Are lien rights absolute?
By Helen Hierschbiel
One of the greatest challenges of the private law practitioner is getting paid. In a perfect world, clients would deposit sufficient monies in advance to cover whatever fees may be incurred. In reality, however, that rarely — if ever – happens, and lawyers must resort to other means to secure their right to payment. There are a variety of tools available for lawyers to ensure payment, some of which may be more effective than others. One of the more controversial methods of extracting payment is the retaining (or "possessory") lien. Assertion of this lien right (particularly as against the client’s file) results in countless calls and letters of complaint to the bar’s Client Assistance Office. Thus, prudence suggests exercising caution and understanding the limits of lien rights before deciding to use this particular tool for collection of fees.
THE TENSION
Oregon RPC 1.16(d) specifies that "the lawyer may retain papers, personal property and money of the client to the extent permitted by other law." ORS 87.430 grants lawyers a possessory lien on "client papers and property for services rendered to the client." On its face, RPC 1.16 recognizes an absolute right to retain client property to secure outstanding fees. Whether this retaining lien right is, in fact, absolute is the subject of some debate, given a lawyer’s other fiduciary obligations to the client. For example, Oregon RPC 1.16(d) also requires that upon withdrawal, a lawyer "take steps to the extent reasonably practicable to protect a client’s interests…" The two provisions of RPC 1.16 arguably create a tension between the lawyer’s ethical obligation to protect a client’s interests and a lawyer’s legal right to exercise the retaining lien.
OSB Formal Op. No. 2005-90 (which remains largely unchanged from its predecessor, former OSB Formal Op. No. 1991-90) attempts to resolve this tension by setting forth factors the lawyer must consider before asserting retaining lien rights. It reads:
If the lien is otherwise valid and if the client has sufficient resources to pay the lawyer what is due but chooses neither to make payment nor to file a bond, the lawyer may lawfully withhold the client’s materials. If, however, the client does not have sufficient resources to pay the lawyer in full and if surrender of the materials is necessary to avoid foreseeable prejudice to the client, the attorney lien must yield to the fiduciary duty that the lawyer owes to the client on payment of whatever amount the client can afford to pay.
Thus, in deciding whether the lawyer may withhold the client property, the lawyer should ask: 1) is a retaining lien available in this situation; 2) does the client have sufficient resources to pay the lawyer fees in full and, 3) is surrender of the property necessary to avoid prejudice to the client?
This paradigm is not without difficulties. Whether the conditions necessary to assert the lien exist can be a matter of great dispute between the lawyer and the client. The client and the lawyer may disagree about whether the client is able to pay the lawyer’s fees, and Op. No. 2005-90 sheds no light on how such a dispute is to be resolved. Moreover, since the point of the retaining lien is to deprive the client of something she needs in order to coerce payment, a broad interpretation of what constitutes "prejudice" to the client arguably eviscerates the attorney retaining lien statute. While the Oregon Supreme Court has yet to offer its opinion of the validity of attorney fee liens upon withdrawal, a review of authority in other states offers some insight into the reasons behind Op. No. 2005-90, as well as guidance for the practitioner in deciding whether to exercise retaining lien rights in a particular situation.
WHAT DO OTHER STATES DO?
Some states’ ethics opinions conclude that it is always unethical to hold a client file hostage against payment because it invariably prejudices the client’s interest. See, Minnesota Ethics Opinion 13(1989); Wisconsin Ethics Opinion E-95-4 (1995). The Restatement of the Law Governing Lawyers, Section 43, (2000) follows this approach, saying that holding the client’s property is inconsistent with the lawyer’s fiduciary duties because "it puts pressure on the client that is disproportionate to the size or validity of the lawyer’s fee claim." This stance is the minority view.
The majority of states recognize the existence of attorney retaining liens and conclude that the retaining lien is not per se unethical. Nonetheless, many states, like Oregon, have carved out exceptions or otherwise limited the exercise of attorney lien rights. See generally, Annotation, Attorney’s Assertion of Retaining Lien as Violation of Ethical Code or Rules Governing Professional Conduct, 69 ALR 4th 974 (1989).
Some courts have held that the lien cannot be asserted if the lawyer has been discharged for good cause or if the lawyer has withdrawn without good cause. Miller v. Paul, 615 P2d 615 (Alaska 1980); People ex rel. McFarlane v. Harthun, 195 Colo. 38, 581 P.2d 716 (1978); In re Kaufman, 93 Nev. 452, 567 P.2d 957 (Nev. 1977); In re Bucknam, 160 Vt. 355, 628 A.2d 932 (Vt. 1993). Other states have required lawyers to show that the client is able to pay, but is deliberately refusing to do so. Lucky Goldstar International (America) Inc. v. International Manufacturing, 636 F.Supp 1059 (DC N.Ill. 1986); In re Tillman, 462 SE2d 283 (S.C. 1993). Some states have declined to uphold the lien when withdrawal itself is based on a fee dispute. See Academy of California Optometrists, Inc. v. Superior Court, 51 Cal.App.3d 999, 124 Cal.Rptr. 668 (Calif.Ct.App. 1975) (lien violated lawyer’s duty not to damage client where client fired lawyer for charging excessive fees and lawyer retained files even though cases was nearing five year dismissal rule).
Like Oregon, many jurisdictions’ authorities say that a lawyer may not refuse to return a client file if it would prejudice the rights of the client. Texas Ethics Opinion 395 (1979)(unethical to assert lien if it would prejudice client’s rights); Vermont Ethics Opinion 91-3 (1991)(unethical to enforce lien by withholding documents if such conduct would prejudice client’s interests); Michigan Ethics Opinion RI-203 (1994)(lawyer may not refuse to return property if the client needs the property to pursue his case).
How much prejudice is too much depends on the jurisdiction. In West Virginia, if the retaining lien on the client’s file interferes with the ability of the client to pursue litigation, the lawyer must yield her lien rights. West Virginia Ethics Opinion 92-02 (1992). Some courts say the lawyer must sacrifice the lien if retaining the file would seriously prejudice the client’s ability either to defend himself against a criminal charge or to assert or defend a similarly compelling personal liberty. See, People (New York) v. Altvater, 78 Misc.2d 24, 355 NYS2d 736 (NY 1974) (lawyer obligated to turn over file where former client on trial for murder); In re Morse, 266 Ga. 652, 470 S.E.2d 232 (1996) (lawyer suspended for failing to return client’s papers for 10 months, attaching attorney’s lien to client’s claim without providing documentary support and failing to release file or lien until client filed grievance with the state bar, thus resulting in substantial delay in client’s receipt of settlement proceeds).
Still other jurisdictions have developed lists of factors for lawyers to consider in deciding whether exercise of a retaining lien is ethical. For example, the Alaska Supreme Court lists the following factors: 1) whether there was good cause for discharging the lawyer; 2) whether the lawyer initiated the withdrawal; 3) the client’s ability to pay the fee or provide other security; 4) the importance of the files to the client; 5) whether the fee is disputed; 6) whether the fee is fixed or contingent and 7) whether part of the sum due is for costs. Miller v. Paul, 615 P.2d 615, 620 (Alaska 1980). See also, Colorado Ethics Opinion 82 (1989) (lawyer may not assert lien if one or more of the following factors are present: 1) no legal basis exists for assertion of the lien; 2) lawyer has been suspended or disbarred; 3) lawyer is guilty of misconduct in the particular matter; 4) the matter is a contingency fee case prior to completion of the case; 5) the client furnishes adequate alternative security; 6) the client’s papers are essential to preservation of an important personal liberty interest; 7) the lawyer has withdrawn without just cause or reasonable notice; 8) the lawyer is discharged for professional misconduct; 9) the client is financially unable to post a bond or pay the fees).
CONCLUSION
While it doesn’t answer every question, OSB Formal Op. No. 2005-90 reminds lawyers that retaining lien rights must be balanced against the lawyer’s fiduciary obligation not to prejudice the client. In the absence of clear guidance from our courts, lawyers may be well advised to heed the guidance of other jurisdictions which have articulated limitations on the attorney retaining lien, all of which indicate that avoiding prejudice to the client trumps the lawyer’s seemingly absolute right to secure payment through the retaining lien.
© 2006 Helen Hierschbiel
ABOUT THE AUTHOR
Helen Hierschbiel is assistant general counsel in the OSB Client Assistance Office. She can be reached at (503) 620-0222, or toll-free in Oregon at (800) 452-8260, ext. 361, or by e-mail at hhierschbiel@osbar.org.