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11/08/91 MARTHA S. ELAM v. MONARCH LIFE INSURANCE

November 8, 1991

MARTHA S. ELAM, APPELLANT
v.
MONARCH LIFE INSURANCE COMPANY, APPELLEE



Certification of Questions of Law by the United States Court of Appeals for the District of Columbia Circuit.

Opinion for the court by Associate Judge Farrell. Terry, Farrell and Wagner, Associate Judges. Wagner, Associate Judge, Concurring in part and Dissenting in part.

The opinion of the court was delivered by: Farrell

In this certification of questions of law pursuant to D.C. Code § 11-723 (1989), we are asked to decide the following two related questions regarding the nature of an attorney's charging lien under District of Columbia law arising from a contingent fee agreement between an attorney and client: *fn1

1. Under District of Columbia common law, does a contingent fee agreement between an attorney and his client which sets contingent compensation at "a sum equal to" a portion of any recovery on the client's cause of action create an attorney's charging lien in favor of the attorney?

2. Under District of Columbia common law, does a validly created attorney's charging lien attach to the proceeds of settlement when the settlement fund out of which the attorney seeks payment is within the possession or control of the court? *fn2

Consistent with general principles of contract interpretation, we conclude that whether or not an attorney's charging lien has been created depends on the language and surrounding circumstances of the employment agreement. Consequently, we hold that an agreement providing for the client's payment of "a sum equal to 33 1/3% (1/3) of any sum I shall recover as the result of this accident" creates an attorney's lien on the funds recovered when, under the circumstances, it is reasonable to conclude that the parties looked to the recovered funds for payment. The present agreement satisfies that test. We also hold that, in general, a lien so created attaches when the fund comes into existence, whether by judgment or by settlement.

I.

Appellant Elam and her attorney, Howard M. Rensin, executed an employment contract for Rensin's services in regard to Elam's claim for damages against Sonya Steele. *fn3 The agreement provided:

I, Martha Elam, the undersigned, hereby retain and employ HOWARD M. RENSIN, Attorney at Law to represent me in my claim for damages against Sonya Steele for injuries sustained on Nov. 13, 1985 at 3rd St. N.W.

I hereby agree to pay my attorney for his services, a sum equal to 33 1/3% (1/3) of any sum I shall recover as the result of this accident. I agree to reimburse my attorney for all out-of-pocket expenses including, but not limited to, filing fees, court costs, investigative fees, process serving fees, deposition costs and the like incidental with the handling of my case.

In the event nothing is recovered, my attorney shall receive nothing for his services.

In September 1987, Elam filed suit against Steele for damages in the United States District Court for the District of Columbia. On October 26, 1988, the parties agreed to settle the case. Under the settlement agreement, Steele's insurance company agreed to pay Elam $19,000 in exchange for Elam's promise to dismiss the lawsuit against Steele.

While the settlement was being consummated, appellee Monarch Life Insurance Company (Monarch) filed an action in the United States District Court for the District of Columbia to enforce a judgment Monarch had previously obtained against Elam, *fn4 and the District Court issued a writ of attachment in judgment. This judgment was served on Steele's insurance company, which was holding Elam's $19,000 in proceeds from the settlement of the lawsuit against Steele. In response to Monarch's motion for condemnation, Elam asserted Rensin's attorney's charging lien on the proceeds of the lawsuit. *fn5 The District Judge refused to recognize the attorney's lien on the funds and granted judgment in favor of Monarch.

On appeal to the United States Court of Appeals for the District of Columbia Circuit, Monarch argued that the terms of Elam's contingent fee contract with her attorney -- providing for payment of a sum "equal to" a percentage of the recovery -- failed to create a lien on the settlement proceeds in favor of the attorney. See Thurston v. Bullowa, 42 App. D.C. 18, cert. denied, 234 U.S. 756 (1914); Annotation, Terms of Attorney's Contingent-Fee Contract as Creating an Equitable Lien in His Favor, 143 A.L.R. 204, 220 (1943) ("Ordinarily, where the language is, in substance, that the client will pay "an amount equal to" a specified percentage or fraction of the recovery, no lien is created"). Moreover, even if an attorney's lien exists in such circumstances, Monarch ...


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