Can a lawyer hold a former client's file, including research and meeting notes, until an unpaid bill is paid?

Plain-English summary

The inquiry involved an attorney who began representing a client in a settlement with the IRS, performed research on settlement options, and held discussions with the IRS, then terminated the relationship before drafting a memo and without discussing the research findings with the client. The client had a large outstanding invoice that included the research time. The lawyer asked whether he had to give the client the research and his meeting and investigation notes before the invoice was paid.

The committee analyzed Rule 1.16(d), under which a withdrawing or dismissed lawyer must take reasonably practicable steps to protect the client's interests, including surrendering papers and property to which the client is entitled, while being allowed to retain papers to the extent permitted by law. It explained that the South Carolina Supreme Court has held that asserting a retaining lien is not a per se ethical violation, but the lawyer must evaluate his interest against the client's and others', weighing factors drawn from Anonymous, White, and Tillman: the client's financial situation and sophistication, the reasonableness of the fee, the client's understanding and agreement to pay, whether the lien would prejudice important rights, whether forgoing it would result in fraud or gross imposition, and whether less stringent means exist to secure the fee.

Applying those factors, the committee concluded that a key reason to forgo a retaining lien is serious prejudice to the client in asserting an important right; because IRS negotiations would not be unusual to implicate the client's important rights, and other less stringent collection means exist, the attorney should turn over the file on the client's request, assuming withholding it would substantially and adversely affect the client. As to which documents, the committee, citing its earlier Advisory Opinion 92-37 and authorities including the Restatement (Third) of the Law Governing Lawyers § 43, concluded the attorney should return the research materials and notes of meetings and follow-up investigations, except notes reflecting the lawyer's personal impressions of the client.

In practice

The committee concluded that, under the South Carolina rule as it stood at the time of the opinion, a lawyer's right to assert a retaining lien for unpaid fees is not absolute: under Rule 1.16(d) the lawyer must weigh the established factors and may not withhold a former client's file where doing so would substantially and adversely affect the client. On these facts, the committee said the attorney should return the file on request, including research materials and meeting and investigation notes, withholding only notes that reflect his personal impressions of the client.

Common questions

Q: Can a lawyer keep a former client's file until the bill is paid?

A: Not if it would prejudice the client. The committee concluded that under Rule 1.16(d) the lawyer may not withhold the file where doing so would substantially and adversely affect the client.

Q: What factors decide whether a retaining lien is proper?

A: The committee listed seven: the client's financial situation; sophistication; reasonableness of the fee; the client's understanding and agreement to pay; whether the lien would prejudice important rights; whether forgoing it would allow fraud or gross imposition; and whether less stringent means exist to secure the fee.

Q: Does the lawyer have to hand over research notes and meeting notes?

A: Yes, on these facts. The committee concluded the attorney should return the research materials and notes of meetings and investigations, except notes reflecting the lawyer's personal impressions of the client.

Background and rules framework

The opinion interprets South Carolina RPC 1.16(d) (protecting a client's interests on termination, including surrendering papers and property to which the client is entitled), corresponding to Model Rule 1.16(d). It applies South Carolina retaining-lien case law (In re Anonymous Member of the S.C. Bar, Matter of White, Matter of Tillman) and the lawyer's earlier Advisory Opinion 92-37, and references Restatement (Third) of the Law Governing Lawyers § 43.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.16(d) / Model Rule 1.16(d): protecting a client's interests on termination; surrendering papers and property.

Cases:

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

Other opinions cited:

• S.C. Bar Ethics Advisory Op. 92-37 (lawyer's notes of personal impressions of the client).
• Ohio Op. 92-8; State Bar of Michigan Op. CI-926 (work product to be surrendered).

See also

• TX Ethics Op. 657: Returning a criminal client's file, costs and format
• TX Ethics Op. 684: Departing lawyer taking the firm's only copy of client files

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-02-11/

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 02-11

Attorney began to represent Client in a settlement agreement with the IRS. Attorney performed research relating to the settlement options and discussions with the IRS. Prior to drafting a memo concerning the research findings, Attorney terminated the relationship with Client. Attorney did not discuss the research findings with the Client. Client has a large outstanding invoice that includes the time the Attorney spent on the research.

Questions:

1. Until the outstanding invoice is paid, must Attorney give the Client the research if Attorney has not been paid for the research or discussed his findings with the client?
2. Until the outstanding invoice is paid, must Attorney give Client copies of Attorney's notes of meetings with Client and follow up investigation of Client's representations?

Summary:
Attorney may not withhold the file of a former client until the outstanding invoice is paid if doing so will prejudice the client. For example, the client would not suffer prejudice if the client could hire another attorney to do the research without substantial effect on the IRS matter. Assuming the attorney must deliver the file, the attorney should deliver the research and notes of meetings, except to the extent the notes reflect Attorney's personal impressions of Client.

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 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). The Court has stated that a lawyer considering the assertion of a retaining lien is required "'to evaluate his or her interest against interests of the client and of others who would be substantially and adversely affected by assertion of the lien.'" Matter of White, 328 S.C. 88, 92, 492 S.E.2d 82, 84 (1997) (quoting Anonymous at 252, 335 S.E.2d at 805) (internal citations omitted). Factors to be considered include:

(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.

Matter of Tillman, 319 S.C. 461, 464, 462 S.E.2d 283, 285 (1995); Anonymous at 252, S.E.2d at 805.
In the case at hand, Attorney has not indicated why he has terminated his relationship with Client; therefore, for the purposes of this opinion, the Committee assumes that he was justified in doing so. The facts also provide that Client has not paid Attorney for all the services Attorney has provided. "Even though a lawyer may be justified in declining to devote further time and expense in behalf of a non-paying client, it does not follow in all cases that he is ethically justified in exercising an attorney's lien." Anonymous at 253, S.E.2d at 805.

A key reason to forego retaining a client's file and imposing an attorney's lien is if the action would seriously prejudice the client in asserting an important right. Id. For example, the client would not suffer prejudice if the client could hire another attorney to do the research without substantial effect on the IRS matter. While all facts regarding Attorney's representation of Client have not been provided to the Committee, it would not be unusual if negotiations with the IRS impacted on important rights of Client. Additionally, there are other less stringent means available for Attorney to try to recover the fees owed. Based upon the facts as presented, and assuming that withholding the file in this situation would substantially and adversely affect Client, it is the Committee's opinion that Attorney should, upon request of Client, turn over Client's file.

Returning Client's file raises the question of what documents should be returned along with the file. The inquiry specifically addresses two items: (1) research materials and (2) notes of meetings with Client and follow-up investigations.
In the absence of an agreement between a lawyer and client, an earlier Ethics Advisory Opinion provides some guidance as to some papers that should be turned over to the client and some that may be retained. With respect to Attorney's notes, he would not be required to provide notes in his file regarding his personal impressions of the client. Advisory Op. 92-37. However, neither this opinion nor South Carolina case law specifically deals with research materials. In his article entitled Turning Over the "The File," John Freeman addresses the issue of who owns the lawyer's work product. Citing an opinion by the Supreme Court of Ohio's Board of Commissioners on Grievances and Discipline, which in turn cites a Michigan ethics ruling, Freeman notes that the Michigan ruling requires lawyers to "surrender to the client or substitute counsel the lawyer's work product for which the client is obligated to pay a fee including, but not limited to, all file interview notes, research notes, and unfiled but prepared pleadings. S.C. LAW., July-Aug., 1998, at 10 (citing Ohio Op. 92-8, 1992 WL 739411 (April 10, 1992); State Bar of Michigan, Op. CI-926 (1983).

The Restatement of the Law Governing Lawyers takes the position that lawyers may properly retain unpaid-for documents provided the client would not suffer unreasonable harm. Section 43(1) of the Restatement (Third) of the Law Governing Lawyers states: "A lawyer may decline to deliver to a client or former client an original or copy of any document prepared by the lawyer or at the lawyer's expense if the client or former client has not paid all fees and disbursements due for the lawyer's work in preparing the document and nondelivery would not unreasonably harm the client or former client." It is unclear whether South Carolina courts would recognize this section. Even so, it does not seem applicable to the current inquiry, which deals with research materials and file notes rather than the original or copy of a document.

As such, it would appear that Attorney should return, upon Client's request, the research materials and notes of meetings with Client and follow-up investigations to the extent that those notes do not include the lawyer's personal impressions of Client, unless the client would not suffer prejudice.