The South Carolina Bar’s Ethics Advisory Committee presents the following, which consists of a collection of the most commonly submitted questions and its summary opinion on the ethical considerations raised by these issues that arise on a frequent basis. Just as with the Committee’s formal opinions, however, please be aware that this committee has no disciplinary authority. Lawyer discipline is administered solely by the South Carolina Supreme Court through its Commission on Lawyer Conduct. As such, the information presented below is merely advisory in nature, although it is intended to assist the reader in finding relevant controlling authority in many instances, including the South Carolina Rules of Professional Conduct (RPC) for lawyers, which can be found in their entirety within Rule 407 of the South Carolina Appellate Court Rules.

1.  How long must a lawyer keep client files?


2.  What are a lawyer’s ethical obligations upon receiving a client's demand for delivery of the "client file"?


3.  What are a lawyer's responsibilities regarding payment of court reporter? 


4. A lawyer receives a subpoena for documents from the file of a former client, who is not a party to the litigation. The former client has not consented to the production of any documents. May the lawyer produce non-privileged documents from the file or must the lawyer object to the subpoena and refuse to comply absent a further court order compelling production?


5. What are a lawyer’s ethical obligations when the lawyer receives notice of a lien or assignment of client funds by a third party


6. May an out-of-state lawyer file a deed in South Carolina?


7. How long do I have to wait before I can disburse money from my trust account (provided the funds are not subject to a dispute)?


8. May a lawyer split the costs of advertising with a non-lawyer?


9. What steps should a lawyer take to protect client property when a client cannot be found?


10. Client has terminated the representation by lawyer, and is demanding a return of fees paid to lawyer.  What are a lawyer’s obligations when some or all of the fees paid by the former client were considered “nonrefundable” when they were paid to lawyer?


Answers

1.  How long must a lawyer keep client files?

Absent any obligation to retain a client’s file imposed by law, court order, or rules of a tribunal, a lawyer shall securely store a client’s file for a minimum of six years after the termination of the representation unless: (1) the lawyer delivers the file to the client or the client’s designee; or (2) the client authorizes destruction of the file in a writing signed by the client, and there are no pending or threatened legal proceedings known to the lawyer that relate to the matter. Rule 1.15(i).

A lawyer may convert files to an electronically stored format, provided the lawyer is capable of producing a paper version if necessary. A lawyer who elects to destroy files shall do so in a manner which protects client confidentiality. 

2. What are a lawyer’s obligations upon receiving a client’s demand for delivery of the “client file?”?

There is no definition of a “client file” within the Rules of Professional Conduct. The rules instead only generally state that upon termination of representation, a “lawyer shall take steps to the extent reasonably practicable to protect a client’s interests” which includes “surrendering papers and property to which the client is entitled.”  Rule 1.16(d). Even though “lawyer may retain papers relating to the client to the extent permitted by other law,” the law is not definitive as to the parameters of such permission. It is generally accepted that the client is entitled to whatever documentation and work product for which the client has already completed payment to the lawyer.

Further, while the lawyer may (and should as a best practice) retain copies of all documents produced in response to client’s request for the file, the cost of the lawyer’s initial delivery to the client of the “client file” and costs associated with the lawyer retaining a copy thereof must be borne by the lawyer absent prior agreement of the client to be responsible for such costs.  The Committee opines that the lawyer may charge the reasonable costs of copying for subsequent requests by the Client. 

3. What are a lawyer’s responsibilities regarding payment of court reporters? 

The South Carolina Supreme Court has held that failure to pay a court reporter’s fee in a timely fashion is a violation of Rule 8.4(e) regardless of whether the client has agreed to be responsible for the costs of litigation. In re Jackson, 365 S.C. 176, 617 S.E.2d 123 (2005).  Payment of other persons providing services in furtherance of an attorney’s request, including, but not limited to, mediators and expert witnesses, are likely analogous.  

4.  A lawyer receives a subpoena for documents from the file of a former client, who is not a party to the litigation. The former client has not consented to the production of any documents. May the lawyer produce non-privileged documents from the file or must the lawyer object to the subpoena and refuse to comply absent a further court order compelling production? 

The lawyer has a continuing duty of confidentiality for former clients that is set forth in Rule 1.9.  Just like the duty of confidentiality for current clients, this duty for former clients is different from, and is broader than, the attorney-client privilege or the work product doctrine. Pursuant Rule 1.9, which references 1.6, disclosure would not be permitted without the client’s permission or a court order. The lawyer should assert the protections of Rule 1.9 on behalf of the former client in response to the subpoena and refuse to produce any documents absent a further court order compelling production. 

5. What are a lawyer’s ethical obligations when the lawyer receives notice of a lien or assignment of client funds by a third party?

 Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person and promptly deliver any funds or other property that the client or third person is entitled to receive.  Rule 1.15(d).  However, ownership of funds that come into the lawyer’s possession are often in dispute, whether because of challenges to asserted liens or assignments or for other reason, and a lawyer may have a duty under applicable law to protect third-party claims against wrongful interference by the lawyer’s client.  In such situations, when “a lawyer is in possession of property in which two or more persons (one of whom may be the lawyer) claim interests, the property shall be kept separate by the lawyer until the dispute is resolved.”  Rule 1.15(e).  However, the lawyer must promptly distribute any portions of the property which are not in dispute. Id.

A lawyer “should not unilaterally assume to arbitrate a dispute between the client and the third party.”  Rule 1.15, Cmt. 4.  However, if the lawyer believes in good faith that the asserted interest is frivolous, then the lawyer may refuse to protect the claim of the third party by holding funds in trust.  Because there is much room for debate in such situations, and substantive law rather than rule of professional conduct may ultimately be determinative as to competing claims of interest in proceeds within the lawyer’s possession, a lawyer who refuses to protect a third party claim of interest based on a frivolity determination by the lawyer is placing himself at risk. See SC Bar Ethics Advisory Opinion 16-01.  When there are substantial grounds for dispute as to the person entitled to the funds, the lawyer may file an action to have a court resolve the dispute.  Rule 1.15, Cmt. 4.

6. May an out-of-state lawyer file a deed in South Carolina?

Generally, no. Filing deeds is the practice of law in South Carolina and, therefore, may only be done under the supervision of a lawyer licensed to practice in South Carolina, unless one of the exceptions of Rule 5.5(c), South Carolina Rules of Professional Conduct, applies.

7.  How long do I have to wait before I can disburse money from my trust account (provided the funds are not subject to a dispute)? 

A lawyer shall not disburse funds from a trust account unless the funds to be disbursed have been deposited in the account and are collected funds, or at least 10 days have passed and the lawyer has not received any notice indicating the funds were not collected. Notwithstanding that requirement, a lawyer may disburse funds from a trust account at the lawyer’s risk when the deposit is made:

  •  in cash or other items treated by the depository institution as equivalent to cash;
  •  by verified and documented electronic funds transfer;
  •  by a properly endorsed government check;
  • by a certified check, cashier’s check, or other check drawn by a depository institution or an insurance company, provided the insurance company check does not exceed $50,000;
  •  by any other instrument as long as the deposit is $5,000, or less, and only if the lawyer has a reasonable belief that the deposit will be collected promptly. 

See Rule 1.15 and comments 5 – 8 thereto for more specific information and instruction.

8.  May a lawyer split the costs of advertising with a non-lawyer

Rule 7.2(e) generally prohibits Lawyer from having another lawyer not in the same firm pay, directly or indirectly, any part of the cost of an advertisement unless certain detailed disclosures are made regarding the relationship between the two lawyers.  However, there is no equivalent restriction or obligation that would preclude a non-lawyer, such as a chiropractor or accountant, from paying for such advertisements. If the advertisement by the third-party is to include an endorsement, the ad would have to disclose the existence of such “payment” to the third-party to be in compliance with Rule 7.1(d)(2), although that rule does not require explanation as to the form or nature of such payment. However, the lawyer should be cautious and avoid any exclusive referral arrangements or interference by the third party in the management of the lawyer’s cases. Also, the lawyer is still responsible for the content of the advertisement subject to the RPC. See Ethics Opinion 18-02 for more information.

9.  What steps should a lawyer take to protect client property when a client cannot be found?

A lawyer is obligated to “abide by a client's decisions concerning the objectives of representation and, as required by Rule 1.4, shall consult with the client as to the means by which they are to be pursued.” Rule 1.2(a).  Further, a lawyer “shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive.” When a client cannot be located, however, a lawyer may take only such action as is impliedly authorized to carry out the representation.  Rule 1.2(a). Such action would necessarily include diligent efforts to locate a client who has effectively disappeared. Continued inability to locate and communicate with the client would eventually constitute “good cause” for withdrawal from representation pursuant to Rule 1.16(b).

When the relationship between lawyer and client terminates, regardless of reason, the lawyer must take steps to the extent reasonably practicable to protect a client’s interests. Rule 1.16(d). That routinely includes return of all files, funds, and any other property belonging to the client. The responsibility for accounting for unclaimed escrow funds is indefinite. Accordingly, when a client cannot be located, the lawyer is tasked with holding the client’s property until such time as either the client, or some person or entity authorized to speak on the client’s behalf, directs further action by the lawyer.

Alternatively, after diligent attempts by the lawyer to disburse the funds to the rightful owner thereof have proved unsuccessful for the requisite period of time, the lawyer may follow the statutory procedure set forth in the Uniform Unclaimed Property Act, S.C. Code Ann. § 27-18-10 (1976), et seq. That statute allows for funds to be deemed abandoned if they remain unclaimed for longer than five years. In compliance with that statute, such funds may then be delivered to the custody of the State. See Ethics Advisory Opinion 02-05.

10.  Client has terminated the representation by lawyer, and is demanding a return of fees paid to lawyer. What are a lawyer’s obligations when some or all of the fees paid by the former client were considered “nonrefundable” when they were paid to lawyer?

The language describing such arrangements varies, and includes terms such as flat fee, fixed fee, earned on receipt, or nonrefundable retainer.  Regardless of label, a lawyer may enter a fee arrangement that allows the lawyer to treat fees paid in advance of performing legal services as immediately earned only if the fee agreement is reduced to writing.  The written agreement must notify the client of the following:

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

(2) 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.  RPC, Rule 1.5(f).

Upon termination of representation, a lawyer must refund “any advance payment of fee or expense that has not been earned or incurred” Rule 1.16(d).  That is true regardless of label, including fees identified as “nonrefundable,” although a “lawyer may retain a reasonable nonrefundable retainer.” Id.

The factors to be considered in determining the reasonableness of a fee are many, and include but are not limited to whether the fee is fixed, the time and labor expended, the novelty or difficulty of the representation, the skill requisite to perform the services properly, the fee customarily charged for similar legal services, the amount of fee and results obtained, time limitations imposed by the client or circumstances, and the experience and reputation of the lawyer performing the services.  See Rule 1.5(a).