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ETHICS OPINION 678-1990 TOPIC: RETAINING LIENS.
QUESTION NO. 678
TOPIC: RETAINING LIENS.
DIGEST: The common law in New York gives a lawyer a retaining lien over all property, documents, moneys or securities that come into the lawyer’s possession in the course of employment as a lawyer. However, both courts and ethics committees have restricted the right of lawyers to exercise a retaining lien.
CODE: DR 2-110(A), DR 5-103(A)(l), EC 5-7, DR 9-l02(B)(4).
QUESTION:
Under what circumstances may a lawyer exercise a retaining lien on the property of a client?
OPINION:
In most circumstances, a lawyer must promptly pay over the client’s property to the client. DR 9-102(B)(4) provides that:
A lawyer shall promptly pay or deliver to the client as requested by a client the funds, securities, or other properties in the possession of the lawyer which the client is entitled to receive.
However, DR 5-103(A)(l) authorizes a lawyer to acquire a lien granted by law to secure legal fees or expenses. See also EC 5-7 (“[I]t is not improper for a lawyer to protect his right to collect a fee for his services by the assertion of legally permissible liens”.)
There are two types of liens that a lawyer may acquire. A charging lien attaches to the judgment a lawyer obtains for a client. In New York, charging liens are granted by statute. See Judiciary Law § 475. A retaining lien is a possessory lien recognized under common law over all property documents, moneys or securities that come into a lawyer’s possession in the course of employment as a lawyer. Robinson v. Rogers, 237 N.Y. 484 (1924); Matter of Heinsheimer, 214 N.Y. 361, 364 (1915); see Note, Attorney’s Retaining Lien Over Former Client’s Papers, 65 Colum. L. Rev. 296, 301 (1965).
Whether a lawyer has acquired a lien on client property is a matter of law upon which this committee cannot pass. However, we note that both courts and ethics committees have restricted the right of lawyers to exercise a retaining lien, and, in order to provide guidance to the Bar, we have undertaken in this opinion to summarize the extent of the lien and those restrictions. Although it is our belief that not everything that is legal capacity, for example, as trustee or escrow agent. Mayeri Corporation v. Shea & Gould, 112 Misc.2d 734, 447 N.Y.S.2d 413 (1982), United States v. J.H.W. & Gitlitz Deli & Bar, Inc., 449 F. Supp. 1010 (S.D.N.Y.1980).
Limitations on the Assertion of a Retaining Lien
Because the retaining lien is such a powerful weapon, both ethics committees and courts have placed limitations on the circumstances in which it can be exercised. For example, the New York State Bar Association Ethics Committee has warned that the inconvenience and annoyance of a. retaining lien should not be inflicted lightly. The lawyer should first be satisfied that the fees billed are justly owed for services properly rendered. N.Y. State 591 (1988).
Lawyers often assert a retaining lien when they have been dismissed by a client who has hired substitute counsel. Accordingly, this Committee has previously found guidance in the provisions of DR 2-110 on withdrawal from representation. N.Y. County 613 (1973). DR 2-110(A)(2) provides:
“a lawyer shall not withdraw from employment until the lawyer has taken reasonable steps to avoid foreseeable prejudice to the rights of the client . . . including delivering to the client all papers and property to which the client is entitled . . .”
In light of this provision, in N.Y. County 613 we held that the lawyer must take such reasonable steps as are possible, without surrendering the retaining lien, to guard the client’s rights, including furnishing the client or the client’s new lawyer with a description of all legal matters on which the attorney is currently working, and such information as is required by the client or the new lawyer to protect the client from foreseeable prejudice.
Several courts have held that, where the client has a compelling need for papers, such as the defense of a murder charge, and lacks the means to pay the lawyer’s fee, the lawyer must relinquish the retaining Hen. Hauptmann v. Fawcett, 243 A.D. 613, 276 N.Y.S. 523, modified 243 A.D. 616, 277 N.Y.S. 631 (1935); Pomerantz v. Schandler, 704 F.2d 681 (2d Cir. 1983); People v. Altvater, 78 Misc.2d 24, 355 N.Y.S.2d 736 (N.Y. Crim. Ct. 1974)1 Compare Artim v. Artim, 109 A.D.2d 811, 486 N.Y,S.2d 328 (2d Dep’t 1985)(absence of exigent circumstances); petrillo v. Petrillo, 87 A.D.2d 607, 448 N.Y.S.2d 44 (2d Dep’t 1982)(absence of exigent circumstances).
In the absence of this “compelling need” a court may require the lawyer to release the client’s papers only if the parties settle their fee dispute or the client posts adequate security for payment. N.Y. County 609 (1972). See Rosen v. Rosen, 97 A.D.2d 837, 468 N.Y.S.2d 723 (1983)(court in matrimonial action awarded the discharged attorney a charging lien on any proceeds to be received by the wife upon the resolution of the action instead of a retaining lien on the wife’s file, finding that it would have been inequitable for the attorney to retain the wife’s papers, since it would have been almost impossible for her to prepare her case without them); Manfred & Sons, Inc. v. Mortillaro, 69 A.D.2d 1019, 416 N.Y.S.2d 156 (1979)(Trial Term correctly directed attorney to turn over client’s documents to enable client to comply with a production order in another court, but court erred in failing to provide for adequate security to protect attorney’s retaining lien).
Where the client is impecunious, and thus unable to pay the lawyer’s fee, courts have also ordered the release of a retaining lien upon substitution of a charging lien. Tiringer v. Grafenecker, 38 Misc.2d 29, 239 N.Y.S.2d 567 (Supt. Ct. 1962); Hernandez v. Nierenberg, 15 Misc.2d 818, 179 N.Y.S.2d 322 (Sup. Ct. 1958).
CONCLUSION:
The common law in New York gives a lawyer a retaining lien over all property, documents, moneys or securities that come into the lawyers possession in the course of employment as a lawyer. However, both courts and ethics committees have restricted the right of lawyers to exercise a retaining lien. For example, (1) the lawyer must be satisfied that the fees billed are justly owed for services properly rendered, (2)the lawyer must take Such reasonable steps as are possible, without surrendering the retaining lien, to guard the client’s rights, including furnishing the client or the client’s new lawyer with such information as is necessary to protect the client from foreseeable prejudice, (3) where the client has a compelling need for papers, such as the defense of a murder charge, the lawyer must relinquish the retaining lien, and (4) in cases of less compelling need, the lawyer may be required to relinquish the retaining lien if the lawyer is given an adequate bond or other security to secure his or her legal fee. A lawyer may ethically assert a retaining lien that complies with the law of New York.
April 5, 1990