In re Alexei ( 2024 )

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 23-BG-0591
IN RE MICHAEL ALEXEI, RESPONDENT.
A Member of the Bar of the
District of Columbia Court of Appeals
(Bar Registration No. 999055)
On Report and Recommendation of the
Board on Professional Responsibility
(Disciplinary Docket No. 2016-D375)
(Board Docket No. 20-BD-018)
(Argued May 14, 2024 Decided August 1, 2024)
Theodore (Jack) Metzler, Senior Assistant Disciplinary Counsel, with whom
Hamilton P. Fox, III, Disciplinary Counsel, Julia L. Porter, Deputy Disciplinary
Counsel, and Caroll Donarye, Assistant Disciplinary Counsel, were on the brief, for
petitioner.
Kristin Paulding for respondent.
Before BLACKBURNE-RIGSBY, Chief Judge, and EASTERLY and SHANKER,
Associate Judges.
SHANKER, Associate Judge: The Office of Disciplinary Counsel for the
District of Columbia alleges that attorney Michael Alexei violated D.C. Rule of
Professional Conduct 1.15(a), regarding safekeeping of client property, by
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withdrawing funds paid by a client as an advance on a flat fee before he had
completed the services for which he had been hired. Both the Ad Hoc Hearing
Committee and the D.C. Board on Professional Responsibility concluded that
Mr. Alexei violated no rules of professional conduct because he had earned at least
a portion of the advance payment as he worked on the case.
We hold that—absent an agreement specifying to the contrary—an attorney
earns a flat-fee payment only upon completion of all the enlisted services. Because,
however, we announce this interpretation of Rule 1.15 for the first time, we embrace
the Board’s recommendation to apply the holding prospectively. We therefore
conclude that Mr. Alexei did not violate Rule 1.15(a), even though the same conduct
might violate the rule if it occurs after the issuance of this opinion.
I. Background
The Board found the following facts. Maria Victoria Dijamco hired
Mr. Alexei to assist her with certain immigration needs. They agreed in writing that
Mr. Alexei would file, on Ms. Dijamco’s behalf: (1) a green card application in
exchange for a fee of $1,500; (2) a humanitarian reinstatement request in exchange
for $750; and (3) an appeal from a prior immigration decision in exchange for
$2,750. The price totaled $5,000, and, in accordance with the agreement,
Ms. Dijamco paid $2,500 upfront, with the remainder due once Mr. Alexei filed the
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documents. Mr. Alexei deposited the advance into his firm’s trust account. The
agreement neither mentioned Mr. Alexei’s hourly rate nor specified how Mr. Alexei
might earn the advanced funds.
Five days after Ms. Dijamco paid the initial deposit, Mr. Alexei withdrew
$1,900 from the trust account, leaving $2,010.98 in the account—$489.02 less than
Ms. Dijamco’s deposit. By this point, the Mr. Alexei had already performed six to
eight hours of work on Ms. Dijamco’s case, which, at Mr. Alexei’s standard hourly
rate of $250 to $350 an hour, the Hearing Committee found exceeded the amount of
Ms. Dijamco’s funds he had withdrawn from the trust account. Mr. Alexei later
withdrew more funds from the trust account, leaving the total funds in the account
at $738.98—$1,761.02 below Ms. Dijamco’s deposit. As before, the Hearing
Committee found $1,761.02 to be less than the amount Mr. Alexei had earned by
working on the case based on his hourly rate. Ms. Dijamco and Mr. Alexei
eventually added an addendum to their agreement, but the overall fee remained the
same.
Roughly nine months after the initial agreement, Ms. Dijamco paid the
remaining $2,500. Mr. Alexei deposited the money directly into his personal
account. The Hearing Committee found that, at this point, Mr. Alexei had completed
all the work required of him by the agreement despite having not filed the forms yet.
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Ms. Dijamco’s green card application was ultimately denied, and she hired
new counsel. She then brought a disciplinary complaint against Mr. Alexei. Just
before submitting the complaint, Ms. Dijamco reached out to Mr. Alexei to explain
the complaint. She wrote:
I wanted to thank you for all of your help with my appeal,
as you know I have chosen other representation in Chicago
that will hopefully help with the application process. I also
wanted to let you know that you may receive a
claim/grievance letter from my new attorney. Please
understand this is not personal, it is just something that is
necessary in order to re-open my case. I hope you
understand, and I sincerely thank you again for all of your
help.
After receiving Ms. Dijamco’s complaint—which did not reference the
misappropriation of any funds—Disciplinary Counsel investigated Mr. Alexei.
Disciplinary Counsel charged Mr. Alexei with violating a number of professional
conduct rules relating to his duty of competence, skill, and care; charging an
unreasonable fee; making false statements to Disciplinary Counsel; and, as relevant
here, misappropriating client funds.
The Ad Hoc Hearing Committee reviewed Disciplinary Counsel’s evidence
and found that Disciplinary Counsel had “failed to prove any of the charged
violations by clear and convincing evidence,” and it “recommend[ed] that the
charged violations be dismissed.” As relevant here, the Committee found that
Mr. Alexei had “earned the fees he took at the time of each payment.”
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Reviewing the Committee’s decision, the Board also concluded that
“Disciplinary Counsel failed to prove by clear and convincing evidence that
[Mr. Alexei] engaged in reckless or intentional misappropriation, in violation of
Rule 1.15(a),” and dismissed all the charges. After discussing this court’s decision
in In re Mance, 980 A.2d 1196, 1203 (D.C. 2009), the Board determined that that
case did not “articulate the bright-line rule that Disciplinary Counsel now
advocates.” Disciplinary Counsel had argued that In re Mance held that advanced
payments on a flat fee could be earned only after the attorney finished the legal
services encompassed by the fee. The Board disagreed. It explained that “the issue
is whether Disciplinary Counsel proved by clear and convincing evidence that
[Mr. Alexei] withdrew more of the flat fee than he had reasonably earned [at that
point] in light of the scope of the representation.” The Board ultimately “agree[d]
with the Hearing Committee that Disciplinary Counsel failed to carry its burden.”
In the alternative, the Board suggested that if this court were to agree with
Disciplinary Counsel about In re Mance, we should apply that understanding
“prospectively.” It emphasized that D.C. Bar Ethics Opinion 355—which had been
withdrawn on other grounds—had advised, even after In re Mance, that attorneys
could withdraw earned portions of flat fees without the client’s consent.
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Disciplinary Counsel appeals only the Board’s decision that Disciplinary
Counsel failed to prove by clear and convincing evidence that Mr. Alexei engaged
in reckless or intentional misappropriation in violation of Rule 1.15(a).
II. Discussion
This case requires the court to determine when an attorney earns advanced
fees within the meaning of D.C. Rule of Pro. Conduct 1.15(e). That rule specifies
that
[a]dvances of unearned fees and unincurred costs shall be
treated as property of the client pursuant to paragraph (a)
until earned or incurred unless the client gives informed
consent to a different arrangement. Regardless of whether
such consent is provided, Rule 1.16(d) applies to require
the return to the client of any unearned portion of
advanced legal fees and unincurred costs at the
termination of the lawyer’s services in accordance with
Rule 1.16(d).
Id. Because unearned fees constitute property of the client, if an attorney removes
the unearned fees from their trust account, the attorney may violate Rule 1.15(a).
See In re Abbey, 169 A.3d 865, 872 (D.C. 2017). In In re Mance, we held that money
advanced on a flat-fee payment constitutes unearned fees within the meaning of
Rule 1.15(e) “until [it is] earned by the lawyer’s performance of legal services.” 980
A.2d 1196, 1203 (D.C. 2009). Thus, if Mr. Alexei had not yet provided the legal
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services necessary to earn the $2,500 advance payment when he withdrew portions
of the funds, he misappropriated Ms. Dijamco’s money.
The parties dispute precisely how attorneys earn fees through the provision of
legal services within the meaning of Rule 1.15. Disciplinary Counsel contends that
attorneys may earn advances on a flat fee only after they complete the entirety of the
assigned task. Mr. Alexei, on the other hand, argues that attorneys may earn portions
of the advance throughout the representation as they work toward their clients’ legal
needs. In particular, he seems to argue that attorneys may earn the advanced fee at
their hourly rate as they perform work. The Board agreed with Mr. Alexei. We
review de novo the Board’s legal conclusion about what it means to earn funds under
Rule 1.15. In re Dobbie, 305 A.3d 780, 792 (D.C. 2023).
We hold that attorneys earn fees advanced on a flat-fee arrangement only upon
completion of the entirety of the solicited services—unless the fee agreement
specifies otherwise. We first address In re Mance and determine that it does not
answer the question at hand. Next, we explain why other considerations favor
treating advanced fees as earned only after all the enlisted legal services have been
provided. Finally, we explain why we decide to apply this rule prospectively such
that Mr. Alexei is not sanctioned.
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A. In re Mance Does Not Resolve this Case
Both parties assert that In re Mance directly or indirectly mandates their
preferred result in this case. We read In re Mance differently. As discussed above,
this court held in In re Mance that an advance payment on a flat fee remains client
money “until it is earned.” 980 A.2d at 1199. The question here is whether
Mr. Alexei had earned at least a portion of the advanced money before he withdrew
it.
Neither the facts nor the holding of In re Mance offer much guidance in
answering that question. There, attorney Robert Mance immediately placed a
portion of an advanced fee into his own operating account, as opposed to his client
escrow account. Id. at 1200. Because he did so immediately, there was no time for
him to have earned the money through his provision of legal services—partial or
otherwise. In holding that this constituted misappropriation, we rejected the view
that advance payments on flat fees are earned “upon receipt.” Id. at 1199. Instead,
we said, the advance payment must be “earned by the lawyer’s performance of legal
services” before the attorney may transfer funds into their personal or operating
account. Id. at 1203. We did not, however, take the further step of explaining
whether the “performance of legal services” means the complete or partial
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performance of those services. The facts and holding of In re Mance, therefore,
cohere with both parties’ interpretations of Rule 1.15(e).
Undeterred, both Mr. Alexei and Disciplinary Counsel glean support for their
interpretations from various phrases and references in the opinion. Disciplinary
Counsel, for its part, points to language in In re Mance that it views as implying that
we intended “earn” to refer to completing the enlisted legal service. For example,
Disciplinary Counsel quotes language from the opinion that a flat fee “is earned
‘only to the degree that the attorney actually performs the agreed-upon services.’”
Id. at 1202 (quoting Alec Rothrock, The Forgotten Flat Fee: Whose Money Is It and
Where Should It Be Deposited?, 1 Fla. Coastal L.J. 293, 346 (1999)). Similarly,
Disciplinary Counsel references language stating that fees “are earned by the
lawyer’s performance of legal services” and “a flat fee is not owned by an attorney
until it has been earned through the performance of services to the client.” Id. at
1203.
This language may be consistent with Disciplinary Counsel’s interpretation of
In re Mance, but it is not inconsistent with Mr. Alexei’s alternative interpretation.
Performance of a legal service could mean the continuous performance of legal
services or the discrete (and complete) performance of a legal service. Notably, In
re Mance never refers to completing legal services or some other term that would
10
foreclose Mr. Alexei’s interpretation—unlike courts in other jurisdictions, which
have expressly adopted Disciplinary Counsel’s approach. See, e.g., Iowa Sup. Ct.
Att’y Disciplinary Bd. v. Piazza, 756 N.W.2d 690, 698 (2008) (per curiam) (“[A] flat
fee is an advance fee that is earned when the services are completed and therefore
requires deposit in a client trust account . . . .”). Apparently reaching the same
conclusion, the Board catalogued the relevant passages from In re Mance about
performing legal services and concluded that “Mance speaks in somewhat flexible
terms regarding when an attorney earns fees.”
Disciplinary Counsel’s best evidence with respect to In re Mance is a passage
contrasting the default rule it established with alternative arrangements attorneys
could create with their clients. The court explained that
[a]lthough the default rule is that an attorney must hold flat
fees in a client trust or escrow account until earned, we
note that an attorney may obtain informed consent from
the client to deposit all of the money in the lawyer’s
operating account or to deposit some of the money in the
lawyer’s operating account as it is earned, per their
agreement.
In re Mance, 980 A.2d at 1206 (emphasis added). By contrasting “deposit[ing] some
of the money in the lawyer’s operating account as it is earned”—which Disciplinary
Counsel takes to be essentially Mr. Alexei’s interpretation of the rule—with the
default rule it was creating, Disciplinary Counsel argues that Mr. Alexei’s
interpretation cannot be In re Mance’s default rule.
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We think this too slender a reed to support Disciplinary Counsel’s
interpretation. First, it is not a direct statement of the court’s holding but rather a
hypothetical that, by implication, sheds some light on the default rule the court
created.
Second, the surrounding discussion casts some doubt on Disciplinary
Counsel’s interpretation. Just after the aforementioned quote, the court quoted from
In re Sather, 3 P.3d 403 (Colo. 2000), modified on denial of reh’g (June 12, 2000),
and “agree[d]” with its explanation of the requirements for informed consent to
create an alternative arrangement. In re Mance, 980 A.2d at 1206-07. And, earlier
in the opinion, the court “agree[d] with” In re Sather’s holding “that ‘an attorney
earns fees only by conferring a benefit on or performing a legal service for the
client.’” Id. at 1202 (quoting In re Sather, 3 P.3d at 410). The Colorado Supreme
Court, however, appears to have endorsed Mr. Alexei’s interpretation of when an
attorney can earn an advanced flat fee. See In re Sather, 3 P.3d at 411 (“Attorneys
often deduct costs from advance payments as they incur the costs, similar to the
manner in which they deduct their fees as they are earned.”). If the In re Mance
court envisioned a different default rule, it did not clearly say so. 1
1
As Disciplinary Counsel points out, a different Colorado rule requires that
“[i]f any portion of the flat fee is to be earned by the lawyer before conclusion of the
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Third, by using the phrase “as it is earned,” In re Mance, 980 A.2d at 1206,
the court arguably embraced Mr. Alexei’s interpretation that fees can be earned
continuously. Granted, the phrase comes in the court’s discussion of alternative
arrangements that a client might consent to, but client consent does not alter the
fundamental nature of when a fee is earned. Instead, it merely permits an attorney
to treat unearned client fees—which remain unearned fees—as their own property.
See D.C. Rule of Pro. Conduct 1.15(e) (“Advances of unearned fees . . . shall be
treated as property of the client pursuant to paragraph (a) until earned or incurred
unless the client gives informed consent to a different arrangement.”); In re Sather,
3 P.3d at 412 (“For other forms of advance fees, the attorney may transfer the funds
to the attorney’s personal or operating accounts only after earning the fees unless,
within a very limited set of circumstances, the attorney and client have agreed in
writing to allow the attorney to treat the unearned fees as property of the attorney.”
(emphasis added)). After all, if client consent could change when an attorney earned
fees, it would not be true that “a lawyer ‘cannot earn a fee for doing nothing,’” In re
representation,” the agreement must specify “the amount to be earned upon the
completion of specified tasks or the occurrence of specified events.” Colo. R. Pro.
Conduct 1.5(h)(1)(iii). The addition of Subsection h, however, post-dated In re
Sather. Compare Colo. R. Pro. Conduct 1.5(f) (2018) (excluding the relevant
subsection and stating only that “[a]dvances of unearned fees are the property of the
client and shall be deposited in the lawyer’s trust account pursuant to
Rule 1.15B(a)(1) until earned”)), with Colo. R. Pro. Conduct 1.5(h)(1)(iii) (2019)
(including the aforementioned language).
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Mance, 980 A.2d at 1203 (quoting In re Sather, 3 P.3d at 414), because a client could
consent to an arrangement whereby the lawyer earned the fees upfront. See id. at
1206 (suggesting that a client could consent to an attorney “deposit[ing] all of the
money in the [attorney’s] account”). Moreover, if consent could make unearned fees
earned, the second half of Rule 1.15(e) would make little sense. That portion of the
rule provides that “[r]egardless of whether [informed] consent is provided,
Rule 1.16(d) applies to require the return to the client of any unearned portion of
advanced legal fees and unincurred costs.” D.C. R. Pro. Conduct 1.15(e). The rule
thus contemplates that the fees remain unearned despite informed client consent.
That would not make sense if the fees had been earned by virtue of the client consent.
In light of these considerations, we do not interpret In re Mance as having held that
fees are earned only upon the completion of legal services.
That does not mean, however, that In re Mance endorsed Mr. Alexei’s
interpretation either. Rather, the best reading of In re Mance is that it did not take a
stance on the issue of whether advances on flat fees may be earned continuously or
only upon completion of the legal services. Indeed, the In re Mance court had no
occasion to answer that question because Mr. Mance placed the funds in his personal
account immediately. In re Mance, 980 A.2d at 1200.
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Mr. Alexei resists this conclusion because In re Mance cited to some authority
consistent with his position. He points in particular to In re Sather and In re
Hallmark, 831 A.2d 366 (D.C. 2003). Although In re Mance discussed In re Sather
with approval, the inference that it therefore incorporated Colorado’s definition of
what it means to earn funds by performing legal services, without saying a word on
the matter, is at least as tenuous as Disciplinary Counsel’s inference discussed above.
As for In re Hallmark, the In re Mance court explained that its holding was
“consistent with” that case. 980 A.2d at 1205. But In re Hallmark did not embrace
Mr. Alexei’s view. It said only: “Even assuming that [Ms. Hallmark] was entitled
to withhold a portion of the retainer fee in compensation for appearing before the
court, this does not justify the withholding of the entire fee amount as it is clear that
she performed only part of the work.” In re Hallmark, 831 A.2d at 372. The court
in In re Hallmark only assumed the possibility of Mr. Alexei’s position; it did not
endorse it. Therefore, In re Mance’s acknowledgment that its holding aligns with In
re Hallmark does not advance Mr. Alexei’s position.
B. Flat Fees Are Earned Upon Completion
Having concluded that In re Mance does not answer the question at hand, we
now address the proper interpretation of Rule 1.15 as a matter of first impression.
We hold that, as a default rule, attorneys earn funds advanced on a flat-fee payment
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only when all the legal services pertaining to the flat fee are complete. We reach
this conclusion for three reasons: (1) it best fits the nature of a flat fee, (2) it places
the onus to contract differently on the party generally best positioned to do so, and
(3) it facilitates clarity and better enforcement of the rules of professional conduct.
First, treating flat fees as earned upon completion of all the legal services
coheres with the nature of a flat fee. Flat fees “embrace[ ] all work to be done,
whether it be relatively simple and of short duration, or complex and protracted.” In
re Mance, 980 A.2d at 1202 (quoting Iowa Sup. Ct. Bd. of Pro. Ethics & Conduct v.
Apland, 577 N.W.2d 50, 55 (Iowa 1998)). Flat fees benefit clients by “eliminat[ing]
the uncertainty, anxiety and surprise often found with hourly rates, especially in
protracted litigation”; and, for the attorney, they “reward[ ] efficiency and enable[ ]
the attorney to concentrate on the representation instead of fighting with the client
over” billing. Id. at 1204 (quoting Alec Rothrock, The Forgotten Flat Fee: Whose
Money Is It and Where Should It Be Deposited?, 1 Fla. Costal L.J. 293, 354 (1999)
(footnote omitted)). At the point where both attorney and client have chosen to
eschew an hourly fee in favor of a flat fee, it would be odd—as a default rule—to
import an hourly fee into the arrangement as Mr. Alexei proposes.
Second, setting the default rule so that advance fees remain client funds until
the legal services are all completed creates positive incentives for attorneys and
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clients to contract for their preferred arrangement. This default rule favors clients
because the funds remain theirs for a longer period. See In re Mance, 980 A.2d at
1203 (“Since a flat fee is not owned by an attorney until it has been earned through
the performance of services to the client, ‘the client will not risk forfeiting fees for
work to be performed in the future if the client chooses to discharge his attorney.’
With the flat fee protected, the client need not hesitate to exercise the right to
discharge an attorney for fear that the attorney may keep the flat fee.” (citation
omitted) (quoting In re Sather, 3 P.3d at 410)). Creating a default rule that favors
clients incentivizes attorneys to negotiate, and include in their contracts, the specific
terms that they seek in contrast to that default rule. Placing the onus to contract
around this default rule on attorneys facilitates better contracting because
attorneys—by virtue of both their profession and the frequency with which they
contract for legal services—will typically be more aware of the default rule and
better able to draft contracts around them. See Ian Ayres & Robert Gertner, Filling
in Incomplete Contracts: An Economic Theory of Default Rules, 99 Yale L.J. 87,
98-99 (1989) (arguing that when “it is reasonable to expect one party to the contract
to be systematically informed about the default rule and the probability of the
relevant contingency arising,” courts should set the default rule against that party’s
interests). This default rule thus encourages attorneys to set forth in their contracts
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their preferred advanced-fee allocation, which in turn apprises the client of the
allocation, likely resulting in a better contract for both parties. See id. at 99-100.
Third, the default rule that attorneys earn money advanced on a flat fee after
completing all the enlisted legal services promotes clarity and facilitates better
enforcement of Rule 1.15. Under the default rule, the money remains unearned until
the attorney completes all the bargained-for tasks. Although there may be some
complicated cases, we anticipate that in most situations determining whether an
attorney has completed the legal services will prove simple. If the parties stipulate
to an alternative arrangement, the terms of that arrangement will be spelled out in
the agreement, and the division of client versus attorney money will be as clear as
the contract.
Adopting Mr. Alexei’s position, however, would lead to the difficult process
of measuring exactly what portion of a fee the attorney had earned. Mr. Alexei
appears to defend a rule whereby the attorney earns increments of the advanced fee
at their hourly rate as they work. Imagine, however, a situation where the client pays
the entire fee as an advance. An attorney in such a situation might “earn” the entire
flat fee before coming close to completing the bartered-for services if their hourly
rate is high. Is it fair to say that an attorney has earned the entire flat fee when they
are not close to completing the task? In the opposite direction, a particularly efficient
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lawyer might have all but completed a legal service yet have “earned” only a small
fraction of the fee. The use of attorney billable hours as a proxy for how much of a
flat fee an attorney has earned is particularly striking when considering that the
parties have, by virtue of choosing a flat fee, explicitly decided to eschew the
billable-hour model. Indeed, as is the case here, the agreement might not even
specify the attorney’s billable rate, and the attorney might not have kept detailed
records of the hours they worked—as they might have under a typical billable-hour
arrangement. This would leave the client entirely unaware of which funds remained
theirs and which funds had become attorney property. Perhaps we could measure
how much of a fee an attorney has earned based on the percent of the work
completed. As attorneys well know, however, predicting how much legal work
remains to be finished—and thus what percent has already been completed—often
proves difficult. Under either regime, both attorneys and Disciplinary Counsel
would be left with substantial uncertainty about which fees were earned versus
unearned. How could either party know whether an attorney had yet earned a certain
percentage of the advanced money?
This uncertainty about which funds are earned versus unearned would,
moreover, pose a significant risk to attorneys. An attorney might claim to have
worked a certain amount of hours or have completed a certain percentage of the
work, but they would not be able to anticipate whether the Hearing Committee and
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Board would agree. If the Board and Committee disagreed with the attorney’s ad
hoc determination about what portion of an advanced fee they had earned, the
attorney might be subject to disbarment for intentionally or recklessly
misappropriating client funds. See In re Addams, 579 A.2d 190, 191 (D.C. 1990)
(en banc) (“We now reaffirm that in virtually all cases of misappropriation,
disbarment will be the only appropriate sanction unless it appears that the
misconduct resulted from nothing more than simple negligence.”); see also In re
Gray, 224 A.3d 1222, 1233 (D.C. 2020) (per curiam) (rejecting an attorney’s
good-faith defense and disbarring him for reckless misappropriation of client funds).
Similarly, if a client terminates their attorney part-way through the representation,
the attorney would need to determine exactly how much of the advanced fee they
had earned at that point in order to return the unearned portion. They would make
that determination unguided by a clear rule or contract and on pain of potential
disbarment. Even if the Hearing Committee and Board believed that the
misappropriation was merely negligent, the attorney still risks suspension and a mark
on their bar disciplinary record. See In re Zamora, 310 A.3d 1074, 1081-82 (D.C.
2024) (suspending an attorney for eight months for negligently misappropriating
client funds and failing to hold client advance fees in a trust account because the
attorney failed to adequately obtain informed client consent per In re Mance).
Rather than pick between these unsatisfying options, we prefer to create a clear
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default rule and leave it for attorneys and their clients to specify alternative
arrangements in their contracts for how to distribute the ownership of advanced
funds as they see fit.2
Mr. Alexei’s arguments in favor of a more flexible default rule rely in large
part on his fear that the default rule we adopt today could leave attorneys unpaid for
significant work if their client terminates the representation before the attorney
completes the job. As Disciplinary Counsel points out, however, attorneys may
recover for uncompensated work through a quantum meruit action. See, e.g.,
Ginberg v. Tauber, 678 A.2d 543, 544 (D.C. 1996) (involving a quantum meruit
action brought by an attorney against their former client for “the reasonable value of
the services [the attorney] provided”); Jonathan Woodner Co. v. Laufer, 531 A.2d
280, 287 (D.C. 1987) (clarifying that appellant, an attorney, could recover under a
quantum meruit theory if he “present[ed] proof of the reasonable value of the
services rendered in advancing” the client’s goal). Or, if the parties have agreed to
2
That is not to say that it is impossible to determine the reasonable value of
the partial services provided by an attorney. As referenced below, courts frequently
do just that in quantum meruit cases, and those cases provide for an important
remedy where a client refuses to pay for partial services. But such a suit does not
require an attorney to make a unilateral determination about the value of the partial
services rendered. And the penalty for an inaccurate determination is a discrepancy
in the funds awarded as relief in quantum meruit, as opposed to the potential of
disbarment for intentionally or recklessly misappropriating client funds (if the
Hearing Committee concludes it is reckless or intentional) or another disciplinary
sanction. See In re Addams, 579 A.2d at 191.
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arbitrate their fee disputes, the attorney may file a petition with the Attorney/Client
Arbitration Board. Attorneys, therefore, are not without remedy against a client who
declines to pay for partial services.
Because the default rule we announce above—that advances on flat fees are
earned upon the completion of all the legal services bargained for in the flat fee—is
novel, we pause to explain how attorneys may deviate from that default rule and the
interplay between those deviations and other professional conduct rules. Attorneys
may depart from the default rule we establish in two distinct (but not mutually
exclusive) ways: they may (1) specify in the agreement when and how portions of
the flat fee are earned or (2) obtain informed consent from the client to treat unearned
fees as their attorney property.
The first option, specifying when and how portions of the flat fees are earned,
allows the attorney to actually earn portions of the fee before completing the full
representation. For example, the agreement might provide that the attorney earns
the flat fee at an hourly rate set forth in the contract up to but not exceeding the total
flat fee. This is essentially what Mr. Alexei advocates for as a default rule, but it
comes with the added benefit of specifying what the hourly rate is and how the fees
will be earned. Or, as was the case here, the agreement might involve multiple
discrete legal services—here, three separate filings—and attach a separate price for
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each service that sums to the total flat fee. Under such a contract, an attorney would
earn the portion of the flat fee attributable to each separate legal service upon
completing that project. 3 Or, the agreement might provide that after the attorney
submits, say, a first draft of a legal brief to the client for approval, they earn a
percentage of the flat fee. These agreements, by deviating from the default rule,
would allow attorneys to earn portions of the advanced flat fee as they worked on
the client’s behalf. The rate at which the attorney earns the fees—whether hourly,
by milestones, or by some other measurement—would still need to comport with the
separate ethical requirement that the fees be reasonable. See D.C. R. Pro.
Conduct 1.5(a). The attorney would not, however, need to secure informed client
consent for this arrangement under Rule 1.15(e). They would only need to comply
with the requirements of a valid contract and any other applicable ethical rules. That
is because, as discussed above, informed consent under Rule 1.15(e) does not affect
whether a fee is earned but rather only what an attorney may do with unearned fees.
Id. 1.15(e); see supra Part II.A.
The second, distinct option available to attorneys is to treat unearned fees as
attorney property with the client’s informed consent. Under this approach, the
3
Although Mr. Alexei’s flat fee encompassed multiple different filings, each
with their own specified price, he does not represent that he completed any of the
filings at the time he first removed the funds from the client account. Accordingly,
he cannot rely on this understanding to explain his conduct.
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attorney does not earn the fees until after they complete all the legal services (or an
alternative arrangement set forth in the contract), but they may use the unearned fees
for personal ends because their client has allowed them to treat the funds as attorney
property. Unlike the first approach, this requires that the attorney meet the strictures
of informed client consent outlined in In re Mance. See 980 A.2d at 1206-07
(explaining the requirements for informed consent to allow an attorney to use
unearned client funds); In re Ponds, 279 A.3d 357, 361-62 (D.C. 2022) (per curiam)
(applying In re Mance’s informed-consent requirement and concluding that the
attorney’s fee arrangement was “fundamentally incompatible with the requirements
of In re Mance”). On the other hand, the amount of unearned funds treated as
attorney property need not comply with Rule 1.5’s reasonable-fee requirement,
because it is not itself a fee; the attorney is not earning the money. As we
contemplated in In re Mance, an attorney could, with informed client consent, treat
the entire advanced fee as their own property immediately, 980 A.2d at 1206—even
though it would presumably be unreasonable to charge the entire amount of the fee
in exchange for no work yet performed—because treating the unearned money as
attorney property is not the same as charging or earning a fee. Because these funds
remain unearned, however, if a client terminates the attorney, the attorney must
promptly return all unearned funds—including those they were authorized to treat
24
as attorney property during the representation. See D.C. R. Pro. Conduct 1.15(e); In
re Ponds, 279 A.3d at 361.
C. Prospective Application of the Holding
Although we hold that, as a default rule, advanced fees are earned upon the
completion of all the legal services associated with the fees, we also concluded that
In re Mance did not resolve this question. Accordingly, we “announce this
interpretation of the rule for the first time.” In re Mance, 980 A.2d at 1199. In bar
disciplinary cases like this, we have seen fit to apply such holdings “prospectively.”
Id. To be sure, our holding here is not the same sea change that In re Mance was.
But, as both Mr. Alexei and the Board point out, D.C. Bar Ethics Opinion 355, which
at least for a time was published on the D.C. Bar’s website, interpreted In re Mance
to permit attorneys to earn advanced fees before the completion of the legal services.
See D.C. Bar. Comm. on Legal Ethics, Opinion No. 355, at 342 (2010) (“Mance
does not address whether a lawyer may transfer some portion of a flat fee from a
trust account to an operating account prior to the conclusion of a representation
where there is no agreement between the lawyer and the client. . . . A lawyer who
has charged a client, for example, two thousand dollars for the preparation of an
estate plan has under most circumstances earned some portion of the fee when the
lawyer sends the client a set of draft documents.”). Although this opinion was later
25
removed from the D.C. Bar website, it reflects the ambiguity following In re Mance
on this question and may have guided attorneys who read it at the time but did not
notice its withdrawal.
In light of (1) the novelty of our holding, (2) the Board’s recommendation to
apply such a rule prospectively, and (3) the prior existence of a contrary Ethics
Opinion, we apply our holding prospectively so as not to reach whether Mr. Alexei’s
conduct or any other similar fee arrangements predating the issuance of this opinion
violated Rule 1.15.
III. Conclusion
For the foregoing reasons, we hold that, as a default matter, advances on
flat-fee payments are earned only upon completion of all the agreed-upon legal
services, and we apply this holding prospectively such that it does not apply to
Mr. Alexei or any agreements already in force before the issuance of this opinion.
So ordered.