Opinion ID: 740486
Heading Depth: 2
Heading Rank: 1

Heading: The Claims of Priority

Text: 20
21 Plaintiffs contend first that, in providing for an award of attorneys' fees under § 1988, Congress evinced an intent that attorneys for successful civil rights plaintiffs obtain an equitable priority in the fee award that is superior to claims of other parties. (Plaintiffs' brief on appeal at 12-15.) This contention finds support in Curtis v. City of Des Moines, 995 F.2d 125 (8th Cir.1993), although neither the text of § 1988 nor its legislative history clearly indicates that this was Congress's intent. 22 Section 1988 provides that in a federal civil rights action, the court, in its discretion, may allow the prevailing party ... a reasonable attorney's fee as part of the costs. 42 U.S.C. § 1988. The legislative history explained that [i]f private citizens are to be able to assert their civil rights, and if those who violate the Nation's fundamental laws are not to proceed with impunity, then citizens must have the opportunity to recover what it costs them to vindicate these rights in court. S.Rep. No. 94-1011, at 3 (1976), reprinted in 1976 U.S.C.C.A.N. 5908, 5910. This Court, noting § 1988's provision for fees to be awarded to the party, has interpreted § 1988 to mean that the person who is entitled to the award of attorneys' fees is the prevailing party rather than the lawyer. Brown v. General Motors Corp., 722 F.2d 1009, 1011 (2d Cir.1983) (Brown ). The Supreme Court endorsed this plain-meaning interpretation of § 1988 in Evans v. Jeff D., 475 U.S. 717, 106 S.Ct. 1531, 89 L.Ed.2d 747 (1986), when it held that a party's entitlement to a fee award enabled the party to waive such an award, if it were so inclined. See id. at 737-38, 106 S.Ct. at 1542-43. The Court noted that although Congress added the entitlement to attorneys' fees to the arsenal of remedies available to combat violations of civil rights, it did not bestow[ ] fee awards upon attorneys. Id. at 731-32, 106 S.Ct. at 1540. 23 It is clear, however, that Congress meant not simply to allow a civil rights claimant to pursue a meritorious constitutional claim without having to pay attorneys' fees out of his own pocket, but also to encourage competent attorneys to prosecute those claims. The purpose of § 1988 is to ensure 'effective access to the judicial process' for persons with civil rights grievances, Hensley v. Eckerhart, 461 U.S. 424, 429, 103 S.Ct. 1933, 1937, 76 L.Ed.2d 40 (1983) (quoting H.R.Rep. No. 94-1558, at 1 (1976)); see also Venegas v. Mitchell, 495 U.S. 82, 90, 110 S.Ct. 1679, 1684, 109 L.Ed.2d 74 (1990) ( § 1988's general purpose [is] enabling ... plaintiffs in civil rights cases to secure competent counsel), and hence the fee rates used by the court should be  'adequate to attract competent counsel,'  Blum v. Stenson, 465 U.S. 886, 897, 104 S.Ct. 1541, 1548, 79 L.Ed.2d 891 (1984) (quoting S.Rep. No. 94-1011, at 6 (1976), reprinted in, 1976 U.S.C.C.A.N. 5908, 5913). Although Brown and Evans make clear that the fee award belongs to the party, neither case involved the question of whether a fee award made by the court to the party was subject to a lien in favor of the attorney. Brown dealt only with the question of whether an attorney could recover fees under § 1988 from the defendant when the client had settled with the defendant and agreed to waive the right to receive such fees. Evans dealt with a plaintiff class's ability to barter its right to attorneys' fees in exchange for more favorable injunctive relief than it could reasonably hope to win after trial. 24 The lien issue was squarely before the Eighth Circuit in Curtis v. City of Des Moines. Curtis was a successful § 1983 claimant who was awarded $11,000 in damages and $49,000 in attorneys' fees in the district court. In connection with that action, Curtis had agreed to pay his attorneys a contingent fee or the amount of any § 1988 award, whichever was greater. Prior to the conclusion of that suit, however, Curtis was sued in state court; an $80,000 judgment was entered against him; and his judgment creditors filed in the district court a notice of levy based on their state-court judgment. Thereafter, Curtis confessed judgment in state court with respect to the approximately $16,000 he owed his attorneys for defending the state-court action; and Curtis's attorneys filed in the district court both the motion for attorneys' fees pursuant to § 1988 and a notice of attorneys' lien on any award of damages or fees to Curtis. The judgment creditors argued that their lien, filed earlier, had priority under Iowa law, and that given the Supreme Court's ruling in Evans that a fee award belongs to the party, they were entitled not only to the amount awarded to Curtis as damages but also to any amount awarded as attorneys' fees. The Curtis court, although concluding that the judgment creditors' lien had priority under state law with respect to so much of the federal judgment as awarded Curtis damages, held that Curtis's attorneys had a superior lien under federal law on the amount awarded as attorneys' fees, stating as follows: 25 The clear Congressional intent and purpose of § 1988 was to encourage attorneys to prosecute constitutional violations. See Venegas v. Mitchell, 495 U.S. at 86, 110 S.Ct. at 1682; Hensley v. Eckerhart, 461 U.S. at 429, 103 S.Ct. at 1937. This is precisely what Curtis' attorneys did in prosecuting Curtis' civil rights claims against the police officials. Whatever priority the [state-court judgment creditors] have with respect to their lien on the judgment in this case has no effect on the award of § 1988 fees. Accordingly, the district court properly ruled that [Curtis's attorneys] are entitled to their fees. 26 Curtis v. City of Des Moines, 995 F.2d at 129. 27 Curtis is the only case of which we are aware that deals with the question of whether § 1988 implicitly grants the prevailing party's attorneys a lien on the fee award, and we have quoted that court's entire discussion of the legal issue. We remain uncertain whether inferring such a lien is consistent with the established principle that the client has the power to waive the fee award altogether. 28
29 Section 1988 also provides that where there are gaps in federal law with respect to the availability of suitable remedies for civil rights violations, the courts should look to state law insofar as it is not inconsistent with federal law. 42 U.S.C. § 1988(a). Plaintiffs contend that if § 1988 itself does not deal with liens and priorities, Vermont law fills any gap here by viewing an attorney's right to payment for his services in winning a judgment for his client as a charging lien that is superior to the judgment debtor's claim of setoff. The merit of this contention too is unclear, and the matter is further confused by Vermont's recognition of a second type of lien in favor of attorneys. 30 In Vermont, an attorney's right to a charging lien is established by common law. See Weed Sewing Machine Co. v. Boutelle, 56 Vt. 570, 578 (Vt.1882); Walker v. Sargeant, 14 Vt. 247, 253 (Vt.1842). The charging lien evolved in England as a means for protect[ing] attorneys against dishonest clients, who, utilizing the services of the attorney to establish and enable them to enforce their claims against their debtors, sought to evade payment for the services which enabled them to recover their demand. Sunwest Bank of Roswell, N.A. v. Miller's Performance Warehouse, Inc., 112 N.M. 492, 816 P.2d 1114, 1116 (1991) (internal quotation marks omitted). This purpose is reflected in the decisions of the Vermont Supreme Court, which has held that the lien gives an attorney the right to recover his taxable costs from a fund recovered by his aid, and also the right to have the court interfere to prevent payment by the judgment debtor to the creditor in fraud of his right to the same, and also to prevent or set aside assignments or settlements made in fraud of his right. Weed Sewing Machine Co. v. Boutelle, 56 Vt. at 578. The lien arises automatically upon entry of the judgment; notice is not required for its creation, see Walker v. Sargeant, 14 Vt. at 252, although until notice of the lien is given to a judgment debtor, the debtor may make payment to the judgment creditor without fear of liability to the attorney, see id.; Weed Sewing Machine Co. v. Boutelle, 56 Vt. at 578. 31 Like the attorney's charging lien, a defendant's right of setoff, i.e., the right to reduce the judgment to be entered for the plaintiff by subtracting from the value of the plaintiff's claim an amount owed to the defendant by the plaintiff, also has its roots in common law. In essence, [t]he right of setoff ... allows entities that owe each other money to apply their mutual debts against each other, thereby avoiding 'the absurdity of making A pay B when B owes A.'  Citizens Bank v. Strumpf, --- U.S. ----, ----, 116 S.Ct. 286, 289, 133 L.Ed.2d 258 (1995) (quoting Studley v. Boylston National Bank, 229 U.S. 523, 528, 33 S.Ct. 806, 808, 57 L.Ed. 1313 (1913)); see Lalime v. Desbiens, 115 Vt. 165, 168, 55 A.2d 121 (1947) (setoff is a demand which a defendant makes against the plaintiff in the suit for the purpose of liquidating the whole or a part of his claim). 32 As to the question of whether the attorney's charging lien or the defendant's right of setoff has priority, Vermont appears to give priority to the setoff if the claim on which it is based arose prior to the suit in which the attorney's lien was created. See, e.g., Fairbanks v. Devereaux, 58 Vt. 359, 362, 3 A. 500 (1886); McDonald v. Smith, 57 Vt. 502, 504 (1884); Walker v. Sargeant, 14 Vt. at 254. It is not clear that the inverse is true. The Walker opinion appears to leave open the possibility that where the claim sought to be offset arose during the pendency of the suit that gives rise to the attorney's charging lien, the question of which of those rights has priority may be a matter for determination by the court in the exercise of its equitable discretion. See id. 33 In addition, in Estate of Button v. Anderson, 112 Vt. 531, 28 A.2d 404 (1942) (Button ), the Vermont Supreme Court recognized a different attorney's lien, which it characterized as an equitable lien that arises if the fee contract entered into by attorney and client indicates that the attorneys are to receive a specified amount of the recovered fund. Id. at 534-35, 28 A.2d 404. Such a lien is created if the parties have indicate[d] an intention to make the fund described in the contract security for the debt of the client or, in other words, if the attorney look[s] to the fund itself for payment and d[oes] not rely on the personal responsibility of the owner of the claim of which the fund was the result. Id. at 536, 28 A.2d 404. In recognizing this equitable lien, the court stated that the rules and restrictions pertaining to attorney's ... charging liens created merely by the common law do not necessarily apply to equitable liens arising by virtue of an express agreement between attorney and client.... Id. at 535, 28 A.2d 404. In distinguishing the equitable lien from the charging lien, the Button court cited two United States Supreme Court cases, Ingersoll v. Coram, 211 U.S. 335, 29 S.Ct. 92, 53 L.Ed. 208 (1908) and Barnes v. Alexander, 232 U.S. 117, 34 S.Ct. 276, 58 L.Ed. 530 (1914), see Button, 112 Vt. at 536-38, 28 A.2d 404, that have been read by federal courts to mean that the attorneys' equitable lien, which becomes effective upon the entry of judgment, relates back to the date the attorney commenced suit and has priority over a claim that was created during the pendency of the suit, see Continental Casualty Co. v. Kelly, 106 F.2d 841, 843 (D.C.Cir.1939) (per curiam) (attorney's equitable lien created by retainer agreement is a contract lien and even if ... inchoate before judgment, it relates back and takes effect from the time of the commencement of the suit and is, therefore, superior to rights of set off which arise subsequently); United States Fidelity & Guaranty Co. v. Levy, 77 F.2d 972, 975 (5th Cir.1935) (same, applying Alabama law). The Button court itself, however, was faced only with a dispute between attorney and client, not with competing claims by an attorney and a person other than the client, and the court made no precise ruling as to the time at which the attorneys' equitable lien is created. It stated only that in the matter before it the lien attached to the fund recovered by the attorneys at the time the fund was received by the plaintiff at the latest. 112 Vt. at 538, 28 A.2d 404.
34 In the present case, plaintiffs submitted to the district court an affidavit from John L. Franco, Jr., the attorney who has represented them continuously in this action, which was commenced in 1993, stating that both the original firm of attorneys representing plaintiffs and Franco, who left the firm in February 1995, provided the legal services in this case under the arrangement that payments of all attorneys [sic ] fees and litigation costs would come from the § 1988 fees award. (Affidavit of John L. Franco, Jr., dated February 15, 1996, pp 1-2.) The District's $200,000 claim against plaintiffs plainly arose after the initial fee arrangements were entered into. Until the parties reached their global settlement, which followed the remand in Valley Disposal I, the state-court action was strictly between the District and Palisades Recycling, which is not a party here; the plaintiffs in the present action did not become parties to the state-court action until September 30, 1994, when the parties filed their stipulation in that court. It was that stipulation that gave the District its contractual claim against plaintiffs; the contract claim was then merged into the state-court judgment entered pursuant to the parties' stipulation. 35 Accordingly, if § 1988 creates a lien in favor of the prevailing party's attorneys, as held by the Eighth Circuit in Curtis, or if under Vermont law an attorney's charging lien has priority to a setoff claim that arose during the suit, or the equitable lien referred to in Button is created either when the fee contract is entered into or when the suit is commenced, it may well be that plaintiffs' attorneys in this lawsuit have a lien on the fee award, and that their lien has priority over the District's claim that was created by the settlement agreement and the state-court judgment during the course of this suit. 36 We need not resolve these potentially far-reaching questions in the present case, however, because we conclude for the reasons that follow that the District's claim of setoff was not properly raised. 37