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Fortunata Liana Ie v. Ageha Japanese Fusion, Inc.

United States District Court, S.D. New York

April 2, 2018

FORTUNATA LIANA IE, Plaintiff,
v.
AGEHA JAPANESE FUSION, INC., et al., Defendants.

          OPINION AND ORDER

          SARAH NETBURN, UNITED STATES MAGISTRATE JUDGE.

         On April 13, 2017, the Honorable John G. Koeltl dismissed this case without prejudice and referred the matter to my docket for the purposes of fixing and enforcing a charging lien. ECF Nos. 97, 98. Counsel for Plaintiff Fortunata Liana Ie subsequently filed a motion to fix and enforce a charging lien against Plaintiff and Defendants Ageha Japanese Fusion, Inc. and Chun Yong Chen. ECF Nos. 102-03. As discussed below, the motion to fix and enforce a charging lien is GRANTED in part and DENIED in part.

         BACKGROUND

         In 2015, Plaintiff brought this action alleging that Defendants violated the Fair Labor Standards Act (“FLSA”) and the New York Labor Law. ECF No. 1. The last time Plaintiff's counsel was able to contact Plaintiff was on March 22, 2017, when counsel communicated to Plaintiff that Defendants had refused to make an offer to settle the action. ECF No. 86. Nevertheless, trial was scheduled to begin on April 4, 2017, apparently in the hopes that counsel would regain contact with Plaintiff before that date. Id. On the eve of trial, however, defense counsel informed the Court that Defendants had privately agreed to pay $15, 000 in cash to Plaintiff to settle the action. ECF No. 91. The parties reached this agreement without their counsel's involvement. Id. Defense counsel then requested that the Court approve the settlement and dismiss the case with prejudice. Id.

         On April 12, 2017, the Court held a conference with Plaintiff's counsel and Defendants. ECF No. 105. Plaintiff did not appear at the conference. Id. at 2:12-16. After hearing arguments from the parties, the Court held:

The plaintiff has apparently accepted a private settlement from the defendants without involving her counsel. In exchange, she will not pursue her claims. Dismissal with prejudice would be the functional equivalent of judicially approving the private settlement, which would effectively circumvent the FLSA's court approval requirement. And, without the plaintiff to confirm the substance of the settlement, this Court could not approve the settlement.
On the other hand, it is clear that this case cannot proceed without the plaintiff's involvement. Accordingly, dismissal of this case for failure to prosecute without prejudice is appropriate.

Id. at 22:20-23:7. In addition, the Court maintained ancillary jurisdiction for the purposes of fixing and enforcing a charging lien. Id. at 24:6-8. On February 20, 2018, Plaintiff's counsel filed a motion to fix and enforce a charging lien against Plaintiff and Defendants, jointly and severally. ECF Nos. 102-03. On March 6, 2018, Defendants responded in opposition to the motion. ECF No. 104.

         DISCUSSION

         “A charging lien is a security interest in the favorable result of litigation, giving the attorney equitable ownership interest in the client's cause of action . . . .” Antonmarchi v. nConsol. Edison Co. of N.Y., 678 F.Supp.2d 235, 240 (S.D.N.Y. 2010) (quoting Chadbourne & Parke, LLP v. AB Recur Finans, 794 N.Y.S.2d 349 (1st Dep't 2005)). Section 475 of the New York Judiciary Law provides:

From the commencement of an action, special or other proceeding in any court or before any state, municipal or federal department . . . the attorney who appears for a party has a lien upon his or her client's cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, award, settlement, judgment or final order in his or her client's favor, and the proceeds thereof in whatever hands they may come; and the lien cannot be affected by any settlement between the parties before or after judgment, final order or determination. The court upon the petition of the client or attorney may determine and enforce the lien.

         “[T]he lien created by section 475, which attaches by its terms in an action or proceeding ‘in any court or before any . . . federal department, ' is enforceable in federal courts in accordance with its interpretation by New York courts.” Chesley v. Union Carbide Corp., 927 F.2d 60, 67 (2d Cir. 1991). “The statute is remedial in character, and hence should be construed liberally in aid of the object sought by the legislature, which was to furnish security to attorneys by giving them a lien upon the subject of the action.” Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 450 (2d Cir. 1998) (quoting Fischer-Hansen v. Brooklyn Heights R.R., 173 N.Y. 492, 499 (1903)).

         “It is well-settled that an attorney loses his right to enforce a charging lien if the attorney withdraws or is discharged for cause.” In re Harley & Browne, 957 F.Supp. 44, 48 (S.D.N.Y. 1997). Based “upon information and belief, ” Defendants contend that Plaintiff instructed her counsel to discontinue the lawsuit on April 3, 2017, after she agreed to the private settlement with Defendants. ECF No. 104 at 5. Defendants also claim that Plaintiff's counsel refused to seek dismissal of the action as directed, leading Plaintiff to discharge her counsel for cause. Id. at 5, 6; see Allstate Ins. v. Nandi, 258 F.Supp.2d 309, 312 (S.D.N.Y. 2003) (“Courts typically find a discharge ‘for cause' where there has been a significant breach of legal duty.”). Yet Defendants do not offer any evidence to support these factual claims-their assertions about what transpired between Plaintiff and her counsel appear to be based solely on Defendants' own speculation. Moreover, Plaintiff's attorneys state that the last time they communicated with their client was on March 22, 2017. ECF No. 103 at 4; see also In re Cooper, 32 N.Y.S.2d 158, 162 (Sup. Ct. 1941) (taking as true allegations in a § 475 petition that were not contradicted by affidavit), rev'd on other grounds, 291 N.Y. 255 (1943). Plaintiff could not have instructed her counsel to discontinue the lawsuit on April 3, 2017, if her last communications with counsel occurred twelve days earlier. Thus, Defendants have not demonstrated that Plaintiff's counsel was discharged for cause.

         “In the event of settlement, the attorney's lien attaches to the fund representing the cause of action extinguished by the settlement.” In re Shirley Duke Assocs., 611 F.2d 15, 18 (2d Cir. 1979). Defendants cannot cut a plaintiff's counsel out of settlement negotiations, exclude attorneys' fees from the settlement, and thereby decrease the amount of money they must pay to the plaintiff to resolve a case. The attorney's lien “attaches to the amount agreed upon in settlement the instant that the agreement is made, and, if the defendant pays over to the client without providing for the lien of the attorney, he violates the rights of the latter, and must stand the consequences.” Fischer-Hansen, 173 N.Y. at 502; cf. Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 205-06 (2d Cir. 2015) (noting that “[w]ithout judicial oversight, . . . employers may be more inclined to offer, and employees . . . may be more inclined to accept, private settlements that ultimately are cheaper to the employer than compliance with the Act” (first two alterations in original) (quoting Socias v. Vornado ...


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