Sunday, October 24, 2010

Tennessee allows non-refundable fees

I have complained before that some jurisdictions have eliminated the advantage of allowing flat fees as an alternative to hourly fees (see here and here). Tennessee is not one of those jurisdictions.

The newly adopted Rules of Professional Conduct (R 1.5(f)) announced by the Tennessee Supreme Court allow for fees to be non-refundable as long as there is a written agreement signed by the client that explains the nature and the amount of the fee. The comment to the rule recognizes that two of the types of fees that can be non-refundable are classic retainers and flat fees. All fees, whether refundable or not, of course, must also meet the requirement of reasonableness.

Paragraph 4a of the comment to Rule 1.5 explains: "A nonrefundable fee is one that is paid in advance and earned by the lawyer when paid. Nonrefundable fees, like any other fees, are subject to the reasonableness standard of paragraph (a) of this Rule. In determining whether a particular nonrefundable fee is reasonable, or whether it is reasonable to charge a nonrefundable fee at all, a lawyer must consider the factors that are relevant to the circumstances. Recognized examples of appropriate nonrefundable fees include a nonrefundable retainer paid to compensate the lawyer for being available to represent the client in one or more matters or where the client agrees to pay to the lawyer at the outset of the representation a reasonable fixed fee for the representation. Such fees are earned fees so long as the lawyer remains available to provide the services called for by the retainer or for which the fixed fee was charged. RPC 1.5(f) requires a writing signed by the client to make certain that lawyers take special care to assure that clients understand the implications of agreeing to pay a nonrefundable fee."

For more on the newly adopted rules in Tennessee, go here. Go here for a copy of the new rules.

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