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South Carolina Supreme Court amends Rules of Professional Conduct to address the charging of advance fees by lawyers

Today the South Carolina Supreme Court adopted amendments to the Rules of Professional Conduct to address the charging of advance fees by lawyers.  Given recent confusing disciplinary opinions regarding the handling of minimum fees or non refundable retainers these new rules provide welcome clarity.

The primary change is the addition of Rule1.5(f), which reads:

(f)  A lawyer may charge an advance fee, which may be paid in whole or in part in advance of the lawyer providing those services, and treat the fee as immediately earned if the lawyer and client agree in advance in a written fee agreement which notifies the client:

(1) of the nature of the fee arrangement and the scope of the services to be provided;

(2) of the total amount of the fee and the terms of payment;

(3) that the fee will not be held in a trust account until earned;

(4) that the client has the right to terminate the lawyer-client relationship and discharge the lawyer; and

(5) that the client may be entitled to a refund of all or a portion of the fee if the agreed-upon legal services are not provided.

The amended and added comments make clear that this fee must still be reasonable [Comment 9 to Rule 1.16, RPC] and that “all such fees are subject to refund if the lawyer fails to perform the agreed-upon legal services.”  Rule 1.5, RPC, Comment 10.  No specific language is required to implicate Rule 1.5(f).  See comment 10, “The language describing such arrangements varies, and includes terms such as flat fee, fixed fee, earned on receipt, or nonrefundable retainer, but all such fees are subject to refund if the lawyer fails to perform the agreed-upon legal services.”

A few years ago I began routinely charging minimum fees after experiencing dozens of cases in which a party would retain me but then decide not to proceed with the case and ask me to refund the unearned retainer.  I would find myself conflicted out of subsequent cases and being responsible for client files for six years–all for a minimal fee.  Thus I typically charge a minimum fee (currently $900.00) for new clients, which I justify on three bases: 1) by undertaking the representation, I promise to handle the client’s problem and that commitment has some value; 2) by undertaking representation, I am required to store the client’s file for six years; 3) by undertaking representation, I am conflicted from representing the other party.  For cases in which I am retained on the eve of trial, I tend to charge much larger minimum fees, which I justify by my commitment to put aside other work and commitments to resolve the client’s case.

These new rules provide explicit guidance on the requirements for charging non refundable retainers or minimum fees.  South Carolina attorneys who have been hesitant to charge minimum fees due to concerns about how to do so without running afoul of the Rule of Professional Conduct should reconsider their decision.  South Carolina attorneys who charge such fees should modify their fee agreements immediately to comply with  Rule1.5(f).

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