Adams, George, Lee, Schulte, & Ward, P. A. v. Westinghouse Elec. Corp., 77-1650

• Decision Date: 22 June 1979
• Docket Number: No. 77-1650,77-1650
• Citation: 597 F.2d 570
• Parties: ADAMS, GEORGE, LEE, SCHULTE, & WARD, P. A., Plaintiffs-Appellants, Cross- Appellees, v. WESTINGHOUSE ELECTRIC CORPORATION et al., Defendants-Appellees, Cross- Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 570

597 F.2d 570

ADAMS, GEORGE, LEE, SCHULTE, & WARD, P. A. Plaintiffs-Appellants, Cross- Appellees, v. WESTINGHOUSE ELECTRIC CORPORATION et al Defendants-Appellees, Cross- Appellants.

No. 77-1650.

United States Court of Appeals Fifth Circuit.

June 22, 1979.

Rehearing Denied Aug. 9, 1979.

Robert C. Ward, Amy Shield Levine, Miami, Fla., for plaintiffs-appellants, cross-appellees.

James F. Comander, Eugene Heiman, Miami, Fla., for defendants-appellees, cross-appellants.

Appeals from the United States District Court for the Southern District of Florida.

Before TUTTLE, TJOFLAT and HILL, Circuit Judges.

TUTTLE, Circuit Judge:

This is one of those rare cases in which a law firm sues its client for attorneys' fees. The case is complicated by the fact that the attorney plaintiffs retained possession, under what they call a "retaining lien," of $300,000 in cash which they recovered for the client, against a claimed fee of $75,000. It is further complicated by the fact that they kept the client's money in a non-interest-bearing "trust account" and now claim a right to interest on the fee awarded them from the time it was earned until the date of the district court's judgment.

The plaintiffs, Adams, et al., P.A., were employed by defendant Westinghouse to file a suit against a Florida contractor and his insurers for damage done to Westinghouse equipment while in transit in Florida. Westinghouse had filed a previous suit in Chicago, but thought it desirable to have Florida counsel file this particular action in order to prevent the running of the statute of limitations in the event of lack of success in the earlier action.

The suit was terminated by the payment by each of three insurers of the limits of their liability, totalling $300,000. This amount was placed in the firm's trust account. ¹ This handling of the fund was done unilaterally without the consent of Westinghouse. The latter was notified by a proposed closing agreement on June 24, 1975, that plaintiffs were holding the sum subject to the payment of their claimed "reasonable" fee of $75,000. This amount was based upon the plaintiffs' contention that the normal fee for the filing of what they called a subrogation suit would have been one-third of the recovery, but since they were forwarding counsel in the case, plaintiffs reduced the claim to $75,000, or twenty-five percent of the recovery.

After some exchange of correspondence, Westinghouse made a demand on the plaintiffs for $300,000 with interest, stating that the attorneys' claim for a fee was a separate and distinct issue, the existence of which did not warrant their retention of the proceeds of the settlement.

During the course of the correspondence between the parties, Adams, et al., offered to place the settlement amount in an interest bearing account if agreed to by Westinghouse. This agreement was not forthcoming. ²

When the case came on for trial, the court found that there was no agreement for a contingent fee; that, therefore, the law firm would be entitled to a reasonable fee. The court stated: "Plaintiff is not entitled to recover an attorney's fee on a contingent fee basis, but on the basis of time expended, the nature of the services rendered, the responsibilities assumed, the complexity of the case, the amount involved, the results obtained, and the other considerations set forth in the Code of Professional Responsibility." The court found such a fee to be $55,000.

The court also found that it was improper for plaintiffs to retain more than the amount of their claimed fee of $75,000 from the amount of the settlement and that the plaintiffs were obligated to remit immediately at least $225,000 to Westinghouse. The court determined that the failure of the plaintiffs to place the $300,000 in safe obligations bearing at least six percent interest obligated them to pay interest at six percent on the sum of $225,000 from the date of the demand on January 21, 1976, until the court by a supplementary order on January 28, 1977, caused the funds to be deposited in the registry of the court and subsequently to be paid to the defendants.

The trial court made no provision for interest on the sum of $55,000 for which it entered judgment in favor of the plaintiffs.

Adams, et al., bring this appeal, claiming that they have been improperly charged with interest on that part of the client's fund which exceeded the maximum claim they were making for a fee and contending that they were entitled to interest on the $55,000 fee from the date it was earned, rather than only from the date of the final judgment.

Westinghouse claims that the action of the law firm in keeping its $300,000 settlement money after demand was made for it amounted to a conversion of its funds and was such unconscionable conduct as to deprive the law firm of the right to any fee, and that even if such a fee was allowable, Westinghouse was entitled to have interest on the excess of $225,000 and should not be held liable for interest on the $55,000 fee.

Briefly stated, the law firm claims that it has what is known as a "general or retaining lien," which it says operates on any property in its hands that belongs to a client who owes it any amount of money, no matter how valuable the property held or how small the amount of the claim. This lien is distinguished from a "charging lien" which arises when counsel obtains property or collects money in litigation and claims a lien for services in creating the fund. A principal distinction between these types of liens is that the retaining lien cannot be foreclosed whereas the charging lien can. Plaintiffs frankly contend that the value of the retaining lien is that it gives them great leverage by creating "embarrassment" to the client who is unable to get any part of its money until the relatively small part owed to the lawyers has been agreed upon. They cite a district court opinion for this proposition. In dictum, the United States Court for the Southern District of Florida stated: "Its (the retaining lien's) value to the attorney is only in proportion to the extent that such retention by him will embarrass the client." Cooper v. McNair, 49 F.2d 778 (S.D.Fla.1931). They also cite a New Jersey case which says: "the effectiveness of the lien is proportionate to the inconvenience of the client in being denied access to his property." Brauer v. Hotel Associates, Inc., 40 N.J. 415, 192 A.2d 831, 835 (1963).

However, appellants cite no Florida case which even approaches the degree of coercion that is represented by the facts here. Nor, in fact, do they cite any Florida case which recognizes the right of a lawyer to retain money under a retaining lien in excess of the actual amount of the maximum claim which he makes against the client.

No such lien is recognized under federal common law. We therefore look to the state law to determine whether it condones what otherwise would be a conversion by the lawyer of property belonging to his client. In Hoxsey v. Hoffpauir, 180 F.2d 84 (5th Cir. 1950), this court said:

It is the general rule that while the Federal law provides no such remedy, Federal Courts sitting in a State enforce that State's statutes creating attorney's liens. Webster v. Sweat, 5 Cir., 65 F.2d 109; Brooks v. Mandel-Witte Co., 2 Cir., 54 F.2d 992, 994, and citations.

180 F.2d at 86. The same rule obtains when such a lien is provided for under the common law of a state instead of by statute. See Webster v. Sweat, supra.

A Florida case that most nearly answers the question presented here is Florida Bar v. Heller, 248 So.2d 644 (Fla.1971). That case, while it appears to erase the distinction between what under the common law of some states constituted a retaining lien as contrasted to a charging lien, speaks clearly on the issue before us. It was an original proceeding to review a referee's report recommending disbarment of a Florida lawyer, Heller. Heller had collected the sum of.$4,610 on behalf of a client, Pan American Surety. He retained the money, claiming not only that he was entitled to one-third of the amount as a fee for its collection, but that he also had a claim of $10,600.18 for other services. In the words of the Florida Supreme Court, he "claimed a lien on the entire proceeds of the Barnett judgment as security for the payment of his claim against the receiver for Pan American." The matter of Heller's lien was presented to a Florida circuit judge who ruled that Heller was not entitled to a lien on the funds recovered in the Barnett case, except for the agreed one-third fee. This decision was affirmed by a per curiam decision of the district court of appeal. Heller v. State ex rel. Larson, 192 So.2d 501 (Fla.App.1966). A petition for certiorari was denied by the Florida Supreme Court, Heller v. State ex rel. Larson, 201 So.2d 461 (Fla.1967). Pending the appeal to the district court of appeal, Heller's supersedeas bondsman became insolvent and Heller failed to post a substitute bond or pay the money to the receiver. Thereafter, a formal complaint was filed against him by the Florida Bar. Dealing with this matter, the Supreme Court of Florida said:

when the original supersedeas bond was cancelled due to receivership of the surety company, And the appellate courts held that he did not have a valid retaining lien on the funds, Heller was under an absolute obligation to either post a substitute supersedeas bond or pay the money to the Receiver. He did neither and continued to withhold funds belonging to his client, the Receiver.

248 So.2d at 646 (emphasis added).

Thus, the Florida Supreme Court, although denying certiorari in Heller's first appeal from the district court of appeal decision, made it apparent in the subsequent disbarment proceedings that it fully recognized that the court of appeal had held "that (Heller) did not have a valid retaining lien on the funds." We conclude, therefore, that under Florida law an attorney is not permitted to...