Articles
Bench & Bar of Minnesota is the official publication of the Minnesota State Bar Association.

Time to Get Paid: Attorney’s liens in Minnesota

In order to have a thriving legal practice, a lawyer must have clients who pay for services in a timely manner. Yet despite implementing screening procedures to make sure your new clients are capable of paying, and requesting up-front deposits to cover the estimated work, you may find yourself unpaid after hours and hours of valuable legal advice and representation. In certain scenarios you may be out of luck—but depending upon the assets your client has or may receive, you have an option of asserting a lien for the value of the services you rendered.

Generally, a lien is “a hold or claim upon the property of another as security for a debt.”1 Liens upon property to secure payment of debt have been authorized in Minnesota since the creation of the state.2 Specifically, attorney’s liens prevent clients from benefiting from an attorney’s work without paying for it.3 In Minnesota, attorney’s liens are governed by Minn. Stat. §481.13, which preempts prior common law doctrines4 concerning attorney’s liens.

Procedure

Minn. Stat. §481.13 sets forth the procedure for “establishing the lien, determining its amount and enforcing the lien.”5 The attorney’s lien statute creates two different types: cause-of-action attorney’s liens and property-interest liens.6 An attorney’s lien attaches to the cause of action or property involved or affected by the attorney’s representation at the commencement of representation.7 While formal notice is not required prior to perfecting a cause-of-action attorney’s lien,8 it is required to perfect a property-interest attorney’s lien. A notice of the lien claim must be filed in order to give notice to third parties of such a lien.9 Such notice, referred to as the “notice of intention to claim a lien10… must be filed in the office of the county recorder… and noted on the certificate… of title affected, in… the county where the real property is located.”11 The attorney must then deliver written notice of the filing to the owner of the real property or the owner’s agent, either in person or via certified mail.12 Failure to deliver the written notice within 30 days prevents the attorney from attempting to enforce the lien.13 

If the attorney’s lien is claimed upon personal property, then the notice must be filed “in the same manner as provided by law for the filing of a security interest.”14 The attorney claiming the lien would then have to file the appropriate notice based on the type of personal property over which the lien is claimed.15 The notice of intent to claim a lien may not be filed “more than 120 days after the last item” of work.16 Once perfected, the attorney lien will generally have priority over all subsequently acquired security interests in the property subject to the lien.17

The attorney can establish the lien by a summary proceeding or in “a separate equitable enforcement action.”18 An attorney’s lien proceeding, in the action or proceeding from which the lien accrued, is a summary proceeding conducted by the district court, and “[a]fter the value of the lien has been determined, the district court enters judgment for the amount due.”19 At a summary proceeding to establish an attorney lien, the district court is not required to consider defenses of legal malpractice and breach of fiduciary duty.20 

Additional points to bear in mind: 

  • “Questions as to the validity of an attorney’s lien are issues of fact.”21 
  • “If an express, written agreement for the attorney-client relationship exists, the amount of the attorney lien is determined by interpreting that agreement.”22 
  • “A court may deny a request for an attorney’s lien after determining that the amount the client has already paid is sufficient compensation for legal services rendered.”23
  • Importantly, the amount of the attorney lien is limited to the attorney’s compensation for the work performed for the client and excludes any collection fees and costs incurred in seeking the attorney lien.24

The resulting declaratory judgment establishes the lien.25 The court action is sometimes referred to as “reducing the lien to a judgment.”26 Once established, the attorney lien does not create an agreement to pay attorney’s fees, but does impose a lien to protect an attorney who already has such an agreement.27 The attorney lien secures payment for the attorney from funds that are to be paid to the client if money or property has been deposited with the court in the action under Minn. R. Civ. P. 67. If no such funds are available or scheduled for disbursement, then other means must be undertaken to secure payment.

Enforcement

An attorney lien “may be enforced in a variety of ways, including through the ordered sale or mortgage of the property to which the lien attaches.”28 “When a court is enforcing a lien, a separate equitable action is always required.”29 The separate equitable action is similar to a foreclosure by action, or mechanics’ lien action.30 Also: “An enforcement action is strictly equitable, and there is no right to a jury trial.”31

It is important to distinguish an attorney lien foreclosure action from an action for breach of contract, and any related claims32 seeking repayment against a former client for unpaid attorney fees. The Minnesota attorney lien statute does not authorize “an unqualified personal judgment, independent of the action or proceeding in which the attorney provided representation….”33 An attorney seeking to have a judgment directly against the former client must proceed with commencing a new civil action for the unpaid fees, which could be combined in a foreclosure action if necessary.34

If an attorney is attempting to enforce an attorney’s lien against real property, the attorney must serve and file the initiating pleadings of the equitable action to reduce the lien to a judgment “within one year after the filing of the notice of intention to claim a lien, unless within the one-year time period the owner has agreed to a longer time period to assert the lien.”35 But the stipulated extension to enforce within one year cannot exceed three years, and must be put in writing that includes a legal description of the affected real property, filed with the county recorder or registrar where the real property is located.36 Essentially, any attorney lien in real property automatically expires if the attorney fails to commence an action to reduce the lien to a judgment within one year of filing, with the possibility of negotiating a small two-year extension. Additionally, if the real property upon which the attorney is attempting to foreclose is subject to the homestead exemption, which is currently $420,000 (or $1,050,000 for a farmhouse37), the attorney must secure a lien waiver to exemption from the debtor.38 The homestead exemption continues to apply to proceeds of a sale of the property by the homeowner, or conveyance by the homeowner, for one year after the sale or conveyance.39 

Ethical concerns

Depending upon the scope of representation, situations may arise where a client does not have money available to pay for a lawyer’s services until disbursement of funds at the resolution of the client’s case. In circumstances such as these, a client may wish to voluntarily stipulate to entry of an attorney lien. While such arrangements are common, there are ethical concerns that a lawyer must take into consideration when proposing such stipulation. Prior to entering into a transaction with a client where the lawyer would be acquiring a security adverse to their client, the lawyer must fully disclose “in writing in a manner that can be reasonable understood by the client” the terms upon which the lawyer is acquiring the interest and a statement indicating that it is desirable for the client to seek the advice of independent legal counsel.40 The attorney must also obtain the client’s “informed consent, in a document signed by the client separate from the transaction documents, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.”41

It is also important to note that attempts to foreclose attorney liens upon homesteads without a valid homestead exemption waiver (in which the client’s interests do not exceed the statutory exemption amount) are ethically prohibited—presumably because the foreclosing attorney would not stand to recover any proceeds from the sale if successful, and could be subjected to sanctions for asserting claims with the improper purpose of harassment in order to leverage payment of attorney fees.42 The $420,000 Minnesota homestead exemption is exceptionally large compared to other states,43 and must be carefully considered when evaluating the burden and expense of pursuing an attorney lien upon a homestead and the likelihood of succeeding on the merits.44

Attorneys are also prohibited from asserting attorney liens over a client’s “papers and property” in order to pressure the client into paying outstanding legal fees, or the cost of copying the files or papers;45 and an attorney lien may not be asserted over an abstract of title.46 

In a perfect world, a client’s promise to pay would be all that is needed to ensure a lawyer is fairly compensated. But such a world would rarely need the services of a lawyer. Until the world learns to live as one, lawyers will continue to have issues with honest but unfortunate souls who are unable to pay—as well as cheapskates, freeloaders, and bill-jumpers.

 

This article is intended for informational purposes only and should not be relied upon as legal advice, nor construed as creating an attorney-client relationship with Andrew A. Green or Cottrell Green PA. Readers should not rely upon any information in this article, and are strongly encouraged to seek independent legal counsel.

ANDREW A. GREEN is a partner at Cottrell Green PA, specializing in creditor’s rights, consumer debt collection, commercial debt collection, construction disputes, and general civil litigation.

 

Notes

1 Host v. Host, 497 N.W.2d 617, 619 (Minn. Ct. App. 1993).

2 See Minn. Const. art. I, §12.

3 City of Oronoco v. Fitzpatrick Real Estate, LLC, 883 N.W.2d 592, 595 (Minn. 2016) (quotations omitted) (quoting Dorsey & Whitney LLP v. Grossman, 749 N.W.2d 409, 420 (Minn. Ct. App. 2008)).

4 “Generally, where a statute purports to cover the entire field, as does ours, it must be considered to govern to the exclusion of common-law or equitable liens.” Akers v. Akers, 233 Minn. 133, 139, 46 N.W.2d 87, 91 (1951); cf. St. Cloud Nat. Bank & Tr. Co. v. Brutger, 488 N.W.2d 852, 855 (Minn. Ct. App. 1992) (discussing two common law types of attorney’s liens: the retaining lien and the charging lien, and that Minn. Stat. §481.13 preempts the common law retaining lien).

5 Boline v. Doty, 345 N.W.2d 285, 289 (Minn. Ct. App. 1984).

6 Minn. Stat. §481.13, subd. 1(a).

7 Dorsey & Whitney LLP, 749 N.W.2d at 420 (quoting Minn. Stat. §481.13, subd. 1(a)).

8 See Minn. Stat. §481.13, Subd. 2; see also City of Oronoco, 883 N.W.2d at 596.

9 Minn. Stat. §481.13, subd. 1(a)(2).

10 The Minnesota Commerce Department provides a blank notice of intent to claim an attorney lien, in .pdf format. Minnesota Commerce Department, Attorney Lien Minn. Stat. 481.13, http://www.commerce.state.mn.us/UCB/40.1.3.pdf .

11 Minn. Stat. §481.13, subd. 2(a).

12 Id.

13 Id.

14 Id. at subd. 2(b).

15 See 46 U.S.C. §31325 (maritime lien upon vessels); 49 U.S.C. §44107 (security interest upon aircraft); Minn. Stat. §168A.17 (security interest upon motor vehicles); Minn. Stat. §§336-9, et. seq. (security interests upon miscellaneous personal property).

16 Minn. Stat. §481.13, subd. 2(a).

17 “[S]eniority is usually determined by the chronological order in which liens… are recorded.” Timeline, LLC v. Williams Holdings No. 3, LLC, 698 N.W.2d 181, 185 n.2 (Minn. Ct. App. 2005) (citing United States v. Dairy Farm Leasing Co., 747 F.Supp. 1335, 1338 (D. Minn.1990)). 

18 First Bank Nat. Ass’n v. Northside Mercury Sales & Serv., Inc., 458 N.W.2d 424, 427 (Minn. Ct. App. 1990) (citing Boline v. Doty, 345 N.W.2d 285, 289 (Minn. Ct. App. 1984)).

19 Thomas A. Foster & Associates, LTD v. Paulson, 699 N.W.2d 1, 6 (Minn. Ct. App. 2005) (citing Minn. Stat. §481.13, subd. 1(c) & quoting Boline v. Doty, 345 N.W.2d 285, 289 (Minn. Ct. App. 1984)).

20 See Id. at 6–7.

21 Ashford v. Interstate Trucking Corp. of Am., Inc., 524 N.W.2d 500, 502 (Minn. Ct. App. 1994) (citing Lende v. Canby Hereford Farms Co., 177 Minn. 318, 320, 225 N.W. 150, 151 (1929)).

22 Matter of Caswell, 905 N.W.2d 507, 511 (Minn. Ct. App. 2017) (citing Dorsey & Whitney LLP v. Grossman, 749 N.W.2d 409, 418 (Minn. Ct. App. 2008)).

23 First Bank Nat. Ass’n, 458 N.W.2d at 427 (citing Roehrdanz v. Schlink, 368 N.W.2d 409, 412 (Minn. Ct. App. 1985)).

24 Effrem v. Effrem, 818 N.W.2d 546, 551 (Minn. Ct. App. 2012) (citing Minn. Stat. §481.13, subd. 1(a)).

25 Dorsey & Whitney LLP, v. Grossman, 749 N.W.2d 409, 422 (Minn. Ct. App. 2008).

26 Kenneth L. Jorgensen, Repeal of Homestead Lien Ethics Opinion, Bench & Bar of Minnesota, May/June 2003, at 17, 18.

27 Williams v. Dow Chem. Co., 415 N.W.2d 20, 26 (Minn. Ct. App. 1987) (citing Johnson v. Blue Cross and Blue Shield of Minnesota, 329 N.W.2d 49, 53 (Minn. 1983)).

28 Dorsey & Whitney LLP, 749 N.W.2d at 421 (Minn. Ct. App. 2008) (citing Boline v. Doty, 345 N.W.2d 285, 290 (Minn. Ct. App. 1984)).

29 Boline v. Doty, 345 N.W.2d 285, 289 (Minn. Ct. App. 1984) (citing Schroeder, Siegfried, Ryan and Vidas v. Modern Electronic Products, Inc., 295 N.W.2d 514, 515 (Minn. 1980).

30 Id. at 289; cf. Minn. Stat. §§514.10-11.

31 Boline, 345 N.W.2d at 290 (citing Village of New Brighton, 278 N.W.2d 321 (Minn. 1979)).

32 Typical causes of action in an independent civil lawsuit seeking unpaid attorney fees include account stated, see Meagher v. Kavli, 251 Minn. 477, 88 N.W.2d 871 (1958); breach of an express contract for legal services; breach of implied contract to provide legal services, and unjust enrichment, see Williams, 415 N.W.2d at 24.

33 Dorsey & Whitney LLP, 749 N.W.2d at 422.

34 See Williams v. Dow Chem. Co., 415 N.W.2d 20, 25 (Minn. Ct. App. 1987) (Attorney’s liens on causes of action and liens on judgments “are not mutually exclusive.”)

35 Minn. Stat. §481.13, subd. 3.

36 Id.

37 Minn. Stat. §510.02.

38 Minn. Stat. §510.05.

39 Minn. Stat. §510.07.

40 Minn. R. Prof’l Conduct 1.8(a)(1)-(2).

41 Minn. R. Prof’l Conduct 1.8(a)(3).

42 Jorgensen, supra note 26, at 19; see also Minn. Stat. §549.211 (providing sanctions for presenting a claim for any improper purpose, including harassment).

43 Compare 11 USC §§522(d)(1) & (5) (New Jersey and Pennsylvania lack homestead exemptions and when filing for bankruptcy debtors must rely on the federal exemption amount of $23,675.00); Va. Code §34-4 (Virginia: $5,000.00); Tenn. Code §26-2-301 (Tennessee: $5,000.00); and Wy. Stat. §1-20-101 (Wyoming: $20,000.00); with Fla. Const. Ar. X §4 (Florida: unlimited); Iowa Code §561.16 (Iowa: unlimited); Kan. Stat. §60-2301 (Kansas: unlimited); and 31 Okla. St. §2 (Oklahoma: unlimited). 

44 Minn. Stat. §510.02, Subd. 1.

45 Minn. R. Prof’l Conduct 1.16(g).

46 Minn. Stat. §386.375, subd. 1(c).

 

Leave a Reply

Articles by Issue

Articles by Subject