End-of-life notice: American Legal Ethics Library
As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.
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South Carolina Legal Ethics
1.8:100 Comparative Analysis of SC Rule
In Rule 1.8(i) the word "personally" has been inserted before "represent a client". South Carolina has added Rule 1.8(k):
(k) In any adversarial proceeding, a lawyer shall not serve as both an advocate and an advisor to the hearing officer, trial judge or trier of fact. A lawyer serving as an advocate in a particular matter shall not directly or indirectly engage in ex parte communication with the hearing officer, trial judge or trier of fact concerning the proceeding.
The South Carolina comments are identical to the comments to Model Rule 1.8, with the following additions:
Paragraph (h) is not intended to apply to customary qualifications and limitations in legal opinions and memoranda.
Family Relationships Between Lawyers
. . . The South Carolina version slightly modified the model version by inserting "personally".
Serving as an Advocate and Advisor in Adversarial Proceedings
This provision addresses those situations which arise primarily in administrative proceedings in which a lawyer who serves as an advisor to that body is permitted to prosecute matters which are adjudicated by that body. This rule prohibits a lawyer who has served or is serving as an advisor on a particular matter from also prosecuting or defending that particular matter. It does not prevent one lawyer from prosecuting an administrative matter in which another lawyer in the same office serves as an advisor to the hearing body, as long as the lawyers do not communicate with one another or share information about the particular case. Communications by the prosecuting lawyer and the advising lawyer with respect to a particular matter would operate as an indirect ex parte communication with the hearing officer, trial judge or trier of fact, because the information gained by the advising lawyer would be available to the hearing officer, trial judge or trier of fact.
By way of example only:
(A) A lawyer assigned to serve as an advisor to the Board of Dentistry may not prosecute a disciplinary action against Dentist Doe while at the same time he advises the Board on matters relative to the Doe matter. He may advise the Board on the Doe matter while another lawyer employed by the same employer prosecutes the Doe matter, but the two lawyers may not share information with one another, except in the regular course of discovery, with notice to Doe. The lawyers must operate as if they are in separate firms, even though they are employed by a common employer.
(B) General counsel employed by a state-supported university may not defend the university in a dispute brought by an employee under the university's internal employee grievance system while at the same time serving as an advisor to the internal panel which is adjudicating the employee grievance matter. One lawyer in general counsel's office may advise the employee grievance body on the particular matter while another lawyer in the same office defends the university in the matter, as long as the two lawyers do not share information concerning the matter. The lawyers must operate as if they are in separate firms, even though they are employed by a common employer.from representing an adjudicatory body in a particular matter while another lawyer in the same law firm prosecutes or defends the same matter before the adjudicatory body. Because of the nature of public employment of lawyers, however, some accommodation must be made to permit the sharing of responsibilities among lawyers of a common employer. The erection of a "Chinese wall" regarding sharing of information among lawyers employed by a common employer permits the efficient carrying out of administrative functions, while at the same time protecting the rights of individuals whose rights are being adjudicated in the proceedings.
1.8:200 Lawyer's Personal Interest Affecting Relationship
Sexual relationships with clients can lead to disciplinary sanctions, especially if the relationship prejudices the legal position of the client. A lawyer was suspended in In re McBratney, 320 S.C. 416, 465 S.E.2d 733 (1996) for misconduct including a sexual relationship with a domestic relations client. The adulterous relationship caused the other spouse to reject a settlement agreement that already had been negotiated. In addition to an ethical grievance, the lawyer faced malpractice claims after the client signed a revised, less favorable agreement, against her best interests. See also In re Nelson, 333 S.C. 498, 510 S.E.2d 718 (1999) (improper sexual advances toward employees, coworkers, potential client, and relative of client); In re Hawkins, 320 S.C. 57, 463 S.E.2d 92 (1995) (lawyer violated prior Code of Professional Responsibility by representing client in personal and business matters while involved in an extramarital affair with client's spouse); In re Bellino, 308 S.C. 130, 417 S.E.2d 535 (1992) (romantic overtures to vulnerable clients amount to abuse of power); In re McDow, 291 S.C. 468, 354 S.E.2d 383 (1987) (adulterous relationship with domestic client prejudiced client); John Freeman, Sex with Clients - A Recipe for Disaster, S.C. LAW., Sept.-Oct. 1996 at 10.
Rule 1.8(a) requires that a lawyer tread with the utmost care when engaging in a business transaction with a client. See In re Conway, 305 S.C. 388, 409 S.E.2d 357 (1991). The transaction must be fair and reasonable to the client, and the terms of the transaction must be provided in writing to the client "in a manner which can be reasonably understood." See In re Belser, 269 S.C. 682, 239 S.E.2d 492 (1977). Further, the client must be given a reasonable opportunity to seek independent counsel, and the client must consent in writing. See In re Reynolds, 335 S.C. 165, 515 S.E.2d 927 (1999) (engaging in sexual relations with wife of client; borrowing money from same client and executing loan repayment agreement but failing to obtain written consent as required under Rule 1.8). See also S.C. Bar Ethics Adv. Ops. # 90-16 (contents of required disclosure).
Unfair or fraudulent dealings with clients have resulted in professional discipline. See In re Edwards, 323 S.C. 3, 448 S.E.2d 547 (1994) (lawyer found buyer for client's property, but failed to disclose lawyer's financial interest in the buyer, which resold property one month later at twice original purchase price); In the re Bowers, 303 S.C. 282, 400 S.E.2d 134 (1991) (lawyer disbarred after borrowing hundreds of thousands of dollars from clients on numerous occasions for speculative investments and gambling, while misrepresenting purpose of loans); In re Easler, 275 S.C. 269, 269 S.E. 2d 765 (1980) (lawyer disbarred after using third person to purchase property for lawyer from client at well below fair value); In re Spence, 265 S.C. 64, 216 S.E.2d 870 (1975) (misrepresentation of stock value used for personal gain of lawyer). See also In re Berry, 320 S.C. 273, 464 S.E.2d 342 (1995) (lawyer disciplined for, among other serious violations, borrowing money from client, although circumstances of loan unclear). In a 1991 disciplinary matter in which a lawyer was disbarred for misappropriating funds of a corporation in which the lawyer served both as president and as legal counsel, the court cautioned the bench and bar of the dangers of engaging in business transactions with a client and noted that a lawyer "does not lose his fiduciary responsibility as an attorney in a business context." In re Conway, 305 S.C. 388, 393, 409 S.E.2d 357, 360 (1991).
Transactions with minors or uneducated clients are likely to be closely scrutinized for fairness. See In re Rollins, 281 S.C. 467, 316 S.E.2d 670 (1984) (risk of lawyer mixing personal and professional business is heightened when lawyer is guardian of minor client; lawyer was disbarred after receiving interest-free loan from highly speculative venture in which lawyer had invested $95,000 of minor's money and after borrowing $5,000 from minor's estate without court approval); In re Pusser, 273 S.C. 115, 117, 254 S.E.2d 926 (1979) ("Only rarely may a profit be justified in a transaction involving minor or uneducated clients. Circumspect attorneys simply will not enter into business transactions involving minors or uneducated clients."); In re Vaught, 268 S.C. 530, 235 S.E.2d 115 (1977) (lawyer put personal interest ahead of interests of unsophisticated clients); In re Kirven, 267 S.C. 669, 230 S.E.2d 899 (1976) (lawyer overreached in deals with unsophisticated client).
The Supreme Court has made clear that the burden falls upon the lawyer to take every possible step to ensure that the client is aware of the risks of the transaction and of the possible impact of the transaction on the lawyer's loyalty to the client. In In re Harper, 326 S.C. 186, 485 S.E.2d 376 (1997), an attorney and client entered into an agreement in which the attorney would arrange to mortgage the client's property and divide the proceeds between the attorney and the client. The funds received by the attorney would be credited toward future legal services. The court held that this transaction, regardless of the fact that a portion of the funds were to be used as attorney's fees, was a business transaction between the attorney and the client. The attorney was found guilty of misconduct because he did not present evidence showing that he fully disclosed to his client the implications of entering into a business transaction with his attorney. See also In re Pyatt, 280 S.C. 302, 312 S.E.2d 553 (1984) (to avoid foreclosure, lawyer advised clients to transfer realty to lawyer's relatives, without any written reconveyance agreement; lawyer's relatives later offered to resell property to clients at well above fair market value; lawyer reprimanded and ordered to arrange reconveyance of land for failing to protect client adequately or to disclose competing interests.).
Some business transactions between lawyers and clients may withstand the strict scrutiny demanded by the South Carolina courts. In Alala v. Peachtree Plantations, Inc., 292 S.C. 160, 355 S.E.2d 286 (Ct. App. 1987), a lawyer represented real estate developers and contracted to purchase a portion of a tract being acquired by the clients. The lawyer and clients agreed that the clients would purchase the land from the lawyer within two years subject to certain terms and conditions. When clients later refused to purchase, the lawyer sued for specific performance. The South Carolina Court of Appeals stated the general rule that "[w]hen a lawyer deals with his client, the burden is on the lawyer to show fairness. . . . There is, however, no absolute prohibition against a lawyer entering into a business transaction with his client." Id. at 165, 355 S.E.2d at 289.
In Alala, six factors influenced the court's conclusion that no impermissible conflict existed: (1) the clients did not expect the lawyer to exercise professional judgment as to the terms of their contract; (2) the clients approached the lawyer seeking financial participation; (3) the clients proposed the essential contract terms; (4) the lawyer purchased the land without financial help from the others; (5) the clients all had college educations and substantial experience; and (6) there was no evidence of unconscionability, overreaching, or undue influence. See also In re Clay, 263 S.C. 230, 209 S.E.2d 561 (1977). See also S.C. Bar Ethics Adv. Op. # 97-26 (attorney who settled large claim for client can purchase structured part of settlement provided attorney complies with Rule 1.8(a)).
Lawyers also may engage in ancillary business activities with clients. South Carolina ethics advisory opinions have opined favorably as to the ethical propriety of a lawyer owning a court reporting service, S.C. Bar Ethics Adv. Op. # 83-13; a lawyer acting as a title insurance agent at a client's closing, S.C. Bar Ethics Adv. Ops. # 92-03, 82-20, 75-03; a lawyer owning a real estate brokerage, S.C. Bar Ethics Adv. Op. # 78-14; a lawyer owning a life insurance agency to which clients are referred, S.C. Bar Ethics Adv. Op. # 90-16; a lawyer making consumer loans to clients of other lawyers, S.C. Bar Ethics Adv. Op. # 92-06; a lawyer acting as consultant to advise parties defending medical malpractice claims, S.C. Bar Ethics Adv. Op. # 92-08; and a lawyer owning a title abstracting company and serving as title insurance agent, S.C. Bar Ethics Adv. Op. # 89-17.
An opinion issued under the prior code determined that a lawyer for a bank may, with proper consent, bid for property in foreclosure as long as the lawyer does not bid against the client. S.C. Bar Ethics Adv. Op. # 84-24. After a bank has purchased land at foreclosure, a lawyer for the bank may acquire the land from the client if there is full disclosure to and consent by the lending institution. S.C. Bar Ethics Adv. Op. # 89-08.
1.8:300 Lawyer's Use of Client Information
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1.8:400 Client Gifts to Lawyer
Rule 1.8(c) prohibits a lawyer from preparing any instrument, including a deed or a will, that gives to the lawyer or immediate family of the lawyer any substantial gift, unless the client is related to the recipient of the gift. The comment to Rule 1.8 distinguishes between simple gifts from a client and gifts requiring that an instrument be prepared, indicating that the former are permitted if not unfair to the client. Although the rule prohibits only the preparation of an instrument donating substantial gifts, the court has made clear that the practice is always risky.
An attorney who prepares a Will in which he is a beneficiary has engaged in a perilous undertaking. At best, he compromises his capacity to provide his client with sound professional advice; at worst, he renders himself incapable of serving her best interest; in any event, he benefits beneficially beyond any legal fee received for preparation of the document.
In re Rentiers, 297 S.C. 33, 34-35, 374 S.E.2d 672 (1988). The lawyer in that matter was reprimanded for failing to give full disclosure, which should have included disclosure that (1) the will would be vulnerable to attack on grounds of undue influence, (2) the lawyer's credibility as a witness would be impaired if the will was challenged, and (3) the lawyer's advice might be affected by financial interests. See also In re Peeples, 297 S.C. 36, 374 S.E.2d 674 (1988) (client should be advised to seek independent counsel).
Rule 1.8 does not prohibit a lawyer who drafts a will from serving as personal representative for the client's estate or as trustee under a trust instrument. S.C. Bar Ethics Adv. Op. # 91-07. The lawyer also may earn commissions as trustee or personal representative or both, S.C. Bar Ethics Adv. Ops. ## 91-07, 90-21, as well as appropriate attorney's fees, S.C. Bar Ethics Adv. Op. # 91-07, subject to restrictions on overlapping charges. See generally, Report of the Special Study Committee on Professional Responsibility of the Section of Real Property, Probate and Trust Law of the American Bar Association, Preparation of Wills and Trusts That Name Drafting Lawyer as Fiduciary, 28 Real Prop. Prob. & Tr. J. 803 (1994).
1.8:500 Literary or Media Rights Relating to Representation
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1.8:600 Financing Litigation
The rules expressly prohibit a lawyer from giving "financial assistance to a client in connection with pending or contemplated litigation" unless an exception applies. Rule 1.8(e). The exceptions are that a lawyer may advance court costs and the expenses of litigation for any client and may pay such costs and expenses for indigent clients. Id. See In re Larkin, 336 S.C. 366, 520 S.E.2d 804 (1999) (loans to clients for personal expenses while representing them in litigation and failure to honor letters of protection to providers of medical services); In re Edwards, 323 S.C. 3, 448 S.E.2d 547 (1994) (loans made to client while acting as its legal counsel); In re McLellan, 305 S.C. 480, 409 S.E.2d 411 (1991) (lawyer disbarred for several acts of misconduct including improper loans to client of $35,000 during the representation). See also S.C. Bar Ethics Adv. Op. # 91-31(lawyer may not advance cost of rental car to client prior to settlement of lawsuit); S.C. Bar Ethics Adv. Op. # 90-02 (lawyer may not make loan to litigation client beyond advancing costs and litigation expenses). The current rule differs from old DR 5-103(B) by allowing costs and expenses to be advanced on a contingency basis
Appellate court rules also prohibit a lawyer from serving as a direct or indirect surety on any recognizance or undertaking in any court unless the lawyer, an immediate family member, or an agent or employee of the lawyer is the principal. Nor may the lawyer refer anyone to a surety who is an immediate family member of the lawyer. S.C. App. Ct. R. 604; see S.C. Bar Ethics Adv. Op. # 90-06.
Under Rule 1.8(e) a lawyer may not advance living expenses to a litigation client. See In re Pusser, 273 S.C. 115, 254 S.E.2d 926 (1979) (improper loan of $1,000 to buy food and Christmas presents); In re Leppard, 272 S.C. 414, 252 S.E.2d 143 (1979) (improper loan of $1,200 to pay utilities and house payments); In re Reaves, 272 S.C. 213, 250 S.E.2d 329 (1978) (loan for client vacation). Similarly, a lawyer may not advance the cost of a rental car during the pendency of wreck case litigation, see In re Mozingo, 330 S.C 67, 497 S.E.2d 729 (1998) and S.C. Bar Ethics Op. # 91-31.
A lawyer may guarantee payment for a client's medical treatments or medical reports that are necessary to pursue claims, S.C. Bar Ethics Adv. Op. # 90-40. However, another opinion concludes that not all treatments are litigation expenses, advising that a medical care provider's statement for medical services is not an expense of litigation and cannot be guaranteed by the lawyer unless conditioned upon recovery in an action against a third-party. Medical reports are distinguished as proper expenses of litigation. S.C. Bar Ethics Adv. Op. # 89-12.
1.8:700 Payment of Lawyer's Fee by Third Person
Whenever a person other than the client pays the lawyer, there exists a risk that the interests of the person paying the fees may interfere with the lawyer's duty to exercise independent professional judgment on behalf of the client. Rule 1.8(f) requires that a lawyer obtain consent of the client before accepting compensation from someone other than the client. The lawyer also must not allow the person paying the fees to interfere with the exercise of judgment, Rules 1.8(f)(2) & 5.4(c), and must not disclose protected information to that person unless permitted under Rule 1.6. See Rule 1.8(f). If the client is a class, consent of the class is obtained by court-supervised procedure. Rule 1.8, cmt. See S.C. Bar Ethics Adv. Op. # 97-01 (seller of real estate can encourage potential purchasers of real estate to utilize services of particular attorney for both sides of closing transaction and title insurance by offering to pay attorney's fees and title insurance premiums associated with such representation). See also S.C. Bar Ethics Adv. Op. # 97-19 (contract provision providing financial incentive for multiple representation permissible).
1.8:720 Insured-Insurer Conflicts [see also 1.7:315]
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[The discussion of this topic has not yet been written.]
1.8:800 Aggregate Settlements
Rule 1.8(g) requires that a lawyer who represents multiple clients obtain the consent of each client, after full disclosure, to the terms of an aggregate settlement of claims. The disclosure to each client must include information identifying all of the claims involved and the names and amounts to be received by all of the parties to the settlement. See In re an Anonymous Member of the South Carolina Bar, 297 S.C. 517, 377 S.E.2d 567 (1989) (no sanction imposed because settlement was reviewed by federal judge, an independent lawyer, and guardian ad litem for minor parties).
If compliance with Rule 1.8(g) would require the disclosure of protected information, the lawyer must either obtain the consent of the client to disclosure or separate that client's case from the others for settlement purposes. Failure to notify all members of a class in the settlement of a class action may result in discipline against the lawyer. See In re Green, 291 S.C. 523, 354 S.E.2d 557 (1987) (public reprimand).
1.8:900 Agreements Involving Lawyer's Malpractice Liability
Although lawyers may wish to protect their interests by obtaining from clients a waiver or release of liability, Rule 1.8(h) prohibits any such agreement prospectively limiting malpractice liability unless permitted by law and the client has independent counsel. In In re Hanna, 301 S.C. 310, 391 S.E.2d 728 (1990), the court disapproved an agreement by which the lawyer attempted to have the client "warrant" the propriety of the lawyer's conduct and agree to hold harmless and indemnify the lawyer. See In re Amick, 288 S.C. 486, 343 S.E.2d 623 (1986) (lawyer suspended when, after misrepresenting status of claim, lawyer improperly sought to avoid liability by obtaining signed statement from client expressing satisfaction with services received); In re Clarke, 278 S.C. 627, 300 S.E.2d 595 (1983) (lawyer reprimanded for demanding that client include statement on receipt for file releasing lawyer from possible malpractice liability). See also In re Hanna, 294 S.C. 56, 362 S.E.2d 632 (1987) (misconduct exacerbated by lawyer's attempt to condition settlement of fee dispute on withdrawal of grievance by client).
A malpractice claim may be settled by the lawyer, but if the client or former client is not represented by independent counsel, the lawyer must first advise that person in writing that independent counsel would be appropriate. Rule 1.8(h).
1.8:1000 Opposing a Lawyer Relative
The lawyer's family relationships may also limit the lawyer's exercise of judgment impermissibly. Thus, a lawyer may not undertake a representation in which the other side is represented personally by the lawyer's parent, child, sibling, or spouse, without first obtaining the consent of the client after consultation. Rule 1.8(i). The South Carolina rule inserts the word "personally" emphasizing that rule is intended to apply only to personal rather than to imputed representation. On the application of the rule see S.C. Bar Ethics Adv. Ops. # 91-23, 90-28, 90-15; see also Ops. # 86-19 (spouse of defense lawyer testifies for prosecution), 85-23 (spouse of assistant solicitor employed as nonlawyer in legal services office).
The S.C. Bar Ethics Advisory Committee has found no per se rule against a child of a circuit judge being employed as a public defender, provided the judge does not hear matters in which the child is the lawyer. S.C. Bar Ethics Adv. Op. # 90-45.
1.8:1100 Lawyer's Proprietary Interest in Subject Matter of Representation
Rule 1.8(a) recognizes that a lawyer's own financial interests may affect the independence of the lawyer's judgment in certain circumstances. Specifically, a lawyer may not "knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client" without the client's written consent. A South Carolina Bar advisory opinion issued under the prior Code of Professional Responsibility noted that a lawyer who is a major shareholder in a local cooperative should not represent a landowner in a condemnation action by the statewide cooperative when there is substantial identity of interest between the state and local cooperatives. S.C. Bar Ethics Adv. Op. # 79-07.
Nor may a lawyer handling a matter acquire an interest in the cause of action or in the subject matter of the litigation. Rule 1.8(j). A lawyer representing a client in a divorce violates this rule by purchasing marital assets from the client. In re Brown, 317 S.C. 25, 450 S.E.2d 586 (1994). See also In re Hanna, 301 S.C. 310, 391 S.E.2d 728 (1990) (lawyer disbarred after purporting to purchase client's interest in settlement proceeds of personal injury case that lawyer settled same day for far greater amount).
The rules make clear, however, that a lawyer does not acquire an impermissible interest in litigation solely by charging a contingent fee is appropriate civil cases. Rule 1.8(j)(2). A lawyer may accept payment of a fee in personal property, including an ownership interest in an enterprise, unless, by doing so, the lawyer would acquire rights that might affect the lawyer's independent judgment. S.C. Bar Ethics Adv. Op. # 87-09; Rule 1.5, cmt. "However, a fee paid in property instead of money may be subject to special scrutiny because it involves questions concerning both the value of the services and the lawyer's special knowledge of the value of the property." Rule 1.5, cmt.
1.8:1120 Contingent Fees [see also 1.5:600]
[The discussion of this topic has not yet been written.]
Rule 1.8(j) recognizes that a lawyer ethically may acquire "a lien granted by law to secure the lawyer's fee or expenses." Similarly, when a representation terminates, Rule 1.16(d) requires that the lawyer protect the client's interest by "surrendering papers and property to which the client is entitled . . . . The lawyer may retain papers relating to the client to the extent permitted by other law." Rule 1.16(d). The comment to Rule 1.16 adds that papers may be retained to secure a fee "only to the extent permitted by law." Decisions of the South Carolina courts suggest that both a charging and a retaining lien may be available to a lawyer as a matter of property law. The existence of either lien, however, does not assure that its enforcement by a lawyer would be ethical.
A retaining lien is a right to retain the files of a client in order to secure the payment of a legal fee. The court confirmed the existence of a retaining lien in appropriate circumstances in In re Anonymous Member of the South Carolina Bar, 287 S.C. 250, 335 S.E.2d 803 (1985). The opinion, however, recognizes a retaining lien only when the lawyer is discharged without good cause. Moreover, the lien may not ethically be asserted if a delay in transfer of the file would prejudice the former client. Id. The court has identified seven factors that must be considered in determining whether a lawyer may assert a retaining lien: "(1) the client's financial situation; (2) the client's sophistication; (3) the reasonableness of the fee; (4) the client's clear understanding and agreement to pay the amount of the fee owed; (5) whether imposition of the lien would prejudice important rights of the client or other parties; (6) whether failure to impose the lien would result in fraud or gross imposition by the client; and (7) whether there are any other less stringent means to resolve the dispute or secure the fees owed." In re Tillman, 319 S.C. 461, 462 S.E.2d 283 (1995).
A lawyer who cannot assert a valid retaining lien may be disciplined for failing to release a client's file to the client promptly upon demand. See, e.g., In re Tillman, 319 S.C. 461, 462 S.E.2d 283 (1995) (among other things, lawyer could not show that client had deliberately refused to pay a fee that was clearly due); In re Haddock, 283 S.C. 116, 321 S.E.2d 601 (1984).
A charging lien is an equitable right of the lawyer to reach the proceeds of a judgment or settlement in order to recover attorney's fees and costs. The Court of Appeals has indicated that a common-law charging lien may be asserted to recover costs and disbursements, but not to recover attorney's fees. However, the lawyer and client may agree expressly to a lien allowing the lawyer to recover fees out of the judgment or settlement. Eleazer v. Hardaway Concrete Co., Inc., 281 S.C. 344, 315 S.E.2d 174 (Ct. App. 1984); see also In re Christian, 267 S.C. 410, 228 S.E.2d 677 (1976) (excess funds of client applied toward expenses of that and prior transactions). In Tillman, the court also rejected a separate asserted "lien on the representation," finding that the client has a right to end a representation at any time.
See 1.8:1130 Lawyer Liens