Every business at some time struggles with not being paid – even law firms. Indeed, I have yet to meet an attorney that has not had some issue with collections. However, Kentucky’s Attorney’s Lien statute (KRS 342.320) is not helpful to most attorneys with their collection efforts. In fact, the Kentucky Supreme Court recently issued an opinion that greatly narrows the ability for an attorney to file liens on a former client’s property in Stone v. Dubarry, No. 2015-SC-000040-DG, 2016 Ky. LEXIS 557 (Dec. 15, 2016).
KRS 376.460 provides:
Each attorney shall have a lien upon all claims, except those of the state, put into his hands for suit or collection or upon which suit has been instituted, for the amount of any fee agreed upon by the parties or, in the absence of such agreement, for a reasonable fee. If the action is prosecuted to a recovery of money or property, the attorney shall have a lien upon the judgment recovered, legal costs excepted, for his fee. If the records show the name of the attorney, the defendant shall be deemed to have notice of the lien. If the parties in good faith and before judgment compromise or settle their controversy without the payment of money or other thing of value, the attorney for the plaintiff shall have no claim against the defendant for any part of his fee.
The statute provides that a lien is created only when the attorney handles a lawsuit for a client which results in the creation of obtaining attachable assets (see Ford v. Faller, 439 S.W.3d 173, 179 (Ky. Ct. App. 2014)). For example, if an attorney files a medical malpractice claim on behalf of a client and the client chooses to move the case forward with another attorney, the first attorney may file an attorney’s lien in the case for his/her reasonable fees. In contrast, if an attorney successfully defends a client against a criminal conviction and the client fails to pay the attorney, the attorney cannot file an attorney’s lien on the client’s personal property.
The Kentucky Supreme Court’s recent opinion in Stone v. Dubarry definitively found that “KRS 376.460 does not apply in dissolution property division matters.” The Court reasoned that the assets in a marriage already exist and are not created by any efforts of the attorney. The Court opined, stating “While It may be that a highly skilled attorney succeeds in getting a larger share for his client, his work did not create the fund, and his client’s right to claim against the fund upon filing for divorce is a contingency against that fund even during the marriage.” The Court affirmed that that the attorney’s lien statute is a very limited vehicle for attorneys in their collection efforts.
Though the Court’s opinion seems to be consistent with the statutory language, one concurring opinion of the Court felt that the opinion was a “sea change” from current practices in the Kentucky bar and that the opinion offered little guidance to the bench and bar. Indeed, there are many attorney’s liens that have been filed around the Commonwealth that have no connection with the creation of assets for a client.
Liability for Incorrectly Filing a Lien
Although courts have been reluctant to find attorneys criminally liable for incorrectly filing attorney’s liens under KRS 434.155, attorneys that use KRS 342.320 incorrectly do run the risk of violating Kentucky’s Rules of Professional Responsibility.
In Ford v. Faller, though the attorney had mistakenly interpreted the lien statute, her conduct was not criminal under KRS 434.155. Ky. Bar Ass'n v. Glidewell, 297 S.W.3d 564 (Ky. 2009) found that the attorney failed to remove a lien until a lawsuit was filed, and established that the lien was left in place for an improper purpose and the attorney was sanctioned.
Attorneys should also be aware that filing liens under KRS 342.320 are arguably also subject to KRS 382.365, which establishes fines for liens not timely released.
In sum, the attorney’s lien in Kentucky is fairly limited and incorrect use can open an attorney to financial and professional liability. If you have a fee dispute with a client and are not clear on whether you may file an attorney’s lien, seek professional advice.