Delaware Corporate Law Update

Updates on Delaware Corporate Law by Evan O. Williford, Esq., Delaware Corporate Litigation Attorney.

Chancery Court Denies Law Firm’s Charging Lien

In Sutherland v. Sutherland (opinion available here), Vice Chancellor Noble rejected a petition by law firm Katten Muchin Rosenman LLP (“Katten”) for a charging lien against an attorneys’ fee award where the allegedly unpaid bill solely related to work after the work on which the fee award was based.

The litigation, which began in 2004 and 2006, resulted in certain benefits to the subject company; namely, elimination of salary to certain persons terminated for cause and modification of provisions allowing insiders to compete with the company.  The Court awarded $275,000 in fees for those benefits, all of which were achieved by 2007.

Katten had represented plaintiff in the litigation.  Katten, which had already been paid $2.7 million, claimed it was still owed $766,166.75 for work occurring after 2008.

As the Court noted, the purpose of a charging lien is “to make sure that the client does not avoid paying her lawyer for the benefits she obtained”.  It held that Katten, however, was seeking a charging lien “for work which caused no benefit and has no connection to the recovery, other than having occurred in the same litigation.”  Thus, the Court rejected the petition: “Seeking a charging lien for work which produced no benefit when the law firm has already been paid for the work which produced the benefit (whether the benefit for the family corporation or the corresponding fee award) is inconsistent with the theoretical underpinnings of the attorney’s charging lien.”

N.B.  Since the publishing of this post, on January 3, 2017, the Delaware Supreme Court reversed the Court of Chancery’s opinion.

The Williford Firm LLC served as Delaware counsel for plaintiff in this action.  Results in cases depend on their specific factual and legal circumstances and results in one do not guarantee the same or similar results in another.

Filed under: Court of Chancery, Delaware Supreme Court

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Delaware Corporate Law Update solely reflect the views of Evan Williford of The Williford Firm, LLP. Its purpose is to provide general information concerning Delaware law; no representation is made about the accuracy of any information contained herein, and it may or may not be updated to reflect subsequent relevant events. This website is not intended to provide legal advice. It does not form any attorney-client relationship and it is not a substitute for one.