Flat Fee Fundamentals: An Introduction to the Ethical Issues Surrounding the Flat Fee After In re Mance

Abstract

Current economic trends are motivating law firms and clients to reassess billing practices. The once invincible billable hour is increasingly criticized, and a growing number of attorneys are abandoning it in favor of "flat fee" or "fixed fee" arrangements. But flat fees can raise some prickly ethical issues, such as whether attorneys can charge non-refundable fees, whether legal fees are ever earned upon receipt, and whether advances of unearned fees must be treated as client property. Moreover, this past September, the D.C. Court of Appeals rekindled the debate surrounding these issues when it held, in In re Mance, that a flat fee remains the property of the client until his or her attorney performs the legal service envisioned by the fee.

This note hopes to serve as an introduction to flat fee ethics and examines the questions raised above in the context of In re Mance. Part I sets the framework for a discussion about flat fees by explaining common terminology that judges and lawyers use to describe various fee arrangements. Part II summarizes scholarship and judicial precedent surrounding the nonrefundable retainer and ownership of fees upon receipt. Part III examines the reasoning of In re Mance. And Part IV suggests steps attorneys should take in light of In re Mance to ethically accelerate access to flat fee funds.