Attorneys Fees

August 12, 2019

Attorney Charing Liens in New Jersey

Attorneys have common law and statutory security interests in the proceeds of recoveries of their clients, generally referred to as charging liens.
A statutory lien is created when a lawyer files a pleading with an affirmative claim for recovery and may be enforced by filing a petition in the underlying action.
Clients have an interest in the assertion of an attorney charging lien and must be notified of their right to have the amount of the fee determined by arbitration.

Attorneys that provide services to clients with that yields a financial recovery to the client will typically have a security interest in that recovery to secure their fee. The lien may be statutory or, in some cases, the attorney may have a lien that is enforceable in equity. These two types of liens, statutory and equitable, have significant differences, but both types of liens provide the lawyer with a security interest in the proceeds of the case. Law Firm Business Divorce Attorneys

In this article, we will take a look at some of the mechanics of asserting and enforcing a lien. In a subsequent post, we will examine the manner in which courts have allocated competing claims for fees.

The Attorney Charging Lien

A lien is more than just a claim for fees. It is a secured interest in the recovery that a client achieves – through the lawyer’s efforts, of course — for the satisfaction of the debt. It may be asserted over all of the recovery and, therefore, even against the client. As a practical matter, liens are asserted when a lawyer is replaced or in rare instances when a client fires the lawyer in an attempt to avoid paying a fee. Continue reading

August 10, 2018

Fair Value of a Corporation: Art not Science

by Jay R. McDaniel, Esq.

In valuing the shares of a minority shareholder, a trial court must consider any valuation technique that is generally acceptable in the financial communities. Determining fair value is an art, not a science.
Directors that hold a majority interest in a closely held business have a duty to deal fairly with the minority and in a merger to make full and fair disclosures and offer a fair price in exchange for shares.
A minority shareholder that sits by or acquiesces to wrongful conduct by the majority waives the right to later pursue a claim based on that behavior.
Fee awards are available only to shareholders with a statutory right to dissent and in the discretion of the judge.

Casey v. Brennan, 344 N.J. Super. 83 (App. Div. 2001)

Statutes: NJSA 14A:11-1, NJSA 14A11-3; NJSA 14A:6-14: NJSA 14A:11-6; NJSA 14A:11-10

Action challenging the valuation provided by controlling directors (also majority shareholders) in corporate reorganization as plan to reduce number of shareholders to 75 or less to qualify for subchapter S status. Directors approved plan of merger at $73 a share in reorganization plan requiring small shareholders to sell. Trial Judge set value at $90 a share. (Opinion here.) The Supreme Court affirmed the Appellate Division. (Opinion here.)

Facts: Community Bank adopted a plan of merger as part of a plan of reorganization that would reduce the number of shareholders by acquring holdings of persons with less than 15,000 sharesat a price of $73 per share. Statutory dissenters and non-statutory dissenters brought various actions consolidated for trial. Trial court holding that proxy statement was misleading and provided non-statutory dissenters with right to sue, and determined fair value $90 per share. Affirmed in part and remanded for reconsideration of valuation issues that were rejected by trial court. Continue reading

July 27, 2017

Oral Agreement to Transfer Shares Is Enforceable

by Jay R. McDaniel, Esq.

The prior owner of a woman-owned business will be required to pay upwards of $500,000 to an oppressed shareholder after a trial court found — and the Appellate Division confirmed — that she had entered into a valid agreement to transfer her shares in return for an agreement that allowed her to continue collecting her husband’s salary while he was in prison.

Opressed Shareholder Sues to Enforce Transfer Agreement

The unreported decision in Dilworth v. DiSalvatore, Docket No. A-4492-14T2 (N.J. App. Div. March 16, 2017) is interesting in a number of respects. First, it presents a case in which we see the results of failing to commit agreements among the owners of a closely held business to writing. It’s great for the litigators but no so fortunate for the owners that failed to get it in writing.

June 28, 2017

Oppressed Shareholder Wins $750,000 Fee Award

by Jay R. McDaniel, Esq.

An oppressed minority shareholder was awarded approximately $750,000 in attorneys fees and expert expenses — some eight times the amount of the buyout — even though the majority had good reason to fire him from his position as the corporation’s CEO.

Fee Award Under Oppressed Shareholder Statute to Selling Shareholder

This case is a 14-year-old litigation involving a dispute between the family members of a family-owned business, and the outsider executive who was brought in to take over the management of the corporation. The relationship quickly deteriorated amid allegations of misappropriation and sexual harassment in the workplace.

Attorneys have common law and statutory security interests in the proceeds of recoveries of their clients, generally referred to as charging liens.

A statutory lien is created when a lawyer files a pleading with an affirmative claim for recovery and may be enforced by filing a petition in the underlying action.

Clients have an interest in the assertion of an attorney charging lien and must be notified of their right to have the amount of the fee determined by arbitration.

The Attorney Charging Lien

In valuing the shares of a minority shareholder, a trial court must consider any valuation technique that is generally acceptable in the financial communities. Determining fair value is an art, not a science.

Directors that hold a majority interest in a closely held business have a duty to deal fairly with the minority and in a merger to make full and fair disclosures and offer a fair price in exchange for shares.

A minority shareholder that sits by or acquiesces to wrongful conduct by the majority waives the right to later pursue a claim based on that behavior.

Fee awards are available only to shareholders with a statutory right to dissent and in the discretion of the judge.

Casey v. Brennan, 344 N.J. Super. 83 (App. Div. 2001)

Opressed Shareholder Sues to Enforce Transfer Agreement

Fee Award Under Oppressed Shareholder Statute to Selling Shareholder