Is An Attorney's Right to Collect Under a Charging Lien Entitled to Priority Over An Adverse Party's Right to a Setoff ?
In Banque Indosuez v. Sopwith Holdings Corp. (98 NY2d 34, 772 N.E.2d 1112, 745 N.Y.S.2d 754), the Court addresses the "narrow issue of whether an attorney's charging lien acquired by defendants' attorneys on their successful cause of action is entitled to priority over plaintiffs right to set off its larger judgment against defendants (id. at 37).
The Court in Banque Indosuez noted that "there has been tension between an attorney's right to collect under a charging lien and an adverse party's right to a setoff -- specifically, which has priority over the other" (id. at 41).
The Court, after a review of the case law concerning such priority issues, held that
an attorney's charging lien maintains superiority over a right of setoff where the setoff is unrelated to the judgment or settlement to which the attorney's lien attached.
However, we conclude that a different rule should apply here, where the setoff is the result of judgments emanating from the same transaction or instrument (id. at 43).
The Banque Indosuez Court eventually found that the plaintiff bank had a superior right to the proceeds that arose in the same litigation in which the defendant's attorneys claimed a charging lien, finding this conclusion to be a result of a "balancing of equities" between the competing claims (id).