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Illinois Appellate Court Upholds Possessory Lien Over Documents In the Cloud

What is an attorney’s possessory lien? It is a lien that an attorney can use to block the client from access to the file. The attorney, however, cannot enforce the lien in court. In a recent unpublished decision the Illinois Appellate Court held that a law firm can assert a possessory lien over a computer database held by a document management firm. The case is captioned Cronin & Company, Ltd. v. Richie Capital Management, LLC., 2014 IL App (1st) 131892-U. Cronin is a law firm that represented Richie Capital (and other parties) in litigation, in which Richie Capital was attempting to recover investment losses incurred when it invested in a Ponzi scheme.

In 2012, Richie authorized Cronin to retain a third-party vendor, Flex Discovery, LLC (d/b/a Landmark Legal Solutions). Landmark was retained to provide a hosting program “that would enable attorneys to access electronic databases containing documents produced in connection with the subject litigation.” ¶ 4.

In January or February 2013, the attorney-client relationship broke down and was terminated. There was a dispute over legal fees between Cronin and Richie Capital. Cronin asked Landmark to “‘hibernate’ the database it was hosting (take it off-line), so it could not be accessed. Cronin claimed it was asserting a retaining lien over its former client’s litigation file, which it argued included the database.”  ¶ 5.

In March 2013, Cronin filed a one-count complaint against Richie Capital in quantum meruit or unjust enrichment. Landmark eventually informed Cronin that it would turn over the database to Richie Capital in seven days. Cronin amended the complaint to add Landmark as a defendant. Cronin also requested that the Circuit Court declare that Cronin had a valid retaining lien on the database and on all other materials in Landmark’s possession. Cronin followed up with a motion for temporary restraining order. At the hearing, the Court ordered Landmark to “turn over to Cronin ‘all versions of the database in its possession in either electronic or hard format.'” ¶ 12.

On appeal the Appellate Court held that Richie Capital (and the other defendants) had standing to challenge the entry of the injunction. The court also found that the order granting the injunction did not serve to enforce the retaining lien. “Rather, the court’s order merely determined which documents were subject to the lien and then found that for purposes of the lien, Cronin had maintained possession of the documents, even thought it transferred them to Landmark for scanning into its computers.” ¶ 20.

However, the Appellate Court remanded the case to the circuit court because the circuit court did not analyze the various factors required for a preliminary injunction. It stated: “we remand with directions that the court order into the record findings on the preliminary injunction factors and findings with respect to the balance of hardships.” ¶ 31.

Comment: this is an interesting opinion on an important issue, which should have been published. The world is much more complicated than it was when the attorney lien first came about. Now files are not just piles of paper. Rather, they can exist in the cloud or in other formats. Can the attorney assert a lien on documents in the cloud? Again, it is a pity that a thoughtful opinion on an important issue was not published.

Edward X. Clinton, Jr.

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