PHILADELPHIA – Both the Pennsylvania Bar Association and Philadelphia Bar Association recently released a concurring ethics opinion discussing how attorneys and their new clients should approach the concept of legal fees.
The document was titled “Ethical Considerations in the Handling of Flat, Earned Upon Receipt and Non-Refundable Fees” and provided specific guidance as to which legal fees belong in an attorney’s operating account, as opposed to those which would be directed into an Interest on Lawyers Trust Accounts (IOLTA) – making clear that an attorney be up-front with their clients about this distinction.
“Ethics opinions are one of the most valuable services that we provide as Philadelphia’s premier trade association for attorneys. We were happy to partner with the Pennsylvania Bar Association in providing valuable clarity for our community on a common practice management issue,” Philadelphia Bar Association Chancellor Wesley R. Payne IV said.
The new opinion, 2022-300, clarifies a 1995 Pennsylvania Bar Association ethics opinion (1995-100) on retainers paid for legal services. The earlier opinion ruled that non-refundable retainers were allowed, but that any arrangement for one would be accompanied by a clear written statement, an agreement between the client and the attorney or, in the absence of such an agreement, the retainer would be deposited into a client escrow account.
According to the opinion, any fee not “earned upon receipt” is an “advance” fee and may be deposited into an operating account with the client’s informed and written consent. In contrast, the opinion adds that “Earned upon receipt” fees may be deposited into an operating account rather than an IOLTA account – as long as the attorney states in the fee agreement that the payment is non-refundable.
“Many attorneys have expressed confusion arising from the rules related to the handling of legal fees. The [two committees] worked together to issue Joint Formal Opinion 2022-300 in an effort to provide some clarity on the proper handling of legal fees paid at the outset of an engagement. Specifically, the opinion distinguishes fees that are earned upon receipt from fees that are simply paid in advance, and concludes that the former may be deposited in the attorney’s operating account,” Sarah Sweeney, Co-Chair of the Professional Guidance Committee, said.
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com