Rethinking Attorney Liens: Why Washington Attorneys Are Forced Into "involuntary" Pro Bono

• Publication year: 2003

SEATTLE UNIVERSITY LAW REVIEWVolume 27, No. 3WINTER 2004

COMMENTS

Rethinking Attorney Liens: Why Washington Attorneys are Forced into "Involuntary" Pro Bono

Zach Elsner(fn*)

I. Introduction

Nearly everyone in the business of providing services knows that clients do not always pay their bills. As service providers, attorneys should consider their options carefully, as each option is likely to have different benefits and raise potential issues: the least favorable option being involuntary pro bono. An attorney suing a client for fees may avoid ethical issues because the Washington Rules of Professional Conduct ("RPCs") do not prohibit suing clients;(fn1) but, the attorney should be prepared for a bar complaint nonetheless. Even if the bar complaint is dismissed, the process will likely be costly and stressful.(fn2) In addition, the client may file a malpractice counterclaim that, even if dismissed, may require disclosure of the matter to the lawyer's insurance carrier, increasing the lawyer's premium.

Another problem attorneys face when suing a client is that it may be difficult to collect a judgment unless the attorney can successfully interplead(fn3) or intervene(fn4) another lawsuit involving the former client. Collecting a judgment from a former client may be difficult, especially when that client refused to pay the first time. In addition, filing suit against a client may damage the attorney's reputation. Who wants to be known as the attorney who sues their clients?

Instead of suing a client for fees, an attorney may assert a "lien for attorney's fees."(fn5) While it is unlikely that asserting a lien will avoid a malpractice suit or bar complaint, an attorney's lien is likely to provide accelerated access to earned and owed fees.(fn6) However, several issues are likely to arise when an attorney asserts a lien. For example, there are different types of liens, one or more of which may or may not be appropriate.(fn7) In Washington, attorney liens can be classified into two categories: the retaining lien on the client's files and the charging liens. The charging liens include liens on the client's money in the attorney's hands, liens on money in the hands of an adverse party, and liens on judgments. While this Comment argues that the lien on the client's money in the attorney's hands should be recognized as a retaining lien, the current Washington law classifies it as a charging lien. Thus, this Comment refers to it as a charging lien.

In addition, the lien must be asserted properly. An improper assertion of a lien will likely result in both discipline under the RPCs(fn8) and failure to recover fees.(fn9) Of course, the claim to fees must be valid. If the client actually does not owe the attorney any fees, a lien for those fees will not be enforceable.(fn10) Unfortunately for attorneys, only a few Washington cases have addressed attorney liens. Nonetheless, the rulings have placed strong limitations on the use of attorney liens.(fn11) Additionally, ethical rules and opinions have drastically limited the use of attorney liens.(fn12)

These ethical and judicial interpretations have transformed Washington's attorney lien statute(fn13) into a confused and illogical body of law that frustrates the statute's purpose-protecting the rights of both attorneys and clients. As a result, the statute is often misused or avoided. Five reasons contribute to the statute's misuse or avoidance: (1) the ethical rules make asserting an attorney lien too risky; (2) the retaining lien has been limited to the point that it is useless; (3) Washington courts have failed to clarify whether a lien on money in the hands of the attorney is a retaining lien or a charging lien; (4) courts have limited the charging lien on policy grounds when the attorney gains too much leverage; and (5) attorney liens are useless when the client settles.

The Washington legislature should amend the attorney lien statute because it is largely unworkable and vulnerable to misuse. First, for a retaining lien on the client's files, the Washington legislature should amend the statute to place the burden of proving that the files are necessary on the client, and the statute should not permit a lien when the files are needed for criminal defense or defending a fundamental right. Second, the statute should classify the lien on money in the attorney's hands as a retaining lien. Third, the legislature should determine which types of property should be excluded on policy grounds and amend the statute to specifically exclude those types of property. Finally, the legislature should amend the statute to provide for a lien on settlement proceeds.

After a brief discussion of the history of the attorney lien in Part II, Part III discusses the basic rules governing the attorney lien in Washington. Part IV of this Comment discusses the various limitations on attorney liens and how those limitations have discouraged use or encouraged misuse of the statute. Part IV begins with a discussion of general professional responsibility concerns and continues with withdrawal and termination as they relate to attorney liens. Part IV concludes the Comment with a discussion of the inconsistencies of the retaining lien and a discussion of the various limitations on the charging liens.

II. History of Attorney Liens

In general, a lien is a claim, encumbrance, or charge on property for payment of some debt, obligation, or duty.(fn14) English courts have recognized attorney liens since the 1700s.(fn15) Because suits for fees were generally not available, English courts recognized attorney liens so that lawyers could be compensated for their services when clients refused to pay.(fn16)

At American common law, courts recognized a general, or retaining lien, while the special, or charging lien, was originally recognized by statute.(fn17) The retaining lien was a passive lien,(fn18) which was not enforceable.(fn19) A lawyer could refuse to turn over any property that came into his possession until the client paid his fees.(fn20) The retaining lien was also possessory: when the attorney surrendered possession of the property, the lien terminated.(fn21) The charging lien, however, was a nonpossessory lien established as an equitable right.(fn22) It granted the attorney a priority on property recovered by the suit.(fn23) At American common law, the retaining lien was the only lien available to attorneys,(fn24) but now many states, including Washington, provide a statutory charging lien.(fn25)

III. LIENS UNDER CURRENT WASHINGTON LAW

The Washington attorney lien statute provides for a retaining lien and a charging lien. Section A discusses the retaining lien and its general characteristics. Section B discusses the three types of charging liens in Washington: on money in the attorney's hands, on money in the hands of an adverse party, and on a judgment. Even though this Comment argues that a lien on money in the attorney's hands should be characterized as a retaining lien, it is referred to as a charging lien, which accords with the current Washington law.

A. Retaining Lien

The retaining lien allows an attorney to hold a client's files hostage until the client pays the attorney fees incurred in pursuing the client's case. Washington's retaining lien statute states that an attorney has a lien for compensation "whether specially agreed upon or implied . . . [u]pon the papers of his client, which have come into his possession in the course of his professional employment."(fn26) The Revised Code of Washington (RCW) subsection 60.40.010(1) ("subsection 1"), the statute governing retaining liens on a client's papers, has not been significantly amended since its codification in 1881.(fn27) As at common law, the retaining lien is possessory: If the attorney relinquishes possession of the client's property for any reason, the lien is void.(fn28) Moreover, the lien is a passive mechanism, which is not enforceable by foreclosure or by sale.(fn29) The retaining lien's primary use is to compel a client to pay through embarrassment or worry.(fn30) Lastly, it is irrelevant whether the papers were retained in connection with the fees in dispute.(fn31)

B. Charging Lien

In contrast to the retaining lien, the charging lien is active and can be enforced through adjudication.(fn32) Washington codified the charging lien as follows:An attorney has a lien for his compensation, whether specially agreed upon or implied, as hereinafter provided: ... (2) upon money in his hands belonging to his client; (3) upon money in the hands of the adverse party in an action or proceeding, in which the attorney was employed, from the time of giving notice of the lien to that party; [and] (4) upon a judgment to the extent of the value of any services performed by him in the action, or if the services were rendered under a special agreement, for the sum due under such agreement, from the time of filing notice of such lien or claim with the clerk of the court in which such judgment is entered, which notice must be filed with the papers in the action in which such judgment was rendered, and an entry made in the execution docket, showing name of claimant, amount claimed and date of filing notice.(fn33)

Under RCW subsection 60.40.010(2) ("subsection 2"), the attorney can assert a lien on money held in trust.(fn34) Similar to a retaining lien, asserting a lien on money...