CALIFORNIA ATTORNEY'S FEES

Ethics, Liens For Attorney Fees: Attorney’s Lien Had Superiority Over Surety’s Later Assignment Of Claims, Gaining Almost $1.39 Million From Settlement Proceeds

Lower Court Did Not Err In Adjudicating Lien Claim In The Underlying Action Because The Parties Stipulated To The Procedure.

               Plaintiff’s attorney in USS Cal Builders, Inc. v. San Francisco Bay Area Rapid Transit Dist., Case No. A168102 (1^st Dist., Div. 5 Sept. 20, 2024) (unpublished) had a lien on settlement proceeds which was way earlier in time than plaintiff’s assignment of claims to its surety, which intervened in the case.  Plaintiff and BART reached a $1.6 million settlement, with the parties stipulating that the lower court could adjudicate who had superiority to the settlement proceeds.  Plaintiff won that battle, being awarded almost $1.339 million. 

               Surety appealed, but it was unsuccessful.  Surety first argued that the lower court had no jurisdiction to adjudge the lien claim in the underlying action, which is the general rule but subject to an exception that the trial judge can if the parties allow him/her to—which happened based on the stipulation.  The attorney’s lien did have superiority over the general assignment, with surety even recognizing that in a pledge agreement indicating surety’s rights were subject to attorney lien claims.  An equitable subrogation argument was rejected because the attorney did no wrongdoing and was entitled to the settlement proceeds based on his lien/work on the case.  Surety argued that it had been a former client of the attorney so that there was a conflict of interest, but attorney had obtained a waiver from surety previously. 

Construction, Liens For Attorney Fees: In Public Works Case, Under Unusual Circumstances, Surety Prevailed Over Attorney Charging Lien

Surety Won This One Under Attorney Lien Exceptions.

            Nichols v. North American Specialty Ins. Co., Case No. B329206 (2d Dist., Div. 2 Nov. 17, 2023) (unpublished) is an interesting (appellate court saying “messy”) dispute over the priority between the attorney’s lien of a general contractor and a surety which paid off subcontractors on behalf of the general contractor on a public works project.  The surety won the priority battle with respect to payment of proceeds, with the appellate court affirming.  Equities do matter, and it did in this opinion.  The equities, under exceptions to attorney’s lien priorities, favored the surety:  it paid off subcontractors on a public project such that it elevated itself for representing the general contractor owing moneys to the subs.

Liens For Attorney Fees, Settlement: Attorney Assigned Some Of A Prevailing Party Fee Award Judgment Was Entitled To Remaining Proceeds In A Malpractice Action Settlement After Payment Of Malpractice Counsel’s Contractual Lien

Opinion Has An Interesting Discussion Of Whether A Suspended Or Disbarred Attorney Can Obtain Assignment Of A Judgment, With The Attorney Structuring The Assignment Correctly.

            In Children Solution, LLC v. Altman (Mastroianni), Case No. B317816 (2d Dist., Div. 1 Oct. 31, 2023) (unpublished), plaintiffs lost to defendants in a bench trial, with the defense receiving a $500,000 prevailing party fee award against the non-victorious plaintiffs.  Plaintiffs then sued their trial counsel for malpractice, reaching a $250,000 settlement which was approved by the lower court.  The defense subsequently assigned $345,000 of their $500k fee award to their counsel (who was suspended and disbarred, ultimately), and that counsel filed a notice of judgment lien in the malpractice action.  In approving the settlement, the lower court agreed that plaintiffs’ counsel in the malpractice case should be paid $113,500 of the $250,000 pursuant to a contractual attorney’s lien, but it denied paying the remaining balance to defense counsel holding an assignment of the partial prevailing party fee award.

            The 2/1 DCA found the lower court properly approved the settlement and allocated money to plaintiffs’ malpractice counsel.  It did, however, reverse denying payment of the remaining malpractice settlement monies to the suspended/disbarred attorney representing defendants in the first action.

            Before turning to the merits, the 2/1 DCA had to confront whether suspended/disbarred attorney could pursue the appeal in the face of the prohibition in Business and Professions Code section 6130, which provides:  “No person, who has been an attorney shall while a judgment of disbarment or suspension is in force appear on his own behalf as plaintiff in the prosecution of any action where the subject of the action has been assigned to him subsequent to the entry of the judgment or disbarment or suspension and solely for purpose of collection.”  Attorney could pursue the appeal because the partial fee award was an absolute ownership assignment, not just for collection only, so that it shows this assignment was structured correctly.

            Because an attorney’s contractual charging lien has priority over a judgment creditor’s lien, there was nothing wrong about that component of the lower court’s settlement approval/allocation order.  Nevertheless, the remaining $136,500 of the malpractice action settlement was ordered to be paid to the disbarred attorney:  no equities demonstrated that payment should have been withheld.  (Code Civ. Proc., § 708.440(b) [authorizing approval of a settlement agreement on “such terms and conditions as the court deems necessary”].)

Liens For Attorney’s Fees: Where One Attorney Fixed His Fee Recovery Under Attorney’s Liens, That Part Of A Judgment Was Sustained Even Though Other Parts Relating To Remaining Funds To Be Released And Successor Attorney’s Claims Would Remain To Be

Opinion Shows You How A Good, Successful Race By One Attorney May Get A Resolution First!

            Aresh v. Marin-Morales, Case Nos. G060579/G060827 (4^th Dist., Div. 3 June 5, 2023) (published) is an interesting decision on attorney priority for fee recovery in settlements.  It may tell competing attorneys that the race goes to the swift, but that the second attorney then must litigate fee entitlement with his clients after the first attorney won the race.  Actually, if the clients or all attorneys participate in the case, closure might be achieved.

            The lessons from the first paragraph emanate from an interesting judgment, where a first attorney recovered fees under protest by the second attorney refusing to fully participate in the proceedings between first attorney and client.  If we understand this opinion based on its very precise construction of the judgment, first attorney did vindicate his attorney’s lien rights but the trial judge exceeded things by resolving how the remaining proceeds should be allocated to the client inclusive of the second attorney’s fee recovery rights.  So, in the end, first attorney did a good thing by pressing his rights, such that client and second attorney had more litigation or negotiations ahead of them as far as what to do.  The judgment was not void as far as first attorney’s rights. 

            Justice Goethals authored the 3-0 opinion.

Judgment Enforcement, Liens For Attorney Fees: $155,524.55 In Funds Transferred To Former Client Through Successor Counsel’s Client Trust Account Properly Awarded To Former Counsel

Successor Trustee’s Transfer Of Client’s Funds From His Client Trust Account Into His General Account Did Not Transform The Funds Into Successor Counsel’s Money Nor Affect Former Counsel’s Ability To Enforce His Lien.

The Queen Mary, once a proud ocean liner, then a floating hotel, Long Beach, California.  Between 1980 - 2006. Photographer, Carol M. Highsmith.  Library of Congress.

            After obtaining a default judgment for unpaid legal fees against his former client, attorney filed a lien against the former client’s interest in a fraud action against the developers of a Queen Mary project – serving notice of lien on the former client, successor counsel, and all parties involved in the fraud action.  More than five years later, former client received a $12 million judgment – ultimately receiving $155,524.55, due to judgment-proof status of defendants, which was disbursed to former client by a deposit into successor counsel’s client trust account.  Three days later, successor counsel transferred the $155,524.55 into his general account to pay fees owed to him.

            Former counsel then served a Notice of Levy under Writ of Execution, which identified successor counsel as a “Third Person in Possession of Funds,” on former client and successor counsel, and successfully renewed his judgment against former client.  Former counsel then filed two actions against successor counsel which the trial court related – one for declaratory and injunctive relief, and the second for failure to honor the notice of levy – obtaining a $155,524.55 judgment entered in his favor. 

            Successor counsel appealed – arguing that: (1) the original lien was ineffective because service of the notice of lien was not made to the address provided for former client in the court’s order, nor to his agent, and that the original lien did not exist because there was no valid writ of execution for it; (2) the later execution lien did not relate back to the original lien; and (3) that successor counsel did not possess or ever receive funds described by the notice of levy because the funds he received did not belong to former client as they were payment for successor counsel’s fees, but the 2/7 DCA affirmed in Nossaman v. Norgaard, Case No. B291410 (2d Dist., Div. 7 April 19, 2021) (unpublished).

            First, former counsel’s service of the notice of lien was indeed valid because it had been made to successor counsel and to former client at the Indonesian prison where he was located at the time – with Code Civ. Proc. § 708.410(c) requiring only that the notice of lien be served on all parties to the action in which the judgment creditor files the lien in a pending action.  Further, California Rules of Court, Rule 1.21(a) provides that service is effected by serving a represented party’s counsel.  Additionally, successor counsel’s contention that the original lien did not exist for lack of a writ of execution was without merit as a lien in a pending action is not subject to execution until after final judgment in the action. (Code Civ. Proc. § 699.720(a).)

            Next, pursuant to Code Civ. Proc. § 697.020(b), the later execution lien related back to the original lien, and substantial evidence supported the trial court’s finding.  The funds transferred to former client through successor counsel’s client trust account were covered by former counsel’s lien in the fraud action as former client’s entitlement to the funds arose from the judgment in the fraud action.   

            Finally, successor counsel’s quick transfer of former client’s funds from his client trust account to his general account did not transform the funds into successor counsel’s money nor affect former counsel’s ability to enforce his lien.

Liens for Attorney Fees, Probate: 4/3 DCA Affirms Probate Court’s Denial Of Fee Petition By Attorney Who Represented Client In Civil Litigation Prior To Client’s Death

Client’s Death Did Not Transform Completed Civil Litigation Into A Probate Administration Task For Which The Probate Court Could Award Fees, Nor Did Client’s Death Waive Requirement That Attorney’s Charging Lien Had To Be Adjudicated.

            In Belcher v. Bakkers, Case No. G058893 (4^th Dist., Div. 3 April 5, 2021) (unpublished), attorney seeking payment of fees and costs, for services rendered in civil litigation prior to his client’s death, filed a petition for payment in probate court.  The trial court denied the petition – concluding the legal services were rendered before client’s death and were not services to the probate estate – and found the proper form for recovering fees owed to attorney from client’s estate was a creditor’s claim (a claim attorney had also filed, but was yet unresolved pending the appointment of a special administrator to the estate).

            Attorney appealed, but the 4/3 DCA, in a 3-0 opinion authored by Justice O’Leary, affirmed.

            Attorney’s argument that his fee petition was the proper mechanism for seeking fees because the trial court authorized fees payments to two other attorneys overlooked the fact that those fees were incurred by client’s conservator and guardian ad litem and were specifically authorized by Prob. Code § 2631(a).

            Attorney also argued, for the first time on appeal, that his contingency fee agreement with client created an attorney charging lien and the trial court’s conclusion that attorney had to file a creditor’s claim for payment of his fees/costs failed to consider his status as a lienholder.  However, an attorney charging lien is only effective if the attorney has filed an independent action – such as a declaratory relief action – to establish the lien’s amount and enforceability.  (Mojtahedi v. Vargas, 228 Cal.App.4th 974 (2014) [reviewed in our July 13, 2014 post].) Here, the lien’s amount and enforceability had not been adjudicated as client died before attorney was able to file a separate, independent action for such determination. As such, the proper avenue for adjudicating the lien’s amount and enforceability was for attorney to file a creditor’s claim.    

Liens For Attorney Fees: Attorney Who Recorded Three Separate Notices Of Judgment Lien Totaling More Than $4.3 Million Against Her Client Properly Ordered To Pay Client’s Attorney Fees Incurred In Having Notices Stricken

Attorney Claimed She Was Judgment Creditor And Client Was Judgment Debtor, But She Had Never Sued Nor Obtained A Judgment Against Client.

            Sargent v. Board of Trustees of CSU, Case No. A157335 (1^st Dist., Div. 1 May 26, 2020) (unpublished), provides a great example of how not to create and enforce liens for attorney fees.

            Plaintiff hired attorney to represent him in a retaliation action against his employer.  Approximately seven months later, another attorney joined as co-counsel.  Following trial, a jury returned a verdict awarding damages to plaintiff, and plaintiff was also awarded attorney fees and costs.  Defendant employer’s appeal of those awards is pending.

            Meanwhile, plaintiff’s original attorney served plaintiff – through his co-counsel – with three separate notices of lien and recorded the lien notices with the county Recorder’s Office.  One notice for $387,895 was based on the judgment plaintiff obtained against his former employer.  The other two notices were in the amounts of $95,898.18 based on the costs award, and $3,905,165.04 based on the attorney fees award plaintiff received.  Although attorney had never sued nor obtained a judgment against plaintiff, each notice of lien identified the attorney as the judgment creditor and plaintiff as the judgment debtor.

            After attorney failed to respond to plaintiff’s demand that she release her lien notices, plaintiff successfully moved to strike the lien notices and release the property subject to the notices.  Additionally, plaintiff requested sanctions under Code Civ. Proc. § 697.660(d) (fees authorized in connection with seeking release of a lien), and §§ 128.5 and 128.7 – with the trial court awarding a total of $16,650 in fees for the two firms representing plaintiff in striking the lien notices. 

            On appeal, attorney argued that her notices of lien should not have been stricken because she had only created liens and had not tried to enforce them, and that the trial court lacked the authority to award attorney fees against her.  The 1/1 DCA disagreed.  The lien notices were invalid and properly struck by the trial court as attorney had not followed proper procedure to claim a lien.  As to the attorney fees award, the 1/1 DCA found that although the trial court’s order did not cite legal authority for the award, the award was authorized under Code Civ. Proc. § 128.5(b)(2) based on attorney’s frivolous actions of recording unenforceable, improper lien notices.  Plaintiff’s moving papers had properly requested fees and identified section 128.5 as authority – thus providing attorney with an opportunity to oppose, and the trial court the authority to award the fees.

Liens For Attorney Fees: No Error In Dismissal Of Action Brought By Former Law Firm Against Successor Law Firm For Interference With Its Liens Against Former Clients’ Settlement Proceeds

Former Law Firm Failed To First Have Its Liens Established, Valued, And Enforced In Independent Actions Against The Clients.

            In SL Environmental Law Group v. Robins Borghei, LLP, Case No. A155906 (1^st Dist., Div. 2 May 22, 2020) (unpublished), plaintiff predecessor law firm – specializing in environmental contamination litigation – lost clients it represented in seven separate cases when those clients followed two departing attorneys to their new firm.  Predecessor firm had entered into contingency agreements with each of the clients, and clients had agreed to a lien attached to any recovery obtained in the actions in order to compensate predecessor firm for the value of its work and for costs it had incurred on the client’s behalf.

            Although it filed notices of liens in the clients’ underlying cases, predecessor firm never brought independent actions against the clients to establish the existence, amount and enforceability of its liens.  Instead, predecessor firm jumped straight to filing an action against the successor firm – after the clients’ actions had settled – for interference with it liens.

            In sustaining successor law firm’s demurrer without leave to amend, the trial court determined Mojtahedi v. Vargas, 228 Cal.App.4^th 974 (2014) [discussed in our July 13, 2014 and August 8, 2014 posts] to be directly on point, and found that plaintiff’s failure to establish the existence, amount and enforceability of its liens in a separate action against each of the clients – thus denying the clients an opportunity to assert any defenses they may have against the liens – foreclosed its action against successor firm. 

            On appeal, predecessor firm argued that the trial court had misconstrued Brown v. Superior Court, 116 Cal.App. 4^th 320 (2004) – which predecessor firm claimed held that an attorney was not required to sue its former client to enforce its lien. It also argued that the trial court erroneously relied on Mojtahedi which it claimed was wrongly decided.

            The 1/2 DCA disagreed with predecessor firm’s contentions and affirmed – including in its opinion a detailed discussion of Brown and explaining that Brown does indeed require an attorney seeking to enforce a lien to bring a separate action against the client even if that action is merely a declaratory relief action.

Liens For Attorney Fees, Prevailing Party: Assignee, Principal Of Client, Had Standing To Bring Declaratory Relief Action As To Contractual Attorney’s Lien Claimed By Prior Counsel

Given Reversal Of Judgment On The Pleadings On This Issue, There Was No Prevailing Party Yet Such That Law Firm Properly Denied Attorney’s Fees.

            In Roth v. Epps & Coulson, LLP, Case Nos. B285265 et al. (2d Dist., Div. 4 Oct. 15, 2019) (unpublished), prior counsel of record ran into a rift with their corporate client, which transferred the rights to the lawsuit to the client’s principal.  A settlement was reached through a different attorney, with the principal being a party to the settlement and with the settlement subject to prior counsel’s attorney’s lien which had been filed earlier.  A trial judge found that principal had no standing to file a declaratory relief claim relating to the attorney’s lien after malpractice claims were dismissed.  Prior counsel moved for attorney’s fees in defeating the principal’s action, a request which was denied.

            On appeal, the 2/4 DCA decided that principal, as assignee, did have standing to bring a declaratory relief action on the claimed attorney’s lien, a claim which was separate from the malpractice claims.  That resulted in a reversal of the judgment on the pleadings ruling.  Given that reversal, there was no prevailing party as between assignee principal and prior counsel such that the attorney’s fees request was properly denied. 

Liens For Attorney’s Fees, Settlement: Judgment Creditor’s Settlement And Release Of Judgment Debtor Did Not Release Interference Claims Against Judgment Creditor’s Attorney Obtaining Judgment Against Judgment Debtor

Interference Claim Was Righteous And Not Released By Judgment Debtor’s Unilateral Settlement With Judgment Creditor.

            Mancini & Associates v. Schwetz, Case No. B290498 (2d Dist., Div. 6 Sept. 4, 2019) (published) goes to show you that a client/judgment creditor has no ability to unilaterally release claims that client’s attorney has against a third-party judgment debtor. 

            Attorney obtained a substantial jury verdict for his client/judgment creditor against defendant/judgment debtor, with the attorney’s retainer agreement indicating that the attorney would receive a percentage of recovery and costs as well as an attorney’s lien against any recovery.  Without attorney’s knowledge or consent, client/judgment creditor entered into a settlement agreement with judgment debtor, releasing that party.  Judgment creditor’s attorney then sued judgment debtor for interference with his retention agreement and attorney’s lien rights, obtaining a $409,351 judgment against judgment debtor.

            On appeal, judgment debtor principally relied on the release in the settlement agreement with judgment creditor.  However, that agreement did not bind judgment creditor’s attorney who was not a party to the settlement, given that interference by a third party with attorney’s lien rights is a cognizable claim in California.  (Little v. Amber Hotel Co., 202 Cal.App.4^th 280, 291 (2011).)  As observed at the start of the opinion, “Does this release preclude the attorney from pursuing his costs and fees from the defendant [judgment debtor]?  Of course not.” 

Liens For Attorney Fees, Retainer Agreements: Broad Retainer Lien Language Relating To A Lien For General Representation Did Allow For Attorney’s Lien Claim Work

Also, Lien Claim Work Can Encompass Unrelated Work To A Specific Litigation Case.

            In Callahan & Blaine v. Vogeler, Case No. G055912 (4^th Dist., Div. 3 July 24, 2019) (unpublished), attorney-defendant in pro per balked at a contractual breach lawsuit brought by Callahan & Blaine—a well-known Orange County law firm—based on broad attorney lien language in the retention agreement:  a lien on the client’s future recoveries, even if not representing the client, and with the lien reaching “general representation and litigation” which included the action at issue where a settlement was reached.  Appellant’s technical arguments on why the attorney’s lien did not attach were dismissed because (1) the broad language did give C&B a claim to general representation work, and (2) an attorney’s lien asserted in an action need not be limited only to fees or costs related to that action (Bluxome Street Associates v. Fireman’s Fund Ins. Co., 206 Cal.App.3d 1149, 1152-1154 (1988)).  Beyond that, C&B gave a discount on their lien in a settlement agreement releasing certain items, so equity did not favor appellant’s technical arguments to the contrary.  Acting Presiding Justice Moore was the author of the 3-0 opinion.

Liens For Attorney Fees, Retainer Agreements: ABA’s Formal Opinion 487 Clarifies Successor Counsel Duties In Contingency Case To Notify Client About Potential Repercussions With Respect To Original Counsel

Successor Counsel Has At Least A Warning Duty, And Successor Counsel May Have More Obligations If That Counsel Tries To Resolve Dispute With Prior Counsel.

            We can report that the American Bar Association’s Standing Committee on Ethics and Professional Responsibility recently released Formal Opinion 487, for which we provide a hyperlink.  It deals with successor counsel obligations, in a contingency matter, to notify the client about potential obligations the client has to prior counsel—a sequential representation situation, clarifying the very different responsibilities that apply to simultaneous, true fee-splitting situations.  We summarize it below.

            First, a successor counsel in a contingency case must notify the client, in writing, that some portion of fee may be due to or claimed by the first counsel even if the exact parameters of the claim are not known, especially given attorney’s liens likely possessed by the first counsel.  The successor counsel must only “provide written notice that a portion of the fee may be claimed by the predecessor counsel.” 

            Second, if the successor lawyer takes on or needs to negotiate fees with the prior attorney on client’s behalf, successor counsel needs to advise and obtain an appropriate personal conflict of interest waiver from the client in taking on such retentions.

            Third, if a dispute arises between allocation of proceeds by a prior counsel, the successor counsel must hold the dispute portion of the funds in a client trust account.  (We would assume that an interpleader would also be an option here.)

Liens For Attorney Fees: Prior Counsel’s Senior Contractual Attorney Lien From Settlement Agreement Had Priority Over Subsequent Counsel’s Later Contractual Lien Set Forth In Retainer Agreement

Arbitration Found Settlement Agreement With Attorney Lien Was Valid, So Priority Was Clear Cut.

            Arkius, Inc. v. Yeh, Case No. B271221 (2d Dist., Div. 1 July 3, 2018) (unpublished) was not a hard call for either the trial or appellate courts. In this case, a prior counsel reached a settlement with the client by which counsel was granted an attorney lien for his services plus an agreement to deduct a stated sum from any amounts collected in certain lawsuits. Client then entered into a later, post-settlement retainer agreement with a different counsel, also containing an attorney lien. An arbitration between prior counsel and client found that the settlement agreement was valid. Subsequent attorney claimed to have a prior contractual attorney lien, but that was belied by the fact that prior counsel’s settlement agreement lien predated subsequent counsel’s retainer agreement such that prior counsel had lien priority. “First in time” is the guiding rule with respect to the priority of contractual attorney liens as well as whether a contractual lien has priority over a subsequent judgment lien (it does). (See Civ. Code, §2897; Brown v. Superior Court, 116 Cal.App.4^th 320, 328 (2004).)

Liens For Attorneys Fees: Martinez Decision Now Published

Dealt With Statutorily Mandated Reduction With Respect to Medi-Cal Liens From A Med Malpractice Settlement.

            In a December 19, 2017 post, we discussed Martinez v. Dept. of Health Care Services, Case No. B278117 (2d Dist., Div. 6, filed Dec. 13, 2017), which was unpublished at the time.  The opinion on appeal made a 25% reduction for statutory attorney’s fees from a Medi-Cal liens based on Welfare and Institution Code section 14124.72(d).  We now can report that this decision was certified for publication on January 12, 2018.

Lien For Attorney Fees: Attorney Properly Following Attorney Lien And Security Foreclosure Procedures Was Entitled To Obtain Property Which Was Security For Fees

Attorney “Went By The Book” In Our Read Of Things In Obtaining Ultimate Victory.

            In Garcia-Bolio v. Hibernian Properties, LLC, Case No. F073973 (5th Dist. Jan. 5, 2018) (unpublished), an attorney took a lien in a contingency agreement and then in the litigation received a lien against the residence of the client (a residence which he successfully obtained as a favorable asset in a Marvin dispute settlement against client’s opponent).  Based on the lien granted on the residence of former client, attorney non-judicially foreclosed, but with the client arguing there was a “one action/security first issue” so as preclude his eventual victory by which he obtained title to the residence.   Neither the trial nor appellate courts bought this argument as a basis to reverse the judgment below.  Actually, we commend this to readers as almost a paradigm of how an attorney judiciously perfected his attorney lien and rights granted pursuant to a deed of trust.  Attorney never sought a personal judgment, but simply perfected his lien rights whether based on the attorney’s lien or deed of trust—violating no security first principles in the process.

Family Law, Lien For Attorney Fees, Probate: Wife Had Authority Under Family Law Equal Management Principles To Engage Attorney For Personal Injuries Incurred By Incapacitated Husband

Also, In Contested Probate Proceedings, An Evidentiary Hearing Is Required Unless Parties Stipulate To Using Affidavits Or Declarations.

            Maldonado v. Giblin, Case No. H041417 (6^th Dist. Dec. 27, 2017) (unpublished) is a prime example showing how appellate jurists are attuned to gender equality issues and legislative changes aimed at promoting such equality in the family law/probate context.

            What happened in this case was that husband became incapacitated following a personal injury accident, leading wife to engage an initial attorney to represent husband and with the retainer agreement containing an attorney’s lien provision.  Initial attorney did some work and obtained a preliminary settlement offer from the tortfeasor defendant’s  insurance carrier.  Later, wife retained discharged first attorney and engaged a second attorney filing litigation which resulted in a $1 million settlement with the insurance carrier.  However, in a contested probate proceeding arising out of wife’s appointment as temporary co-conservator with husband’s son, the lower court approved the settlement (including fees to the second attorney) but denied first attorney’s request for fees based on the attorney’s lien and quantum meruit recovery.  The primary basis for rejecting first attorney’s claims was that the wife did not have agency authority for husband to enter into a retainer agreement with first attorney.

            The trial court’s conclusions were reversed on appeal so that first attorney gets another shot at compensation for his prior services.

            First attorney did have a reasonable expectation of compensation because wife, just like husband, had equal management powers when another spouse becomes incapacitated as far as entering into a client-attorney relationship to redress personal injuries to the other spouse.  It found that 1975 family legislative amendments gave husband and wives equal management abilities, such that older cases only recognizing male supremacy were antiquated in nature, establishing the basis for an attorney’s lien by first attorney.

            There also was a procedural issue addressed by the appellate court in order to provide assistance on remand.  First of all, the attorney’s lien dispute could be raised in the probate proceeding (unlike the situation where a separate action is necessary in a civil litigation context) because of the lower court’s unique position to approve a settlement entered into by a guardian or a conservator (the situation here).  Next, it was error for the lower court to decide the contested probate dispute on the basis of just declarations, without an evidentiary hearing under Probate Code section 1022 unless the parties stipulate otherwise. 

Liens For Attorney Fees: Medi-Cal Lien Had To Be Reduced By 25% Based on Specialized Welfare and Institutions Code Section Allowing For Attorney Fee Services Reduction

Section 14124.72(d) Is the Particular Statutory Section.

            The California Department of Health Care Services can bring a claim to determine the amount of a Medi-Cal lien after a settlement of a plaintiff’s medical malpractice action, generally a lien where Medi-Cal made payments to repair the damage caused by the negligent doctor.  In Martinez v. Dept. of Health Care Services, Case No. B278117 (2d Dist., Div. 6 Dec. 13, 2017) (unpublished), the appellate court agreed with the trial judge’s valuation of the Medi-Cal lien, but did reduce it a further 25% on a stipulated basis in one request.  Welfare and Institutions Code section 14124.72(d) allows for a 25% reduction as follows:  “Where the action or claim is brought by the beneficiary alone and the beneficiary incurs a personal liability to pay attorney’s fees and costs of litigation, the director’s claim for reimbursement of the benefits provided to the beneficiary shall be limited to the reasonable value of the benefits provided to the beneficiary under the Medi-Cal program less 25% which represents the director’s reasonable share of attorney’s fees paid by the beneficiary and that portion of the cost of litigation expenses determined by multiplying by the ratio of the full amount of the reasonable value of benefits so provided to the full amount of the judgment, award, or settlement.” 

Liens For Attorney’s Fees/Judgment Enforcement/Retainer Agreements: Two Unpublished Decisions Discuss These Issues

Attorney’s Liens/Retainer Agreements—Primo Hospitality Group, Inc. v. The Americana At Brand, LLC, Case No. B271188 (2d Dist., Div. 5 Nov. 17, 2017) (Unpublished).

            In this case, which involved some interesting third-party creditor and offset issues of interest to judgment collection attorneys, the appellate court did agree that attorney’s liens do not have to comply with UCC perfection requirements in order to be valid.  It also determined that “gross recovery” under a contingency agreement will be determined by what recovery was effectively gained by a client after considering gains under a complaint and hits under a cross-complaint, with waiver of set-offs not making a difference as far as a recovery to attorneys.

Judgment Enforcement—Grail Semiconductor, Inc. v. Mitsubishi Electric & Electronics USA, Case No. H043762 (6^th Dist. Nov. 17, 2017) (Unpublished).

            This was one shows how judgment creditors with a foreign federal district court judgment need to strictly comply with California judgment enforcement procedures.  What happened here, in brief, was that attorney obtained a substantial award for attorney services against a former client in New York federal court, then liening client’s potential recovery in a case which was ultimately settled and dismissed (but only attached the New York federal court judgment, not registered in California).  The problem for attorneys was that they did not have an effective lien against the case which earlier settled such that moneys were disbursed.   The reason is very technical—they did not register the judgment in California, relying instead on the New York judgment which was ineffective for registration and lien purposes.  Ouch!  The interesting thing about this decision is whether it would have recognized a prior effective registration of the federal judgment in California as being valid without going through other obstacles—although we personally think a different result likely would have occurred if the judgment had been registered in California.  If you are out-of-state California attorneys seeking to enforce a judgment in this state, engage competent California judgment enforcement collection (and, vice versa, for California attorneys in other states).

Equity/Judgment Enforcement/Liens For Attorney Fees: Assignment Of Judgment To Attorney Subject To Offsets As A Matter of Equity

Result No Different Even If Classic Attorney’s Fees Lien Involved.

            Although the facts are too convoluted to discuss in detail, Lalanne v. Armanino, Case No. A147227 (1^st Dist., Div. 5 Aug. 31, 2017) (unpublished) involved a situation where an attorney obtained an assignment of judgment which was held subject to claimed offsets in the form of amounts owed under a prior judgment.  That result stood up on appeal, given that an assignment of judgment takes subject to offsets against the judgment.  However, the appellate court went further, acknowledging that even if a classic attorney’s lien was involved, relative priority of an offset and attorney’s lien is an equitable issue committed to the trial judge’s discretion.  (Crasnick v. Marquez, 248 Cal.App.4^th Supp. 1, 607 (2016).) 

Liens For Attorneys Fees: Attorney’s Lien In Artwork Was Not A Fraudulent Transfer

Clients Can Prefer Attorneys Over Others, Following Reasoning In Wyzard.

            In Stoltenberg v. Sheppard, Mullin, Richter & Hampton LLP, Case No. B271524 (2d Dist., Div. 5 June 20, 2017) (unpublished), plaintiffs/judgment creditors challenged law firm’s attorney’s lien on specific client property (such as artwork) to secure payment of accrued, unpaid legal fees, based primarily on a fraudulent transfer theory.  The Court of Appeal, in a 3-0 opinion, affirmed the trial court’s conclusion that the lien was not preferential.  In doing so, it relied heavily (as did the trial judge) on the reasoning in Wyzard v. Goller, 23 Cal.App.4^th 1183, 1187 (1994), which held that a routine transfer via a bona fide attorney’s lien was not a fraudulent transfer and was not preferential in nature.  We note that the author of the opinion was Orange County Superior Court Judge Kim Dunning, who is sitting by assignment on the 2/5 DCA. 

Lien For Attorney Fees: Attorney Lost Fee Recovery From Settlement Fund For Failure To File Separate Action And For Prejudicially Abandoning Client So Lien Went Kaput

 

 

Procedural and Merit Grounds Led To The Same Result.

 

            Moore v. Orloff & Associates APC, Case No. G052463 (4^th Dist., Div. 3 April 18, 2017) (unpublished) shows that attorney’s liens are subject to equitable principles.  The trial judge after a prior appellate remand found that the attorney was not entitled to vie as a competitor for settlement proceeds despite asserting an attorney’s lien.  That result was affirmed on appeal, in an opinion authored by Acting Presiding Justice Bedsworth.  Two reasons justified the affirmance:  (1) attorneys did not file a separate action to adjudicate the merits of their lien; and, notwithstanding that procedural nuance, (2) attorneys abandoned client at a perilous juncture such that recovery was not appropriate whether their relationship was an hourly or contingency arrangement.  Further, the modest victory producing the settlement fund was not produced by attorneys’ efforts, another equitable reason to sustain the lower court’s denial of the attorney’s lien against settlement funds.

Liens For Attorneys Fees/Quantum Meruit: 2/5 DCA Sorts Through Various Standing And Statute Of Limitations Issues In Attorney’s Lien/Quantum Meruit Dispute

 

End Result Is Declaratory Relief Action Based On Attorney’s Lien Did Survive Based On Longer Four-Year SOL Relating To Written Contracts.

     In Younessi v. Munoz, Case No. B265750 (2d Dist., Div. 5 Jan. 25, 2017) (unpublished), prior discharged counsel, both the individual lead attorney and the law firm, in a contingency-based personal injury case sued both client and subsequent attorneys settling client’s case. Client successfully demurred out claims by the prior individual attorney and the prior law firm representing her based on standing and statute of limitations arguments.

     Those determinations were affirmed in part and reversed in part, with a remand on the reversed portions on appeal.

     The appellate court found no difficulty in concluding that the individual attorney had no standing to sue because he was not a party to the contingency fee agreement, as opposed to the law firm. However, a different result occurred with respect to the law firm which was a party to the contingency agreement. The firm brought a declaratory relief claim based on an attorney’s lien provision in the contingency agreement. That was subject to a longer four-year statute of limitations (based on the written contract SOL relating to the attorney’s lien) such that the lower court’s SOL ruling was erroneous in nature. (There is a nice discussion of quantum meruit and attorney’s lien issues relating to a firm’s rights after discharge from a contingency fee relationship.) So, the matter was remanded for a reconsideration of the attorney’s lien declaratory relief count.

Lien For Attorney Fees: Delaware Supreme Court Determines Attorney Charging Lien, In Hourly Case Representation, Properly Claimed For Entire Hourly Amount, Not Just Amounts Tethered Directly To Obtaining Beneficial Litigation Results

Narrowing Charging Liens To Only Beneficial Services Would Improperly Rewrite Attorney Lien Contractual Arrangement In Hourly Cases.

            Although we generally post on California cases, we stray to discuss a recent attorney’s lien decision from Delaware, which may have some persuasive impact in California cases considering attorney’s liens.

            In Katten Muchin Rosenman LLP v. Sutherland, No. 151, 2016 (Del. Supreme Court Jan. 3, 2017), the Delaware Supreme Court reversed a chancery court’s decision that an attorney’s lien in an hourly case representation should be limited to unpaid fees that are directly connected to the recovery which attorneys obtain on their client’s behalf.  The state high court determined that, in hourly matters, the attorney’s lien could be claimed on to the entire hourly fees left unpaid, not just those fees for services which were directly tethered to the benefits ultimately recovered by the client.  The court determined that this might be a proper limitation in a contingency case, but not in an hourly representation matter.  “When a party, such as Martha, agrees to pay hourly fees to prosecute a complex case, she is assuring her counsel that it will not suffer the commercial damage of uncompensated services if it presses her claims as aggressively as she demands and as the law permits.  To permit a client who is a party to such an agreement to escape a charging lien as if she made a strict contingency fee agreement limiting fees to a percentage of recovery is to judicially rewrite the contract at the expense of the attorney and to undermine the traditional purpose of a charging lien.”  (Slip Op. at p. 11.)

            Here is a link to the Delaware Supreme Court’s decision in Sutherland.

Liens For Attorney Fee/Quantum Meruit: Discharged Attorneys In Class Action Not Entitled To Pursue Conversion Or Common Counts Against Successor Attorneys Without First Proving Entitlement To Attorney’s Lien Against Client

 

Court Of Appeal Found Instructive The Reasoning In Mojtahedi Decision.

    In this next case we post on, predecessor, discharged counsel was found to have sued the wrong party—successor counsel, rather than properly suing client to establish the validity and amount of an attorney’s lien in a retainer agreement under a “reasonable value of services” (quantum meruit) measure of recovery after predecessor counsel was discharged.

    Duke Gerstel Shearer, LLP v. Pusiano, Case No. D068633 (4th Dist., Div. 1 Dec. 13, 2016, received for posting Dec. 16, 2016) (unpublished) involved a situation where plaintiff law firm entered into a written contingency agreement in a construction defect class action.   After the death of the lead attorney occurred unexpectedly, another law firm attorney left and the class action plaintiffs discharged first law firm and retained departing attorney’s firm, which latter firm and other attorneys litigated the class action for another 5 years before resolving it through a settlement.  Successors counsel moved to recover pursuant to a similar contingency arrangement with plaintiffs, a motion approved by an Arizona court in awarding successor attorneys a total of $1.2 million of the settlement.  However, plaintiff predecessor firm submitted no fee submissions or request in the Arizona proceedings.  Later, predecessor firm sued successor attorneys on various tort claims and a common count (money had and received), largely premised on the theory that predecessor firm had an attorney’s fees lien as set forth its contingency agreement with class representatives such that it was entitled to $1.1 million.  The lower court sustained a defense demurrer without leave to amend, a ruling which was affirmed in part and reversed in part in a prior appeal.  There, the appellate court determined that prior firm should be allowed an opportunity to plead conversion and money had/received claims if it could allege a valid attorney lien giving it a right to a share of the contingency fee received by successor attorneys.  Prior law firm did file such another complaint with these two claims, but the lower court granted successor attorneys summary judgment because prior firm did not establish the enforceability and amount of the lien on which is based both its causes of action.

    In the second appeal by prior law firm, the 4/1 DCA affirmed the summary judgment ruling.

    Because prior law firm had been discharged, the proper measure of recovery for it was quantum meruit, which was further buttressed through a provision in the retainer agreement between clients and prior firm agreeing to (1) the quantum meruit recovery, and (2) submit the matter to binding arbitration.  The reviewing court found Mojtahedi v. Vargas, 228 Cal.App.4th 974, 977-978 (2014) [discussed in our July 13 and August 8, 2014 posts] instructive, where a prior firm lost a suit to obtain fees based upon an attorney lien from successor counsel because discharged counsel did not establish the existence, amount, and enforceability of the lien in an independent action against the clients before suing successor counsel.  Prior firm in Pusiano principally argued that Mojtahedi was distinguishable because an Arizona court had already awarded fees to class counsel, which was the necessary “independent action.”  The 4/1 DCA disagreed because prior law firm did not submit fee billings or file a motion to recover fees in Arizona court, with the Arizona court never passing on the validity of its attorney’s lien.  In fact, prior firm should have followed the retainer agreement procedure by trying to resolve the reasonable value of its services with clients and then submit the issue to binding arbitration as required under the retention contract.  Because prior firm did not sue client to determine the validity of and amount of its attorney fees lien, it was premature to sue the successor attorneys for claims based on the claimed lien which necessarily had to be adjudged first vis-à-vis the former clients.

Interpleader/Lien For Attorney’s Fees: 2/5 DCA Determines That Interpleader Fee Recovery Can Include Post-Discharge Supporting Activities And That Interpleader Action Can Qualify As Independent Action In Which Attorney’s Lien Can Be Resolved

 

Scope of Interpleader Proceeding Resolved In This Case.

    Southern California Gas Co. v. Flannery, Case No. B268298 (2d Dist., Div. 5 Nov. 14, 2016) (published) involved an interpleader action filed in the wake of a settlement agreement for injuries sustained in the 2008 Sesnon wildfire, with personal injury claimants, palimony litigants, and attorneys all vying over who got what from the settlement funds.  Gas Co. interpled the settlement funds, with the lower court granting it a discharge and awarding it attorney’s fees of $169,983.13 under CCP § 386.6(a).  Also, it determined that the interpleader action was a proper vehicle to resolve an attorney’s lien vis-à-vis a personal injury client in the tort case producing the settlement. 

    The appellate court sustained both of these determinations on appeal.

    It first determined that section 386.6(a) included Gas Co.’s post-discharge efforts to sustain the discharge order, which included post-trial work and appellate work along the way.  Then, it found that the interpleader action did qualify as a separate, independent proceeding—apart from the prior personal injury lawsuit—allowing the lower court to adjudge an attorney’s lien as against a contesting personal injury claimant/client.

Lien For Attorney’s Fees/Equity: Crasnick Decision Now Posted On CalGov Website

 

Case Dealt With Propriety of Judgment Offsets Against Fee Award Subject To Contractual Attorney’s Lien.

    On June 5, 2016, we posted on Crasnick v. Marquez and Diaz, Case No. BV 031459 (L.A. Superior Court Appellate Div. May 24, 2016 (published) (3-0 decision authored by Judge Ricciardulli), which held that a tenant’s fee award subject to a contractual attorney’s lien was properly not offset by landlord’s subsequent judgments against tenant in other matters.

    We can now report that the decision was posted on the calgov website on June 21, 2016.  In our earlier post, we disclosed that the Appellate Division had transmitted the decision for transfer/certification review by the Second District.  We can further report that transfer/certification was denied by the 2/3 DCA on June 16, 2016 such that the decision can be cited.

Liens For Attorney’s Fees/Equity: Los Angeles County Superior Court Appellate Division Decides That Rights Of Needy Tenants To Obtain Legal Representation In Unlawful Detainer Actions Prevented Offset Of Fee Award Against Subsequent Judgments Obtain

 

Equities Were Weighted, Favoring No Offset Of Fee Award.

     Crasnick v. Marquez and Diaz, Case No. BV 031459 (L.A. Superior Court Appellate Div. May 24, 2016 (published) (3-0 decision authored by Judge Ricciardulli), transmitted to 2d Dist. for consideration of transfer, No. B272469 involved an interesting judgment offset situation. There, a tenant in an unlawful detainer action in one court obtained a summary judgment and later attorney’s fees of $6,245 against a non-prevailing landlord where the lease had a fees clause. Tenant had earlier in the representation granted tenant’s attorney (from Public Counsel because tenant was indigent) a contractual lien on any fee recovery. Down the line, landlord obtained two separate judgments against prior winning tenant and another tenant in a subsequent unlawful detainer action and a small claims action, totaling $6,377.42. Landlord moved to offset the fee award against the judgments he later obtained, a motion denied by the superior court and affirmed on appeal by the Appellate Division.

     Whether to offset judgments, especially one involving a contractual attorney fee lien, involves weighing the equities under a multi-factored test set forth in Brienza v. Tepper, 35 Cal.App.4^th 1839 (1995). Although some factors weighed for and against landlord, the public policy factor tipped heavily against him: indigent tenants would not obtain needed legal representation if an attorney could not count on obtaining a potential future fee recovery based upon a contractual lien. The offset denial was affirmed.

     BLOG UPDATE AND HAT TIP—We checked the Second District website and have seen no disposition on the transmittal by the Appellate Division for transfer consideration. We give a HAT TIP to Kevin Hermansen of BASTA, Inc., a non-profit organization which represented the tenants in the superior court proceedings leading to the Appellate Division decision, for sharing this opinion with us.

Lien For Attorney’s Fees, Retainer Agreements: Claimants In Civil Asset Forfeiture Reform Act Cannot Assign Attorney’s Fees Award To Handling Attorney

 

Assignment Void Under The Anti-Assignment Act; However, Not All Is Lost—Contractual Attorney’s Lien Is Allowable As Against Government In CAFRA Actions.

    Under the Civil Asset Forfeiture Reform Act (CAFRA), successful claimants challenging the U.S. government’s seizure of property can obtain an attorney’s fee award against the government, which happened in the next case we discuss.  The attorney, seeking to protect his interest in the recovery, had upfront entered into a retainer agreement with the clients by which he was assigned their interest in a fee recovery such that it would be paid directly to him by the government.  Claimants did win a substantial fee award against the government, and the district court held that the fees awards could be paid directly to attorney rather than the clients/claimants—important because claimants had federal tax liens against them.

    The assignment was voided in United States v. Kim, No. 12-56922 (9th Cir. Aug. 13, 2015) (published), but the Ninth Circuit did indicate that an attorney could protect his interest in a fees award through a contractual attorney’s lien.

    This case is must reading in the CAFRA area, because it confronts many interesting issues.  After rejecting a judicial estoppel claims against government, the appeals court found no equitable exceptions to the Anti-Assignment Act applied given that a CAFRA fee award is a claim against the U.S. and CAFRA fees belong to the client rather than the attorney.  The goods news for attorneys is that even though the Ninth Circuit determined the fees must be paid to the clients, it refused to find that the Anti-Assignment Act avoided all interests of the attorney such that a contractual charging lien for attorney’s fees was valid.  The reviewing court vacated the order awarding fees directly to the attorney and remanded to determine the priority of liens, with the future possibility that the attorney’s charging lien “trumps” the government’s tax liens against claimants.

Attorney Lien/Probate: Attorney With Broad Contractual Attorney Lien Did Not Have To File Creditor’s Claim To Preserve Lien Against Trust “After Acquired” Assets

 

Matter Reversed and Remanded to Determine Value of Attorney’s Lien in Trust.

     Novak v. Kay, Case No. B256889 (2d Dist., Div. 5 Apr. 28, 2015) (published) involved an attorney with broad contractual attorney’s fees language in a retainer letter with a client who died but who was determined to be a pretermitted spouse having an interest with a separate trust with assets. The lower court denied the attorney’s effort to enforce the lien through a probate petition, based on the theory that attorney did not timely file a creditor’s claim against deceased client’s estate. The appellate court reversed, determining that an equitable lienholder like attorney did not have to file a creditor’s claim or initiate an independent action to foreclose the lien under Probate Code section 9391. It also remanded the matter so that the probate court could determine the value of lawyer’s interest in the trust.

     BLOG UNDERVIEW—This case is must reading for counsel inserting attorney lien provisions in retention agreements because it quotes the broad contractual charging lien language which was honored on appeal.

Liens For Attorneys Fees: Trial Court Acted In Excess Of Jurisdiction By Expunging Attorney Liens

 

Lower Court Could Not Expunge By Enforcing Settlement In Same Underlying Action.

     A trial judge in Martinez v. Mayberry, Case No. A142385 (1^st Dist., Div. 3 Mar. 24, 2015) (unpublished) expunged some attorney liens in enforcing a settlement agreement upon motion by defense and new plaintiff counsel (counsel other than former plaintiff’s counsel having the liens). This one was reversed on appeal based upon a jurisdictional issue. A trial court in an underlying action has no jurisdiction to determine the validity or existence of an attorney lien, especially since an attorney cannot intervene in the action and the lien issue must be adjudged in a separate action. No different result occurred just because the trial judge did so in the context of a settlement enforcement motion in the same underlying action. (Carroll v. Interstate Brands Corp., 99 Cal.App.4^th 1168, 1173 (2002).)

Appeal Sanctions/Attorney Lien/SLAPP: Defendants Trying To “SLAPP” In Fee Dispute Involving Attorney Lien Impact Were Correctly Not Allowed SLAPP Relief

 

However, Winning Plaintiff Attorney Negotiating Personal Injury Settlement Not Entitled to SLAPP Fee-Shifting Fees or Frivolous Appeal Sanctions.

     Well, we have an appellate court decision saying fees disputes do not rise to constitutional protected activity under the SLAPP statute. We are not offended, because these usually are more in the nature of private disputes in most situations.

     In Drell v. Cohen, Case No. B253688 (2d Dist., Div. 8 Dec. 5, 2014) (published), most of the litigation activity involved a fight between attorneys representing a personal injury claimant. After ex-attorneys for the claimant withdrew from representation albeit having an attorney’s lien, claimant’s second attorney negotiated a successful settlement with an insurer, who tendered a settlement check made payable to the second attorney and the ex-attorneys. That prompted second attorney to file a declaratory relief action relating to the impact of the ex-attorneys’ attorney lien. Ex-attorneys moved to SLAPP the declaratory relief complaint, but that was denied. The lower court also denied second attorney’s fee request predicated on the rejected theory that the SLAPP motion was frivolous.

     All results were affirmed on appeal.

     The appellate court found that the attorney lien dispute did not arise out of SLAPP “protected activity.” Here is how the panel put it: “None of the purposes of the anti-SLAPP statute would be served by elevating a fee dispute to the constitutional arena ….”

     Because second attorney never cross-appealed the lower court fee denial, his claim of error could not be considered. Finally, although indicating the appeal by ex-attorneys had “no merit whatsoever and [was] poorly conceived,” the panel believed there was not enough to impose appellate sanctions for a frivolous appeal.

Civil Rights/Lien For Attorney’s Fees: Nunc Pro Tunc Order Directing Payment Of FEHA Fee Award To One Set Of Plaintiffs’ Attorneys No Abuse Of Discretion

 

Trial Judge Did Not Resolve Attorney’s Lien Claim Brought by Estate of Another Deceased Plaintiffs’ Attorneys, So No Prejudice.

     Marcisz v. Ultrastar Cinemas, Case No. D063902 (4^th Dist., Div. 1 Aug. 29, 2014) (unpublished) involved two sets of FEHA attorneys moving to recover fees after successfully prosecuting a sexual harassment for four plaintiffs. The lawyers then moved to recoup fees, and that is where the in-fighting began.

     One set of attorneys moved for fees, while the estate of another plaintiff’s attorney also moved to recoup fees—this latter attorney had been suspended from the practice of law and had died from cardiac arrest (some of you may have litigated against him, Mr. Kay). The first group of attorneys obtained a fee award, and Mr. Kay’s estate moved to have an attorney’s lien honored against the recovery. The lower court dodged having to make a ruling on the lien issue, entering a nunc pro tunc later order saying defendant should pay the first group of attorneys directly and indicating the court was not deciding any contractual fee entitlement between the two attorney sides. Later, Mr. Kay’s fee request was granted, and his estate apparently filed a San Francisco lawsuit challenging that the first group of attorneys deprived his estate of proper fee divisions.

     The appellate court found the nunc pro tunc order no abuse of discretion; after all, the San Francisco litigation was pending and the lower court did not decide any contractual issues among the lawyers to Mr. Kay’s estate’s prejudice.

Lien For Attorney’s Fees: First Attorney Not Seeking Recovery On Attorney’s Lien Cannot Sue Second Attorney For Fee Recovery Under Client Settlement Agreement

 

No Enforceable Lien Being Enforced, No Recovery.

     On July 13, 2014, we did post on an unpublished case which has now been published after rehearing.

     Mojtahedi v. Vargas, Case No. B248551 (2d Dist., Div. 3 Aug. 8, 2014) (partially published, discussion of attorney’s lien published) involved attorney # 1 in a personal injury case who was shut out from recovering fees out of settlement proceeds against attorney #2 in the same case where attorney #1 did not attempt to enforce #1’s attorney’s lien in the matter.

     This one was affirmed on appeal. You can see the cases relied upon in our July 13, 2014 post, but the gist was there no claim against the settlement funds without enforcement activities related to the attorney’s lien.

Lien For Attorney’s Fees: Plaintiff First Attorney Properly Had Case Dismissed Against Client Settlement Proceeds Brought Against Second Attorney Where He Did Not Prosecute A Separate Action To Adjudicate Attorney’s Lien Against Client

 

Gotta Get Attorney’s Lien Adjudicated Against Client First.

     Mojtahedi v. Vargas, Case No. B248551 (2d Dist., Div. 3 July 9, 2014) (unpublished) is a stark reminder that a discharged attorney in a case seeking to recoup settlement funds against a client cannot just sue the second attorney directly without passing “go”—with “go” being in this case an action to adjudicate a contractual attorney’s lien against the client in the first instance.

     What happened here is that first attorney, later discharged, filed an action against second attorney alleging various torts (mainly) for failing to pay his claimed fees out of personal injury settlement. The lower court sustained a demurrer without leave, which prompted first attorney to appeal.

     The appeal was unsuccessful. The reason was that first attorney never prosecuted a separate action against client to establish his attorney’s lien entitlement to fees. Given that this was the case, he did not have “ripened” damages for a tort claim against the second attorney. Here are the cases relied on by the appellate court in getting to this result, essentially saying the attorney’s lien against client has to be adjudicated first: Brown v. Superior Court, 116 Cal.App.4^th 320, 328 (2004); Curtis v. Estate of Fagan, 82 Cal.App.4^th 270, 278 (2000); Valenta v. Regents of University of California, 231 Cal.App.3d 1465, 1470 (1991); Hansen v. Jacobsen, 186 Cal.App.3d 350, 356 (1986); Bandy v. Mt. Diablo Unified Sch. Dist., 56 Cal.App.3d 230, 234 (1976); Hendricks v. Superior Court, 197 Cal.App.2d 586, 588-589 (1961).

Liens For Attorney Fees: Subsequent Judgment Creditor Cannot Defeat Prior Attorney’s Lien In Client Retainer Letter

 

Lien Not Collusive and Did Not Violate RPC 3-300.

      We can sympathize with judgment creditors who then find out about a “secret” attorney’s lien which can often trump those other creditors‘ rights without having any notice of the attorney’s lien. The next case illustrates the point very poignantly.

      Agora Concepts, Inc. v. Raynak, Case No. B243907 (2d Dist., Div. 2 Oct. 3, 2013) (unpublished) is a situation where landlord was sued for wrongful eviction/abuse of process by former tenant obtaining a dismissal of a previous unlawful detainer action. The wrongful eviction/abuse of process prompted landlord to sue for breach of contract/guaranty, with tenant/tenant partner’s attorney obtaining an attorney’s lien on any settlement relating to representation of tenant. An unrelated party, judgment creditor, obtained a judgment against tenant in a separate action and filed a notice of lien in the landlord-tenant imbroglio. The parties in the imbroglio settled, with the settlement specifying that the landlord’s $35,000 payment went to tenants‘ attorneys. Lower court approved the settlement over judgment creditor’s objection, triggering an appeal by judgment creditor.

     Judgment creditor lost.

     The attorney’s lien was not collusive because the client-attorney retainer agreement was inked way before the judgment creditor’s claim surfaced. As far as the claim that attorney did not comply with Rules of Professional Conduct 3-300 requirements (client consent and requirement to advise client it should consult independent counsel with respect to the lien), the appellate court did not believe that the retainer agreement alone had to have these disclosures. The attorneys introduced evidence that they advised the client verbally and in writing about 3-300 requirements and client indicated an acknowledgment by signing the retention agreement. This proof satisfied the 3-300 concern, according to the reviewing court.

Liens For Attorneys Fee/Retainer Agreement: Triable Issue Of Fact Required Reversal of Summary Judgment Where Evidence Demonstrated Existence Of Retainer Agreement Should Be Decided By Trier Of Fact

 

If Second Retainer Agreement Signed By Client, Attorneys Lien Did Exist.

     Majlessi v. Parman, Case No. B241063 (2d Dist., Div. 3 July 12, 2013) (unpublished) is a case where the lower court granted summary judgment across the board when a discharged personal injury attorney sued successor attorneys to honor an attorneys’ lien in a second retainer agreement that attorney claimed was signed by discharging client. The lower court credited client’s declaration that he never signed the retainer; without such a contractual relationship, no recovery could be allowed, reasoned the trial judge.

     On appeal, the summary judgment was reversed.

     The reason had to do with the very nature of SJMs, which cannot be used to fact decide rather than decide if a material issue for trial exists. Although client’s declaration did serve to shift the burden of production of contrary evidence to plaintiff attorney, plaintiff did submit proof in the form of another declaration from his former legal assistant where she testified about seing client sign a second retainer agreement in her presence. This certainly presented a contested issue which would need to be decided at trial. However, because client discharged former attorney, his recovery was limited to quantum meruit for pre-discharge services. (Fracasse v. Brent, 6 Cal.3d 784, 791 (1972); Weiss v. Marcus, 51 Cal.App.3d 590, 598 (1975).)

     The appellate court also had an interesting discussion about whether de novo or abuse of discretion was the correct standard of review when scrutinizing evidentiary rulings in connection with SJMs. It observed that our state supreme court expressly has left open which review standard applies in Reid v. Goggle, Inc., 50 Cal.4th 512, 535 (2010); see also the concurring decision of Justice Mosk in Howard Entertainment, Inc. v. Kudrow, 208 Cal.App.4th 1102 (2012) reasoning that the abuse of discretion standard should apply. However, the Majlessi panel also explained that prejudice must be shown from any erroneous evidentiary ruling. Using that standard, the only prejudice came from sustaining an objection to the former legal assistant’s declaration which created an issue of triable fact. Once that testimony was factored in, the summary judgment grant had to be overturned.

Family Law/Lien For Attorneys Fees: Attorney Did Not Get Additional Fee Recovery From Client Based On Lien Clause Language and Family Code Provision On Perfection Of Further Fee Recovery

 

     In Fuchs & Associates, Inc. v. Lesso, Case No. B239246 (2d Dist., Div. 2 Jan. 8, 2013) (unpublished), an attorney sought to recover $647,688.13 in fees against a former client through a binding arbitration, fees in addition to what the client already had paid (about $481,000) in dissolution-related proceedings. The arbitrator awarded zilch/nada, which prompted an appeal by attorney.

     Attorney did not do any better on appeal.

     The appellate court found that the attorneys lien contractual language about attaching to “any recovery” was not tantamount to an attachment against all client’s assets, validating the arbitrator/lower court’s decision to narrowly construe the contractual provision.

     But, there was more. Under Family Code section 2033(b), the attorney representing a client must give notice to an opponent before obtaining a lien on a client’s interest in real property to secure payment of attorney’s fees. Attorney did not do so, such that this was an alternative ground to affirm the decision by the arbitrator, as sustained by the trial judge.

     As the case involves arbitration issues, on January 8, 2013, co-contributor Marc posted about Fuchs & Associates, Inc. v. Lesso on California Mediation and Arbitration.

Year End 2012 California Intermediate Fee/Costs Decisions

 

Here are the remaining December 31, 2012 intermediate DCA decisions on fees/costs issues,

Liens For Attorneys Fees: Timothy D. Reubon, Inc. v. One West Bank, Case No. B234958 (2d Dist., Div. 1 Dec. 31, 2012) (unpublished)

     In this one, judgment creditor/former attorney obtained a judgment against judgment debtor/former client for past due services. However, judgment debtor client settled an independent indemnification claim against a related bankrupt entity by which the entity paid out money on the indemnification claim and paid off a lien by an outside bank on entity’s property. Judgment creditor was incensed, filing a motion against bank to have his judgment lien honored against bank for its payout. Both the trial and appellate courts found that judgment creditor attorney was not entitled to pursue the indemnification payment to judgment debtor because it was an independent claim, with judgment debtor abandoning a motion for fees--a recovery to which the attorney’s liens would have attached to except for the abandonment. No direct payment to the client.

Allocation/Reasonableness of Fees/Section 998: Nagaoka v. Ponce, Case No. G045562 (4th Dist., Div. 3 Dec. 31, 2012) (unpublished)

     Plaintiff property owner won 1 of 3 claims (but a contractual claim) for a total of $5,680 against a contractor in a home improvement work dispute. Earlier, property owner had made a CCP § 998 offer for $10,000, having incurred preoffer attorney’s fees of $22,795 and preoffer costs of over $1,000. Even though property owner incurred total fees of $102,251 (yikes, for a $5,680 recovery), prevailing plaintiff did a smart thing in only asking for 1/3 of incurred fees amounting to $35,000 as well as $8,235.85 in costs. The trial court granted the entire requests, determinations affirmed on appeal in a 3-0 opinion authored by Justice Moore. No apportionment error was shown given the 2/3rds reduction, and plaintiff did beat the $10,000 998 offer once one-third of the preoffer awarded fees/costs were added to the $5,680 contractual award.

Appeal: Goodman v. Neutra, Case No. G046528 (4th Dist., Div. 3 Dec. 31, 2012) (unpublished)

     Last but not least for 2012, property owners in this case obtained a $100,000 professional malpractice award against an architect, who himself obtained a $30,000 recovery on a contract cross-claim. The lower court decided that architect was the prevailing contractually-based party and awarded him fees and costs of $51,000. After deducting the various awards, interest and costs due to architect, a net judgment of $27,626.92 was owed to property owners, an amount paid off by architect. Property owners then appealed, but the appeal was dismissed. Reason? They had accepted the benefits of the judgment, and no equitable exceptions (compulsion or severability) applied under the circumstances. Presiding Justice O’Leary authored this one, and architect prevailed on appeal so that he could seek additional fees and costs

     Blog Bonus:  Dion Neutra, a modernist/International style American architect, is son of the famed architect Richard Neutra (1892-1070).

Attorney Lien/Retainer Agreements: Successor Counsel Not Knowing Of Prior Counsel’s Attorney Lien Did Not Have To Modify Retainer Agreement In Order To Comply With Business And Professions Code Section 6147

 

Also, Prior Counsel Entitled to Receive $25,000 Holdback Based on His Attorney’s Lien.

     Henry Shain Professional Corp. v. Bergeron, Case No. A131328 (1st Dist., Div. 5 Mar. 20, 2012) (unpublished) is an interesting case illustrating how two attorneys--prior and successor counsels--did things right as far as perfecting attorney’s liens or drafting retainer agreement to protect their interests.

     Client was unhappy that $25,000 was held back for prior counsel based on an attorney’s lien. On appeal, the court sustained the holdback, recognizing the utility of an attorney’s lien to secure payment for services even after an attorney is discharged. (Siciliano v. Fireman’s Fund Ins. Co., 62 Cal.App.3d 745, 752 (1976).)

     However, a lower court had ordered successor law firm to disgorge a little over $118,000 from a $160,000 contingency fee it collected based on failure to account for the prior attorney lien in the terms of successor counsel’s retention agreement. That disgorgement was reversed on appeal because nothing demonstrated that successor counsel knew about the prior counsel’s lien such that contingency retainer agreement was not voidable under Business and Professions Code section 6147--the contingency fee arrangement requirements--for not revealing how disbursements and costs incurred in connection with a settlement of a claim (such as an attorney’s lien) would affect the contingency fee. Given no knowledge of the fee, there was nothing to disclose under section 6147, requiring an overturn of the disgorgement order. “Neither the court nor [client] provides authority for the proposition that after learning of the existence of the [prior] attorney fee lien, [successor counsel] had a duty to modify [successor counsel’s] fee agreement in order to enforce it, and we have found no such authority.” (Slip Opn., p. 15.)

Retainer Agreements/In The News . . . . New York Voids Retainer Agreement Terms Discouraging Clients From Following An Exiting Attorney

 

Attorney Lien “Penalty” Provision Also Invalidated.

     As reported by both the American Bar Association Journal and Buffalo News in January 10, 2012 posts, New York Supreme Court Justice John A. Michalek voided two provisions in a retainer agreement apparently designed to encourage clients from following an exiting attorney to another legal firm. The ruling came in a lawsuit by Cellino & Barnes against departing attorney Paul B. Becker by which the firm sought a determination he had violated the retainer agreement.

     First, the justice found that a provision forbidding a departing lawyer from informing clients of his impending exit is unenforceable and violated governing attorney ethics rules.

     Second, the justice also voided a contract provision saying that the old firm could put a 43.56% lien on future work done for a client by the exiting lawyer who went elsewhere, labeling the provision a penalty. He noted that the percentage reserved to cover case acquisition costs had not changed since 2005 such that the percentage was a penalty because it bore no relationship to actual damages or expenses of the firm. Also, “[t]o the extent that a departing lawyer ... must continue to pay the firm’s overhead in the amount of 43.56 percent of the fees that he earns if he represents a former firm client, that penalty serves as a strong disincentive for him to represent any client who wishes to follow him.”

Above:  Prisoners in shackles.  1905 – 1915.  Photographer:  Sergeĭ Mikhaĭlovich Prokudin-Gorskiĭ (1863-1944).  Library of Congress.