On the heels of my criticism of an ethics opinion out of New York as weird-ish, let me turn my attention closer to home to discuss a Court of Appeals opinion this week here in Tennessee that is fortunate for the law firm involved but unfortunate for lawyers in Tennessee in general.
In Guo v. Woods & Woods, PP (which you can read by clicking on this link: guox_031417 ) the Tennessee Court of Appeals issued an opinion that held that a lawyer (and his firm) were entitled to keep the entirety of a $7,000 fee paid to them at the beginning of a representation because it was earned when paid. The outcome was certainly fortunate for the lawyer involved, and it is likely the correct outcome in the appeal if for no other reason than the inept nature of the effort of the pro se plaintiff on appeal, as the opinion describes.
The really unfortunate part of the opinion, however, is that it makes no reference whatsoever to our ethics rule – Tenn. Sup. Ct. R. 8, RPC 1.5(f) – that addresses what is necessary to charge a nonrefundable fee. Instead, the Court of Appeals looked to an earlier appellate opinion from 2005 [before our state enacted RPC 1.5(f)] and applied a three-part test for non-refundable retainer fees established in that case, Stalls v. Pounders.
Charging and enforcing non-refundable retainer fees or other non-refundable fees is a tricky enough area. The last thing Tennessee lawyers need is two separate tracks of authority to have to work through and seek to reconcile. Particularly when one of them relates to potential discipline against their law license. Unfortunately, this Court of Appeals opinion adds to that risk by not even acknowledging the existence of RPC 1.5(f). The ethics rule reads:
A fee that is nonrefundable in whole or in part shall be agreed to in a writing, signed by the client, that explains the intent of the parties as to the nature and amount of the nonrefundable fee.
Given the pro se nature of the losing party in the matter and the small stakes involved, it seems unlikely that the case will go to the Tennessee Supreme Court where there would be an opportunity to make clear that a nonrefundable fee has to comply with RPC 1.5(f). So, hopefully, over time there will not be any further appellate opinions in Tennessee that tackle this kind of matter without acknowledging the rule.
Until such time, the safer course for lawyers is to make sure to comply with the rule because it is hard to decipher a way that satisfying the rule would not also satisfy the Court of Appeals’ three-part test. (Although insisting on saying that the fee has to be “just and reasonable” when the rule only requires that it be “reasonable” as explaned in cmt. [4a] to the rule at least creates a smidgen of doubt,) The converse is not as clear particularly if you look at the language of the letter in Guo, take heed of footnote 2 in that opinion, and analyze the requirement in the rule that the writing has to “explain() the intent of the parties as to the nature and amount” of the nonrefundable fee.