Attorney’s Fee Lien Upheld in 2-1 Decsision in High Net Worth Divorce in Memphis: Coleman v. Coleman

Knoxville divorce lawyersFacts: Wife, a litigant in a pending divorce, retained a Washington, D.C. attorney  (“Attorney”) to advise her on business issues related to the parties’ largest marital asset, an international business. Attorney’s contract included a provision granting Attorney an attorney’s lien on any recovery Wife might obtain, in order to ensure the collection of the attorney’s fees under the contract.

Upon the signing of the engagement agreement, Attorney swung into action as part of Wife’s team of lawyers, which was comprised of her primary divorce lawyer and two other divorce attorneys. There were a lot of complicated issues surrounding the marital business for which Attorney’s particular expertise was helpful to Wife. Even so, Attorney was never admitted to practice in Tennessee courts pro hac vice.

After a three-day mediation, the parties reached an agreement that was memorialized in a marital dissolution agreement (“MDA”). All told, Wife was to receive approximately $37 million in assets from the divorce settlement.

Soon after the parties finalized the settlement, Wife began to express her dissatisfaction with it and repudiate the terms of the MDA. Wife’s dissatisfaction also took the form of lodging several complaints against her legal team. This prompted Attorney to terminate his representation of Wife.

The trial court held the MDA was an enforceable agreement binding on both parties. A final decree of divorce was entered incorporating the MDA.

Attorney filed a motion to enforce his attorney’s lien. After a hearing, the trial court awarded Attorney $112,000 in past-due attorney’s fees and $94,000 in interest that accrued over a nearly three-year period.

Wife appealed.

On Appeal: In a 2-1 decision, the Court of Appeals affirmed the trial court.

An attorney is entitled to compensation in the amount agreed upon by contract, provided that the contract is fair at its inception and entered into in good faith. Good faith and fairness can be established by an attorney who seeks to enforce an attorney fee agreement by showing that (1) the client fully understood the contract’s meaning and effect, (2) the attorney and the client shared the same understanding of the contract, and (3) the terms of the contract are just and reasonable.

On appeal, Wife argued that Attorney failed to establish the third element — that the terms of her contract and the fees ultimately charged were just and reasonable. In determining whether an attorney’s fee is reasonable, a trial court must consider the non-exclusive factors enumerated in Rule 1.5(a) of the Tennessee Rules of Professional Conduct:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services;
(8) whether the fee is fixed or contingent;
(9) prior advertisements or statements by the lawyer with respect to the fees the lawyer charges; and
(10) whether the fee agreement is in writing.

Regarding attorney’s fee liens, Tennessee Code Annotated § 23-2-103 provides as follows:

Any attorney or solicitor who is employed to prosecute a suit that has already been brought in any court of record shall have a lien upon the plaintiff’s right of action from the date of the attorney’s or solicitor’s employment in the case; provided, that the record of the case shall first be made to show such employment by notice upon the rule docket of such court, by a written memorandum filed with the papers in the case or by notice served upon the defendant in the case.

After reviewing the record, the Court determined:

Perhaps Wife, from the safety of her current perch and with the benefit of hindsight, now feels free to deride the attorneys’ efforts as indulging flights of fancy at her expense. We do not…. The proof at trial showed that Husband’s resistance to cooperation yielded only to the tactics [Attorney] devised, including the forensic audit of [the marital business] and the threat of a shareholder derivative lawsuit. The proof also showed that the prospect of Wife being drawn into the vortex of Husband’s allegedly seamy business dealings and the potential of civil or even criminal liability were hardly hypothetical. And the fact that Wife later developed a case of buyer’s remorse about the settlement of her divorce litigation does not mean that the settlement was in fact unfavorable to her. Considering the evidence in the record as a whole, … we find substantial evidence to support the trial court’s holding that the hours expended by [Attorney] in [his] representation of Wife were reasonable.

Thus, the trial court was affirmed.

Dissent: Judge Stafford dissented because, in his view, Tennessee courts lack subject matter jurisdiction because Attorney was not admitted to practice in Tennessee courts. Judge Stafford argued that the statutes make a threshold requirement to be entitled to an attorney’s lien to be that the attorney must first be “employed to prosecute a suit.” It was undisputed that neither Attorney, nor any other attorney in his firm, was licensed to practice law in Tennessee or admitted pro hac vice. The majority responded that Wife knew when she signed the contract that Attorney was licensed in D.C., and nothing in the contract made her agreement to the charging lien contingent on Attorney obtaining pro hac vice admission to the Tennessee bar. Thus, the Majority reasoned, Wife cannot now be heard to argue that the attorney’s lien to which she agreed is not valid and enforceable simply because Attorney was not admitted pro hac vice in the trial court.

Coleman v. Coleman (Tennessee Court of Appeals, Western Section, September 19, 2013).

Information provided by K.O. Herston: Knoxville, Tennessee Divorce, Matrimonial and Family Law Attorney.

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K.O. Herston is a family-law attorney in Knoxville, Tennessee whose practice is devoted exclusively to family law, including divorce, child custody, child support, alimony, prenuptial agreements, and other aspects of family law.

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