The Default Position On Advanced Fees In Maryland

The Maryland Supreme Court provided guidance on the handling of advanced fees in an opinion that stayed a 90-day suspension of a solo practitioner admitted in 2010

In this case, clear and convincing evidence supports the conclusion that Mr. Jones violated Rule 1.15 with respect to both the Johnson and Chambers matters by failing to obtain informed consent to the deposit of fee payments into Mr. Jones’s operating account.

“Informed consent” means “the agreement by a person to a proposed course of conduct after the attorney has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” Md. Rule 19-301.0(f). The informed consent must be confirmed in writing.

As to Mr. Johnson, we base our conclusion concerning Rule 1.15 on the undisputed evidence that Mr. Johnson made partial payments toward the $4,000 flat fee over the course of several months, and that Mr. Jones did not enter his appearance on behalf of Mr. Johnson in the criminal case until Mr. Johnson provided the full $4,000 flat fee, more than five months after Mr. Johnson’s first partial payment. Mr. Jones deposited all of these partial payments in his operating account.

Our default position is that an attorney may not deposit partial payments toward a flat fee into an operating account and use those funds as the attorney sees fit before it is clear that the attorney will ever perform any services for the client. We do not rule out the possibility that, with the proper disclosure, a client could agree to such an arrangement. However, we find it difficult to believe that a client with an adequate understanding of how trust accounts work, compared with how operating accounts work, would agree that partial payments toward a flat fee should become the property of an attorney, where the attorney has made it clear that they will not work on the case until the flat fee is fully paid. In this type of scenario, we generally will require more than an executed retainer agreement of the kind Mr. Johnson signed before we will conclude that a client gave informed consent to the deposit into an operating account of partial payments toward a flat fee.

Here, there is no evidence in the record that Mr. Jones actually explained the potential consequences to Mr. Johnson of depositing the partial payments into the operating account. Among other things, there is no evidence that Mr. Jones explained to Mr. Johnson what would have become of partial payments made by Mr. Johnson if Mr. Johnson had never been able to pay the full $4,000, and Mr. Jones therefore never did any work on the case. Thus, we conclude that Mr. Johnson did not give informed consent to the deposit of his partial payments into Mr. Jones’s operating account.

With respect to the Chambers matter, we base our conclusion that Mr. Jones violated Rule 1.15 on the hearing judge’s crediting of the testimony of Jada and Paula that Mr. Jones never discussed the distinction between the operating account and the trust account with them, and that neither of them “knew the difference between the two.” The hearing judge also found that there was “no evidence that [Mr. Jones] explained the possible risks and alternatives to the arrangement stated in the retainer agreement.”

In sum, there is clear and convincing evidence in the record that Mr. Jones failed to obtain informed consent from the clients in both matters to deposit advance fee payments into his operating account.

COVID impacted the sanction

we agree with Bar Counsel that a 90-day suspension is warranted given the seriousness of the rules violations. However, we choose to stay this sanction in favor of a one-year probationary period, given the unique circumstances in this case, including Mr. Jones’s substantial, albeit ultimately unsuccessful, efforts to comply with the [Conditional Diversion Agreement]  during the COVID-19 pandemic.

(Mike Frisch)