Langerman Law Offices v. Glen Eagles, 1 CA-CV 08-0104.

• Decision Date: 03 March 2009
• Docket Number: No. 1 CA-CV 08-0104.,1 CA-CV 08-0104.
• Citation: 204 P.3d 1101
• Parties: LANGERMAN LAW OFFICES, P.A., and Law Office of Richard Langerman, Plaintiffs/Appellants, v. GLEN EAGLES AT the PRINCESS RESORT, LLC, and Kari Kilian, Defendants/Appellees.
• Court: Arizona Court of Appeals

204 P.3d 1101

LANGERMAN LAW OFFICES, P.A., and Law Office of Richard Langerman, Plaintiffs/Appellants, v. GLEN EAGLES AT the PRINCESS RESORT, LLC, and Kari Kilian, Defendants/Appellees.

No. 1 CA-CV 08-0104.

Court of Appeals of Arizona, Division 1, Department C.

March 3, 2009.

Law Office of Richard Langerman By Richard W. Langerman, Phoenix, Attorneys for Plaintiffs/Appellants.

Snell & Wilmer, L.L.P. By Patrick J. Paul, Marc A. Erpenbeck, Martha E. Gibbs, Phoenix, Attorneys for Defendants/Appellees.

OPINION

HALL, Judge.

¶ 1 This case involves a plaintiff's attorney's attempt to collect attorneys' fees allegedly owed him by the plaintiff from the defendant even though the defendant was awarded more in sanctions under Arizona Rule of Civil Procedure 68(g)¹ than the plaintiff was awarded by the jury. The superior court dismissed the complaint, and we affirm.

FACTS AND PROCEDURAL HISTORY

¶ 2 Langerman Law Offices, P.A., and the Law Office of Richard Langerman (collectively "Langerman") represented Kari Kilian in a lawsuit against Glen Eagles at the Princess Resort, L.L.C. In that suit, the jury awarded Kilian $100,000.00, and the court awarded Kilian $21,756.91 in costs. Because Kilian had rejected an offer of settlement that exceeded the jury's award, the court also granted Glen Eagles's request for sanctions pursuant to Rule 68(g) in the amount of $151,891.69. Glen Eagles proposed a form of judgment that offset the awards and entered a judgment in its favor of $30,134.78. Kilian objected to this form of judgment because it "fail[ed] to account for [prejudgment] interest earned on the jury's verdict from the date of the verdict to the date of the court's order awarding taxable costs and sanctions to the parties." Kilian's objection specified that the amount of that interest was $1,506.85. Instead of proposing a form of judgment that subtracted the $1,506.85 from the $30,134.78 owed to Glen Eagles, however, Kilian proposed a judgment that "enter[ed] judgment" for Kilian for $100,000.00 with interest accruing from April 23, 2004 until paid in full; "enter[ed] judgment" for Kilian for $21,756.91 with interest accruing from June 17, 2004 until paid in full; and "enter[ed] judgment" for Glen Eagles in the amount of $151,891.69 with interest accruing from June 17, 2004 until paid in full. The superior court signed a final judgment in the form proposed by Kilian.

¶ 3 On July 19, 2005, Kilian filed for bankruptcy. Glen Eagles initiated an adversary proceeding against Kilian in the bankruptcy court in an effort to have the awards for Kilian set off against the award for Glen Eagles. Kilian and Glen Eagles reached a settlement that would offset the awards and leave Glen Eagles with an unsecured claim in the bankruptcy proceeding for $30,134.78 plus accrued interest. On December 12, 2006, Kilian and Glen Eagles filed a motion asking the bankruptcy court to approve the settlement. On November 6, 2006, however, Langerman had filed a complaint in superior court requesting a judgment in its favor and against Glen Eagles for the amount purportedly awarded to Kilian in the previous lawsuit. Langerman no longer represented Kilian and asserted it had an attorney's charging lien on the awards in favor of Kilian that exceeded the amount of those awards. The bankruptcy court refused to approve the settlement between Kilian and Glen Eagles while Langerman's complaint was still pending in the superior court.

¶ 4 In an order filed December 20, 2007, the superior court dismissed Langerman's complaint. Langerman timely appealed, and we have jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) section 12-2101(B) (2003).

DISCUSSION

Appeal is not moot

¶ 5 After Langerman filed its notice of appeal in this matter, the bankruptcy court approved the settlement agreement between Glen Eagles and Kilian. Glen Eagles argues this renders the appeal moot because Langerman can only possibly have a claim on the debt Glen Eagles owes to Kilian if Glen Eagles owes a debt to Kilian, and now it does not. Ordinarily, this might indeed render the appeal moot. See Bd. of Supervisors v Robinson, 105 Ariz. 280, 281, 463 P.2d 536, 537 (1970) (explaining that courts do not decide cases when the resolution of the case cannot affect the plaintiff). Here, however, the bankruptcy court approved the settlement only after Langerman's complaint was dismissed. Because Glen Eagles has not shown that Langerman could not obtain relief reinstating the debt in the bankruptcy court if we were to reverse the superior court's dismissal order, we conclude that Glen Eagles has failed to sufficiently demonstrate that the issue is moot.

Langerman has no charging lien

¶ 6 To establish that it has a common-law charging lien on the judgment, Langerman must demonstrate, at a minimum, that it is owed attorneys' fees under its contingency fee contract with Kilian and that there is some judgment in Kilian's favor to which a charging lien can attach, see 7A C.J.S. Attorney & Client § 468 (2008) ("[T]he judgment recovered by an attorney's efforts is primarily the subject matter of a charging lien.... In order that a valid charging lien may exist, it is essential that there exist some subject matter to which such lien may attach."). Whether Kilian owes Langerman attorneys' fees is a matter of contract, see id. at § 443 ("An attorney's right to compensation remains based on contract, and attorney liens provide security for these contractual rights."), and is not before us. We do, however, conclude that, in any event, Langerman has no charging lien because there is no judgment in favor of Kilian to which it could attach.

¶ 7 Langerman argues that there were three separate judgments in this case, and that it has an attorney's lien against the two in favor of Kilian. Glen Eagles argues that there was only one final judgment, containing three awards, and that judgment was in its favor. If Glen Eagles is correct, then Langerman can have no charging lien.

¶ 8 As defined in our rules of civil procedure, a "`[j]udgment' ... includes a decree and an order from which an appeal lies." Ariz. R. Civ. P. 54(a). In this sense, there was a single judgment filed on August 23, 2004, which contained three awards. The text of the document itself, which is text proposed by Langerman, reads "it is directed that this judgment be entered pursuant to Rule 54(b) of the Arizona Rules of Civil Procedure." (Emphasis added.) Although the document purports to "enter[ ] judgment" for three separate amounts, we conclude that in the sense relevant to establishing a common-law charging lien, the document is but one judgment in favor of Glen Eagles for the net amount. Therefore, there being no judgment in favor of Kilian to which Langerman could attach a charging lien, Langerman has no charging lien.

¶ 9 "A charging lien is an attorney's lien that attaches after a judgment is obtained in the litigation." Skarecky & Horenstein, P.A. v. 3605 N. 36th St. Co., 170 Ariz. 424, 428, 825 P.2d 949, 953 (App.1991). Part of the reason for permitting charging liens is to ensure that a dishonest client does not walk away with an award secured for the client through the attorney's efforts without paying the attorney for those efforts. See In re Warner's Estate, 160 Fla. 460, 35 So.2d 296, 298-99 (1948) ("[A] litigant should not be permitted to walk away with his judgment and refuse to pay his attorney for securing it."); Dorsey & Whitney, LLP v. Grossman, 749 N.W.2d 409, 420 (Minn.Ct.App.2008) ("An attorney lien is an equitable lien created to prevent a client from benefiting from an attorney's services without paying for those services."); Computer One, Inc. v. Grisham & Lawless, P.A., 144 N.M. 424, 188 P.3d 1175, 1179-80 (2008) ("The charging lien arises from a recognition that when an attorney assists a client in procuring a judgment or `fund recovered by his efforts,' the attorney needs to be paid from that fund for the value of services rendered before the proceeds are disbursed. A court, sitting in equity, has a responsibility to enforce the lien against the judgment to protect lawyers from dishonest clients."). "The principle ... was settled long ago ... that the party should not run away with the fruits of the cause without satisfying the legal demands of his attorney, by whose industry, and in many instances, at whose expense, those fruits are obtained." State v. Nat'l Sur. Co., 29 Idaho 670, 161 P 1026, 1035 (1916) (quoting Read v. Dupper, 101 Eng. Rep. 595, 596 (1795)).

¶ 10 Here, the fruit of Langerman's efforts was a jury verdict for less than was offered in settlement. Indeed, after factoring in the Rule 68(g) sanctions, Kilian ended up the net loser. When the client is the net loser, there is no award with which the client could abscond and no judgment to which a charging lien could attach. See Skarecky, 170 Ariz, at 428, 825 P.2d at 953 ("Only an attorney successful in the litigation will have a fund from which to recover fees."); see also Nat'l Sales & Serv. Co. v. Superior Court, 136 Ariz. 544, 545, 667 P.2d 738, 739 (1983) (explaining that charging liens "attach to the funds or other property created or obtained by the attorney's efforts.... [S]uch a lien arises only when it appears that the parties looked to the fund itself for the payment of the attorney's fee."); Richfield Oil Corp. v. La Prade, 56 Ariz. 100, 105, 105 P.2d 1115, 1118 (1940) ("[I]f the proceeds of a settlement pass through the hands of plaintiff's attorneys, they have an attorney's lien thereon for the amount of their fee...."); Correa v. Christensen, 780 So.2d 220, 220 (Fla.Dist.Ct.App. 2001) ("It is not enough to support the imposition of a charging lien that an attorney had provided his services; the services must, in addition, produce a positive judgment or settlement for the client, since the lien will attach only to the tangible fruits of the services.").

¶ 11 That the superior court did not offset the awards in the...