Supreme Court clarifies distinction between retainer, advanced legal fee

An attorney who refused to return a nonrefundable consultation fee to a pair of clients after the consultation did not go forward was in violation of the Rules of Professional Conduct, the Supreme Court of Virginia affirmed.

On appeal, the attorney argued that the consultations fees represented a retainer, while the Virginia State Bar contended that they were advanced legal fees.

In writing for the court, Justice Wesley G. Russell Jr. agreed with the state bar and the circuit court.

“The undisputed facts make clear that each $300 fee was an advanced payment for legal services and not a retainer,” Russell wrote. The justice added that the communications from the attorney’s firm “characterized the payment as a ‘consultation fee,’” meaning the fee “entitle the client to an actual consultation involving discussion between the attorney and the client.

As such, the court concluded that by depositing the money in his operating account before the consultation would have occurred and by not providing the consultation, the attorney violated the Rules of Professional Conduct.

Russell’s opinion in Swango v. Virginia State Bar (VLW 025-6-021) was joined by the court’s other justices.

Counsel for the attorney appellant did not respond to a request for comment by deadline. Counsel for the Virginia State Bar declined to comment.

Fairfax attorney Juli M. Porto, who tracks decisions in Virginia’s appellate courts, said attorneys hearing about this case should understand the difference between advanced legal fees and a retainer “boils down to the purpose of the payment.”

“It’s also important to note that simply calling a payment a ‘retainer’ doesn’t necessarily make it so,” Porto said. “Swango demonstrates that courts will look beyond labels to examine the real purpose of the payment.”

Distinction unclear

Jason Swango, a Virginia Beach domestic relations attorney, charged two prospective clients a “non-refundable $300 consultation fee.” Swango’s firm’s standard policy was to deposit these fees into the firm’s operating account as an earned fee once it is received.

The first client scheduled a consultation on July 18, 2023, for two days later. The client received a confirmation email stating the fee was non-refundable and that 24 hours notice was required for cancellation.

[Be] clear with your client as to the substance of what you’re providing them.

— Juli M. Porto, Fairfax

The client canceled his appointment with Swango three hours before his appointment after he “came to ‘an understanding’” with his wife. The firm refused to grant the client’s request for a refund, and the client unsuccessfully disputed the charge with his credit card company.

The second client called Swango’s firm on July 25, 2023, and scheduled a consultation for two days later. The client also received the same confirmation email, and the fee was deposited in the operating account.

The second client simply missed his meeting and tried to reschedule but was told he would have to pay another consultation fee.

The Virginia State Bar charged Swango with violating Rules 1.5 and 1.15 of the Rules of Professional Conduct in each case. Citing Legal Ethics Opinion 1606, the bar asserted that the fees represented advanced legal fees, rather than retainers, and were not earned when the clients paid the fees.

Before a three-judge panel of the Virginia Beach Circuit Court, Swango “admitted to charging a non-refundable consultation fee but denied that he violated his ethical obligations” as he believed his standard practice was consistent with the Rules of Professional Conduct.

Swango argued that the distinction between advanced legal fees and retainers “was unclear and that he made a reasonable judgment call after sufficiently analyzing the relevant rules and LEO 1606.”

After reviewing the evidence, and twice denying a motion to strike by Swango, the panel determined Swango violated Rules 1.5 and 1.15.

The panel determined that Rule 1.5 was violated as advanced legal fees “are ‘paid in advance for particular legal services not yet performed’ and are not earned when paid.” This, the panel wrote, distinguishes them from retainers, which are payments given to ensure attorney availability on a matter. Rule 1.15 was violated when the fees were placed in an operating account despite not being earned, according to the panel.

The circuit court issued Swango a public reprimand with terms, requiring him to refund the consultation fees.

Prior to the court issuing its final order, the VSB sought comment on a proposed amendment to Rule 1.5. Swango moved for reconsideration, arguing the proposed amendment “demonstrated that the rule was ambiguous.” The motion was denied, and Swango appealed.

Fee argument ‘unpersuasive’

In analyzing the appeal, Russell wrote that the case “poses questions of law that we review de novo” regarding the interpretation of the Rules of Professional Conduct.

When putting the relevant rules under the microscope, Russell wrote that LEO 1606 “makes clear that it is those substantive differences and not the label an attorney places on a payment from a client that determines how the lawyer must treat the payment.”

LEO 1606 goes on to state in relevant part that “any fee arrangement involving advanced legal fees and providing for a non-refundable or minimum fee… is… improper.”

There can be no dispute that all of Swango’s conduct regarding the fees in this case was intentional.

— Justice Wesley G. Russell Jr.

On appeal, Swango argued that the $300 consultation fees represented a retainer, thus he could deposit the funds directly into his operating account. The VSB countered that they were advanced legal fees and should have been refunded and not placed in the operating account.

“The circuit court agreed with the VSB and so do we,” Russell concluded. “There can be no serious argument that a lawyer researching a client’s situation, meeting with the client to discuss that situation and to answer any questions that the client poses, and then providing advice on the best way for the client to approach the matter going forward is not the provision of legal services,” Russell wrote.

The justice also found Swango’s arguments that the fees were retainers “unpersuasive,” noting the distinction between retainers and advanced legal fees and the communications from the firm on the consultations.

“[N]othing in the communications suggested that the fee would not involve immediate legal services for the known matter, but rather, was a payment to guarantee that Swango would represent the client if a matter were to ‘arise in the future,’” Russell wrote.

Swango further argued on appeal that, if his conduct violated the Rules of Professional Conduct, he did not intend to violate the rules and thus should not be subject to discipline. He supported this argument by asserting he read the rules and LEO 1606 “and concluded that his conduct was permissible.”

“Assuming that the relevant RPCs contain an intent requirement, any such requirement would be that the lawyer’s conduct be intentional,” Russell wrote. The justice wrote that “there can be no dispute that all of Swango’s conduct regarding the fees in this case was intentional.”

In a footnote, the justice left for another day “whether a lawyer who intended to place an advanced legal fee into his trust account violates RPC 1.5(a) and RPC 1.15(a)(1) when the money is placed in his operating account because the lawyer accidentally used the incorrect deposit slip.”

On the circuit court’s denial of a motion to reconsider, Russell wrote that the proposed changes to Rule 1.5 that were adopted in May 2025 “did not apply to Swango’s conduct, all of which predated the proposed changes.”

Russell wrote that the amendment, which added subsection (g) to the rule to state that advanced legal fees are prohibited, did not make any “substantive change.”

“To the extent it does anything, the amendment removes any need for a lawyer to engage in the minimal research that would have been necessary to find LEO 1606,” Russell wrote.

The Supreme Court of Virginia thus upheld the judgment of the Circuit Court.

Avoiding ethical pitfalls

Porto said that for attorneys looking to avoid falling into the same ethics issue, communication is key.

“The key is being clear with your client as to the substance of what you’re providing them,” Porto said. “If you intend to collect a retainer, make clear that the payment secures your willingness to represent the client if they need services later, not that it pays for any specific current services.”

Porto also advised attorneys to deposit payments for consultation services into their trust accounts initially, rather than the operating accounts.

“Describe specifically the services you will provide in exchange for payment, provide those services, and then transfer the appropriate portion of the fee to your operating account,” Porto said. “If the consultation doesn’t occur, refund the appropriate portion of the fee.”