SC Lawyer, January 2006, #1. Money Issues Under the New Rules.

• Author: By John Freeman

South Carolina Lawyer

Ethics Columns.

SC Lawyer, January 2006, #1.

Money Issues Under the New Rules

South Carolina LawyerJanuary 2006Money Issues Under the New RulesBy John FreemanThe Supreme Court's latest amendments to the Rules of Professional Conduct took effect October 1, 2005. They're available on the Web at www.judicial.state.sc.us/courtReg/newrules/NewRules.cfm. The Rules and Comments basic content has not changed much, but some changes are significant. This month's column discusses changes affecting how lawyers deal with money-related issues.

Fee splitting approval

In re Hart, 1 S.C. 392, 605 S.E.2d 532 (2004), drove home lawyers' obligations to put their agreement in writing when fee-splitting under Rule 1.5(e). In Hart, the lawyer was publicly disciplined for not doing so (and other failings), even though no client had complained, all clients consented and the ethics error was self-reported. To Hart's get-it-in-writing message, the new amendments add the requirement that the client consent be "confirmed in writing" after the client has given "informed consent" to the arrangement, including approval of each lawyer's share.

Costs must be reasonable

Lawyers always have been required to charge reasonable fees. Now, under Rule 1.5(a) as amended, unreasonably high expense charges are now specifically a basis for discipline. This is not a change in the law, for charging clients for excessive expenses is simply a form of theft. For a case disbarring a lawyer who marked up expense items and charged clients for overhead items, see Matter of Jennings, 321 S.C. 440, 468 S.E.2d 869 (1996).

Contingent fee pitfalls

The writing requirement for contingent fee contracts has been tightened in two key respects. First, the fee agreement must now actually be signed by the client. Secondly, "[t]he agreement must clearly notify the client of any expenses the client will be expected to pay." Obviously, not every single expense item will be foreseeable in most cases, but the categories of expenses should be listed with as much precision as possible. Relying on the new language in Rule 1.5(c) requiring specific references to expense items for which the client must pay, the Illinois Court of Appeals held, in Guerrant v. Roth, 334 Ill. App. 3d 259 (2002), that if a lawyer wants to recover computeraided research expenses in a...