In In re Gilbert, 346 P.3d 1018 (Colo. 2015), the Colorado Supreme Court clarified how lawyers should proceed with flat-fee agreements, specifically related to benchmarks in those agreements. The Court said that attorneys should include benchmarks in flat-fee agreements to help delineate when portions of the flat fee has been earned in the event the representation terminates early, but that such benchmarks are not required by the Rules of Professional Conduct. (This blog’s author also recommends, where not impractical, using benchmarks tailored to the nature of the representation for this reason and to keep the client’s expectations clear.) In a footnote, the Court stated that it believed that amendments to the Rule of Professional Conduct might be in order to provide further guidance in this area, but offered no proposed changes.
The Court also stated that a lawyer with a flat-fee agreement who is terminated before the event entitling the attorney to the flat fee may still recover under a theory of quantum meruit – even if the agreement provides no notice of this possible alternative recovery – distinguishing these types of agreements from contingent fee agreements. Lawyers should still be advised to carefully guard in their trust accounts any retainer funds paid in advance by their clients and must return any unearned funds over which there is no dispute at the conclusion of the representation. See Colo. R.P.C. 1.15A(c).