Chapter Thirteen Attorneys' Fees and Litigation Expenses

• Library: Marital Litigation in South Carolina (SCBar) (2020 Ed.)

Chapter Thirteen ATTORNEYS' FEES AND LITIGATION EXPENSES

A. In General

"Attorney's fees are not recoverable unless authorized by contract or statute. Hegler v. Gulf Ins. Co., 270 S.C. 548, 243 S.E.2d 443 (1978)." S.C. Dep't of Soc. Servs. v. Tharp, 312 S.C. 243, 245, 439 S.E.2d 854, 856 (1994).

A lawyer may charge a client a set fee for handling a divorce in South Carolina or charge the client by the hour. The family court may order one spouse to pay the other spouse's attorneys' fees and litigation expenses. However, the family court determines the amount of the fee that an opposing party can be required to pay on the basis of the number of hours spent on the case and the hourly rate charged to the client.

B. Recovering Fees from Clients

1. In General

A lawyer's fee is based on the lawyer's contract with the client. If there is no contract, the lawyer is entitled to collect a fee based on quantum meruit, that is, an amount reflecting the value of the services to the client. In either case, the fee must be reasonable. Rule 1.5(A), Rules of Professional Conduct, Rule 407, SCACR.

An attorney-client relationship is by nature a fiduciary one. Weatherford v. Price, 340 S.C. 572, 532 S.E.2d 310 (Ct. App. 2000), citing Hotz v. Minvard, 304 S.C. 225, 403 S.E.2d 634 (1991); In Re Green, 291 S.C. 523, 354 S.E.2d 557 (1983); Royal Crown Bottling Co. v. Chandler, 226 S.C. 94, 83 S.E.2d 745 (1954)). The relationship requires a high degree of fidelity and good faith. Thus, fee arrangements between an attorney and a client are "examined with utmost care by the courts in order to avoid any improper advantage to the attorney." Weatherford, at 582, 532 S.E.2d at 315, quoting Royal Crown Bottling Co. at 105, 83 S.E.2d at 750.

It is the lawyer's responsibility to ensure that the client understands the fee arrangement, preferably by putting it in writing. Weatherford v. Price, 340 S.C. 572, 532 S.E.2d 310 (Ct. App. 2000), citing Royal Crown Bottling Co. v. Chandler, 226 S.C. 94, 83 S.E.2d 745 (1954); Coley v. Coley, 94 S.C. 383, 77 S.E. 49 (1913); Rule 1.5(b), Rules of Professsional Conduct, Rule 407, SCACR, "When the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation.").

2. Entitlement and Amount

a. Factors to Consider

In evaluating quantum meruit claims, the family court must consider all relevant factors surrounding the professional relationship to ensure that the fee awarded is fair to both the attorney and the client. Weatherford v. Price, 340 S.C. 572, 532 S.E.2d 310 (Ct. App. 2000). This includes consideration of the factors established by case law or statute as well as those set forth in the Rules of Professional Conduct, Rule 407, SCACR. The trial court must consider the following factors, among others, in determining a reasonable fee to award against a client:

1. nature, extent, and difficulty of legal services rendered;
2. time and labor devoted to the case;
3. professional standing of counsel;
4. fee customarily charged in the locality for similar services;
5. beneficial results obtained;
6. reasonableness of hours billed;
7. reasonableness of hourly rate;
8. special nature of the attorney/client relationship; and
9. actual value of the services to the client.

The first five factors were re-affirmed by the Supreme Court in Blumberg v. Nealco, Inc., 310 S.C. 492, 427 S.E.2d 659 (1993) (involving a fee award against a party where fees are set by contract or statute). Another factor listed in Blumberg, "contingency of compensation," does not apply in actions to recover fees from clients in domestic relations matters because the phrase refers to the ability of the party on behalf of whom the services were provided to pay the fee. It is relevant when considering an award against a third party, not a client. Weatherford v. Price, 340 S.C. 572, 532 S.E.2d 310 (Ct. App.2000), citing Glasscock v. Glasscock, 304 S.C. 158, 403 S.E.2d 313 (1991).

Factors six and seven were specifically listed in Glasscock v. Glasscock, 304 S.C. 158, 403 S.E.2d 313 (1991), although they do not add much because "reasonableness" will be determined in light of the first five factors.

Factors eight and nine were given some prominence in Weatherford v. Price, 340 S.C. 572, 532 S.E.2d 310 (Ct. App. 2000). The actual value of the services to the client is a particularly important factor in evaluating quantum meruit claims for fees, according to Weatherford.

Furthermore, the factors listed in Rule 1.5, Rules of Professional Conduct, Rule 407, SCACR must also be considered. They provide guidance to the bar in determining a reasonable fee, and a starting point in this analysis. Weatherford v. Price, 340 S.C. 572, 532 S.E.2d 310 (Ct. App. 2000).

Rule 1.5 reads in applicable part as follows:

(a) A lawyer's fee shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following:

(1) The time and labor involved, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal services properly;
(2) The likelihood that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) The fee customarily charged in the locality for similar legal services;
(4) The amount involved and the results obtained;
(5) The time limitations imposed by the client or by the circumstances;
(6) The nature and length of the professional relationship with the client;
(7) The experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) Whether the fee is fixed or contingent.

A failure to consider the factors in Rule 1.5 does not constitute an error of law, however. Weatherford v. Price, 340 S.C. 572, 581, 532 S.E.2d 310, 314-315 (Ct. App. 2000) cited Smith v. Haynsworth, Marion, McKay & Geurard, 322 S.C. 433, 472 S.E.2d 612 (1996), for the proposition that the Rules of Professional Conduct are not substantive law in the setting of an action for legal malpractice, although they may be relevant and admissible evidence in assessing the legal duty of an attorney in a malpractice action, provided the specific rule was intended to protect a person in the plaintiff's position or is addressed to the particular harm. A violation of the Rules is not negligence per se, or evidence of recklessness, thus, a fee agreement that violates Rule 1.5 is not unenforceable in all circumstances as against public policy.

Merely because the outcome is successful is not a basis for enhancing a fee. In Weatherford, an attorney helped a client recover machinery from Jamaica. There was no fee agreement between the lawyer and the client, and the attorney did not keep detailed time records, claiming that he always worked on a contingency basis. He sought a percentage of the value of the recovered property as his fee. The trial court awarded this, but the Court of Appeals reversed the award and remanded the case. The Court of Appeals determined that a contingency fee was inappropriate here because there was no risk that the lawyer would not be paid if the outcome was unsuccessful. A failure to recover the equipment might have affected the amount of a reasonable fee, but the lawyer would have been paid something on his quantum meruit claim for his efforts on behalf of the client. The Court of Appeals noted that the ruling was not intended to encompass situations in which courts have historically employed a multiplier, often referred to as the "Lodestar" approach. These situations typically involve an attorney working on a contingency fee arrangement who is terminated without fault prior to recovery, or in a setting in which fees are assessed against the adversary. Weatherford at 584 n.6, 532 S.E.2d at 317 n.6.

b. Contingency Fees Not Allowed

Contingency fees are not allowed in divorce cases. See Weatherford v. Price, 340 S.C. 572, 532 S.E.2d 310 (Ct. App. 2000); Glasscock v. Glasscock, 304 S.C. 158, 403 S.E.2d 313 (1991). In Glasscock, an attorney claimed a fee of $150,000, justifying the amount in excess of his hourly rate as an allowable increase for the beneficial results accomplished for his client. The Supreme Court stated: "We expressly disapprove any percentage fee agreement in a domestic case." Glasscock at 161, 403 S.E.2d at 315. The Supreme Court cited Rule 407(1.5)(d)(1), SCACR, which prohibits "any fee in a domestic relations matter, the payment or amount of which is contingent upon . . . the amount of alimony or support, or property settlement in lieu thereof. . . ." The Supreme Court agreed with the husband that a domestic lawyer's fee may not be contingent upon the amount recovered on the client's behalf.

Glasscock specifically overrules Darden v. Witham, 263 S.C. 183, 209 S.E.2d 42 (1974), to the extent that it is inconsistent with Glasscock. In Darden, the trial court had awarded $175,000 in attorneys' fees, justifying the award in part on the testimony of expert witnesses (other attorneys) who said that the appropriate amount of fees was in the range of $75,000 to $350,000. The Supreme Court approved the award, although Justices Littlejohn and Brailsford dissented in separate opinions because they thought the award was too high. Justice Littlejohn pointed out that the fee amounted to $233 per hour. Justice Brailsford noted that "the record brings conviction that this conception of the amount involved in the controversy and of the benefits resulting to Mrs. Witham dominated the evaluation of the expert witnesses and the court of the legal services furnished her." Darden at 197, 209 S.E.2d at 48. However, no member of the Court said that it was inappropriate to consider the benefits obtained in setting the fee award. This led to some confusion, which Glasscock ended by making it clear that beneficial results do not warrant charging a percentage fee.

The prohibition against contingency fees does not...