Attorneys’ Liens, Contingency Fee Agreements and Quantum Meruit Recovery – An Illinois Case Note

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In a prior post (http://paulporvaznik.com/tag/retaining-lien), I discussed the common law retaining lien, which allows an attorney to keep a client’s papers and property as security for the payment of past due fees.  Another legal device at a lawyer’s disposal to encourage payment is the statutory attorneys’ lien, codified in Illinois at 770 ILCS 5/1.

Grane v. Methodist Medical Center of Central Illinois, 2015 IL App (3d) 130003-U, considers the attorneys’ lien remedy where a client fires his attorney, hires someone else and later rakes in big bucks in a settlement.

The personal injury plaintiff entered a written contingency fee agreement with a law firm (Law Firm 1) whom he (the plaintiff) later fired before hiring new counsel (Law Firm 2).  Law Firm 1 served a written notice of its attorneys’ lien on the defendant hospital while it still represented plaintiff.

When the suit settled for several million dollars, Law Firm 1 sought to recover pursuant to the 30% recovery contingency fee contract.  The trial court agreed and awarded Law Firm 1 nearly $600K: 30% of the total fee award.  Law Firm 2 and plaintiff appealed.

Held: Reversed.

Q: Why?

A: To collect fees under the Illinois Attorney Lien Act, 770 ILCS 5/1, the attorney must file a petition to adjudicate her lien.  A prerequisite to filing a lien petition is that the attorney must have been hired by the client to assert a claim and the lien must have been “perfected.”

To perfect an attorney lien, the claimant must serve notice in writing of his lien upon the party against whom her client has a claim.  The lien may be served by registered or certified mail.

The lien attaches on the date of service of the statutory notice.  An attorneys’ lien must also be perfected during the time there is an attorney-client relationship. (If the attorney waits until after she’s fired to serve the notice, it’s too late.)

When a client fires a lawyer, the fee agreement signed pre-firing is extinguished and no longer exists.  Once that happens, the lawyer’s recourse is to try and recover under a quantum meruit theory: to seek the reasonable value of her services before she was fired.

The quantum meruit factors an Illinois court considers when deciding a fee award include: (1) the skill and standing of the attorney employed, (2) the nature of the case and difficulty of the questions at issue, (3) the amount and importance of the subject matter, (4) the degree of responsibility involved in the management of the case, (5) the time and labor required, (6) the usual, customary fee in the community, and (7) the benefit flowing to the client.  (¶¶ 19-22).

Since the court awarded fees based on a cancelled contingency fee agreement, the appeals court reversed so that the trial court could award the plaintiff’s its fees under the quantum meruit factors.

Takeaway:

The case’s obvious lesson for lawyers is to Track Your Time.  Even in cases where a client isn’t paying by the hour or where it seems unlikely that a fee dispute is likely to ever crystallize.

By keeping diligent time records, the attorney who is fired before a client gets a hefty settlement can show tangible proof of her services and can quantify the dollar value of them.

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PaulP

Litigation attorney at Kanaris Stubenvoll & Heiss, P.C. representing businesses and individuals in post-judgment enforcement, collections and real estate litigation.