Flat Fees, Trustees, and the Clear-and-Convincing Burden: West Virginia Clarifies Proof and Fee-Handling in Attorney Discipline

Flat Fees, Trustees, and the Clear-and-Convincing Burden: West Virginia Clarifies Proof and Fee-Handling in Attorney Discipline

Introduction

In Lawyer Disciplinary Board v. Paul J. Harris (Supreme Court of Appeals of West Virginia, March 21, 2025), the Court substantially reshaped the outcome recommended by the Hearing Panel Subcommittee (HPS) in a multi-count disciplinary proceeding. The case arose from three distinct factual clusters:

  • Count 1: Allegations that Harris assisted a client (Emil N.) in diverting marital assets during divorce-related litigation and engaged in conflicted conduct as trustee and declaratory judgment counsel relating to a family trust in which Emil N. and his former spouse (Healy B.-N.) were involved.
  • Count 2: Allegations that Harris charged and mishandled a $50,000 fee from a federal criminal-defense client (Rocky Tingler), including safekeeping violations, unreasonable fee practices, and deceitful conduct.
  • Count 3: Unrelated allegations the HPS recommended dismissing due to the primary complainant’s lack of credibility.

The HPS found twenty-three rule violations (fifteen on Count 1; eight on Count 2) and recommended annulment (disbarment) of Harris’s law license. Harris objected, arguing both evidentiary insufficiency and disproportionality. The Office of Lawyer Disciplinary Counsel (ODC) urged adoption of the HPS report in full.

The Supreme Court’s opinion meaningfully clarifies several points of West Virginia disciplinary law and practice: (1) the clear-and-convincing burden on ODC cannot be met through surrogate testimony or underdeveloped records where key witnesses are absent; (2) disqualification or trustee-removal orders from underlying litigation do not automatically prove Rule violations without the analysis those Rules require; (3) a lawyer acting solely as a trustee is not subject to “representation” duties (e.g., Rules 1.3, 3.2) absent a Rule 5.7 framework; and (4) so-called “flat fees” are treated as advanced fees unless clearly explained in writing—advanced fees must be kept in trust and withdrawn only as earned.

Summary of the Opinion

  • Count 1 (trusts, alleged concealment of marital assets, declaratory judgment conflicts): The Court held ODC failed to prove these Rule violations by clear and convincing evidence, emphasizing the absence of the key witness (Healy B.-N.) and the inadequacy of relying on litigation postures or disqualification orders without substantive Rule-by-Rule analysis. All Count 1 violations were rejected.
  • Count 2 (Tingler fee): The Court affirmed seven of eight violations, finding violations of Rules 1.5(a) (unreasonable fee), 1.5(b) (no written communication of the fee terms), 1.15(a) and (b) (safekeeping/commingling), 1.16(d) (failure to refund unearned advanced fees), 8.4(c) (deceit), and 8.4(d) (prejudicial to the administration of justice). It rejected 8.4(b) because ODC identified no specific criminal act.
  • Count 3: The Court accepted the HPS’s recommended dismissal based on credibility.
  • Sanctions: The Court modified the HPS’s recommendation and imposed: (a) a two-year suspension; (b) restitution to Tingler of $34,995; (c) three years of annual CPA audits of practice accounts upon reinstatement; and (d) costs. Harris must petition for reinstatement and show proof of restitution before reinstatement.

Key Takeaways

  • Clear and convincing evidence means ODC must prove the absence of client consent; it cannot shift the burden to the respondent or rely on an absent key witness.
  • Disqualification orders are not substitutes for a Rule 1.7/1.9/3.7 analysis; the Court requires the specific elements for conflicts and lawyer-as-witness to be addressed.
  • When a lawyer acts solely as a trustee (i.e., not representing a client), duties tied to “representation” (e.g., Rules 1.3, 3.2, 3.4(c)) do not apply unless charged and analyzed under Rule 5.7 (law-related services).
  • In West Virginia, “flat fee” labels do not bypass safekeeping: unless clearly explained in writing as earned on receipt, such fees are treated as advanced fees, must be deposited into trust, and withdrawn only as earned.
  • Rule 8.4(b) requires identification of a specific criminal act; courts will not infer one from fee mishandling alone.

Precedents Cited and How They Shaped the Decision

  • Blair; McCorkle; McGraw; Jordan; Walker: Together, these cases set the review framework—de novo for law and sanction, deference for HPS fact-finding if supported by “reliable, probative, and substantial evidence,” and ODC’s burden to prove formal charges by clear and convincing evidence. They also guide sanctioning under Rule 3.16 and deterrence principles.
  • Smoot: The Court applied Smoot to Rule 2.14’s statute of limitations, holding the “complainant’s” knowledge—here, the lawyer who filed the disciplinary complaint—controls the accrual date, not knowledge of third parties (e.g., litigants).
  • Bluestone Coal and McClanahan: These decisions require granular, element-by-element analysis for Rule 1.9 conflicts (existence of prior/current relationships, substantial relation, material adversity, non-consent). The Court faulted reliance on conclusory disqualification phrasing instead of this analytic framework.
  • Smithson: Disqualification under Rule 3.7 (lawyer as witness) requires consideration of factors like whether evidence is obtainable elsewhere and potential hardship to the client—analysis missing in the disqualification order invoked by ODC.
  • Haught (2014): A Rule 8.4(b) violation requires identification of a crime; absent that, the Court will not sustain a “criminal act” charge.
  • Sanction comparators—Morgan, Haught (2014), Thorn: These guided the baseline one-year suspension where lawyers mishandled advanced fees, placed client funds in operating accounts, did little/no work, or commingled funds. The Court increased to two years here due to aggravators (prior admonitions, express warnings, dishonest motive, lack of remorse).

Legal Reasoning

A. Standards of Proof and Review

The Court reiterated its role as the “final arbiter of legal ethics,” and applied de novo review to law, application, and sanction while giving deference to supported HPS fact findings. Crucially, ODC bears the clear-and-convincing burden to prove each charged violation; it may not shift that burden by arguing that the respondent failed to disprove non-consent or by substituting lawyers’ “surprise” for the testimony of the person whose consent is at issue.

B. Statute of Limitations (Rule 2.14)

The Court held:

  • Count 1 was timely because the “complainant” was attorney McArdle, and her knowledge gained during the December 2016 family court hearing triggered Rule 2.14’s two-year period (complaint filed March 2017). This applies Smoot’s complainant-focused rule.
  • Count 2 was timely because Tingler’s fee grievance accrued when Harris first provided the itemized invoice and purported fee agreement (February 22, 2020) and then refused a refund; the complaint filed June 24, 2021, was within two years.

C. Count 1: Trusts, Alleged Asset Concealment, Declaratory Judgment Conflicts

1) Summit proceeds and alleged “hiding” of marital assets

The HPS found consent-related violations based largely on lawyers’ accounts of surprise; the Supreme Court reversed. Because ODC charged Harris with acting without the wife’s informed consent, ODC had to prove lack of consent by clear and convincing evidence. Without the testimony of the alleged non-consenting spouse (who neither appeared nor testified), and with record evidence including Harris’s contemporaneous email referencing use of her identification and consent to pay fees, the Court held the record did not meet ODC’s burden. The Court also noted:

  • The family court’s equitable distribution (later affirmed on appeal) treated the massive fees paid as marital, recouped them in litigation, and redistributed proceeds—cutting against an inference of concealment.
  • ODC’s reliance on a pattern of outgoing payments from Harris’s operating account to Emil N. (explained as loan repayments and LLC distributions) was underdeveloped; the transactions had been disclosed elsewhere, and ODC did not marshal evidence undermining the proffered explanations.
  • It is not the Court’s role to “sort through an avalanche of evidence” to find support for ODC’s case.

2) Declaratory judgment action: Conflicts and lawyer-as-witness

The Court rejected the HPS’s findings of Rule 1.7, 1.9, and 3.7 violations, noting that both the HPS and ODC leaned on the circuit court’s disqualification order without undertaking the elements those Rules require:

  • Rule 1.9 analysis requires the five-factor Bluestone test; labeling parties “former and/or current” clients and declaring adversity does not suffice, especially where the core issue—whether the wife was actually a client for the trust—was hotly disputed and the key witness (the wife) was absent.
  • Rule 3.7 analysis must consider whether the evidence is available from other sources and whether disqualification would cause substantial hardship to the client; the disqualification order’s conclusory statements did not supply that analysis.

The Court also highlighted statutory trustee authority to seek declaratory relief (W. Va. Code § 55-13-4) and noted ODC failed to grapple with the interplay between trustee powers, Rule-based conflicts, and the lawyer’s status as trustee versus advocate.

3) Trustee performance post-settlement

The Court vacated findings under Rules 1.3, 3.2, and 3.4(c), reasoning those duties presuppose representation of a client. Harris, acting solely as trustee and having been disqualified as counsel, was not functioning as a lawyer for a client. ODC neither alleged nor analyzed Rule 5.7 (law-related services) as the applicable framework. The Court underscored that litigation friction about carrying out a settlement (e.g., tardy royalty distributions) is generally addressed within the litigation and is not automatically disciplinary misconduct.

D. Count 2: The Tingler Fee

1) Advanced fees, flat fees, and trust accounting

The Court declined to adopt a per se rule on “non-refundable” or “flat” fees. Instead, it found that Harris’s conduct—depositing the $50,000 into IOLTA and then depleting it through “telephone transfers” without correlation to earned work—demonstrated treatment of the fee as an advanced payment. Under Rule 1.15(c), advanced fees must be kept in trust and withdrawn only as earned; under Rule 1.5(b), fee terms must be communicated in writing. The Court credited Tingler’s testimony that he was not given (and did not sign) a clear written fee agreement and understood $50,000 as a “start,” not a flat, non-refundable fee.

Accordingly, the Court affirmed violations of:

  • Rule 1.15(a) and (b): commingling and failure to safeguard client funds;
  • Rule 1.16(d): failure to refund unearned advanced fees upon termination;
  • Rule 1.5(b): failure to communicate fee terms in writing;
  • Rule 1.5(a): unreasonable fee—“a flat fee for which little or no work is done is by definition unreasonable.”

The Court also affirmed violations of:

  • Rule 8.4(c): deceit—Harris engineered billing entries and assembled “window dressing” (e.g., pristine regulations, extensive legal research entries) without basic threshold actions (no contact with prior counsel or the U.S. Attorney), and delayed producing an itemization while claiming to await an invoice already paid.
  • Rule 8.4(d): prejudice to the administration of justice—by draining the unearned fee, Harris forced Tingler to seek court-appointed counsel, shifting costs to the public.

The Court rejected a violation of Rule 8.4(b) (criminal act) because ODC identified no specific crime, consistent with Haught.

E. Sanctions

Using Morgan, Haught, and Thorn as comparators (all roughly in the one-year suspension range for fee mishandling and commingling), the Court increased the baseline to a two-year suspension due to multiple aggravators:

  • Two prior admonitions under Rule 1.15 and express prior warnings from the Board about “flat fee” practices;
  • Dishonest/selfish motive (fee-gouging for financial gain);
  • Lack of remorse (including a threat to sue replacement counsel who pursued a refund).

The Court ordered restitution of $34,995 to Tingler and three years of CPA audits upon reinstatement, in addition to costs.

Restitution calculation:

  • Starting retainer: $50,000
  • Less third-party payments: $5,535 (Attorney Williams) + $4,020.43 (investigators) = $9,555.43
  • Subtotal: $40,444.57
  • Less “courtesy” refund already paid: $5,449.57
  • Ordered restitution: $34,995.00

Impact

1) On disciplinary practice and proof

  • ODC must present the key witness whose consent or knowledge is at issue; surrogate testimony (e.g., opposing counsel’s “surprise”) will not carry the clear-and-convincing burden.
  • Disqualification and trustee-removal orders from civil cases neither substitute for, nor establish, specific Rule violations; disciplinary bodies must analyze the Rule elements (Rules 1.7/1.9, 3.7, 5.7) and prove them with reliable, probative evidence.
  • Rule 8.4(b) requires pleading and proof of a specific crime.

2) On West Virginia fee practices

  • Labels do not control. Unless clearly explained in writing as earned on receipt, “flat fees” will be treated as advanced fees: deposit into trust; withdraw only as earned; promptly refund any unearned portion upon termination.
  • Rule 1.5(b) requires written communication of fee scope, basis/rate, and expense responsibility. Vague “fixed fee” letters without explanation of when/how fees are earned (or non-refundability) are noncompliant.
  • Unreasonable fees include extracting large sums with little work and padding files with non-substantive materials. Such conduct risks violations of Rules 1.5(a), 8.4(c), and 8.4(d).

3) On lawyers serving as trustees

  • When acting solely as a trustee (not as a lawyer for a client), Rules that presuppose “representation” (e.g., Rules 1.3, 3.2) are inapposite unless charged and analyzed under Rule 5.7’s law-related services framework.
  • Trustee conduct may still implicate other Rules (e.g., 8.4(c) if deceitful), but the charging theory must match the lawyer’s actual role and capacity.

Complex Concepts Simplified

  • Clear and convincing evidence: More than “more likely than not,” less than “beyond a reasonable doubt.” The fact-finder must have a firm belief in the truth of the allegations.
  • IOLTA (trust account): A pooled, interest-bearing account for client funds. Advanced fees belong to the client until earned and must be held in trust.
  • Advanced fee vs. flat fee vs. general retainer:
    • Advanced fee: Upfront payment for future work; remains client property until earned; must stay in trust; withdraw as work is performed.
    • Flat fee: A fixed-sum price for specified services. Unless clearly explained as earned on receipt, treat as an advanced fee (trust account; draw down as earned).
    • General retainer: Payment to secure a lawyer’s availability; earned when paid; generally not entrusted. It is different from a flat fee for services.
  • Rule 1.9 “substantially related” matters: Prior and current representations involve the same transaction or legal dispute, or there is a substantial risk that confidential information from the prior representation would materially advance the new client’s position.
  • Rule 3.7 (lawyer as witness): A lawyer generally should not be advocate where likely a necessary witness, unless exceptions apply (e.g., hardship on the client); courts analyze if the testimony is necessary and whether it can be obtained elsewhere.
  • Annulment vs. suspension: In West Virginia, “annulment” is the functional equivalent of disbarment (license voided). Suspension is temporary removal of practice rights, often with conditions for reinstatement.

Practical Compliance Checklist for West Virginia Practitioners

  • Put all non-contingent fee terms in a clear writing before or within a reasonable time after starting work (Rule 1.5(b)). Explain whether the fee is advanced, flat, or availability-based; when and how it is earned; and any non-refundability.
  • Deposit advanced fees into IOLTA; withdraw only as earned (Rule 1.15(c)). Avoid “round-number” transfers unconnected to work performed.
  • Maintain accurate, descriptive time and expense records. Avoid generic entries that cannot be substantiated.
  • Promptly return unearned fees and client property upon termination (Rule 1.16(d)).
  • When serving as trustee, assess Rule 5.7 implications; document the role and capacity; obtain separate counsel for the trust where appropriate.
  • Before relying on a disqualification order to justify a conflict decision, perform and document the Rule 1.7/1.9/3.7 analyses (including Bluestone/Smithson factors).

Conclusion

Lawyer Disciplinary Board v. Harris clarifies important boundaries in West Virginia disciplinary law. The Court insistently enforced ODC’s clear-and-convincing burden, refusing to infer lack of consent or Rule violations from underdeveloped records or disqualification orders lacking Rule-by-Rule analysis. When a lawyer acts as a trustee rather than as counsel, the disciplinary theory must fit that non-representational role (Rule 5.7 or otherwise)—representation-based duties do not automatically apply.

On fees, the Court did not adopt a per se ban on flat or non-refundable fees. Instead, it underscored a practical, client-protective rule: unless expressly and clearly explained in writing as earned on receipt, such fees will be treated as advanced fees that belong in trust and must be withdrawn only as earned. Failure to do so—especially when paired with inflated or engineered billing—will trigger violations for unreasonable fees, commingling, deceit, and prejudice to the administration of justice.

The recalibrated sanction—a two-year suspension, restitution, CPA audits, and costs—signals the Court’s heightened concern with fee integrity and the need to deter opportunistic billing conduct, while also drawing a principled distinction between fee mishandling and the per se misappropriation of undisputed client funds warranting disbarment. In the broader legal context, Harris fortifies procedural rigor in disciplinary prosecutions and advances clearer guardrails for fee practices and lawyer-trustee roles in West Virginia.

Case Details

Year: 2025
Court: Supreme Court of West Virginia

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