Lien Granted In Part

The Delaware Court of Chancery granted in part a charging lien to Skadden, Arps, Slate, Meagher & Flom LLP

Under the engagement letter, Skadden represented AutoLotto in this action to secure the return of $16,500,000 in escrowed funds held by defendant J. Streicher Financial, LLC (“J. Streicher”).  On September 26, 2022, I granted partial summary judgment in AutoLotto’s favor and ordered J. Streicher to return the escrowed funds. I also shifted AutoLotto’s attorneys’ fees in the amount of $397,036.94 and entered an order reflecting the parties’ stipulation that J. Streicher would pay those fees no later than November 30, 2022 (the “Fee Order”).

On December 8, 2022, Skadden filed the Motion seeking a charging lien in the amount of $3,024,201.17 against the $16,500,000 awarded in this matter, representing unpaid fees not only for its representation of AutoLotto in this action, but also for its representation and work for AutoLotto in a variety of other matters.

Choice of law

there is no conflict between New York and Delaware law, and I need not decide which governs. Delaware and New York law reach the same result with respect to the scope of the charging lien: Skadden is entitled to a charging lien on AutoLotto’s recovery in this matter for its fees earned in this matter, and not its other matters. I grant Skadden’s motion for a charging lien with respect to the $397,036.94 in attorneys’ fees earned in this action.

Fee shifting did not affect the result

AutoLotto provides no authority under either New York or Delaware law supporting its suggestion that Skadden’s entitlement to secure its debt against AutoLotto’s recovery could be satisfied by allowing Skadden to pursue an ancillary recovery from J. Streicher. And hornbook authority refutes AutoLotto’s suggestion: “[T]hat an allowance has been made for attorney’s fees to be paid by a third person may not affect the lien of an attorney as against the attorney’s own client.” In New York, where charging liens are governed by statute, “[t]he statute has provided a lien in all cases, and not merely where the client fails to provide some other form of security or protection, and the courts cannot themselves substitute another form of protection for that provided in the statute.” And in Delaware, “[t]o permit a client who is a party to such an [hourly fee] agreement to escape a charging lien . . . is to judicially rewrite the contract at the expense of the attorney and to undermine the traditional purpose of a charging lien,” namely to “compensat[e] the attorney for her efforts” and “encourag[e] attorneys to provide legal services to clients.” Allowing counsel to pursue a fee award against its client’s adversary is a poor substitute for a charging lien in view of those purposes. Skadden has the right to secure its debt, in the amount of unpaid fees owed in this action, against AutoLotto’s recovery.

(Mike Frisch)