Retaining Liens: When Should I Use One?
By Gina Hendryx, OBA Ethics Counsel

"My client hasn't paid me in months, I can't afford to continue working on the file without compensation, so the court has approved my Motion to Withdraw. The client wants to pick up the file with all of my 'free' legal work included..."

Or...

"My client hasn't paid me in months, I have hours of uncompensated work in the file, and now the client has fired me. His new attorney is calling daily demanding I turn over the file and all its contents."
"May I keep the file until the client pays my bill?"

Two different scenarios with the same inquiry. Is it proper to retain, until the fee is paid, a client's papers, money and other property that came into the attorney's possession in the course of the professional employment? Oklahoma recognizes the common law retaining lien, also known as a general lien or possessory lien. The retaining lien is an attorney's claim to hold a client's file, money or property until the fee is satisfied. The retaining lien may be applicable when a client's failure to comply with a fee agreement has led to a lawyer's withdrawal or when a client has discharged an attorney and there remains an outstanding fee balance.

In a recent decision, the Oklahoma Court of Civil Appeals reviewed the retaining lien and set forth guidelines to assist in determining when it is proper to assert and enforce a retaining lien. "Oklahoma law recognizes two types of lien by which a lawyer may secure payment for services: 1) a statutory charging lien and 2) a common-law general possessory or retaining lien... The retaining lien generally attaches to all property, papers, documents, securities and monies of the client coming into the hands of the attorney in the course of the professional employment." Britton and Gray, P.C. v. Shelton, 2003 OK CIV APP 40, 69 P3d. 1210. However, "a lawyer [may not] take money or property entrusted to him for a 'specific purpose' and apply it to the attorney's fee claim." State ex rel. Oklahoma Bar Ass'n v. Cummings, 1993 OK 27, 863 P.2d 1164, 1170.

Specific Purpose Analysis

When money or other property has been entrusted to an attorney for a specific purpose, the attorney must apply it for that purpose. For example, money paid to an attorney for the "specific purpose" of taking a deposition would not be subject to a retaining lien. Likewise, moneys being paid into an attorney's trust account for a filing fee would not be properly held pursuant to a claim of a retaining lien. However, in State ex rel. Oklahoma Bar Ass'n v. Briggs, 1999 OK 76, 990 P.2d 869, 872-873 the sale of stock to pay attorney's fee was permitted since the stock was given for that purpose.

The specific purpose analysis of retaining liens when dealing with property other than money requires a determination of whether the client's original documents were delivered to the attorney for a specific purpose different from that representation for which the attorney was hired.

Prejudice to the Client

The attorney's common law right to a retaining lien must be weighed against the potential harm or prejudice to the former client. The Oklahoma Rules of Professional Conduct state:

Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law. Rule 1.16(d), Rules of Professional Conduct, 5 O.S. Ch.1, App. 3-A

The court held in the Britton case that the assertion of a retaining lien that is prejudicial to the client is inconsistent with the lawyer's continuing duty to the client. When determining whether or not to claim a retaining lien to original documents you should assess 1) whether the client will suffer serious consequences without the documents and 2) whether any prejudice to the client can be mitigated by means other than a return of the documents.

Reasonable Fees Due and Owing

A valid retaining lien will only attach when there are reasonable fees due and owing. It may not be asserted for legal services not yet performed, whether or not the client has agreed to pay for the future services. The attorney claiming the lien has the burden of proof on reasonableness and indebtedness. Once met, it is upon the client to prove prejudice.

The attorney's legal rights to secure payment for services rendered must be balanced with the ethical responsibilities not to harm the client. Before you hold a client's file "hostage" weigh the competing factors:

• Why do I have this document or property in my possession?
• By holding the property do I prejudice the client's ability to go forward with the matter?
• Can the client get the retained material by other means?
• Are my fees reasonable?
• Are my claimed fees for completed work?

Most states, including Oklahoma, permit lawyers to assert liens to secure payment of client bills. It gives the lawyer power to coerce payment from recalcitrant clients. However, this power must be tempered by your ethical duties to your clients and the profession.