Charging Lien: Judiciary Law Section 475

Attorney is entitled to a charging lien pursuant to Judiciary Law Section 475

As the former attorneys of record for the plaintiff, the law firm is entitled to maintain a charging lien attached to any verdict, report, determination, decision, judgment, or final order rendered in Plaintiff’s favor, including any settlement of the action, if such a favorable result is ultimately achieved by Plaintiff.

As held by the court in Ruta & Soulios LLP v. Litman & Litman, PC, 9 Misc 3d 1123(A) [Sup Ct 2005] affd, 27 AD3d 236 [1 Dept 2006]:

“ A charging lien is a security interest in the favorable result of litigation giving the attorney equitable ownership interest in the client’s cause of action and ensuring that the attorney can collect his fee from the fund he has created for that purpose on behalf of the client.” Chadbourne & Parke, LLP v. AB Recur Finans, 18 AD3d 222, 223 (1st Dept.2005) citing LMWT Realty Corp. v. Davis Agency, 85 N.Y.2d 462, 467–468 (1995); Butler, Fitzgerald & Potter v. Gelmin, 235 A.D.2d 218 (1st Dept.1997). ”

In a recent decision, Stair v. Calhoun, 722 F.Supp. 258 [E.D.N.Y. 2010], the court analyzed the motion of a law firm to withdraw as counsel for the plaintiff and for both charging and retaining liens, holding:

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. See N.Y. Judiciary Law Section 475. The Second Circuit in Butler, Fitzgerald & Potter v. Sequa Corp., 250 F.3d 171, 177 (2d Cir.2001) explained the rationale behind the charging lien:

New York’s statutory charging lien, see N.Y. Judiciary Law Section 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).

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, award, settlement, judgment or final order in his or her 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.

The charging lien is not lost by reason of the substitution of counsel. See, In re Burroughs & Brown, 239 AD 794 [2d Dept. 1933]. In this case, Plaintiff replaced the law firm with another at the client’s own choosing. The substitution of counsel does not vitiate the charging lien in favor of the law firm.

Under New York law, a client may discharge an attorney at any time, with or without cause (Matter of Montgomery, 272 N.Y. 323, 326, 6 N.E.2d 40; Reubenbaum v. B. & H. Express, 6 A.D.2d 47, 48, 174 N.Y.S.2d 287 [Breitel, J.]). When a client discharges an attorney without cause, the attorney is entitled to recover compensation from the client measured by the fair and reasonable value of the services rendered whether that be more or less than the amount provided in the contract or retainer agreement (Matter of Montgomery, supra, 272 N.Y. at 326–327, 6 N.E.2d 40). As between them, either can require that the compensation be a fixed dollar amount determined at the time of discharge on the basis of quantum meruit (Reubenbaum v. B. & H. Express, supra, 6 A.D.2d at 48, 174 N.Y.S.2d 287) or, in the alternative, they may agree that the attorney, in lieu of a presently fixed dollar amount, will receive a contingent percentage fee determined either at the time of substitution or at the conclusion of the case (id.). See, Lai Ling Cheng v. Modansky Leasing Co., Inc., 73 NY2d 454, 457-58 [1989].

As held by the Second Department in Mello v. City of New York, 303 AD2d 564 [2 Dept. 2003], based upon the election by the law firm, the charging lien ought to be acknowledged and fixed based upon a contingent percentage to be determined at the conclusion of the action.

The motion brought by the law firm is appropriately brought before the court in the underlying action, as opposed to being commenced as a separate, plenary action. See, Miller v. Kassatly, 216 AD2d 260 [1 Dept. 1995] (“ Judiciary Law Section 475 establishes a statutory attorneys’ lien, [and] permits enforcement of the lien either by way of motion in the main action or by plenary action. ”); Wasserman v. Wasserman, 119 AD3d 932 [2 Dept. 2014]  (“ An attorney may enforce a charging lien simply by making a petition to the court in the proceeding where he or she appeared, rather than having to bring a separate plenary action. ”)

Other entries in this blog involving the subject of Judiciary Law Section 475:

When Lawyers Engage in a Tug-of-War

Lawyers are men whom we hire to protect us from lawyers

An attorney maintains a common law and statutory charging lien in the judgment

Not so fast. Lawyer Can’t Be Displaced by Client without Court Order.

— Richard A. Klass, Esq.

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