Opinion ID: 3009946
Heading Depth: 2
Heading Rank: 1

Heading: Attorney's Lien

Text: Kramer claims that defending Network against Armstrong's counterclaims entitles him to a fee and a lien to secure payment of it. He avers that all predicates to his claim are satisfied because his fee is not contingent upon Network's success in its antitrust case against Armstrong, and hence the jury's verdict for Network on the counterclaims, which was not contested on appeal, is for all purposes final. We conclude that the issue is ripe for review but is without factual or legal support. We will affirm. The matters before us on appeal have been unduly complicated by appellant. His theory on why he is entitled to a fee and an attorney's lien, for example, has been evolving throughout the proceedings, from a quantum meruit request for $3.2 million in fees to compensate him for an alleged 8,000 hours of work; to a retaining lien for his defense to counterclaims;4 4 . Kramer states in his brief that he spent seven years of work in successfully defending the multi-million dollar counterclaims. He modified this contention downward at oral argument to defending the $400,000 counter-claims. Neither estimate, however, is material to our decision except to note the labile nature of Kramer's contentions. to a charging lien based upon the New Jersey Statutes Annotated (upon which he based the motion that the district court denied on February 25, 1994, which is one of the orders Kramer specified in his notice of appeal); to a fee based upon a bankruptcy order authorizing him to represent Fineman in bankruptcy; and at oral argument he contended for the first time that he is entitled to a lien under unspecified bankruptcy laws. Throughout his arguments, Kramer seems to conflate the terms fees and liens. They are two different matters. With respect to a lien, we have before us on appeal only whether the district court adequately protected Kramer's retaining lien or erred by denying him a statutory charging lien. It is axiomatic, of course, that Kramer must show that he is or will become entitled to a fee before he is entitled to a lien. When pressed by the court at oral argument for the fee agreement or other basis entitling him to a fee for defending the counterclaims, Kramer referred the court to Supplemental Appendix page 29. This, as the court then pointed out, is only an order denying him a fee and deeming the district court's referral of jurisdiction with respect to fees withdrawn. Nevertheless, Kramer then argued that by authorizing the debtor-in-possession Fineman to employ him as his antitrust attorney, the bankruptcy court created the obligation to pay him a fee. There are several problems with Kramer's contentions. First, Fineman, who was the debtor-in-possession, signed the Application only in his individual capacity, and any fee Kramer has earned is from the bankrupt estate for preserving its assets, not from the parties to the underlying litigation.5 Under the Bankruptcy Code, an attorney for a debtor-in-possession is entitled to be paid only in accordance with an agreement filed with the court. 11 U.S.C. § 328. But the Code does not entitle the attorney to a lien -- and for good reason. Section 503(b) of the Code allows reasonable compensation for an attorney as an administrative expense of the estate and § 507(a)(1) gives the expense priority. A lien, however, is neither authorized by the Code nor necessary. Second, Kramer's argument is disingenuous at best and deceptive at worst. As debtor-in-possession, Fineman applied to the bankruptcy court with full knowledge of and assistance by Kramer, to have Kramer appointed under the terms and conditions set forth in the annexed affidavit of proposed antitrust counsel. Kramer, in his Affidavit of Proposed Special Counsel for Debtor-in-Possession, which he submitted with the Application to the Bankruptcy Court, averred, I have rendered to debtor professional services in connection with the within action and in accordance with a retainer agreement memorialized by letter attached hereto as Exhibit A...In connection with this retention I shall assist the Debtor-in-Possession in resolving all issues in the [underlying litigation] and 5 . Fineman withdrew from the litigation after the first trial, and is no longer a party. shall try the case to conclusion or settlement as is necessary. (emphasis added). Moreover, Kramer concludes his affidavit, I am unable to estimate the time for completion of these services. This case involves a prosecution of a complex anti-trust case and inasmuch as my application will be based on a contingency agreement set forth in Exhibit A the amount of time necessary is not applicable under these circumstances. (emphasis added).6 Kramer contends that his right to a fee, hence his right to a statutory lien, is for the hours he spent. Yet from his own sworn words, his fee is based upon the contingency agreement set forth in Exhibit A. This contingency agreement, which is signed by both Kramer and Elliot Fineman individually, provides that Kramer shall receive 36% of any and all sums recovered, whether by settlement or judgment. Recovery shall be defined as all monies recovered, including damages, treble damages, and counsel fees paid by defendant pursuant to statute. In sum, Kramer agreed to represent the debtor-in- possession on all issues for a fee that was contingent upon Fineman's success in the antitrust case and not, as he has argued, based upon a hourly sum for time spent or in quantum 6 . In the Appendix Kramer filed on appeal, he supplied the court with neither his Affidavit nor Elliot Fineman's Application. Inasmuch as Kramer's entire argument on appeal, by his own account, depends upon the bankruptcy court's order, it is difficult for the court to view Kramer's act of omitting these documents, so damaging to his argument and so critical to our review and decision, as other than deliberate. meruit. Because Fineman recovered nothing, and indeed did not participate in the second trial, the condition precedent to Kramer's right to a fee -- a verdict in the antitrust case in Fineman's favor -- has not occurred, and the entire basis of Kramer's counterclaim lien theory collapses. On this record he simply is not entitled to either a fee or a lien. But Kramer is wrong in his other arguments as well. He relies upon our decision in Novinger v. E.I. duPont de Nemours & Co., Inc., 809 F.2d 212 (3d Cir.), cert. denied, 481 U.S. 1069 (1987), in which we held that the district court was required to affirmatively protect an attorney's retaining lien before requiring that he relinquish his files. His reliance, however, is misplaced because Novinger was decided under Pennsylvania law. Under New Jersey law, as in Pennsylvania an attorney will lose a retaining lien by voluntarily relinquishing files to substituted counsel. In New Jersey, however, an attorney will not lose the lien if the files are given to substituted counsel under compulsion of a court order. In Frenkel v. Frenkel, 599 A.2d 595 (N.J. Super. Ct. 1991), counsel for plaintiff likewise refused to give case files to substituted counsel until his fees were paid by plaintiff. The court held that a conflict between the withdrawing attorney and the former client should not be allowed to delay the underlying action. Id. at 598. It concluded that a withdrawing attorney's common law retaining lien [was] not relinquished when it obeyed the court's order to turn them over. Id.; accord Brauer v. Hotel Assoc., Inc., 192 A.2d 831, 835 (N.J. 1963). The situation is no different here. When Kramer was ordered by the court to relinquish his files, he had no choice but to do so. His retaining lien was and is protected, as the district court explicitly recognized. Industry Network, Inc., v. Armstrong, No. 84-3837, slip. op. at 10 (D.N.J. Jan. 21, 1994) (unpublished opinion): At issue today is not whether Mr. Kramer should voluntarily turn over the files, thereby destroying his retaining lien. Rather, the issue is whether the court should order Mr. Kramer to turn over the files involuntarily, a step which would preserve Mr Kramer's lien rights. Kramer unnecessarily exposed himself to contempt by his disobedience, and without any foundation in the law he appealed the surrender order. Kramer also incorrectly asserts that the district court erred by denying his February 16, 1994 motion in which he requested a statutory charging lien for the work done defending the counterclaims. First, the motion was entirely redundant because he was already protected by his common law retaining lien. But, more fundamentally, he relied in his motion upon N.J.S.A. § 2A:13-5, which provides: After the filing of a complaint or third- party complaint or the service of a pleading containing a counterclaim or cross-claim, the attorney or counsellor at law, who shall appear in the cause for the party instituting the action or maintaining the third-party claim or counterclaim or cross-claim, shall have a lien for compensation, upon his client's action, cause of action, claim or counterclaim or cross-claim, which shall contain and attach to a verdict, report, decision, award, judgment or final order in his client's favor, and the proceeds thereof in whosesoever hands they may come. The district court held that this statute was limited on its face to attorneys who initiate claims and confers no rights whatsoever upon an attorney in his capacity as the representative of a party successfully defending a claim of another party. Industry Network System, Inc. v. Armstrong World Indus., Inc., No. 84-3837, slip op. at 3 (D.N.J. Feb. 25, 1994) (unpublished opinion). We agree. The plain language of N.J.S.A. § 2A:13-5 grants a lien to an attorney for affirmatively pursuing his client's action, cause of action, claim or counterclaim or cross-claim. Rather than providing a lien for all services performed by an attorney, the state legislature took pains to list those specific services to which the lien applies, but it did not include the defense to a defendant's counterclaims. And Kramer has neither cited to us nor have we found any New Jersey case that interprets this statute otherwise. At least one case, however, recognizes the plain language of the statute as a barrier to the same argument that Kramer now makes. See Wilde v. Wilde, 184 A.2d 758 (N.J. Super. 1962) (questioning the propriety of defense counsel's claim that he should be entitled to a lien under § 2A:13-5 for successfully defending his client's title to property). We decline to contravene the plain language of the statute and read new rights into it. For all of the foregoing reasons, the district court's order of January 21, 1994 and its order of February 8, 1994 denying reconsideration will be affirmed.