This is a dispute between an attorney and a client concerning an attorney lien. Such disputes are common. This case illustrates the correct way to protect a disputed legal fee with an attorney lien.
The Sixth Circuit has affirmed a legal fee award of $1.4 million to a lawyer who brought proceedings to enforce an attorney lien. The underlying dispute was a software licensing dispute between two companies, which occurred in the federal district court. Infocon was to receive a $5 million settlement from Exact Software, Inc. Just before the settlement was finalized, Infocon fired its lawyer, J Fox DeMoisey. DeMoisey placed a charging lien on the proceeds of the litigation. The district court froze the disputed portion of the settlement ($1.2 million) pending the outcome of litigation.
Infocon then filed a legal malpractice action against DeMoisey in state court. DeMoisey obtained summary judgment on the legal malpractice action and then moved to transfer the case back to the federal court, which was still holding the disputed $1.2 million. DeMoisey prevailed at a trial before the district court and was awarded the full $1.2 million.
Infocon then appealed to the Sixth Circuit Court of Appeals, where it lost again.
There is an important federal jurisdiction question: did the district court have supplemental jurisdiction over the fee dispute? The Sixth Circuit held that it did. It explained as follows:
“A federal court has “supplemental jurisdiction” over related claims that arise from the same core of operative facts that prompted the lawsuit over which the court has original jurisdiction. Thus:
in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.
28 U.S.C. § 1367(a). So long as a court has original jurisdiction over a civil action, § 1367(a) provides a “broad grant of supplemental jurisdiction over other [related] claims.”Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 558-59 (2005).”
The court then moved to the merits of the appeal, and it agreed with the district court’s factual findings that DeMoisey earned his legal fee.
Comment: this case illustrates how liens can be used to protect an attorney’s right to be paid. Here, the lien was asserted to make sure that the amount in dispute ($1.2 million) would be frozen, pending the outcome of the fee dispute. The second lesson is that district courts may have supplemental jurisdiction over the fee dispute if the court also had jurisdiction over the original case.
Edward X. Clinton, Jr.