First Natl. Community Bank v. Garretson Firm Resolution Group
2017 Ohio 7582
| Ohio Ct. App. | 2017Background
- PLG (The Powell Law Group) and MMWR (Montgomery, McCracken, Walker & Rhoads) are Pennsylvania firms; PLG represented >4,000 Avoca plaintiffs against Tronox. MMWR agreed to assist PLG in Tronox bankruptcy work under a written fee agreement (MMWR/PLG Agreement).
- The agreement provided MMWR would be paid the greater of 1% of the cumulative gross recovery for PLG’s Avoca clients or an hourly (lodestar) multiplier, and that MMWR’s fee would be paid from PLG’s 40% contingency fee and from no other source.
- MMWR’s work helped create the Tronox Torts Claims Trust (the Tronox Trust), which ultimately held plaintiffs’ awards; Garretson administered the trust and held substantial sums attributable to PLG’s 40% fee.
- On Feb 15, 2011 the Tronox Trust authorized a $3 million advance to PLG earmarked in part for outside counsel; by that date MMWR had billed $1,478,465.94 under the agreement but PLG paid nothing to MMWR.
- When the trust was fully funded on Sept 16, 2015, PLG became entitled to distributions; MMWR sought to enforce an attorney’s charging lien over PLG’s contingency-fee funds in the trust for $2,951,316.06 plus interest.
- The trial court granted summary judgment to MMWR declaring an attorney’s charging lien over the Tronox Trust funds and set two accrual dates for prejudgment interest; PLG appealed.
Issues
| Issue | Plaintiff's Argument (PLG) | Defendant's Argument (MMWR) | Held |
|---|---|---|---|
| Whether MMWR is entitled to an attorney’s charging lien | Agreement limited MMWR to PLG’s contingency fee and did not name the Tronox Trust; no express agreement to look only to that fund | Agreement explicitly ties MMWR’s fee to PLG’s 40% contingency fee; MMWR’s services substantially produced the fund | MMWR entitled to charging lien under Pennsylvania law (Recht factors met) |
| Choice of law to decide lien entitlement | On appeal, PLG argues Ohio law should apply | Parties litigated and briefed under Pennsylvania law; trial court applied Pennsylvania law | PLG forfeited choice-of-law argument by failing to raise it below; Pennsylvania law applies |
| Whether a "fund" existed such that lien could attach | The contingency fee had not been drawn from the trust; PLG not yet entitled to full contingency fee before distributions | The Tronox Trust held PLG’s contingency-fee funds and MMWR helped create the trust; the agreement required payment from PLG’s contingency fee | The trust constituted the fund; MMWR could attach the contingency-fee proceeds in the Tronox Trust |
| When prejudgment interest began to accrue | No interest should run before plaintiffs’ underlying claims settled/distributions started | Interest accrues on the portion of fees corresponding to the Feb 15, 2011 advance for outside counsel; remaining balance accrues when distributions became payable (Sept 16, 2015) | Trial court did not abuse discretion: interest on $1,478,465.94 accrues from Feb 15, 2011; remainder accrues from Sept 16, 2015 |
Key Cases Cited
- Recht v. Urban Redev. Auth. of City of Clairton, 168 A.2d 134 (Pa. 1961) (establishes five-factor test for attorney charging lien)
- Grafton v. Ohio Edison Co., 671 N.E.2d 241 (Ohio 1996) (standard of review for summary judgment)
- Blakemore v. Blakemore, 450 N.E.2d 1140 (Ohio 1983) (standard for abuse of discretion review)
- In re Indep. Pier Co., 210 B.R. 261 (E.D. Pa. 1997) (discusses requirement of an express agreement to look to a particular fund for payment)