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Indiana Attorney Fee Liens In Commercial Cases

Can attorneys for parties to Indiana commercial foreclosure actions file liens for unpaid legal fees?  Miller v. Up In Smoke, 2011 U.S. Dist. LEXIS 80684 (N.D. Ind. 2011) (pdf) sheds light on the matter. 

Context.  In Miller, the Court ultimately appointed a receiver to oversee the management and operation of a defendant company.  Attorneys representing the defendants contested the receivership proceedings.  The attorneys did not get paid and filed notices of attorney fee liens in the case.  The attorneys then filed a motion to enforce their liens.  The receiver opposed the motion, resulting in the Miller opinion. 

Retaining lien.  Indiana law recognizes only two kinds of attorney’s liens.  The first is a “retaining” lien, which prevents a client from utilizing materials held by the attorney until the client either settles the fee dispute or posts security for payment.  The existence of a retaining lien depends upon the attorney’s possession “of money, property or papers of the client.”  Basically, attorneys can retain their clients’ stuff until they get paid.  As a practical matter, this lien acts as a leverage tool, but is unlike a more traditional lien that can be foreclosed. 

Charging lien - generally.  The second and potentially more meaningful lien is a “charging” lien for “services rendered in a particular cause of action or proceeding to secure compensation for obtaining a judgment, award or decree on the client’s behalf.”  Indiana case law says that an attorney “has a lien for his costs upon a fund recovered by his aid, paramount to that of the persons interested in the fund or those claiming as their creditors.”  This lien is based upon the idea that “the client should not be allowed to appropriate the whole of the judgment without paying for the services of the attorney who obtained it.”  The Court explained that “an attorney’s charging lien attaches to the fruits of the attorney’s skill and labor . . . [but] if the attorney’s work produces no fruit, then the attorney has no lien.” 

Charging lien - statute.  Indiana’s charging lien is statutory:  Ind. Code § 33-43-4.  The statute provides that an attorney “may hold a lien for the attorneys’ fees on a judgment rendered in favor of a person employing the attorney to obtain the judgment.”  The lien arises if the attorney files a written notice on the docket of an intention to hold a lien on the judgment, along with the amount of the claim, no later than sixty days after the date of the entry of judgment.  I.C. § 33-43-4-2.  I.C. § 33-43-4-1 expressly states that “no lien can be acquired before judgment . . ..”  Indiana law strictly enforces this “judgment” requirement.

No judgment = no charging lien.  The attorney fee claim in Miller was an alleged charging lien.  But the services of the attorneys did not produce a “fund” upon which they sought to impose the lien.  The alleged fund was the receivership estate (property of) the defendant company.  The attorneys’ efforts, however, did not secure or create the receivership estate.  If anyone deserved a lien, it would be the receiver and the receiver’s counsel, not the counsel of the defendants, who resisted the appointment of the receiver. 

Lender’s counsel.  Miller tells us that lender’s counsel can file a charging lien against a judgment that counsel secures for its client.  Miller even hints that lender’s counsel could file a lien on real estate acquired by the client at a sheriff’s sale.  The point is that plaintiff lenders can be exposed to attorney/charging liens if they don’t pay their lawyers.  Alas, lenders typically possess both the willingness and capacity to pay. 

Borrower’s counsel.  Unlike lenders, defendant borrowers and guarantors come to attorneys already in financial distress.  Getting paid can be a challenge, no question.  As stated in Miller, very rarely can defense counsel assert a charging lien.  Essentially, counsel must obtain an affirmative judgment in favor of their client, such as in a case of set-off or counterclaim.  (The Court cited to a Georgia case for the proposition that a defense attorney could obtain a lien on a client’s land if he successfully defended an adverse claim on such land.)  The bottom line is that, even assuming the defendant won the case, there still must be a judgment or fund to which a defense counsel’s charging lien could attach.  This is why, in the vast majority of cases, defense counsel at best may have a retaining lien on the client’s money, property or papers (usually, the file and attorney work product), but this lien is not particularly valuable.  Hence the need for up-front retainers.


IndyStar: Rent-to-own contracts challenged in federal court

Yesterday, The Indianapolis Star picked up the story discussed by the IBJ that was the subject of my 5/31/17 post, New Spin On Alleged Predatory Lending: Land Contracts.  Here is a link to the IndyStar piece:  6/26/17 article.  

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If you are involved in a land contract dispute or wish to obtain advice about land contracts on the front-end, please email me at John.Waller@WoodenMcLaughlin.com or call 317-639-6151. Also, don't forget to follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to my blog posts via RSS or email as noted to your left.


IBJ: "Scrappy insurer continues pursuit of $25M judgment from Symons family"

Last week, Greg Andrews of the Indianapolis Business Journal wrote about the ongoing judgment enforcement action pending in the U.S. District Court for the Southern District of Indiana.  Click here for the latest IBJ.com article.  Our firm is local counsel for the judgment creditor.  Our coordinating counsel, Bressler, Amery & Ross out of Florham Park, NJ, has taken the lead with the judgment collection efforts described in the news piece.     


Seventh Circuit Holds That Proof Of Claim For “Stale” Debt Does Not Violate FDCPA

Lesson. The filing of a bankruptcy proof of claim for a time-barred debt does not violate the Fair Debt Collection Practices Act (FDCPA) in the Seventh Circuit, which includes Indiana.

Case cite. Owens v. LVNV Funding, 832 F.3d 726 (7th Cir. 2016) (pdf).

Legal issue. There were two: (1) whether a “claim” includes only legally-enforceable obligations and (2) whether a creditor’s attempt to collect on a time-barred debt in bankruptcy violates the FDCPA.

Vital facts. Defendant debt collector filed a proof of claim in a Chapter 13 bankruptcy case for a time-barred (“stale”) debt. The plaintiff debtor successfully objected to the claim and then sued the debt collector alleging FDCPA violations.

Procedural history. The district court dismissed the debtor’s action. The debtor appealed to the Seventh Circuit, which issued the opinion addressed here. Please note: the debtor later appealed to the U.S. Supreme Court, which refused to hear the case.

Key rules.

  • A “claim” under the bankruptcy code is a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” A claim is not a cause of action.

  • The FDCPA prohibits the use of “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. 1692e.

Holding. The Court first held that a claim on a time-barred debt “does not purport to be anything other than a claim subject to dispute in the bankruptcy case.” Thus a claim can include an unenforceable obligation. Next, the Court concluded that the defendant’s conduct was not deceptive or misleading so as to give rise to FDCPA liability.

Policy/rationale. The Court reasoned that the bankruptcy code contemplates that creditors will “file proofs of claim for unenforceable debts … and that the bankruptcy court will disallow those claims upon debtor’s objection.” The code and interpreting case law recognize that the term “claim” has a broad definition, including a right to payment, and whether the claim ultimately is enforceable is immaterial.

Moreover, the Court articulted that the information contained in the subject proof of claim was not misleading. Indeed, the information about the status of the debt was accurate. Whether the statute of limitations had run was apparent on the face of the proof of claim. Moreover, the debtor’s attorney successfully objected to the proof of claim.

Related posts.

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I frequently represent lenders, as well as their mortgage loan servicers, entangled in loan-related litigation. If you need assistance with such a matter, please call me at 317-639-6151 or email me at john.waller@woodenmclaughlin.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted to your left.


In Wake Of Marsh Bankruptcy, Commercial Foreclosures: IBJ.com

The Indianapolis Business Journal reports that "Landlords across Indiana are feeling the pain from the collapse of Marsh Supermarkets...."  Here is a link to the full article: Landlord's Marsh bet leaves trail of foreclosures

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I represent parties, including borrowers and guarantors, in commercial mortgage foreclosure disputes.  If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenmclaughlin.com.  Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted to your left.