Ethics Advisory Opinion 86-01
When a client repudiates a settlement the client authorizes, a lawyer must return the settlement check and advise the adverse party of the client's change in position. The lawyer is entitled to recover from the client any costs advanced on behalf of the client. He is also entitled to recover a legal fee for his services; but the amount of the fee will depend on the contractual arrangement between the lawyer and the client.
When a client repudiates a settlement entered into by his attorney at his request, (a) what responsibility would the client have with respect to the settlement check, (b) what right does the attorney have to collect costs incurred by the attorney, and (c) what right does the attorney have to collect a fee for his services rendered?
An attorney is the agent of his client. His actions normally bind his client and this situation is no exception. The enforcement of a settlement would be the duty of the adverse party with whom the settlement was made. Therefore, the attorney should return the settlement check to the party with whom he has been dealing and advise the party of his client's change in position with regard to the settlement. Normally, that adverse party would then proceed to seek enforcement of the settlement in the property form. At this point, the attorney would evaluate whether he should withdraw from continued representation of his client base don the events which have transpired. Under Canon 2, Ethical Consideration 2-32 provides that "a decision by a lawyer to withdraw should be made only on the basis of compelling circumstances, and in a matter pending before a tribunal he must comply with the rules of the tribunal regarding withdrawal." Disciplinary Rule 2-110 provides an explanation when withdrawal from employment is appropriate. Under subsection (C) concerning permissive withdrawal, subsections (d), (e) and (f) allow that when conduct renders it unreasonably difficult for the lawyer to carry out his employment effectively, or when the lawyer is required to engage in conduct which is contrary to his judgment, or where the client deliberately disregards an agreement or obligation as to legal fees or expenses, the attorney can apply for withdrawal.
With respect to collecting costs and expenses which an attorney has paid on his client's behalf, the attorney has the continuing right and responsibility to request payment of such costs and expenses as they arise. An attorney shall never gratuitously advance costs and expenses on behalf of his client. Burns v. Clayton, 237 S.C. 316, 117 S.E.2d 300 (1960). Canon 5 provides that a lawyer should exercise independent professional judgment on behalf of his client. Ethical Consideration 5-8 further provides that a financial interest in the outcome of litigation also results if money advances are made by the lawyer to his client. Although this assistance generally is not encouraged, there are instances where it is not improper to make loans to a client. Examples are costs and expenses of litigation. DR 5-103(B) further provides that a lawyer may advance or guarantee the expenses of litigation including court costs, expenses of litigation, expenses of medical examination, and costs of obtaining and presenting evidence providing that the client remains ultimately liable for such expenses.
The right to collect a fee by an attorney from his client is governed largely by the arrangement entered into between the attorney and the client. In the event the fee is based on hourly remuneration, the attorney should bill for the fees earned on some regular or periodic basis. Where the fee is contingent on the favorable outcome of the matter being handled, the decision on when to request payment for services rendered may rest with the wording of the contingent fee contract. Assuming, however, that the contract provides for payment of a percentage of a settlement obtained on behalf of the client, the attorney may request payment of his fee when the settlement is negotiated at the client's request. If the client thereafter repudiates the settlement, the attorney has a right to bill his client for the fee earned and seek whatever statutory lien may be available to him. Disciplinary Rule 5-103(A)(1) acknowledges that the acquisition of a lien to protect one's fee is an exception to the generally avoided practice of acquiring an interest in litigation. With respect to contingency fee contracts, Ethical Consideration 2-19 points out that it is usually beneficial to reduce to writing the understanding of the parties with regard to the fee, particularly when it is contingent. It is also important to note that Ethical Consideration 2-23 cautions attorneys to be zealous in their efforts to avoid controversies over fees with clients and such controversies should e resolved amicably if at all possible.