Opinion ID: 1470023
Heading Depth: 1
Heading Rank: 9

Heading: The Equitable Lien

Text: We have given due consideration to defendants' argument that payment of a contingent fee would represent an illegal diversion of the state's receipts, but we have concluded that defendants' position is overly myopic. In our judgment, a successful contingent fee attorney has an equitable lien on any recovered damages in accordance with the term of the fee agreement. [54] See Button's Estate v. Anderson, 112 Vt. 531, 28 A.2d 404, 406 (1942) (Where the parties have contracted that the attorney shall receive a specified amount of the recovered fund, such agreement will create an equitable lien on the fund in favor of the attorney   .) (emphasis added); [55] see also Barnes v. Alexander, 232 U.S. 117, 120, 34 S.Ct. 276, 58 L.Ed. 530 (1914) (Holmes, J.); Wylie v. Coxe, 56 U.S. (15 How.) 415, 419-20, 14 L.Ed. 753 (1853); 7 Am.Jur.2d Attorneys at Law § 319 at 354 (2007) (Where the parties contract that the attorney will receive his or her fee from the amount recovered, the agreement creates an equitable lien in favor of the attorney   .). After the appropriate fee has been paid to contingent fee counsel, the net amount would constitute what defendants characterize as the State's receipts  and that amount would indeed be payable to the General Treasury. [56] The amount properly to be paid to contingent fee counsel pursuant to a contingent fee agreement falls within the realm of equity; as such, it is inherently within a court's discretion to oversee the payment of such amounts to contingent fee counsel. Although the state would hold the legal title to any damages that might be awarded to the state in a civil trial, outside counsel who are retained on a contingent fee basis would have an equitable right to the portion of such damages that represents their fee (subject to the significant caveat referenced in the next subsection of this opinion). See State v. Hagerty, 580 N.W.2d 139, 144-45 (N.D.1998); Button's Estate, 28 A.2d at 406-07, 409-10; City of Montpelier v. Gates, 106 Vt. 116, 170 A. 473, 475-76 (1934). We unreservedly agree with the Supreme Court of Vermont when it made the following helpful distinction between legal title and equitable rights in the context with which we are presently confronted: Although the legal title to the whole fund no doubt is in the State, the [contingent fee attorneys] have equitable rights to that portion of the same which represents their fee. This part in all equity and good conscience belongs to them. They have earned it and should receive it. This portion of the fund never legally and equitably belonged to the State as part of its public funds for, at the latest, when received, the lien attached to it and remains upon it so that it is held by the State subject to the same. Button's Estate, 28 A.2d at 410 (emphasis added). As that same court stated in an earlier case: It is all a matter of bookkeeping, and an honest creditor is not to be denied, simply because the payment of his claim may somewhat upset the treasurer's books. City of Montpelier, 170 A. at 475; see also Button's Estate, 28 A.2d at 410. C