Washington Attorney’s Liens and the Departing Lawyer
Washington State created the concept of attorneys liens in the 1880’s, and very little has changed since then. The statute was originally enacted in order to create a property right for lawyers in the cases they litigate, and then modified to better prevent the double taxation of clients. Attorney’s liens are still largely misunderstood by many, and misused by too many. And even in those circumstances wherein liens are legitimately created and imposed, courts have not acted uniformly in their enforcement. This article addresses some of the issues chronically associated with attorney’s liens.
First and foremost, what is an attorney’s lien? An attorney’s lien is a creature of statute and thus exists exclusively within the confines of the statutory authorization. RCW section 60.40.010 defines an attorney’s lien as a lien securing “his or her compensation” imposed upon certain things, securing payment for legal services performed by certain lawyers in certain limited circumstances. A common misimpression among the bar is that an attorney’s lien may be asserted by any lawyer or firm and imposed for all legal services performed in all instances, even to secure a revenue sharing arrangement among lawyers. This is clearly not the case.
Although no Washington case law has yet addressed this issue, the right to claim an attorney’s lien appears to belong exclusively to individual lawyers who perform compensable legal services. Several published decisions wherein law firms sought to enforce attorney’s liens have been decided, thus creating the misimpression that the statute authorizes lien rights in more than individual lawyers. Those decisions, however, have not addressed the fundamental meaning of the statutory language “his or her compensation.” We submit that this question remains open for the appropriate case. Envision for example the very common situation wherein Attorney A is a member of Firm B, and Attorney A performs work on a certain case while at Firm B. Attorney A leaves Firm B and the client and his case follows him. Does Firm B have lien rights relating to the case under RCW chapter 60.40? Perhaps not, except to the extent that Firm B has legally succeeded to the statutory rights of Attorney A by express or implied assignment. And to what extent does Attorney A lose his lien rights or experience their diminishment when he or she leaves Firm B mid-case ? This remains to be seen.
Second, to what assets does an attorney’s lien attach? Subpart (a) identifies “papers of the client” which have come into the attorney’s possession. This is a possessory lien, meaning that the moment the client files are no longer in the attorney’s possession, the lien dissolves. From a practical standpoint, the lien on client’s papers is meaningless. Bar opinions make it clear that client’s papers belong exclusively to the client, and such papers must be delivered to the client without restriction upon demand. Most would agree that holding the delivery of client papers hostage to payment of legal fees runs afoul of the Rules of Professional Conduct.
Subpart (b) identifies as lienable “money in the attorney’s hands belonging to the client.” For example, a settlement payment deposited into the attorney’s trust account would fall into this category. Again, this is a possessory lien meaning that it can only attach when the money actually resides with the attorney. To the extent money is released from trust, the lien does not attach to or follow the disbursement. Issues can arise in this context which potentially prejudices the rights of the client. In the example given above, Attorney A settles his client’s case and the full settlement is deposited into Attorney A’s trust account. Firm B asserts an attorney’s lien claiming entitlement to one-third of the settlement based upon the fee agreement that the client originally signed with Firm B. Attorney A has lien rights himself ostensibly based on a new fee agreement client has signed which attach to the trust account. RPC 1.15A(g) may be found to restrict an attorney from releasing funds from trust if there is a disagreement between two or more parties, one of whom may be the attorney, over entitlement to the money. The conflict between the lien rights of Firm B and Attorney A might thus adversely affect the client if he expects to pay only a total of one-third of his settlement in fees, and if delivery of his portion of the settlement is blocked by the dispute.
Subpart (c) identifies as lienable money “in the hands of the adverse party in an action or proceeding.” This is widely understood to mean, for example, the insurance proceeds of a defendant in a personal injury lawsuit. Entitlement to lien in this circumstance is restricted, however, to the extent to which the attorney actually performed legal services in the “action or proceeding.” In other words, legal services in the nature of an investigation of a claim where no action or proceeding was commenced are not lienable. Or if the attorney liening an adverse party performed no services in a pending action or proceeding, then a lien is not authorized. Returning again to our example, if Attorney A investigated a claim while at Firm B, but then commenced an action for the client after leaving Firm B, there would be no lien entitlement in Firm B (assuming firms have the legal right to lien in the first place). Attorney A would have the exclusive right to impose a lien on the defendant’s money. A further restriction of this subpart is that the lien right does not arise until an action or proceeding is actually “commenced.” Once an action is commenced, the lien right in the attorney performing services in the action or proceeding automatically attaches as a matter of law, effective from and after the date notice of claim of lien is served. The lien notice need not be “filed” or in any particular format to be effective.
Subpart (d) identifies as lienable “an action”, including arbitration or mediation, and “its proceeds” to the extent of the “value” of the attorney’s legal services performed in the action. As with subpart (c), only the fees representing services performed in the action are lienable. This subpart introduces the concept of “value”, which likely means quantum meruit as opposed to lodestar, flat or percentage fees. The section does, however, add an entitlement to lien for fees incurred pursuant to a “special agreement”, perhaps a flat-fee or lodestar arrangement or even possibly a percentage fee arrangement. This creates an additional quandary. Assume for example, that the client’s action was commenced while Attorney A was at Firm B, but thereafter the client’s case departed with Attorney A. Lien rights against the “action” attached as of the commencement of the action. It could theoretically be argued that the fee agreement signed by the client with Firm B is a “special agreement” subject to enforcement according to its terms, although this seems unlikely. One can envision a situation wherein two competing “special agreements” for the payment of fees exist giving rise to a dispute over entitlement to proceeds which could seriously prejudice the client.
Subpart (e) identifies as lienable a “judgment”, but again only to the extent of the “value” of legal services performed by the lawyer “in the action.” The “special agreement” proviso also appears in this subpart. Filing of the notice of claim of lien is a requirement here. The lien’s priority is governed by the date of filing with the clerk of the court in which the judgment is ultimately entered. The filing must include “the papers in the action”, and must name the claimant, the amount claimed, and the date of filing. An entry in the execution docket setting forth the amount claimed must appear. In other words, a lien claim purporting to attach to a judgment is not going to be effective if it fails to set forth an amount certain from which the clerk can make the appropriate notation in the execution docket.
Assuming a correct and timely filed notice of attorney’s lien exists, how is that lien enforced? Attorney’s liens are “foreclosed” in the same manner as judgment liens, with a special exception. A possessory lien on the papers or money of the client in the attorney’s possession may be brought forth for adjudication on an expedited basis, wherein the court is empowered to summarily adjudicate the facts underlying the lien claim. For example, we have effectively employed the show cause process to obtain summary relief in this instance.
The courts, however, adhere to no particular rule in adjudicating attorney’s claim rights. In Marriage of Glick, 154 Wn. App. 729 (Div. I 2009), in a study of the legislative history the court concluded that trial courts have limited jurisdiction to do much of anything regarding the enforcement of a possessory attorney’s lien. The opinion holds that because attorney’s liens imposed on “client papers” or on client money in the lawyer’s hands (e.g., a trust account) are “possessory” only, the court’s only power was to rule on the client’s attempt to regain possession. In other words, the client has to sue the lawyer to get the property (money) back or at least make an unambiguous demand on the lawyer before the court can do a thing.
Consider this ruling juxtaposed against the provision in the Act permitting the court to summarily “determine” the facts underlying the lien claim. The cases give scant guidance on how to do this, or on how fast “summarily” actually is. But it appears that in the possessory lien category, the court’s power is now limited to defining the lien rights in terms of amount and property encumbered and the identity of the lawyer who is entitled to the lien but to do no more.
In one of the cleanest recent cases we handled representing a lien claimant, the lien was properly and timely served, it set forth an amount certain, and it was based upon a written “special agreement”. Impeccable records of time spent were kept by the lienor. When the matter came before the court however, it handled it as a run of the mill quantum meruit application and exercised broad discretion in discounting the claim and exonerating the lien. The take-away was that despite the fact that attorney’s liens, as statutory creatures, are to be strictly construed then and liberally applied to protect the lienor, courts may still be expected to treat liens as a footnote to an ordinary application for an award of “reasonable attorney’s fees”.
In the hands of experienced practitioners, attorney’s liens may still be effectively employed. They can create the leverage needed to obtain fair payment for litigation services rendered, particularly in tort cases where risk-averse insurers may be unwilling to fund a settlement until all lien rights have been resolved. Attorney’s liens are by no means a panacea, however. Reliance upon an attorney’s lien should be gauged in light of the statutory restrictions and the propensity of court’s to act unpredictably in enforcement.