Nonrefundable Advanced Fees Are Unreasonable

The Indiana Supreme Court has imposed a public reprimand in a matter involving charging unreasonable fees in two family law matters. In each matter, the agreements called for a nonrefundable engagement fee. The court held that “[r]egardless of the term used to describe a client’s initial payment, its type is determined by its purpose,i.e., what it is intended to purchase.”

Here, the agreements were not a general retainer to secure the attorney’s availability; rather, the fees were advanced and credited against the services the attorney agreed to perform. However, the court rejected charges that the attorney had failed to return unearned fees: “…we are not prepared to hold that some amount of a flat fee must be retiurned in all cases in which the attorney-client relationship ends before the work contracted for is completed.”

Chief Justice Shepard and Justice Rucker dissented as to sanction:”Respondent’s lawyer indicates in very strong language that she is unrepentant. We conclude that a period of suspension without automatic reinstatement is necessary for the protection of clients.” (Mike Frisch)