Opinion ID: 901347
Heading Depth: 1
Heading Rank: 10

Heading: Whether the trial court erred in refusing to instruct on Behrens' theory of breach of fiduciary duty in Wedmore's charging the 1% transaction fee.

Text: [¶ 48.] Although Wedmore had represented Behrens for many years, a dispute arose over the reasonableness of Wedmore's attorney fee. Behrens apparently assumed that Wedmore would bill on an hourly basis as he had historically done. However, Wedmore billed both Don and Jon a flat fee of $18,625 each ($37,250), which was a 1% transaction fee on the sale price of the business. Although there are disputes about the fee conversations that took place between the parties, there is no dispute that the transaction fee was not communicated to Behrens until three months after Wedmore was retained and after most of the legal services had been provided. [¶ 49.] Behrens paid the bills and sued, claiming the fee was unreasonable. At trial, Wedmore submitted expert evidence that his bill was reasonable and customary for this type of transaction in that community. Behrens did not introduce contrary evidence suggesting that the fee was unreasonable. [10] Furthermore, Behrens failed to submit expert evidence reflecting an attorney's fiduciary duties in charging fees. Instead, Behrens only argued that: (1) the fee was unreasonable; (2) that they were entitled to a breach of fiduciary duty instruction as a matter of law because the fee was unreasonable and because Wedmore failed to notify them of the fee within the time required by South Dakota Rule of Professional Conduct 1.5(b) [11] ; and, (3) that they were entitled to have the jury determine the reasonableness of the fee. [¶ 50.] The trial court granted Behrens' latter request by submitting the reasonableness of the fee to the jury. However, the trial court declined to give the requested breach of fiduciary duty instruction, essentially granting a partial directed verdict on one of Behrens' two theories challenging the reasonableness of the fee. The trial court acknowledged that a lawyer has a legal duty under the Rules of Professional Conduct to charge a reasonable fee and to timely communicate the basis of the fee to the client. However, the trial court repeatedly asked for authority that the failure to follow these requirements was a breach of a fiduciary duty. Because no authority was submitted, [12] the trial court declined to instruct on breach of fiduciary duty. [13] As previously mentioned, the trial court did, however, submit the reasonableness of the fee dispute to the jury, instructing them to consider the issue under the factors set forth in Rule of Professional Conduct 1.5. [14] [¶ 51.] In analyzing this issue, we see no legal error because a failure to charge a reasonable fee or a failure to timely communicate the basis of a fee in violation of Rule 1.5 does not automatically establish a breach of a fiduciary duty. Rather: [v]iolation of a Rule [of Professional Conduct] should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The Rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability. Standish v. Sotavento Corp., 755 A2d 910, 915 (ConnAppCt 2000) (citing Mozzochi v. Beck, 529 A2d 171, 176 n8 (Conn 1987) (quoting the Rules of Professional Conduct, Preamble (1986)). This is not to say that other violations of the rules would not establish a breach of fiduciary duty. On the contrary: [u]nlike the disciplinary rules regarding negligent conduct, the ethics rules concerning the fiduciary obligations commonly are cited by the courts in civil damage actions regarding the propriety of the attorney's conduct. One reason for this difference in usage is that the disciplinary rules concerning the fiduciary obligations often are reasonably accurate statements of the common law.... 2 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 14.5, 551 (5th ed 2000). Thus, as is explained below, fiduciary rules such as Rule 1.6 regarding confidentiality, Rule 1.7 and 1.8 regarding conflicts of interest, and Rule 1.9 regarding adverse representation may establish a breach of fiduciary duty. See generally id. §§ 14.5-14.7. [¶ 52.] A breach of fiduciary duty in the attorney-client relationship arises from the representation of a client and involves the fundamental aspects of an attorney-client relationship. The fiduciary obligations are twofold: (1) confidentiality; and (2) undivided loyalty. Id. § 14.2 at 535. Thus, [t]he phrase `fiduciary breach'... is no more descriptive than the phrase `legal malpractice[;]' [and a] cause of action for fiduciary breach requires a breach of confidence, a breach of loyalty, or both. Id. at 536-537. [15] Therefore, [a]lthough the attorney functions in a fiduciary relationship, a wrong by an attorney does not thereby become a fiduciary breach. Id. at 537 . [T]he courts have recognized that claims of negligence [breach of duty], which do not implicate a duty of confidentiality or loyalty, do not support a cause of action for fiduciary breach. Id. [¶ 53.] In this case, Behrens were not entitled to a breach of fiduciary duty instruction because they were unable to establish that the failure to communicate the basis of the fee, or the dispute over the reasonableness of the fee, involved a breach of a fiduciary duty; i.e., one involving confidentiality or loyalty. We note that numerous courts have discussed breach of fiduciary duty when an attorney embezzles, [16] engages in conflicts of interest, or violates obligations of loyalty, thus violating the common-law duty of a fiduciary. [17] However, no such facts were presented in this case. Therefore, we believe that, absent some showing of misuse of trust, conflict of interest, breach of loyalty, or other conduct involving honesty and fair dealing in the attorney-client relationship, an untimely disclosure and subsequent disagreement over the reasonableness of a fee does not necessarily involve a breach of a fiduciary duty. [18] [¶ 54.] Finally, even if a fiduciary instruction were appropriate, we see no prejudice because the reasonableness of the fee was submitted to the jury. As Wedmore points out, even [t]he relief [Behrens] sought under the breach of fiduciary duty claim concerned excessive attorney's fees, and the jury was allowed to consider the reasonableness of Wedmore's fees under ... Rule ... 1.5. [19] Therefore, we agree that even if a breach of fiduciary duty instruction had been warranted, Behrens were not prejudiced because the jury was permitted to consider Behrens' only request for relief. [20] [¶ 55.] In summary, Behrens cited no facts or authority that a reasonableness dispute or a failure to timely communicate a fee arrangement was automatically and necessarily a breach of a fiduciary duty. Therefore, the trial court did not err in declining to give such an instruction. We have often held that the failure to cite authority in support of an issue at trial is a waiver of the right to present that issue on appeal. State v. Pellegrino, 1998 SD 39, ¶22, 577 NW2d 590, 599 (citations omitted). Furthermore, considering the lack of Behrens' evidence and the trial court's submission of the fee dispute to the jury on an alternate theory, Behrens have failed to establish prejudicial error.