With the adoption of the new Rules of Professional Conduct in November 2018, California joined the vast majority of jurisdictions that require attorneys to deposit all client monies, including advanced attorney fees, into a client trust account. Former Rule 4-100 only required deposits for costs to be deposited into a CTA. However, advanced fees did not have to be deposited into a CTA. Many attorneys did not routinely deposit advanced fees into a CTA. Now advanced fees need to be deposited into a CTA pursuant to Rule 1.15, which covers safekeeping funds and property of clients and other persons in almost all cases. The only carve-out for requiring advanced fees to be deposited into a CTA is for a flat fee, and then only in specific circumstances. Attorneys who routinely perform legal work on a fixed-fee or flat-fee basis need to pay special attention to Rule 1.15(b) so they do not run afoul of the new trust accounting rules.
Flat fees are appropriate in relatively simple matters such as a non-contested divorce or writing a basic trust. They can also work on more complex cases when the representation can be broken down into distinct segments or phases, such as an immigration case which clearly delineates the process for obtaining the visa, including the filing of the petition, the filing of the immigrant visa application and the representation at the Consulate interview. Instead of one fee agreement stating a flat fee for all these services, the attorney can break down each segment and charge a separate flat fee for each service. The first important point for attorneys accepting flat fees under the current Rules of Professional Conduct is that all flat-fee agreements should be in writing, no matter the amount of the flat fee, since the attorney has to disclose in writing that the client could require the flat fee to be deposited into a CTA and that the client is entitled to a refund of any part of the flat fee that has not been earned. The other important provision is that the attorney should keep accurate time records on all flat-fee cases since the attorney must be able to determine what part of the flat fee has been earned if the attorney is terminated prior to completing the legal services. A flat fee is not earned until full performance. Once the attorney has fully performed, the attorney has earned only the flat fee, not the value of all the time invested in the case. (See Reynolds v. Sorosis Fruit Co. (1901) 133 Cal. 625, 628.)