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April 26, 2010

Plummer v. Day/Eisenberg (2010) 184 Cal.App.4th 38

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 The Fourth District holds that attorneys who attempt to avoid a valid lien asserted by prior counsel can be subject to both conversion and interference with prospective economic advantage claims.  The Court also held that attorneys need not comply with a Rule of Professional Conduct pertaining to taking an interest adverse to a client when a charging lien is included in an initial contingency fee agreement. 

Attorney Mark Plummer agreed with attorneys Andrew Bisom and Isaac Cohen to represent the Acosta family in a personal injury suit.  Their oral agreement was for an equal sharing of fees.  The clients executed a two-page retainer agreement with Bison & Cohen and in an addendum acknowledged Plummer’s role, his fees, and granted Plummer an independent lien on their recovery to secure fees.

After Plummer worked on the case for a year, Bisom & Cohen forced Plummer out.  Plummer notified defense counsel about his lien and asked to be named a payee on any settlement check.  Bisom & Cohen later associated Day/Eisenberg to finish the case.

The case settled for one million dollars.  When Plummer contacted defense counsel he learned that the settlement check named Plummer as a payee and had been sent to Day/Eisenberg.  Somehow Bisom, Cohen, and Day/Eisenberg were able to negotiate the check without Plummer’s signature and retain all of the attorney fees, despite

Plummer’s lien.  Plummer asserted causes of action against Day/Eisenberg for conversion and interference with prospective economic advantage.

In the context of summary judgment, Day/Eisenberg contended the conversion cause of action failed as a matter of law because Plummer did not perfect an enforceable attorney’s lien and did not therefore own or have a right to possess the settlement funds.

Day/Eisenberg asserted that the retention agreement was not sufficient to create a lien.  It also asserted that it did not convert the funds because it it did not possess or control the settlement proceeds; Bisom & Cohen had agreed to satisfy any outstanding liens and had taken possession of the funds.

Day/Eisenberg contended the interference cause of action failed because Plummer had no economic relationship with the clients; Day/Eisenberg did not know about his purported lien until after the settlement; and it did not dishonor his lien, interfere with his relationship with the clients, or otherwise interfere with any purported economic advantage.

Plummer offered evidence that Day/Eisenberg had communicated with the underlying defense counsel who told the attorneys that Plummer would be named a payee on the settlement check because Plummer had filed a valid lien.  Mr.  Day attempted to convince defense counsel to leave Plummer off of the settlement draft asserting the lien was not valid.

Plummer showed that the settlement check itself had five endorsements on the back, and argued that both Day and Eisenberg endorsed the check for Day/Eisenberg to make it appear that all five payees on the check had endorsed the check.

The trial court granted Day/Eisenberg’s summary judgment motion.  On the conversion cause of action, it found Plummer had no direct contractual relationship giving rise to a lien entitling him to payment from the settlement proceeds and thus no immediate right to possession.  Nor was there a direct contractual relationship between Plummer and Day/Eisenberg.

On the interference cause of action, the absence of a direct contractual relationship between Plummer and the client meant that there was no relationship for Day/Eisenberg to interfere with.

The Court of Appeal held that there were triable issues of fact concerning Plummer’s right to possess the settlement funds through his attorney lien.  A right to possession requires neither legal title nor absolute ownership of the property.  The existence of a lien can establish the immediate right to possess needed for conversion.  Thus, attorneys may maintain conversion actions against those who wrongfully withhold or disburse funds subject to their liens.
The Court of Appeal disagreed with Day/Eisenberg’s contention that there was no direct contractual relation-ship between the Acostas and Plummer.  The first page employing Bisom & Cohen, LLP must be read in con-junction with the second page where the clients agreed to Plummer’s work on the case, his fee, and an independent lien.  This language created a contract between Plummer and the clients.

Plummer took substantive actions on behalf of the clients.  He substituted into the case; he filed a complaint and other documents; and he made court appearances.  Plummer was not riding the coattails of a lien granted to another attorney, he had his own lien.  If Plummer was able to prove his lien at trial, he could satisfy the “right to possess” element of conversion.

The Court of Appeal rejected Day/Eisenberg’s argument that Plummer’s lien was invalid as a matter of law because it violated Rule 3-300 of the Rules of Professional Con-duct.  An attorney who secures payment of hourly fees by acquiring a charging lien against a client’s future judgment or recovery acquires an interest adverse to the client.  Thus Rule 3-300 requires that the terms be fair and reasonable and that the attorney advise the client in writing of the client’s opportunity to seek independent counsel.

In a case involving hourly fees, the California Supreme Court declined to decide whether Rule 3-300 applies to a contingency fee.  Subsequently a Los Angeles County Bar Association ethics opinion suggested that rule 3-300 did not apply to a contingency fee coupled with a lien against the client’s prospective recovery.

The Court of Appeal adopted the reasoning of the State Bar Standing Committee on Professional Responsibility & Conduct.  It concluded that the inclusion of a charging lien in the initial contingency fee agreement does not create an adverse interest to the client within the meaning of rule 3-300.  A charging lien is an equitable corollary to, and thus inherent in, a contingency fee contract because, unlike the situation in hourly fee agreements: (a) the attorney and client have agreed that the attorney’s fee will be limited to a percentage of, and derived only from, a successful recovery created by the attorney’s work; (b) the attorney and client share the risk of a recovery; (c) any fee the attorney earns or receives is delayed until the client obtains a recovery, usually at the very end of the representation; and (d) the recovery often represents the only source of funds from which the attorney can ever be paid.  There is no point to advise of a right to independent counsel since counsel could only advise that charging liens are universally included in contingent fee contracts, that their inclusion in such contracts has consistently been upheld by the courts, and that the client would be hard pressed to find a competent lawyer to take a case on a contingency fee basis without a charging lien.

The Court was not persuaded that Day/Eisenberg never possessed or controlled all of the settlement proceeds sufficient for the conversion cause of action.  It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.  Any act of do-minion wrongfully exerted over the personal property of another inconsistent with the owner’s rights constitutes conversion.  Day/Eisenberg’s possession of the check and its needless endorsement by both of its partners to deceive a bank into negotiating it without Plummer’s endorsement may constitute conversion.

The Court rejected the contention that because the dispute was between Plummer and Bison & Cohen he could not show conversion of any specific sum capable of identification.

The Court also reinstated the Intentional Interference with Prospective Economic Advantage cause of action.  The elements of the tort are: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.

The trial court’s summary judgment ruling was premised on a lack of a contractual relationship between Plummer and the client, a factual premise rejected by the Court of Appeal in considering the conversion cause of action.

Day/Eisenberg’s additional arguments that it lacked knowledge of a relationship between Plummer and the clients; that it had no interaction with Plummer over the case; and that its retention was temporally distant from Plummer’s discharge were equally unavailing.
The correspondence between Day/Eisenberg and the underlying defense counsel is evidence that Day/Eisenberg knew about Plummer’s lien on the settlement funds.  Day/Eisenberg may have interfered with Plummer’s lien by both Day and Eisenberg endorsing the settlement check, one with an illegible scribble, to make it appear as if all five payees had signed.  Plummer was damaged by this interference when the liened funds were disbursed.

Comment: This opinion demonstrates that attempts to avoid another attorney’s valid lien are not wise.  It also establishes that contingent fee agreements need not comply with Rule 3-300.

 

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