Court Opinion

ID: 4209531
Source: CourtListenerOpinion
Date Created: 2017-10-05 16:15:08.521715+00
Date Added: 2024-06-11T14:41:09.169908
License: Public Domain

[Cite as Kisling, Nestico & Redick, L.L.C. v. Progressive Max Ins. Co., 2017-Ohio-8064.]

                 Court of Appeals of Ohio
                                EIGHTH APPELLATE DISTRICT
                                   COUNTY OF CUYAHOGA

                               JOURNAL ENTRY AND OPINION
                                       No. 105287

                 KISLING, NESTICO & REDICK, L.L.C.

                                                            PLAINTIFF-APPELLEE

                                                      vs.

                      PROGRESSIVE MAX INSURANCE
                           COMPANY, ET AL.

                                                            DEFENDANTS-APPELLANTS

                                              JUDGMENT:
                                              AFFIRMED

                                      Civil Appeal from the
                             Cuyahoga County Court of Common Pleas
                                    Case No. CV-15-853760

        BEFORE: Kilbane, J., E.A. Gallagher, P.J., and Jones, J.

        RELEASED AND JOURNALIZED: October 5, 2017
ATTORNEYS FOR APPELLANT

For Progressive Max Insurance Company

David G. Utley
Collins, Roche, Utley & Garner, L.L.C.
520 S. Main Street - Suite 2551
Akron, Ohio 44311

Richard M. Garner
Collins, Roche, Utley & Garner, L.L.C.
655 Metro Place South - Suite 200
Dublin, Ohio 43017

ALSO LISTED

For Todd Anthony Thornton

Christopher Ankuda
Ankuda, Stadler & Moeller, Ltd.
1100 Superior Avenue - Suite 1120
Cleveland, Ohio 44114

For Darvale Thomas

Darvale Thomas
1900 Bairsford Drive
Columbus, Ohio 43232

ATTORNEYS FOR APPELLEE

Christopher J. Van Blargan
John J. Reagan
Kisling, Nestico & Redick, L.L.C.
3412 West Market Street
Akron, Ohio 44333
MARY EILEEN KILBANE, J.:

      {¶1} Defendant-appellant, Progressive Max Insurance Company (“Progressive”),

appeals from the trial court’s decision granting summary judgment in favor of

plaintiff-appellee, Kisling, Nestico & Redick (“KNR”). For the reasons set forth below,

we affirm.

      {¶2} In 2014, Todd Anthony Thornton (“Thornton”) and Darvale Thomas

(“Thomas”) were involved in an automobile accident.        At the time of the accident,

Thornton was insured with Progressive.      Thomas retained the law firm of KNR to

represent him for all claims arising from the accident. Thomas and KNR entered into a

contingent fee agreement, which gave KNR a charging lien on the proceeds of any

insurance settlement, judgment, verdict, award or property obtained on Thomas’s behalf.

While negotiating with Progressive on Thomas’s behalf, KNR presented a settlement

package and demand and obtained a settlement offer of $12,500.

      {¶3} During the course of its representation of Thomas, however, KNR became

aware that Thomas discussed his accident with another law firm. KNR contacted both

the other firm and Progressive and notified them of its fee agreement and charging lien

with Thomas. Thomas then began negotiating, on his own, his claim with Progressive.

Progressive eventually settled the claim directly with Thomas, despite its prior knowledge

of KNR’s charging lien.
       {¶4} In November 2015, KNR sought payment of its legal fees and expenses by

filing a complaint against Progressive, Thornton, and Thomas. KNR alleged that it met

its obligations under the contingent fee agreement with Thomas and obtained a settlement

offer from Progressive but did not receive any payment for its services. KNR’s claims

against Thomas were for breach of contract, breach of fiduciary duty and the implied duty

of good faith and fair dealing, and quantum meruit/unjust enrichment. It alleged that

Thomas intentionally breached the terms of the contingent fee agreement by settling the

claim directly with Progressive after KNR obtained a settlement offer. As a result,

Thomas was unjustly enriched by accepting KNR’s services and advancement of claim

expenses without reimbursing KNR for its services.

       {¶5} KNR’s claims against Progressive and Thornton were to enforce the

charging lien and for tortious interference. It alleged that Progressive and Thornton

(through his agent, Progressive) had actual knowledge of its charging lien prior to settling

directly with Thomas and distributing the proceeds to him solely. KNR further alleged

that Progressive and Thornton knew of the contingency fee agreement between Thomas

and KNR and intentionally procured Thomas’s breach of the fee agreement.1

       1KNR  also sought a declaration that the fee agreement and charging liens
were valid and enforceable.
          {¶6} KNR voluntarily dismissed Thornton from the action and conceded that it

did not have a claim of tortious interference against Progressive. The trial court granted

default judgment in KNR’s favor against Thomas. As a result, the only remaining issues

related to Progressive were whether KNR had a right to “enforce the charging lien” and

whether KNR was entitled to damages based on quantum meruit/unjust enrichment.

Both Progressive and KNR filed motions for summary judgment as they relate to these

issues.

          {¶7} The trial court denied Progressive’s motion for summary judgment but

granted KNR’s motion for summary judgment. It found that Progressive “had a duty to

protect [KNR’s] interest in the settlement proceeds.”          The trial court held that

Progressive owed KNR the amount of KNR’s interest in the settlement proceeds;

therefore, Progressive was “liable for the quantum meruit value of [KNR’s] legal services

which include litigation expense[s].”

          {¶8} Progressive now appeals, raising the following single assignment of error

for our review.

                                     Assignment of Error

          The trial court committed reversible error by entering summary judgment in
          favor of [KNR] and against [Progressive] with respect to [KNR’s] claim for
          an “equitable lien” for contingent attorney fees.

          {¶9} Progressive argues the trial court erred because it was not in privity of

contract with KNR and there is no statute obligating it to assist KNR in the recovery of

fees owed to KNR by Thomas. Progressive contends that KNR’s remedy lies with KNR
pursuing Thomas only, not Progressive.

       {¶10} Appellate review of summary judgment is de novo. Grafton v. Ohio Edison

Co., 77 Ohio St. 3d 102, 105, 1996-Ohio-336, 671 N.E.2d 241. Summary judgment is

appropriate under Civ.R. 56 when: (1) there is no genuine issue of material fact; (2) the

moving party is entitled to judgment as a matter of law; and (3) viewing the evidence

most strongly in favor of the nonmoving party, reasonable minds can come to but one

conclusion and that conclusion is adverse to the nonmoving party. Temple v. Wean

United, Inc., 50 Ohio St. 2d 317, 327, 364 N.E.2d 267 (1977), citing Civ.R. 56(C).

       {¶11} Once the moving party satisfies its burden, the nonmoving party “may not

rest upon the mere allegations or denials of the party’s pleadings, but the party’s response,

by affidavit or as otherwise provided in this rule, must set forth specific facts showing

that there is a genuine issue for trial.” Civ.R. 56(E); Mootispaw v. Eckstein, 76 Ohio

St.3d 383, 385, 1996-Ohio-389, 667 N.E.2d 1197. Doubts must be resolved in favor of

the nonmoving party.        Murphy v. Reynoldsburg, 65 Ohio St. 3d 356, 358-359,

1992-Ohio-95, 604 N.E.2d 138.

       {¶12} In its motion for summary judgment, KNR argued that under the contingent

fee agreement it had with Thomas, Thomas assigned his interest in any settlement

proceeds to the extent of KNR’s fees and expenses, and this assignment created a valid

charging lien. Progressive was aware of the charging lien, a point Progressive concedes.

 As a result, KNR contends that Progressive “remains liable for the quantum meruit value

of KNR’s services and expenses KNR advanced on [Thomas’s] behalf despite its
settlement with Thomas and distribution of the settlement proceeds.” In support of its

motion, KNR submitted the contingent fee agreement entered into between Thomas and

the firm, which provides in relevant part that

       [t]he Attorneys shall receive as a fee for their services, one-quarter (¼) of
       the total gross amount of recovery of any and all amounts recovered, and
       Client hereby assigns said amount to Attorneys and authorizes Attorneys to
       deduct said amount from the proceeds recovered. Attorney shall have a
       charging lien upon the proceeds of any insurance proceeds, settlement,
       judgment, verdict award or property obtained on your behalf. In the event
       of no recovery, Client shall owe Attorneys nothing for services rendered.

       {¶13} We note that “Ohio recognizes two types of attorney liens: (1) general, or

retaining liens, and (2) special, or charging liens.” Putnam v. Hogan, 122 Ohio App. 3d
351, 353-354, 701 N.E.2d 774 (10th Dist.1997), citing Fire Protection Resources, Inc. v.

Johnson Fire Protection Co.,72 Ohio App.3d 205, 594 N.E.2d 146 (6th Dist.1991). An

attorney may have a special or charging lien upon a judgment, decree, or award obtained

for a client. Putnam at 354, citing Mancino v. Lakewood, 36 Ohio App. 3d 219, 223-224,

523 N.E.2d 332 (8th Dist.1987). “[A] ‘charging lien’ is a lien upon a judgment or other

monies awarded to a client, or former client, for work previously performed by the

attorney.”   Bd. of Commrs. v. Maloof Properties, Ltd., 197 Ohio App. 3d 712,

2012-Ohio-470, 968 N.E.2d 602, ¶ 143 (8th Dist.), citing Petty v. Kroger Food &

Pharmacy, 165 Ohio App. 3d 16, 2005-Ohio-6641, 844 N.E.2d 869 (10th Dist.); Hill

Hardman Oldfield, L.L.C. v. Gilbert, 190 Ohio App. 3d 743, 944 N.E.2d 264,

2010-Ohio-5733 (9th Dist.); First Bank of Marietta v. Roslovic & Partners, Inc., 10th

Dist. Franklin No. 03AP-332, 2004-Ohio-2717.
       {¶14} Ohio courts recognize an attorney’s equitable right to enforce a “charging

lien for the payment of fees earned in the prosecution of litigation to judgment.”

Mancino at paragraph three of the syllabus. In Mancino, we stated:

       “The right of the attorney to payment of fees earned in the prosecution of
       litigation to judgment, though usually denominated a lien, rests on the
       equity of such attorney to be paid out of the judgment obtained by him, and
       is upheld on the theory that his services and skill created the fund.
       Although there is no provision in the Code creating or recognizing the right
       of an attorney to a lien as security for payment of compensation for his
       services, it is plain from a long line of decisions by the courts of this state
       that the right exists, and in proper cases the courts will lend their aid to
       maintain and enforce it.

       “* * *

       “A special or charging lien may be created by an express agreement on the
       part of the client that the attorney shall have a lien for his compensation on
       the amount recovered. While, before judgment, an attorney has no lien
       upon or interest in the cause of action, in the absence of statute, yet where
       the parties have contracted that the attorney shall receive a specified amount
       of the recovery, such agreement will operate as an equitable lien in favor of
       the attorney.” 6 Ohio Jurisprudence 3d (1978), Attorneys at Law, Sections
       178-179, at 721-722; Section 183, at 725. See, also, Foor v. Huntington
       Natl. Bank (1986), 27 Ohio App. 3d 76, 27 OBR 95, 499 N.E.2d 1297,
       paragraph two of the syllabus.

       An attorney’s lien is founded on the equitable principle that an attorney is
       entitled to be paid his or her fees out of the judgment rendered in the case.
       See Annotation (1983), 23 A.L.R. 4th 336.

       Contingent fee arrangements in civil cases are a widely accepted practice.
       An attorney and client may lawfully agree upon compensation to the former
       contingent upon the amount to be recovered, either by settlement or by
       judgment, and a court will recognize the validity and enforceability of
       contracts providing for such arrangements. 6 Ohio Jurisprudence 3d
       (1978), Attorneys at Law, Section 155, at 690.

Id. at 224.
      {¶15} This right of the attorney to obtain payment from the judgment for work

preformed on behalf of the client or former client also encompasses the settlement the

attorney obtains on the client’s behalf. Maloof, 197 Ohio App. 3d 712, 2012-Ohio-470,

968 N.E.2d 602, ¶ 15. This right is “based on the theory that the attorney’s ‘service and

skill created the fund.’” Id., quoting Cohen v. Goldberger, 109 Ohio St. 22, 141 N.E.
656 (1923), paragraph one of the syllabus.

      {¶16} In Maloof, we also noted that

      charging liens are generally superior to the claims of the client’s other
      creditors. Goldberger, 109 Ohio St. at 23, 141 N.E. 656, paragraph two of
      the syllabus. Indeed, charging liens have been recognized as having a
      “superpriority” that is superior even to federal tax liens. See Reed &
      Steven v. Hip Health Plan of Florida, Inc., 81 F. Supp. 2d 1335 (S.D.Fla.
      1999). An attorney to whom an interest in the proceeds of a judgment has
      been assigned may enforce his interest against the judgment debtor if he has
      notified the judgment debtor of his interest. In re Simms Constr. Servs.
      Co., Inc., 311 B.R. 479 (6th Cir.2004). The court stated:

             In allowing for enforcement by notice to the judgment debtor,
             Ohio law parallels the requirement articulated in the
             Restatement of the Law Governing Lawyers, i.e., that “the
             lien becomes binding on a third party when the party has
             notice of the lien.” Restatement (Third) of the Law
             Governing Lawyers §43 (2000); see also Restatement
             (Second) of Agency § 464 cmt. n (1958) (“Unless the
             judgment is for costs only, the right [of the attorney to be paid
             from the proceeds of the judgment] exists only if the attorney
             gives notification of his intent to enforce it * * * to the
             judgment debtor * * *.”).

(Emphasis added.) Id. at ¶ 18. See also Devis v. Pineview Court Condominium Assn.,

8th Dist. Cuyahoga No. 102147, 2015-Ohio-2704.

      {¶17} In the instant case, there is no dispute that Thomas and KNR entered into a
contingency fee agreement. The agreement attached to KNR’s motion for summary

judgment indicates that Thomas signed the agreement on July 10, 2014. KNR presented

a settlement package and demand to Progressive on Thomas’s behalf. On June 30, 2015,

Progressive made an offer to KNR to settle Thomas’s claim for $12,500. On July 9,

2015, KNR learned that Thomas had talked to another law firm regarding his claim.

That same day, KNR advised Progressive that it was asserting a lien against any

settlement funds paid to Thomas. Then on July 14, 2015, Progressive, despite knowing

that KNR had asserted a charging lien for its expenses and fees on any settlement

proceeds paid to Thomas, settled the claim directly with Thomas. Tellingly, Progressive

does not dispute that it had notice of the charging lien prior to the disbursement of the

funds.

         {¶18} Based on the foregoing circumstances, we find KNR’s charging lien is

enforceable against Progressive. Progressive had knowledge of KNR’s charging lien

before it settled Thomas’s claim and, despite this knowledge, distributed the settlement

proceeds to Thomas solely.

         {¶19} Moreover, we find Progressive’s reliance on our decisions in Charles

Gruenspan Co., LPA v. Thompson, 8th Dist. Cuyahoga No. 80748, 2003-Ohio-3641, and

Meros v. Rorapaugh, 8th Dist. Cuyahoga No. 77611, 2000 Ohio App. LEXIS 5477 (Nov.

22, 2000), factually distinguishable from the instant case. In Gruenspan, the attorney’s

equitable lien was found not to extend to accountants in a previously dismissed action.

In Meros, the attorney settled his claim against his former client before pursuing an action
against the tortfeasor, which forfeited his right to recover fees he might have in equity.

Notably, neither Gruenspan or Meros involved notice to the third-party insurer of an

attorney charging lien, and KNR did not settle its claims against its former client.

Rather, it asserted equitable claims against its former client and Progressive.

       {¶20} We are also not persuaded by Progressive’s reliance on W. Broad

Chiropractic v. Am. Family Ins., 122 Ohio St. 3d 497, 2009-Ohio-3506, 912 N.E.2d 1093.

 In W. Broad Chiropractic, the patient assigned her rights against the tortfeasor as

payment for West Broad’s chiropractic treatment, but American Family Insurance ignored

the assignment when distributing the settlement proceeds. Subsequently, West Broad

sued American Family for a declaration that its patient’s assignment of rights against

American Family’s insured was enforceable and that American Family had to pay West

Broad for the patient’s treatment.

       {¶21} The agreement between the patient and West Broad was titled “‘Assignment

of Right to Receive Benefits and/or Proceeds of Settlement or Judgment.”’ Id. at ¶ 8.

This agreement assigned the patient’s “right to receive from the tortfeasor’s insurance

company compensation for [her] injuries in exchange for her treatment.” Id.

       {¶22} The Ohio Supreme Court found that the agreement between the patient and

West Broad “could not operate as an assignment because [the patient] had no right in any

settlement proceeds to transfer to West Broad.” Id. at ¶ 17. The court further held that

“R.C. 3929.06 precludes an assignee of prospective settlement proceeds from bringing a

direct action against a third-party insurer after the insurer has distributed settlement
proceeds in disregard of the written assignment.” Id. at ¶ 32.

        {¶23} W. Broad Chiropractic is easily distinguishable from the instant case. W.

Broad Chiropractic involved a document entitled “Assignment of Right to Receive

Benefits and/or Proceeds of Settlement or Judgment,” which was a future assignment of

an interest by the patient to the medical care provider, whereas the instant case involves

an actual charging lien set forth in a contingency fee agreement between a law firm and

its client.

        {¶24} “An assignment is a transfer to another of all or part of one’s property in

exchange for valuable consideration. A vested right in the assigned property is required

to confer a complete and present right on the assignee.” Id. at ¶ 14, citing Hsu v. Parker,

116 Ohio App. 3d 629, 688 N.E.2d 1099 (11th Dist.1996); Christmas v. Griswold, 8 Ohio

St. 558 (1858).

        {¶25} An assignment is distinguishable from a lien. This difference is set forth in

Springer v. J. R. Clark Co., 138 F.2d 722 (8th Cir.1943), where the court stated: “[a]

lien is distinguished from an assignment in that it is a charge upon property, while an

assignment creates an interest in property.” Id. at 726. See also First State Bank v.

United States, 166 F. Supp. 204 (D.Minn.1958).

        {¶26} Here, KNR’s contingent fee agreement with Thomas provided for a

charging lien upon property. Specifically, “the proceeds, settlement, judgment, verdict

award or property obtained on [Thomas’s] behalf.”          This charge upon property is

completely different from the assignment of rights to receive settlement benefits as set
forth in W. Broad. Furthermore, “‘Ohio law parallels the requirement articulated in the

Restatement of the Law Governing Lawyers * * * that “the [charging] lien becomes

binding on a third party when the party has notice of the lien.”’” Maloof, 197 Ohio

App.3d 712, 2012-Ohio-470, 968 N.E.2d 602, ¶ 18, quoting In re Simms Constr. Servs.

Co., Inc., 311 B.R. 479 (6th Cir.2004). See also Goldberger, 109 Ohio St. 22, 141 N.E.
656. Therefore, Progressive’s reliance on W. Broad is misplaced.

       {¶27} In light of the above, Progressive’s sole assignment of error is not well

taken, and we find that the trial court properly granted summary judgment in favor of

KNR.

       {¶28} Judgment is affirmed.

       It is ordered that appellee recover of appellant costs herein taxed.

       The court finds there were reasonable grounds for this appeal.

       It is ordered that a special mandate issue out of this court directing the common

pleas court to carry this judgment into execution.

       A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of

the Rules of Appellate Procedure.

MARY EILEEN KILBANE, JUDGE

EILEEN A. GALLAGHER, P.J., CONCURS;
LARRY A. JONES, SR., J., DISSENTS (SEE SEPARATE DISSENTING OPINION).

LARRY A. JONES, SR., J., DISSENTING:
       {¶29} Respectfully, I dissent and would reverse the trial court’s judgment. I

agree with the majority that a charging lien is a mechanism by which an attorney may

attempt to collect for services rendered, and that it may be used even if counsel was

discharged at the time of judgment.     The problem I have with this case is against whom

the lien was asserted. I do not believe, as the majority does, that it was properly asserted

against Progressive.    Rather, I believe that any action KNR had in regard to the lien

vested with Thomas.

       {¶30} I think the majority muddles the terms “assignment” and “lien” to reach its

conclusion that KNR had a lien it can enforce against Progressive.      The attorney-client

agreement KNR and Thomas entered into reads: “Client hereby assigns said amount to

Attorneys and authorizes Attorneys to deduct said amount from the proceeds recovered.”

(Emphasis added.)      I, therefore, believe that this case is not distinguishable from W.

Broad Chiropractic v. Am. Family Ins., 122 Ohio St. 3d 497, 2009-Ohio-3506, 912 N.E.2d
1093, wherein the Ohio Supreme Court held that “R.C. 3929.06 precludes an assignee of

prospective settlement proceeds from bringing a direct action against a third-party insurer

after the insurer distributed settlement proceeds.” Id. at ¶ 6.

       {¶31} In light of the above, I dissent.