17.10.01. Retaining Lien

A retaining lien allows a lawyer to keep property (including papers, money and securities) that belongs to the client until the client pays the lawyer’s fee.  Retaining liens are recognized either by common law or statute.  The ethics rules recognize that there are situations where a lawyer can retain client property.  Rule 1.15(d) provides that upon termination a lawyer must give the client “papers and property to which the client is entitled….”  If the lawyer has a retaining lien on the property the client is not “entitled” to it.  There is also another obvious proposition – if the lien is limited to property that has no meaning or valueto the client then the lien is worthless (or as one court put it:  “The retaining lien is only as valuable as the documents possessed by the attorney and the inconvenience caused to the client by the attorney’s retention.”[1]).  Therefore, by its very nature the retaining lien is meant to give the lawyer a tool to prompt the client to pay the lawyer’s bill, by withholding valuable property from the client.

Think of the situation this puts the client in.  The client may have fired their previous lawyer and hired a new lawyer, but cannot prosecute their case because the first lawyer will not turn over the case file until they are paid.  A client, especially a criminal client, can suffer severe harm if there were no limitations on a lawyer’s retaining lien.  In addition to potentially harming the client, withholding client documents can also harm the judiciary by delaying resolution of cases.  Recognizing all of these interests, the ABA issued an Informal Opinion 1461 in 1980 and recommended that lawyers apply a balancing test to determine whether a retaining lien is appropriate:

The lawyer should take into account the financial situation of the client, the sophistication of the client in dealing with lawyers, whether the fee is reasonable, whether the client clearly understood and agreed to pay the amount now owing, whether imposition of the retaining lien would prejudice important rights or interests of the client or of other parties, whether failure to impose the lien would result in fraud or gross imposition by the client, and whether there are less stringent means by which the matter can be resolved or by which the amount owing can be secured. Even though a lawyer may be justified in declining to devote further time and expense in behalf of a non-paying client, it does not follow in all cases that he is ethically justified in exercising an attorney’s lien.

If, for example, exercise of the retaining lien would prejudice the client’s ability to defend against a criminal charge, or to assert or defend a similarly important personal liberty, the lawyer should ordinarily forego the lien. Similarly, if the court, or other parties, or the public interest would be adversely and seriously affected by the lien, the lawyer should be hesitant to invoke it. Financial inability of the client to pay the amount owing should also cause the lawyer to forego the lien because the failure to pay the fee is not deliberate and thus does not constitute fraud or gross imposition by the client. The lawyer should forego the lien if he knew of the client’s financial inability at the beginning or if he failed to assure agreement as to the amount or method of calculating the fee.

Assertion of the lien would be ethically justified when the client is financially able but deliberately refuses to pay a fee that was clearly agreed upon and is due, since this conduct would constitute gross imposition by the client.[2]

In application of the various tensions involved with a retaining lien, courts have been willing to enforce the lien, but will not hesitate to require the lawyer to turn over client property (and forego the lien) if the equities weigh in favor of the client.  Situations where a lawyer has been required to forego the lien include: (1)  the lien would compromise the client’s ability to defend against a criminal charge; (2) where someone other than the client would be harmed if the lien were enforced; and (3) where the client does not have the ability to pay the bill (because the refusal to pay is not based on bad faith by the client.[3]

[1] Bennett v. NRS, Inc., 553 N.E.2d 881, 882 (Ct. App. Ind. 1990).

[2] ABA Informal Op. 1461, Assertion of Attorney Lien Until Payment of Fee (1980).  This ethics opinion was officially withdrawn by ABA Informal Op. 86-1520 (1986); however, the part of the opinion withdrawn had to do with a lawyer withholding a settlement agreement that only lacked the client’s signature to induce the client to pay the lawyer’s fee – the opinion held that the lawyer’s duty of diligence would not allow the lawyer to withhold the settlement agreement.  In my opinion, Opinion 1461 is still good to the extent it sets out factors that can be considered in other contexts where a lawyer has client property.

[3] See Lucky-Goldstar International v. International Manufacturing Sales Co., Inc., 636 F. Supp. 1059 (N.D. Ill. 1986)(holding that none of the exceptions apply and enforcing the lien).  See also Judy v. Preferred Communication Systems, Inc., 29 A.3d 248 (Del. 2011)(requiring client to post security in amount of bill due to receive files).