As of April 1, lawyers no longer will be able to hold onto client files and papers to collect fees.
An amendment to Rule of Professional Conduct 1.16(d), effective that date, states flatly, "No lawyer shall assert the common-law retaining lien."
The state Supreme Court on Monday ordered abolition of the lien, which dates back to 18th-century England and is still allowed in many states, at the suggestion of the Advisory Committee on Professional Ethics.
Last November, the ACPE, chaired by Steven Mannion, proposed replacing a clause in the RPC stating, "The lawyer may retain papers relating to the client to the extent permitted by other law."
The ACPE cited the need to protect clients, the potential for attorney overreaching and breach of fiduciary duty, and the concern that assertion of the lien could exert pressure on a client disproportionate to the size or validity of the lawyer’s fee claim.
The lien is most effective in coercing payment when the client is in acute need of the documents held, but resorting to it in such circumstances "is unduly destructive of the lawyer-client relationship and impairs public confidence in the Bar and in the judicial system," the ACPE said.
During the more than 60-day comment period that ended on Jan. 31, three comments in opposition and one in favor were submitted.
The State Bar Association wanted to keep the lien and clarify the ability to use it by adding a reference to "the common-law retaining lien, as a means of securing payment for legal services rendered."
In a Jan. 17 letter to the ACPE, Bar President Kevin McCann called the lien "still a viable option, albeit in limited circumstances," and one that "may be particularly useful when dealing with a client who is quite able to pay and simply refuses to do so."
McCann, noting many lawyers are "struggling financially" and have a "difficult time getting paid," said liens should be allowed "if circumstances so warrant" and "so long as the rights of clients are not unduly prejudiced."
The lien, as an alternative to suing a client for fees, can save the attorney-client relationship and avoid jeopardizing a lawyer’s malpractice insurance, given that some carriers frown on fee suits because clients often respond with malpractice claims, said McCann, of Bridgeton’s Chance & McCann.
He added that unlike clients, lawyers cannot initiate fee arbitration and must therefore use other means.
Jack Borrus of Borrus Goldin Foley Vignuolo & Stahl in North Brunswick agreed with the State Bar that collection of unpaid fees is a "serious problem."
Weighing in on the same side but from a different angle was Robert Greenberg, who identified the central issue as lawyers’ relationships with free-riding successor counsel rather than with their former clients.
Greenberg, a personal injury lawyer with Aronberg & Kouser in Cherry Hill, described a "familiar" scenario in which the new lawyer "hides behind the client" in demanding the file without reimbursing the first lawyer for costs expended or providing a letter recognizing the first lawyer’s right to a portion of the fee on a quantum meruit or other rational basis.
"[A]ll too often, and after the file is received by a successor firm, there is, shall we say, selective memory of the letter or the work done or the expenses incurred," leaving initial counsel "high and dry," Greenberg wrote.
He suggested the ACPE add language saying it is unethical to take a file without reimbursing expenses and requiring written acknowledgment that any fee disagreement will be resolved later, by mediation or arbitration, or a suit as a last resort.
In an interview Tuesday, Greenberg said it is clear, even with a retaining lien, that lawyers cannot hold client files hostage until their fees are paid. He instead sees the lien as a recognition of the value of his services and "usable down the road against the other lawyer."
The sole comment in favor of the ACPE proposal came from Rutgers Law School-Newark Professor John Leubsdorf. He said the lien hurts the client, who is "impeded in pending litigation or denied badly needed funds, not as an unavoidable by-product of some other goal, but precisely in order to pressure the client," contrary to a lawyer’s obligation to protect clients and safeguard their property.
Leubsdorf also said the lien shifts the burden of resolving a fee dispute from lawyer to client, undermines the goal of encouraging clients to trust their lawyers and is not very effective.
Newton solo Paul Abramo, whose fee fight with a client prompted the court to have the ACPE look at whether the lien was still needed, does not agree with the rule change. The lien provided security for payment of fee arbitration awards, he says.
Abramo used the lien in trying to get fees from client Mark Peirano, who then filed the grievance.
The Disciplinary Review Board wanted Abramo admonished for violating RPC 1.16(d) by holding Peirano’s files "hostage" and for ending the representation without taking appropriate steps to protect his interests.
The Supreme Court disagreed, dismissing the admonition, sending the issue to the ACPE and saying the State Bar should be part of the process.
The State Bar’s stance supporting the lien was based on a trustee vote after its own Professional Responsibility and Unlawful Practice Committee concluded the lien was no longer needed and should be abandoned.
Metuchen solo David Rubin, chairman of the State Bar committee, terms the lien "a tool that’s outlived its usefulness." Modern practice management methods, like obtaining an adequate retainer and getting bills out promptly, "can help avoid these collection problems to begin with," he says.
"I don’t think its demise is going to have a significant change on the practice of law for most of us," Rubin adds.