SC Lawyer, November 2005, #6. Paying litigation helpers.

• Author: By John Freeman

South Carolina Lawyer

Ethics Columns.

SC Lawyer, November 2005, #6.

Paying litigation helpers

South Carolina LawyerNovember 2005Paying litigation helpersBy John Freeman President Kennedy once observed, "Victory has a thousand fathers, but defeat is an orphan." So it goes in big, expensive, hotly contested litigation where there is no recovery to split up. The client who signed your retainer agreement agreeing to pay the "expenses and costs of litigation," shot you a stunned, cold look upon leaving the courtroom and uttered just two words, "Appeal it."

A couple months before trial, your client commenced ignoring your invoices, and now you are sensing he is avoiding taking your phone calls. Meanwhile, invoices are streaming in from a variety of service providers, including court reporters who prepared deposition transcripts; two mediators, one for a court-ordered mediation and a second for a likewise unsuccessful mediation you and the other side's lawyer set up on the eve of trial; trial preparation consultants who conducted two mock trial focus group sessions for you and who prepared our trial exhibits; and both of the expert witnesses you used at trial. Meanwhile, time is running on the deadline for filing your notice of appeal, which will necessitate paying for a transcript of record and related expenses. You do not foresee your AWOL client stepping up to pay these costs.

The foregoing facts implicate a number of lawyering principles, some grounded in substantive law, some ethical, some based on common sense. These principles are not hard to see or comprehend, assuming the lawyer looking for them is clear-eyed. Unfortunately, too often the lawyer's vision is clouded by too much thought of self, specifically: self-pity, self-righteousness and a self-serving view of others' rights.

Get your court reporters paid. If anything is clear in the South Carolina law of lawyering, it is that lawyers must see that court reporters' bills are paid. It is true, of course, that trial lawyers function as agents for disclosed principals, and that, under agency law, where a contract is made with a known agent acting within the scope of his or her authority for a disclosed principal, the contract is that of the principal alone and the agent is not liable for the breach of such contract. See Green v. Industrial Life & Health Insurance Co., 199 S.C. 262, 18 S.E.2d 873 (1942). It is equally true that only a fool would rely on this black letter legal principle, for it has no validity in South Carolina when it comes to lawyers' duty to pay court reporters. See Matter of Jackson, 365 S.C. 176, 617 S.E.2d 123 (2005) (relying on Rule 1.15 and citing cases). A court reporter simply must be paid promptly; if the client will not do it, the lawyer needs to step up and get the invoice satisfied post haste.

What about mediators? A mandatory mediation undertaken pursuant to court rule should be viewed as a cost of the action, with the court-approved and sanctioned mediator a type of "officer of the court" entitled to payment as a form of court costs under S.C. Code Ann. § 15-37-10. The client's nonpayment would not lead to the lawyer having to discharge the obligation as a general rule. This assumes the lawyer has not held himself or herself out to the mediator as a contracting party, surety or guarantor. As a technical, agency-contract law issue, the same would hold true for mediators hired to conduct voluntary mediations. But what sensible lawyer would prefer to see an accomplished, well-meaning mediator go unpaid if stiffed by the lawyer's wayward client? Life is short. The very best mediators are in great demand. What sensible lawyer wants to squander good will built with an important professional contact over a relatively modest bill owed for services rendered? Why get crosswise with a respected, hard-working mediator over at most a low four-figure bill? To repeat: life is short.

Consultants, investigators and experts. The starting point with payment obligations with these players is the contract by which they were hired. If the contract is clear that the client, not the lawyer, is on the hook for payment, then the financial problem facially belongs to the client. Lacking a contract claim, the service provider has no claim against the lawyer absent reliance on a representation by the lawyer that he or she will assure payment. Conn. Bar Ass'n, Informal Opinion Number 02-10, 2002 WL 31971805 (Sept. 19, 2002). In domestic cases, services rendered by an investigator or expert may be recoverable as "suit money." See Brunner v. Brunner, 296 S.C. 60, 62, 370 S.E.2d 614, 616 (1988) ("The decision of whether to award expert witness fees rests within the sound discretion of the family court."); Stevenson v. Stevenson, 295 S. C. 412, 368 S. E. 2d 901 (1988) (awarding investigator's fees as "suit money"). That such expenses may be recoverable by the client as court costs suggests they are not counsel's responsibility absent a special contractual arrangement or an agreement on the lawyer's part to act as surety or guarantor.

Assume that the client will not pay these service providers and you do so in order to keep the case on track. What about paying these helpers' bills and then withholding their work product from the client either to coerce the client into paying your bill or to compel reimbursement for your advanced expenses? Such behavior amounts to asserting a retaining lien to the client's detriment. Use of retaining liens to prejudice a client's legal rights is ill advised. See e.g., Lawyer's Right to Withhold Expert Reports Where the Client Fails to Pay for Them, Ethics Op. No. 2004-1, 2004 WL 225015 (Alaska Bar Ass'n Ethics Comm. 2004) ("[A]n expert or investigator's report is part of the client's file A lawyer may not withhold such reports to serve the lawyer's own interest in getting paid or reimbursed for the cost of the report if it will prejudice the client.").

The basic rule when it comes to avoiding financial problems with clients and service providers is simple: document the parties' contractual relations carefully, and get the client to pay enough into escrow up front to cover foreseeable costs. Stated differently, prior planning prevents problems.

The duty to appeal. In the opening hypothetical, the client demanded the lawyer appeal the adverse verdict. Must you? Assuming reasonable grounds to appeal exist, the trial lawyer's duty to handle an appeal largely hinges on the scope of representation laid out in the lawyer's retainer agreement. A contract disavowing any duty to handle an appeal is very likely to be honored. A retainer agreement that is silent or ambiguous about undertaking any appeals carries serious risk for the lawyer. Client abandonment is a nasty charge to defend against. An ambiguous retainer agreement is apt to be construed in favor of the client and against the lawyer. At a minimum, a lawyer who does not want to handle the appeal in such a case should protect the client's interests by filing a notice of appeal for the client and then seek court permission to withdraw.