In recent years, lawyers have looked for ways to thrive in difficult economic times. Among other things, many have changed the way they charge for their services. Instead of billing by the hour, some charge flat fees for services.

And that, it would appear, is opening a can of ethical worms.

As Stephen Conover, who represents attorneys in disciplinary matters put it, “there’s an uptick in lawyers who are using fixed fees,” so naturally there will be some lawyers who will get into trouble, “because they aren’t managing [those funds] properly.”

Consider the case of John J. O’Brien Jr., who recently received a written reprimand from the Statewide Grievance Committee after he charged a $10,000 flat fee to handle a lawsuit and then an extra $6,000 when the case went to the appellate stage.

It all started back in 2007, when Laura Chiulli hired O’Brien, who practices in Wethersfield, to represent her in a civil lawsuit. In one case Chiulli was involved in, her family business, Advanced Home Builders, was being sued for nonpayment of construction materials and labor costs to another company during the construction of a Rocky Hill subdivision.

Records indicate that O’Brien provided Chiulli with a written fee agreement, as required under Practice Book rules. In that August 2007 agreement, O’Brien said he would represent Chiulli “for a non-refundable flat fee of $10,000.” His fee agreement also contained language about a $5,000 “success fee,” which was the sole discretion of the client to pay or not pay.

The flat fee, according to the agreement, did not include court costs or representation for any appeal. Chiulli signed the agreement, and paid O’Brien his fee. Over the next several months, she paid an additional $4,060 for court costs.

A trial was held, which resolved some of the issues in dispute. Afterward, Judge Trial Referee Richard Rittenband ordered both sides to submit briefs on the remaining legal issues. In April 2008, O’Brien told the Chiulli he would not work on those briefs until she paid him more money. According to the client, O’Brien said his continued services would cost an additional $6,000.

Chiulli initially refused to pay, noting the flat fee agreement. She eventually relented, and the civil case was ultimately resolved. But then Chiulli filed a complaint with the Statewide Grievance Committee last year, which resulted in an investigation.

So what did the attorney do wrong?

The Statewide Grievance Committee said O’Brien violated the Practice Book rules by collecting what he called “a non-refundable fee.” Then there was the matter of the extra $6,000. When called to testify in his own defense, O’Brien claimed he did not request the additional $6,000, but instead said it was “offered to him” by Chiulli, said one state grievance official. After considering the evidence, the Grievance Committee found that the additional $6,000 that O’Brien collected was an unreasonable fee under Practice Book rules, and ordered him to pay that amount back. O’Brien made that payment.

The reason the $6,000 was found to be unreasonable, was because it was significantly more than the agreed-upon flat fee, grievance authorities said.

“There’s no problem with attorneys charging flat fees, but non-refundable fees are not allowed in Connecticut,” Chief Disciplinary Counsel Patricia King said. When an attorney accepts a flat fee, he or she is supposed to keep that money separate from his other funds and not touch it until a case is resolved. That way, if a client fires a lawyer before the end of the case, some money can — and must — be refunded. Problems occur, according to state officials, when the lawyer tells a dissatisfied client all the money has been spent, or when the money has been allowed to co-mingle with other client funds.

O’Brien could not be reached for this article. But according to the grievance records, he told state officials he was no longer using non-refundable language in his fee agreements. “He indicated that he now understands that non-refundable fees are not allowed under Rule 1.5 of the Rules of Professional Conduct,” said Karyl Carrasquilla, an assistant state disciplinary counsel.

Conover, who was not involved in the O’Brien case, said attorneys need to avoid any language in fee agreements that mention a “non-refundable fee” or a “success fee.”

“These fees are big red flags for the disciplinary authorities, which invariably result in some sanction,” he said.

Conover has served as a court-appointed grievance counsel for the past 11 years, defending lawyers facing sanctions. He frequently lectures to local bar association groups about the rules regarding flat fees.

Back in 2009, after the economy went sour, he said, some lawyers who had previously handled mostly real estate transactions took on some criminal cases. Some of those lawyers took to using flat fee structures, which criminal defense lawyers have used for years. But some got into trouble because they assumed flat fees were “non-refundable.” The result was a slight spike in grievance cases over flat fees. Records indicate a handful of such grievance cases led to disciplinary decisions that year.

“Lawyers can avoid disputes by specifying in their fee agreements, this amount will be used for this portion of the case, through trial, or up to a judgment,” Conover said. “The Connecticut rule is very clear, that you shall not collect unearned fees, so if a lawyer is discharged before the case is resolved, there is always some amount that should available to be paid back to the client, if they request it.”•