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Tuesday, August 29, 2006

Attorney's Lien. Cassie Sutton retained Leeds Morelli & Brown ("LMB") to represent her in a discrimination action against her former employer. Her retainer agreement with LMB provided that she would pay a $5,000 retainer upon signing the agreement and two additional payment of $2,500. LMB would be entitled to 40% of any settlement, less all retainer payments, or 40% of a damage award after trail, without deduction for retainer payments. Sutton paid $5,000 plus one $2,500 payment. LMD filed a Title VII action against her employer. The parties reached a settlement where Sutton would be paid $15,000, but the agreement was not executed. Sutton told LMB that she would not sign because she was uncomfortable with having LMB represent her.

LMB wrote to the Chief Magistrate Judge, informing her that it wished to be removed as counsel after Sutton raised questions with the firm regarding a news story implicating it in possible unfair settlements in other cases. The Magistrate Judge relieved the firm as counsel. LMB than applied to the Magistrate Judge for a charging lien in the amount of $37,879.18 (less the $7,500 retainer payments) on Sutton's file. It also asked for an immediate payment of $544.54 in expenses. Sutton opposed the application and sought return of the payments that she had made.

The Magistrate Judge denied Sutton's request for return of the payments, granted LMB's request for its expenses and granted an attorney's lein in the amount of $10,490.50. Sutton sent a letter to Judge Gerson objecting to the Magistrate Judge's order. Judge Gerson treated the letter as an appeal from the order, and affirmed the order. While these proceedings were ongoing, Sutton filed a notice of appeal.

The Second Circuit found that it had appellate jurisdiction. The notice appeal was either a timely notice of appeal from the Magistrate Judge's judgment or was a premature notice of appeal from Judge Gerson's judgment, confirming the Magistrate Judge's judgment.

The Court noted that had Sutton accepted the settlement, LMB would have been provided to no additional payments (other than expenses) because 40% of $15,000 is less than the $7,500 it had already been paid. Hence, the Court held that LMB was entitled to its expenses, that Sutton was not entitled to a return of the funds she had already paid and vacated the charging lien.

The decision is Sutton v. New York City Transit Authority can be found here.

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