When can an attorney retain a client’s file and not violate the ethical obligations of Rule 1.16(d) of the Rules of Professional Responsibility? The answer is not always clear. This article will review the ethical concerns and the case law defining the common law retention lien and attempt to provide some guidance on when the lien may be safely asserted.
A common complaint submitted by clients to the ARDC is that the client has terminated a lawyer’s services and wants to retain a different lawyer, but the first lawyer will not return the client’s file.
Often, when asked for a response, the first lawyer will assert that the client owes fees and that the lawyer intends to hold the file until the client pays.
Question: Is the lawyer on firm ground or looking for a disciplinary experience? The answer is, as is with many ethical dilemmas: it depends.
A properly acquired lien can create an exception to the rule prohibiting the lawyer from acquiring an interest in a client’s cause of action and the rule requiring that the lawyer promptly deliver client funds and property.
While Illinois courts recognize a common law retaining lien that would allow a lawyer to hold a client’s file to secure payment of fees; an attorney’s ethical obligations restrict the circumstances under which the lien may be exercised.
Rule 1.16(d) provides a lawyer shall not withdraw from employment until the lawyer has taken reasonable steps to avoid foreseeable prejudice to the rights of the client, including giving due notice to the client, allowing time for employment of other counsel, delivering to the client all papers and property to which the client is entitled, and complying with applicable laws and rules.
An Illinois attorney attempting to decide whether to invoke an attorneys’ lien by retaining the client’s file, must consider the consequences of his/her actions. If the exercise of a retaining lien would prejudice the client’s ability to defend against a criminal charge, or to assert or defend a similarly important personal liberty, the attorney should ordinarily forego the lien. (Sanders v. Seele, 128 Ill. 631, 21 NE 601 (1889)). Financial inability of the client to pay the amount due should also cause the lawyer to forego the lien because the failure to pay the fee is not deliberate and, therefore, does not constitute fraud or gross imposition by the client. The attorney should also forego the lien, if he knew of the client’s financial inability at the beginning or if he failed to assure an agreement to the amount or the calculation of the fee. (Lucky-Goldstar Int’l. (America), F Supp 1059, 1064 (ND ILL 1986).
Types Of Liens
The retaining lien derives it origin from common law. This lien has existed in Illinois for more than a century and is still judicially approved. The retaining lien which is also called a general or possessory lien, was recognized as early as 1734 by the English courts. (Attorneys’ Retaining Liens, 6 J.) Leg Prof. 263 (1981). It has been codified in several states and is recognized at common law in most of the other states. The common law retaining lien was first recognized in Illinois in Sanders v. Seele, 128 Ill. 631, 21 NE 601 (1889) in which the Court stated that the retaining lien is "a well established common law right." (Sanders at 603). The Court held "that in a proper case an attorney in Illinois may legally maintain such a lien." (Id.) It was further held that the " retaining lien exists on all papers and documents of the client placed in the attorney’s hands in his [or her] professional character in the course of ... professional employment." (Id.)
An attorney - client relationship is essential to the existence of a retaining lien. This is due to the fact, that the property to which the lien attaches must come into the attorney’s possession during representation. (Attorneys’ Retaining Liens, at 264).
The question of what property to which the attorney lien attaches was discussed at length by the court in Sanders v. Seele, 128 Ill. 631, 21 NE 601. In Sanders it was determined that attorneys’ liens were classed as general or retaining liens and charging or special liens. The first category attaches to all the papers, documents, etc., which the attorney receives professionally. The second attaches only upon those which are recovered through his professional services. (Sanders at 602). In other words, the first refers to fees and the second refers to the attorney’s right to a portion of the money or property obtained in litigation through the attorney’s efforts.
The Lucky-Goldstar (Lucky-Goldstar Int’l. (America), 636 F Supp 1059 (ND ILL 1986), court provided guidelines for an attorney to apply when deciding whether to invoke a retaining lien. These guidelines require an attorney to evaluate his [her] interests against the interests of the client and of others that would be substantially and/or adversely affected by the assertion of the lien. (Id. at 1063). The lawyer should take into account the following: 1) the financial situation of the client, 2) the sophistication of the client in dealing with lawyers, 3) whether the fee is reasonable, 4) whether the client clearly understood and agreed to pay the amount due, 5) whether imposition of the retaining lien would prejudice the important rights or interests of the client or of other parties, 6) whether failure to impose the lien would result in fraud or gross imposition by the client, and 7) whether there are less stringent means by which the matter can be resolved or by which the amount due can be secured. (Id.) But the client must make a clear showing of need, prejudice and inability to pay.
The Illinois statutory lien (770 ILCS5/1) also known as the"charging lien," attaches only to the proceeds recovered by the attorney through his [her] professional services. This lien was enacted to provide assurance to attorneys that they will receive payment for their services rendered and is frequently used in contingent fee agreements.
This lien is easily established because the statute sets forth explicit requirements that must be followed. To begin, the attorney must have been retained to handle the suit or action instituted for the amount of the fee agreed upon. To enforce the lien, the attorney must give notice to the client, if the attorney - client relationship is to be terminated; and the party against whom the client may have suit, by registered or certified mail. This notice must be given while there is a standing attorney - client relationship. Once notice is given, the lien attaches to any proceeds recovered by the client. It should be noted, that in order for an attorney to recover, he/she must strictly comply with all of the statutory provisions.
Contractual agreements or liens between a client and an attorney are of doubtful validity on two counts.
First, the Illinois Rules of Professional Conduct grant of permission to an attorney to acquire an interest in a client’s cause of action extends only to a lien granted by law to secure his fee or expenses. (Rule 1.8 of the Illinois Rules of Professional Conduct).
Second, to the extent that the contractual security interest in a client’s property clearly falls outside the Rules that strictly limit business dealings between a lawyer and his client such action is prohibited.
Illinois courts, when compared to other states, have been conscientious in enforcing attorneys’ liens and emphasize "that a lawyer should be protected in his retaining lien until he is paid..." (Ross v. Wells, 6 Ill App 2d 305, 127 NE 2d 519 (1955)). Nevertheless, in cases where Illinois courts have enforced the lien, clients have been given the option of providing security for unpaid fees pending a final determination of the amount and the reasonableness of the fees. (Id. at 305; Upgrade Corp. v. Michigan Carton Co., 87 Ill App 3d 662, 410 NE 2d 159 (1st D 1980); Intaglio Service Corp. v. J.L. Williams, Inc., 112 Ill App 3d 824, 445 NE 2d 1200 (1st D 1983); Lucky-Goldstar Int'l. (America), 636 F Supp 1059 (ND ILL 1986)). Therefore, the client has his files, the attorney has a claim to his fees secured by property, and the progress of the underlying litigation is not impeded. This balancing of the interests seems to underlie the decisions of many courts. The retaining lien is enforceable only by possession. This is the reasoning behind having a client provide adequate security to protect the attorney’s interests.
As a general principle, all transactions between an attorney and his/her client should be fair and reasonable to the client. Although, the assertion of an attorneys’ lien is a matter of common and state law, the Rules of Professional Conduct require the attorney, upon withdrawal, to take the appropriate steps necessary to protect the client’s interests. When the attorneys’ lien comes into conflict with the Rules, the attorneys’ lien is subordinate to the attorney’s ethical obligation to the client.
An attorney should not retain the original documents of a client that cannot be reproduced or that are absolutely necessary to continue with pending litigation. This is the type of situation in which an attorney would seek to have the client post adequate security as stated in many Illinois court decisions. (Id. at 305; Upgrade Corp. v. Michigan Carton Co., 87 Ill App 3d 662, 410 NE 2d 159 (1st D 1980); Intaglio Service Corp. v. J.L. Williams, Inc., 112 Ill App 3d 824, 445 NE 2d 1200 (1st D 1983); Lucky-Goldstar Int'l. (America), 636 F Supp 1059 (ND ILL 1986)).
If an attorney retaining a file will prevent a client from obtaining another attorney or proceeding with the case in a timely manner, then the attorney has breached the ethical duty owed to a client under Rule 1.16. (Annotated Model Rules of Professional Conduct (1996)).
The assertion of the lien is ethically justified when the client is financially able, but deliberately refuses to pay a fee that was clearly agreed upon and due. (Lucky-Goldstar at 1064.) This is the type of conduct that constitutes fraud or gross imposition by the client.
While these cases do recognize the possible conflict between the attorney’s right to assert a lien and the Rules of Professional Conduct, they do not purport to provide a clear and comprehensive solution to the conflict. The Rules of Professional Conduct only provide some guidance in determining an attorney’s duty when asserting his right to a lien.
If you want to steer clear of disciplinary pitfalls, there is absolutely no substitute for a careful and reasonable approach that considers current case law, the procedures as outlined in the statute (770 ILCS 5/1) and the Rules of Professional Conduct.
Renee L. Robinson is Litigation Counsel for the Attorney Registration and Disciplinary Commission. She is a former DuPage County Assistant State's Attorney in the Felony Trial Division. She received her Undergraduate Degree in 1977 from Chicago State University, her MA in 1983 from Keller Graduate School of Management and her Law Degree in 1993 from Northern Illinois University.