State Bar of Arizona Ethics Opinions

04-01: Liens; Files of Client; Collection of Legal Fees
1/2004

An attorney may not assert a retaining lien against any items in a client’s file that would prejudice the client’s rights. While an attorney may withhold internal practice management memoranda that does not reflect work done on the client’s behalf, the burden is on the attorney claiming the lien to identify with specificity any other documents or materials in the file which the attorney asserts are subject to the retaining lien, and which would not prejudice the client’s interests if withheld from the client.

FACTS[1]

The inquiring attorney represented a client in custody litigation in juvenile court.  The client had been previously represented in the same matter by another lawyer.  The client's former lawyer provided the inquiring attorney with the previous pleadings and correspondence related to the matter.  The inquiring attorney received from the client various personal items such as photographs and copies of certificates of completion of various evaluation programs the client had completed.  These items were supplied to the inquiring attorney for possible use as exhibits in the trial of the case.  The inquiring attorney also received and maintained substantial correspondence from the client.  The inquiring attorney conducted research and prepared numerous pleadings and memoranda in connection with the litigation.  These documents constituted the contents of the inquiring attorney's files at the end of his representation of the client.

The client never paid the inquiring attorney in full.  At the conclusion of the trial the client demanded her entire file.  The time for appeal has not expired.  The client also desires to use the contents of the file in other subsequent proceedings.  The inquiring attorney desires to assert a retaining lien over all the documents in the client's file and declines to deliver any part of the file to the client.  The inquiring attorney offers to consider delivering particular documents in the file if the client needs them in subsequent proceedings if they were not already marked in the concluded litigation.

QUESTIONS PRESENTED

1.     May an attorney ethically assert a retaining lien as to the entire contents of his client's file?

2.     May an attorney withhold documents or material from the client, pursuant to the lien, if the client will be prejudiced or damaged by lack of access to the document or material?

3.     Which party bears the burden of establishing prejudice to the client's rights?

RELEVANT ETHICAL RULES

ER 1.16     Declining or Terminating Representation

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(d)     Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering documents and property to which the client is entitled and refunding any advance payment of a fee that has not been earned.  Upon the client's request, the lawyer shall provide the client with all of the client's documents, and all documents reflecting work performed for the client.  The lawyer may retain documents reflecting work performed for the client to the extent permitted by other law only if retaining them would not prejudice the client's rights.

Comment:  Assisting the Client Upon Withdrawal

[9]     Ordinarily, the documents to which the client is entitled, at the close of the representation, include (without limitation) pleadings, legal documents, evidence, discovery, legal research, work product, transcripts, correspondence, drafts, and notes, but not internal practice management memoranda.  A lawyer shall not charge a client for the cost of copying any documents unless the client already has received one copy of them.

[10]     Even if the lawyer has been discharged by the client, the lawyer must take all reasonable steps to avoid prejudice to the rights of the client.

ER 1.15     Safekeeping Property

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(d)     . . . . Except as stated in this Rule or otherwise permitted by law or by agreement between the client and the third person, a lawyer shall promptly deliver to the client . . any funds or other property that the client  . . . is entitled to receive and, upon request by the client . . ., shall promptly render a full accounting regarding such property.

OPINION

Recent amendments to the Arizona Rules of Professional Conduct ("Rules of Professional Conduct" or "ERs") by the Arizona Supreme Court effective December 1, 2003, restrict the ability of the inquiring attorney to ethically claim a lien on the contents of his clients' files.  Prior to the amendment, Rule 1.16 permitted a lawyer to ethically assert a retaining lien[2] on the file of his client "to the extent permitted by other law." Ariz. R. Sup. Ct. 42, ER 1.16.  But, in the 2003 amendments, the Supreme Court made it clear that even if substantive law permitted the assertion of a retaining lien, a lawyer ethically may only assert such a lien "if retaining [the file materials] would not prejudice the client's rights." Id.

In the present inquiry, the inquiring attorney desires to assert a retaining lien against the entire contents of the client's file.  He indicates that he will return such file materials to the client if and when his client needs a specific document for other purposes.  Such a course of action, however, misperceives who has the burden of proving that "retaining [the file materials] would not prejudice the client's rights."  Arizona substantive law has long established that the attorney bears this burden.

The leading case on the assertion of attorney's retaining liens in Arizona remains National Sales & Service Co. v. Superior Court, 136 Ariz. 544, 667 P.2d 738 (1983), decided just prior to the promulgation of the ethical rules in 1983.  Because the National Sales case generated three opinions without a majority, it has been subject to various interpretations concerning both the ethical and substantive legal requirements pertaining to retaining liens.

In that case, National Sales hired an attorney ("Alper") to bring suit on its behalf.  It provided Alper with certain of its books, records, and files for use in preparing the case.  Before trial, National Sales and Alper "began to argue over fees and retainers."  Alper withdrew as counsel but refused to turn over National Sales' files and corporate books to its new attorney because Alper alleged that National Sales had not paid him for his services.  Alper thus asserted a retaining lien on National Sales' documents.  National Sales' motion to compel the return of the documents was denied by the trial court, which recognized the validity of the retaining lien as to the whole file.  The Arizona Supreme Court accepted special action jurisdiction and vacated the trial court's initial determination, finding that the trial court abused its discretion by ruling on the motion as to "the file" without requiring the parties to particularize their dispute as to specified items in the file.  The Court offered some instruction as to when an attorney's retaining lien would and would not attach to documents in the file and remanded to the trial court for rehearing.

The National Sales Court was divided in identifying which party had the burden of proving whether a retaining lien could be enforced as to a particular document.  The plurality opinion stated that on remand "it will be [the client's ] burden to establish, with particularity, the documents he contends [his attorney] is not entitled to retain and the reasons, consistent with this opinion, why [his attorney's] lien rights should not extend to those documents."  Id. at 547, 667 P.2d at 741.  The inquiring attorney's proposed course of conduct apparently incorporates this view of the burden of proof suggested by the National Sales plurality.

However, that view was not shared by a majority of the National Sales Court.  The dissent (Justice Cameron joined by Justice Gordon) noted that "[b]esides objecting to the standard adopted, I also disagree strongly with placing the burden on the client to prove the contents of a file to which he is denied access.  I would place the burden on the attorney to list all documents in the file, and to demonstrate that withholding them is not likely to prejudice the client's interests."  Id. at 550, 667 P.2d at 745 (Cameron, J., dissenting).  The special concurrence agreed with the dissent.  "I concur in remand, but agree with the dissent that the burden should be on the attorney to itemize the material in his or her possession to establish that such items are properly subject to the possessory lien."  Id. at 549, 667 P.2d at 743 (Feldman, J., concurring).

Thus, the view of the majority of the Court with regard to which party bears the burden of proof is that expressed by the dissent.  When an attorney wishes to withhold documents as being subject to a possessory lien, he bears the burden of specifically identifying the documents or materials he is withholding, and, in light of the explicit requirement of the amended rule, establishing that withholding the documents or materials in question does not prejudice the client's interests.

Here the inquiring attorney's proposed course of conduct does not comply with that requirement of the substantive law. It attempts to shift the burden of proof to the client to establish that she will be prejudiced by the inquiring attorney's lien as to a particular document.  Substantive law requires just the opposite.  Since the inquiring attorney's proposed course of conduct would not comply with the requirements of substantive law for asserting an attorney's retaining lien, it would not be ethical.  Both the amended rule and its prior version only permit an attorney to retain the materials in the file of the client to the extent authorized by substantive law.[3]

As a result of the inquiring attorney's desire to assert a blanket lien as to all the contents of the client's file, he does not identify the contents of the client's file, he does not identify the contents of the file with particularity.  However, he does identify several broad categories of documents within the file that he wishes to withhold from the client pursuant to this retaining lien.  Among them are memoranda, trial exhibits, pleadings, correspondence, and other matters.  To the extent the inquiring attorney identifies these categories of file materials, we note that his proposed course of conduct is also problematic for the following reasons.

1.     Trial Exhibits

The inquiring attorney desires to assert a retaining lien against certificate copies and photographs given to him by his client.  But, he acknowledges that these materials were given to him for use as exhibits at trial.  We need not determine whether a lien against such documents would prejudice the client because according to National Sales, the inquiring attorney's retaining lien never attaches to such documents.  National Sales makes clear that an attorney's retaining lien does not attach to documents given to an attorney for use as potential exhibits at trial.  136 Ariz. At 546, 667, P.2d at 741 ("Likewise, if a client brings some book, document, or other chattel to his lawyer for use as an exhibit at an impending trial, the client's purpose is inconsistent with the fixing of a lien upon the document."); see also Id. (Feldman, J., concurring) ("I . . .join in refusing to recognize the attachment of the lien to the documents, papers and records of the client which were given to the lawyer for the purpose of trial preparation or actual use at trial.").  Because no retaining lien can attach to materials given to the inquiring attorney for use as potential exhibits at trial, the inquiring attorney ethically cannot attempt to assert a lien against such items.

2.     Memoranda

In somewhat of an oversimplification, this committee has previously characterized National Sales as holding that an attorney ethically may assert a retaining lien as to his own work product in a client's file.  See Our Opinion 94-02 (March 1, 1994)  ("Under National Sales & Service Co., the retaining lien should apply only to the attorney's and his staff's research notes and internal memoranda, not the entire file.")[4]  To the extent our previous reading of National Sales was substantively correct, the amendment to the Rule now establishes an ethical requirement beyond the requirements of the substantive law.  "The lawyer may retain documents reflecting work performed for the client to the extent permitted by other law only if retaining them would not prejudice the client's rights.

Thus, even assuming National Sales permits the inquiring attorney, as a matter of  substantive law, to assert a lien as to his own work product in a client's file, the amended Rule now makes clear that the inquiring attorney cannot ethically do so unless he can establish that withholding such documents would not prejudice the client.  Thus, a lawyer is obliged to provide to the client, not only the client's own documents, but all documents reflecting work performed for the client, unless he can establish no prejudice by withholding the documents.

3.     Pleadings, Correspondence and Other Materials

According to the inquiring attorney, the balance of the file consists of pleadings and correspondence received from the client's previous attorney in this matter.  It also contains pleadings the inquiring attorney prepared and correspondence he received from the client.  The inquiring attorney indicated in his inquiry that the time for appeal of the trial court's ruling has not yet lapsed, and that the client desires parts of the file for use in the appeal and other matters.  Certainly, access to the remaining materials in the file would likely be of assistance to the client in pursuing her appeal.  Even assuming it is possible for client to pursue her appeal and other legal matters without access to the remaining materials in the file, it is likely that the client's inability to access those materials would impede her ability to receive adequate legal advice from another lawyer.

In connection with other ethical violations, our Supreme Court has disbarred a lawyer for violation of ER 1.16 (d) because "[h]is failure to return documents hindered his client's ability to receive adequate legal assistance."  In re Blankenburg, 143 Ariz. 365, 367, 694 P.2d 195, 197 (1984); see also Campbell v. Bozeman Investors of Duluth, 964, P.2d 41, 46-47 (Mont. 1998)  (lawyer claiming possessory lien failed to protect interest of client while claim was still pending); Miss. State Bar Ethics Committee Opinion 144 (1988)  (if retention of file will prevent client from proceeding with case in a timely manner, lawyer has breached ER 1.16); cf. In re Morse, 470 S.E.2d 232, 232-33 (Ga. 1996)  (failure to return file necessitating another lawyer's reconstruction of file and substantial delay in client's receipt of settlement proceeds was a violation of Georgia's equivalent of ER 1.16 (d)).

Even if circumstances may exist that make it possible for the client to receive adequate legal advice on the appeal and other matters without obtaining access to the documents in the file, it is, as set forth above, Attorney's burden to demonstrate that it is so.  National Sales, 136 Ariz. at 550, 667 P.2d at 745 (Cameron, J., dissenting).  The inquiring attorney has provided no facts to suggest that copies of the pleadings or other materials in the file are not necessary for the client to receive adequate legal advice or pursue the appeal.  In fact, all the facts provided by the inquiring attorney suggest the contrary.

We note that the text of the Rule continues to provide for the possibility that file documents, other than internal practice management memoranda, may exist that would not prejudice a client if not provided.  However, some practical realities should be accounted for by any lawyer contemplating the assertion of a retaining lien in such documents.

First, as the dissent in National Sales notes, a lien that does not cause some prejudice to the client is not an effective collection device.  "In order for  . . . liens to be effective as collection remedies, the retention of the property must be detrimental to the client's interest."  136 Ariz. at 550, 667 P.2d at 745 (Cameron, J., dissenting).  In evaluating any particular document to determine whether withholding it would prejudice the client, attorneys should consider that to the extent an asserted lien is more effective in producing payment, it is less likely to be considered valid.

Second, Comment 9 to Rule 1.16, added by the Supreme Court in conjunction with the 2003 amendments to the Rule, specifies that "[o] rdinarily, the documents to which the client is entitled at the close of the representation, include (without limitation) pleadings, legal documents, evidence, discovery, legal research, work product, transcripts, correspondence, drafts, and notes, but not internal practice management memoranda."  Comment 9.  These are the types of documents the inquiring attorney seeks to withhold here.  Even assuming the inquiring attorney was unfairly discharged, he must take care not to prejudice the interest of his client.  Comment 10 ("Even if the lawyer has been discharged by the client, the lawyer must take all reasonable steps to avoid prejudice to the rights of the client."). 

CONCLUSION

The inquiring attorney's assertion of a retaining lien on the entire file is improper.  Because the inquiring attorney's asserted retaining lien does not extend to materials given to inquiring attorney for use at trial, it is unethical to assert a lien as to such materials.  As to the remaining items in the file against which the inquiring attorney desires to assert a lien, the inquiring attorney bears the burden of establishing that his lien attaches to identified items in the file based on a particularized inquiry into the circumstances, and the requirements of Arizona law.  No lien can attach to documents when the attachment would prejudice the client's rights.  The limited facts provided by the inquiring attorney do not establish that he is entitled to a lien on the documents in the file.  Therefore, he should assert no lien on the documents, and should promptly return or provide to the client the documents on which he has no lien claim.  Not only do the plain terms of ER 1.16 compel the documents' return upon the client's request, so do the requirements of ER 1.15 (d), which states "[A] lawyer shall promptly deliver to the client or third person any . . . other property that the client . . . is entitled to receive and, upon request by the client . . ., shall promptly render a full accounting regarding such property.

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[1] Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.  © State Bar of Arizona 2003

[2] A retaining lien is distinct from a "charging lien."  A charging lien is a lien that attaches to funds or  "property created or obtained by the attorney's efforts." National Sales, 136 Ariz. at 545, 667 P.2d at 739.  The validity of charging liens was not at issue in National Sales, nor is it at issue here.

[3] While the legality or enforceability of a retaining lien is a subject beyond our jurisdiction, see our Opinion 92-01 (March 12, 1992) at 2  ("As to whether the inquiring attorney has a legal right to retain the documents in the file, we note that this is a pure legal question upon which the committee has traditionally declined to issue an opinion."), the rules of professional conduct, which define a lawyer's ethical obligations in this state, establish that it is only ethically permissible for a lawyer to retain the papers of his client as security for payment of his fee "to the extent permitted by law."   ER 1.16.  Thus, a lawyer who retains his client's papers beyond the extent permitted by law not only acts in excess of legal authority, but also violates his ethical obligations.  It is within our jurisdiction to opine on the ethical questions that involve "a mixed question of law and ethics."  Committee on the Rules of Professional Conduct, Statement of Jurisdictional Policies, No. 6(a) (January 20, 2000).

[4] The Court's plurality opinion in National Sales held that "it is proper for the lien to apply to the lawyer's and his staff's research notes and internal memoranda concerning the case.  This kind of paper work, the work product of the lawyer's efforts, is clearly the lawyer's property and remains his property at least until he is paid."  Id. at 546, 667 P.2d at 740.  The concurrence also seems to support that view.  "A retaining lien is akin to a lien of an artisan or mechanic, runs against the property, not against the attorney's debtor, and affords the attorney the same advantage as has any other workman who is entitled to retain things upon which he has worked until he is paid for his work."  Id. at 547, 667 P.2d at 741 (Feldman, J., concurring)  (quoting 7A C.J.S. Attorney & Client § 358, at 712 (1980) (footnote omitted)).