By Steven C. Fraser, Esq. | FL Bar No. 625825 | DC Bar No. 460026
The D.C. Court of Appeals has changed the way lawyers have to think about prepaid flat fees. The shift did not arrive in one case. It arrived through a trilogy of disciplinary decisions and the D.C. Bar's revised Legal Ethics Opinion 389.
Nakia L. Matthews summarizes the moment well in the May/June 2026 Washington Lawyer column, "A New Era in Flat Fees." The practical message is direct: a flat fee may be simple to explain to a client, but it is not simple to handle ethically unless the agreement says exactly when and how the fee is earned.
The Starting Point: Advance Fees Are Client Property Until Earned
Under D.C. Rule 1.15, money paid in advance for legal services remains client property until the lawyer earns it. That includes prepaid flat fees. The lawyer's fee agreement cannot solve the problem by calling the money "nonrefundable" or "earned upon receipt" unless the payment is truly for availability only, which is rare.
That distinction matters. A client who pays a flat fee for representation is usually paying for legal work, not merely for a lawyer's availability. If the work has not yet been performed, the unearned portion must be protected.
The Problem With Casual Flat-Fee Language
Flat fees are attractive because they give clients price certainty. They also give lawyers a clean way to avoid open-ended hourly billing. But certainty about the total price does not answer the trust-account question.
The fee agreement still has to define when portions of the fee become earned. A lawyer can do that with milestones or earning mechanisms tied to specific work, events, or stages of representation. Without that structure, the lawyer risks treating client property as lawyer property too early.
That is the danger revised LEO 389 is trying to prevent.
Informed Consent Has to Be Real
The D.C. cases also make clear that informed consent is not a signature ritual. If a lawyer wants to place an advance fee in an operating account instead of trust, the client must receive enough information to understand the material risks and reasonable alternatives.
That includes explaining that funds in an operating account may be spent, lost, or exposed to the lawyer's creditors. It also includes explaining what happens if the representation ends early and some portion of the fee has not been earned.
The consent has to be oral and written. More importantly, it has to be meaningful.
Termination Changes the Math
When the attorney-client relationship ends before the work is complete, the lawyer must return unearned fees promptly. If there is a dispute over what has been earned, the disputed amount should remain in trust until the dispute is resolved.
The article's discussion of quantum meruit is important here. A lawyer may have a claim for the value of work actually performed, even if the fee agreement did not include perfect earning milestones. But that does not give the lawyer permission to hold funds hostage or coerce the client into accepting the lawyer's position. Rule 1.15(d) still matters.
The Practical Drafting Lesson
The best flat-fee agreement is not the longest one. It is the clearest one. It should identify:
- the scope of the representation;
- the total flat fee;
- whether the fee is paid in advance;
- where the funds will be held;
- when specific portions of the fee are earned;
- what happens if the representation ends early;
- what expenses are separate from the fee; and
- how any disputed portion will be handled.
For many matters, two or three reasonable milestones may be enough. The point is not to make the agreement unreadable. The point is to avoid pretending the fee was earned before the lawyer has provided the benefit the client paid for.
Why This Matters Beyond Lawyer Discipline
Flat fees are often good for clients. They reduce surprise, make legal services easier to budget, and can align the lawyer's incentives with efficient completion of the matter.
But a flat fee only works if it balances both sides of the relationship. The lawyer should be paid for valuable and necessary work. The client should not lose the protection of unearned funds simply because the engagement letter used confident language.
That is the new era. Not the end of flat fees. The end of casual flat fees.
Source note: This post was inspired by Nakia L. Matthews, "A New Era in Flat Fees," Washington Lawyer, May/June 2026, discussing revised D.C. Legal Ethics Opinion 389 and related D.C. disciplinary decisions. This post is for general informational purposes only and is not legal advice.