Flat Fee Fight: What’s Really Going On?

The State Bar's "you criminal defense lawyers are all violating the rules already" response to concerns about the rule amendment gutting flat fees, which I marked here, was written by "Lillian Hartwick," whom the response describes as "a former chair of the State Bar TDRPC Committee." (Archived PDF here.) There is no "Lillian Hartwick" licensed to practice law in Texas. There is, however, a Lillian Hardwick. (The State Bar can't even get its expert's name right—ethos again.) Here's Hardwick's online profile; she describes herself as being in "other law-related employment." There's a brief bio of Hardwick here:

Lillian B. Hardwick holds a political science degree from the University of Houston, a Ph.D. in English from The University of Texas at Austin, and a J.D. from the University of Houston School of Law.  In 2002, she and co-author Bob Schuwerk published their initial volume of the Handbook of Texas Lawyer & Judicial Ethics (Thomson-West), with extensive yearly supplements since then.  She became a member of the State Bar of Texas Disciplinary Rules of Professional Conduct Committee in 2001 and was co-chair in 2006-2007 and chair in 2007-2008, 2008-2009, and 2009-2010.  She now serves as a consultant and expert witness in the areas of attorney and judicial ethics, attorney breach of fiduciary duty, and judicial recusal and disqualification.

So: apparently a non-practicing lawyer who serves as a consultant and expert witness (Hardwick would agree with me that ethos is important), Hardwick was a cochair in 2006-2007 and the chair from 2007 to 2010 of the State Bar's standing committee to revise the rules. Bob Schuwerk, Hardwick's collaborator on the Handbook of Texas Lawyer & Judicial Ethics, had been chair of this committee from 1994 to 2004 (information from Hardwick's A Supreme Collaboration). Schuwerk was the State Bar's designated expert in Committee for Lawyer Discipline v. Looney (I discussed it here), in which the State Bar failed to convince the trial court that a contractual "flat fee" in a criminal case was partially unearned where the lawyer was discharged before the case was resolved. The court did not allow Schuwerk's testimony (the State Bar lawyer's litigation and trial skills are frankly embarrassing), but we have a transcript of the bill that the State Bar was allowed to make:

Q.    Well, if it's a flat fee and the money was not in your trust account initially, how would you get the money into your trust account; or what obligation does the lawyer have once the dispute arises?

A. (Schuwerk)    Well, if the lawyer — I believe it was a — it would be a disciplinary violation to have not placed the money in the trust account; but if you — if you didn't do that, I'd put the — I'd put $10,000 in there from an operating account and earmark it, you know, some sort of — in the records indicating that that's why it's there and then try to get that fee dispute resolved as quickly as possible.

.  .  .  .  .

Q.    Now, I think it's come up that, well, what if the lawyer entered into an agreement, an oral agreement with the client for $12,000 to represent the client and the client fires the lawyer, the promise the lawyer made and if he still stands ready to fulfill that promise is enough to keep the $12,000. What is your position on that premise?

A.    I think that's confusing retainers with fees. It's a rule that sort of would apply to a retainer where I agree to hold myself available to represent you.    In that case, assuming I maintain that promise and am, in fact, available, I have probably earned that retainer; but this doesn't look like what we're talking about here. What we're talking about here is I will perform certain services for you, and the client isn't bargaining for the promise to perform the services. The client is bargaining for the services. And so, when all the services that have been bargained and paid for have not been performed, then the client is due some money back.

Q.    When can the lawyers safely disburse the funds and not be subject to disciplinary action?

A.    Well, if they've done everything that they contractually agreed to do, that would be one point in time.    If we're talking about a situation where a dispute has already risen when some authoritative body has told them how much is due to the lawyer and how much is due to be refunded, they can act on that, whether that's a client-initiated court proceeding or a lawyer-initiated declaratory judgment proceeding. If they have a written contract, it talks about when money can be disbursed at various phases of the case. They could take money in accordance with that agreement, but those are the only terms — situations I can think of.

Q. What is your position about a flat fee is earned upon receipt?

A. I think that's false.

Q. Why?

A. Because the fee is being paid to you for you to do certain things and you haven't done them; so, you haven't earn it. And that's a whole thing right there.

That is, indeed, the whole thing right there: Bob Schuwerk thinks it's false. What's really going on here is this: a few opinionated non-practicing lawyers—Schuwerk, Hardwick, possibly another one or two—think that a flat fee can't be earned upon receipt. The rules don't support this proposition, and neither does public policy, so they have never been able to get any traction for it in the courts. If they tried to amend the rules to explicitly say so, 10,000 criminal-defense lawyers would be up in arms; they probably won't even get it on the referendum ballot. So they tweak the rule a little bit to shift the focus from "property belonging to the client" to "unearned fees." If the rules, the law, and public policy don't support the proposition, why do these non-practicing lawyers think flat fees can't be earned upon receipt? I suspect it's because in their worldview lawyers sell their time, punching clocks and justifying their value to the client in 6-minute increments. In such a world, it's easy to tell what has been earned and what hasn't. By making the trust rule "unearned fees" they try to squeeze us all into thinking like wage slaves. But "earned" makes little sense in the context of a flat fee, or indeed in the defense of a criminal case. If the case isn't resolved (and even if it is) there is no way to tell what has been earned and what hasn't. The email I sent to my investigator in the first thirty seconds after taking the case, even before I was paid, may have made victory at trial inevitable; the 30 hours I spent ruling out various defenses may be worth next-to-nothing; the brilliant idea I had while walking the dog may ultimately save my client from life in prison. Our clients generally can't guarantee the fees we would charge if we were billing hourly. Even if they could, winning a case quickly provides much more value to the client than winning it after a long drawn-out fight. We criminal-defense lawyers are not selling our time, and we never should let the Schuwerks and Hardwicks of the world force us into the position of doing so.

6 responses to “Flat Fee Fight: What’s Really Going On?”

  1. Thanks for taking these topics on. I’m getting pretty sick of the State Bar’s emails trying to tell me what’s best for me. It seems like a lot of this is “we worked hard, so it should be passed.” That’s not how it works.

    My clients LOVE flat fees. In fact, I think hourly billing is one of the main reasons lawyers get bad wraps. I understand a client’s frustration with getting an bill for $200 for a phone or an email.

  2. I like the rule that a lawyer’s fees shouldn’t be unconscionable—-and that’s it! We are not in the business of fixing widgets, where the parts always cost a certain amount and the labor always takes the same amount of time. We defend PEOPLE.(sound familiar?)
    I was wondering why the Bar is messing with us about flat fees and the only thing I could come up with is that they want us to start making larger deposits in our IOLTA accounts so they can make more money off the interest. That can’t possibly be it, could it? Has their been an inordinate amount of Bar complaints about flat fees?

  3. Mark, there is one question related to this flat fee issue that I don’t think you have addressed and that I’m very curious about. Specifically, under the present ethics rules in Texas (as they really read, and not as that kooky expert claims they say), what happens in a situation where a client pays a flat fee to a criminal defense attorney and a few months down the road, wants to fire the lawyer. Let’s also assume for purposes of my question that this isn’t a case where the client is unreasonable, but rather one where the lawyer is objectively sub-par: never returns phone calls, does not appear to be doing work on the case and goes on TV every chance he can get and offers commentary that is prejudicial to the client.

    Given that the entire fee is treated as “earned” on receipt, how does a client go about seeking a refund in these circumstances so that he can get at least some of his money back to hire another lawyer? The client has the right to do this but presumably, would be deterred if he’ll have to forfeit everything that he paid to the first lawyer and doesn’t have enough to hire another.

    Can you discuss a little bit how this type of situation is currently handled?

  4. It is not only criminal defense lawyers who do not sell their time. I don’t sell time directly when I am pitching representation for the administrative/regulatory matters I deal with – the representation has a value to my clients and I attempt to match the fee to the value to the client. And by taking on the client, I may conflict myself out of representing another client. Taking these issues into consideration, then when I have earned the fee is largely a matter of opinion – entirely subjective.

  5. Mark,

    I finally read through your very extensive commentary and found an answer to my question (or if not an answer, at least your view on why the topic of my question should not control the debate). In my view, the problem of lack of refund in the case of a substandard attorney should not control the debate either, since I think that clients could seek a refund by claiming that the full fee is inherently unreasonable when the work performed was sub-par.

    In any event, at least you have a chance at beating this thing. In DC, we have a similar rule regarding deposits of flat fees into trust but it was implemented by judicial fiat (reflecting a court’s interpretation of the rules in a disciplinary case where the issue, did not even need to be reached). I do not know how CDLs in this jurisdiction are dealing with In Re Mance; I use flat fees but it is not as difficult for me to include milestones for when they are considered earned because my work is not as unpredictable as a criminal matter

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