has been appointed counsel, nor the client who has been tapped out by an hourly-fee lawyer. That defendants should be able to change lawyers at will is not a principle; it's a nice goal, but there's no reason it should control over the principle that the parties to a contract should be able to choose its terms, or the principle that private criminal-defense services should be accessible to more than only the very wealthy.

Society needs criminal-defense lawyers. Forbidding flat fees in Texas criminal cases will be the beginning of the end of the criminal-defense bar: when the private criminal-defense bar is eviscerated, the existence of any criminal-defense bar will "depend on the largesse of the government. The day they cut off the fee spigot, there will be no more criminal defense lawyers."