This month the Oklahoma Bar Association Journal has a legal ethics themed issue. We believe in sharing with others in the profession. So you 
can access the entire issue as a PDF or use the handy index of the Table of Contents to select the articles you wish to read online. https://www.okbar.org/barjournal/august-2023/ Two of the articles cover AI and ChatGPT.
There is also a heartwarming story about one young lady and her life-changing experience of support from a CASA volunteer.
In November 2022, OpenAI released ChatGPT. ChatGPT, along with other artificial intelligence (AI) tools, has dominated the conversation about cutting-edge technology and legal technology tools during 2023. The reactions have ranged from “the most entertaining thing on the internet” to an incredible new tool that will change society in a positive way to a corporate tool that will allow companies to be more efficient and profitable (often by a reduction in workforce) to a potentially dangerous development, that if allowed to expand unchecked without regulatory safeguards, could lead to global instability and, possibly, an extinction event.
ChatGPT is a large language model (LLM) AI. This means its training involved digesting almost everything on the internet, including Wikipedia and many books, as of September 2021. An often-used cliche among programmers is GIGO (garbage in, garbage out), and it cannot be disputed that there was a fair amount of garbage on the internet by 2021. ChatGPT is aware of the current date based on the date and time stamp of your query, and it sometimes refers to events that took place post-September 2021, possibly based on others’ queries. Unanswered questions and apparent inconsistencies such as these are why many IT professionals call ChatGPT a “black box.”
Since the November 2022 introduction, there have been many new products incorporating ChatGPT. It set a record by amassing 100 million monthly active users within two months (for comparison purposes, TikTok required nine months and Instagram more than two years to reach that mark). This reaction was caused by how well the product performed. It is simply stunning. Interacting with a chatbot that chats with you conversationally like another human and has vast amounts of accurate data to use is impressive. The speed and clarity of its responses are amazing.
OF COURSE, THERE ARE LIES AND HALLUCINATIONS
ChatGPT displays many human-like traits. Not only will it answer your questions easily and quickly, but, like a human friend, it may sometimes tell you what you want to hear, and sometimes it may share outright fabrications (called hallucinations). Just like a human, it might slip and share something you didn’t intend to be shared.
ChatGPT’s responses are very confident and persuasive. As Ed Walters, co-founder of Fastcase who also taught “The Law of Robots” at Georgetown University Law Center, says, “The answers are often totally wrong, but highly convincing.”
Some lawyers will learn of that credibility issue and decide never to use ChatGPT or any other AI. That is probably not the correct lesson, as AI tools will be increasingly hard to avoid and will provide many time-saving benefits in the very near future.
There are many positive ways that these tools can be used today, and there will be hundreds more. For example, you are traveling with your
family, and an automobile breakdown strands you for the day in a city you never intended to visit. A quick query on the ChatGPT app on your phone for the top 10 things to do in that city will produce a detailed list with descriptions. It is probably quite accurate. But if not, so what? The point isn’t whether some experienced, objective human travel expert might disagree with some suggestions. The point is receiving a list with useful information you didn’t have in seconds.
I have Google, DuckDuckGo and ChatGPT installed on my phone. I use Google and DuckDuckGo when I want an answer, a location or some other basic information. But if I want an explanation, ChatGPT is the first option for a search.
I also note that OpenAI has provided a fix for the concern of “your friend” sharing information about your queries. There is a setting to prevent your ChatGPT queries from being further used to train the system. Once lawyers start to do research for client matters, they will probably want to enable that setting – not because it’s likely information would be compromised, but just because we don’t understand everything, and it is the safer course of action.
SO WHY HALLUCINATIONS?
The large language model AIs certainly appear to understand your queries and provide logical responses. Professor Kenton Brice, director of the Donald E. Pray Law Library at the OU College of Law, had a helpful analogy at our OBA Solo & Small Firm Conference program on ChatGPT and AI. He said to think of the game Mad Libs.™ The AI does not understand the meaning of its communication with you. To use Professor Brice’s analogy, if the AI is completing the sentence “A cat is ___,” there are many possible word choices to complete the sentence. A cat is a mammal. A cat is black. A cat is a feline. The AI chooses based on its ingestion of hundreds of millions of online pages and the context of the query or discussion. The surprising thing is how often it selects the perfect word or phrase. The remarkable thing is not that it gets things wrong, but that it mostly gets things right. But since it doesn’t understand truth or falsity, it doesn’t apply those values, just probabilities.
Of course, “mostly correct” is not an appropriate standard for lawyers when working for clients. When you use ChatGPT for drafting, consider its output a first draft that needs your careful editing. But legal research tools with appropriate AI tools are being introduced into the market, as discussed below.
A CAUTIONARY TALE OF POTENTIAL MALPRACTICE AND SANCTIONS FROM POOR USE OF CHATGPT
Steven Schwartz, a practicing New York lawyer for 30 years, used ChatGPT to prepare a brief for federal court. Mr. Schwartz found cases with citations that supported his client’s rather unorthodox claim. At least six cases he cited in a brief as filed were hallucinations that did not exist, with fictitious quotes and internal citations. When the brief was filed, the fact that ChatGPT could hallucinate cases (including fabricated quotes from the cases) was well known within the legal technology community, but certainly not all lawyers were aware of this.
Opposing counsel filed a response brief calling out the bogus cases and moving for sanctions. Mr. Schwartz, disregarding that the opposing counsel’s filing presented a huge red flag, went back to ChatGPT to confirm that the cited law was correct. “I apologize for the confusion earlier,” ChatGPT replied. “Upon double-checking, I found the case Varghese v. China Southern Airlines Co. Ltd., 925 F.3d 1339 (11th Cir. 2019), does indeed exist and can be found on legal research databases such as Westlaw and LexisNexis. I apologize for any inconvenience or confusion my earlier responses may have caused.”
The lawyer filed a response reaffirming the opinions represented good law without locating or reading the actual opinions. Apparently, the lawyer’s only legal research tool was Fastcase, with a limited New York law-only package. As we all appreciate, the answer was to find another source for the cases. Instead, he “doubled down” and instantly became an internet meme. At the sanctions hearing, Mr. Schwartz was sworn to testify truthfully and then spent two hours being grilled by the judge. While ChatGPT made the national headlines, Mr. Schwartz could not avoid the simple fact that he cited as authority case law he had not read. It had to have been one of the most unpleasant experiences of his legal career. He noted that he had suffered great personal damage from his error. The court granted an award of sanctions for $5,000. But, no doubt, the two-hour examination was also punishment.
This situation has prompted a few federal judges to issue standing orders requiring counsel to submit affidavits that they either did not use AI in preparation of the brief or, if they did, a human checked the AI’s work. Some have observed that any potential problem is already addressed by Rule 11.[i]
CASETEXT TO COCOUNSEL TO THOMSON REUTERS
Casetext has provided AI-powered legal research for some time. Their basic service is a discounted OBA member benefit. Casetext also worked with OpenAI to incorporate advanced functions of ChatGPT into a new offering.
On March 1, as ABA TECHSHOW was beginning, we learned via social media that a national cable news network hosted the product launch
for Casetext’s new offering, CoCounsel, an AI-powered legal research tool. Free trials were only for a short period. The results were so stunning that many lawyers immediately subscribed at the rate of $500 per user per month, including many lawyers who would have said that they would not have subscribed at that price point. Casetext gained access to ChatGPT in 2022. The result was quite a success.
On June 26, it was announced that Thomson Reuters agreed to purchase Casetext for $650 million cash.[ii] I hope Thomson Reuters will offer a pricing plan affordable to small firm lawyers and not just focus on larger law firm pricing.
ARE AI AND CHATGPT REALLY THAT SIGNIFICANT?
The easy answer here is yes. Smart, serious people have referred to it as being as significant as the discovery of fire, the invention of movable type or the internet itself.[iii]
I’ve done many presentations about the future of law across the country over the years. One of the keys to future law firm success will be to automate as much as possible. Creating automated templates is time-consuming. AI tools will make it less so, and some have reached the market. Did I mention that ChatGPT can also write computer code? That is scary for the programmers of the world. My prediction is the business world will be transformed by generative AI over a few years. And if corporate business practices change, the law businesses will also change.
Next month, I will cover several popular AI tools and provide some tips on using AI appropriately.
[1] See “Judicial Treatment of ChatGPT: Throwing the Baby Out with the Bath?” by lawyer-blogger Stephen Embry.
[ii] See LawSites’ blog post, “The Rumors Were True: Thomson Reuters Acquires Casetext for $650M Cash.”
[iii] Noted legal futurist Richard Susskind shares his thoughts about AI and the legal profession in his LinkedIn post “AI in the law – six thoughts.” He has studied the impact of AI on lawyers for decades, and he deems these developments very significant. Andrew M. Perlman, dean and professor of law at Suffolk University, stated, “ChatGPT suggests an imminent reimagination of how we access and create information, obtain legal and other services, and prepare people for their careers.” In “The Implications of ChatGPT for Legal Services ad Society.”
Originally published in the Oklahoma Bar Journal — August, 2023 — Vol. 94, No. 6
Our Digital Edge podcast Generative AI and Copyright: Collision is Inevitable tracks the fact that copyright lawyers is buzzing with the rising possibilities of AI-related legal matters. Is this a major concern in our current era of blossoming AI technologies? Sharon Nelson and Jim Calloway welcome Vedia Jones-Richardson to get her expert opinion on a variety of legal questions arising from the “creative expressions” of generative AI. This includes a discussion of the current landscape of AI’s copyright connections, explanations on what is and isn’t protected, and discussion of notable cases that have explored the infringement and copyright implications of AI-created materials.
Vedia Jones-Richardson is a Principal with Olive and Olive, PA, where she leads the trademark and copyright practice group. She covers many aspects of the upcoming collisions between AI and IP ahead. There will be very. very interesting times ahead on this front.
Office Sharing Arrangements with Other Lawyers was the subject of American Bar Association Formal Opinion 507, released July 12, 2023.
The opinion “addresses some minimum ethical requirements and suggested practices arising in the office sharing context, particularly in the areas of
confidentiality, conflicts of interest, supervision, and communications concerning a lawyer’s services.” It notes that when lawyers in an office sharing arrangement share support staff, such as receptionists, administrative assistants and paralegals, maintaining confidentiality of client information is “tested.”
But some practical advice is omitted. The opinion notes that lawyers in an office sharing arrangement should use separate business cards, letterhead, directory listings, office signs, and advertisements describing their distinct practices. But it fails to mention one important safeguard. In my view, every lawyer in such an arrangement should be contractually obligated to the other lawyers to have a written contract with every client and to include disclosure about the office sharing arrangement and that only the lawyer signing the contract is responsible to the client. Perhaps the client even initials that provision.
Learn to use the term “officemate” rather than partner or associate when discussing the other lawyers.
The opinion notes it is natural for lawyers in office sharing arrangements to informally consult one another about their respective client matters and it gives guidance in that area.
“It is desirable for lawyers sharing office space to have separate telephone lines, but a receptionist may answer a common telephone line with a generic salutation such as ‘Law Offices’ to avoid implying that the lawyers are practicing together in the same firm,” according to the opinion.
I think it is important for lawyers to have different phone numbers, more because of the practical considerations than the ethical ones. If there is a need to terminate the sharing arrangement, the dispute over who gets the jointly-purchased phone number can be a huge issue. It also prevents one lawyer paying for marketing efforts that inadvertently benefit the other lawyers. Separate websites are often the best policy for the same reason.
The problems with lawyers representing clients with adverse interests are numerous, especially if the office has only one waiting room. It may make sense to consider not taking clients when another attorney in the office represents the opposing party. That policy should be in writing. But there will be challenges. At some point, Lawyer A will sign up a new divorce client on Monday and Lawyer B will be prohibited from agreeing to represent the opposing party on Tuesday, even if that potential client is the lawyer’s best friend from high school. In fact, Lawyer B should not even meet with the client on Tuesday. So, some process to track these possible conflicts must exist even though it is office sharing and not a law firm.
If you are in an office sharing arrangement, read this opinion and share it with your officemates.
Suppose next week begins with one of your top paralegals or legal secretaries giving you two weeks’ notice. Maybe they are moving to another location or another local law firm. But now you have an opening to fill.
The first response is not about filling the position. First, you must determine if there are any matters the employee is working on that they no longer should. You must also determine whether some network access rights should be changed.
FIRST THINGS FIRST
If you have been informed the employee is going to work for another law firm, then it is prudent to check and see what matters you have in which that firm is opposing counsel. Hopefully there are not any – or there are only a few old, closed cases. If a departing employee is going to a firm with which you have several contested matters currently underway, it is prudent to have your IT professional restrict that employee’s access to those files and to reassign someone else to do that work, even if it is the lawyer. Some firms take two weeks’ notice as an event which it is simpler to let the employee go immediately and just pay the two weeks’ severance. I am not suggesting that approach. I just know it happens. If you want to retain the employee and your staff rotates who performs receptionist duties, it may make sense to have the employee do more receptionist tasks, which typically involve less sensitive information.
To avoid adding to or causing any negativity, share with the departing staff person that this is the process the firm has adopted, and it is not intended to reflect poorly on them. Rather, it is intended to protect both law firms.
REPLACING DEPARTING EMPLOYEES
You have, no doubt, heard the business maxim, “Fire fast. Hire slow.” No one likes losing a good and trusted employee, but shortcutting the replacement process may ultimately result in having to do it far too often.
That means you must do your homework. Even if you may find it more challenging to hire a replacement in these times, you still must invest the time to hopefully find a great fit for the firm who will stay there for a long time.
So I still support the traditional practice of requiring a cover letter and resume. If they do not have a resume, you may allow them to submit an employment history. Then look for any mistakes.
It might seem harsh to disqualify a recent law school graduate applicant for a typo on their resume or cover letter, but we are discussing staff hiring. Typos, poorly written sentences and other mistakes are significant for those whose job duties would include proofreading and preparing documents and correspondence.
CHECK THE REFERENCES
It is easy to be cynical about references, assuming someone will only provide the names of people who view them positively. But they must list their employment history. If none of their references are from their most recent employment, you will want to make a note to ask about that omission if you schedule an in-person interview. Asking which lawyers they primarily worked with at that firm and what they did for them is a good start.
It is very important to check references, even in this tighter job market. Imagine the worst possible disaster scenario someone new could create. Maybe it is a social media mess, stolen client information, stolen money or maybe an event that makes the local or national news.
Document the date and time you checked their references or previous employer, even if the specifics should not be shared (except perhaps with law enforcement when criminal activity is suspected).
One challenge in checking references or prior employment is that many employers, including law firms, no longer provide much information because of liability concerns. Sometimes all you will receive is employment verification with the start date and end date. Others have suggested you might obtain more information by asking if that former employee would be eligible to be rehired at the firm. A simple “No” response gives you valuable information.
CRIMINAL BACKGROUND CHECKS
Today it is prudent to run a criminal background check for every new hire. There will be some exceptions, but the background check is relatively inexpensive and can be done online.
You can also exercise your own judgement with the results and explain to the potential employee that not every mistake is disqualifying. For example, a DUI arrest reduced to reckless driving 10 years ago may not be a problem. But if the person is still on probation for their third DUI and the job involves driving to courthouses to file documents, the past at least merits further discussion, if not moving on to another candidate. Prior theft or embezzlement charges are most likely disqualifying.
Historically, some law firms do not contact law enforcement when they discover embezzlement, whether it is from embarrassment at being a victim, the time involved in dealing with law enforcement or preconceptions about whether charges would be filed. This is another reason why it is important to check references and pay attention to significant employment gaps in their resume.
State background checks can be done at CHIRP, the Criminal History Information Request Portal.
The website states:
In addition to a subject’s first and last name, requests for criminal history record information must include a date of birth. CHIRP will search three (3) years before and after the date of birth for possible matches. Additional identifiers such as aliases (maiden names, previous married names, nicknames) and social security numbers, if known, can be provided for a more thorough search of the OSBI Computerized Criminal History (CCH) Database.
It might be advisable to create a form for potential employees to sign providing all that information, including prior names. I would also encourage you to observe the candidate when you tell them a criminal background check will be required. One grimace may be worth a thousand words. If they say, “I know what you will find. Let me explain,” then let them do so, and give them some credit for their candor. They might confess something in another state that might not be picked up by the Oklahoma background check. But it is also likely they have a reasonable, non-disqualifying explanation.
EMBEZZLEMENT RISK
Depending on the type of law practice, temptations can be presented to employees. Suppose an employee who normally doesn’t handle money is the only staffer remaining at the end of a long day. A client shows up just before closing with a $300 cash payment. The staffer takes the payment and, because it is the end of the day, does not write the client a cash receipt. The bank deposit has gone for the day, so the employee puts the cash in an envelope and puts it in their desk drawer to be turned over the next day. But they do not know how to enter the payment into the client’s ledger. Then maybe absences or the weekend remove it from the top of the employee’s mind. Three weeks later the employee notices a crumpled envelope in the back of the desk drawer. Even the honest employee will recognize that if someone was going to say something they would have done so by now. They may also note that when they turn the cash in, they may be criticized for not writing a receipt or hanging onto the money too long. Add in other complicating factors like the utility cutoff notice they just received.
This is how many of the six-figure law firm embezzlement by employee cases begin. Once it is seen how an embezzlement could work, they could begin looking for other avenues that are open. An Oklahoma lawyer/CPA told me a story where five employees of a firm had American Express business accounts. The bookkeeper soon figured out that she could pay her personal American Express bill with a law firm check and no one would be the wiser. Soon her AmEx account had a large positive balance, and the bookkeeper began traveling for pleasure more.
Good processes can limit the opportunities for financial mischief. Someone other than the bookkeeper doing the books should review the bank statement or online bank records monthly. All cash payments received must result in a receipt given to the client with carbonless copies made.
For an example of a worst-case scenario, we have the case of Blanca P. Greenstein. The West Palm Beach lawyer did not bother with a background check because her then-husband, who was also the law firm’s CFO, recommended the employee, having worked with her at another firm. Had a background check been run, the firm would have discovered this person was a felon, having been previously convicted of theft. As the headlines later noted, “A Swindle Cost a South Florida Attorney Her Law License, Marriage and $155,000.”
Even though the lawyer borrowed money to replenish all missing funds within 48 hours and no one accused her of a wrong, intentional act, she ended up with an agreed three-year suspension from the practice of law, along with paying $8,261 in costs.
That she was an innocent victim was likely a mitigating factor. But the fact that the bookkeeper wrote personal checks to herself totaling $155,000 over an 18-month period was likely an aggravating factor, as even a cursory examination of trust accounting records would have revealed the scheme.
The law practice management advice is the trust account contains funds from clients and others. The lawyer with the trust account has complete responsibility. A lawyer can delegate certain duties, but you cannot abandon oversight of your trust accounting responsibilities. Many large law firms have their employees who handle money bonded, a process that would also catch felony convictions.
CONCLUSION
One of Greenstein’s friends said Greenstein’s story should serve as a lesson to all attorneys that the bar has an “acute sensitivity” when it comes to trust accounting. Given that the lawyer receives the money in trust to keep it safe, that “sensitivity” is understandable.
But this is not the only lawyer discipline story that started with an inadequate hiring process, which is why I want to stress that good processes are essential for law firm staff hiring.
Originally published in the Oklahoma Bar Journal — May, 2023 — Vol. 94, No. 5
As we enter the Artificial Intelligence Age, there is a lot to think about in many aspects of law and society. I encourage you to read Brian X. Chen’s piece in the New York Times Don’t Use A.I. to Cheat in School. It’s Better for Studying. (Gift article link.) The power of the emerging AI 
tools cannot be denied.
I encourage lawyers to read this piece not because of cheating concerns. I have “missing the point” concerns. When I see people post about a new AI tools impacting legal, for example like an AI tool that reviews contracts and creates a memo summarizing the primary provisions, there is always an immediate reaction like “you will lose your law license or get sued if you use that tool.” We had a few well-publicized blunders by lawyers not understanding the limits of ChatGPT. Sadly, we will probably see a few more. But don’t assume it will make errors in document summaries. That is a relatively routine AI function. If you are unsure of the completeness or accuracy of a summary, then you review that section of the document, which is how summaries have always been used.
You may not feel ready for AI. But as a lawyer you are a life-long learner. This article outlines using AI to learn. I was peripherally involved in a few major trial war rooms decades ago. The excitement of the upcoming trial was tempered with terror as last minute items sometimes cropped up. There were boxes of exhibits, depositions and those ever-important deposition summaries. Today depositions come with key word indexes, which save time. But why would it be wrong or even a negative to have your AI quickly prepare summaries of all depositions? Maybe you instruct it to compare the summaries to your “theory of the case” document and make suggestions for adding deposition snips to it. Back in the day we had interns or new lawyers do many deposition summaries. There were likely inconsequential errors. Experienced lawyers caught them.
Think of using AI to structure and make more accessible your law firm’s information about lots of substantive areas while maintaining client confidentiality. The tool you want may not exist at the moment or it may be hard to locate. But it is coming—soon.
I must confess that, although the Attorney at Work website is one of my top resources, some posts there by Analog Attorney. Call it “digital bias” if you will. But sometimes the pieces seem to strain to do something the traditional way, even when digital methods are preferable.
That is noted because I want to encourage you to read “Run Your Practice More Mindfully on a Legal Pad” from Attorney at Work. It is 
informative and even entertaining to those of us who have spent a large part of our lives writing on legal pads. I know when I had to go to the office supply store to buy legal pads, my favorite brands were “Sale” and “Reduced.” 🙂 But the writer’s collection of the six best legal pads for your firm demonstrates an impressive range of styles, including a wide landscape style pad. If you are often cramming handwritten notes into the margins, this may be the tool for you. But I’m not sure how the Analog Attorney will file those extra wide pages in the paper client file without having to turn it sideways to read the pages.
For attorneys using digital client files, remember that it is fine to take notes on legal pads. Just don’t forget to scan them into the digital client file.
Attorneys need to know about ChatGPT and other AI tools because your clients will use them and at some point there will be a legal issue. So it’s important to understand the basics.
Some lawyers tell me they have never heard of ChatGPT, an artificial intelligence tool from OpenAI, released late last year. I read dozens of posts and articles
about ChatGPT every day. Lawyers sometimes tell me they fear ChatGPT misinformation and will never, ever use it. But I believe that many will use AI-powered tools in the near future.
Many lawyers only know the story of the New York City lawyer who is facing sanctions because he used ChatGPT to create a brief and didn’t realize many of the cases he cited were fictitious. Even when opposing counsel noted the cases were fictitious in a sanctions motion, he doubled down by having ChatGPT provide quotes from the fictitious cases. He had a Fastcase account that could have easily helped him determine he was citing fictitious opinions. In the sanctions hearing last week, the lawyer said he was “both embarrassed, humiliated and extremely remorseful” and said his reputation had suffered. But the lesson is not “Do not use ChatGPT.” The lesson is actually very traditional. Don’t cite cases in a brief you have not read. It is particularly dangerous when you are relying heavily on those cases. It is probably best not to use ChatGPT for legal research, but if you do, treat any result with great skepticism, even more than you would with a new law student or paralegal you have just hired, because those employees won’t make things up.
AI-powered legal research and other AI tools will be a game changer—if the tools fit within your budget. Thomson Reuters announced generative AI was coming to Westlaw Precision but then, after CaseText released CoCounsel in March 2023, decided to purchase CaseText for $650 million cash. It is also worth noting Thomson Reuters’ investment of $10.9 million in Spellbook, an assistive AI tool that helps lawyers create documents in May 2023. LexisNexis is promoting Lexis+AI™. Given the legal information these companies have, they will likely resolve the fake cases issue.
But many great uses for AI are extremely low risk—from summarizing a long document you have provided it, to planning vacation travel. If you are submitting a document with confidential client information or legal strategy, you will need to understand how the OpenAI privacy tools operate, so you don’t share the submitted information with others.investment in
For a great “nonhysterical” guide to ChatGPT, I direct your attention to New Possibilities With ChatGPT: Two Professors Weigh In On AI And Legal Education from the North Carolina Bar Association. These professors do quite well explaining how ChatGPT works and outlining its inherent positives and negatives. When a client asks you a ChatGPT related question, you will be glad to have read this.
Originally posted in OBA Courts and More. Some content updated.
Prepaid legal fees and refundability of those fees was the subject of American Bar Association Formal Opinion 505. Yesterday I did a blog post about that and noted it tracked the opinion of the Oklahoma Supreme Court released in Oklahoma Bar Association v Weigel, 2014 OK 4 (2014).
This is probably a good time to note that this post contains only my personal opinions and represents no policy or view of my employer.
I note the writers of Opinion 505 had to struggle with acknowledging the tension between a somewhat archaic advance form of attorney fee payment known as the general retainer or availability retainer and the thrust of the opinion that unearned fees must be held in the trust account.
This is because there is precedent noting that availability retainers, a fee where the trust account deposit requirement is waved because the fee is earned in its entirety just based on the lawyer’s promise to be available to the client for the stated time, usually a month. The opinion notes that these types of fee arrangements have largely disappeared and are quite rare. This is largely because, as the opinion notes, “the fact that very few clients would actually need or benefit from one…” (page 3)
So why are they even discussed when they are rarely used and are objectively a bad arrangement for most clients? As a review of the case law demonstrates, lawyers charged with a legal ethics violation based on not placing client advances in their trust account will, with some quick research, determine these general or availability retainers are an exception to the general rule. So, it is easy for them to argue the retainer fee in their case must be one of the type that is allowed. It is generally not a winning argument. As noted in the opinion, these rare arrangements are often a poor arrangement for individual consumers and significant disclosure would be required to effectuate one. Sliding the word “nonrefundable” before retainer in the attorney-client agreement, as the opinion (and the Oklahoma Supreme Court) states, would not serve to create an availability retainer.
While I hesitate to quibble with legal scholars and some case law, let me also suggest that perhaps the historical use of availability retainers wasn’t really about availability as much as they were about conflicts of interest. Availability was the reasoning that could be used to approve a practice that at the time was much more common. The practice pre-dated many of the modern ethics rules and some aspects of lawyer regulation.
Suppose Big Bank has one law firm in their region that they used, and the bankers were very pleased with the firm’s competency and service level. They would not want this law firm either advising their competition or being on the opposite side of litigation from them. So, the simple solution was to keep the law firm on retainer. Availability was included, but it was perhaps not the primary motivation. No one at the time would have immediately noted any ethics issue because it was a sophisticated banking client making an arrangement with a sophisticated law firm and it was easy to see how the client benefitted, even in the months where they had little or no contact with “their” law firm. To me that seems more logical than paying the client a large retainer monthly just so someone will answer the client’s phone call at 3:00 a.m.
Now let’s move on to another area where arguably the logic of the availability retainer should apply – subscription legal services. Opinion 505 didn’t mention subscription legal services, likely because they are a relatively new innovation that is not in wide usage. But I am aware of law firms with a subscription offering, where clients can log in for resources to download, get answers to basic questions, how to’s and other resources.
So, assuming the subscription is monthly, can the law firm put all their subscription legal services revenue in their operating account on the first of the month or must it be held in the trust account until the end of the month? Assuming the law firm has made the arrangement very clear to the client and the method of unsubscribing is clear and easy, I predict it would be deemed earned on the first. First, unlike the term retainer, which was criticized in Opinion 505 and not all lawyers agree on its meaning, the term subscription is well understood by the general public. If you don’t want to pay for your subscription next month, simply cancel it this month. There is also the aspect that these services are usually targeted to assist people of modest means and have modest subscription fees. I looked at one such service based in Colorado that charged $24.95 per month and had a 30-day money back guarantee (presumably for the first month). That looks much different than the non-refundable retainer scenario where a lawyer who received a retainer that was prepayment for ten or more billable hours could retain the entire retainer even if the lawyer’s services were terminated after only working two hours on a matter.
It is hard to say when or if there will be a formal ethics opinion by any bar association or judicial body relating to subscription services. But these services may be one aspect of improving access to justice for many citizens, so I wanted to discuss them.
Prepaid legal fees and refundability of those fees was the subject of American Bar Association Formal Opinion 505. The recently released opinion states that under the Model Rules of Professional Conduct, a fee paid to a lawyer in advance for services to be rendered in the future must be placed in a client trust account and may be withdrawn only as earned by the performance of the contemplated services. This includes flat and fixed fees.
This opinion should not surprise Oklahoma lawyers as it tracks the opinion of the Oklahoma Supreme Court released in Oklahoma Bar Association v Weigel, 2014 OK 4 (2014) which provided clear guidance to Oklahoma lawyers. While sometimes bar ethics advisory opinions use conditional or cautious language, the tone of this opinion was quite blunt.
“The Model Rules of Professional Conduct do not allow a lawyer to sidestep the ethical 
obligation to safeguard client funds with an act of legerdemain: characterizing an advance as ‘nonrefundable’ and/or ‘earned upon receipt.’ This approach does not withstand even superficial scrutiny. A lawyer may not charge an unreasonable fee. (Citations omitted.) Therefore, under the Model Rules, an advance fee paid by a client to a lawyer for legal services to be provided in the future cannot be nonrefundable. Any unearned portion must be returned to the client. Labeling a fee paid in advance for work to be done in the future as ‘earned upon receipt’ or ‘nonrefundable’ does not make it so.”
The opinion indicated that even the term “retainer” might be confusing to consumers and advance or deposit might be preferable.
