The Nevada Supreme Court Revisits Attorney Charging Liens & Interpleader Actions In Recent Decision.
By J. Malcolm DeVoy, Esq.
The Nevada Supreme Court does look out for the state’s lawyers.
In its recent decision in Golightly & Vannah, PLLC v. TJ Allen, LLC, the Supreme Court provided more clarification about how attorneys can secure payment in their cases using the statutory attorney lien created by Nevada Revised Statutes (“NRS”) 18.015. 132 Nev. Adv. Rep. 41 (2016). It also provided important guidance that can streamline interpleader actions that are required when people who are entitled to recovery from funds obtained in a case cannot agree on their distribution.
To appreciate the significance of the Golightly decision, though, some background is necessary on attorneys’ liens in Nevada, and the Supreme Court’s treatment of them.
In 2001, the Nevada Supreme Court decided that attorney liens have precedence over medical liens, and attorney liens are not subject to distribution on a pro rata basis in the event of a dispute among lienholders. Michel v. Eighth Jud. Dist. Ct., 117 Nev. 145, 150-151, 17 P.3d 1003, 1007 (2001). Because of the power of attorneys’ liens created under NRS 18.015—commonly known as “charging liens,” which are distinct from common law retaining liens that an attorney maintains over a client’s files until paid—the Nevada Supreme Court has had to frequently address the issue.
Since the mid-2000s, the Nevada Supreme Court has issued a string of decisions addressing how charging liens should be deployed. By way of example, the Supreme Court has had to:
- clarify what property, such as retirement accounts, is exempt from being applied toward a charging lien, Bero-Wachs v. Law Office of Logar & Pulver, 123 Nev. 71, 157 P.3d 704 (2007);
- clarify the procedure for adjudicating a law firm’s rights under a charging lien, Argentena Consol. Mining Co. v. Jolley Urga Wirth Woodbury & Standish, 125 Nev. 527, 216 P.3d 779 (2009); how to interpret the notice requirements for perfecting a lien under NRS 18.015, Leventhal v. Black & LoBello, 129 Nev. Adv. Rep. 50, 305 P.3d 907 (2013); and,
- clarify that attorneys who worked on the case before obtaining recovery are entitled to assert a charging lien on any settlement, verdict, or other award, McDonald Carano Wilson LLP v. Bourassa Law Grp., LLC, 131 Nev. Adv. Rep. 90, 362 P.3d 89 (2015). (This is a frequent issue in the Nevada Supreme Court’s relatively austere number of reported decisions.)
In Golightly, the Supreme Court revisited some of the ground it tread in Leventhal. Because NRS 18.015’s lien in favor of attorneys is so powerful and jumps the line over medical providers, the Supreme Court has construed its procedural requirements very strictly. The Golightly decision reminds attorneys that NRS 18.015’s provisions are not self-executing, must be completed within the time provided in the statute and in the manner prescribed, and only apply to recovery obtained after the charging lien properly is asserted.
The Supreme Court did allow some daylight in its otherwise strict interpretation of NRS 18.015, though: NRS 18.015(3)’s requirement to “stat[e] the amount of the lien” to be effective does not necessarily require a specific dollar amount. By the Supreme Court’s own admission, calculating this amount in contingency cases is impossible, especially when the value of the verdict and final costs needed to obtain it are unknown at the time of providing notice of the lien.
The Nevada Supreme Court also gave another gift to attorneys in the Golightly decision by no longer requiring interpleader funds to be deposited with the Court under Nevada Rule of Civil Procedure 22. This is a retreat from the Supreme Court’s 2001 position in Michel, where it held that, “the disputed funds must be tendered to the court in their entirety.” 117 Nev. at 151, 17 P.3d at 1007 (emphasis added). Relying on precedent from the United States Court of Appeals for the Ninth Circuit, which held that depositing funds with the court is not necessary in interpleader actions brought only under Federal Rule of Civil Procedure 22, the Nevada Supreme Court used Golightly to clarify that an attorney can hold the funds in his or her own trust account until the court deciding the interpleader action directs their release.
The benefits of this clarification are marked for attorneys who regularly face interpleader actions. First, the cumbersome and sometimes delayed process of receiving funds from the court is eliminated. The attorney can unambiguously maintain the disputed funds in trust and release them only once the competing claims to the money are adjudicated. Second, it prevents opponents from claiming that the attorney holding the funds has somehow taken them hostage, or unilaterally taken control of them. So long as the funds remain in trust, the Nevada Supreme Court has determined that it is an appropriate place for disputed funds to remain until a court decides the competing claims upon the money.
While Golightly is something of a mixed bag, it reminds attorneys of the need for strict compliance with NRS 18.015. The decision also confirms best practices for asserting charging liens, and provides new guidance to streamline interpleader actions. Based on the frequency with which the Nevada Supreme Court publishes decisions addressing NRS 18.015, it appears that Nevada’s highest court is particularly mindful of its main constituents’ needs.
- Malcolm (“Jay”) DeVoy is the owner of DeVoy Law P.C. DeVoy focuses on providing representation in commercial disputes, serious personal matters, and advising medical professionals and practices about issues including
HIPAA, the Stark Law, and the Anti-Kickback Statute.