WV Supreme Court: Attorneys’ Charging Lien Follows Settlement Proceeds

The West Virginia Supreme Court of Appeals has handed down a decision which is must reading for every West Virginia litigation attorney.  On February 5, 2009, the West Virginia court, in Trickett, et al. v. Laurita, et. al, No. 34141,  laid down the following legal holdings in the court’s syllabus, at Syllabus Points 7, 8, 9 and 10, concerning the steps required to establish and enforce an attorneys’ charging lien and answering the question whether that lien can attach to attorneys’ fees recovered by a subsequent law firm retained to represent the client after the initial attorney-client relationship was terminated through no fault of the original attorney.

7 .      An attorney may bring a charging lien against his/her client or former client premised upon an oral or written contract between the attorney and his/her client or former client which provides for the attorney’s compensation. A charging lien brought against an attorney’s client or former client may proceed in a separate suit or in the underlying action in which the judgment sought to be attached was obtained.      

8 .      There are four requirements for the imposition of an attorney’s charging lien against an attorney’s client or former client. First, there must be a valid oral or written contract between the attorney and the attorney’s client or former client. Second, there must be a judgment or fund that resulted from the attorney’s services. Third, the attorney must have filed notice of his/her intent to assert a charging lien, and such notice must have been served on the attorney’s client or former client against whose interest in said judgment or fund the lien is sought to be enforced. Fourth, notice of the lien must be filed before the proceeds of the judgment or fund have been distributed.

9 .      “Where an attorney has been discharged, without fault on his part, from further services in a suit just begun by him under a contract for payment contingent upon successful prosecution of the suit, his measure of damages is not the contingent fee agreed upon, but the value of his services rendered; and in the absence of evidence of the reasonable value of such services, no recovery can be had.” Syllabus, Clayton v. Martin, 108 W. Va. 571, 151 S.E. 855 (1930).

10.       When an attorney has properly and timely filed a charging lien in a particular case, the circuit court must address the charging lien in the final order distributing the judgment or fund to which the lien will attach.

The factual pattern in Trickett is not that unusual.  Mr. Trickett retained a Morgantown lawyer, Gary Wigal, to represent him in a complex civil matter involving two civil actions.  The terms and conditions of the representation,  including compensation in the event the client termination the representation, was set forth in a written “Contract For Legal Services” signed by both parties.  Pursuant to the contract, Mr. Wigal associated with co-consel and represented Mr. Trickett and his interests in the pending litigation.  

Later, about three years into the litigation, Mr. Trickett terminated Mr. Wigal and his firm as his attorneys and informed the Circuit Court of Monongalia County of his decision represent himself pro se.  Although Mr. Wigal initially filed a pleading with the court objecting to the plaintiff appearing pro se in such complex litigation, he and his co-counsel filed a motion to withdraw as counsel and the dismissal/withdraw was granted by the court.

Upon request, Mr. Wigal then provided Mr. Trickett with a letter informing Mr. Trickett that the balance of attorney’s fees due and owing from services performed by Mr. Wigal, individually, and by his firm amounted to $21,376.40.  Mr. Trickett then hired another firm and then another to represent him in his ongoing litigation.  The last firm, Allen, Guthrie, McHugh & Thomas, eventually negotiated a $525,000.00 settlement of Mr. Trickett’s claim.  Mr. Trickett then challenged the settlement and additional litigation ensued concerning this matter.  In the midst of this litigation, Mr. Wigal’s firm filed a petition for quantum meruit attorneys’ fees asking the court to apportion the attorneys’ fees recovered from the settlement between Mr. Wigal’s firm and the Allen firm.  

After additional motions and briefing, the circuit court entered an order denying the motion for attorney’s fees based upon Mr. Wigal’s contract with Mr. Trickett or in quantum meruit.  In making this ruling, the circuit court framed the issue and its ruling, as follows:

[a] valid contract existed between the plaintiffs and GBW, setting forth the remedies available to the parties in the event of a dispute. Specifically, the contract called for any payment of attorney’s fees following the dissolution of the attorney-client relationship to be paid by the client, and as such, there is no basis for a recovery or sharing of such fees from funds received by plaintiffs’ subsequent counsel.

On appeal, the West Virginia Supreme Court explained, in an opinion authored by Justice Davis, that “[t]he sole issue presented by the instant appeal involves questions of law regarding the circuit court’s interpretation of W. Va. Code § 30-2-15 (1923) (Repl. Vol. 2007), and the circuit court’s application of this Court’s prior holding in Syllabus point 4 of Shaffer v. Charleston Area Medical Center, Inc., 199 W. Va. 428, 485 S.E.2d 12 (1997).”  In reaching its holding that Mr. Wigal’s attorney fee or charging lien follows the proceeds wherever they may be found, the Court summarized its reasoning and provided guidance to attorneys and trial courts in future cases.

Where an attorney has been discharged, without fault on his part, from further services in a suit just begun by him under a contract for payment contingent upon successful prosecution of the suit, his measure of damages is not the contingent fee agreed upon, but the value of his services rendered; and in the absence of evidence of the reasonable value of such services, no recovery can be had.
Accord Syl. pt. 2, in part, Polsley & Son v. Anderson, 7 W. Va. 202 (1874) (“That [attorneys] are not necessarily entitled . . . in addition to the [sum] certain, named in the contract, to recover the whole amount of the contingent fee therein specified; but for breach of said contract, by [their client], may recover such damages, by way of compensation for their time, labor and attention, as these are reasonably worth; as well, also, for any loss or injury they may have sustained; provided the whole recovery shall not exceed the entire amount stipulated in the contract.”). In the case sub judice, the parties’ “Contract for Legal Services,” though essentially a contingent fee contract, is consistent with this Court’s holding in Clayton because it specifically requires Mr. Trickett to pay Mr. Wigal for “his services rendered,” Syl., in part, 108 W. Va. 571, 151 S.E. 855, upon Mr. Wigal’s termination prior to the completion of the contemplated litigation: “If the Client [Mr. Trickett] terminates the Attorney [Mr. Wigal], the Client agrees to pay the Attorney his accrued fees to date, as well as costs and expenses which have been incurred up to the time.” Therefore, the circuit court, on remand, should consider Mr. Wigal’s fees, costs, and expenses incurred in his representation of Mr. Trickett in determining the amount of GBW’s charging lien.

      Finally, we reiterate that an attorney’s charging lien is not an attachment of the client’s individual assets but rather “[a]n attorney’s charging lien for his fee is confined to the judgment or fund recovered by him as attorney[.]” Syl. pt. 2, in part, Hazeltine v. Keenan, 54 W. Va. 600, 46 S.E. 609. As such, courts should be vigilant in safeguarding such proceeds when an attorney requests a charging lien to attach such proceeds. Thus, we find the prudent course for courts to follow in such instances to be, and accordingly hold, that when an attorney has properly and timely filed a charging lien in a particular case, the circuit court must address the charging lien in the final order distributing the judgment or fund to which the lien will attach. Inclusion of the charging lien in said final order will safeguard the attorney’s claim by providing notice to other potential creditors of the attorney’s interest in such proceeds.

      Although an attorney’s charging lien typically is an attachment of the client’s “judgment or fund recovered by” the attorney asserting the lien, Syl. pt. 2, in part, Hazeltine, 54 W. Va. 600, 46 S.E. 609, where, as here, the judgment proceeds sought to be attached have been disbursed before the court has resolved the attorney’s claim for a charging lien, the lien “follows the proceeds, wherever they may be found.” Tunick v. Shaw, 842 N.Y.S.2d 395, 397, 45 A.D.3d 145, 148 (2007) (citation omitted). Permitting the attorney’s charging lien to follow the proceeds of the judgment or fund sought to be attached is premised upon

        the general rule . . . that a lien upon property attaches to whatever the property is converted into and is not destroyed by changing the nature of the subject . . . [.] It follows its subject and cannot be shaken off by a change of form or substance. It clings to any property or money into which the subject can be traced . . . [.]

Tunick, 842 N.Y.S.2d at 397, 45 A.D.3d at 148-49 (internal quotations and citation omitted). In the case sub judice, the circuit court disbursed the settlement proceeds to Mr. Trickett before it resolved GBW’s claim for an attorney’s charging lien. Thus, GBW may, upon entry of judgment by the circuit court on remand, enforce its charging lien against whatever property said proceeds may now have become. The facts of the case sub judice make it apparent, then, just how imperative it is that courts presented with charging liens address and resolve those matters in conjunction with the entry of the final order disbursing the judgment or fund sought to be attached in order to safeguard the property and resources of the clients who are parties to such proceedings.

As a result of its holding, the WV Supreme Court reversed and remanded the case back to the Circuit Court of Monongalia County for further proceedings.  The lessons to be learned as plaintiff’s counsel?  Make sure you have a written contract setting forth the terms of your representation and compensation.  Make sure you place the court and replacement counsel on notice of your attorneys’ fee charging lien if you are terminated through no fault of your own.  As replacement counsel, make sure that you take the charging lien into consideration when accepting the case, when negotiating settlement and when making a final distribution.

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