Katten Muchin Rosenman LLP is entitled to an interest in a $275,000 fee award in a dispute over a family-owned corporation even though the law firm withdrew before the award was entered ( Katten Muchin Rosenman LLP v. Sutherland , Del., No. 151, 2016, 1/3/17 ).
Katten is entitled to a “charging lien” on the judgment regardless of whether its unpaid services were directly connected to the litigation’s results, the Delaware Supreme Court ruled Jan. 3 in a rare reversal of the state chancery court.
The decision clarifies when Delaware lawyers may hold a client’s property or funds until payment has been made for their services.
The state high court based its decision on the fact that Katten charged an hourly rate. “In the case of hourly billing, unlike with a contingency fee, the total amount that the client is required to pay her lawyer is not based on the client‘s recovery,” Chief Justice Leo E. Strine Jr. said.
In the lawsuit, Martha Sutherland, who was ousted as a director of Sutherland Lumber-Southwest Inc. in 2004, hired Katten to represent her in a books and records action in Delaware. She later filed derivative claims against her two brothers and cousin alleging that their employment agreements with the company were improper.
Katten withdrew as counsel in 2011 before the litigation was resolved. According to the court’s decision, Ms. Sutherland at the time had accrued over $760,000 in unpaid fees owed to the firm.
In 2014, the Delaware Chancery Court awarded Ms. Sutherland $275,000 in counsel fees for “minor benefits” she obtained on the company’s behalf. Katten intervened, claiming it was entitled to a lien on the entire award.
Two years later, the chancery court found that the firm wasn’t entitled to a lien because it already had been paid for services that produced a benefit.
Reversing, the state high court said that contractual provisions for legal services create incentives for both lawyer and client, and paying an hourly rate can assure that complex cases are pursued aggressively.
“To permit a client who is a party to such an agreement to escape a charging lien as if she made a strict contingency fee agreement limiting fees to a percentage of recovery is to judicially rewrite the contract at the expense of the attorney and to undermine the traditional purpose of a charging lien,” Strine wrote.
To contact the reporter on this story: Michael Greene in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Yin Wilczek at email@example.com
The decision is available at http://www.bloomberglaw.com/public/document/Katten_Muchin_Rosenman_LLP_v_Sutherland_No_151_2016_2017_BL_322_D.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)