Fletcher v. Davis

In Fletcher v. Davis (2004) 33 Cal.4th 61, the California Supreme Court determined that an attorney's charging lien is "an adverse interest within the meaning of Rules of Professional Conduct rule 3-300." "A charging lien grants the attorney considerable authority to detain all or part of the client's recovery whenever a dispute arises over the lien's existence or its scope. That would unquestionably be detrimental to the client." (Ibid.) Thus, "When an attorney wishes to secure payment of hourly legal fees and costs of litigation by obtaining a charging lien against a client's future recovery," (id. at p. 64) under rule 3-300 the attorney must "explain the transaction fully, to offer fair and reasonable terms, to provide a copy of the agreement, to give the client an opportunity to seek independent legal advice, and to secure the client's written consent." (Fletcher, at p. 71.) The Fletcher opinion expressly declined to decide the precise issue presented here, "whether rule 3-300 applies to a contingency-fee arrangement coupled with a lien on the client's prospective recovery in the same proceeding." (Fletcher, supra, 33 Cal.4th 61, 70, fn. 3.) The court noted an opinion of the Los Angeles County Bar Association, however, that suggested "rule 3-300 did not apply to a contingency fee coupled with a lien against the client's prospective recovery 'in the same matter in which legal services are being provided.' (3 Cal. Compendium on Prof. Responsibility, L.A. County Bar Assn. Formal Opn. No. 496 (Nov. 16, 1998) p. 238.)" (Ibid.) The Court held that a charging lien is adverse to the client's interests and therefore requires the client's written consent for its creation. (Id. at p. 69.) In explaining why the lien may become detrimental to a client, the court cited several examples to illustrate the power a charging lien gives an attorney to detain the proceeds of a settlement or judgment. (Id. at pp. 68-69.) Citing Ex parte Kyle (1850) 1 Cal. 331, 332, the court discussed in one example that an attorney with a charging lien "'may stop the money in transitu, by giving notice to the opposite party not to pay it, until his claim for costs be satisfied, and then moving the court to have the amount of his costs paid to him in the first instance . . . .'" (Fletcher v. Davis, supra, at p. 69.) As a further example, the court noted that "even when the proceeds have been deposited in the client's trust account, the attorney may withhold an amount equivalent to the disputed portion." (Ibid.)