Had the “Real Wealth” lawyer read Ethox & Paradox?
In August 2011, characters Ethox and Paradox discussed that Arizona Ethics Opinion 10-03 permits a lawyer to charge a nonrefundable fixed or flat fee and to treat that fee as earned upon receipt. http://bit.ly/z95xgJ. Missouri Formal Opinion 128 (2010), however, rejects this position, stating that any excessive fee should be refunded, and that flat fees must be placed in a trust account until earned.
Perhaps the lawyer in FTC v. Real Wealth, Inc., 2011 WL 6046442 (W.D. Mo. Dec. 5, 2011), read this Ethox & Paradox column. The case rises in Missouri, but the lawyer argues that a $15,000 fee was earned upon receipt because Arizona law governed. The lawyer was seeking to avoid having the funds retained as part of the client's assets -- which were frozen due to a $10M assessment for violation of the FTC Act.
Unfortunately for the lawyer, the District Court slices through this argument. Federal law, the District Court held, determines when the transfer of funds occurred. Under federal law, the transfer of funds to the lawyer would have occurred when the check was honored. But this was after the client's assets had been frozen. So the lawyer had no right to the fee.
"Real Wealth," indeed.