Reported / Citable
Background
Brian and Diane Friedland sustained injuries in a car accident and were successively represented by three different attorneys or firms on contingency fee bases. The first firm represented them for about 18 months without filing suit. In 2019, attorney Thomas Papez took over and filed a personal injury action, with a 40 percent contingency fee agreement that included an attorney lien on any recovery. Within weeks of filing, Papez and the Friedlands terminated the representation, and Papez filed a notice of attorney lien for $60,000.
The Friedlands proceeded pro per for some time and then retained attorney Jeffrey Jacobs in September 2020 under another 40 percent contingency fee agreement, with a first lien on any recovery. Jacobs litigated the case and ultimately negotiated a $200,000 settlement against the driver in August 2021. The driver’s insurer paid the bulk of the settlement directly and withheld about $67,000 to address the various attorney liens. The first firm settled its claim for $5,000, leaving roughly $62,000 in dispute between Papez and Jacobs.
In 2022, Jacobs filed a declaratory relief action in El Dorado County Superior Court against Papez and the Friedlands, seeking a single judicial determination of all parties’ respective rights to the withheld funds. Papez moved to dismiss for lack of subject matter jurisdiction, arguing that Jacobs first had to bring a separate action to establish his own lien before joining Papez. The trial court agreed and dismissed the action against Papez. Jacobs appealed.
The Court’s Holding
The Third District Court of Appeal reversed. The court held that California law does not require a successor attorney with a competing lien to litigate his own lien claim in a separate action before joining the prior attorney in a declaratory relief action over the disputed settlement funds. The successor attorney may bring a single declaratory relief action that names both the clients and the prior attorney and asks the court to determine the validity, amount, and priority of all competing liens.
The trial court had relied on the principle that priority generally goes to the first-created lien under Civil Code section 2897, but the Court of Appeal explained that priority is exactly what is to be determined in the action; it does not dictate which lawsuit must come first. The court also pointed out that “other things being equal” is the qualifier in section 2897, and other equitable considerations can shift priority. Requiring sequential lawsuits would also let a senior lienholder indefinitely block resolution of disputed funds, contrary to the policies recognized in Brown v. Superior Court.
The court emphasized that bringing all parties into one action ensures that each lien claimant has a fair opportunity to litigate its own lien within the same proceeding. Papez was not deprived of the chance to assert the validity, amount, and priority of his lien; he was simply asked to do so in a single proceeding alongside the competing claims. The case was remanded for further proceedings consistent with the opinion.
Key Takeaways
- An attorney with a contingency fee lien can bring a declaratory relief action against the client and competing lien holders to resolve all liens in a single proceeding.
- The general rule that the first-created lien has priority does not dictate the sequence of lawsuits; priority is determined within the lien adjudication itself.
- A senior lienholder cannot indefinitely block release of disputed funds by refusing to file its own lien enforcement action.
- Courts should encourage consolidated resolution of competing attorney liens to avoid duplicative litigation and protracted disputes.
- Insurers holding back settlement funds in light of competing liens can take comfort that California law provides a single-action mechanism to resolve the dispute.
Why It Matters
Successor counsel are common in personal injury and other contingency fee cases, and disputes over attorney liens often delay distribution of settlement proceeds for months or years. By confirming that a single declaratory relief action can resolve all competing liens, the opinion gives lawyers and insurers a more efficient path to closure. It also discourages tactical litigation by senior lienholders who might otherwise refuse to file their own actions in hopes of leveraging settlement.
For practitioners, the lesson is to plead all competing lien claimants and the client in one declaratory relief action and to ask for full adjudication of validity, amount, and priority. The case is also a useful citation for trial courts considering motions to dismiss based on the supposed need for sequential, separate actions among competing attorney lien claimants.