Flat Fees In Nevada

The Nevada Supreme Court reversed a finding of no misconduct and ordered a reprimand of an attorney for his handling of a flat fee in an immigration matter

Facts

Sull has been licensed to practice law in Nevada since 2010 and has no prior discipline. Sull’s practice primarily consists of immigration matters. In June 2021, a preexisting client retained Sull to prepare and file an E-2 visa application. For this representation, the client agreed to pay Sull a flat fee of $15,000, plus a $750 client file fee. The fee agreement  provided that, in the event of early termination, Sull’s “time completed on the matter will be billed at an hourly rate” of $395 per hour and that Sull would “refund any unused portion of the costs and/or expenses.” The client wired the full $15,000 to Sull’s firm’s operating account. Within a month, Sull had withdrawn all of those funds without attributing the withdrawals to the E-2 visa matter. At no time did Sull place the client’s funds into the firm’s client trust account.

In December 2021, the client informed Sull that he did not want to move forward with the visa application. As a result, Sull never filed the application. The next month, the client requested that Sull provide an accounting of work performed on the matter and a refund of any unearned fees. Sull promised to provide the requested accounting within a month but failed to do so. The client continued to request an accounting for several months and eventually filed a grievance with the State Bar. After the parties participated in a fee dispute mediation, Sull provided the client with an accounting. In early 2023, Sull refunded the client $3,500.

Analysis

The American Bar Association’s recent opinion addressing the proper treatment of flat or fixed fees paid before an attorney earns those fees is instructive. “If a flat or fixed fee is paid by the client in advance of the lawyer performing the legal work, the fees are an advance. Use of the term tat fee’ or ‘fixed fee’ does not transform [an] arrangement into a fee that is ‘earned when paid.” ABA Comm. on Ethics & Pro. Resp., Formal Op. 505, at *4 (2023). Because fees paid in advance of legal services being performed have not yet been earned, those fees cannot be earned upon receipt. When a lawyer receives an advance of fees, “that fee must be placed in a Rule 1.15-compliant trust account, to be disbursed to the lawyer only after the fee has been earned.” Id.

Accordingly, fees paid in advance must be placed into the lawyer’s trust account until the lawyer earns the fees by performing the agreed-upon work. See, e.g., RPC 1.16(d) (requiring attorneys to “refund[ ] any advance payment of fee or expense that has not been earned or incurred” upon termination of the representation). So long as there is a possibility that fees are unearned and subject to a refund, fees “must be held in trust to ensure their availability.” Alec Rothrock, The Forgotten Flat Fee: Whose Money Is It and Where Should It Be Deposited? 1 Fla. Coastal L.J. 293, 347-48 (1999).

Proper handling of flat fee payments from escrow

A prudent attorney who accepts advanced fees should spell out in the fee agreement the purpose of the representation and inform the client “at what intervals the lawyer may withdraw a portion of the fee, and at what intervals the lawyer will render an accounting.” Iowa Sup. Ct. Bd. of Pro. Ethics & Conduct v. Apland, 577 N.W.2d 50, 59 (Iowa 1998). When the fee agreement specifies when and how the attorney will earn the fee, it is easier to resolve any ambiguities or confusion as to what portion, if any, of the funds are unearned and therefore must be refunded in the event the representation is terminated early under RPC 1.16(d). Regardless of whether the fee is earned at the conclusion of the matter or in some percentage based on benchmarks, what is important is that the client consents to the fee and is aware of how the fee will be earned. See In re Discipline of Bowen, 500 P.3d 788, 796 (Utah 2021) (“Flat fee agreements must . . . explain when the flat fees are to be earned and why those fees are reasonable . . . .”)

Here

When the client retained Sull for the E-2 visa matter, the client agreed to pay Sull a flat fee of $15,000 in advance. Su11 agreed to keep the client informed about how Sull was earning the advanced fees. Specifically, the fee agreement provided that the $15,000 fee was for “legal services to be rendered” and indicated that Sull would send billing statements to the client explaining how any deposited fees would “be applied towards the balance of the legal services rendered.” By the terms of the agreement, the client’s fees in this matter were paid in advance and were to be earned by Sull providing services in the future. The agreement further provided that, in the event of termination, Sull’s work “on the matter will be billed at an hourly rate” of $395 per hour. While the language of the fee agreement does not clearly delineate whether the fee was to be drawn down on an hourly basis or when Sull completed specified tasks, the agreement makes clear that the fees charged were an advance held for the client’s benefit.

Consistent with RPC 1.15(c), those fees should have been deposited in a client trust account and withdrawn by Sull only as fees were earned or expenses incurred. Sull instead treated the funds as “earned upon receipt,” placing the client’s funds directly into her operating account without first performing work to earn those funds. By doing so, Sull violated RPC 1.15. We cannot agree with the hearing panel’s contrary conclusion.

CONCLUSION

Sull violated the Nevada Rules of Professional Conduct by mishandling client funds and by failing to account for and refund client funds after the client terminated her representation. Given the clear evidence of these violations, we reverse the hearing panel’s order dismissing the disciplinary charges against Sull. Considering the aggravating and mitigating circumstances, particularly that Sull has had no prior attorney discipline, we conclude that a reprimand is sufficient to serve the purpose of attorney discipline.

Accordingly, we reprimand attorney Hardeep Sull for violating RPC 1.15 (safekeeping property) and RPC 1.16 (declining or terminating representation).

STIGLICH, J., dissenting:

Flat fee client agreements are used routinely by many attorneys to provide a particular legal service for a specified rate. In this opinion, the court reshapes how such agreements are treated in a significant way that will affect many practitioners, and the opinion thus presents a significant public policy issue. As the opinion restricts the flexibility that clients and attorneys have in structuring client agreements in a way at odds with practice in most jurisdictions, I would render a different disposition and therefore respectfully dissent.

A better approach

Rather than categorically foreclosing advance payment retainers, the court today could instead have provided guidance for attorneys and clients to more robustly safeguard that clients understand whether a flat fee is intended as a deposit to be drawn down or a complete payment for future work. See Jones, 297 A.3d at 1206 (discussing considerations for courts to review, and thus guidance for attorneys to follow, to ensure clients fully understand the nature of a flat fee payment). Indeed, other courts have recognized that parties with eyes open and informed consent could elect to structure payments as an advance payment retainer. See, e.g., In re Mance, 980 A.2d 1196, 1206 (D.C. 2009) (“Although the default rule is that an attorney must hold flat fees in a client trust or escrow account until earned, we note that an attorney may obtain informed consent from the client to deposit all of the money in the lawyer’s operating account or to deposit some of the money in the lawyer’s operating account  as it is earned, per their agreement.”). Because the effect of this opinion is to deviate from majority practice with uncertain consequences for other practitioners and to deprive clients and attorneys of valuable flexibility, I respectfully dissent.

The case is IN THE MATTER OF DISCIPLINE OF HARDEEP SULL, BAR NO. 12108, decided August 28, 2025.  (Mike Frisch)