Peter MARTIN v. Elissa MARTIN, 335 N.J. Super. 212 (App. Div. 2000), November 28, 2000:

An attorney’s “special” or “charging” lien has mystified bench and bar at least since its codification from the common law in 1914. L. 1914, c. 201, § 1; R.S. 2:20-7 (repealed); currently N.J.S.A. 2A:13-5. What the statute does, what an attorney must do and when, whether and how the modern rules of practice impact required procedures under the statute, and what priorities exist among competing liens are just some of the questions that have been debated over the years, with relative degrees of clarity and resolution. As recently as 1998, the Federal District Court, in reviewing an appeal from the bankruptcy court, noted that although lien perfection is determined by state law in federal bankruptcy, the New Jersey Supreme Court “has not decided the point at which the statutory attorney’s lien is perfected under § 2A:13-5.” Hoffman & Schreiber v. Medina, 224 B.R. 556, 561 (D.N.J. 1998).

The attorney’s lien act, as it now reads, is not significantly different from the version initially enacted in 1914. The bulk of the alterations between the original version and the current version were made in 1952 when Title 2 was revised as Title 2A following enactment of our current Constitution.

N.J.S.A. 2A:13-5 now reads:

After the filing of a complaint or third-party complaint or the service of a pleading containing a counterclaim or cross-claim, the attorney or counsellor at law, who shall appear in the cause for the party instituting the action or maintaining the third-party claim or counterclaim or cross-claim, shall have a lien for compensation, upon his client’s action, cause of action, claim or counterclaim or cross-claim, which shall contain and attach to a verdict, report, decision, award, judgment or final order in his client’s favor, and the proceeds thereof in whosesoever hands they may come. The lien shall not be affected by any settlement between the parties before or after judgment or final order, nor by the entry of satisfaction or cancellation of a judgment on the record. The court in which the action or other proceeding is pending, upon the petition of the attorney or counsellor at law, may determine and enforce the lien.

The statute embodies the so-called charging lien that existed at common law, but it also expands the common law lien which had attached only to a judgment. Norrell v. Chasan, 125 N.J. Eq. 230, 236-237 (E. & A. 1939).

The lien is rooted in equitable considerations, and its enforcement is within the equitable jurisdiction of the courts. It is intended to protect attorneys who do not have actual possession of assets against clients who may not pay for services rendered. Republic Factors, Inc. v. Carteret Work Uniforms, 24 N.J. 525, 534 (1957); Norrell, supra, 125 N.J. Eq. at 235-236. Since the earliest days of the statute, though, courts have cautioned against use of the remedy in a summary fashion. See, e.g., Levy v. Public Service Ry. Co., 91 N.J.L. 183, 186 (E. & A. 1918) (“[T]he language of the statute will be searched in vain for any expression of a legislative intent that the value of such services shall be determined in a summary proceeding”).

The procedures to be followed in effectuating the statute are rooted in dicta set forth in Artale v. Columbia Insurance Co., 109 N.J.L. 463, 467-468 (E. & A. 1932), and more recently endorsed in H. & H. Ranch Homes, Inc. v. Frank H. Smith, 54 N.J. Super. 347 (App. Div. 1959). In H. & H. Ranch Homes, Justice, then Judge, Haneman stated:

For the guidance of counsel in connection with future applications, consistent with the spirit of our present rules of practice, we suggest that, where the determination or enforcement of an attorney’s lien is sought, the following procedure, patterned on Artale, be employed: The attorney should make application to the court, as a step in the proceeding of the main cause, by way of petition, which shall set forth the facts upon which he relies for the determination and enforcement of his alleged lien. The petition shall as well request the court to establish a schedule for further proceedings which shall include time limitations for the filing of an answer by defendants, the completion of pretrial discovery proceedings, the holding of a pretrial conference, and the trial. The court shall, by order, set a short day upon which it will consider the application for the establishment of a schedule. A copy of such order, together with a copy of the petition, shall be served upon defendants as directed by the court. The matter should thereafter proceed as a plenary suit and be tried either with or without a jury, in the Law Division, depending upon whether demand therefor has been made, R.R. 4:39-1 et seq., or without a jury if the venue of the main cause is laid in the Chancery Division. In no event should the matter be tried as a summary proceeding.

[Id. at 353-354.]

This procedure remains in place today subject to certain necessary modifications, such as are required by our fee arbitration rules. R. 1:20A. See Shalit v. Shalit, 323 N.J. Super. 351, 355 (Ch. Div. 1999); Rosenfeld v. Rosenfeld, 239 N.J. Super. 77, 80 (Ch.Div. 1989). Thus it has been held that simply moving for an attorney’s lien pursuant to N.J.S.A. 2A:13-5, as distinguished from filing a complaint demanding a fee, is not the proper way to establish an attorney’s lien. Mateo v. Mateo, 281 N.J. Super. 73, 79 (App. Div. 1995). In that decision Judge Brody, citing to H. & H. Ranch Homes, supra, again emphasized that these matters cannot be tried in a summary proceeding.

Once successive attorneys, each having represented the same client, are faced with the prospect of a limited pool of assets that may not satisfy all the fees that may reasonably be assessed, the question arises as to the proper procedure under N.J.S.A. 2A:13-5.

Under the statute, the lien attaches to the judgment, decision, award, etc., in gross, not to specific assets. If it becomes necessary to allocate assets between or among attorneys who have otherwise established entitlement to a charging lien, then this must be done as equitably as possible. In our view, no attorney in this circumstance is entitled to a priority. Each stands on equal footing. We believe a pro rata distribution is appropriate. Thus, if one attorney’s bill represents twenty-five percent of all the attorney fees properly due, owing and unpaid, then that attorney is entitled to a charging lien on twenty-five percent of the viable assets in the judgment awarded the client. The trial judge must scrupulously evaluate the nature of each asset in the judgment. A promissory note that may not be paid cannot be placed in the same category as a fund in existence. If the sale of property is contemplated, the likelihood of sale and the probable money it will realize must be carefully assessed. While much of this will never be an exact science, nevertheless, a court must make every effort to treat the claiming attorneys evenhandedly so that none is preferred over the others.

NOTE: This Blog/Blawg, NJ Family Issues, is managed by Paul G. Kostro, Esq., an attorney/lawyer/mediator in Linden, Union County, New Jersey.