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2012-07-30-01

The Supreme Court of South Carolina

RE: Amendments to the Rules of Professional Conduct, Rule 407, South Carolina Appellate Court Rules

Appellate Case No. 2011-198067


ORDER


Rules 1.5, 1.15, and 1.16, RPC, Rule 407, SCACR, are hereby amended as set forth in the attachment to this order.  The rule amendments address the charging of advance fees by lawyers. 

The amendments are effective immediately. 

s/Jean H. Toal                                  C.J.

s/Costa M. Pleicones                          J.

s/Donald W. Beatty                             J.

s/John W. Kittredge                             J.

s/Kaye G. Hearn                                  J.

Columbia, South Carolina
July 30, 2012


Rule 1.5, RPC, Rule 407, is amended by adding Paragraph (f):

(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.

Comment 4 to Rule 1.5 is amended to provide:

Terms of Payment

[4]  A lawyer may require advance payment of a fee, but is obliged to return any unearned portion.  A lawyer may accept property in payment for services, such as an ownership interest in an enterprise, providing this does not involve acquisition of a proprietary interest in the cause of action or subject matter of the litigation contrary to Rule 1.8(i).  However, a fee paid in property instead of money may be subject to the requirements of Rule 1.8(a) because such fees often have the essential qualities of a business transaction with the client.

The following Comments are added to Rule 1.5:

Payment of Fees in Advance of Providing Services

[10]  A lawyer may treat a fee paid in advance of providing services as the property of the lawyer and deposit the fee in the lawyer's operating account, rather than hold the fee in trust, if the client agrees in a written fee agreement which complies with Paragraph (f)(1) through (5), and the fee is reasonable under the factors listed in Rule 1.5(a).  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. 

[11]  When the lawyer has regularly represented a particular client, the written fee requirement in Paragraph (f) may be satisfied by a single agreement with the particular client that is applicable to multiple current or future matters or files, without the need for the lawyer and client to enter into a new written agreement for each individual matter.

Paragraph (c) of Rule 1.15, RPC, Rule 407, SCACR, is amended to provide as follows:

(c)  A lawyer shall deposit into a client trust account unearned legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred, unless the lawyer and the client have entered into a written agreement concerning the handling of fees paid in advance pursuant to Rule 1.5(f).

Comment 9 to Rule 1.16, RPC, Rule 407, SCACR, is amended to provide as follows:

Assisting the Client Upon Withdrawal

[9]  Even if the lawyer has been unfairly discharged by the client, a lawyer must take all reasonable steps to mitigate the consequences to the client.  The lawyer may retain papers as security for a fee only to the extent permitted by law.  See Rule 1.15.  When permitted, a nonrefundable retainer still must comply with Rule 1.5 and not be unreasonable.