On certification of a question of Law to the United States Court of Appeals for the Third Circuit.
In this matter, considered by the Court pursuant to Rule 2:12A, the Court determines whether the Attorney's Lien Act (the Act), N.J.S.A. 2A:13-5, requires that an attorney file a petition to acknowledge and enforce an attorney's lien prior to settlement or judgment in the matter that gave rise to the lien. In June 1998, Musikoff retained the services of the Stark & Stark law firm (appellant) to represent him in a then-pending lawsuit against the defendant in the United States District Court for the District of New Jersey. Musikoff and appellant entered into a written fee agreement that included a $10,000 retainer. In February 2000, appellant was informed that Musikoff had retained a new attorney. One month later, appellant informed the new attorney by letter that it had a lien for unpaid legal services and expenses stemming from its prior representation of Musikoff. Subsequently, the litigation between Musikoff and the defendant was settled. The District Court dismissed Musikoff's action without costs and without prejudice on April 26, 2000.
On May 10, 2000, appellant sent a letter that inquired about the status of respondent's case. A week later, appellant received a response from another new attorney, a member of the California bar. The attorney did not reveal that the case had been settled, and stated instead that the case was pending and that the trial date had been adjourned. After learning from other sources that the case had settled and that a check for an undisclosed amount had been sent to the California attorney, appellant sent several letters. However, Musikoff refused to recognize appellant's lien.
On June 2, 2000, appellant sent Musikoff a letter informing him of his right to pursue arbitration of their fee dispute as provided under the New Jersey Rules of Court. The letter also informed Musikoff that if he failed to pursue fee arbitration within thirty days, it would being suit against him and his attorney to recover the disputed fees. Musikoff did not pursue arbitration.
On June 14, 2000, appellant moved before the District Court seeking an acknowledgement of an attorney's lien under the Act and an order to compel Musikoff or his attorney to deposit the settlement proceeds into a trust pending the outcome of the fee dispute. Relying on recent New Jersey case law, the District Court denied the motion, reasoning that under the Act an attorney must file a petition to enforce a lien while the underlying proceeding is still pending. The court concluded that appellant did not have a valid and enforceable lien because it had failed to file its petition prior to the date on which Musikoff's action was dismissed. Appellant sought relief before the United States Court of Appeals for the Third Circuit. That court, in turn, certified the question of law to this Court, pursuant to Rule 2:12A, and the question was accepted as certified. HELD: The Act does not require an attorney to file a petition to acknowledge and enforce an attorney's lien prior to settlement or judgment in the matter that has given rise to the lien itself.
1. An attorney's right to impress a lien on client property derives from the common law. Generally, our courts have recognized two forms of liens for the collection of fees--the charging or special lien and the retaining lien. The charging lien gives an attorney the right to retain possession of his client's property until the entire balance due him for legal services is paid. The retaining lien attaches to the judgment in the cause for which the services were rendered and does not rest upon possession. (Pp. 5-6). A-39-01 Musikoff v. Jay Parrino's The Mint, L.L.C. 2. 2. The Act not only codifies the common-law special or charging lien, but also expands the common law lien which had attached only to a judgment. The Act must be viewed in concert with the applicable Rules of Court, however. If a client has requested fee arbitration under the Rules, then the fee arbitration committee will determine the amount of the attorney's lien. If the client does not request fee arbitration, the court will resolve the lien dispute after conducting a plenary hearing. (Pp. 6-8).
3. Canons of statutory construction dictate that if the plain language of a statute creates uncertainties or ambiguities, a reviewing court must examine the legislative intent underlying the statute and construe the statute in a way that will best effectuate that intent. Here, the last sentence of the Act refers to a pending action and states: "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." However, the preceding sentence states: "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." Further, the Act declares that the lien shall attach to "a verdict, report, decision, award, judgment or final order in [the] client's favor." Therefore, the Court is confronted with an ambiguity that requires consideration of extrinsic factors to resolve. (Pp. 8-9).
4. First, the Court finds that the Act's language that explicitly refers to any settlement between the parties evinces a legislative intent to permit attorneys to file lien petitions in the aftermath of such settlements. This construction is consistent also with the Act's purpose, which is to protect unpaid attorneys in this setting. Moreover, the main focus of the Act's last sentence is on the court and its explicit authority to determine and enforce the lien. That focus suggests that the drafters were more concerned with identifying the forum in which the lien petition would be evaluated and enforced than with limiting the period during which the petition could be filed. (Pp. 9-10).
5. Second, the Court notes the equitable underpinnings of the Act. Here, appellant promptly notified the subsequent attorneys of its claimed lien and diligently followed the progress of the underlying suit. Moreover, the settlement occurred without appellant's knowledge. (Pp. 10-11).
6. Third, decisions reported prior to 1959 generally are consistent with the Court's answer. The more recent New Jersey case law on which Musikoff relies rests on an apparent misinterpretation of H. & H. Ranch Homes, Inc. v. Smith, 54 N.J. Super. 347 (App. Div. 1959). Even if the Appellate Division intended language in H. & H. to mean that an attorney had to file the lien petition prior to the conclusion of the client's underlying action, such an interpretation of the Act would be at odds with its purpose. (Pp. 11-17).
7. The Act is grounded in equitable principles and was designed to protect attorneys who have represented their former clients competently and with diligence, but have gone unpaid. In furtherance of that design, the Act describes the forum in which a lien petition may be brought; it does not limit the period within which the petition must be filed. The Court affirms the basic elements of the process articulated in H. & H., except it does not interpret the process to require an attorney to file and enforce a lien petition prior to settlement or judgment in the underlying action. (Pp. 17).
8. Although the Court declines to express an opinion in respect of the time period in which a petition must be filed, it cautions attorneys that they should not delay in asserting their liens under the Act. (Pp. 18).
CHIEF JUSTICE PORITZ and JUSTICES STEIN, COLEMAN, LONG, LaVECCHIA and ZAZZALI join in JUSTICE VERNIERO's opinion.
The opinion of the court was delivered by: Verniero, J.
We are called on to answer a question of law certified and submitted by the United States Court of Appeals for the Third Circuit. This is the first time that this Court will answer such a question pursuant to the procedures set forth under Rule 2:12A. The inquiry involves N.J.S.A. 2A:13-5, known as the Attorney's Lien Act (the Act). As certified, the question is:
Whether under New Jersey law, in order to enforce a lien under [N.J.S.A.] 2A:13-5, an attorney must file a petition to acknowledge and enforce the lien prior to any settlement or final judgment in the underlying matter in which the attorney provided services giving rise to the lien? In other words, is the last sentence of [N.J.S.A. 2A:13-5] ("The court in which the action or other proceeding is pending, upon the petition of the attorney or [counsellor] at law, may ...