Lesson. Statutory attorney’s charging liens are not valid unless a judgment has been entered. However, a common law equitable lien for the recovery of fees may attach to settlement proceeds paid into court.
Legal issue. Whether alleged statutory or equitable attorney’s liens were valid.
Vital facts. In Browne, an attorney represented a litigant in a case that resulted in a settlement. The terms of the settlement required the funds to be deposited with the court. After apparently not being paid by his client, the attorney filed notices of attorney’s liens on the settlement funds.
Lymon arose out of an attorney’s withdrawal from a pending case. Shortly after withdrawing, the attorney filed a notice of a statutory charging lien with the court intending to give notice of the unpaid fees against any future settlement or judgment in favor of his client.
Procedural history. The Browne dispute surrounded whether the attorney was entitled to be paid out of the settlement funds by virtue of his lien. On the other hand, Lymon focused on the client’s motion to strike a lien filed before the case had been resolved.
Key rules. There is no federal law providing for an attorney’s lien. Indiana state law controls.
Indiana Code § 33-43-4-1 allows an attorney charging lien only "on a judgment rendered." By statute, there cannot be a valid statutory charging lien before judgment is entered in the case.
Our state also has an equitable attorney's charging lien, which “is the equitable right of an attorney to have fees and costs owed to them for services provided in a lawsuit to be secured out of the funds their client recovers in the lawsuit.” This equitable lien may be enforced in the absence of a judgment.
My 6/30/17 post Indiana Attorney Fee Liens In Commercial Cases discusses these rules in the context of a receivership case, and I comment on how they might factor into a commercial foreclosure matter.
Holding. In Browne, the U.S. District Court for the Northern District of Indiana ruled in favor of the attorney and upheld his equitable lien on the settlement funds. In Lymon, the Court struck the lien.
Policy/rationale. The Browne matter did not involve a judgment, so there was no statutory charging lien. That was the basis of the Lymon decision too. The purported lien was “premature.”
However, the Court in Browne found that a valid equitable lien existed on the settlement proceeds that had been deposited into the Court. The policy behind the decision was “based on natural equity—the client should not be allowed to appropriate the whole of the judgment [or recovery] without paying for the services of the attorney who obtained it.”
Part of my practice involves representing parties in lien-related disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. 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 on my home page.