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Seventh Circuit Rejects Attorney Lien Claim And Suggests That Lawyer Should Be Sanctioned

Goyal v. GAS TECHNOLOGY INSTITUTE, 718 F. 3d 713 – Court of Appeals, 7th Circuit 2013 – Google Scholar.

The Seventh Circuit sanctioned an attorney for asserting an attorney lien long after the lawyer was terminated.

The Facts:

Anil Goyal was terminated by his employer in 2004. Barry Gomberg, an attorney, represented Goyal in negotiations with the employer, but those negotiations did not produce a settlement of any kind. Goyal then retained another lawyer to pursue litigation. That lawyer eventually withdrew. Years later, litigating pro se, Goyal obtained a settlement on his own.

After the settlement, Gomberg asserted his lien and some portion of the settlement was paid to him. Goyal then brought a motion to quash the lien. The district court granted the motion and Gomberg.

Gomberg argued that while he was counsel, the defendant offered a settlement of $375,000, which Goyal rejected. Years later, the employer paid Goyal $1.3 million. But that was long after Gomberg had been terminated.

Here the contingent fee contract provided as follows:

“We have a lien on all funds secured by us. Should we [be] required to enforce this Agreement, we will be entitled to reasonable attorneys fees and costs for doing so. We do not guarantee success. The Agreement does not contemplate litigation.”

Because of the language quoted above, Gomberg’s best argument was that he had an equitable lien on a portion of the recovery.

The trial court and the Seventh Circuit held that there was no equitable lien because of the phrase “secured by us” in the contingent fee agreement. Because Gomberg secured nothing at all, he was not entitled to payment.

Gomberg was not entitled to proceed under the Illinois Attorney’s Lien Act of 1909, 770 ILCS Section 1. That statute gives the lawyer a lien “for the amount of any fee which may have been agreed upon by and between such attorneys and their clients.” The “secured by us” language precluded any claim under the Attorney’s Lien Act.

The Seventh Circuit, under Rule 38, ordered Gomberg to show cause why he should not be sanctioned. The court stated: “First, for the reasons we explained above, his position that he ‘secured’ funds for Goyal when the opposing party made an unacceptable and unaccepted settlement offer is unreasonable to the point of being frivolous and possibly warrants sanctions…” Moreover, the court noted that the claimed lien of $70,000 was far greater than 10% of the unaccepted offer of $375,000.

Finally, the Seventh Circuit held that the lien was unreasonably high, under Rule of Professional Conduct 1.5. “We believe that Rule of Professional Conduct 1.5 on attorney fees includes an implicit requirement that an attorney not assert unreasonable or baseless demands for attorney fees contrary to his fee agreement, including asserting a lien.”

Comment: this case deals a harsh blow to a lawyer who had a contingency fee agreement with a client. Here, the problem was that the lawyer may not have drafted the agreement with as much care as was required under Illinois law. This failure to make it clear that the lawyer had a lien on any proceeds recovered at any time put a difficult burden on the lawyer.

Edward X. Clinton, Jr.

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