Opinion ID: 2329269
Heading Depth: 1
Heading Rank: 7

Heading: First Order Entering Partial Judgment on Pleadings

Text: As noted above, the People initially sought partial judgment on the pleadings as to Colo. RPC 8.4(c), which provides that it is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit, or misrepresentation. A lawyer knowingly misappropriates client funds and thus violates Colo. RPC 8.4(c) by taking client funds entrusted to him, knowing the client has not authorized such a taking. [20] Intent to permanently deprive a client of funds is not a necessary element of the rule, [21] but the element of scienter must be shown. [22] Under Colorado law, a lawyer does not earn advance funds, including advance fees or flat fees, upon receipt. [23] Rather, an attorney earns fees only by conferring a benefit on or performing a legal service for the client. [24] Only under narrow circumstances embodied in an engagement or general retainer may an attorney earn a fee upon receipt. Under this type of retainer, the attorney earns a fee either by consenting to forgo other possible employment opportunities, by agreeing to make the client's work a top priority, or by virtue of the attorney's unavailability to represent an opposing party. [25] Unless a fee agreement explicitly designates an engagement retainer as such and explains that the retainer is earned upon receipt, it is presumed that an advance fee is a deposit that is not earned upon receipt. [26] In this matter, Respondent has not made any assertions to rebut the presumption under Colorado law that Allen's $30,000.00 retainer was an advance payment of fees. The evidence shows that the retainer was not an engagement retainer but rather that it was designed to compensate Respondent for future legal services. As such, the retainer belonged to Allen or Allen's mother until such time as Respondent earned the legal fees. Respondent admits he did not earn the entire $30,000.00 retainer and that he exercised dominion or ownership over ... funds held for Allen's benefit. Although Respondent denies he lacked Allen's permission to use the funds for his personal purposes, he only denies that allegation on the basis that he did not believe he required such permission. Moreover, given Respondent's admission that he knew he owed Allen or Allen's mother at least $9,687.00 for the purposes of accounting, the requisite mental state for a violation of Colo. RPC 8.4(c) has been demonstrated here. The evidence shows that Respondent knew he was using Allen's retainer for his own purposes before having performed $30,000.00 of legal services. It is not necessary to establish that Respondent knew Colorado law did not authorize him to use the retainer for his own purposes. [27] In accordance with the foregoing analysis and the standards provided in C.R.C.P. 12(c), the PDJ determined as a matter of law that Respondent exercised unauthorized dominion over Allen's retainer in contravention of Colo. RPC 8.4(c). The PDJ also observed that Texas law appears to accord with Colorado law as to how an attorney earns a flat fee. Under Texas law, a non-excessive true retainer that functions to secure a lawyer's services, and remunerate him for loss of the opportunity to accept other employment is earned at the moment it is received, [i]f the lawyer can substantiate that other employment will probably be lost by obligating himself to represent the client. ... [28] But [i]f a fee is not paid to secure the lawyer's availability and to compensate him for lost opportunities, then it is a prepayment for services. [29] In Texas, such a prepayment belongs to the client until the services are rendered and must be held in a trust account. [30] Here, the evidence shows that Allen's retainer was not a true retainer that was earned upon receipt, but rather was an advance payment that Respondent did not earn upon receipt under Texas law.