Opinion ID: 4542240
Heading Depth: 2
Heading Rank: 3

Heading: The Attorney’s Lien

Text: Under New York law, “[f]rom the commencement of an action, . . . the attorney who appears for a party has a lien upon his or her client’s cause of action, claim or counterclaim, which attaches to a verdict, . . . settlement, judgment or final order in his or her client’s favor, and the proceeds thereof in whatever hands they may come; and the lien cannot be affected by any settlement between the parties before or after judgment, final order or determination.” N.Y. Jud. L. § 475. The district court concluded that Gleizer had 6 Gleizer contends that Argentina also caused a direct effect in the United States because he, a United States resident, was financially injured when Argentina made its settlement payment to plaintiffs without retaining the amount of his lien. Argentina argues in response that the harm to Gleizer did not follow directly from the settlement—rather, his harm was caused by plaintiffs’ failure to pay him. Because there is no question that the dismissal of the underlying lawsuit followed directly from the MSA, which constitutes a direct effect in the United States, we need not reach this alternate theory. 13 no lien upon the settlement proceeds here because the Propuesta was a universal offer to bondholders and therefore did not result from Gleizer’s efforts. The district court erred in concluding that Gleizer had no lien upon the settlement proceeds. The New York Court of Appeals has repeatedly held that an attorney’s lien attaches to a settlement made without the attorney’s knowledge, even where the attorney withdrew prior to the negotiation of that settlement. In Fischer-Hansen, for example, the defendant in a personal injury action settled with the plaintiff without the participation of the plaintiff’s attorney. 173 N.Y. at 499. The attorney then sued to enforce his lien upon the settlement proceeds. Id. The Court of Appeals—construing the predecessor statute to § 475—held that “a lien upon a claim or a cause of action follows the fund created by a settlement of the claim. . . . It attaches to the amount agreed upon in settlement the instant that the agreement is made, and if the defendant pays over to the client without providing for the lien of the attorney, he violates the rights of the latter and must stand the consequences.” Id. at 502. Similarly, in Sargent v. New York Central & Hudson River Railroad Company, 209 N.Y. 360 (1913), an attorney brought a personal injury action on behalf of a railroad employee. Id. at 362. The attorney then died, and the railroad company 14 subsequently settled with the plaintiff. Id. at 363. The Court of Appeals held— construing the then recently-enacted § 475—that the attorney’s estate was entitled to enforce his lien against the settlement proceeds, notwithstanding that he had played no part in the settlement. Id. at 365. More recently, the Court confronted a similar issue in Klein v. Eubank, 87 N.Y.2d 459 (1996). There, the plaintiff’s attorney withdrew 13 months prior to settlement. Id. at 461. The Court of Appeals once again held that the attorney’s lien applied to the settlement. Id. at 462. New York law therefore unambiguously holds that an attorney’s lien, once attached to the client’s cause of action, also attaches to a subsequent settlement, whether or not the attorney is involved in the settlement itself. These holdings by the New York Court of Appeals merely confirm the plain import of the statutory language, which specifically provides that “the lien cannot be affected by any settlement between the parties.” N.Y. Jud. L. § 475. Indeed, we have previously recognized this rule, noting “that where a defendant settles with a plaintiff without making provision for the fee of the plaintiff’s attorney, that attorney can in a proper case proceed directly against the defendant pursuant to section 475.” Chesley v. Union Carbide Corp., 927 F.2d 60, 67 (2d Cir. 1991). 15 The cases relied on by the district court are not to the contrary. The district court placed great emphasis on the rule that “the attorney’s lien applies ‘only to proceeds created through the attorney’s efforts.’” Fontana, 2019 WL 8112476, at  (quoting Oppenheim v. Pemberton, 164 A.D.2d 430, 433 (3d Dep’t 1990)). We respectfully disagree with the able district court in its interpretation of that language. In Oppenheim, the attorneys were discharged prior to settlement and subsequently attempted to enforce their lien against certain real property. 164 A.D.2d at 431–32. The Appellate Division, Third Department, held that the lien could not be enforced against this property because the clients had not acquired the property in the settlement; they acquired only an interest in its conveyance. Id. at 433. Oppenheim therefore stands for the unremarkable proposition that the attorney’s lien may be enforced only against the actual proceeds of a settlement.7 7 The other cases relied on by the district court are similarly distinguishable. In Goldstein, Goldman, Kessler & Underberg v. 4000 East River Road Associates, 64 A.D.2d 484 (4th Dep’t 1978), the court held that a prospective reduction on tax payments did not constitute “proceeds” within the meaning of § 475. Id. at 488–89. That rule has no bearing in this case. And in Max E. Greenberg, Cantor & Reiss v. State, 128 A.D.2d 939 (3d Dep’t 1987), the court held that the attorney in a state proceeding had no lien on the recovery from a federal proceeding on the same cause of action. Id. at 939–40. But that case was overruled by Cohen v. Grainger, Tesoriero & Bell, 81 N.Y.2d 655 (1993), in which the Court of Appeals held that an attorney’s lien “attaches to the recovery . . . even if recovery 16 Argentina argues that, even if a lien exists, it may not be enforced against the Republic. A lien may be enforced against a defendant, according to Argentina, only where the defendant “either still possesses the proceeds or . . . has knowingly paid the proceeds to the client so as to deprive the attorney of an earned fee.” Br. for Appellee 27–28 (quoting Kaplan v. Reuss, 113 A.D.2d 184, 186– 87 (2d Dep’t 1985)). Although we acknowledge that this formulation appears in cases from intermediate appellate courts in New York, e.g., Kaplan, 113 A.D.2d at 186–87; Haser v. Haser, 271 A.D.2d 253, 255 (1st Dep’t 2000), the Court of Appeals has definitively held that a showing of malice is not required. Rather, even where a defendant settles “in good faith and in the belief that . . . no lien thereafter existed,” Sargent, 209 N.Y. at 363, the attorney may enforce his lien against a defendant who failed to provide for the attorney’s fee, id. at 365; see also FischerHansen, 173 N.Y. at 501 (holding that even though settlement “was made in good is obtained in an action different from the one in which the services were rendered.” Id. at 657–58. In any event, even if these cases were on point, they cannot overcome the clear holdings of Fischer-Hansen, Sargent, and Klein. 17 faith,” the defendant “paid at its peril” because “its duty was to ascertain the amount [owed to the plaintiff’s attorney] and retain it for him”). 8 Argentina argues in the alternative that Gleizer was, at a minimum, required to proceed against plaintiffs first before attempting to collect from Argentina. Assuming without deciding that Argentina is correct that, as a general matter, attorneys must first attempt to collect from their clients before proceeding against the defendant, we are satisfied that the circumstances of this case permit Gleizer to assert his claim against Argentina and plaintiffs simultaneously. The New York Court of Appeals has held that, when the client 8 While some cases may suggest that only a defendant “having knowledge of an attorney’s lien” may be liable under § 475, e.g., Schneider, Kleinick, Weitz, Damashek & Shoot v. City of New York, 302 A.D.2d 183, 188 (1st Dep’t 2002), the New York Court of Appeals has stated that no notice is required to enforce an attorney’s lien because “it is generally regarded as an equitable assignment to the attorney of the fund procured by his efforts to the extent of the amount of his lien.” In re City of New York, 5 N.Y.2d 300, 307 (1959); Peri v. New York Cent. & H.R.R. Co., 152 N.Y. 521, 528 (1897) (observing that “no notice was required” in order to enforce an attorney’s lien against the defendant under the predecessor statute to § 475); see also Brooks v. Mandel-Witte Co., 54 F.2d 992, 994 (2d Cir. 1932) (“[I]f the lien exists, it is statutory and notice thereof is not required to be given.”). In any event, there is no dispute that Argentina received sufficient notice here. Gleizer moved in 2010 for an order fixing the amount of his attorney’s lien. See Order to Show Cause 5, Dist. Ct. Dkt. No. 60. Argentina thus had actual notice, years prior to the instant fee dispute, that Gleizer might be entitled to a lien on the proceeds of any settlement. 18 has returned to their foreign country of residence, the attorney may proceed directly against the defendant to enforce an attorney’s lien. See Fischer-Hansen, 173 N.Y. at 493-94; Peri v. New York Cent. & Hudson Riv. R.R. Co., 152 N.Y. 521, 528 (1897); see also Chesley, 927 F.2d at 68 (observing that “the [Court of Appeals in Fischer-Hansen] allowed the attorney to proceed directly against the defendant” where “the plaintiff [had] received the settlement fund and left the country”). Indeed, the fact that plaintiffs failed to respond to Gleizer’s motion for fees suggests that he will have difficulty collecting from them, even if he does obtain a favorable judgment. We therefore see no barrier to his proceeding against Argentina at this time. In short, Gleizer’s lien attached to the settlement proceeds, even though the settlement was made without his involvement, and Argentina’s arguments that it should not be held liable are unpersuasive. We therefore vacate the order of the district court and remand for further proceedings consistent with this opinion.