In re Saroff, 509 B.R. 166

Debtor hired Lewis, King, Krieg & Waldrop, P.C. (Lewis King) in Feb. 2009 on a contingency fee to pursue an inverse-condemnation suit against KCDC and the City of Knoxville; fee: 5% of first $4.2M, 33 1/3% above that; firm agreed to advance expenses and be reimbursed.
Involuntary Chapter 7 petition filed July 6, 2009; Order for Relief entered Feb. 24, 2010; Trustee appointed and later sought to retain Lewis King but conflict prevented employment; Hollow was later retained as special counsel.
Lewis King filed the Circuit Court lawsuit Feb. 26, 2009 and recorded a Notice of Attorney Fee Lien Jan. 19, 2010 (post-petition recording) with Knox County Register of Deeds.
The Trustee settled the lawsuit for $1,450,000 in Aug.–Nov. 2013 and moved to sell estate property free and clear; proceeds were received by the Trustee.
Trustee objected to Lewis King’s secured claim (Claim No. 21-1), asserting the lien was ineffective because recorded post-petition and that, at most, the firm was owed allowed unsecured pre-petition expenses ($2,272.13).
Trial court found Lewis King performed substantial pre-petition work benefitting the estate, awarded the lesser of contingency or quantum meruit, reduced by estate expenses caused by the firm’s post-petition actions, and held the claim secured by the recovery proceeds.

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Is Lewis King entitled to any compensation for pre-petition legal services?	Yes — performed substantial pre-petition work and has a contractual right to fees.	Trustee: No — firm played no role in ultimate settlement; therefore no recovery under contingency.	Held: Yes — firm performed significant pre-petition work benefiting estate; entitled to compensation.
2. If entitled, what measure — contingency fee or quantum meruit?	Quantum meruit for value of services (higher amount claimed).	Trustee: Contingency only (firm didn’t secure settlement).	Held: Recover the lesser of contingency or quantum meruit; contingency (5% of $1,450,000 = $72,500) is the lesser.
3. Should the claim be reduced for harm caused by post-petition conduct?	N/A (firm argued claim as filed).	Trustee: Reduce for costs the estate incurred due to firm’s post-petition actions.	Held: Reduced by $1,060 (costs to obtain turnover/defend trustee’s interest).
4. Is Lewis King’s claim secured (attorney’s charging lien) despite post-petition recording?	Lien relates back to suit filing (Feb. 26, 2009) and secures proceeds; thus secured.	Trustee: Recording post-petition violated automatic stay and lien perfection invalid.	Held: Lien relates back under Tenn. law; although recording post-petition violated stay, lien existed as of suit filing and claim allowed as secured against recovery proceeds.

Easley v. Pettibone Mich. Corp., 990 F.2d 905 (6th Cir.) (actions in violation of the automatic stay are voidable and may be voided absent limited equitable circumstances)
Starks v. Browning, 20 S.W.3d 645 (Tenn. Ct. App.) (distinguishing retaining and charging attorney liens; charging lien secures fees from recovery)
Mitch Grissim & Assoc. v. Blue Cross & Blue Shield of Tenn., 114 S.W.3d 531 (Tenn. Ct. App.) (recovery on discharge without cause governed by quantum meruit or contract whichever is greater; with cause, lesser of quantum meruit or contract)
Peoples Nat’l Bank of Wash. v. King, 697 S.W.2d 344 (Tenn.) (attorney’s charging lien encompasses reasonable and necessary expenses incurred in prosecution of the claim)
Schmitt v. Smith, 118 S.W.3d 348 (Tenn.) (attorney’s lien requirements satisfied if adequate notice of lien provided to affected parties)
In re Cleveland, 349 B.R. 522 (Bankr. E.D. Tenn.) (burden-shifting on objections to proofs of claim)