Articles Posted in Legal Fees

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What is an attorney’s possessory lien? It is a lien that an attorney can use to block the client from access to the file. The attorney, however, cannot enforce the lien in court. In a recent unpublished decision the Illinois Appellate Court held that a law firm can assert a possessory lien over a computer database held by a document management firm. The case is captioned Cronin & Company, Ltd. v. Richie Capital Management, LLC., 2014 IL App (1st) 131892-U. Cronin is a law firm that represented Richie Capital (and other parties) in litigation, in which Richie Capital was attempting to recover investment losses incurred when it invested in a Ponzi scheme.

In 2012, Richie authorized Cronin to retain a third-party vendor, Flex Discovery, LLC (d/b/a Landmark Legal Solutions). Landmark was retained to provide a hosting program “that would enable attorneys to access electronic databases containing documents produced in connection with the subject litigation.” ¶ 4.

In January or February 2013, the attorney-client relationship broke down and was terminated. There was a dispute over legal fees between Cronin and Richie Capital. Cronin asked Landmark to “‘hibernate’ the database it was hosting (take it off-line), so it could not be accessed. Cronin claimed it was asserting a retaining lien over its former client’s litigation file, which it argued included the database.”  ¶ 5.

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FERRIS, THOMPSON & ZWEIG, LTD. v. Esposito, Ill: Supreme Court 2015 – Google Scholar.

This mundane dispute between two law firms quarreling over a referral fee reached the Illinois Supreme Court. Because the underlying case was a workers compensation case, the Defendant law firm argued that the dispute should have been resolved by the Workers Compensation Commission. The Supreme Court, affirming the Appellate Court, held that the dispute presented an issue of contract, which should be resolved by the Circuit Court.

This is the key language:

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Beery v. Chandler, Dist. Court, ED Missouri 2015 – Google Scholar.

Plaintiff sued his former personal injury lawyer for legal malpractice, alleging that the lawyer negligently advised him to reject a settlement offer. The lawyer sued for legal fees under breach of contract, quantum meruit and unjust enrichment theories. Plaintiff moved to dismiss the claim on the ground that the lawyer was not licensed in Missouri.  Plaintiff noted that the Missouri state court had denied the lawyer a lien on the recovery on the ground that the lawyer was not licensed.

The district court rejected that argument apparently on the ground that the lawyer was licensed in Illinois and appears to have done work on the case. There is some suggestion that the lawyer indicated on his stationery that he had an office in Missouri.

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The case is captioned Donald W. Forhman, and Associates, Ltd., v. Marc D. Alberts, P.C., 2013 IL App (1st) 123351, decided March 14, 2014 by the Illinois Appellate Court, Sixth Division.

This is a dispute between two law firms over referral fees. A referral fee is a fee paid by the lawyer who obtains a referral. The lawyer making the referral collects the referral fee. This is the third referral fee dispute I have seen in the Illinois reports this year. The increase in referral fee disputes may be due to the tough economic times in the legal profession. That may, in turn, cause lawyers to fight with each other over fees.

The Facts:

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The case is captioned Ferris, Thompson & Zweig, Ltd., 2014 IL App (2d) 130129. The plaintiff law firm entered into a written agreement with the defendant, another lawyer, under which two workers’ compensation cases were referred to defendant’s law firm. Under the agreement, plaintiff was to receive 45% of the legal fees recovered in the cases with the defendant receiving the remaining 55%.

When the cases concluded, the defendant did not pay the plaintiff law firm and the plaintiff filed a breach of contract action. The defendant argued that the plaintiff should have brought the case before the Illinois Workers’ Compensation Commission and not in the circuit. The trial court rejected this claim and entered a monetary judgment for breach of contract. The Appellate Court, in a written opinion dated February 5, 2014, affirmed in all respects.

The Appellate Court construed the Worker’s Compensation Act and held that the Commission has the authority to resolve questions relating to the amount of the fee award, but did not have exclusive jurisdiction over the referral fee dispute.

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The case is captioned Walter Duemer v. Edward T. Joyce and Associates, P.C., 2013 IL App (1st) 120687.

This case involved a fee dispute between Joyce, the attorney, and his former clients. In 2002, Joyce agreed to represent the plaintiffs in securities litigation with Deloitte & Touche, Jeffries Company, EPS Solutions and Enterprise Profit Solutions Corporations in connection with plaintiffs’ purchase of EPS stock. The fee agreement provided for “a contingent fee equal to twenty-five (25) percent of any and all money or other benefits recovered on the claims.”  In the underlying case, plaintiffs obtained settlements with some defendants and obtained an arbitration award against EPS. However, EPS’s insurers refused to pay the arbitration award.

In 2007, Joyce retained Morgan Lewis to file suit against the insurers of EPS.

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Recently, the undersigned encountered an arbitration clause drafted by a successful Chicago law firm.

I will quote the relevant language in full and then discuss what the language means for a client.  I am not in any way criticizing the clause or the lawyers who drafted it.

“This Agreement shall be construed under the laws of the State of Illinois and any disputes concerning the Agreement, our fees that relate in any way to our representation, including any claims relating to our billings for breach of fiduciary duty, professional negligence or malpractice or other disputes over our representation, shall be resolved under Illinois law in Chicago, Illinois through a summary procedure involving limited discovery in which we will jointly appoint a qualified arbitrator who specializes in such matters to promptly resolve any disputes through arbitration, whose decision shall be final and binding upon the parties.  These limitations shall be imposed on any arbitration: (i) five (5) depositions, thirty (30) interrogatories, forty (40) document requests and fifty (50) requests for admissions per side; (ii) pre-hearing briefs totaling fifteen (15) pages per side; (iii) post-hearing briefs totaling twenty-five (25) pages per side; (iv) no more than three (3) days for hearing testimony and argument. Because this procedure for dispute resolution involves a waiver of [Client’s] rights and ours, we jointly acknowledge that this alternative procedure for dispute resolution waives our respective rights to seek relief through litigation or to have a trial by jury or to conduct full discovery or to appeal or to otherwise exercise rights available in litigation, rather than through arbitration. It is therefore, important that this matter be carefully discussed with independent counsel and only after that review has been completed can we jointly agree to this alternative dispute-resolution procedure. In the event agreement cannot be reached on a suitable arbitrator, we shall jointly seek the assistance of the American Bar Association for the selection of a suitable person. (Emphasis supplied).

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EXACT SOFTWARE NORTH AMERICA, INC. v. DeMOISEY, Court of Appeals, 6th Circuit 2013 – Google Scholar.

This is a dispute between an attorney and a client concerning an attorney lien. Such disputes are common. This case illustrates the correct way to protect a disputed legal fee with an attorney lien.

The Sixth Circuit has affirmed a legal fee award of $1.4 million to a lawyer who brought proceedings to enforce an attorney lien. The underlying dispute was a software licensing dispute between two companies, which occurred in the federal district court. Infocon was to receive a $5 million settlement from Exact Software, Inc. Just before the settlement was finalized, Infocon fired its lawyer, J Fox DeMoisey. DeMoisey placed a charging lien on the proceeds of the litigation.  The district court froze the disputed portion of the settlement ($1.2 million) pending the outcome of litigation.

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