October 3, 2008
Escrow Until Earned
The Iowa Supreme Court adopted a proposed public reprimand of an attorney who had charged an illegal fee and engaged in other misconduct in connection with the representation of a defendant in a drug case. He had agreed to a $7,500 fee if the case went to state court and $15,000 if prosecuted by the feds, but had no written retainer agreement. A $5,000 cash retainer was dropped off on a Friday, he claimed that he earned it over the weekend and treated it as his own on Monday. He treated an additional $2,500 cash payment in the same manner. The case went to federal court, where the client pleaded guilty.
The client filed a bar complaint and request for fee arbitration. The arbitration board determined that the lawyer had earned the $7,500. The complaint resulted in findings that the failure to escrow and account to the client merited a public reprimand. The lawyer appealed, claiming that his "flat fee" arrangement did not obligate him to escrow the fees. The court disagreed: "At the time the initial payment was received by [the lawyer], no fee had been earned. [He] cannot rely on his own interpretation that he had earned the advance fee by the time an opportune moment came to deposit the fee." Flat fees are earned when the services are completed and requires deposit into escrow. (Mike Frisch)
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