## Facts

- Larry D. Sather, a Colorado attorney, entered a written fee agreement with client Franklin Perez for representation in a civil rights action arising from a traffic stop.
- The agreement required a $20,000 advance fee and characterized it as “non-refundable.”
- Sather deposited the $20,000 into his operating account, treated it as his own property, and spent it before completing work sufficient to earn the entire fee.
- Sather’s representation ended after he received a 30-day suspension in an unrelated matter.
- Sather acknowledged he had not earned approximately $13,000 of the advance fee and agreed to refund it, but did not return the unearned amount for more than five months.
- Perez disputed the fees and pursued bar fee arbitration; the arbitration award required Sather to pay approximately $2,100 in arbitration costs, which he later paid.
- Disciplinary authorities charged Sather with violations of Colo. RPC 1.15(a) (safekeeping property), 1.16(d) (duties on termination, including refund of unearned fees), and 8.4(c) (dishonesty, fraud, deceit, or misrepresentation).
- A hearing board found violations of all three rules and recommended suspension for one year and one day.

## Issues

1. Whether advance fees (including flat or lump-sum fees) must be placed in a trust account and may be withdrawn only when earned under Colo. RPC 1.15(a).
2. Whether labeling an advance fee as “non-refundable” constitutes misrepresentation or improperly burdens the client’s right to discharge counsel.
3. Whether Sather’s handling of the advance fee and delay in refunding unearned amounts violated Colo. RPC 1.15(a), 1.16(d), and 8.4(c), and what sanction was appropriate.

## Decision

- The Colorado Supreme Court interpreted Colo. RPC 1.15(a) to require that all advance fees, including flat and lump-sum fees, be treated as client property and held in trust until earned.
- The court held that Sather’s “non-refundable” characterization of an advance fee was misleading and violated Colo. RPC 8.4(c).
- The court held that Sather violated Colo. RPC 1.16(d) by failing to promptly return unearned fees upon termination of representation.
- Although the court concluded Sather’s conduct fit a violation of Colo. RPC 1.15(a), it declined to impose discipline on that basis because the trust-account treatment of flat and lump-sum advance fees had not previously been clearly articulated in Colorado; the interpretation would govern going forward.
- The court imposed a substantial suspension based on the knowing deception and failure to promptly refund unearned fees, taking into account Sather’s disciplinary history.

## Legal Principles

- Advance fees for future legal services remain client property until earned and must be deposited into a trust account; they may be withdrawn only as the lawyer performs services or confers benefits on the client.
- A fee is “earned” only by providing legal services or conferring a benefit on the client; mere receipt of an advance payment does not convert it to lawyer property.
- “Non-refundable” labels for advance fees are improper when they mislead clients about refund rights or chill the client’s right to discharge counsel; such conduct may violate rules prohibiting misrepresentation and requiring protection of client interests at termination.
- Upon termination of representation, a lawyer must promptly refund any unearned portion of an advance fee.
- When a court clarifies an unsettled professional-conduct rule, it may apply the interpretation prospectively for sanction purposes while still announcing the governing rule for future conduct.

## Conclusion

The Colorado Supreme Court disciplined Sather for knowingly misleading a client by labeling an advance fee “non-refundable” and for failing to promptly return unearned fees after the representation ended, while also clarifying that all advance fees—including flat and lump-sum fees—must be held in trust until earned.


In re Sather, 3 P.3d 403 (Colo. 2000)