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The U.S. Bankruptcy Court for the Southern District of New York recently issued a decision in In re Coudert Brothers LLP, No. 06-12226 (RDD), 2007 Bankr. LEXIS 4003 (Bankr. S.D.N.Y. Nov. 21, 2007) concerning the treatment of an attorney's retaining lien in the bankruptcy of a law firm. The decision does not alter the analysis that would obtain under applicable state law, and serves as an important reminder to attorneys that their liens to secure payment of amounts owed by clients and former clients depend on state law and are not enhanced in the bankruptcy setting.
Attorneys' Liens Under NY Law
New York attorneys have at their disposal two types of liens that they can assert to secure the payment of fees from their clients. First, under New York common law, an attorney may obtain a retaining lien on a client's files, papers, and property in the attorney's possession. See In re Heinsheimer, 214 N.Y. 361, 364 (1915); Goldstein, Goldman, Kessler & Underberg v. 4000 E. River Road Assocs., 64 AD2d 484, 487 (4th Dept. 1978). Absent exigent circumstances, a lawyer may withhold turning over a client's files to a successor attorney until a court determines the amount of the lien and whether turnover of the files should be conditioned on payment or the posting of security. See Renner v. Chase Manhattan Bank, No. 98-926 (CSH), 2000 U.S. Dist. LEXIS 16150, at *2-3 (S.D.N.Y. Nov. 8, 2000)
Second, Judiciary Law ' 475 provides the basis upon which New York attorneys may assert a charging lien against the proceeds resulting from the attorney's assertion of an affirmative claim on the client's behalf. See N.Y.Jud.L. ' 475 (2007).The rationale behind the charging lien provided by Judiciary Law ' 475 is that an attorney is entitled to a lien against a fund created through the attorney's own efforts.See Greenberg v. State, 128 AD2d 939, 940 (3d Dept. 1987).The charging lien may also attach to a fund created to settle a client's claim.See Schneider, Kleinick, Weitz, Damashek & Shoot v. City of New York, 302 AD2d 183, 187 (1st Dept. 2002).This lien is only applicable in a litigation representation, but is not available to an attorney who is solely providing a legal defense to a client absent the assertion of a counterclaim.See Rosenman & Colin v. Richard, 850 F.2d 57, 61 (2d Cir. 1988).
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