Flat Fees Are Not Earned Upon Receipt in Nevada: Trust-Account Treatment and Termination Duties for Limited-Scope Engagements

Introduction

In In re: Discipline of Hardeep Sull (141 Nev., Advance Opinion 43, Aug. 28, 2025) (en banc), the Nevada Supreme Court reversed a disciplinary hearing panel and issued a public reprimand to attorney Hardeep Sull. The decision sets a clear, statewide rule governing how advance flat fees must be handled under the Nevada Rules of Professional Conduct (RPC), and clarifies duties triggered when a limited-scope representation is terminated by the client. At stake were two core questions:

Whether a flat fee paid in advance can be treated as “earned upon receipt,” thus bypassing the client trust account; and
Whether and when an attorney must account for and refund unearned fees after the client terminates a discrete, limited representation while other matters remain open.

The State Bar of Nevada (appellant) challenged the hearing panel’s dismissal of charges that Sull violated RPC 1.15 (safekeeping property) and RPC 1.16(d) (duties upon termination). Amicus curiae Nevada Attorneys for Criminal Justice weighed in, reflecting the widespread reliance on flat fees in criminal and immigration practices. The Court’s en banc ruling withdraws a prior panel opinion and now serves as binding authority.

Summary of the Judgment

The Court held that advance fees—including flat or fixed fees paid before legal work is performed—are client funds that must be deposited in a client trust account and may be withdrawn only as fees are earned or expenses incurred under RPC 1.15(a), (c).
Labeling a fee as a “flat” or “fixed” fee does not make it “earned upon receipt.” An attorney must actually perform work—and the fee agreement should explain how and when the fee becomes earned (e.g., on an hourly draw-down or by milestones).
The client terminated Sull’s representation in the discrete E-2 visa matter, triggering RPC 1.16(d): duty to provide an accounting and refund any unearned fees. The fact that Sull remained counsel in unrelated matters did not alter termination as to the visa engagement.
Sanction: Although the baseline sanction for a knowing violation of termination duties is suspension (ABA Standards 7.2), a public reprimand was imposed due to substantial mitigation (no prior discipline, no dishonest motive, personal/emotional issues, cooperation, and good character) outweighing one aggravator (substantial experience). Sull must pay costs, including $1,500 under SCR 120, upon invoicing.

Analysis

1) Precedents and Authorities Cited

The Court’s framework draws on Nevada’s RPC text and multiple authorities, with particular weight on plain-language read of RPC 1.15 and ABA Formal Opinion 505:

RPC 1.15(a), (c) and SCR 78(1)(a): Require attorneys to deposit “all funds received or held for the benefit of clients” into a trust account and permit withdrawals only as fees are earned or expenses incurred. The Court interprets “all funds” to include advance flat fees.
ABA Formal Opinion 505 (2023): Flat or fixed fees paid before work is performed are “advances”; calling them “flat” or “fixed” does not make them “earned when paid.” Such funds must be placed in a compliant trust account and disbursed only as earned. The Court expressly aligns Nevada practice with this view.
In re Sather, 3 P.3d 403 (Colo. 2000): Fees are earned by conferring a benefit or performing a legal service—not by labeling. Supports the earned-as-work-is-performed principle.
In re Seare, 493 B.R. 158 (Bankr. D. Nev. 2013), aff’d, 515 B.R. 599 (B.A.P. 9th Cir. 2014): Clients must know what they are paying for; a flat fee label does not obviate the duty to define scope and value of work.
Iowa Bd. of Prof. Ethics v. Apland, 577 N.W.2d 50 (Iowa 1998): Advises spelling out when the lawyer may withdraw portions of the fee and when accountings will be provided—adopted as best practice guidance.
In re Discipline of Bowen, 500 P.3d 788 (Utah 2021): Flat fee agreements should explain when they are earned and why they are reasonable. Supports the Court’s call for specificity and reasonableness (RPC 1.5).
In re Mance, 980 A.2d 1196 (D.C. 2009): Cited via ABA 505 to warn against “extreme front-loading” of milestones as potentially unreasonable. Also noted in the dissent for its informed-consent alternative.
In re Watt, 717 N.E.2d 246 (Mass. 1999): Defines client “deprivation” where misuse of funds exposes risk or denies timely access.
Nevada authorities on review standard and sanctions: In re Discipline of Colin, 135 Nev. 325 (2019) (deferential factual review, de novo legal conclusions); In re Discipline of Lerner, 124 Nev. 1232 (2008) (four-factor sanction analysis); In re Discipline of Schaefer, 117 Nev. 496 (2001) (de novo sanction); In re Discipline of Arabia, 137 Nev. 568 (2021) (purpose of discipline); In re Discipline of Drakulich, 111 Nev. 1556 (1995) (clear-and-convincing burden); ABA Standards 7.2 (baseline suspension for knowing violation causing injury or risk).

2) The Court’s Legal Reasoning

a) Trust-Account Treatment of Advance Flat Fees (RPC 1.15)

The Court reads RPC 1.15’s text as categorical: all client funds include fees paid in advance; such funds must go to trust and may be withdrawn only as earned. The Court squarely rejects the premise that a flat fee can be “earned upon receipt” simply by agreement or by label. Earning requires performance—either:

By hourly drawdown from trust (the “security retainer” model), or
By predefined tasks or milestones that, once completed, allow a proportionate transfer from trust to operating.

This approach is functionally consistent with ABA Formal Op. 505 and scholarship warning that fee labels cannot override fiduciary obligations. Reasonableness constraints (RPC 1.5) guard against “front-loading” milestones that effectively gut the client’s refund rights.

Applying these rules, the fee agreement here described a $15,000 flat fee paid in advance “for legal services to be rendered,” with bills to explain application of fees to work performed. That language made it an advance for future services—client property that must be held in trust. Sull deposited into her operating account without earning the fee and withdrew funds unrelated to the matter. That violated RPC 1.15.

b) Termination and Refund Duties in Limited-Scope Engagements (RPC 1.16(d))

RPC 1.16(d) requires that upon termination, an attorney must surrender papers and property, provide an accounting, and refund any unearned fees. The Court emphasizes that limited-scope representations are discrete. Here, although Sull had multiple matters for the same client, the E-2 visa case had its own fee agreement. When the client decided not to proceed, that separate engagement terminated—even though Sull remained counsel in another matter.

The Court finds clear and convincing evidence that the E-2 visa matter ended before the principal task (filing the application) was completed, and that Sull failed for months to provide an accounting and refund. That violated RPC 1.16(d).

c) Sanction Analysis

The Court applies Nevada’s four-factor framework (duty, mental state, injury, aggravation/mitigation). It finds actual or potential injury because the client was deprived of access to unearned funds for over a year. Sull’s mishandling of trust funds was negligent, but the termination-duty violation was knowing, which sets a baseline of suspension (ABA Standard 7.2). Nonetheless, significant mitigation (no prior discipline; no dishonest motive; personal or emotional problems; cooperation; good character) outweighs a single aggravator (experience), justifying a downward departure to a public reprimand plus costs.

3) The Dissent and the Majority-Minority Split

Justice Stiglich dissents, warning that the majority stakes out a position at odds with “most jurisdictions” that permit flat fees to be treated as earned upon receipt if the client gives informed consent in a clear written agreement. The dissent canvasses doctrine distinguishing:

Classic/engagement retainers (earned on receipt for availability),
Security retainers (held in trust; earned as work is done), and
Advance payment retainers (lump-sum prepayment for services that some jurisdictions deem earned upon receipt with sufficient disclosure and consent).

Citing decisions from Illinois, Indiana, Michigan, Oregon, Maryland, North Dakota, Tennessee, and the Restatement (Third) of the Law Governing Lawyers §38 cmt. g, the dissent advocates a more flexible approach: allow “earned upon receipt” flat fees if the client fully understands and consents, subject to reasonableness and non-refundability limits. It urges guidance, not prohibition, contending that Nevada’s new rule will unsettle settled practices and reduce client-attorney flexibility—particularly in flat-fee-heavy fields like criminal defense.

Impact

Transformative Effect on Nevada Fee Practices

Advance flat fees must now be treated as client property until earned. Nevada lawyers can no longer rely on “earned upon receipt” clauses to immediately move flat fees into operating accounts.
Fee agreements need specificity. Agreements should:
- Define the exact scope and objectives of representation (RPC 1.2(c));
- Explain how the advance flat fee will be earned—either by hourly drawdowns or by clear, reasonable, proportional milestones;
- State when transfers from trust to operating will occur; and
- Commit to regular accountings and prompt refunds if the engagement ends early.
Limited-scope matters are separable. Termination of one discrete matter triggers RPC 1.16(d) even if other matters remain active. Lawyers should open separate ledgers for each matter and treat termination duties on a matter-by-matter basis.
“Front-loading” risk. Milestone schedules that allocate most of the fee to early steps may violate RPC 1.5’s reasonableness standard. Milestones should reflect genuine value delivered and risk assumed.
Criminal and immigration practices. These fields often rely on flat fees. The Court’s suggested criminal-case milestones (e.g., after preliminary hearing, first day of trial prep, after sentencing/dismissal) indicate acceptable structures if reasonably proportional.
Compliance and audit posture. Expect increased scrutiny of trust accounting and fee agreements in bar audits and grievance investigations. Maintain contemporaneous records showing when and why funds were transferred from trust.
Cross-jurisdictional caution. Out-of-state models allowing “earned on receipt” flat fees cannot be imported into Nevada engagements. Nevada law governs Nevada matters and Nevada trust accounts (see SCR 78; RPC 8.5 may also be relevant in multijurisdictional practice).
Classic/engagement retainers. The dissent emphasizes these remain permissible if truly for availability. The majority did not disapprove classic retainers; it addressed advance payments for future work. Lawyers must not mischaracterize a payment for services as a classic retainer.

Practical Compliance Blueprint for Nevada Lawyers

Open and maintain a compliant client trust (IOLTA) account; keep matter-specific ledgers.
For flat fees paid in advance:
- Deposit the entire amount into trust upon receipt.
- Use either (i) hourly drawdown with billing or (ii) milestone-based earning with documented completion.
- Provide periodic accountings showing work done, milestones reached, and trust-to-operating transfers.
Draft fee agreements that:
- Define scope and limits (limited-scope language where applicable);
- Identify milestones and proportional fee allocations; avoid unreasonable front-loading;
- State when and how accountings will be delivered;
- Explain refund rights upon early termination consistent with RPC 1.16(d).
On termination of any discrete matter: promptly provide an accounting, surrender papers/property, and refund unearned amounts.

Complex Concepts Simplified

Client trust account vs. operating account: Trust holds client property (e.g., advances) until earned; operating holds the lawyer’s funds/earned fees. Moving money early from trust to operating is permitted only when fees are earned or expenses incurred.
Flat fee: A fixed price for a defined service. In Nevada after Sull, if paid in advance, it is client property in trust until earned by work performed or milestones met.
Classic (engagement) retainer: Payment to secure a lawyer’s availability over time; generally earned on receipt if truly for availability—not a prepayment for services. Mislabeling risks discipline.
Security retainer: Advance deposit to be drawn down hourly as work is performed—always held in trust.
Advance payment retainer: Lump-sum payment for future services; many jurisdictions allow “earned upon receipt” with informed consent, but Nevada now requires trust-account treatment until earned.
Limited-scope representation: A discrete task or phase with its own fee agreement and objectives. Termination of one limited matter triggers RPC 1.16(d), separate from other ongoing matters.
Clear and convincing evidence: A high standard of proof in discipline cases, requiring evidence that is highly and substantially more probable to be true than not.
“Front-loading”: Allocating most of a flat fee to early tasks regardless of value delivered; may render the fee unreasonable under RPC 1.5.

Unresolved Questions and Future Litigation

Contours of classic retainers: While not at issue, future cases may test the line between true availability retainers (earned on receipt) and disguised advance payments for services (must be in trust).
Sufficiency of milestone structures: What allocations and timing are “reasonable” will be fact-specific; guidance will emerge as disciplinary and fee-dispute decisions accumulate.
Informed consent workarounds: The dissent favors permitting “earned on receipt” flat fees with informed consent; the majority rejects that approach for Nevada advance payments. Expect challenges attempting to harmonize client consent with the majority’s categorical rule.
Cross-border engagements: How Nevada’s rule interacts with clients and lawyers from jurisdictions that allow “earned on receipt” flat fees may require conflict-of-laws analysis under RPC 8.5 and related provisions.

Conclusion

The Nevada Supreme Court’s en banc decision in In re Discipline of Sull establishes a bright-line, client-protective rule: advance flat fees are client funds that must reside in trust until earned by work performed or by clearly defined, reasonable milestones. Attorneys cannot convert future-service payments into their own property “upon receipt” by contract label alone. The Court also clarifies that limited-scope representations are discrete: termination of a specific matter triggers immediate duties to account, surrender client property, and refund any unearned portion.

While the dissent underscores that many jurisdictions permit “earned upon receipt” flat fees with informed consent, Nevada now aligns with ABA Formal Opinion 505 and a minority view emphasizing fiduciary safeguards and transparency in fee earning. The practical message is clear: revise flat-fee agreements, tighten trust accounting, define earning events, and respond promptly upon termination. The reprimand imposed—tempered by strong mitigation—signals both the seriousness of mishandling advances and the Court’s intent to guide the bar toward compliant, client-centered billing practices.