Legal Malpractice

Charging Liens and Their Calculation

By (Andrew Lavoott Bluestone)

In MELNICK v. CARY PRESS,;No 06-CV-6686 (JFB) (ARL);UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK;2009 U.S. Dist. LEXIS 77609; August 28, 2009, Decided we find an excellent discussion of the rules of attorney fee liens under the Judiciary Law.
 

"Under New York law, an attorney who is discharged is statutorily entitled to a charging lien on any monetary recoveries obtained by the former client in the proceedings in which the attorney had rendered legal services. 1 See N.Y. Judiciary Law § 475. The Second Circuit has [*7] explained the rationale behind the charging lien:
New York's statutory charging lien, see N.Y. Judiciary Law § 475 (McKinney 1983), is a device to protect counsel against "the knavery of his client," whereby through his effort, the attorney acquires an interest in the client's cause of action. In re City of New York, 5 N.Y.2d 300, 307, 184 N.Y.S.2d 585, 157 N.E.2d 587 (1959). The lien is predicated on the idea that the attorney has by his skill and effort obtained the judgment, and hence "should have a lien thereon for his compensation, in analogy to the lien which a mechanic has upon any article which he manufactures." Williams v. Ingersoll, 89 N.Y. 508, 517 (1882).
Butler, Fitzgerald & Potter v. Sequa Corp., 250 F.3d 171, 177 (2d Cir. 2001).

FOOTNOTES

1 A discharged attorney is also entitled to a retaining lien on the former client's papers and property that are in the attorney's possession, under New York common law. See Resolution Trust Corp. v. Elman, 949 F.2d 624, 626 (2d Cir. 1991); see also McDermott v. Great Am. Alliance Ins. Co., No. 5:02 Civ. 0607 (NAM/DEP), 2006 U.S. Dist. LEXIS 52878, 2006 WL 2038452, at *2 (N.D.N.Y. July 18, 2006) ("In New York, an attorney who ceases to represent his or her client but has rendered [*8] services for which payment has not yet been received has two forms of recourse against non-payment, other than commencement of a plenary action -- one derived from the common law [generally referred to as a retaining lien], and the other created by statute [referred to as a charging lien]."). Wagner Davis' assertion of a retaining lien is discussed in connection with plaintiffs' motion to compel infra.

Specifically, Section 475 of the New York Judiciary Law provides:
From the commencement of an action . . . the attorney who appears for a party has a lien upon his client's cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, judgment or final order in his client's favor, and the proceeds thereof in whatever hands they may come; and the lien cannot be affected by any settlement between the parties before or after judgment, final order or determination. The court upon the petition of the client or attorney may determine and enforce the lien.
N.Y. Judiciary Law § 475. The Second Circuit has made clear that Section 475 governs attorneys' charging liens in federal courts sitting in New York, and such liens are "enforceable in federal courts in [*9] accordance with its interpretation by New York courts." Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 449 (2d Cir. 1998) (internal quotation marks and citations omitted). In order to establish a lien under Section 475, "there must be asserted a claim which can eventuate in there being proceeds payable to, or assets recoverable by, the client as a result of the efforts of the attorney." Rosewood Apartments Corp. v. Perpignano, No. 99 Civ. 4226 (NRB), 2005 U.S. Dist. LEXIS 8396, 2005 WL 1084396, at *3 (S.D.N.Y. May 3, 2005). Further, attorneys who terminate their representation are still entitled to enforce their charging liens, as long as the attorney does not withdraw without "good cause" and is not discharged for "good cause." See, e.g., McDermott v. Great Am. Alliance Ins. Co., No. 5:02 Civ. 0607 (NAM/DEP), 2006 U.S. Dist. LEXIS 52878, 2006 WL 2038452, at *2 (N.D.N.Y. July 18, 2006); Hill v. Baxter, No. 98 Civ. 4314 (SJF) (ASC), 2005 U.S. Dist. LEXIS 7157, 2005 WL 465429, at *2 (E.D.N.Y. Feb. 7, 2005); Petition of Harley & Browne, 957 F. Supp. 44, 48 (S.D.N.Y. 1997); Rankel v. Tracey, No. 84 Civ. 3412 (KMW), 1991 U.S. Dist. LEXIS 10673, 1991 WL 156324, at *7 (S.D.N.Y. Aug. 2, 1991); Klein v. Eubank, 87 N.Y.2d 459, 663 N.E.2d 599, 600, 640 N.Y.S.2d 443 (N.Y. 1996).
 

On calculating the actual amount the court wrote: "The Court does, however, find it necessary to subtract those hours that the firm spent on its motion to withdraw and on this pending motion. Such activities were not in furtherance of obtaining a favorable judgment on behalf of plaintiffs in this case and are thus not properly the subject of the charging lien. See, e.g., Cutner & Assocs., P.C. v. Kanbar, No. 97 Civ. 1902 (SAS), 1998 U.S. Dist. LEXIS 1045, 1998 WL 104612, at *3 (S.D.N.Y. Feb. 4, 1998)

"The Johnson factors are: "(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the level of skill required to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the attorney's customary hourly rate; (6) whether the fee is fixed or contingent; (7) the time limitation imposed by the client or the circumstances; (8) the amount involved in the case and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the 'undesirability' of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases." 488 F.2d at 717-19."

Full post as published by New York Attorney Malpractice Blog on October 11, 2010 (boomark / email).