Memorandum of Decision Re: Charging Lien

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Decisions
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re JANE NEVE,                                                                                   No. 96-11587      Debtor. ___________________________/ JANE NEVE,      Plaintiff,      v.                                                                                               A.P. No. 96-1170 CHRISTOPHER J. RILLO, et al.,      Defendants. ______________________________/
Memorandum of Decision
     Before her bankruptcy, debtor and plaintiff Jane Neve was involved in lengthy and difficult marital dissolution proceedings. Defendant Kerstetter & Rillo was the fourth law firm Neve hired to represent her in the case. While represented by Kerstetter & Rillo, Neve reached a settlement. She later discharged Kerstetter & Rillo and unsuccessfully tried to set the settlement aside. At issue in this adversary proceeding is the contractual lien securing Kerstetter & Rillo's fees.       At common law, an attorney has a special or "charging" lien for his or her fees against any judgment obtained on behalf of a client. While California does not generally follow this rule, it does allow the attorney and client to contract for such a lien. See 7 Cal.Jur.3d, Attorneys, sections 170 and 171. The agreement between Kerstetter & Rillo and Neve contained such a provision.      The fee agreement is written in clear, nontechnical language. It gives Kerstetter & Rillo a lien on all proceeds of any recovery or settlement. Neve attacks the validity of the lien because Kerstetter & Rillo failed to advise her to seek independent counsel before having her sign the fee agreement. Neve argues that the provisions of Rule 3-300 of the California Rules of Professional Conduct required such advice to validate the lien.      The court sees no merit in Neve's position. Rule 3-300 by its terms applies only to security interests adverse to a client. A security interest is not adverse to a client unless it gives the attorney the ability to summarily extinguish the client's interest in property. Brockway v. State Bar, 53 Cal.3d 51, 64 (1991); Hawk v. State Bar, 45 Cal.3d 589, 600 (1988). The rule has never been held to apply to lien rights in property which may be recovered through the litigation for which the law firm is employed.      In many cases, California courts have upheld the lien even where the agreement does not specifically provide for it, so long as it is clear from the contract that the lawyer is to look to the recovery for payment of the fee. See, e.g., Hansen v. Jacobsen (1986) 186 Cal.App.3d 350; Trimble v. Steinfeldt (1986) 178 Cal.App.3d 646. Where the lien can be created under such vague circumstances, it make no sense to hold that if the attorney makes the right to a lien clear in the contract the lien is void unless the client was advised to consult other counsel. This is probably why the court has found no case applying either Rule 3-300 or Rule 1.7(b)(2) of the American Bar Association Model Rules of Professional Conduct to a lien on a recovery.      The court understands that there may be special considerations in applying charging lien law to family law situations. It does appear that in the early stages of this litigation Kerstetter & Rillo asserted that its lien extended to child support payments and certain real property already owned by Neve when the agreement was signed. However, it has backed down from these positions and the court accordingly does not need to address these issues.      There also remains an issue as to spousal support. Neve argues that a portion of the property settlement obligation owed to Neve by her former spouse is disguised spousal support, and the attorneys' lien is not valid as to this portion. This issue is not yet ready for resolution. However, Rule 3-300 is irrelevant in any event. The nature, extent, and application of an attorney's lien is a matter of state law, not legal ethics. See American Bar Association, Annotated Model Rules of Professional Conduct, Rule 1.8(j)(1).      The court makes no ruling as to the nature and extent of Kerstetter & Rillo's lien at this time. However, it does find that the language of the fee agreement was sufficient to create a contractual lien to the extent such a lien is permissible under state law, and that any such lien is not void because Kerstetter & Rillo did not advise Neve to seek the advice of independent counsel. These findings shall be deemed without substantial controversy pursuant to FRCP 56(d) during the remainder of this litigation.      Counsel for Neve shall submit an appropriate form of order.
Dated: August 19, 1996                                                           _______________________                                                                                                Alan Jaroslovsky                                                                                               U.S. Bankruptcy