Charging Lien For Legal Fees Not Enforced In Divorce Case
The trial court in this high-asset divorce action properly declined to enforce the charging liens that had been filed by the plaintiff’s attorneys, the Michigan Court of Appeals has ruled.
In Eldridge v Eldridge (Docket No. 365601), the defendant and the plaintiff were divorced. When the defendant became “uncooperative with” orders directing him to disburse assets to the plaintiff, the Wayne County Circuit Court appointed a receiver to maintain control of some or all of the assets on the plaintiff’s behalf. Thereafter, Szymanski Law, PLC and attorney Bruce Nichols, who both represented the plaintiff during the divorce proceedings, sought charging liens for their unpaid legal services.
The trial court denied the attorneys’ motions to enforce the charging liens. In making this decision, the trial judge said: “… I indicated this Court sits in equity and given the - given the substantial funds that have not been paid to [the plaintiff]. It is in my equitable judgment, given the amount of time that has passed and given the fees that you [Szymanski] and Mr. Nichols have already realized that it would not be equitable. … IT IS ORDERED that the Court has determined that given the substantial amounts owed to Plaintiff, and given the amount of time that has passed and the fees already paid to Attorneys Szymanski and Nichols, their charging liens are dismissed.” The trial court denied the attorneys’ motions for reconsideration. Szymanski and Nichols appealed the decision.
The Court of Appeals affirmed, noting the “passage of time” made it “difficult” for the trial court to make a “principled decision.”
In addition, “while not the complete amounts they seek, Szymanski was paid about $100,000 in attorney fees, and Nichols was paid about $10,000 in attorney fees,” the Court of Appeals said. “Thus, as the trial court noted, declining to enforce the charging liens would not result in the attorneys being unpaid for their legal services.”
Judge Kristina Robinson Garrett, Judge Michael J. Riordan and Judge Anica Letica were on the panel that issued the unpublished decision.
Liens Correctly Unenforced
On appeal, Szymanski and Nichols argued the trial court’s reasons for “dismiss[ing]” their charging liens were invalid.
“[W]hile the trial court’s use of the word ‘dismissed’ may have been imprecise, the trial court reasonably may be understood as declining to enforce the charging liens,” the Court of Appeals said. “We conclude that the trial court did not abuse its discretion in that regard.”
In its analysis, the Court of Appeals pointed out the decision whether to impose an attorney’s lien “lies within the trial court’s discretion” and such decisions “are reviewed for abuse of discretion.”
The Court of Appeals also explained there are two types of attorney’s liens:
a general, retaining or possessory lien that “grants the attorney the right to retain possession of property of the client, including money and documents, until the fee for services is paid.”
a special or charging lien that is an “equitable right to have the fees and costs due for services secured out of the judgment or recovery in a particular suit.”
While charging liens “automatically attach to funds or a money judgment recovered through the attorney’s services,” the Court of Appeals noted that “whether to enforce a charging lien is a separate question. … The trial court may decide whether and how to enforce a charging lien.”
The Court of Appeals continued by explaining that a charging lien is equitable in nature. “The existence or ‘attach[ment]’ of a charging lien is automatic, but whether such a lien may be perfected or ‘enforce[d]’ depends on the facts of the case. Moreover, other states have recognized that a trial court may either limit or largely prohibit charging liens in divorce cases. This makes sense, as the charging lien itself is equitable in nature, as are divorce proceedings in general.”
Next, the Court of Appeals pointed out that, when denying the attorneys’ motions for a charging lien, the trial court emphasized the “substantial amounts” owed to the plaintiff and the “amount of time that has passed and the fees already paid to” both Szymanski and Nichols.
“While it is true [the plaintiff] has received a substantial amount of money following the 1996 divorce judgment, this fact would weigh in favor of enforcing the charging liens, as it may be inferred that doing so would not leave her destitute,” the Court of Appeals wrote. “However, as the trial court observed, [the plaintiff] was owed hundreds of thousands of dollars that she likely would never recover. In addition, the post-divorce proceedings had been ongoing for over 25 years, and when the trial court decided the case, the parties were arguing about services provided over a decade prior. The passage of time arguably rendered it difficult for the trial court to even provide a principled decision at this stage of the case. Further, … Szymanski was paid about $100,000 in attorney fees, and Nichols was paid about $10,000 in attorney fees. Thus, as the trial court noted, declining to enforce the charging liens would not result in the attorneys being unpaid for their legal services.”
Therefore, “[g]iven these facts, as well as the fact that this is a divorce case - which other state courts have recognized as perhaps weighing against a charging lien - we conclude that the trial court did not abuse its discretion by declining to enforce the charging liens.”
