Court Opinion

ID: 8375613
Source: CourtListenerOpinion
Date Created: 2022-10-24 17:02:06.213524+00
Date Added: 2024-06-11T16:46:34.873621
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

CAPSTACK NASHVILLE 3, LLC,                §
CSP N3 PARTNER LLC,                       §     No. 50, 2022
CAPSTACK PARTNERS LLC, and                §
DAVID BLATT,                              §     Court Below—Court of Chancery
                                          §     of the State of Delaware
       Plaintiffs Below                   §
       Appellants,                        §     C.A. No. 2020-0519
                                          §
       v.                                 §
                                          §
NED H. COHEN,                             §
NHCOHEN PARTNERS LLC, and                 §
NHCOHEN CAPITAL LLC,                      §
                                          §
       Defendants Below,                  §
       Appellees,                         §
                                          §
WILKS LAW LLC,                            §
                                          §
       Interested Party Below,            §
       Appellee.                          §

                            Submitted: August 10, 2022
                            Decided: October 24, 2022

Before VAUGHN, TRAYNOR, and MONTGOMERY-REEVES Justices.

                                     ORDER

      On this 24th day of October 2022, it appears to the Court that:

      (1) In this appeal we consider whether a law firm may assert an attorney’s

charging lien for services rendered against a settlement fund that the client recovers

through litigation, but which was not incorporated into a judgment, judicial decree,

or court-ordered award. The client is the Plaintiff-Appellant Capstack Nashville 3
LLC, et al. (“Capstack”). Capstack contends that an attorney’s charging lien can

“attach” only to a judgment, judicial decree, or court-ordered award.1 It cannot,

Capstack contends, be asserted against a settlement fund where the settlement

agreement which creates the fund has not been incorporated into a judgment, judicial

decree, or court-ordered award.2 The law firm asserting the charging lien is Wilks

Law LLC (“Wilks Law”). It contends that a judgment, judicial decree, or court-

ordered award is not required and that Capstack’s settlement fund itself can be the

subject of a charging lien.3 The Vice-Chancellor agreed with Wilks Law, awarded

a charging lien in its favor against Capstack’s settlement fund in the amount of

$125,229.35, and ordered Capstack to pay to Wilks Law “any and all funds plaintiffs

have received or will receive in settlement of this action in satisfaction of the

charging lien.”4 For the reasons that follow, we affirm.

       (2) Capstack was an investor in certain multifamily apartment complexes in

Nashville, Tennessee. Disputes arose and Capstack retained Wilks Law to represent

it in dealing with those disputes. Capstack agreed to pay Wilks Law attorney’s fees

at hourly rates and to reimburse Wilks Law for expenses paid on Capstack’s behalf.

On July 3, 2019, Wilks Law initiated an arbitration on behalf of Capstack against

1
  Opening Br. at 8.
2
  Id. at 10.
3
  Answering Br. at 13, 18.
4
  Chancery Order at add. to Opening Br. at 37.

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Ned H. Cohen, a real estate broker, and entities affiliated with him.5 On May 11,

2020, an arbitrator entered an award in Capstack’s favor in the amount of

$220,220.70. Shortly after the arbitrator entered the award, the Wilks Law attorney

assigned to represent Capstack left the firm. Capstack decided to retain a different

law firm, one that had, it appears, not been previously involved in Capstack’s matter,

to represent it in any further proceedings. At that time, Capstack owed Wilks Law

$125,229.35 in unpaid attorneys’ fees and unreimbursed expenses from the Cohen

arbitration.

      (3) On June 26, 2020, Capstack’s new counsel filed an action in the Court of

Chancery to have the arbitration award confirmed. On September 14, 2020, counsel

for Capstack wrote to Chancellor Bouchard indicating that the case had been settled.

Counsel’s letter stated that the settlement included “an agreement to file a notice of

voluntary dismissal with prejudice upon completion of terms of settlement or a

stipulation of judgment in the event of default on the terms of settlement[.]”6 On

October 15, 2020, Wilks Law filed a notice in the action that it was asserting a

charging lien “on any and all sums to be paid to Plaintiffs in satisfaction of the

[Arbitrator’s] Award by judgment, settlement or otherwise.”7 This notice was

followed later by a Motion to Enforce an Attorney’s Charging Lien.

5
   This was one of two arbitrations initiated by Wilks Law on Capstack’s behalf. The other
arbitration is not relevant to this appeal.
6
  App. to Opening Br. at A29.
7
  Id. at A32.

                                            3
       (4) At a hearing on the Motion to Enforce an Attorney’s Charging Lien, the

Vice-Chancellor determined that the settlement referred to in the letter to Chancellor

Bouchard involved an agreement that Capstack would be paid money from the sale

or refinancing of one or more of the Nashville properties. She further determined

that such sale or refinancing had not yet occurred when Wilks Law put Capstack on

notice of its assertion of a charging line. Her ruling in Wilks Law’s favor followed

from these findings.

       (5) Capstack’s contention on appeal is succinctly set forth in its Summary of

the Argument in its opening brief as follows:

              The Court of Chancery entered an attorney’s charging lien
              below, but there was no judgment, award, or judicial
              decree entered against which the charging lien can attach.
              As a result, there is nothing upon which the charging lien
              can be executed or satisfied and the charging lien is a legal
              nullity. There is no legal basis to support what the Court
              of Chancery did and this Court should reverse.8

       (6) Capstack relies upon this Court’s opinion in Katten Muchin Rosenman

LLP v. Sutherland as support for its position.9 In that case this Court:

              embrace[d] the definition that a charging lien is “an
              equitable right to have costs advanced and attorney’s fees
              secured by the judgment entered in the suit wherein the
              costs were advanced and the fee earned,” which had been
              previously adopted by the Court of Chancery in its earlier
              decision in Zutrau v. Jansing.10
8
  Opening Br. at 2.
9
  See id. at 8-9.
10
   153 A.3d 722, 723 (quoting 7A Kristina E. Music Biro, J.D., et.al., Corpus Juris Secundum
Attorney & Client § 523 (2016)) (en banc).

                                             4
Capstack also relies on definitions of an attorney’s charging lien from legal

dictionaries and on comparisons of an attorney’s charging lien with other types of

liens, such as mechanic’s liens or mortgages which attach to a legally tangible thing

or res.11

       (7) The issue Capstack raises here was not raised in Katten. In that case the

Court of Chancery awarded the plaintiff legal fees and expenses in a derivative

action.12 Katten asserted a charging lien against that award, and the Court of

Chancery limited the attorney’s charging lien to amounts which were “directly

relate[d] to [the] client’s recovery.”13 It excluded from the charging lien work which

had “no connection to the recovery, other than having occurred in the same

litigation.”14 This Court stated that “the sole issue on appeal is whether the Court of

Chancery’s requirement that a charging lien can only be obtained for unpaid services

that directly relate to a client’s recovery was a proper prerequisite to impose on

Katten’s equitable right to a charging lien.”15 This Court reversed the Court of

Chancery’s judgment as too narrow and one that “undermines the utility of a

11
   See Opening Br. at 9-11.
12
   153 A.3d at 724-25.
13
   Id. at 725-26.
14
   Id. at 725 (citation omitted) (emphasis omitted).
15
   Id. at 726.

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charging lien in encouraging counsel to provide legal services to clients by ensuring

them that their contractual right to a fee will be upheld by the judiciary.”16

          (8) A treatise cited by the Court in Katten does not limit the application of

charging liens to “judgments.”17 We think that Capstack places undue emphasis on

the Court’s use of the word “judgment” in Katten and that this Court’s opinion in

Doroshow, Pasquale, Krawitz & Bhaya v. Nanticoke Mem’l Hosp. is of greater

precedential value in this appeal. In that case, the Doroshow law firm filed a

personal injury action against a tortfeasor on behalf of an injured party.18

Doroshow’s fee agreement with its client provided that the law firm would receive

a contingent fee of 40% plus costs from any recovery.19 The case was settled for

$19,671.49, which was paid in full in two payments.20 The settlement checks were

made payable to both the Doroshow law firm and the plaintiff.21 The law firm

deducted its fee and deposited the balance in its escrow account. 22 Nanticoke

asserted a hospital lien for the plaintiff’s medical expenses against the entire

$19,671.49.23 Doroshow filed an interpleader action against Nanticoke and the

16
   Id. at 723.
     17
     See id. at 623, 28; 7A Kristina E. Music Biro, J.D., et.al., Corpus Juris Secundum Attorney &
Client § 523 (2022) (“A charging lien is the equitable right of an attorney to have fees and costs
due the attorney for services rendered in a particular suit secured by the judgment or the recovery
in that suit.” (emphasis omitted)).
18
   36 A.3d 336, 339 (Del. 2012) (en banc).
19
   Id.
20
   Id.
21
   Id.
22
   Id.
23
   Id. at 338-339.

                                                6
plaintiff seeking to release the amount remaining after deduction of its fee, the sum

of $11,619.47, to the Superior Court for distribution.24 The Superior Court ruled

that Nanticoke’s hospital lien took priority over Doroshow’s attorney’s lien and

ordered that the full $19,671.49 be paid to Nanticoke.25

       (9) On appeal, this Court found “that the right of an attorney to a charging

lien is well established at common law.”26 The Court quoted with approval the

definition of an attorney’s charging lien appearing in A Treatise on Attorneys at Law

by Mark Thornton as “the right of an attorney at law to recover compensation for his

services from a fund recovered by his aid, and also the right to be protected by the

court to the end that such recovery might be effected.”27 This Court ultimately

reversed the judgment of the Superior Court, finding that the Doroshow law firm

had an attorney’s charging lien which had priority over Nanticoke’s hospital lien.28

       (10) In Doroshow, no mention is made of a judgment in the personal injury

case and a fair reading of the opinion creates a clear inference that the settlement

creating the settlement fund was an “out-of-court” settlement.29 Capstack seeks to

distinguish Doroshow on the ground that the facts are different in that the settlement

proceeds there were paid directly to the law firm and the issue in the case “was

24
   Doroshow, 36 A.3d at 339.
25
   Id. at 339-40.
26
   Id. at 340.
27
   Id. (quoting 2 Edward Mark Thornton, A Treatise on Attorneys at Law § 578 (1914)).
28
   Id. at 339.
29
   Id.

                                              7
simply . . . whether the law firm or the [hospital] had priority in terms of which lien

should be discharged first.”30 However, the Court first discussed attorney’s charging

liens in some detail as a threshold matter and arrived at the conclusion that Doroshow

had a valid attorney’s charging lien on the settlement proceeds.31

         (11) Although the precise issue involved in this appeal was not expressly

raised in Doroshow, we are persuaded that Doroshow supports the view that an

attorney’s charging lien can be asserted against a settlement fund such as the one

recovered by Capstack in this case, and that charging liens are not restricted to

judgments, judicial decrees, or court-ordered awards. We are also persuaded that

the use of the word “judgment” in Katten was not intended to exclude settlement

recoveries which are not reduced to judgment from attorney’s charging liens. After

having thoroughly reviewed the authorities cited by both parties, we conclude that a

Wilks Law attorney’s charging lien could be awarded against Capstack’s settlement

recovery as ordered by the Court of Chancery.

         NOW, THEREFORE, IT IS THE ORDER of the Court that the judgment of

the Court of Chancery is AFFIRMED.

                                        BY THE COURT:

                                        /s/ James T. Vaughn, Jr.
                                        Justice

30
     Opening Br. at 13.
31
     Doroshow, 36 A.3d at 240-42.

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