Legal Malpractice

Charging Liens and Legal Malpractice

By (Andrew Lavoott Bluestone)

Emery Celli Brinckerhoff & Abady LLP v Rose; 2010 NY Slip Op 33288(U); November 23, 2010
Sup Ct, NY County; Judge: Joan A. Madden is a decision which outlines the law of charging liens and legal malpractice.  In this particular case, attorneys were representing plaintiff in a series of interrlated but separate litigations, all revolving around the resolution of who owns a family business, and who has to pay whom to get control of that business. 

"At issue on this petition is whether ECBA is entitled to a charging lien based on a
settlement which increased Rose's ownership in Broadside and resulted in Rose receiving certain
items of personal property. The settlement resolved, inter alia, three actions related to disputes
among the shareholders of Broadside regarding their ownership rights in Broadside and
Broadside's management, that arose after the death of Rose's father, Stanley Rose, in 1994"

"Judiciary Law  475 provides that '[flrom the commencement of an action ... the attorney
who appears in an action has a lien upon his [or her] client's cause of action, claim or
counterclaim, which attaches to a verdict, report, determination, decision, judgment or final order
in the client's favor and the proceeds thereof in whatever hands they may come.' It further
provides that 'the lien cannot be affected by any settlement between the parties before or after
judgment, final order or determination.'

'A charging lien is a security interest in a favorable result of litigation ...giving the
attorney equitable ownership interest in the client's cause of action and ensuring the attorney can
collect a fee from the fund he has created for that purpose on behalf of the client.' Chadbourne &
e. LLP v. AB Recur Finmz, 18 AD3d 222,223 (1' Dept 2005)(citations omitted).

Furthermore, although charging lien extends to settlement proceeds. ..it is only enforceable
against the fund created by that action.' Ig, (citation omitted). Thus, 'where the attorney's
services do not create any proceeds but consist solely of defending title or interest already held by
the client, there is no lien on the title or interest.' Theroux v. Theroux, 145 AD2d 625 (2d Dept
1989), citing, Pesmond v. Socha, 38 AD2d 22,24 (3d Dept 1971) lv dend,; 1 N Y2d 687 (1972).
In addition, the charging lien only extends to fees arising out of the attorney's services in a
specific action or proceeding in which they were incurred and does not include fees due to an
attorney for other matters. See Renbl , 121 AD2d 546 (2d Dept 1986); 7
NYJur2d Attorneys at Law 4 295."

The preliminary question raised is whether the April Settlement created proceeds to
which a charging lien could attach. Even assuming arguendo that Rose did not obtain my
additional stock in Broadside as a result of the April Settlement, he nonetheless attained 100%
ownership in Broadside. Moreover, although the settlement required Broadside and Rose to buy
out the other shareholders, it cannot be said that the settlement did not result in proceeds of
litigation in his favor, particularly as the settlement resolved the issues regarding the conflicting
rights of the shareholders and made him the sole owner of Broadside. See:Tunick v. Shaw,
45 AD3d 145 (1'st Dept 2007), jv dismissed, 10 NY3d 930 (2008)(holding that photographic
images constitute proceeds of litigation to which attorneys' charging liens could attached even
though images existed prior to litigation where attorneys' efforts culminated in settlement
resolving conflicting rights to possession and commercial exploitation of the images); Con~are
The roux v. The roux, 145 AD2d 625 (holding that attorney's services did not create any proceed
on which charging lien could attach where equitable distribution settlement merely permitted
plaintiff to maintain a one-half interest in the condominium that she held as a tenant by the
entirety).
That being said, however, it cannot be established on this record the extent to which the
unpaid legal fees at issue in this proceeding arose out of EC BA's services in connection with the
litigation that was settled.

Full post as published by New York Attorney Malpractice Blog on December 06, 2010 (boomark / email).