Chaudhry v. American Family Mutual Insurance Company

[4] UNITED STATES DISTRICT COURT 5 WESTERN DISTRICT OF WASHINGTON AT SEATTLE [7] ANN CHAUDHRY, et al., Cause No. C20-6005RSL [8] Plaintiffs, ORDER [9] v. [10] AMERICAN FAMILY MUTUAL 11 INSURANCE COMPANY, [12] Defendant. [14] This matter comes before the Court on plaintiffs’ objections to a notice of intent to claim [15] a lien filed by their former attorney, Matthew B. Edwards. Dkt. # 27 and # 28. Mr. Edwards [16] 17 filed the above-captioned insurance coverage litigation in Thurston County Superior Court on [18] behalf of plaintiffs in September 2020. Defendant removed the matter to federal court on [19] October 9, 2020, and three weeks later Mr. Edwards notified plaintiffs that he intended to [20] 21 withdraw from the representation. Plaintiffs obtained the services of other counsel, and Mr. [22] Edwards’ filed a notice of his “intent to claim a lien against this action, any judgment in this [23] action, and any proceeds payable or due to the Chaudhrys in the hands of adverse parties in this [23] 25 action, to secure our claim for payment for amounts that may be due to us arising out of our [26] representation of and/or the special agreement we entered into with the Chaudhrys.” Dkt. # 13. [27] The notice does not assert a present claim, it does not state that amounts are actually due and [28] 1 owing, it does not reveal the terms of the representation agreement, and it does not state the [2] principal amount for which the lien is claimed. [3] A year later, on February 1, 2022, defendant filed a notice of settlement. The case was [4] 5 dismissed “without prejudice to the right of any party upon good cause shown within sixty (60) [6] days hereof to reopen this cause if the reported settlement is not consummated.” Dkt. # 26. On [7] March 30, 2022, the Chaudhrys objected to Mr. Edwards’ notice of intent to claim a lien, [8] 9 arguing that their former attorney had abandoned them when he concluded that the lawsuit [10] would not be successful, that he had no equitable claim to settlement proceeds that were [11] obtained through the work of others, and that Mr. Edwards waived any claim for monies, funds, [12] 13 or reimbursements of any kind in exchange for plaintiffs’ agreement not to oppose his motion [14] for withdrawal. The action was dismissed with prejudice on or about April 4, 2022. Mr. [15] Edwards has made no effort to pursue the lien raised in January 2021. [16] 17 RCW 60.40.010(1)(d) creates a statutory lien for attorney compensation “[u]pon an [18] action . . . and its proceeds after the commencement thereof to the extent of the value of any [19] services performed by the attorney in the action, or if the services were rendered under a special [20] 21 agreement, for the sum due under such agreement.” An attorney with a lien under subsection [22] (1)(d) “has the option of asserting a lien to ensure payment without necessitating a separate [23] lawsuit.” Davis v. Wash. State Dep’t of Soc. & Health Servs., No. 2:17-CV-00062-SMJ, 2021 [23] 25 WL 4341124 , at *1 (E.D. Wash. Apr. 27, 2021). “Once an attorney’s lien attaches to an action, [26] that lien ‘is superior to all other liens’ and ‘is not affected by settlement of the parties until the [27] lien is satisfied in full.’” Ferguson Firm, PLLC v. Teller & Assocs., PLLC, 178 Wn. App. 622 , [28] 1 631 (2013) (quoting Smith v. Moran, Windes & Wong, PLLC, 145 Wn. App. 459 , 466–67 [2] (2008)). “When valuing services performed by an attorney who was discharged or otherwise [3] prevented from fully performing under a contingent fee agreement, the court must consider the [4] 5 value of the ‘services actually performed’ by the attorney rather than relying on the contingent [6] fee agreed upon. In re Alexander, No. 19-01326-FPC7, 2020 WL 5649277 , at *3 (Bankr. E.D. [7] Wash. Sept. 21, 2020) (quoting Ross v. Scannell, 97 Wn.2d 598, 608-09 (1982)). “A proceeding [8] 9 to enforce a lien is an equitable proceeding,” in which courts have broad discretion. King Cnty. [10] v. Seawest Inv. Assocs., LLC, 141 Wn. App. 304, 314 (2007). [11] Mr. Edwards’ notice of an intent to claim a lien is deficient in a number of respects, the [12] 13 most important being that no actual claim was asserted and no amount was stated. Even if those [14] deficiencies could be corrected at this late date, because there was no judgment entered and the [15] action has now been compromised, Mr. Edwards’ only possible claim would be to the [16] 17 “proceeds” of the action. Although “proceeds” are broadly defined for purposes of the attorney’s [18] lien statute in general, “[o]nce proceeds come into the possession of a client, such as through [19] payment by an opposing party . . . the term ‘proceeds’ is limited to identifiable cash proceeds [20] 21 determined in accordance with RCW 62A.9A-315(b)(2).” RCW 40.60.010(5). [23] // [26] // [28] 1 Mr. Edwards failed to effectively preserve his lien rights as to any amount by filing a [2] notice of intent regarding amounts that “may [or may not] be due.” Nor has he identified “the [3] proceeds [of the settlement] by a method of tracing” as required by RCW 62A.9A-315(b)(2). [4] 5 Plaintiffs’ objections (Dkt. # 27 and # 28) are therefore SUSTAINED, and Mr. Edwards’ notice [6] of intent to claim a lien (Dkt. # 13) is STRICKEN. [8] 9 Dated this 1st day of February, 2023. [11] 12 Robert S. Lasnik United States District Judge