"Earned Upon Receipt" for Attorney Fee Arrangements Ended in Maryland
Effective July 2025
BY KELSEY B. WILLIAMS
Effective July 1, 2025, attorneys practicing law in Maryland may no longer state that their fees are “earned upon receipt” in their engagement agreements.
EFFECTIVE JULY 1, 2025, attorneys practicing law in Maryland may no longer state that their fees are “earned upon receipt” in their engagement agreements. Under the new, amended Rule 19-301.15, “[a]n attorney shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the attorney only as fees are earned or expenses incurred.”
Under the expiring Rule 1.15, an attorney was permitted to deposit fees directly into their operating account if the client gave “informed consent, confirmed in writing[.]” Informed consent required that the attorney give their client any explanation reasonably necessary to inform the client of the material advantages and disadvantages of the proposed course of conduct and a discussion of the client’s options and alternatives. This Rule mirrored the District of Columbia Court of Appeals’ decision in In re Mance, 980 A.2d 1196 (D.C.
2009), which held for the first time that an attorney may treat fees as earned upon receipt with informed consent confirmed in writing. Importantly, this means that the Maryland Rule will no longer align with the District of Columbia’s version of the Rule.1
The Rule, therefore, no longer permits a “carve-out” for informed consent. The change to Rule 1.15 can be visualized as follows, with the new portions of the Rule highlighted and in bold:
(c) An attorney shall deposit into a client trust
1 Compare Md. Rule 19-301.15(c) (eff. July 1, 2025), with D.C. R. Prof. Conduct, Rule 1.15(e) (stating that “[a]dvances of unearned fees and unincurred costs shall be treated as property of the client . . . unless the client gives informed consent to a different arrangement). See also Attorney Grievance Commission of Maryland, Notice: Changes to Maryland Rule 19-301.15, available at https://www.mdcourts.gov/ sites/default/files/import/attygrievance/pdfs/rule19_301_15changes.pdf.
To be sure, it is an attorney’s ethical duty—regardless of the type of representation—to be reasonably available to their clients.
account legal fees and expenses that have been paid in advance, to be withdrawn by the attorney only as fees are earned or expenses incurred.
Per the Rules Committee, this change is linked to the change to the former Rule 2-652(a), which governed what was referred to as “common law attorneys liens.”2 The previous Rule 2-652(a) provided that an attorney who had a “common-law retaining lien” for legal services rendered to a client could assert the lien by retaining the client’s papers until the attorney’s fees were satisfied.3 In its 211th Report of the Rules Committee, the Committee recommended the change because “common-law attorneys’ liens” appeared to be in conflict with the Rules of Professional Conduct 19-301.16, which requires attorneys to surrender clients’ papers upon termination.4 The Rules’ Committee stated in its Reporter’s Note: “In the wake of the [repeal of the common law attorneys’ lien], the Rules Committee received a request to revise Rule 19-301.15 to bring it into closer alignment with American Bar Association Model Rules of Professional Conduct Rule 1.15 (Model Rule 1.15).”5
The Rule change addresses an “advance payment,” not a traditional retainer. Although often used interchangeably in the legal field, there are differences between advanced payments and retainers. Simply put, as explained by the Maryland Supreme Court, an advanced payment is an advance on the fee that the attorney will eventually earn through their work, or “a payment to an attorney for future services.”6 As discussed in more detail below, common examples of advanced payments are an hourly agreement that requires a client to pay $5,000.00, up front, to then be used to pay the attorney’s hourly fee, or a flat fee arrangement where the client agrees to pay a flat fee of $5,000.00 for the terms of the representation.
A retainer, on the other hand, “is a fee paid, apart from any other compensation, to ensure that a lawyer will be available for the client if required.”7 The retainer does not pay for the attorney to provide legal services. Instead, it is paid, among other things, in consideration of the attorney’s expertise and skill in a given area of law, as a basis for the attorney prioritizing the client’s case over other work, in consideration of the attorney regularly keeping up with the areas of law that affect that client, and in
consideration of the attorney having to turn away other work that they could have otherwise accepted.8 Therefore, separate and apart from the retainer, the attorney will be “additionally compensated for actual work, if any, performed.”9
The quintessential example of a true retainer is as follows: a prospective client contacts an attorney, saying that they received a tip that they would be arrested next week and that they want an attorney to be available to them in case they are arrested, interrogated, possibly indicted, etc. The attorney and the client then enter into a retainer engagement agreement, where the attorney agrees to reject other work to make sure they are available to the client. The attorney also agrees to reject other possible clients, such as a possible co-defendant, in order to avoid a potential conflict of interest with their own client. This is what the client pays for when they enter into a retainer engagement agreement: the client pays for the attorney’s availability, and the attorney’s responsibility to reject other work that would prevent the attorney’s availability.
Retainers are also used in the corporate field. For example, an attorney may enter into a retainer engagement agreement with a corporation. By entering into this retainer agreement, the attorney agrees not to represent other corporations that might, one day, present a conflict of interest to the attorney’s client. For example, the attorney might agree not to engage with any other corporations in the technology space, even if that corporation has no present relation to their client, in case one day, the two corporations are averse to one another for any reason. The attorney would also stay on top of changes in federal regulations and other laws that affect the corporation’s business. Again, the retainer does not buy the legal services, but it buys the attorney’s availability to provide these services.
To be sure, it is an attorney’s ethical duty – regardless of the type of representation – to be reasonably available to their clients.10 Therefore, an attorney cannot simply attempt to convert an advanced fee into a retainer simply by changing the name of the engagement agreement and expect to be in compliance with the Rules. For example, an attorney attempted to charge their clients a “non-refundable engagement fee,” which they argued was a retainer, because the Agreement stated that it was paid “for the
2 Standing Committee on Rules of Practice and Procedure, 223rd Report at 254 (July 18, 2024), available at https://www.mdcourts.gov/sites/default/ files/rules/reports/223rdreport.pdf.
3 Md. Rule 2-652(a) (repealed December 2022).
4 Standing Committee on Rules of Practice and Procedure, 211th Report at 6 (July 11, 2022), available at https://www.mdcourts.gov/sites/default/files/rules/reports/211threport.pdf.
211th Report at 6. Of course, statutory attorneys’ liens remain, and they continue to be governed by Md. Rule 2-652 and Md. Code Ann., Bus. & Occ. Art. § 10-501.
5 Standing Committee on Rules of Practice and Procedure, 223rd Report at 254 (July 18, 2024), available at https://www.mdcourts.gov/sites/default/files/rules/ reports/223rdreport.pdf.
6 Attorney Grievance Commission of Maryland v. Jones, 484 Md. 155, 199 (2023).
7 Restatement (Third) of the Law Governing Lawyers § 34 cmt. e (Am. L. Inst. 2000) (cited by Jones, 484 Md. at 199).
8 Attorney Grievance Commission of Maryland v. Stinson, 428 Md. 147, 184 (2012).
9 Id.
10 See Md. Rule 19-301.4.
Attorney’s (1) willingness to provide legal advice and services to the Client; (2) ensuring their availability to the Client; and (3) willingness and availability to represent the Client, for reasonable fees, in transactions and litigation.’”11 The Supreme Court of Maryland held that “the benefit provided to [the client] in exchange for her payment of a nonrefundable . . . fee ‘was nothing more than the ethical obligation imposed on all lawyers when they agree to provide legal services to a client.’”12 The Supreme Court ultimately upheld this attorney’s disbarment (for this and other serious violations).13
To be sure, attorneys may still charge advanced fees. The important distinction is that attorneys may not treat these advanced fees as earned upon receipt. The unearned fees must be kept in trust until those fees are earned.14 For an hourly agreement, this arrangement is rather straightforward. If an attorney charges a $5,000.00 advanced fee for their hourly agreement, they must keep the $5,000.00 in their trust account and only withdraw these funds into their operating account when they work the hours to earn these funds. When the rule change to Md. Rule 19-301.15 was presented to the Rules Committee, the presenting attorney “noted that there is still peril for lawyers who charge a flat fee regarding when that fee can be deemed ‘earned,’ but the amendment clarifies the Rule for cases where the attorney charges an hourly rate.”15
The change to Rule 19-301.15 affects advanced flat fees, but this does not mean that advanced flat fees are now, per se, unethical. Instead, an attorney must be careful to remove any language from their agreement stating that they may treat the fees as earned upon receipt. A flat fee arrangement includes when an attorney, for example, agrees to represent a client in the administrative and criminal proceedings for their charge of driving under the influence for a “flat fee” of $5,000.00.16 Charging a flat fee meets an attorney’s ethical duties, even under the Rule change, provided that the fee is reasonable under Md. Rule 19-301.5.17 As the Supreme Court has explained, charging a flat fee can be “thought of as a risk allocation mechanism.”18 The client risks that they will pay more than they would have for an hourly arrangement, and the attorney risks that they earn less than they would have if they
11 Stinson, 428 Md. at 184.
The change to Rule 19-301.15 affects advanced flat fees, but this does not mean that advanced flat fees are now, per se, unethical.
had charged by the hour.19 Still, a “full flat fee is not earned until all the work associated with the fee is completed.”20 Therefore, in the above example, an attorney could not deposit a flat fee into his operating account until the DUI proceedings are completed.
Attorneys practicing in Maryland should be careful to take note of the change. Issues with comingling fees are one of the most common issues that catch the attention of the Attorney Grievance Commission. Rule violations relating to fees can – and often do – lead to discipline.
Kelsey Williams is an associate attorney with Carr Maloney, P.C., and is admitted to practice law in Maryland and the District of Columbia. She graduated cum laude from the University of Maryland Francis King Carey School of Law in May 2021. She then completed a clerkship with The Honorable Kathryn Girll Graeff on the Maryland Appellate Court. Her practice focuses on legal ethics and professional liability, including legal malpractice. She has represented clients in federal and state courts in Maryland and in the District of Columbia, and she has represented clients in disciplinary proceedings and investigations with the Maryland and District of Columbia bars.
12 Id. (quoting Iowa Supreme Court Bd. of Professional Ethics and Conduct v. Frerichs, 671 N.W.2d 470 (Iowa 2003)).
13 Id. at 197.
14 Md. Rule 19-301.15(c).
15 The Supreme Court Standing Committee on Rules of Practice and Procedure, Minutes of March 15, 2024, Meeting, at 46, accessible at https://www.mdcourts.gov/sites/default/files/ minutes-rules/minutes20240315.pdf.
16 See Jones, 484 Md. at 199 (“A flat fee . . . is a type of advance payment.”).
17 See id. at 204 (“An attorney may not contract out of their ethical obligation to charge reasonable fees.”).
18 Id. at 203.
19 Id.
20 Id. at 204 (quoting Attorney Grievance Commission v. Zuckerman, 386 Md. 341, 360 (2005).