NJ: Attorney's Liens Enforced Prior to Resolution of Malpractice Action

Posted on August 3, 2010 by Krishna Shah

Cole v. Cole, N.J. App. Div. February 8, 2010

Facts: Defendant allegedly failed to pay his attorneys for services rendered, and the attorneys sought to impose a lien under N.J.S.A. which attaches to a verdict, report, decision, award, judgment, or final order in the client's favor.  The trial court made a determination as to the proper amount of the lien and ordered its judgment to be paid.  Defendant argued that the trial court should not have decided the issue while a malpractice action was pending.

Issue:  Can the Court enter and enforce an attorney's lien while a separately filed legal malpractice action is pending? 

Ruling:  Yes.  Holding a plenary hearing to determine the amount of the attorney's lien within the underlying action is in accordance with the generally accepted procedure regarding attorney's liens in the absence of a motion to stay: 

While arguably a client may be entitled to a stay of the adjudication of any attorney's lien issue pending the outcome of a legal malpractice case, the record does not indicate that defendant sought such a stay. 

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Ordinarily, an attorney will not be able to collect fees for services that were negligently performed.  As a result, a fee arbitration award will be stayed pending the outcome of a related legal malpractice case provided the court finds a 'substantial basis' for the legal malpractice action.

While defendant sought to vacate the judgment in his motion for reconsideration, he did not, in the alternative, seek a stay of its enforcement.  Under these circumstances, we find no error in the trial court's action determining the amount of the attorney's lien, and entering and enforcing a judgment for the attorney fees owed.

Lesson:  In the absence of a motion to stay pending resolution of a separately pending legal malpractice action, courts may properly determine and enforce attorney's liens in the underlying matter.

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The Co-Counsel Relationship: Friend or Foe?

Posted on June 3, 2010 by Krishna Shah

Steinberg v. Schnapp, 2010 NY Slip Op 02991 (1st Dept. April 13, 2010)

Underlying Probate Matter

Facts: Steinberg and Schnapp, both attorneys practicing independently, undertook the representation of another attorney, Borstein. Borstein had retained Steinberg and Schnapp to represent him with respect to “all legal proceedings and asset administration concerning the wills, assets and estate of the late Isi Fischzang”. More specifically, Borstein’s retainer agreement provided that Steinberg was “the general counsel…with respect to all litigation proceedings concerning the wills, assets, and estate”.

Soon after the commencement of the representation, however, Steinberg instituted an action against Schnapp for quantum meruit and interference with an advantageous economic relationship. Essentially, Steinberg alleged that Schnapp fired him to shift the blame for delays in the probate action that upset Borstein.

Issue: Where two attorneys are retained by an executor, one as trial counsel and the other as “Of Counsel”, should “Of Counsel” be permitted to seek his fees from trial counsel?

Ruling: No. The Court resorted to principles of contract law to resolve Steinberg’s claim, and held that the written documents evidenced that Steinberg’s client was the estate, not Schnapp:

In this case Steinberg has sought to recover compensation for his services from a party who did not have any obligation to compensate him – his co-counsel – with whom he was clearly not in privity. There is not even a suggestion that the estate is an undisclosed principal, in which case liability might attach to Schnapp, under time-honored principles.

The Court further held that Steinberg’s claims would fail in any event, since “[a]s a general rule, where there is a contractual relationship between a lawyer and client, the client has the right to terminate the attorney-client relationship at any time with or without cause”:

At best, Steinberg is suggesting that Schnapp made an inaccurate statement about the quality of Steinberg’s work, which statement led Borstein to terminate the attorney relation, a relationship that is terminable at will, in any event. Such statements would be neither tortious nor criminal.

Lesson: An attorney cannot seek compensation for services rendered from co-counsel, even where co-counsel’s representations allegedly led the client to terminate the representation. A client can terminate the attorney-client relationship at will. The attorney can seek to recover compensation for his services only from his former client.

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