Texas Lawyers: “No” to the Proposed Amendments to the Texas Disciplinary Rules

It’s enough for me that the State Bar wants to do away with flat fees. Most people who have the money to pay me a flat fee, in which I accept the risk that litigation will drag on and the client accepts the risk that it won’t, could not possibly afford to deposit enough in trust to cover my hourly rate through every reasonably anticipable contingency of my representation. Forbidding criminal-defense lawyers charging flat fees would deprive many of effective representation. (By the way, Abraham Lincoln was wrong: my time is not my stock in trade.)

So I’m voting “no” to all of the State Bar’s ill-thought-out and unnecessary amendments to the Texas Disciplinary Rules of Professional Conduct, with the possible exception of Rule 1.13, forbidding lawyers having sex with clients. And so, if you’re a Texas lawyer, should you. (Note that you can only vote “no” by actually voting “no.” The rules have changed so that a majority of members are not required to approve the amendment, but only a majority of voting members. Once upon a time an abstention was a “no” vote, but no longer.)

Here are the redlined Rules. Here is the text of the Rules. See the Comments? No. Me either. But there are reportedly 44,000 words of interpretive comments that go along with the Rules.

In case you’re not yet convinced, Gary Peak has helpfully compiled additional commentary and given me permission to republish:

Dear Fellow Attorneys:

I normally do not get involved in things like this, but this time I feel I must.

First, these proposed changes are not necessary, and certainly not an improvement over the current rules.  It is almost like the changes are being made just so we can say we changed something.  If it isn’t broke, don’t mess with it.

What these changes will do is require millions of dollars in legal fees fighting over what the new rules actually mean, and how they differ in application from the current rules.

What these changes will do is encourage grievances against attorneys when there is no need, no actual wrong, and no harm.

What these changes do is infringe on each of our rights as citizens to freely contract with clients for our services.

We must be careful not to think this rule affects big firm attorneys and not me, or that this rule affects criminal attorney’s or solo attorneys and not me.  Each of these rules affects us all and we are bound by them.  They are all equally bad and we need to oppose them all and not try to pick and chose.

Rather than recreate the wheel I have attached input from several folks who have examined and studied the proposed changes much more thoroughly than I, and share their thoughts and concerns.

I am sending this letter to my many friends and acquaintances, whether you are primarily in civil practice, criminal practice, district attorneys, CPS counsel, or other.  These rules will affect us all and we need your support.

We should receive ballots after Jan 18 and must submit our votes by Feb 17.  I believe we will be able to vote by returning a written ballot by mail or online.

Please take the time and vote “NO” as to all of the proposed amendments to the Disciplinary Rules.

Also, please take the time and E-mail this, or your own letter, to ALL other attorneys you have on your E-mail list.

Thank you for your assistance.

Sincerely yours,
Gary D. Peak

INPUT FROM FOUR SOURCES WITH THEIR THOUGHTS ON THE PROPOSED AMENDMENTS

Comment 1.

We recommend a “No” vote on the entire referendum for the proposed amendments to the Disciplinary Rules. After reviewing the proposals over several months, we have concluded that the current draft is too flawed to merit support. Voting starts on Tuesday, January 18th. Some of the reasons for our recommendation are:

•       The proposals are seriously flawed, but they will dramatically affect Texas law practice—case-acceptance standards, attorney-client contract forms, conflicts of interest standards, disqualification, fees, billing, confidential client information, and on and on. These are critical components of Texas law practice.

•       Some proponents of the changes have said that lawyers need to support these new rules “because we’ve been working on them for 7 years.” If a meal turns out to be inedible, no one eats it simply because it took a long time to cook. One reason for the current problems in these proposals is the troubled drafting process. The State Bar committee and the Task Force disagreed intensely on various rule proposals. The current draft resulted from mediation sessions, and parts of the compromise version still don’t fit with one another. The Bar Board asked the Supreme Court for more time to address the conflict of interest rules, but the Court refused to grant that extension.

•       The proposed conflict-of-interest rules will create serious problems for lawyers and clients. Proposed Rule 1.07 is an entirely new conflict-of-interest rule. Texas currently has no such rule—nor does any other state. And it applies to every representation of two or more clients, whether in litigation or in transactions. (Current Rule 1.07 does not apply to representing co-parties in litigation.) Proposed Rule 1.07 requires lawyers to give clients what are in effect “Miranda warnings.” And some of the Miranda warnings make no sense. For example, if co-clients disagree on an issue, the required warning says that they must resolve the issues themselves “without the lawyer’s advice,” even if the clients want the lawyer to tell them what the controlling law is on the issue or provide other simple advice that they both request.

•       Worse, proposed Rules 1.06 and 1.07 cross-incorporate each other: you must satisfy both before you can represent any multiple clients. No state has that system. Both rules, in turn, depend on the new definitional rule, Rule 1.00.

•       Proposed Rule 1.08 contains standards that are inconsistent with a lawyer’s fiduciary duties. Rule 1.08(a) would permit a lawyer-client business transaction if “the lawyer reasonably believes that the terms of the transactions…are fair and reasonable to the client.” But the fiduciary standard requires that the transaction be objectively fair and reasonable to the client. And the arbitration provision in Rule 1.08(g) describes standards that are inconsistent with both Texas and ABA ethics opinions. Note that Texas lawyers are not being allowed to vote on the Comments to the Rules. Yet over two-thirds of the language in the proposed Rules and Comments is in the Comments (over 44,650 words of the 64,000+ words). And the Preamble says the Comments provide the “interpretive guidance.”

•       In fact, some of the Comments are muddled. Others even misstate Texas law. Proposed Comment 8 to Rule 1.07 says lawyers must make several “determinations” before agreeing to represent multiple clients in a case or matter. First, a lawyer must determine that “any potential differences” among the clients are “not so serious” that the clients would be “unable to agree among themselves to a resolution of any material issue.” How can a lawyer know or determine that at the outset of representation? These provisions require unrealistic future predictions. And if your crystal ball breaks or inaccurately predicts the future—you may get sued for breach of fiduciary duty.

•       Comment 7 to Rule 1.09 misstates the long-standing definition of when two matters are “substantially related” as defined by Texas courts. This point is critical in determining conflicts-of-interest. The 20+ year Coker precedent, repeatedly reaffirmed by the Texas Supreme Court, defined “substantially related” as whether the facts of two matters are so related that they create a genuine risk that the confidential information of a former client will be violated. Inexplicably, Comment 7 declares that the test is whether the facts and issues are similar. The Comment attempts to change longstanding, substantive law declared by the Texas Supreme Court.

•       Some proponents of the changes have said that Texas needs to “catch up to the ABA,” which amended the Model Rules in 2002. But on critical rules, these proposals ignore the ABA’s Model Rules or even flout the ABA standards. The fee rule adopts a previously discarded 40 year old version of the ABA Model Rule. The dual-structure, interconnected conflicts rules, proposed Rules 1.06 and 1.07, are nothing like the ABA Model Rules. This Texas-only approach makes no sense in an increasingly national and global economy, particularly when lawyers increasingly engage in multijurisdictional practice.

•       The rules would needlessly confuse federal court practice. The Fifth Circuit applies “ethical rules announced by the national profession.” Federal courts consider and reconcile both the Texas Rules and the ABA Model Rules. Twenty years of federal case law has interpreted how that works. If we adopt these proposed Texas-only standards, that 20 years of federal case law precedent is out the window. Lawyers will be at risk of being disqualified under new, as-yet-unknown federal court standards.

•       Proposed Rule 1.15(b) would change how lawyers handle client property and settlement funds. Some commentators believe it creates strict liability for discipline if you fail to distribute funds to everyone who is “entitled” to the funds—even if you don’t know the person exists. Strict liability discipline is bad for lawyers—and doesn’t help clients either.

•       The State Bar Board failed to conduct the financial-impact analysis prescribed by its Policy Manual. What would that cost-benefit analysis have shown? We believe that the costs of implementing this new, Texas-only patchwork system of rules will far outweigh the benefits. Just reading these rules and comments takes time: they’re 164 pages, 65,000 words. Then you need to compare them to the current rules, in order to know the impact on your law practice. But make no mistake. If these amendments pass, you will have to change your law practice—from which clients you accept, to how you conduct conflicts-of-interest determinations, to the form of your attorney-client contracts, to your fee and billing practices, to how you handle confidential client information.

•       The proposed confidentiality rule, Rule 1.05, presents a different but obvious problem. Imagine that your client asks this common question: “Is what I’m telling you right now confidential?” Under the current confidentiality rule, the answer is usually “Yes.” We now have a clear, bright line test. Under proposed Rule 1.05, confidentiality would depend, in part, on whether the information “is or becomes generally known or is readily obtainable from sources generally available to the public.” That includes the Internet. If information happens to appear on the Internet at any particular moment—or to disappear if a website shuts down—neither you nor your client may know that. But that unknown occurrence would change your confidentiality obligations. Once again, the proposed rule creates unnecessary risks for both lawyers and clients—and the public. The proposed Rules and Comments are seriously flawed, but they would dramatically change Texas law practice. Texas lawyers can and should do better than this ragged set of proposals. We owe that to ourselves, our clients, and the public.

Amon Burton
Chuck Herring
Jim McCormack
For more detailed commentary on the proposed rules, see our previous discussions and analyses at www.TexasRulesCommentary.com.

Comment 2.
 
I practiced law in Texas from 1988 to 2002, often representing lawyers sued for malpractice and law firms that were targeted for disqualification. I also served for several years on the committee that writes the Texas Disciplinary Rules of Professional Conduct (the “Texas Rules”). I’ve taught ethics at the University of Texas School of Law as well as the Houston Law Center, and speak at Texas CLE events several times each year.

I am still licensed there, but also now practice in and am a professor in Georgia. I would strongly urge Texas lawyers to vote against the proposed amendments to the Texas Rules for many reasons. This note is intended to explain why just the conflict of interest provisions will create significant hardship for Texas lawyers and their clients. Conflicts Systems are Not Enough: Discipline for Innocent Conflicts

Let’s start with one of the stranger things, and one which neither Texas clients nor lawyers should want: a rule that allows lawyers to be disciplined when they “should have known” that some other lawyer’s representation created a conflict. Suppose Bob starts to represent Bill against Ernie, not knowing that someone else in his firm represents Ernie: for whatever reason, the conflicts check misses it. But, if one lawyer affiliated with a firm is disqualified, all are, and so Bob is disqualified and will have to withdraw from the matter once the true facts come to light.

Right now, in Texas and in all states that I am aware of, if Bob’s inadvertent conflict arose because the firm’s conflicts system is inadequate, the partners who were responsible for setting up and running the conflict system can be disciplined.

But what about Bob (to coin a phrase)?

To my knowledge, no disciplinary proceeding has ever been brought (in Texas or anywhere) against a lawyer who represented a client believing in good faith there was no conflict, but it turned out that there was. If you run a conflicts check and it misses something, you won’t be disciplined.

The opposite result can occur if these rules are adopted (and this problem permeates essentially all of the conflict rules). While I believe the scienter requirement was intended to “help” lawyers by eliminating fear of this never-been-brought disciplinary proceeding against an innocent but conflicted lawyer, the amendment would in fact do the opposite: Bob can be disciplined if he “reasonably should” have know of the conflict. If these rules are adopted, lawyers cannot rely upon the delegation of responsibility to partners to insulate them from innocent conflicts. Instead, if they should know – perhaps through taking reasonable steps beyond the conflict system – they are subject to discipline. Narrower Definition of Confidentiality that Undermines Lawyer and Client Certainty

Under the new definition of “confidential information” in proposed rule 1.05, rather than being obligated to not reveal and not misuse information relating to the representation of a client, from whatever its source (the position that many states and courts have applied), Texas lawyers are free to misuse or reveal information learned while being paid by a client if the information “is or becomes generally known or is readily obtainable from sources generally available to the public.” Tex. R. 1.05 (as proposed).

Think about that from the client’s perspective: what the client tells to the lawyer can be disclosed or misused if the lawyer can put together an argument that it is “generally known.” (Whether information is “generally known” the comments say “depends on all the circumstances.”) As a lawyer, you will need to explain this odd duty of confidentiality so that the client understands this new capacity for misuse and betrayal. How does Texas look? How will your clients in sensitive matters view your loyalty?

While you may think “why should I be required to keep information confidential if it is generally known,” ask yourself if that really helps you. Or, does it create another trap: lawyers will believe information is generally known, and be subject to discipline (or malpractice, since the rules are often used in that context). Bright lines have their benefit. Texas Rules in Federal Court and Multistate Litigation

Most of my time is spent in federal court or matters relating to federal agencies, such as the patent office. At other times, multi-state transactions are involved. Often these circumstances raise complex choice of law problems. If the laws are the same, though, then it doesn’t matter: if Texas has the same rule as Alabama, what difference does choice of law analysis make?

But it will matter, and greatly, because Texas’ proposed conflict rules are very different from most states’ and agencies’ rules. Rather than enhancing and easing the ability of lawyers to engage in multi-state or federal court representations, these amendments will make it much more difficult. Many things will be proper under Texas rules that are improper under essentially every other state’s rules, such as misuse of “generally known” information of a current client. Making your reputation turn on whether you guess choice of law properly is not a good thing.

I have no doubt the Texas Rules can be improved. I have grave doubts, however, that the current proposal improves them both in the best way possible and without creating unintended side effects.

I’m going to vote “no” and suggest you do, too.

David Hricik
Professor of Law Mercer University School of Law Macon, GA

Comment 3.

Please vote “No” on the referendum. Voting starts January 18 and runs through February 17.

We encourage Texas lawyers to vote “No” in the upcoming referendum on the proposed disciplinary rule amendments. The proposed changes are seriously flawed, but they will dramatically affect Texas law practice—case-acceptance standards, attorney-client contract forms, conflict of interest standards, disqualification from representation, fees, billing, confidential client information, and on and on. Texas lawyers and the public deserve better rules and standards than these proposals provide. For example:

•       The rules would impose a duty to distribute settlement funds to everyone “entitled” to receive funds—whether or not you even know such person exists. That would create a strict liability discipline standard, and that’s a bad idea. By contrast, the duty to give notice when you receive settlement funds applies only if the lawyer “knows [funds] belong to” the third person. That’s a better standard, but then the rules permit knowledge to be “inferred from circumstances.” Those two, conflicting standards create undue risk for plaintiffs’lawyers.

•       The proposed conflict-of-interest rules would require every lawyer who represents two or more clients in a matter to give new “Miranda warnings” to clients. Texas currently has nothing like this rule. Nor does any other state. For example, you’d have to warn clients that they “must be willing to make independent decisions”—without your advice—to resolve any settlement issue that might develop in the case.

•       We are not being allowed to vote on the proposed Comments to the Rules. Two-thirds of the wording in the proposed Rules and Comments are in the Comments (over 44,000 words). The Comments are supposed to provide “guidance” concerning the “applicable standard of conduct.” But Texas lawyers don’t get to vote on them. Moreover, some of the Comments appear to be inconsistent with existing Texas law.

•       Certain proposed Comments would require a lawyer to make advance predictions about client conduct—and then risk discipline or a lawsuit if the lawyer guesses wrong. For example, a lawyer would have to determine before the representation that the clients will be able to “agree among themselves” on every “material issue.” Before the representation begins, and before filing suit, a lawyer may not even know what issues will be in the case. That standard, and other similar standards in the Comments, are unrealistic. They would require lawyers to have crystal balls to predict the future. And the consequences of guessing wrong could be grievances and breach-of-fiduciary-duty liability claims by disgruntled former clients.

•       Making the situation worse, proposed Rules 1.06 and 1.07, on conflicts of interest, expressly cross-incorporate each other. Texas would be the only state in the country with two general conflict-of-interest rules. Further, the informed-consent warnings in Rule 1.06 are different from, and inconsistent with, the new “Miranda warnings” in Rule 1.07.

•       The proposed rules would cause problems in federal court practice. The Fifth Circuit applies “ethical rules announced by the national profession.” For 20 years, to develop that standard, federal courts in Texas have considered and reconciled both the Texas Rules and the ABA Model Rules. These new proposals would undo that 20 years of jurisprudence. We’d be left with unknown standards in federal court—and new risks of disqualification from representation.

•       The proposed rules and comments are 164 pages long, 65,000 words. They are full of new, different standards. And many standards are different from any other state. If adopted, these rules would affect your law practice in major ways: case-acceptance standards, attorney-client contracts, conflicts consent procedures, disqualification from representation, billing practices, settlement disbursement procedures, and many other practice issues. These issues are too important to adopt such flawed standards.

Please vote “No” on the referendum. Voting starts January 18 and runs through February 17.    

Steve Mostyn                 Russell Budd                     Steve Baron  Joe Longley                    Joe Crews                          Lisa Blue      Mike Slack                     Mike Davis  Paul Knisely          Robby Alden                  Tom Prehoditch Clark Richards          Mike Kaseke                  Jim Furman  Dave Richards       Terry Weldon                  Karl Bayer  Ben DuBose         John Pieratt                     Jan Soifer       Pat O’Connell          Malcolm Greenstein       Waylon Allen Paul Danziger            Brian Burris                     Jason Panzer       Joanalys Smith               Rod de Llano                  Derek Howard     Thomas Kobelan         Logan Howard PO Box 2505 Austin Texas 78768 United States

Comment 4.

“I actually don’t see that they’re going to require that big a change to my fee arrangements, even though most of what I do is flat fee work.”

You have far more faith in the SBOT, grievance committees, and the courts than most of us.

There has been an effort by some for the last couple of decades to use the grievance system to eliminate flat fees in criminal cases.  This is the latest shot in that war.

“Generally, it will just be a matter of clearly defining what things constitute “earning” our fees so the client is informed.”

Not even close.  The clear requirement of these rules is to require all money paid for work that has not yet been done to be put in trust.  Last I checked, the Bar did not look fondly on folks trying to contractually write around ethics.  You can call it “earned” all you want, but even though it might be contractually earned, it is not ethically earned until the work is done and the work is never done the moment you receive the payment.

This may also present some practical issues for acceptance of credit card payments.  You cannot (should not) accept a credit card payment to a trust account — the charge back agreement does not work with a trust account and the fee assessment is problematic unless you charge the fee to the client.  If you accept the credit card payment in an operating account, the money is commingled until it is moved to a trust account.

“For example, say I charge someone $2500 for a state jail felony representation, including one trial. We contract for a flat fee with the provision that the hourly rate will not be less than $100 nor more than $500. It’s still a flat fee, and no refund will be required unless I work the case out with less than five hours work (not likely, since it should take at least that much time even if I get them a good plea bargain) and they’ll only have to pay more if I put in more than 25 hours (also not likely, since even trials in most state jail cases will take two days at most). Doesn’t seem to be a problem to me.”

This hypothetical is fraught with problems.  First, $2500 for a state jail trial?  Spend no more than 25 hours on such a case?  Surely, you jest on both counts. A strong case could be made that such a fee is more likely insufficient.

In any event, your scenario is not a flat fee and requires that we keep track of hours, which defeats one of the primary advantages of a flat fee. I suspect that when I spend 40 hours on such a case and ask the client for more money, they are going to balk because I set a flat fee.  These rules are going to end up requiring us the refund money when cases resolve quickly but seldom, if ever, being able to collect more money when cases take longer than expected.  The purpose of a flat fee will be destroyed.

Plus, until you have expended the minimum hours to earn the fee as defined by the fee agreement, even assuming that the contract could define it for ethical purposes, it is unearned and the new rules require it to be in a trust account.

How about a situation where you set a $50,000 flat fee for a potentially habitual felony DWI case involving an accident and injuries that may amount to serious bodily injury and could result in a felony murder or intoxication assault or manslaughter charge.  You accept the fee and the client pays the fee with recognition by both parties that it is a flat fee whether the case takes one hour or 1000 hours.  At the first setting or meeting with the prosecutor, they offer a three year TDCJ deal, which the client jumps on and decides to take immediately.  Anyone here interested in refunding $45,000 or more?  These new rules likely require it and certainly require that the $50,000 to have been put in a trust account.  All of this is true even if the deal went from 25 years to 3 years just because it was you — something that happens but is near impossible to prove.

If the Bar is going to eliminate flat fees then it should be done directly so there is no doubt in anyone’s mind.

These are the result of a multi year effort to “modernize” our rules, brought about by a perceived need to change because they have not been changed in 20-30 years.  There have been local meet, greet and bitch sessions all over the state. There was a long public comment period. The Supreme Court has approved them and is submitting them to the Bar for a vote.

All that is left is to vote yes or no.

I am firmly in the camp that is OPPOSED to these new rules.  They are a disaster waiting to happen,  They do little to protect the public or advance professionalism within the bar.  Most of the changes are little more than changes for the sake of change and are not intended to scratch any proverbial itch.

Vote early and vote often, but as Nancy Reagan said, “Just Say No.”

Troy

W. Troy McKinney
Schneider & McKinney, P.C.
440 Louisiana Suite 800
Houston, Texas 77002
http://www.texascriminaldefenselawyers.com
http://www.houstondwiattorneys.com/
Board Certified in Criminal Law – Texas Board of Legal Specialization
Board Certified in DWI Defense, National College for DUI Defense (NCDD) NCDD Certification Program Approved by the American Bar Association and Accredited by the Texas Board of Legal Specialization.

About Mark Bennett

Mark Bennett got his letter of marque from the Supreme Court of Texas in May 1995. He is famous for having no sense of humor when it comes to totalitarianism.
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8 Responses to Texas Lawyers: “No” to the Proposed Amendments to the Texas Disciplinary Rules

  1. James Miller says:

    Mark:

    Thanks for this post; I was getting tired of reading all the vote-yes propaganda. I have yet to find a decent argument supporting the proposed conflict-of-interest rules.

    I had no idea that flat fees for litigation cases were de facto in danger. Anyone care to risk their license and be the first person to charge $50,000.00 for the first hour? Thankfully, most of my flat-fee cases are transactional.

    Keep the posts coming,
    James

  2. Fred Moss says:

    Folks,

    Regarding the upcoming referendum on the ethics rules, those who advocate a “straight party pull” against ALL of the proposals are simply irresponsible. That is the easy, apathetic way out. There are a ton of needed and beneficial changes proposed. The responsible thing to do is to examine the proposals and vote on their individual merits. The ballot will have 6 groups of rules to be voted on. One disliked rule should not justify a blanket negative vote.

    Now, as to the flat nonrefundable fee issue. The proposed rule (1.15(d)) says that unearned fees must go into a trust account until earned. Comment 12 to that rule says, “Applicable law, not these Rules, determines when a fee is earned.” So what is the “applicable law”? That’s not easy to answer, but that’s not the fault of the proposed Rule. Texas Ethics Op. 431 (’86) said refundable flat fees were not unethcal per se, but were required to be reasonable. This means that if you charge a client a flat fee to repesent him and he fires you later that day, keeping the entire amount will result in your getting an unreasonable fee, and some of it will have to be refunded.

    However, Barron v. Countryman, 432 F.3d 590, 595 (5th Cir. ’05), held that “an advance payment or flat fee retainer involves fees paid as compensation for services to be rendered, but the payment passes entirely to counsel upon remittance, at which time the debtor [client] relinquishes all interest…. [and, therefore, the paid fee does not become property of the bankruptcy estate].”

    So, there is conflicting law on the issue. But, don’t blame the proposed rule for not settling a question of law.

    Let me say, finally, that all the predictions that passing these new rules will end “life as we know it,” are just baseless fear-mongering. Don’t be stampeded like a herd of sheep. Read the rules and decide for yourselves.

    Fred Moss, Dallas

    • Mark Bennett says:

      Fair enough, Fred, though you necessarily sacrifice much credibility when you canvass for the amendments without identifying yourself as a member of the committee that drafted them.

      Let’s put it this way: if you are certain that a particular rule a) is necessary; or b) will make your clients’ lives and your life easier, vote for it.

      Otherwise vote no.

      Perhaps, as a member of that committee, you would like to help us out with a link to the new interpretive comments?

      • Fred Moss says:

        Mr. Bennett,

        You are right. I forgot to mention that I was added recently to the SBOT rules committee (last person added) — after about 99% of the recommendations were already done. I worked only on the Preamble and a couple of comments that had problems. My bad. But, I’m not defending my work here.

        To see a clean copy of the rules and the comments simply pick up the Dec. issue of the Bar Journal. A link to same is on the bar’s website. Just click on the “referendum” at the bottom of the first page. Or go specifically to:

        http://www.texasbar.com/Content/NavigationMenu/ForLawyers/GrievanceInfoandEthicsHelpline/Proposed-TDRPC-Exhibit-A-TBJ.pdf (Phew!)

        Also on the Bar’s website under “additional resources” you can read a specific piece entitled: “Question Regarding Criminal Defense Lawyers and Fee Collection”

        Inquiring minds might be interested. Let me know if I can be of further assistance.

        Thanks for posting my stuff.

        Fred Moss

      • Mark Bennett says:

        Fred, what the SBOT keeps claiming applicable law is is not applicable law. The State Bar has been trying for years to litigate its position that, even by contract, fees cannot be earned upon receipt.

        The SBOT is trying to do by amending the Rules what it has failed to do with litigation.

        I suspect that the SBOT’s position is driven by lawyers who, having come up as wage slaves in firms that counted their lawyers’ worth by the hour, think that the billable hour is the only way for lawyers to live.

        More on that in future posts; your comments are always welcome. I’d love your reaction to my explanation of why flat fees benefit clients.

      • Fred Moss says:

        Mark,

        I don’t quarrel with your statement that some clients are benefitted with the flat fee up front. It locks in their costs and removes uncertainty regarding the fee.

        But your claim that that the Bar is trying to eliminate all flat fees is wrong. The comment to proposed 1.15 recognizes them as legitimate. Indeed, some “white shoe” firms are using flat fees, so you can be sure that the SBOT won’t do anything to upset them.

        The only issue concerns so-called “nonrefundable fees” that are usually taken up front.

        First point, the proposed 1.15 doesn’t change the current state of affairs in this regard. In 1986, Tex Ethics Opinion 391 held that because ANY fee for future services 1) must be returned if it is not earned by the end of the representation, and 2) ALL fees are subject to review for unreasonableness (and if they are, them must be refunded), there really is no such thing as a non-refundable fee for future services. Every fee is subject to being refunded, UNLESS it is a “true retainer,” meaning that the fee is “earned upon receipt” because the lawyer has promised to stand ready to handle the client’s future legal business and must suffer opportunity costs or msut incu costs getting prepared for the anticipated work.

        The whole question whether an advance fee must be put in a trust account or not depends upon whether the fee is “earned.” Most aren’t. But the comment to 1.15 says that applicable law, not the Rule, governs when a fee is “earned.”

        In voting against the Rule, you are shooting the messenger. The rule changes nothing.

        Finally, to vote against all of the rules because you think one or two unwise is about as smart and responsible as the “straight party pull” at election time. How many good judges were flushed from the bench by a straight party pull? In Dallas, lots.

        Fred Moss

      • Mark Bennett says:

        Fred, last things first: I’ve voted for Question D. I didn’t see anything in the rest of them worth changing the current rules. A presumption against voting to change a system that works is probably a good idea.

        (If we reject Question A, by the way, I’m not sure what we’ll do with references to 1.00, but that’s not my problem; I’m not the one who tried to manipulate the polling with the groupings of the rules.)

        I tend to agree that we shouldn’t be calling our fees “nonrefundable,” since there is always the possibility that part should be refunded; I don’t use the word, since a Colorado lawyer got dinged by the Supreme Court of Colorado a few years ago, suspended for six months for calling fees “nonrefundable” when there was some possibility—however remote—of refund.

        But criminal-defense lawyers have been charging up-front flat fees in Texas for many decades. The State Bar’s position—and yours, apparently—is that all of these up-front flat fees (whatever you call them—”contract,” “flat,” “minimum / maximum”) should be placed in IOLTA, so that tens of thousands of Texas criminal defense lawyers have been violating the rules in millions of cases. Nonsense. The State Bar hasn’t been able to get a court to bite off on that theory, and declined to appeal CFLD v. Looney, because that theory is wrong.

        The State Bar has never been able to get any traction in court for its proposition under the rule requiring money “belonging to” the client to be placed in trust; that, I believe, is the reason for the change in rules: when a client pays a lawyer an up-front flat fee (under the current regime), it might not be “earned,” and it might under certain circumstances be “refundable,” but it does not “belong to” the client.

        Talking about whether a fee is “earned” makes sense for hourly lawyers, but not for hired guns. When do I “earn” more: when I spend 30 minutes on a case and get it dismissed, or when I spend 300 hours on it and my client goes to prison? Using an hourly lawyer’s metrics, in the latter situation I will have earned more. Which is, as any criminal-defense lawyer or client will readily tell you, absurd.

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