California's proposal on "classic retainers" and flat fees

As you probably know, California is going through the process of revising it rules of professional conduct.  See here and here for recent updates on that.  If you are a long time reader of this blog, you may also know that I have often commented on the confused state of the law regarding flat fees.  See here, here and here for examples of why I have said that.  Much of that confusion relates to the issue of whether fees can be non-refundable.

California's proposal is actually pretty straightforward and, in my opinion, a good approach to the question.  It states, in part,

(d) A lawyer may make an agreement for, charge, or collect a fee that is denominated as “earned on receipt” or “non-refundable,” or in similar terms, only if the fee is a true retainer and the client agrees in writing after disclosure that the client will not be entitled to a refund of all or part of the fee charged. A true retainer is a fee that a client pays to a lawyer to ensure the lawyer’s availability to the client during a specified period or on a specified matter, but not to any extent as compensation for legal services performed or to be performed.

(e) A lawyer may make an agreement for, charge, or collect a flat fee for specified legal services as long as the lawyer performs the agreed upon services. A flat fee is a fee which constitutes complete payment for legal fees to be performed in the future for a fixed sum regardless of the amount of work ultimately involved and which may be paid in whole or in part in advance of the lawyer providing those services.

Section (d) says that a classic retainer can be non-refundable.  However, you must remember that the retainer is still subject to the rule that says that all fees must be reasonable.  So is it possible that under certain circumstances making the retainer non refundable can make it unreasonable?  How about a case where a client agrees to, and pays the retainer, and then decides the next day that he does not want the lawyer any more?  Or a case where the client pays the retainer and when he goes to ask the lawyer to provide services, the lawyer is not available?  In those cases, it seems to me the client would have a good argument that the lawyer has a duty to refund the retainer because otherwise the non-refundability aspect of it would make it unreasonable.  If I am right, then all the rules says is that, in the end, a classic retainer can be non-refundable only as long as making it non-refundable does not make it unreasonable.  I think that is pretty much the prevailing view, and I don't have a problem with it.

Section (e) is more controversial.  Many, perhaps most, jurisdictions, have held that flat fees (at least when they are paid in advance for work to be performed later) can't be non refundable.  However, I have argued that doing so eliminates the advantages of flat fees as alternatives to hourly fees.  For that reason I have argued that flat fees should be allowed to be non refundable as long as there is a real possibility that the work to be performed could take longer than originally expected or agreed upon.  Section (e) appears to take this approach.  As long as the service is completed, the fact that it is completed in less time than expected does not require the lawyer to reimburse the amount of money equivalent to the time saved.  Again, however, the fee is subject to the requirement of reasonableness, but in this case the reasonableness refers to the amount charged taking into account the difficulty of the task, how much time it is expected to take to complete, the market rate and other similar factors.  this is not the prevailing view, but, again, I don't have a problem with it.