Thursday, February 20, 2003
Agreement Creating Fee Lien Need Not Be Written—C.A.
By a MetNews Staff Writer
An agreement creating an attorney’s fee lien on a cause of action need not be in writing to be enforceable, the Court of Appeal for this district has ruled.
Div. Seven Tuesday reversed a judgment barring Inglewood attorney Freddie Fletcher’s action to enforce what he claims is a contractual lien for fees earned in representing a former client who fired him in the middle of litigation.
Fletcher formerly represented Master Washer & Stamping Co. in litigation with its former landlord, whom the company claimed converted its property. After the first trial in the case ended in a mistrial, the company fired Fletcher and hired attorney Beverly Hills attorney Joseph Fischbach to handle the second trial, which resulted in a judgment for more than $600,000, including interest.
A creditor of Master Washer then sued, seeking a recovery against the proceeds of the judgment. A settlement agreement subsequently divided those proceeds among the creditor, Master Washer, Fischbach, and the landlord, who earlier obtained a stipulated judgment against Master Washer for $85,000 for breach of the lease.
Fletcher then sued all four of those parties, claiming he had no prior notice of their agreement and that they had converted funds to which he was entitled as a result of his charging lien on the proceeds of Master Washer’s suit. That lien, Fletcher said, was orally agreed to when he agreed to represent Master Washer at $200 per hour without a retainer.
Los Angeles Superior Court Judge Richard Fruin dismissed the suit on the ground that the alleged lien was not perfected, since it was not in writing. He also ruled that Master Washer was entitled to a dismissal on the ground that Fletcher failed to give the ex-client notice of its right to arbitrate the fee dispute.
Justice Earl Johnson Jr., writing Tuesday for the Court of Appeal, concluded that there is no requirement of a written agreement to create a lien for unpaid attorney fees.
The issue is a close one, the justice acknowledged. He noted that a State Bar ethics committee opinion has held that a written agreement is required, a San Francisco Bar Association opinion says otherwise, and the Los Angeles County Bar Association issued conflicting opinions 16 years apart.
Johnson said the better conclusion is that a written agreement is not required under the reasoning of Hawk v. State Bar (1988) 45 Cal.3d†589.
In Hawk, the Supreme Court said what is now Rule 3-300 of the State Bar Rules of Professional Conduct, requiring an attorney to comply with certain requirements—including the obtaining of written consent—before acquiring an interest in a client’s property, applies when the client is asked to give a promissory note secured by a deed of trust for attorney fees.
In contrast, the Hawk court said, an unsecured promissory note would not be covered by the rule. The court reasoned that since a suit would be required to enforce the unsecured note, the client could raise defenses at that time and did not need the protections required by the rule.
The justice wrote:
“In our view, a charging lien is like an unsecured note and, therefore, not subject to rule 3-300. A charging lien is not adverse to the client because ‘[i]t does not give the attorney a present interest in the client’s property which the attorney can summarily realize.’ Rather, after the client obtains a recovery, the attorney must bring a separate, independent action against the client to establish the existence of the lien, to determine the amount of the lien, and to enforce it. The client may set up any defenses she may have, including a claim the fees sought are unconscionable or that she is entitled to a set-off against the fees for the attorney’s malpractice. We believe the procedures for establishing and enforcing a charging lien provide the kind of judicial scrutiny called for in Hawk—.”
In an unpublished portion of the opinion, Johnson said the suit was correctly dismissed as to Master Washer based on the lack of fee-arbitration notice.
The case is Fletcher v. Davis, 03 S.O.S. 897.
Copyright 2003, Metropolitan News Company