The Liening Tower: The Double-Edged Sword of Lawyer's Liens

Lawyer's liens are legal tools that attorneys can use to secure payment for their services. While very jurisdictionally nuanced, liens come in a few common shapes and sizes:

1. Retaining Lien

• Definition: A retaining lien allows a lawyer to retain possession of a client’s property or documents (e.g., case files, evidence, or other relevant materials) until the legal fees are paid.
• Key Characteristics: Applies to items already in the lawyer's possession. The lawyer cannot sell or use the property but can withhold it to compel payment. It is generally passive; no legal action is required to enforce the lien.
• Limitations: Subject to ethical constraints, especially if withholding the property would cause substantial harm to the client’s case.

2. Charging Lien

• Definition: A charging lien attaches to a specific monetary recovery or judgment obtained for the client through the lawyer's efforts.
• Key Characteristics: Applied to funds or property recovered as part of the representation (e.g., settlement or awards). Ensures the lawyer is compensated directly out of the proceeds before the client receives them. Typically asserted in the underlying case or explicitly agreed upon in the fee agreement.
• Limitations: The attorney may need to give formal notice of the lien to the court or other parties and counsel involved. By its nature, generally only used on plaintiff-side claims.

3. Contractual Lien

• Definition: A contractual lien arises from a written agreement between the lawyer and the client.
• Key Characteristics: Explicitly agreed upon in the attorney-client retainer or fee agreement. Allows the lawyer to claim a lien on specific property or funds as security for payment. Covers property or funds identified in the contract.
• Limitations: Enforceability depends on the terms of the contract and compliance with jurisdictional rules and ethical standards. Relies on collateral outside of the attorney's control.

4. Statutory Lien

• Definition: A statutory lien is created under laws that grant attorneys a right to secure payment for services.
• Key Characteristics: Defined and regulated by jurisdiction-specific statutes. Typically broader in scope than other liens, covering various types of client property or funds. Provides additional protections for lawyers seeking payment for their services.
• Limitations: Attorneys must adhere strictly to statutory requirements to enforce the lien.

5. Equitable Lien

• Definition: An equitable lien is a remedy granted by a court based on fairness principles to secure an attorney’s payment from specific property or funds.
• Key Characteristics: Does not require a formal agreement or statutory provision. Applied when an attorney’s services directly create or preserve client assets or recovery. Typically granted to ensure fairness, especially when other types of liens are unavailable.
• Limitations: Requires judicial approval, and the court must find that equitable circumstances justify the lien.

Jurisdictional Variations

The availability, rules, and enforcement mechanisms for these liens vary by jurisdiction. Just to spice things up, states often use the various labels without consideration of what their sister states are doing and often, statutory attempts to codify lawyers' liens simply made the process more complicated. Lawyers must understand and comply with local laws and ethical obligations to use liens appropriately.

The Double-Edged Sword

While a viable tool and sometimes necessary, liens are truly a double-edged sword, inviting substantial risk.

1. Ethical Risks

• Client Harm: Asserting a lien, especially a retaining lien, might harm the client’s interests, such as by delaying their case or access to critical documents. This could violate your ethical obligation to prioritize the client’s welfare.
• Conflict of Interest: Taking action to enforce a lien could create a conflict of interest if it compromises your ability to provide unbiased, effective representation.
• Professional Discipline: Mishandling a lien, such as using it coercively or failing to comply with the ethics rules, could result in disciplinary action by the state bar - there's a very good chance that even if you're completely justified and properly execute the lien, the client will file a complaint against you anyway.

2. Legal Risks

• Jurisdictional Compliance: Rules governing lawyer’s liens vary by jurisdiction. Failing to meet local procedural requirements (e.g., providing notice, filing proper claims) could render the lien invalid.
• Breach of Fiduciary Duty: If the lien is asserted improperly or unfairly, the client could claim you breached your fiduciary duty, potentially leading to legal liability or, at minimum, a headache.
• Legal Challenges: Clients (or new counsel) often contest the lien in court, leading to costly and time-consuming litigation. If the lien is found invalid, it could damage your credibility and ability to recover fees, all while potentially resulting in a published decision, etc.

3. Financial Risks

• Recovery Uncertainty: Even with a valid lien, there is no guarantee of recovering the owed fees, especially if the client has limited assets or the case does not result in monetary recovery.
• Client Bankruptcy: If the client declares bankruptcy, the lien might be subordinated to other creditors or invalidated entirely, leaving the you unpaid.
• Costs of Enforcement: Enforcing a lien can involve legal fees and administrative expenses, but at a minimum will cost you time and aggravation - which might outweigh the amount owed.

4. Reputational Risks

• Damage to Professional Reputation: Assertive collection efforts will damage your reputation, particularly if clients perceive you as overly aggressive or unfair - this extends beyond your client community to other lawyers and judges as well.
• Client Relationships: Even if successful, asserting a lien can harm the relationship with the client and lead to negative word-of-mouth campaigns, unhinged yelp reviews, or disciplinary complaints.
• Public Perception: If the lien assertion becomes public knowledge, it will likely deter future potential clients who fear similar treatment.

5. Practical Risks

• Impact on Case Progress: A retaining lien that withholds documents or property might delay ongoing cases or settlements, potentially leading to disputes with the client or third parties.
• Third-Party Claims: If the lien affects property or funds involving other parties (e.g., co-plaintiffs, creditors), disputes with those parties could arise.
• Judicial Discretion: Judges may limit or deny enforcement of a lien if they believe it would unfairly harm the client or disrupt the case. The very nature of the lien demands close inspection of the legal fees at issue, which even in the best of circumstances complicates things.

The best way to avoid the double-edged sword is to use a different weapon all together. Rather than a liening tower, build a sound structure - require conservatively realistic retainer fees.

While most lawyers believe retainer fees are more art than science, there is a hard science to it:

1. Estimate the time/dollar value of the work to be done for 3 billing periods. Then double it.
2. Hold that amount as a security retainer, to be released to the client at termination.

Let's chat about better practice, less stress.