In Re O'Farrell, 2011 Ind. LEXIS 72

Respondent Heather McClure O'Farrell was subject to Indiana Supreme Court disciplinary jurisdiction due to prior admission to the state bar.
She used flat and hourly fee contracts that contained nonrefundable engagement fees and sought to keep unearned fees when representations ended.
Client 1 paid a $3,131 total fee under a Flat Fee Contract stating the engagement fee was nonrefundable and earned on commencement; representation ended and refund was denied.
Client 2 paid $9,500 total (initial $1,500 engagement plus $3,000, then $5,000 flat fee) under varying fee terms; firm refused any refund after termination.
The Commission alleged violations of Indiana Professional Conduct Rule 1.5(a) (unreasonable fees) and Rule 1.16(d) (failure to refund unearned fees).
The hearing officer found the engagement fees were flat fees and that nonrefundable terms violated Kendall, but the record left unsettled the amount of any unearned refund due to limited stipulations.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether nonrefundable engagement/flat fees violate Rule 1.5(a).	O'Farrell charged nonrefundable fees under flat/engagement terms.	Fees were reasonable, justified by availability or services rendered.	Nonrefundable flat fees violated Rule 1.5(a).
Whether the firm could treat flat fees as earned on receipt and retain unearned portions.	Fees were nonrefundable regardless of services performed.	Fees could be earned upon commencement and apply to future work.	Treating nonrefundable flat fees as earned on receipt violated Kendall.
Whether the failure to refund unearned portions violated Rule 1.16(d).	Unrefunded fees were unearned when representation ended.	Amount of unearned fees could not be determined from the stipulations.	Court did not prove unearned portion due under the stipulated facts.
What disciplinary sanction is appropriate.	Discipline should reflect improper nonrefundable fees; public reprimand or short suspension possible.	Mitigating factors exist; severe sanction unnecessary.	Public reprimand appropriate; no suspension.

Matter of Kendall, 804 N.E.2d 1152 (Ind. 2004) (nonrefundable 'advance' fees must be refunded if not earned; explicit basis advisable)
Matter of Thonert, 682 N.E.2d 522 (Ind. 1997) (unreasonable nonrefundable fee; precludes termination penalties)
Matter of Sather, 3 P.3d 403 (Colo. 2000) (fee based on services, not merely availability; nonreflection of value)
Grosz v. Cooper? (Cooperman), 633 N.E.2d 1069 (N.Y. 1994) (nonrefundable retainers clash with fiduciary relationship; improper)
Frerichs, 671 N.W.2d 470 (Iowa 2003) (availability retainer does not justify nonrefundable minimum fees)