When a contingency-fee client fires the lawyer, can the lawyer hold the file until paid and bill hourly for the work done, including travel?

Plain-English summary

A client in a Maryland hospital phoned Lawyer A (in South Carolina) to handle a car wreck that happened in Maryland. Lawyer A traveled to Maryland, signed the client to a contingency retainer, took photos, and spent roughly seven hours on site, with about eight and one-half hours of travel each way and another eight hours of work afterward, thirty-two hours in total. The client then retained Lawyer B and told Lawyer A to turn over the file. Lawyer A offered to release the file only on receipt of a letter of protection for expenses and a fee of 32 hours at $100 per hour; the client and Lawyer B refused. The questions were whether Lawyer A could withhold the file pending a letter of protection, and whether he could bill the client hourly under the contingency agreement, including travel time.

On the file, the committee explained that under Rule 1.16(d) a lawyer who is discharged must take reasonably practicable steps to protect the client's interests, including surrendering papers and property to which the client is entitled, while retaining papers only "to the extent permitted by law." Although the South Carolina Supreme Court has held that asserting a retaining lien is not a per se ethical violation, the lawyer bears the burden of showing the client is financially able but deliberately refuses to pay a fee clearly agreed upon and due (Anonymous; Tillman; White). The committee listed the seven factors courts weigh and found none favored Lawyer A; several opposed a lien, since withholding the file could prejudice the client's injury claim and there was no showing the client could pay but deliberately refused. Lawyer A should therefore promptly deliver the file.

On the fee, the committee noted that a fee may be hourly or contingent, and that Rule 1.5(b) requires communicating the basis or rate of the fee. Here the agreement was a contingency agreement with nothing showing an hourly provision, so Lawyer A could not charge the client by the hour for his time or withhold the file if the client refused to pay an hourly amount. The committee added, as a matter of substantive law it does not decide, that depending on the agreement and the outcome of the client's case, Lawyer A might be able to recover in quantum meruit for the reasonable value of his services.

In practice

The opinion holds that, under the South Carolina rules as they stood at the time, a discharged contingency-fee lawyer should promptly surrender the client's file under Rule 1.16(d) rather than assert a retaining lien, because the factors South Carolina courts weigh (the client's finances and sophistication, the reasonableness of the fee, a clear agreement and deliberate refusal to pay, prejudice to the client, and less-stringent alternatives) do not support a lien where withholding could prejudice the client's injury claim. It also holds the lawyer cannot bill hourly under a contingency agreement that contains no hourly term, while noting that quantum meruit recovery may be available as a matter of substantive law. South Carolina revised its Rules of Professional Conduct effective 2005; verify the current text of Rules 1.16 and 1.5 before relying on the specific subsections here.

Common questions

Q: Can a discharged lawyer hold the client's file until paid?

A: The committee concluded the lawyer should promptly deliver the file under Rule 1.16(d): a retaining lien is not per se unethical, but the factors courts weigh did not favor one here, and withholding could prejudice the client's injury claim.

Q: Can a contingency-fee lawyer switch to billing hourly when the client leaves?

A: The committee concluded no: with a contingency agreement that contains no hourly provision, the lawyer cannot charge the client by the hour for the time invested.

Q: Can the lawyer recover anything for the work already done?

A: The committee noted, as a matter of substantive law it does not decide, that depending on the agreement and the case's outcome the lawyer might recover in quantum meruit for the reasonable value of his services.

Background and rules framework

The opinion interpreted South Carolina RPC 1.16(d) (duties on termination, including surrendering the client's papers and retaining only as permitted by law) and 1.5(b) (communicating the basis or rate of the fee), corresponding to the like-numbered Model Rules, against South Carolina retaining-lien case law (In re an Anonymous Member of the South Carolina Bar, Matter of Tillman, and Matter of White) and a bar journal column on retaining liens.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.16(d) / Model Rule 1.16: duties on termination; surrendering papers and property; retaining liens only as permitted by law.
• South Carolina RPC 1.5(b) / Model Rule 1.5: communicating the basis or rate of the fee.

Cases:

• In re an Anonymous Member of the South Carolina Bar, 287 S.C. 250, 335 S.E.2d 803 (S.C. 1985); Matter of Tillman, 319 S.C. 461, 462 S.E.2d 283 (S.C. 1995); Matter of White, 328 S.C. 88, 492 S.E.2d 82 (S.C. 1997).

See also

• SC Bar Ethics Op. 02-11: Withholding a Client File
• SC Bar Ethics Op. 12-10: Deceased Client's File to Adversary
• SC Bar Ethics Op. 05-05: Lien Against a Former Client

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-02-08/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 02-08

Client, in Maryland hospital, communicates by telephone she desires to retain Lawyer A's services for car wreck, which occurred in Maryland. Lawyer A travels from South Carolina to Maryland, consults with Client who executes a contingency retainer. Lawyer A takes photos of Client and Client's car while in Maryland. Time spent on the case in Maryland consumed about seven hours. The trip from South Carolina to Maryland took approximately eight and one-half hours, as did the trip back. After returning, Lawyer A did an additional eight hours of work on the file over a one and one-half to two months' period. In total, Lawyer A spent thirty-two hours of work on the case.

Client then retained new counsel, Lawyer B, and instructed Lawyer A to discontinue services and to turn file over to Lawyer B. Lawyer A sent a letter to Lawyer B indicating that he would gladly release the file upon receipt of a letter of protection for statement of expenses incurred and fee (32 hours times an hourly rate fee of $100). Lawyer B and Client refuse to provide letter of protection.

Questions:

1. May Lawyer A withhold Client's file until Client or her new lawyer provides a letter of protection of expenses and fee?
2. May Lawyer A charge Client on an hourly basis for time spent on case with contingency fee agreement? If so, may Lawyer A include time he spent for travel to see Client in another state if the trip was made at Client's request?

Summary:

1. Lawyer A should not withhold Client's file but should promptly deliver the file to Client as requested.
2. Lawyer A should not charge Client on an hourly basis for time spent on the case, unless the contingency fee agreement to which Client agreed expressly provided for such an arrangement.

Opinion:
Under Rule 1.16(d) of the Rules of Professional Conduct, when a lawyer is dismissed or withdraws from the representation of a client, he or she "shall take steps to the extent reasonably practicable to a protect a client's interests, such as . . . surrendering papers and property to which the client is entitled . . . ." Id. The rule further allows an attorney to "retain papers relating to the client to the extent permitted by law." Id

Although the South Carolina Supreme Court has recognized that "an attorney's assertion of a retaining lien is not a per se" ethical violation, the attorney must still "consider whether the assertion of a retaining lien in a particular case would be unethical." In re an Anonymous Member of the South Carolina Bar, 287 S.C. 250, 252, 335 S.E.2d 803, 804 (1985) (Anonymous). The Court "warned that the attorney bears the burden of showing the circumstances justify assertion of a lien because 'the client is financially able but deliberately refuses to pay a fee that he has clearly agreed upon and is due.'" Matter of Tillman, 319 S.C. 461, 464, 462 S.E.2d 283, 285 (1995) (quoting Anonymous at 253, 335 S.E.2d at 805) (emphasis added in Tillman).

In his Ethics Watch column, John Freeman warns, "Though the ethics rule recognizes that the layer may have a right to withhold documents in order to assert a retaining lien, good lawyers understand that retaining liens are for the birds. The value of the lien to the lawyer is in direct proportion to the misery visited on the client, revealing a patent conflict of interest. Assertion of the lien invites a grievance." Turning Over "The File," S.C. LAW., July-Aug. 1998 at 10.

There are several factors an attorney should consider if he or she contemplates retaining a client's file and asserting a retaining lien:
(1) the client's financial situation;
(2) the client's sophistication;
(3) the reasonableness of the fee;
(4) the client's clear understanding and agreement to pay the amount of the fee owed;
(5) whether imposition of the lien would prejudice important rights of the client or other parties;
(6) whether failure to impose the lien would result in fraud or gross imposition by the client; and
(7) whether there are any other less stringent means to resolve the dispute or secure the fees owed.

Tillman at 464, 462 S.E.2d at 285; Anonymous at 252, S.E.2d at 805.

Based upon the facts as presented, none of the factors cited above appear to favor Lawyer A's retaining Client's file; several factors oppose such an action. Client intends to file an action or claim for the injuries that she incurred in the accident. Failure to provide the information contained in Client's file could very well prejudice her right in this action.

Moreover, in the case at hand, Lawyer A had a contingency fee agreement with Client. There is no information presented that this agreement allowed Lawyer A to charge an hourly rate for any time spent on the case. There is also no information presented that "the client is financially able but deliberately refuses to pay a fee that [s]he has clearly agreed upon and is due." Id. See also Matter of White, 328 S.C. 88, 92-93, 492 S.E.2d 82, 84-85 (1997) (Court held that retaining a client's file in order to have "a general assurance that whatever interest he may have would be protected" was an improper basis upon which to assert a lien where the record was clear that it "was not a situation where the client knew how much was owed and deliberately refused to pay it.") As such, Lawyer A should not withhold Client's file until or unless Client provides him with a letter of protection for his fees; rather, Lawyer A should promptly deliver the file to Client as requested.

With some exceptions inapplicable to the situation at hand, an attorney's fee can be based either upon an hourly or contingency fee basis. Rule 1.5(b) provides that "[w]hen the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, preferably in writing before or within a reasonable time after commencing the representation." In the case at hand, Lawyer A did enter into a fee agreement with Client, a contingency fee agreement. There is nothing in the facts presented to show that the fee agreement included a provision to allow Lawyer A to charge Client on an hourly basis for time spent on the case. As such, Lawyer A cannot charge Client by the hour for the time he invested in the case or withhold Client's file if Client refuses to pay.

While the Committee does not answer questions of substantive law, it notes for Lawyer A's benefit that depending on the language of the agreement he has with Client and the ultimate outcome of Client personal injury case, he may, however, be able to recover in quantum meruit for the reasonable value of the services that he rendered to Client.