Gavin Howe
In the context of transactional law, a charging lien is a legal concept that allows an attorney to protect their fees by placing a lien on the proceeds of a claim they have pursued on behalf of their client. This type of lien is typically utilised when the attorney works under a contingent fee agreement and contributes to obtaining a settlement, but the client fails to compensate them for their work. The charging lien serves as a mechanism for the attorney to recover the fees owed for their services. It is important to note that the specific laws and procedures governing charging liens may vary across different jurisdictions, and attorneys must adhere to ethical guidelines when enforcing their rights.
| Characteristics | Values |
|---|---|
| Type of lien | Charging lien |
| Who can use it | Attorneys |
| When it can be used | When an attorney withdraws from a case or is discharged by the client |
| Purpose | To protect an attorney against the 'knavery of his client' and ensure they receive compensation for their work |
| What it applies to | The client's cause of action, claim, or counterclaim, and the proceeds thereof |
| When it comes into existence | Upon commencement of the action or proceeding |
| What it doesn't depend on | An agreement that the attorney shall have a lien upon the judgment |
| Enforcement | Attorney can pursue the defendants in addition to the client for money owed |
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What You'll Learn
Charging lien vs retaining lien
In the context of attorney-client relationships, a charging lien and a retaining lien are two types of remedies that lawyers can use to collect unpaid fees.
Charging Lien
A charging lien allows an attorney to claim a portion of the future settlement or judgment in the client's case. The attorney must demonstrate that their work substantially contributed to the case. The charging lien gives the attorney an equitable ownership interest in the client's cause of action, which attaches to the judgment from the commencement of the action. This type of lien does not require the attorney to solely chase the client for the money owed but can also pursue other defendants.
Retaining Lien
A retaining lien allows an attorney to retain possession of the client's papers, documents, and other personal property related to the subject representation. The attorney can hold these items until their disbursements are fully paid and their legal fees are determined or set by the court. The retaining lien gives the attorney a right to keep the client's property, with certain exceptions, such as voluntarily giving away the items. The client can lift the retaining lien by paying the amount owed or posting a bond for this amount.
Both types of liens are recognized and enforced by courts and are designed to protect attorneys against non-payment or "knavery of his client." The attorney may pursue any or all of these remedies at the same time to get paid, and the client cannot argue that the attorney elected one remedy over another.
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Common law and statutory charging lien
In the United States, attorneys can enforce common law and statutory charging liens against their clients and other defendants to recover their legal fees. This is a mechanism to protect attorneys against non-payment or "the knavery of [their] client [s]".
At common law, an attorney was only entitled to a lien upon the judgment. However, the scope of the charging lien has been extended by statute (Judiciary Law §475) to give the attorney a lien upon the client's cause of action. This lien comes into existence without notice or filing, upon the commencement of the action or proceeding. The lien attaches to a cause of action and gives the attorney a right against the client's assets.
In Haser v. Haser, the court held that under New York law, a plaintiff's attorney may enforce a statutory charging lien against the defendant's assets if they still possess the settlement proceeds or knowingly paid them to the plaintiff to deprive the attorney of their compensation.
There are three remedies available to an attorney discharged by their client without cause: the retaining lien, the charging lien, and an action for breach of contract damages. The retaining lien allows the attorney to keep the client's papers, documents, and other personal property related to the subject representation until disbursements are paid and legal fees determined or set by the court. The charging lien is governed by Judiciary Law Section 475, which provides that from the commencement of an action, the attorney has a lien upon their client's cause of action, which attaches to any favourable verdict, report, decision, judgment, or final order.
The court may determine the reasonable value of the attorney's services, referred to as "quantum meruit", and this may be enforced against all of the client's assets. The attorney may pursue any or all of the three remedies simultaneously to get paid.
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Enforcing a charging lien
A charging lien is a legal claim made by an attorney on a client's property or assets, to ensure payment of legal fees. This type of lien is typically enforced when an attorney withdraws from a case or is discharged by the client.
In the state of New York, an attorney may enforce a statutory charging lien against the defendant's assets, if the attorney still possesses the settlement proceeds or knowingly paid them to the client, thus depriving the attorney of their compensation. This was upheld in the case of Haser v. Haser, 271 AD2d 253 [1 Dept. 2000]. The lien cannot be impaired by a collusive settlement.
In the state of Florida, a former attorney's charging lien is enforceable against a defendant. In Sinclair, Louis, Siegel, Heath, Nussbaum & Zavertnik, P.A. v. Baucom, 428 So. 2d 1383, 1385 (Fla. 1983), it was found that when a defendant has notice of a charging lien before a case is settled, the defendant may be held liable to the former plaintiff's attorney. The Florida Supreme Court has stated that there are no requirements for perfecting a charging lien beyond timely notice.
To determine the reasonable value of an attorney's services, the court will consider factors such as the terms of any percentage fee agreement, the nature of the litigation, the difficulty of the case, the amounts customarily charged by attorneys for such services, and the results achieved.
It is important to note that an attorney may pursue multiple remedies at the same time to ensure they receive payment for their services.
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Determining reasonable value
A charging lien is a legal mechanism that allows an attorney to protect their fees and get compensated for their services. It is a common law and statutory right that gives the attorney a lien on the client's cause of action, claim, or counterclaim from the commencement of the action or proceeding.
When determining the reasonable value of an attorney's services, the court considers several factors to calculate the "quantum meruit". This includes:
- Terms of any percentage fee agreement: The court will consider the agreed-upon fee structure between the attorney and the client. If there is a contingency fee agreement, the attorney can assert a charging lien against the fund obtained if the client does not pay for the work done.
- Nature and difficulty of the case: The complexity and unique challenges of the case will be factored into determining the reasonable value of the attorney's services.
- Customary charges for similar services: The court will consider the standard rates charged by attorneys for similar services in the same jurisdiction.
- Results achieved: The outcome of the case may impact the value assigned to the attorney's services.
In addition to these factors, the court may also take into account the time spent by the attorney on the case, their expertise, and the overall benefit obtained by the client. The determination of reasonable value is crucial in quantifying the attorney's compensation and ensuring they are fairly remunerated for their contributions to the case.
It is worth noting that the attorney can pursue multiple remedies simultaneously, including the retaining lien, charging lien, and breach of contract action, to ensure they receive the payment owed to them.
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Confidentiality obligations
A charging lien is a legal concept that allows an attorney to protect their fees by placing a lien on the proceeds of a claim they have pursued on behalf of a client. This typically occurs when the lawyer works under a contingent fee agreement, and the client fails to pay for the work that contributed to obtaining the settlement.
However, it is important to note that even when enforcing a charging lien, attorneys must uphold their confidentiality obligations towards their former clients. This means that any information gained during the professional relationship must remain confidential. For instance, when notifying the successor counsel or likely custodian of the property subject to the lien, the attorney must not disclose information about the client's financial situation or past refusals to pay without the client's consent.
In the context of charging liens, attorneys must carefully navigate their confidentiality obligations. They can only disclose client confidences to the minimum extent necessary to collect their fees. This may involve providing limited information about the existence of the lien and the attorney's right to compensation. Additionally, protective orders and filings in camera or under seal should be utilised whenever possible to maintain the confidentiality of sensitive information.
Attorneys must also be mindful of the ethical guidelines and Rules of Professional Conduct governing fee disputes between lawyers and clients. These rules outline the appropriate procedures for enforcing liens and collecting fees while maintaining the confidentiality of client information. Overall, confidentiality obligations are a crucial aspect of the legal profession, and attorneys must carefully balance their right to compensation with their duty to protect the privacy and interests of their clients, even in the context of enforcing charging liens.
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Frequently asked questions
A charging lien is a remedy available to an attorney for the recovery of their fee. It is a lien against the proceeds of a claim that the lawyer pursued on the client’s behalf.
An attorney can enforce a charging lien when they have obtained a settlement or verdict for their client but the client does not pay them for their work.
A retaining lien allows an attorney to keep their client's papers, documents, and other personal property related to the subject representation until their legal fee has been determined or set by the court. On the other hand, a charging lien allows an attorney to pursue their client's assets to recover their fee.
