In Escamilla v. Vannucci 2025 Cal. LEXIS 439 (Cal. Mar. 20, 2025), the California Supreme Court weighed in on the question of how long non-clients have to sue attorneys for professional misconduct (e.g., malicious prosecution). This decision has implications for businesses who have been targeted by frivolous lawsuits, as well as attorneys who might find themselves on the receiving end of a claim from a previous case.

In the underlying case, Daniel Escamilla, working as a fugitive recovery agent, searched the home of Lan Ting Wu and Andy Yu Feng Yang, looking for Yang’s brother, who was wanted on felony drug trafficking charges.

Yang and Wu sued Escamilla for assault, battery, trespass, false imprisonment, and emotional distress. They hired an attorney (Vannucci) to represent them in the case in which Escamilla claimed the search was supported by probable cause and cross-complained for abuse of process. The jury found in favor of Escamilla and was awarded $20,000 in damages.

Additionally, Escamilla filed a malicious prosecution action against Yang, Wu, and their attorney, John Vannucci. Vannucci moved to strike Escamilla’s complaint as a strategic lawsuit against public participation (SLAPP), and the trial court granted Vannucci’s motion, agreeing that the one-year statute of limitations for claims against attorneys (Cal. Civ. Proc. Code § 340.6) applied. The California Court of Appeal affirmed this decision.

The Supreme Court’s Intervention

The California Supreme Court reviewed the case to determine whether the one-year statute of limitations for claims arising from a lawyer’s professional services also applied to a claim for malicious prosecution. The key statute under discussion, Section 340.6, reads:

An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.

The crux of the matter was whether the one-year statute applied when a non-client sued a lawyer for alleged professional misconduct, such as malicious prosecution. The Supreme Court acknowledged that the statute was ambiguous in this specific context and because of this ambiguity, the court considered legislative history, policy, and purpose in rendering its opinion. Although some justices argued the text of the statute was clear and should be followed according to its letter, the court ultimately held that the two-year statute applies in malicious prosecution lawsuits brought by a non-client.

Key Takeaways

This ruling has implications for businesses who have been targeted by malicious prosecution. If your business has faced frivolous litigation or questionable legal tactics from opposing counsel, this ruling provides additional time to consider your options. However, it’s still advisable to consult with your legal team promptly to preserve evidence and evaluate potential claims.

The Escamilla decision reflects the court’s commitment to fairness in the legal system, ensuring businesses and other non-clients have reasonable time to pursue legitimate claims against attorneys who may have abused the litigation process.

Congratulations to Maloney Firm attorneys Patrick Maloney and Greg Smith for being recognized as 2025 Southern California Super Lawyers ® in Business Litigation.

Super Lawyers recognizes top attorneys in Southern California each year. The selection process involves peer nomination, independent research, and peer evaluations. This recognition covers various legal fields and emphasizes distinguished professionals in the region.

Effective January 1, 2025, amendments to the California Code of Civil Procedure (CCP) § 664.6 aim to enhance the settlement enforcement process and clarify the court’s authority in civil disputes. These changes are expected to encourage settlements, ensure compliance with agreed terms, and improve procedural efficiency. Attorneys must familiarize themselves with these updates to effectively navigate the litigation process and safeguard their clients’ interests.

One of the key changes to CCP 664.6 is the court’s ability to dismiss a case without prejudice while retaining jurisdiction to enforce the settlement agreement until all terms are fulfilled. In the past, the request for the court to retain jurisdiction needed to be done explicitly, either through filing a stipulation and proposed order with a copy of the settlement agreement and request for the trial court retain jurisdiction under Section 664.6, or the filing of a stipulation and proposed order signed by the parties noting the settlement and asking that the trial court retain jurisdiction under Section 664.6. This process meant that some parties failed to formally ask for the trial court to retain jurisdiction beyond agreeing to this inside of the settlement agreement itself.

The new Request for Dismissal form includes a checkbox that allows the parties to request the court to retain jurisdiction over the settlement under Section 664.6. This eliminates the need for parties to formally request that the court retain jurisdiction, ensures that settlements can be enforced, and reduces the paperwork needed to be filed with the court.

Another significant amendment concerns the validity of signatories for the new Request for Dismissal form. The updated Request for Dismissal Form (CIV-110) includes a checkbox to request the trial court to retain jurisdiction. When the parties request that the court retain jurisdiction to enforce a settlement agreement, the matter must be dismissed without prejudice. When a matter is dismissed with prejudice, the court loses jurisdiction.

 The form itself can be signed by the party, their attorney, or an authorized agent of an insurer (with written authorization). However, attorneys must exercise caution: signing agreements of any kind without explicit authorization may result in professional discipline unless good cause can be demonstrated.

Additionally, the amendments address filing fees and post-judgment motions. Parties who have already paid a first appearance fee will not be charged again for filings related to the settlement after judgment or dismissal. This adjustment reduces financial burdens and simplifies post-settlement procedures, making the process more accessible and efficient for all parties involved.

In summary, the amendments to CCP 664.6 are designed to make settlement agreements more enforceable and procedural requirements more transparent. Attorneys should take proactive steps to adapt to these changes, including ensuring proper authorization before signing agreements, familiarizing themselves with the updated rules for retaining court jurisdiction, and staying informed about the Judicial Council’s updates to forms and Rules of Court. Additionally, in matters where the court is asked to retain jurisdiction, counsel should contemplate whether to require a dismissal with prejudice to be filed once the settlement obligations have been completed. By doing so, they can effectively represent their clients and navigate the evolving legal landscape with confidence.

The summary judgment process in the California courts is undergoing significant changes as of the beginning of 2025. AB 2049 (effective January 1, 2025) marks the first major changes made to Code of Civil Procedure §437(c) in several decades. The new legislation affects motion timelines, successive motions, and briefing limitations. Though the bill was designed to streamline the litigation process, it is likely to complicate the litigation process for attorneys by front-loading the preparation needed to participate in the summary judgment process.

Longer Notice Periods for Summary Judgment and Adjudication Motions

AB 2049 lengthens the notice period for filing and responding to summary judgment motions. Now, summary judgment motions will need to be filed 81 days in advance of the hearing date, rather than 75. Oppositions are now due 20 days before the hearing date, and reply briefs are due 11 days before the hearing. 

These extended deadlines are designed to give judges more time to evaluate motions after replies are filed. Whether the extra time will result in more summary judgment motions being granted remains to be seen.

Strict Limit on Successive Summary Judgment Motions

Parties are now limited to one summary judgment motion per case, unless the trial court grants them permission to file a second summary judgment motion.  But the process of obtaining leave to file a second motion requires the presentation of the fully prepared motion.  Thus, parties unsuccessful on a summary judgment motion will be required to devote substantial effort and incur substantial expense just to ask to do so. To avoid this burden, attorneys are well advised to delay the bringing of summary judgment motions until later in the litigation process to ensure they present the very best arguments. Unfortunately, due to court congestion and most courts hearing a single summary judgment motion per day, the filing of a summary judgment motion will almost invariably result in a trial continuance. 

Though some courts had previously allowed parties to file multiple motions, it is now universally the rule that a party may only file a second summary judgment if the party is able to obtain the court’s permission. This requirement means that attorneys will need to anticipate opposing arguments and present their entire case initially to maximize their chances of being granted summary judgment in their one crack at it.

While a party is limited to one motion for summary judgment, there are no such limits placed on summary adjudication motions. As such, are we likely to see a proliferation of cases being adjudicated piecemeal through countless adjudication motions? If so, won’t this likely lead to even more paperwork for the parties, burdens on the court, and ultimately delay?

Restrictions on New Evidence in Reply Briefs

New facts and evidence may no longer be introduced in reply briefs under AB 2049. This resolves the inconsistency we’ve seen from court-to-court, with some courts allowing the introduction of new evidence in some situations and other courts never allowing new evidence to be introduced in reply briefs. With these changes, attorneys must be vigilant to include all relevant evidence in their initial motion.

Key Takeaways

The codification of AB 2049 is aimed at making the courts move more efficiently, promoting clarity, and ensuring thoroughness in the briefing process throughout litigation. The extended filing deadlines, limitations on the number of summary judgment motions allowed, and prohibiting the introduction of new evidence in reply briefs may encourage this streamlining of the litigation process. However, it’s also possible that, as attorneys adjust to the new process, there may be new complications that emerge because of what has been left out of the bill.

With limitations on successive motions, attorneys must present all relevant evidence and arguments in their initial filings, anticipating potential counterarguments and evidence from opposing parties. Additionally, cases should be carefully evaluated to determine the best strategy for meeting clients’ needs in each case. Though attorneys can plan for dealing with fewer summary judgments, they may find their workloads drastically increased by an onslaught of summary adjudication motions.

Attorneys should carefully evaluate the strategic implications of the new summary judgment rules on each of their cases and how these new rules will affect their ability to help their clients.

The New Pro Bono Law

Lawyers practicing in California may be affected by a new law governing pro bono legal services. AB 2505, signed into law by Governor Gavin Newsom, requires active California lawyers to report their pro bono hours when renewing their license each year. The law is not scheduled to go into effect until 2026, though the California State Bar may begin asking for information on pro bono hours before that date.

Mandatory Reporting of Pro Bono Hours

Starting in 2026, California lawyers will be required to report the number of pro bono hours they completed during the previous calendar year when they renew their license to practice law each year with the California State Bar. The information is to be collected by the State Bar and may potentially be published by the Bar. The individual lawyers’ totals will remain confidential and protected under the state’s public records laws; however, information on pro bono hours may be published in the aggregate.

AB 2505 is created as part of an effort to encourage lawyers to offer more free and low-cost legal services as a part of their regular practice. Sponsored by the Legal Aid Association of California, the bill was designed to help gain more transparency about where and how pro bono services are being provided in the state. This increased transparency is designed to identify “pro bono deserts” in the state and better understand what kinds of attorneys are more or less likely to provide pro bono services. Working with the California Lawyers Association, the bill was updated to allow the State Bar to include options for active lawyers “who do not track their pro bono hours or reduced fee legal services hours or who decline to answer” (6073.2(c)) to note this when they are prompted to disclose their hours. This allows for employment types where pro bono work is more difficult or prohibited.

Beginning in the early 2000s, other states began passing laws similar to this one to encourage the reporting of pro bono hours. California has had several attempts at passing a law similar to AB 2505. The COVID-19 pandemic saw the shutdown of many one-day legal clinics in which attorneys would complete several hours of pro bono service at once, which led to huge drops in volunteering. Other states that have implemented mandatory reporting have seen an increase in attorney pro bono hours because attorneys seem to dislike reporting a lack of pro bono work.

What California Attorneys Need to Know

Attorneys licensed in California should be aware of this new reporting requirement. While the law does not officially go into effect until 2026, the California State Bar may request voluntary reporting of pro bono hours from 2024 during the 2025 billing cycle. Attorneys should stay informed of updates from the State Bar regarding AB 2505’s implementation and remain prepared to comply with reporting requirements.

AB 2505 represents a significant shift in how pro bono legal services are monitored and recorded in California. By understanding the implications of this law and being prepared to report your pro bono hours, you can help to increase the availability of free and low-cost legal services across the state.

Founding partner Patrick Maloney has been selected as one of the LA Times B2B Publishing’s 2024 Law Firm Visionaries. Attorneys featured on this list in the LA Times’ annual Business of Law issue represent influential leaders and attorneys in the greater Los Angeles area. Recognition as a 2024 Legal Visionary underscores each attorney’s commitment to excellence, thought leadership, and impactful contributions to their clients and the larger legal community.

Patrick Maloney’s leadership and dedication to legal excellence are exemplary. Over the past two years, he has served as a volunteer fee dispute arbitrator for the Los Angeles County Bar Association and has earned accolades such as the AV-Preeminent rating from Martindale-Hubbell and Super Lawyers honors from 2015 to 2023. In recent years, Maloney secured a $1.1 million arbitration win in a film fraud case, a significant property dispute victory and a summary judgment dismissal in a $150-million racketeering lawsuit. Active in the legal community, Mr. Maloney has held leadership roles, including as president of the South Bay Bar Association, and is actively engaged in local organizations such as the Manhattan Beach Chamber of Commerce.

Patrick Maloney’s contributions continue to make a positive impact within The Maloney Firm and in the legal profession as a whole. Read the Business of Law issue on the Los Angeles Times website.

Some parties to a Mandatory Fee Arbitration fail to treat the proceedings with the proper amount of seriousness. A stern reminder to treat these proceedings with respect comes from California’s Second Appellate District in the form of the case Hooman Automotive Group, et al. v. Glaser Weil Fink Howard Avchen & Shapiro, LLP (“Hooman”). The outcome of Hooman demonstrates that a failure to respect the arbitrators’ time and authority can have devastating consequences for the parties to an arbitration. While this case is not published and is therefore not precedential, it is of note because it underscores the importance of adhering to all the policies and procedures of arbitration. This is particularly important when considering the policies of the arbitrators themselves.

The Arbitrator Sets the Rules

The case stems from the appeal by Hooman Nissani and his corporate entities — HK Automotive Group, Inc., RHC Automotive, Inc., and RHH Automotive — from a judgment that favored their former legal firm, Glaser Weil Fink Howard Avchen & Shapiro, under the Mandatory Fee Arbitration Act (“MFAA”). Their primary argument against the judgment was the perceived unfairness of arbitration being conducted in their absence. The clients also asserted it was improper to enter judgments against corporate entities and Nissani individually, given they were (according to the plaintiffs) either not notified of the proceedings or absent from the proceedings due to illness.

In advance of the hearing, Susan Keenberg, the chair of the three-person arbitration panel, issued a notice stating the date, time, and venue for the fee arbitration. The notice also warned:

If either the client or the responding attorney does NOT appear at the hearing, the arbitrator may hear and determine the controversy upon the evidence produced, notwithstanding such failure to appear.

The notice continued, in bold-face font, that

[a]ny party who willfully fails to appear at the hearing, as provided for under the rules of procedure governing this proceeding, may not be entitled to a trial in the civil court after a non-binding arbitration. The arbitrator may include findings in the arbitration award as to the willfulness of any party’s non-appearance at the hearing.

Despite these unsubtle warnings and indications of the arbitrators’ thoughts about attendance of hearings, the plaintiff contacted Keenberg less than 24 hours before the hearing to explain he would not be attending. Via his assistant, Nissani told Keenberg he was ill and that “we need to cancel due to health reasons.”

The arbitrator replied that the “arbitration will go forward as scheduled tomorrow unless Mr. Nissani provides us with a doctor’s note TODAY.” Keenberg also stated the doctor must state in the note that “Mr. Nissani is unable to attend a video meeting.” Although Nissani transmitted a doctor’s note, it was vague about the limitations of Mr. Nissani’s ability to participate in arbitration and only stated that “complete bed rest advised until stabilized.”

Keenberg responded, noting the doctor’s note was insufficient and that the arbitration would go forward. Nissani objected, claiming that Nissani was not able to be on video if he was on bed rest. However, Keenberg was adamant that her instructions for the doctor’s note were explicit in their demands. The last part of the exchange between the arbitrator and Nissani took place via Nissani’s personal email account, which Keenberg took to suggest that even if Nissani were in bed, he would still be able to participate in the arbitration hearing (via a cell phone or tablet). Nevertheless, Nissani failed to appear at the arbitration hearing.

The arbitrators rejected the plaintiffs’ excuses for being absent. Instead, the absence was determined to be a willful non-attendance—a ruling later upheld by the trial and appellate court. Keenberg reiterated that the doctor’s note submitted had been inadequate, and Nissani’s multiple attempts to prevent the scheduling of the arbitration suggested this was part of a larger effort to delay the proceedings. Under the spotlight of Business and Professions Code Section 6204, a client’s deliberate decision to skip a mandatory fee arbitration hearing can lead to the forfeiture of the right to challenge the arbitration award in a trial de novo, a right the arbitrators ruled was waived by Nissani and his businesses by their failure to appear.

In this case, the presiding arbitrator was convinced the initiating party was using absence as a delay tactic and that their absence was willful. Though the trial court has the ultimate authority on determining willfulness, this is the one area in which the trial court may take the arbitrators’ opinions into account. Though arbitrators might vary on what they consider to be willful non-attendance, is that the arbitrator’s decision can influence the trial court’s ultimate decision. The plaintiffs in Hooman failed to adhere to Keenberg’s rules, and the trial and appellate courts agreed with her assessment that the plaintiffs had waived their right to a trial de novo.

Key Takeaways

The Hooman case serves as a reminder of the peril of disrespecting the role and directives of arbitrators in mandatory fee arbitration. Initiating arbitration and then failing to appear — without valid, substantiated reasoning and a doctor’s note — casts a shadow on the initiating party’s commitment to the process. This case clearly demonstrates that the arbitrator’s criteria of what constitutes “willful” absence can be determinative, and the burden to prove otherwise is a steep uphill climb for the absent party.

Additionally, this case is a poignant admonition for all participants within the landscape of fee arbitration: disrespecting the process or underestimating the dedication required for participation can lead to being barred from future legal recourse. Trying to delay proceedings, waiting until the day before the hearing to report illness, the artifice of communicating through an assistant, a vague doctor’s note, and the admonishment of the chief arbitrator for adhering to the rules of ex parte communication betrayed an arrogance and unseriousness which likely undermined the plaintiff’s case. While the arbitrator is obligated to remain neutral in determining proceedings, this disrespect could not possibly have gone unnoticed by the panel. As evidenced by Hooman, trivializing the arbitration process is a misstep with potentially grave ramifications.

California landlords are increasingly finding themselves the subject of opportunistic legal pitfalls. In addition to the well-established practice of targeting owners of older apartment buildings for potential ADA lawsuits, landlords are now the subject of solicitations by individuals looking for Section 8 compliance violations. Recently, landlords have been targeted over housing discrimination concerning their acceptance of Section 8 housing vouchers, often by individuals with no intention of ever renting a property. In fact, court records show that one law firm has already filed 36 cases on behalf of one client and 28 cases on behalf of another.

The Section 8 Solicitation Trap

Participation in the Section 8 housing voucher program is mandatory in California. We have encountered several instances where landlords have received texts, ostensibly from potential tenants, who inquire specifically about Section 8 vouchers. These individuals likely have no genuine interest in renting; however, when a landlord unknowingly responds with a negative or non-compliant reply, these individuals seize the opportunity to initiate a lawsuit.

The consequences of such lawsuits can be significant. Even if a landlord manages to prevail in court, the cost of legal defense can be considerable. What can landlords do to avoid these situations?

1. Educate Yourself and Your Team: Know the laws in California about Section 8 and ADA Compliance.

2. Standardize Responses: Prepare a standard, compliant response to use for inquiries about Section 8 or any other services that might be discriminatory if handled improperly.

3. Consult Legal Advice: It’s always worthwhile to check with an attorney about compliance with rental agreements, policies, advertisements, and even text response templates for prospective tenants.

4. Stay Informed: California laws and regulations governing housing are constantly evolving. Staying up to date about legislative changes can help landlords adapt their policies to make sure they remain in compliance.

In a pivotal decision dated September 5, 2024, the United States Court of Appeals for the 9th Circuit upheld the lower court’s summary judgment, marking a significant victorious milestone for the Maloney Firm’s client. This case revolved around allegations of malfeasance by property developers accused of misusing the California Environmental Quality Act (CEQA) to engage in behaviors allegedly equivalent to violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). The appellate court decisively reaffirmed the legitimacy of the developers’ utilization of CEQA procedures. Notably, this decision may influence future interpretations of RICO allegations within environmental litigation contexts.

The plaintiffs contended that the developers had abused CEQA to hinder competitors by bringing bogus lawsuits. In the district court, Patrick Maloney successfully argued that the clients’ actions under CEQA were safeguarded by the Noerr-Pennington doctrine, which protects the rights of individuals and entities to petition the government without fear of litigation, except in cases of “sham” litigation. The firm reiterated the same arguments in response to the plaintiffs’ efforts to persuade a higher court to reverse the trial court’s ruling. Several environmental interest groups filed briefs in the appellate court, expressing concerns that overturning the lower court’s decision might set a perilous precedent and dissuade the filing of legitimate CEQA complaints.

Ruling

The 9th Circuit’s affirmation of the summary judgment recognized that the defendants’ petitioning actions fell under the protection of the Noerr-Pennington doctrine. The court determined that the defendants’ actions under CEQA were not objectively baseless, thus not fitting into the “sham litigation” exception detailed in the doctrine.

This ruling fortifies the legal protections associated with petitioning activities under Noerr-Pennington and celebrates a decisive victory for the Maloney Firm and its clients, reinforcing an essential principle of the legal system. This ruling is hoped to guide future legal strategies and the interpretation of fundamental legal doctrines. We are thrilled to achieve such a complete victory for our clients at the appellate level.

The case is Relevant Group et al. v. Stephen Nourmand et al., No. 23-35438, 2024 WL 3909574 (9th Cir. Sept. 5, 2024).

In Dickson v. Mann, No. D081851 (Cal. Ct. App. July 16, 2024), the California Court of Appeal addressed the ownership of funds in a client trust account and whether they were subject to a creditor’s lien. The law firm Higgs Fletcher & Mack LLP (HFM) agreed to represent a client, Jack Mann, on a flat fee basis, placing a substantial sum, $585,000, in the firm’s client trust account. Thereafter, one of Mann’s creditors sought to levy the funds he had paid into the law firm’s trust account. After hearing arguments, the trial court concluded that the money in question was Mann’s and therefore subject to the creditor’s lien, despite HFM’s contention that it was their property based on the flat fee agreement. The Court of Appeal affirmed the lower court’s decision.

True Retainers and Flat Fee Agreements

In Dickson, the Court of Appeal ruled that 1) a flat fee for legal services paid in advance is not earned until the services are rendered; and 2) funds in a client trust account are de facto presumed to belong to the client unless the lawyer or law firm can prove otherwise.

The decision notes a difference between a “true retainer”—a fee paid to ensure the lawyer’s availability during a certain period—and funds advanced for legal services yet to be rendered. HFM argued the $585,000 in the client trust account had been earned because it was paid in conjunction with a flat fee agreement for legal services, which provided that the funds were to be “deemed earned by [HFM]when received.” Thus, HFM claimed the $585,000 flat fee was paid for services and costs for representation in four matters.

However, because the $585,000 was not a true retainer, under the Rules of Professional Conduct, HFM did not actually earn the funds until the contemplated legal services had been provided. Thus, in response to Dickinson’s levy, HFM bore the burden of establishing that it had provided the contemplated legal services to have a viable claim to the money. Because HFM could not show it had provided any legal services, HFM fell short in establishing its superior claim to the money held in trust.  Accordingly, the funds in the client trust account remained the legal property of Mann.

The Rules of Professional Conduct allow flat fees for specified legal services. However, Rule 1.5(d) states that flat fees cannot be designated as “earned on receipt” or labeled non-refundable unless they fit the criteria of a “true retainer,” and the client has agreed to this in writing after full disclosure.

The Rules of Professional Conduct also say flat fees may be paid “in whole or in part in advance of the lawyer providing those services.” But any unearned portion of the fees must be returned to the client in the event “the representation is terminated or the services for which the fee has been paid are not completed.”  

Best Practices for Flat Fees and Client Trust Accounts

The case brings to the forefront several critical lessons for fee agreements between law firms and clients:

Be Wary of Clients with Outstanding Judgments

Law firms face serious risks when representing clients with outstanding judgments, financial issues, and even criminal exposure. As Dickinson reflects, simply denoting a large deposit as a flat fee is not enough to protect the law firm from third party creditors. To this end, while the Court of Appeal found it unnecessary to analyze the issue, trial court in Dickinson, on its own, expressed its concern that the fee flat fee arrangement violated the Uniform Voidable Transactions Act by impairing Mann’s efforts to enforce his judgment. When the prospective client has a judgment or is accused of engaging in conduct rendering their funds “dirty”, the law firm should carefully consider the risk of levy or claw back. Solutions may include having a third party pay with “clean” money or passing on the representation.

True Retainer Clarification

The distinction between a true retainer and a flat fee agreement must be clear and understood by the client, ensuring non-refundable fees are properly categorized and disclosed. A true retainer, as defined by the Rules of Professional Conduct 1.5(d), is a fee “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.”

Ownership of Trust Account Funds

Though the presence of funds in a client trust fund does not establish definitively, in all cases, that the funds belong to a client, the Dickson decision reinforces the idea that only funds earned by fulfilling the agreed-upon legal services can be considered the property of the law firm. Until then, funds held in attorney trust accounts remain the property of the client. This means they are subject to levy in the event of a judgment or other creditor action.

Flat Fee Agreements

The court’s ruling may have implications for flat fee agreements and their terms of payment. Because fees may only be transferred out of the client trust account once the fees are earned, a flat fee might be considered unearned—and thus not the property of the law firm—until after the full resolution of the matter for which the firm has been hired. To avoid problems with this issue, the engagement agreement should include payment terms for the flat fee that define when parts of the flat fee will be considered as having been earned (e.g., by periods of time or stages of the case, for example).

Diligent Fund Management

Attorneys are mandated to manage client funds in trust accounts diligently by only claiming funds that are earned and moving them out of trust accounts promptly, as per the ethical guidelines.

The Dickson v. Mann case highlights the pitfalls of flat fee agreements. It underscores the importance of proper handling of client trust accounts and employing precise, client-centric practices in law firm fee agreements and retainers. Law firms are well-advised to stay abreast of these regulations to ensure compliance and uphold the highest standards of professional conduct.