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In Defense of Non-Refundable Flat Fee Agreements
Posted in Litigation

The law governing fee agreements in Indiana is complex and seemingly ever-changing. Recently, the Indiana Supreme Court provided additional guidance on the permissibility and use of non-refundable flat fee agreements in a case defended by Bingham Greenebaum Doll LLP.

In this case, the respondent was hired by a client to represent him on a Class A felony charge of dealing in methamphetamine. From the outset, the client made it clear that his goal was to resolve the case through a plea agreement. The fee agreement stated that the respondent would take the case to conclusion for a non-refundable flat fee of $10,000. After spending approximately 20 hours on the case, the respondent negotiated a plea agreement for the client. The client initially viewed the plea agreement favorably, but later decided to hire a different lawyer to see if he could get a better deal. The respondent withdrew his appearance and obtained the release of the $10,000 cash bond for his fee. The Indiana Supreme Court Disciplinary Commission responded by charging the respondent with violations of the Indiana Rules of Professional Conduct 1.5(a) and 1.16(d).

However, the court concluded that the respondent’s $10,000 flat fee was reasonable because it properly advised the client that a refund was possible in the event of a failure to perform the agreed upon services. The court reached this conclusion even though the fee agreement contained language stating it was non-refundable because of the possibility of preclusion of other representation and to guarantee priority of access. Those phrases are often used to justify general retainers, which are usually separate agreements paying only for preclusion or priority of access. Given the court’s ruling, it appears that under the right circumstances, a fee may permissibly pay in part for preclusion and/or priority of access and in part for the actual services rendered.

The court also concluded that the respondent did not have to refund any portion his fee because the commission failed to show by clear and convincing evidence that he did not earn it. The only reason that this plea agreement was not entered was that the client changed his mind and hired replacement counsel. The fact that the client hired new counsel and caused the case to continue did not in and of itself mandate a refund. Attorneys facing similar demands for a refund may now be able to rely on this defense in their case under the right circumstances.

This case serves as a good reminder to ensure that your fee agreements are in writing and contain clear language that sets the expectations for service. This language should also indicate under which circumstances a refund may occur. In the context of flat fee agreements, this means that even if you have labeled a flat fee non-refundable, you must state in the agreement that it is in fact refundable if you do not perform the agreed upon legal services. Given the complexities of this area of law, and the new understanding set forth in this decision, it is important for attorneys to reevaluate their existing fee agreements to ensure that they comply with Rules 1.5(a) and 1.16(d).

For additional information on non-refundable fees, check out this article that my colleagues, James J. Bell and Kevin P. McGoff, wrote for The Indiana Lawyer.

To learn more about Alex Gude and his practice, visit his profile.

  • Partner

    Alex is a passionate and thorough advocate who prides himself on crafting reasonable solutions and obtaining the best results possible for his clients.  He focuses his practice on fiduciary litigation in the corporate and estate ...



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