When MIRA liens trump attorney fee claims: a harsh result in light of Karpierz?

• Author: Williamson, Carrie B.
• Position: Missouri Incarceration Reimbursement Act

State ex rel. Nixon v. Bass (1)

1. INTRODUCTION

   The Missouri Incarceration Reimbursement Act ("MIRA") is a powerful tool which allows the State to recover incarceration costs directly from an inmate's personal assets. (2) But what if the inmate's assets include funds obtained in some fashion by the legal services of an attorney? Could a subsequent MIRA claim take priority over that attorney's interest in being paid from the fruit of his labor? In the 2003 case of State ex rel. Nixon v. Karpierz, the Missouri Supreme Court sought to provide answers to these questions. (3) Karpierz placed a limitation on the parameters of MIRA's reach by allowing a plaintiff inmate's attorney to take a reasonable fee for legal services performed in obtaining a judgment prior to the attachment of the MIRA claim. (4)

   In the factually similar case of State ex rel. Nixon v. Bass, the Missouri Court of Appeals, Western District made no mention of Karpierz. (5) This Note argues that in deciding Bass, the Missouri Court of Appeals should have discussed the Karpierz holding in order to provide more clear and definitive guidance for attorneys who undertake the representation of inmates. Particularly helpful would have been some direction regarding whether and when Karpierz might be invoked to protect from MIRA's grasp a legal fee arising from an attorney's active defense of an inmate.

2. FACTS AND HOLDING

   On March 29, 2006, Loren Bass ("Bass") was arrested in Cole County, Missouri for drug related offenses. (6) At the time of the arrest, Bass was in possession of $4421.00 in cash, which was seized by the arresting officers for forfeiture pursuant to Missouri's Criminal Activity Forfeiture Act ("CAFA"). (7) Shortly after being formally charged with drug possession, Bass hired the law firm of Hanrahan Trapp, P.C. ("Hanrahan") as legal counsel and agreed to pay a $10,000.00 legal fee. (8) Bass paid Hanrahan $5600.00 up front and indicated that he would pay the remaining portion by assigning his interest in the seized cash to the firm. (9) He signed a document entitled "Authorization for the Release of Funds by Inmate," which provided: I, Loren Bass, hereby authorize the release of any and all of my funds currently in the possession of Cole County, Missouri (believed to be approximately $4421.00) to the firm of Hanrahan Trapp, PC as the initial retainer for legal representation fees. (10) On June 12, 2006, Bass pled guilty to a lesser criminal charge and received a three year prison sentence. (11) At the plea hearing, Hanrahan filed a motion for release of the seized funds and the defense's interest was recorded in the criminal case docket. (12) The State dismissed its CAFA petition four days later. (13) On the day that the CAFA action was dismissed, then-State Attorney General Jay Nixon filed a petition against Bass for incarceration reimbursement under MIRA, claiming the seized funds as compensation for Bass' prison expenses. (14) Hanrahan intervened in the case, arguing that, pursuant to the signed authorization, the money was no longer Bass' property but rather belonged to the law firm. (15) In support of its position, Hanrahan utilized the Missouri Supreme Court's statutory interpretation of the definition of a MIRA "asset" as announced in the case of State ex rel. Nixon v. Karpierz. (16)

   Nixon subsequently filed a motion for summary judgment, pointing out that Hanrahan's position implied that the authorization signed by Bass created an assignment of Bass' full interest in the seized money. (17) Nixon argued that the authorization was not a valid assignment for two reasons. First, he asserted that the document merely authorized the release of money for a specified use. (18) Thus, there was no full assignment of Bass' interest to Hanrahan. (19) Second, Nixon argued that, to be valid, an assignment must transfer the assignor's full interest in the property to the assignee. (20) Specifically, he relied on the fact that Bass signed the authorization at a time when the seized funds were the subject of the CAFA action. (21) Thus, because the authorization was an agreement to transfer the money at a future point in time, "[t]he release did not vest any present interest in the funds." (22)

   The trial court granted Nixon's motion for summary judgment on June 29, 2007, and awarded the State $4845.14 in incarceration expenses. (23) It then held that the funds seized from Bass were subject to the incarceration reimbursement judgment. (24) The court was silent regarding the legal effect of the authorization signed by Bass. (25)

   On July 24, 2007, Hanrahan filed its notice of appeal to the Missouri Court of Appeals, Western District. (26) On appeal, the primary issue raised was the same argument presented in the lower court--that the funds at issue did not belong to Bass because they were assigned to Hanrahan before the MIRA action was filed. (27) Nixon, in addition to the arguments presented at the summary judgment hearing, raised two new points on appeal. First, he asserted that, at the time the authorization was signed, "Hanrahan ... had not undertaken [its] representation of Bass." (28) "As such ... [the] assignment could only be considered contingent, [thus] Bass must have retained an interest in the funds." (29) Second, Nixon argued that because Bass retained an interest in the funds, the most that Hanrahan obtained through the authorization was a secured interest in the funds, over which the MIRA claim had priority. (30)

   In making its decision, the appellate court focused primarily on the use of the phrase "initial retainer for legal representation fees" in Hanahan's authorization. (31) It explained that, in the attorney-client context, such words describe funds that do not belong to the lawyer until they are earned. (32) Thus, the court held, when an attorney accepts a client's signed authorization of a release of funds held by a third party as an advance fee payment, until the fee is earned by the attorney, the client retains an interest in the funds which may either be reclaimed by the client or executed against by a priority claim such as that which arises under MIRA. (33)

3. LEGAL BACKGROUND

   In order to fully understand and analyze the issues in the instant case, it is necessary to examine generally the nature of a MIRA claim and its effects on attorney fees. Additionally, it is important to explore the laws in Missouri as they apply to attorney fees. Each of these topics will be discussed in turn.

   1. The Missouri Incarceration Reimbursement Act

      The State's petition in the instant case was filed pursuant to the Missouri Incarceration Reimbursement Act, also known as MIRA. (34) Enacted in 1988, MIRA provides an avenue for recovering "the cost of caring for and maintaining prisoners in the Missouri Department of Corrections." (35) Under MIRA, Missouri may claim up to ninety percent of a prisoner's assets as reimbursement for the costs of incarceration. (36) Assets are defined as any "property, tangible or intangible, real or personal, belonging to or due an offender." (37) The act further provides that a MIRA claim is superior over almost all other obligations attached to a prisoner's assets. (38)

      An exception to MIRA's ability to reach a prisoner's assets, designed to protect attorney fees, was created by the Missouri Supreme Court in State ex rel. Nixon v. Karpierz. (39) In Karpierz, a Missouri prisoner was awarded a civil judgment in the amount of $46,470.04. (40) The State then filed a MIRA suit for incarceration expenses, seeking to attach its claim to the civil award. (41) The trial court thereafter awarded to the State incarceration costs in the amount of $36,854.43. (42) Karpierz's attorney from the civil case appealed the MIRA award, arguing that he was entitled to his full attorney fee before the State's claim attached. (43) The State responded that, pursuant to Missouri Revised Statute [section] 217.837.4, the State's lien for expenses of incarceration had priority over other liens and, thus, the State's interest trumped the attorney's contingent fee lien on the judgment. (44)

      In making its decision in Karpierz, the Missouri Supreme Court first pointed out that, contrary to the State's argument, the issue was not one of lien priority. (45) Instead, the resolution of the matter depended upon the legislature's definition of an "asset." (46) Particularly, the court focused on the MIRA statutory provision defining an asset as "'property ... belonging to or due an offender.'" (47) Using simple statutory construction techniques, (48) the court determined that, while the civil defendant was liable to Karpierz for the full award, what was actually due to the inmate was something less. (49) What "rightfully belong[ed] to Karpierz" for MIRA purposes was only the amount of the judgment in excess of the attorney fees and expenses. (50) This lesser amount was the asset which was subject to the State's MIRA claim. (51)

      The court's rationale for this holding was twofold. First, the court reasoned that to hold otherwise "would give the State not only the proceeds of a judgment it could not access without the [contribution] of [a] private attorney, but also the attorney fees necessary to procure that judgment." (52) Second, the court stated that this outcome supported public policy in that it encouraged attorneys to represent inmates. (53)

      Thus, it is apparent that the key inquiry becomes whether a particular attorney fee to be paid from an inmate's assets falls within the scope of Karpierz's asset exception. If Karpierz does apply, the MIRA lien would only attach to any amount remaining in the "pool" of recovered funds after attorney fees and expenses have been deducted. If the scope of the Karpierz exception is so narrow as to make it inapplicable in a given situation, then the "traditional" rules regarding attorney fees and contracts should be utilized to determine which party's interest prevails. (54) These traditional rules will...