Referendum 2011: By the Ballot - An Improvement to the Current Rules

Referendum 2011 started on Tuesday, January 18. Please take the time to understand the proposed disciplinary rules. This post explains by ballot item how the proposed rules improve the current rules. To read the proposed rules, please click here [PDF]. Again, please take the time to study the issues before you vote.

 

Ballot Question A.Terminology, Competent and Diligent Representation, Scope of Representation and Allocation of Authority, Communication, Fees, Confidentiality, Safekeeping Property, and Declining or Terminating Representation:

Do you favor the adoption of Proposed Rules 1.00–1.05 and 1.15–1.16 of the Texas Disciplinary Rules of Professional Conduct, as published in the December 2010 issue of the Texas Bar Journal?

  • Proposed Rule 1.00, which replaces the current Terminology section, adds terms that reflect the modern-day practice of law (for example, see "affiliated," "confirmed in writing," and "writing") and that should help Texas lawyers understand when they may be violating a Rule (for example, see "personally prohibited" and "represents").
  • These and other proposed Rules require a client's "informed consent" to otherwise prohibited activity.  Other proposed Rules, such as the conflicts-of-interest rules, require further that the "informed consent" be "confirmed in writing"; oral consent would no longer suffice. But a lawyer could generally comply with this new requirement by sending a written confirmation (such as an e-mail) of the client's oral informed consent.
  • Proposed Rules 1.03, 1.04, and 1.15 require lawyers to communicate more with their clients. These requirements respond to the large number of grievances that are filed based on lawyers' alleged failure to communicate sufficiently with clients.
  • Proposed Rule 1.05 simplifies the definition of "confidential information" by removing the burdensome distinction between "privileged information" and "unprivileged client information." The definition remains broad to protect clients, but the Rule would no longer subject a lawyer to discipline for using or disclosing information that is generally known or readily obtainable from sources generally available to the public. The revised Rule would also allow a lawyer to use or disclose confidential information when seeking legal advice about the lawyer's compliance with the Rules.
  • Proposed Rule 1.15 distinguishes between a lawyer's obligations to a client and to a third person when safekeeping property. The proposed Rule was revised substantially in response to concerns that were raised in the public comment period and now makes clear that the lawyer's duty to third persons generally arises only when the lawyer "knows" that property belongs to third persons. The proposed Rule also adds a defense for lawyers dealing with claims to the property that the lawyer reasonably believes are not valid, and it contains more explicit guidance about client trust accounts.
  • A list of defined terms in each proposed Rule appears before the comments to each Rule.


Ballot Question B. Conflicts of Interest: Multiple Clients in the Same Matter:

Do you favor the adoption of Proposed Rule 1.07 of the Texas Disciplinary Rules of Professional Conduct, as published in the December 2010 issue of the Texas Bar Journal?

  • Texas would follow the ABA’s lead in abolishing current Rule 1.07, which addresses a lawyer’s often misunderstood role as an “intermediary.” While proposed Rule 1.07 is unique, it gathers requirements that lawyers in Texas and elsewhere have to tease out of other rules. The proposed Rule mandates certain disclosures to clients before, or as soon as reasonably practicable after, a lawyer undertakes the representation of more than one client in the same matter. The proposed Rule lists three specific, reasonable things that lawyers must tell clients to comply with the disciplinary rules and, thus, provides far more certainty to lawyers than the current Rules governing multiple-client representations (Rules 1.06(c)(2) and 1.07) in what they must disclose to avoid discipline.


Ballot Question C. Other Conflicts of Interest:

Do you favor the adoption of Proposed Rules 1.06 and 1.08 - 1.12 of the Texas Disciplinary Rules of Professional Conduct, as published in the December 2010 issue of the Texas Bar Journal?

  • Proposed Rule 1.06 aligns Texas with every other state by defining conflicts of interest so that a conflict exists if a lawyer is adverse to a current client in any matter, not just in substantially related matters. The elimination of the substantial relationship test is not as significant as some lawyers seem to believe.  There are actually two prongs to the current Texas conflicts rule.  One is the substantial relationship test; the other prong provides that a lawyer shall not represent a person if the representation of that person “reasonably appears to be or become adversely limited by the lawyer’s or law firm’s responsibilities to another client or to a third person or by the lawyer’s or law firm’s own interests.” Additionally, because the federal courts in Texas adopt the 49-state rule, and because so many lawyers are also admitted elsewhere, many lawyers currently follow the 49-state rule, which provides that a lawyer or law firm may not be adverse to a current client on any matter without consent from their clients.
  • Proposed Rules 1.06 and 1.08–1.11 contain imputation provisions that do not subject a lawyer to discipline for engaging in a conflicted representation unless the lawyer either knew or reasonably should have known of the conflict. Proposed Rule 1.08(a) also contains new scienter standards that should protect against a lawyer being disciplined despite having acted reasonably. Finally, like other proposed Rules, proposed Rule 1.08 contains more specific guidance for lawyer-client communications.
  • Proposed Rules 1.09 and 1.12 have been reorganized and clarified. Proposed Rule 1.12 also provides enhanced guidance for lawyers facing reporting requirements imposed by Federal law.


Ballot Question D. Prohibited Sexual Relations, Diminished Capacity, and Prospective Clients:

Do you favor the adoption of new Proposed Rules 1.13, 1.14, and 1.17 of the Texas Disciplinary Rules of Professional Conduct, as published in the December 2010 issue of the Texas Bar Journal?

  • Proposed Rule 1.13 generally prohibits a lawyer from representing a client with whom the lawyer has sexual relations. But there are exceptions for a lawyer and client who are married to one another or were engaged in an ongoing, consensual sexual relationship that predates the lawyer-client relationship. The proposed Rule is a workable articulation of a requirement that has been discussed for over a quarter of a century by the Texas Bar.
  • Proposed Rule 1.14 addresses a lawyer's options and obligations when the lawyer is dealing with clients who have diminished capacity. It replaces current Rule 1.02(g), which lawyers have said exposes them to fiduciary duty claims for their roles in initiating allegedly unnecessary guardianships. The proposed Rule provides several options aside from guardianships and permits a lawyer to disclose a client's confidences when the lawyer is seeking to protect the client's interests.
  • Proposed Rule 1.17 concerns conflicts created by prospective clients. The proposed Rule defines a "prospective client" in a manner that excludes individuals who seek solely to conflict out lawyers who might otherwise represent the individuals' adversaries. The proposed Rule also contains a waiver provision that permits the lawyer to condition a conversation with a prospective client so that the conversation will not prohibit any future representations.


Ballot Question E. Advocate, Law Firms and Associations, Public Service, and Maintaining the Integrity of the Profession:

Do you favor the adoption of Proposed Rules 3.01-3.10, 5.01-5.07, 6.01-6.03, and 8.01-8.05 of the Texas Disciplinary Rules of Professional Conduct, as published in the December 2010 issue of the Texas Bar Journal?

  • Several changes to these proposed Rules are not substantive. But proposed Rule 3.03 has been revised substantively to clarify a lawyer's obligation of candor toward a tribunal. For example, with an exception for criminal matters, the Rule now permits a lawyer to refuse to offer or use evidence that the lawyer reasonably believes, but does not know, is false. Proposed Rule 3.07, which relates to trial publicity, has also been revised substantively. As revised, it gives a lawyer more leeway in responding to allegations of misconduct against the lawyer and in making statements to protect a client from the prejudice of publicity that neither the lawyer nor client initiated.
  • The substantive changes to the Section 5 Rules, which address supervised lawyers and nonlawyer assistants, reflect the changes in partnership designations and responsibilities since the current Rules were drafted. The changes place responsibility where it belongs (i.e., on lawyers with managerial or supervisory authority), not on lawyers based purely on their titles. The proposed Rules also make clear, however, that lawyers are not expected to take remedial action beyond the scope of their authority.
  • Proposed Rule 6.03 is new and addresses a lawyer's obligations when the lawyer participates in law-reform activities that may affect the interests of the lawyer's client. In light of this new Rule, references to law-reform activities in current Rule 6.02 have been deleted.


Ballot Question F. Counselor, Non-Client Relationship, Information About Legal Services, and Severability of Rules:

Do you favor the adoption of Proposed Rules 2.01–2.02, 4.01–4.04, 7.01–7.07, and 9.01 of the Texas Disciplinary Rules of Professional Conduct, as published in the December 2010 issue of the Texas Bar Journal?

  • Proposed Rule 2.01 is substantively the same as current Rule 2.01. Consistent with other proposed Rules, proposed Rule 2.02 now requires a client's "informed consent" rather than "consent[] after consultation." The changes to proposed Rules 4.01–4.04 are generally stylistic; however, the current Rule 4.04 requirement for a lawyer not to use means that have no substantial purpose other than to "embarrass" a third person has been modified for constitutional reasons. No substantive changes were made to Rules 7.01–7.07, which were modified in 2005 after going through a referendum in 2004. Proposed Rule 9.01 also contains no substantive changes.
     

This email was prepared with assistance from members of the Texas Disciplinary Rules of Professional Conduct Committee. For more information about Referendum 2011 and to vote, visit www.texasbar.com/rulesupdate.

 

Referendum 2011 started on Tuesday, January 18. Please take the time to understand the proposed disciplinary rules. This post explains by ballot item how the proposed rules improve the current rules.

Referendum 2011: Letter from Chief Justice Wallace B. Jefferson

Texas Supreme Court Chief Justice Wallace B. Jefferson has written the below open letter to Texas lawyers. The letter was published in the January issue of the Texas Bar Journal. For more information about Referendum 2011, please visit www.texasbar.com/rulesupdate.

Dear Texas Lawyers,

You have the privilege to help establish the ethical standards that govern our profession. I encourage you to exercise that privilege by analyzing the proposed amendments to the Texas Disciplinary Rules of Professional Conduct; making educated, independent decisions regarding the amendments; and voting on them in the referendum.   

The Court proposed these amendments after engaging in a collaborative exchange with members of the State Bar of Texas and the general public. In 2003, the Court appointed a task force to analyze extensive changes made to the ABA Model Rules of Professional Conduct in 2002, compare the changes with the current Texas rules and other states’ rules, and make recommendations for improvements to the Texas rules. Between 2003 and 2008, the Court oversaw the work of not only the task force but also the State Bar Committee on the Texas Disciplinary Rules of Professional Conduct, which also submitted recommendations. Between 2008 and 2009, the Court devoted multiple administrative conferences to considering the task force’s and committee’s recommendations. We studied their proposals in conjunction with comparable ABA language, existing Texas rules, and applicable law, among other things.

Because these amendments affect all of you and the clients you serve, the Court and State Bar leadership felt the revisions should be vetted by lawyers with diverse backgrounds and expertise. To that end, the Court task force and State Bar committee included, among others, lawyers from small, mid-sized, and large firms; in-house counsel; government lawyers; academics; and representatives of disciplinary authorities. To obtain additional perspectives, we also sought feedback from all Texas lawyers and members of the general public in a public-comment period between 2009 and 2010.

The Court listened. We made many changes in response to helpful suggestions we received from lawyers in multiple practice areas, members of the general public, and academics specializing in professional responsibility. As a result, the initial version of the proposed amendments (issued in October 2009) differs substantially from the current one (issued in November 2010). This impressive collaboration among the bench, the bar, and the public has generated amendments that enhance the profession’s role as the guardian of rights and liberties under law.

If you adopt these amendments, our rules will be more consistent overall with the ABA rules. Some of them may also serve as a model for other states and the ABA in crafting ethical standards for the legal profession.

I am proud of the process that resulted in the proposed amendments. I urge you to study them carefully and exercise your right to vote. I think you will conclude, as the Court has, that the proposed amendments will serve you and your clients well.

Sincerely,

Wallace B. Jefferson

Chief Justice, Supreme Court of Texas

 

Referendum 2011: Clarifying the Issues

Voting in Referendum 2011 starts next Tuesday, January 18, and continues through February 17. Some have suggested vote “No” on everything; some have suggested vote “Yes.” It is up to each Texas lawyer to vote responsibly by studying the proposed rules independently before casting a vote. This post is in response to many requests for information about statements circulated among members of the Bar. Below are six statements you may have heard or read and some clarifying information. Additional statements will be addressed soon. 

YOU MAY HAVE HEARD/READ: “Proposed Rule 1.07 requires lawyers to give clients what are in effect ‘Miranda warnings.’ And some of the Miranda warnings make no sense. For example, if co-clients disagree on an issue, the required warning says that they must resolve the issues themselves ‘without the lawyers advice,’ even if the clients want the lawyer to tell them what the controlling law is on the issue or provide other simple advice that they both request.”

CLARIFICATION: Aside from the fact that the disclosures in Proposed Rule 1.07 are intended to enlighten the listener, they have nothing in common with Miranda warnings. The disclosures in the proposed rule are intended to make clients aware of the implications of a lawyer representing multiple clients in the same matter. Under the proposed rule, the lawyer must tell clients that they “must be willing” to make independent decisions without the lawyer’s advice to resolve issues that arise among them. This is because the lawyer cannot advocate for one client against any other client in the matter. See the full text of proposed Rule 1.07(a)(2)(ii) and comment 8.



YOU MAY HAVE HEARD/READ: “Proposed Comment 8 to Rule 1.07 says lawyers must make several ‘determinations’ before agreeing to represent multiple clients in a case or matter.”

CLARIFICATION: Comment 8, like other comments to the proposed rules, does not require lawyers to take any action. Instead, the comment explains determinations a lawyer “should” make. As paragraph 7 in the Preamble states, the comments do not add obligations to the rules, and no disciplinary action may be taken solely for a lawyer’s failure to conform to comments.



YOU MAY HAVE HEARD/READ: “Comment 7 to Rule 1.09 misstates the long-standing definition of when two matters are ‘substantially-related’ as defined by Texas courts. This point is critical in determining conflicts-of-interest. The 20+ year Coker precedent, repeatedly reaffirmed by the Texas Supreme Court, defined ‘substantially related’ as whether the facts of two matters are so related that they create a genuine risk that the confidential information of a former client will be violated. Inexplicably Comment 7 declares that the test is whether the facts and issues are similar. The Comment attempts to change longstanding, substantive law declared by the Texas Supreme Court.”

CLARIFICATION: Comment 7 to proposed Rule 1.09 is consistent with precedent. In an opinion that postdates and cites NCNB Texas National Bank v. Coker, 765 S.W.2d 398 (Tex. 1989), the Supreme Court of Texas asserted: “We have held that two matters are ‘substantially related’ within the meaning of Rule 1.09 when a genuine threat exists that a lawyer may divulge in one matter confidential information obtained in the other because the facts and issues involved in both are so similar.” In re Epic Holdings, Inc., 985 S.W.2d 41, 51 (Tex. 1998) (emphasis added) (citing Texaco, Inc. v. Garcia, 891 S.W.2d 255, 256–257 (Tex. 1995) (per curiam); Coker, 765 S.W.2d at 400; Metropolitan Life Ins. Co. v. Syntek Finance Corp., 881 S.W.2d 319, 320–321 (Tex. 1994) (per curiam); Tex. Disciplinary R. Prof’l Conduct 1.09, cmt. 4B, reprinted in Tex. Gov’t Code Ann., tit. 2, subtit. G app. A (1998) (Tex. State Bar R. art. X, § 9)), quoted in Landers v. State, 229 S.W.3d 532, 535 (Tex. App.—Texarkana 2007), aff’d 256 S.W.3d 295 (Tex. Crim. App. 2008); see also Nat’l Med. Enters., Inc. v. Godbey, 924 S.W.2d 123, 129 (Tex. 1996) (“The pending action is substantially related to the prior investigations and lawsuits involving NME and Cronen, as the district court found. The allegations throughout are identical in all material respects. See Texaco, Inc. v. Garcia, 891 S.W.2d 255, 257 (Tex. 1995) (holding two distinct claims were substantially related due to the existence of similar liability issues, scientific issues, and defenses).”). 



YOU MAY HAVE HEARD/READ: “The proposed rules will turn fee collection in the criminal defense world on its head.”

CLARIFICATION: This concern may be a reference to proposed Rule 1.15 (regarding safekeeping of property). Comment 12 to that rule says, “Applicable law, not these Rules, determines when a fee is earned.” Criminal defense counsel should review the law on commingling client and lawyer funds when the lawyer has possession of unearned fees. The proposed rule does not (and could not) change this law, and it does not change how the existing rule handles a flat fee.



YOU MAY HAVE HEARD/READ: “Proposed Rule 1.08 contains standards that are inconsistent with a lawyer's fiduciary duties. Rule 1.08(a) would permit a lawyer-client business transaction if ‘the lawyer reasonably believes that the terms of the transactions ... are fair and reasonable to the client.’ But the fiduciary standard requires that the transaction be objectively fair and reasonable to the client.”

CLARIFICATION: Proposed Rule 1.08(a) does nothing to undermine when lawyers may be sued for breach of fiduciary duty by specific clients they have harmed. The “reasonably believes” standard recognizes that a lawyer defending against a disciplinary complaint that he or she had entered into a transaction with a client that was not “fair and reasonable” would necessarily present the objective view of a “reasonable” lawyer in the same circumstance. The “reasonably believes” standard is implicit in the existing rule. Making the standard explicit will provide a clear defense for a lawyer who acted reasonably when entering into a business transaction with a client.



YOU MAY HAVE HEARD/READ: “The Bar Board asked the Supreme Court for more time to address the conflict of interest rules, but the Court refused to grant that extension.”

CLARIFICATION: In a letter dated October 1, 2010, State Bar President Terry Tottenham conveyed to the Court the State Bar Board of Directors’ recommendation that the Court allow the Board more time to consider proposed Rules 1.06 through 1.09. The Court allowed the Board until November 8, 2010 to collect more information and to provide final recommendations. During the extended review period, Bar leaders re-opened the public-comment period, hosted a meeting of ethics counsel to discuss proposed Rules 1.06 through 1.09, and held a special Board meeting during which directors took final votes on the proposed rules. Proposed Rules 1.06 and 1.07 were modified further in response to the input received in the extended review period.


Patricia D. Chamblin
Chair, Texas Disciplinary Rules of Professional Conduct Committee

Linda S. Eads
Past Chair, Texas Disciplinary Rules of Professional Conduct Committee

Lillian B. Hardwick
Past Chair, Texas Disciplinary Rules of Professional Conduct Committee

Additional information regarding the proposed rules is posted at www.texasbar.com/rulesupdate. Exercise your right to vote responsibly by taking the time necessary to understand the issues and options yourself before casting your vote on the proposed rules.

Referendum 2011: Q&A with Tom Watkins

State Bar members will begin voting on proposed changes to the Texas disciplinary rules on Tuesday, January 18. Below is an interview with Thomas H. Watkins, who served as chair of the Supreme Court of Texas Task Force on the Texas Disciplinary Rules of Professional Conduct. 

Q: How did you become an authority on the Texas disciplinary rules?
A: The Supreme Court of Texas called and asked if I would chair the Task Force on the Texas Disciplinary Rules of Professional Conduct. I puffed up like a toad. I was so proud. It wasn’t until seven years later that I realized this is what a Republican Supreme Court does to punish a Democrat.

Q: What is the most frustrating criticism of the proposed rules?
A: There have been a number of criticisms based on misunderstanding. For example, the proposed “No sex with clients” rule. Several have complained that it doesn’t go as far as the American Bar Association model rule. In fact, it’s almost exactly the same. If anything, it’s stronger.

Q: What is the most compelling argument for adopting the proposed amendments?
A: First, there are areas in the disciplinary rules where we need more uniformity. Second, there are areas where we need better protection for lawyers. Third, there are areas where we need better protection for clients.

Q: Have lawyers and the public had enough opportunity to provide input?
A: There have been plenty of opportunities. The truth is that lawyers have very busy schedules and are driven by client needs. You have to take time out of a busy schedule to study and consider the proposed rules. Of course, that’s true of the old rules, too.

Q: Are there surprises in the rules?
A: Every change — every current rule, for that matter — is a surprise to some. Some think the multiple-client representation rule is burdensome. In fact, it’s not as burdensome as the current rule, which is ignored. The new rules are useable. The current rules are not useable.

Q: Why is the ballot divided into six questions?
A: There are various issues for various segments of the bar membership.

Q: Which are the easiest ballot questions to vote “Yes” on?
A: All of them are easy to vote “Yes” on. The most misunderstood proposals are the conflicts of interest rules. Most misread proposed Rules 1.06 and 1.07. Proposed Rule 1.06 removes the “substantially related matter” test. Some want to keep it. Personally, I don’t understand that. They want to be able to sue and defend the same client. I think that’s bad PR for us as a profession. The “substantially related matter” test is not recognized in federal courts or the ABA Model Rules. If we’re striving for uniformity, we need to fix that.

Q: Why are proposed Rules 1.06 and 1.07 separate?

A: Proposed Rules 1.06 and 1.07 are essentially covered by 1.06 in the current rules. Some don’t like having an extra rule. I believe strongly that we need it. If you are ever sued for malpractice, the disclosures required under current Rule 1.06(c)(2) will haunt you. There’s no way you could have complied. Proposed Rule 1.07 eliminates that. The disclosures under the current rule are replaced with three important disclosures that create a safe harbor. The tradeoff is that you have to make the disclosures every time, but there’s a safe harbor. You’d be better off than under the current system. I think that’s a good tradeoff.

Q: Are the comments and criticisms that have circulated about the proposed rules fair?

A: Lots of groups and individuals have provided input. That has been an essential part of this process. The proposed rules have changed from one draft to the next. The instances where those criticisms have not been adopted have been because of counter opinions and compromises. If you try to design a horse by committee you’re going to get a camel. The proposed rules are a camel. But they can’t be accused simultaneously of being not enough like the ABA Model Rules and changing too much. If we adopted the ABA rules, it would require far more changes.

Q: What happens if the proposed rules don’t pass?

A: We’re stuck with what we’ve got. We’ll be a national embarrassment on the “No sex with clients” rule. A whole lot of work will go down the tubes.

Q: If a member of the State Bar is just tuning in now, what’s the best way to get up to speed on the proposed changes in order to make an informed decision?
A: There will be plenty of presentations at CLE programs. Of course, not every lawyer will be interested in or affected by all of the disciplinary rules. There are various practices that are not covered by all of the disciplinary rules. In my opinion, Texas lawyers know a whole lot more about the disciplinary rules because of the attempts to change them. If they fail, a lot of good education has taken place. If they pass, it will improve how lawyers comply. Lawyers will start off with better knowledge of the new rules than they have of the current rules.

Q: Any final thoughts?
A: As with any legislative act, any court decision, or any public endeavor that you begin to scrutinize, it’s easy to pick out portions and say, “They don’t do that right.” But you have to pay attention to the compromises that were necessary to move forward. There are provisions in the original U.S. Constitution we find objectionable today. Everyone says, “That’s wrong.” But were they worth it if otherwise we didn’t get a country? I hope Texas lawyers will recognize other views in order to achieve much-needed changes.

Thomas H. Watkins is a partner in Brown McCarroll, L.L.P. in Austin. A graduate of the University of Texas School of Law, he is a member of the American College of Trial Lawyers and the American Board of Trial Advocates. A frequent speaker at CLE seminars, Watkins has served on the Texas Commission for Lawyer Discipline and as chair of the Texas Board of Disciplinary Appeals.


For more information about Referendum 2011, including A Guide to the Issues [PDF] and Commentary from Members of the State Bar TDRPC Committee on Specific Rules [PDF], please visit www.texasbar.com/rulesupdate

TexasBarCLE to present a webcast today on the proposed amendments to the disciplinary rules

Today from 10 a.m. until 2 p.m., TexasBarCLE will present a webcast on the proposed amendments to the disciplinary rules featuring Linda Eads, Tom Watkins, and Kennon Peterson. Registrants can earn 2 hours of ethics MCLE. For more information and to register, click here.

For more information on the proposed rules and on the referendum, please visit www.texasbar.com/rulesupdate.

Referendum 2011: Asking the experts

There is a lot of information available about Referendum 2011 and we hope we have provided some materials that make the information easier to digest. Late last week, we received a question asking about a concern from some criminal defense lawyers that the proposed amendments, if passed, would turn fee collection in the criminal defense world on its head. To get the best answer possible, we asked past chairs of the Texas Disciplinary Rules of Professional Conduct Committee the question and following below is the quick answer and then a more in-depth answer from past chair Lillian Hartwick. We hope this is helpful to Texas lawyers as they think about the proposed rules.

From the TDRPC Committee chairs: 

"This concern may be a reference to proposed Rule 1.15 (regarding safekeeping of property). This rule does nothing to harm defense counsel, but defense counsel should be aware that there may be obligations under other laws on how to handle fees not yet earned. Criminal defense lawyers should not have an ethical problem with this rule but should review the law on commingling client and lawyer funds when the lawyer has possession of unearned fees. The proposed rule does not change this law (and it could not) and puts criminal defense lawyers in no worse or better position than the current rule."

For a more in-depth explanation of the discussion leading up to the proposed rule, here is a historical explanation from Lillian Hartwick, former chair of the TDRPC Committee:

The ABA Model Rule:

(c) A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred.

The Texas proposal:

(d) A lawyer shall deposit unearned fees and advanced expenses into a client trust account, to be withdrawn by the lawyer only as fees are earned or expenses are incurred.

Following is the explanation by the Committee (in its report) regarding why it rejected that provision—

ABA Paragraph (c) This paragraph tells lawyers that legal fees and expenses paid in advance shall be deposited into the client trust account, to be withdrawn only as earned. The Task Force also adopted this paragraph. The Committee did not adopt this paragraph. Lawyers use different terms to label advance payments. Sometimes they are called flat fees. Sometimes agreements with clients make it clear that fees paid in advance are non-refundable retainers or flat fees. Sometimes clients agree that the lawyer has earned the fee when it is received. The validity of such agreements will depend on many factors, such as the work actually done, the client’s sophistication and the client’s desire to hire a particular lawyer. The variations on these agreements and the different results in the case law depending on the facts involved make this area not suitable for the blanket rule proposed by the ABA.

During the court conference in March 2008, the committee continued to suggest that the issue that the ABA was targeting be handled in the comments. (The committee actually suggested this comment during the conference: "When a lawyer receives from a client moneys that constitute a prepayment of a fee, the lawyer shall handle that fee in accordance with this rule until the lawyer has earned the fee.") Part of the committee’s concern was that some readers wouldn’t know an “advance fee” (the rule contains “advance”) from a “flat fee,” causing the rule language to be unclear. However, given reasoning from the Court, the committee ultimately agreed to the inclusion in the rule, as long as comments made clear that there were many kinds of fee agreements, implying that a flat fee agreement was certainly a possibility, but that it should be clear (to the lawyer, as well as to the client) and agreed to by the client. Thus, no one in the conference was anticipating making a flat fee (or even advance fee) arrangement go away. However, the goal was to make lawyers think about any differences between those two types of fee agreements (and Texas case law may suggest they’re the same, such that criminal defense lawyers should find some other term to use or not use a term and simply be descriptive in a written fee agreement with the client).

The criminal bar should understand that (except for the problem of commingling, which is a violation of this rule) its problem would be with applicable law, not this rule, as indicated in the proposed comment: “Paragraph (d) addresses unearned fees. Fee agreements sometimes state that the fee is a flat fee, advance fee, nonrefundable retainer, or some other kind of fee. But without regard to the label, if the fee is a prepayment for services, paragraph (d) requires a lawyer to deposit the fee into a trust account until it is earned. Applicable law, not these Rules, determines when a fee is earned.” If a criminal defense lawyer takes money that applicable law says belongs to the client, the lawyer has violated a number of the Rules.