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Peterson v. Islamic Republic of Iran

United States District Court, District of Columbia

December 6, 2016

DEBORAH D. PETERSON, et al., Plaintiffs


          Royce C. Lamberth United States District Judge.


         This is a dispute between attorneys over who will reap the rewards of a sprawling litigation against the Islamic Republic of Iran (Iran) under the state sponsor of terrorism exception to the Foreign Sovereign Immunities Act (FSIA). Nearly a decade ago, this Court lamented the "contentious road blocks and setbacks in what has been an increasingly futile exercise to hold Iran accountable for unspeakable acts of terrorist violence." In re Islamic Republic of Iran Terrorism Litigation, 659 F.Supp.2d 31, 35 (D.D.C. 2009). In spite of the difficulties FSIA plaintiffs have historically had in obtaining and enforcing judgments against state sponsors of terrorism- difficulties too often chronicled by this Court-plaintiffs here managed to obtain judgments against Iran totaling in billions of dollars. Now, after more than fifteen years of litigation, plaintiffs' attorneys are eager to collect their fees.

         In short, attorneys David Cook and Jay Glenn have filed notices of attorney's charging liens [ECF Nos. 525, 528, 533, & 538], claiming they are entitled to a share of the contingent attorney's fees from the plaintiffs' recovery. Before this Court are plaintiffs' emergency motions to quash those liens [ECF Nos. 539 & 542]. This Court also considers Cook's Counter Motion to Compel Arbitration [ECF No. 544]. For the reasons discussed below this Court will GRANT the motion to quash Cook's lien, GRANT the motion to quash Glenn's lien, and DENY the motion to compel arbitration.


         Plaintiffs here are victims of the October 23, 1983 bombing of a United States Marine Corps barracks in Beirut, Lebanon. With help from Iran, suicide bombers from Hezbollah murdered 241 American servicemen and injured several more. This Court presided over a consolidated action by nearly one thousand plaintiffs consisting of the victims, their families, and the representatives of their estates. On September 7, 2007, this Court found Iran liable for damages because they provided material support and assistance to Hezbollah. Iran did not appear here, and default judgment was entered in favor of the plaintiffs in the amount of more than $2 billion.

         In 2013, plaintiffs successfully brought an action to seize Iranian assets in the United States District Court for the Southern District of New York. That court ordered the turnover of $1.75 billion in assets held by Citibank N.A., cash bonds that Bank Markazi-the Central Bank of Iran- held in an account through an intermediary. The court's order created a qualified settlement fund (QSF trust) and transferred the seized funds to a trustee-the Honorable Stanley Sporkin-for the benefit of the plaintiffs. The court's order was affirmed by both the Second Circuit[1] and the United States Supreme Court.[2]

         Plaintiffs were represented before this Court by the Fay Law Group, PA, Thomas Fortune Fay, the Perles Law Firm, P.C., and Steven R. Perles (collectively, "Fay and Pedes"). The contingency agreement is set forth below in full:

I, ___, ___, on their own behalf hereby retain and employ Fay & Perles (Attorneys) to represent them in the litigation and recovery or settlement of all claims and causes of action against The Islamic Republic of Iran, The Iranian Ministry of Information and Security, and their associates and agents with regard to the October 23, 1983 bombing of the Marine Corps Barracks in Beirut, Lebanon.
Client agrees to pay to said Attorneys a fee which will be computed as follows: (1) 33 1/3 % of the total gross recovery before deduction of any fees, liens or charges of any type; and (2) an amount equal to the necessary expenses in the preparation, domestic and foreign litigation, lobbying efforts, and administration of the case. This fee is contingent upon collection and to the extent of collection only. The percentage attorneys fee above described will be distributed to each of the Attorneys in an equal share. The "necessary expenses" portion of the attorneys fee will be distributed in the proportion which that attorney's expenses bears to the total expenses of the attorneys.
Client shall have no liability for any expenses in connection with the preparation, prosecution and administration of the claim, the above provision relating solely to the computation of the attorneys' fee. The Attorneys will, under no circumstances, represent to any vendor, supplier of services or contractor with regard to services, that they are incurring expenses on behalf of or chargeable to the credit of the Client and all such expenses shall be the sole obligation of the Attorneys and not in any manner the legal obligation of the Client. Under no circumstances shall any part of the attorneys' fee be considered to be a loan from the Attorneys to the Clients. The fees due the Attorneys shall constitute a lien upon any proceeds realized having priority before all other liens on any sums realized from this claim.
Client understands that Fay & Perles are lead counsel and co-counsel in a number of actions against the Islamic Republic of Iran, that most of these cases have judgments, and all are in a more advanced procedural posture than this case. Client further understands that although the Attorneys have been successful in the past in prosecuting cases under the Foreign Sovereign Immunities Act, collection may depend upon factors beyond their control, including, but not limited to, statutory amendments and the foreign relations of the United States. Attorneys will assert their best efforts but cannot guarantee success.

         Fay and Perles Contingent Retainer Agreement [ECF No. 539-2]. Fay and Perles argue that this agreement authorized them to employ other attorneys to assist them in their efforts, but did not authorize counsel to obligate the plaintiffs to pay fees of any other attorney employed. Pis.' Mem. in Supp. of Em. Mot. to Quash Cook's Lien 3 [ECF No. 539-1].

         Fay and Perles engaged Jay Glenn to prove the plaintiffs' damages to a Special Master. Glenn asserts that, pursuant to a written agreement signed in 2003, Fay and Perles agreed to pay Glenn 3% of the gross amounts collected on judgments for plaintiffs represented before the Special Master. Decl. of Glenn Exhibit 1 [ECF No. 546-1]. Further, Glenn asserts that Fay and Perles orally agreed to pay an additional one-third of amounts collected on plaintiffs referred by Glenn. Decl. of Glenn ¶ 11 [ECF No. 546]. Glenn claims to have represented 103 plaintiffs before the Special Master, resulting in a combined award of over $309 million. Mem. in Opp'n to Em. Mot. to Quash Glenn's Lien 2 [ECF No. 545]. The referred plaintiffs were allegedly awarded $111, 750, 000.00. Decl of Glenn Exhibit 10 at p. 3 [ECF No. 546-16]. In contrast, Fay and Perles claim Glenn's only agreement was with Fay and Perles themselves; they deny that the oral agreement existed and argue that Glenn is not entitled to a charging lien. Mem. in Support of Pis.' Em. Mot to Quash Glenn's Lien 3 [ECF No. 542-1] ("Glenn has no contract with Plaintiffs and no lien in [sic] can exist.").

         Fay and Perles similarly engaged David Cook "to represent the [p]laintiffs above referred to in order to effect a collection of the amounts due [in this action]." See Cook Agreement ¶ 3 [ECF No. 539-3]. Cook agreed to bear all expenses while pursuing collection on the judgment. Id. ¶ 6. "To the extent of the recovery by the Collection Service, the recovery shall first be subject to reimbursement of costs and expenses, and thereafter, subject to the fees due the Collection Service." Id. According to the agreement, the fee due the collection service was "a contingency fee of 10% on any net recovery, as received." Id. ¶ 7. "Net recovery is defined as the total recovery less costs of enforcement incurred by the Collection Service." Id. "In the event of any collection, the funds shall be remitted to a joint escrow account from which the contracting parties will disburse funds as they deem fit, however, the Collection Service shall be able to deduct their fees and expenses before remitting the funds to [Fay and Perles] who serve as the agent and repository for any collections." Id. ¶ 9. "In the event of any disputes by and among any of the attorneys, or all of the same, and the clients, and all of the same, such disputes shall be resolved by way of binding arbitration ...." Id. ¶ 5.

         Glenn and Cook each filed a notice of charging lien asserting a property interest in the QSF trust. Specifically, Glenn asserts a charging lien "for the purpose of securing Glenn's fee claims of: (a) 3% of the respective gross amounts collected on behalf of the 103 plaintiffs in this action ... to which Glenn is entitled pursuant to an agreement between Glenn and [Fay and Perles]; and (b) 11.11% of the respective gross amounts collected on behalf of the 40 plaintiffs in this action ... to which Glenn is entitled pursuant to agreements between Glenn, [Fay and Perles], and the respective plaintiffs; plus (c) unreimbursed costs and expenses due Glenn of $15, 288.56." Glenn's Am. Notice of Charging Lien [ECF No. 538]. Cook also asserts a charging lien "for the purposes of securing the fee claim of 10% of the gross proceeds guaranteed under that certain written contract dated April 5 and 6, 2008 by and between [Cook] and the Plaintiffs." Cook's Notice of Charging Lien [ECF No. 533].

         Fay and Perles moved to quash those charging liens. Specifically, Fay and Perles argue that this Court does not have jurisdiction over the liens or funds at issue here because the corpus-the QSF trust-is being administered in New York pursuant to orders issued by the SDNY court. Em. Mot. to Quash Glenn's Lien 2 [ECF No. 542]; Em. Mot. to Quash Cook's Lien 3 [ECF No. 539]. Further, they argue that Glenn's lien should be quashed because no agreement existed between Glenn and the plaintiffs here. Em. Mot. to Quash Glenn's Lien 2 [ECF No. 542]. Thus, because this is a dispute between attorneys rather than a dispute between attorneys and client, a charging lien is improper. Id. Similarly, Fay and Perles argue that Cook's lien should be quashed because he never appeared in the SDNY case that lead to recovery, and instead was terminated for incompetence. Em. Mot. to Quash Cook's Lien 2, ¶ 4 [ECF No. 539]. Further, Fay and Perles argue that "Cook has no right to lien any property of the Plaintiffs because he does not have a written agreement with the Plaintiffs." Mem. in Support of Pis.' Em. Mot. to Quash Cook's Lien 6 [ECF No. 539-1].

         Glenn argues that his charging lien is valid because he represented the 103 plaintiffs pursuant to the 2003 written agreement, an additional oral agreement, and the 40 retainer agreements he executed on behalf of Fay and Perles. Mem. in Opp'n to Pis.' Em. Mot. to Quash Glenn's Lien 4-6 [ECF No. 545]. Cook argues that, while he did not appear in the SDNY action, he retained New York attorneys to secure the Bank Markazi assets. Id. at 8. Cook also argues, similarly to Glenn, that the plaintiffs here were also parties to Cook's retainer agreement with Fay and Perles. Mem. in Opp'n to Pis.' Mot. to Quash Cook's Lien 9-14 [ECF No. 543]. In other words, Cook argues that plaintiffs authorized Fay and Perles to hire third-party service providers who would be paid an additional contingency fee out of the recovered judgment. Id. at 10-11. Thus, Cook argues he had a contingency agreement with plaintiffs themselves and not merely with Fay and Perles. Id. at 16. Finally, Cook argues that the question of whether Cook is entitled to some or all of his fee should be decided by an arbitrator pursuant to the arbitration clause in the retainer agreement. Id. at 5; Counter Mot. and Mot. to Compel 5 [ECF No. 544]. Cook asks this Court to compel arbitration of his claims against Fay and Perles, order the appearance of plaintiffs at that arbitration, and order the QSF trustee to withhold 10% of the funds from distribution pending the outcome of the arbitration. Id. at 19.


         The existence and effect of an attorney's lien is governed by the law of the place in which the contract between the attorney and client is to be performed. 7 Am. Jur. 2d Attorneys at Law § 351 (1980). The District of Columbia has no statute setting out attorney's liens; rather, D.C. relies on the common law. See Wolf v. Sherman, 682 A.2d 194, 197 (D.C. 1996). The "charging lien" arises when an attorney obtains a judgment or decree for a client, and has been characterized as "merely a claim to the equitable interference by the court to have that judgment held as security for his debt [the attorneys' charges against the client]." Id. at 197 (quoting Lyman v. Campbell, 182 F.2d 700, 701-02 (D.C. Cir. 1950)). Unlike the retaining lien, the charging lien is not dependent on possession of a corpus. Id.

         In order for a charging lien to attach, "it is indispensable that there exist between the client and his attorney an agreement from which the conclusion may reasonably be reached that they contracted with the understanding that the attorney's charges were to be paid out of the judgment recovered." Id. Whether written or verbal, an unmistakable contingency agreement between a client and his attorney gives rise to an equitable attorney's charging lien. See District of Columbia Redevelopment Land Agency v. Dowdey,618 A.2d 153, 160 (D.C. 1992) (finding an undisputed oral contract between an attorney and his clients that the attorney would be paid out of the recovered funds sufficient to support an equitable lien). However, if no agreement exists between a client and an attorney, there is no basis for inferring the intent necessary giving rise to such an equitable lien. See Democratic ...

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