Opinion ID: 340500
Heading Depth: 1
Heading Rank: 2

Heading: The Calculation of the Attorneys' Lien

Text: 22 The bankruptcy court found that Kersten and Harding had a valid attorneys' lien for services rendered in the Oster litigation, the district court affirmed that finding, and trustee Bitker does not pursue his objection on cross-appeal. The sole question presented is whether the extent of the lien was correctly assessed below. On this point, cross-appeals were taken. We hold that no error was committed in calculating the extent of the lien. 23 Kersten and Harding ask us to hold that the bankruptcy court did not have the authority to determine the extent of their lien on a reasonable fee basis. To the extent this is merely a suggestion that the intervention of bankruptcy did not vitiate their lien, we need not quarrel with them. The order appealed from recognizes and preserves that lien. However, to the degree appellants suggest that the bankruptcy court could not determine the extent of the lien, we must disagree. Our holding that the bankruptcy court had summary jurisdiction of the judgment proceeds necessarily in this case includes the corollary that it could determine the validity and extent of encumbrances thereto. See Sanders v. Providence Washington Insurance Company, 442 F.2d 1317 (8th Cir. 1971); Jackson v. Vance, 179 F.2d 154 (10th Cir. 1949), cert. denied, 339 U.S. 937, 70 S.Ct. 673, 94 L.Ed. 1355 (1950). 24 Appellants cite Sherman v. Buckley, 119 F.2d 280 (2d Cir. 1941), cert. denied, 314 U.S. 657, 62 S.Ct. 110, 86 L.Ed. 527; United States v. Transocean Air Lines, Inc., 356 F.2d 702 (5th Cir. 1966); and In re Prudence Co. Inc., 96 F.2d 157 (2d Cir. 1938), cert. denied sub nom. McGrath v. Davison, 305 U.S. 616, 59 S.Ct. 75, 83 L.Ed. 393, to support their contrary argument, but each case is readily distinguishable. In Sherman the Second Circuit refused to hold that the bankruptcy court could not exercise its summary jurisdiction even to liquidate an attorneys' lien in a proper case. The court did hold that because the bankruptcy trustee, with the permission of the court, had substituted attorneys in an ongoing state court action in the interest of the bankrupt, and the state court as a condition of substitution fixed the amount of the outgoing attorneys' lien, the trustee could not later enjoin state court proceedings to enforce the incidents of the state court jurisdiction once accepted. Likewise, in Transocean, the federal district court in which a bankrupt's action had been pending entered an order granting the bankrupt's initial attorneys' charging lien once the trustee and the defendant settled the case. The court of appeals affirmed, finding that the district court had authority to enforce the lien, and noting that the trustee raised no objection to that court's jurisdiction. We need not consider whether the state courts of Wisconsin may have had jurisdiction to determine and enforce appellants' lien, because those courts did not purport to do so. In response to appellants' argument that trustee Bitker had no other option than to seek such a determination in the state courts, we note only that neither of the cited cases supports such an absolute rule, and that we would be extremely slow to impose such a duty on a trustee when the schedule of Jolin's assets filed in the bankruptcy proceedings, prepared by appellant Harding, did not even include the Oster judgment. Bitker did not concede full actual notice of the Oster proceedings, and appellants point to no evidence of such notice, other than communications with the trustee of the corporate bankrupt which can not be presumed to be binding on Bitker. The fact that Harding's omission in scheduling was in good faith does not serve to create a duty in the trustee. 25 Nor does the Prudence case support appellants' argument that the bankruptcy court could not determine the extent of the lien contrary to the attorney-client contract. For in Prudence, as in Transocean and Sherman, a specific contingent fee percentage agreement was demonstrated and enforced. Here, of course, the record fully supports the findings of the courts below that while a contingent fee was agreed to, the precise extent thereof was not. In these circumstances the bankruptcy court had no real alternative to determining a reasonable contingent fee for the Oster case. It was not obliged to accept on their face appellants' conclusions as to the amount of such a fee. 26 Having decided that the bankruptcy court had summary jurisdiction over the Oster judgment proceeds and the authority to determine the extent of appellants' lien on a reasonable fee basis, we have little difficulty affirming the courts below on the substance of the turnover order. Rule 810 of the Rules of Bankruptcy Procedure provides that on review of a bankruptcy court's decision by the district court, that court shall accept the referee's findings of fact unless they are clearly erroneous, and shall give due regard to the opportunity of the referee to judge the credibility of the witnesses. Nor are we free, on review of the district court's review, to adopt a more rigorous standard for assessing the facts determined below. 27 Under this standard, we conclude there was no such error committed here. Appellants insist that the bankruptcy court should have accepted the conclusions of their expert witness that a fee of at least 46.7% of the judgment was reasonable. Although this was the only expert testimony offered, both the conclusions and the methods of their derivation were vigorously contested on cross-examination. Moreover, certain discrepancies in the hourly fee calculations submitted were noted by the bankruptcy court as was the fact that Harding's estimate of the Oster fees, submitted in the bankruptcy schedule of Land Investors' assets and liabilities after the great bulk of the legal work on the case had been concluded, was substantially below the level of 46.7% of the judgment, and was in fact substantially less than the fee awarded by the bankruptcy court. In view of these facts, we are convinced no clear error was committed in calculating a 40% fee on the recovery. 28 On cross-appeal, trustee Bitker urges that the bankruptcy court erred by including, in the figure to which the 40% fee was applied, the $15,000 portion of the judgment which had been assigned to Harding and the interest earned on the judgment. Bitker cites no authority by which we might find such a calculation to have been an error of law, and we see no reason to declare it a clear error of fact in finding a reasonable fee. It is apparent to us that the bankruptcy court in exercising its essentially equitable jurisdiction was reconciling competing claims to property in an effort to reach an overall fair resolution of the controversy before it. See Katchen, supra, 382 U.S. at 327, 86 S.Ct. 467. What we regard as a completed package arrived at by a process which no doubt included some balancing should not be quickly upset by this court. The appellants created an asset by dint of extensive and effective work on their part. The fees they claimed were substantially reduced. We also note some incongruity in the trustee's arguing here that the bankruptcy court abused the very discretion in determining a reasonable fee that the trustee insists, as pertinent to Harding's and Kersten's appeal, was properly exercised. In sum, we decline the invitation to separate out from the equitably created messuage the minor outbuildings to which the trustee points.