Question
I know there is a procedure for me to place advanced fee payments into my business account, but I am confused about the steps I must take. Can you clarify this for me?
Answer
There is a procedure to allow a lawyer to immediately use funds paid by a client for services to be rendered in the future. This procedure is found in the Wisconsin trust account rule, SCR 20:1.15.
There is a lot of confusion about the steps a lawyer must take to properly communicate with a client about the use of advanced fee funds and the placement of those funds into the lawyer’s business account instead of the lawyer’s trust account. The process is called the “alternate protection for advanced fees” and is found in SCR 20:1.15(b)(4m).
The rule allows a lawyer to accept an advanced payment of fees and deposit the funds into the lawyer’s business account but the lawyer must comply with several requirements. Those requirements are summarized as follows:
Upon accepting the advanced payment of fees to be placed into the business account, the lawyer must deliver to the client a written notice that 1) describes the amount of the advanced fee payment; 2) describes the basis or rate of the fee charged; 3) describes any expenses for which the client will be responsible; 4) indicates that the lawyer has an obligation to refund any unearned advanced fee along with an accounting of the fees earned at the time of termination of representation; 5) states that the lawyer is required to submit any unresolved fee dispute to binding arbitration within 30 days after receiving written notice of a dispute from the client; and 6) states that the client has the right to file a claim with the Wisconsin Lawyers’ Fund for Client Protection if the lawyer does not refund any part of the unearned advanced fee.
This letter or notice must be given to the client at the start of the representation or when the lawyer is accepting an advanced payment of fees that will be placed into the lawyer’s business account.
At the end of the representation, the lawyer must deliver to the client another written notice that includes 1) a final accounting regarding the advanced fee payment (or an accounting from the most recent fee statement sent by the lawyer) along with a refund of any unearned fees; 2) a notice that if the amount of the fee is disputed and the client wants to proceed to binding arbitration, the client must provide written notice of the dispute over the fee within 30 days after the mailing of the accounting; and 3) a notice that if the lawyer is unable to resolve the fee dispute within 30 days after receiving notice, the lawyer agrees to submit the dispute to binding arbitration.
If the lawyer receives notice of a dispute from the client within the 30 days, the lawyer must attempt to resolve the dispute with the client and if not resolved, the lawyer must submit the dispute to binding arbitration with the State Bar Fee Arbitration Program or a local bar association program within 30 days after receipt of the notice from the client.
If the matter is processed to arbitration and an award is rendered requiring a payment to the client, the lawyer must pay the amount of the arbitration award to the client within 30 days after receipt of the award unless the client indicates he or she will not comply with the arbitration award as a final resolution of the dispute.
Need Ethics Advice?
As a State Bar member, you have access to informal guidance and help in resolving questions regarding Wisconsin’s Rules of Professional Conduct for Attorneys.
Ethics Hotline. To informally discuss an ethics question, contact the State Bar ethics counsel, Timothy Pierce or assistant ethics counsel, Aviva Kaiser. They can be reached at (608) 229-2017 or (800) 254-9154, Monday through Friday, 9 a.m to 4 p.m.
While the above appears to be complex, it really only involves two written communications to the client. The first communication indicates what the lawyer is going to do with the funds, what responsibilities the client has regarding expenses, and notice of an agreement to submit a fee dispute to arbitration. The second communication involves a final accounting for how the fees were earned by the lawyer and notice that a fee dispute can be processed to arbitration either under the State Bar Fee Dispute Program or the Milwaukee Bar Association Fee Dispute Program.
The rule is designed to allow lawyers to make use of advanced fee payments immediately but only if a lawyer gives proper notification to clients about how the funds will be used and how a fee dispute will be resolved if that should arise. Lawyers should ensure they have full disclosures in their written communications to be in compliance with this alternative protection for advanced fees.
