Court Opinion

ID: 3180970
Source: CourtListenerOpinion
Date Created: 2016-02-29 08:15:06.637449+00
Date Added: 2024-06-11T12:18:04.505822
License: Public Domain

EFiled: Feb 26 2016 02:48PM EST
                                                      Transaction ID 58636615
                                                      Case No. 2399-VCN

                              COURT OF CHANCERY
                                    OF THE
                              STATE OF DELAWARE

 JOHN W. NOBLE                                              417 SOUTH STATE STREET
VICE CHANCELLOR                                             DOVER, DELAWARE 19901
                                                           TELEPHONE: (302) 739-4397
                                                           FACSIMILE: (302) 739-6179

                                  February 26, 2016

Evan O. Williford, Esquire             David S. Eagle, Esquire
The Williford Firm LLC                 Klehr Harrison Harvey Branzburg LLP
901 North Market Street, Suite 800     919 North Market Street, Suite 100
Wilmington, DE 19801                   Wilmington, DE 19801

        Re:    Sutherland v. Sutherland
               C.A. No. 2399-VCN
               Date Submitted: November 9, 2015

Dear Counsel:

        Plaintiff Martha S. Sutherland (“Sutherland”) sued two of her brothers

regarding their handling of the family businesses. That effort, which spanned a

decade, had some minor success, but otherwise would be perceived as a failure.

Because of that minor success, the Court awarded Sutherland $275,000 for her

attorneys’ fees and expenses.1

1
    Sutherland v. Sutherland, 2014 WL 3906500, at *5 (Del. Ch. July 31, 2014).
Sutherland v. Sutherland
C.A. No. 2399-VCN
February 26, 2016
Page 2

      When her efforts began in 2004, she was represented by Intervenor Katten

Muchin Rosenman LLP (“Katten”). One of her lawyers there, Stewart Kusper,

Esq. (“Kusper”), left the firm in the spring of 2011 and continued to represent her.

In April 2011, Katten transferred Sutherland’s files to Kusper’s new firm. 2 From

then on, Katten performed no (or substantially no) services for Sutherland. All of

the benefits achieved by Sutherland were accomplished while Katten was

representing her.

      Katten had billed Sutherland regularly for its services.           She paid

approximately $2.7 million out of approximately $3.5 million in total billings from

Katten, and still owes $766,166.75.3 Katten intervened in this action to assert an

attorney’s charging lien against the fees awarded by the Court. Sutherland claims

entitlement to those fees.4

2
  Aff. of Bonita L. Stone in Supp. of Intervenor Katten Muchin Rosenman LLP’s
Mot. for Summ. J. (“Stone Aff.”) ¶ 9; id. Ex. F.
3
  Stone Aff. ¶¶ 4–6; id. Ex. D. These fees are based on Katten’s services regarding
Sutherland’s litigation in Delaware. They do not include work done on companion
litigation elsewhere.
4
  Neither Kusper nor his new firm(s) has joined in this conflict. Thus, there is no
debate about priority of (or allocation between) competing charging liens.
Sutherland v. Sutherland
C.A. No. 2399-VCN
February 26, 2016
Page 3

      Katten has moved for summary judgment on its right to an attorney’s

charging lien which would cover all of the Court’s fee award.5

      In March 2004, Sutherland initiated an effort under 8 Del. C. § 220 to

inspect the books and records of the family businesses. At that time, Sutherland

and Katten may have entered into a written fee agreement that cannot now be

found.6 Whether there was a written agreement, however, is not determinative

because of the duration of the Katten-Sutherland attorney-client relationship, the

regular monthly billings, and the significant sums that Sutherland paid over several

years to Katten.7

      In September 2006, Sutherland filed a derivative and double-derivative

action against her brothers on behalf of the family businesses. That litigation was

protracted.   The Special Litigation Committee process was cumbersome, but

5
  Intervenor Katten Muchin Rosenman LLP’s Mot. for Summ. J. on Its Verified
Pet. for a Charging Lien. Katten has offered no other theory for attaching or
placing a lien on the funds that are due Sutherland.
6
  Katten insists that there was a written fee agreement. Sutherland denies (or at
least cannot remember) its existence. Perhaps the passage of time or the transfer of
files by Katten to Kusper’s new firm would explain the loss of any written
agreement.
7
  It is, of course, desirable, appropriate, and sometimes necessary for lawyers and
clients to memorialize in a written agreement their common understanding
regarding the scope of representation and the fee arrangement.
Sutherland v. Sutherland
C.A. No. 2399-VCN
February 26, 2016
Page 4

Katten’s (and Sutherland’s) efforts resulted in eliminating the brothers’

expectations of two-year’s salary if terminated for cause and a modification

(favorable to the family businesses) of provisions allowing the brothers to compete

with the family businesses. These benefits were all achieved (adopted by the

boards of the family companies) by 2007, years before Katten’s departure. In

2010, the Court granted summary judgment against Sutherland on most of her

claims.8 The remaining claim was tried in November 2012.9

      In seeking an award of fees, Sutherland relied upon Katten’s invoices which

detailed its services performed for her and its expenses incurred in her behalf.10

Indeed, in making an award of fees to Sutherland, the Court relied upon Katten’s

invoices as sponsored by Sutherland.11

8
  Sutherland v. Sutherland, 2010 WL 1838968 (Del. Ch. May 3, 2010).
9
  Sutherland v. Sutherland, 2013 WL 2362263, at *1–4 (Del. Ch. May 30, 2013).
10
   Kusper not only argued the fee application on behalf of Sutherland, but he had
also been deeply involved in the work which Katten performed on her behalf while
he practiced at Katten.
11
   Sutherland, 2014 WL 3906500, at *1–2.
Sutherland v. Sutherland
C.A. No. 2399-VCN
February 26, 2016
Page 5

      Summary judgment is appropriate if no material facts are in dispute and the

moving party is entitled to judgment as a matter of law.12

      An attorney’s charging lien is not a novel concept. An attorney’s charging

lien is “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.”13 The theoretical basis for the lien is

“that one should not be permitted to profit by the result of litigation without

satisfying the demand of his attorney.”14      Delaware recognizes the attorney’s

charging lien in both courts of law and courts of equity. Although frequently

12
   Ct. Ch. R. 56. Sutherland has raised no questions of material fact as to Katten’s
contention that she owes the firm at least $275,000, the amount of the fee award.
There may have been disagreements between Katten and Sutherland, but
Sutherland has not offered a factual basis for concluding that she was “overbilled”
by an amount that would reduce the amount she owes below the fee award. See
Aff. of Martha S. Sutherland in Opp’n to Intervenor Katten Muchin Rosenman
LLP’s Mot. for Summ. J. ¶¶ 2–5.
13
   Doroshow, Pasquale, Krawitz & Bhaya v. Nanticoke Mem. Hosp., Inc., 36 A.3d
336, 340 (Del. 2012) (quoting 2 Edward Mark Thornton, A Treatise on Attorneys
at Law § 578 (1914).
14
   Id. (quoting 2 Edward Mark Thornton, A Treatise on Attorneys at Law § 580
(1914).
Sutherland v. Sutherland
C.A. No. 2399-VCN
February 26, 2016
Page 6

referred to as equitable remedy, the use of the word equitable in describing the lien

has come “in the broad sense to mean ‘fair’”15

      The fees and expenses for which Katten seeks a charging lien were incurred

after 2008; that is, the fees and expenses were incurred after the derivative benefits

for the family businesses upon which the Court’s fee award was premised had been

achieved.16 Thus, the principal question is: may a lawyer obtain a charging lien

upon a recovery by the (former) client based on the work done by the lawyer if the

lawyer has already been paid for the work that led to that recovery? Stated

differently, may a lawyer secure a charging lien for work done after the benefits

supporting a fee award (in this instance, the derivative benefits accruing to the

family businesses) were achieved if the lawyer’s work which achieved the benefits

has been paid for?17

15
   Id. at 341 (quoting Polin v. Delmarva Poultry Corp., 188 A.2d 364, 366 (Del.
Super. 1963)).
16
    Sutherland paid Katten’s fees until after the derivative benefits had been
obtained.
17
   The scope of the dispute between Katten and Sutherland is not as expansive as it
once might have been. For example, Sutherland does not contend that the
arrangement with Katten was in her individual (and not as trustee) capacity; that
the fee agreement might have had venue or arbitration provisions; or that Katten
Sutherland v. Sutherland
C.A. No. 2399-VCN
February 26, 2016
Page 7

      The purpose of a charging lien is to make sure that the client does not avoid

paying her lawyer for the benefits she obtained.18 Katten has been paid in full for

its invoices based on its work that provided both benefits to the family companies

and the basis for the Court’s fee award.19 In essence, Katten seeks imposition of a

charging lien for work which caused no benefit and has no connection to the

recovery, other than having occurred in the same litigation.           The Court in

Doroshow recognized that because a law firm represented a client on a contingent

fee basis, “the law firm had not been compensated before its work produced the

funds.”20 Seeking a charging lien for work which produced no benefit when the

law firm has already been paid for the work which produced the benefit (whether

had improperly allocated her fee payments between litigation in Delaware and
elsewhere.
18
   “[T]he rationale for an attorney’s charging lien [is] that attorneys have a right to
compensation for funds recovered by their efforts.” Doroshow, 36 A.3d at 343.
19
   Frequently, allocation will be difficult because the recovery typically comes at
the end of the litigation and linking any benefit to any specific effort would be
imprecise.
20
   Doroshow, 36 A.3d at 342.
Sutherland v. Sutherland
C.A. No. 2399-VCN
February 26, 2016
Page 8

the benefit for the family corporation or the corresponding fee award) is

inconsistent with the theoretical underpinnings of the attorney’s charging lien.21

      Accordingly, Katten’s motion for summary judgment is denied.22

      IT IS SO ORDERED.

                                       Very truly yours,

                                       /s/ John W. Noble

JWN/cap
cc: Robert S. Saunders, Esquire
     S. Mark Hurd, Esquire
     Register in Chancery-K

21
   In addition, because Sutherland paid Katten for the services which generated the
benefit, the equitable or “fair” approach would be to allow her reimbursement for
those fees which she paid.
   Katten expresses concern that this result could lead to gamesmanship: of clients
who would selectively pay invoices that are connected to legal efforts that were in
some sense successful. Perhaps evidence of that sort would change the Court’s
analysis, grounded as it is in notions of equity and fairness, but no such evidence
has been offered in this action.
22
   This is a dispute about payment of Katten’s fees from a specific fund. It does
not impact Katten’s right to pursue Sutherland personally for whatever she may
owe it.