Peterson v. Islamic Republic of Iran

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

DEBORAH D. PETERSON, et al., §
Plaintiffs §
v. § Civil Case No. 01-cv-2094 (RCL)
ISLAMIC REPUBLIC OF IRAN, et al., §
Defendant §
MEMORANI))UM OPINION

I. INTRODUCTION

This is a dispute between attorneys over who will reap the rewards of a sprawling litigation
against the Islamic Republic of lran (lran) under the state sponsor of terrorism exception to the
Foreign Sovereign Immunities Act (FSIA). Nearly a decade ago, this Court lamented the
“contentious road blocks and setbacks in what has been an increasingly futile exercise to hold lran
accountable for unspeakable acts of terrorist violence.” 111 re Islamic Republl`c of lrcm Terrorism
Litigation, 659 F. Supp. 2d 3 l, 35 (D.D.C. 2009). In spite of the difficulties FSIA plaintiffs have
historically had in obtaining and enforcing judgments against state sponsors of terrorism_
difficulties too often chronicled by this Court_plaintiffs here managed to obtain judgments
against Iran totaling in billions of dollars. Now, after more than fifteen years of litigation,

plaintiffs’ attorneys are eager to collect their fees.

ln short, attorneys David Cook and Jay Glenn have filed notices of attomey’s charging liens
[ECF Nos. 525, 528, 533, & 538], claiming they are entitled to a share of the contingent attomey’s
fees from the plaintiffs’ recovery. Before this Court are plaintiffs’ emergency motions to quash

those liens [ECF Nos. 539 & 542]. This Court also considers Cook’s Counter Motion to Compel

Arbitration [ECF No. 544]. F or the reasons discussed below this Court will GRANT the motion
to quash Cook’s lien, GRANT the motion to quash Glenn’s lien, and DENY the motion to compel

arbitration.

II. BACKGROUND
Plaintiffs here are victims of the October 23, 1983 bombing of a United States l\/Iarine Corps

barracks in Beirut, Lebanon. With help from Iran, suicide bombers from Hezbollah murdered 241
American servicemen and injured several more. This Court presided over a consolidated action by
nearly one thousand plaintiffs consisting of the victims, their families, and the representatives of
their estates. On September 7, 2007, this Court found Iran liable for damages because they
provided material support and assistance to Hezbollah. Iran did not appear here, and default

judgment was entered in favor of the plaintiffs in the amount of more than $2 billion.

In 2013, plaintiffs successfully brought an action to seize Iranian assets in the United States
District Court for the Southern District of New York. That court ordered the turnover of $1.75
billion in assets held by Citibank N.A., cash bonds that Bank Markazi_the Central Bank of Iran-
held in an account through an intermediary. The court’s order created a qualified settlement fund
(QSF trust) and transferred the seized funds to a trustee_the Honorable Stanley Sporkin_for the
benefit of the plaintiffs. The court’s order was affirmed by both the Second Circuitl and the United

States Supreme Court.2

Plaintiffs were represented before this Court by the F ay Law Group, PA, Thomas Fortune Fay,
the Perles Law Firm, P.C., and Steven R. Perles (collectively, “F ay and Perles”). The contingency

agreement is set forth below in full:

1 Peterson v. lslamic Republic of[ran, 758 F.3d 185 (2014).
2 Bank Markazi v. Pelerson, 136 S.Ct. 1310 (2016).

I, ,on their own behalf hereby retain
and employ Fay & Perles (Attorneys) to represent them in the litigation and
recovery or settlement of all claims and causes of action against The lslamic
Republic of lran, The Iranian Ministry of Information and Security, and their
associates and agents with regard to the October 23, 1983 bombing of the Marine
Corps Barracks in Beirut, Lebanon.

Client agrees to pay to said Attorneys a fee which will be computed as follows:
(1) 33 1/3 % of the total gross recovery before deduction of any fees, liens or
charges of any type; and (2) an amount equal to the necessary expenses in the
preparation, domestic and foreign litigation, lobbying efforts, and administration of
the case. This fee is contingent upon collection and to the extent of collection only.
The percentage attorneys fee above described will be distributed to each of the
Attorneys in an equal share. The “necessary expenses” portion of the attorneys fee
will be distributed in the proportion which that attorney’ s expenses bears to the total
expenses of the attorneys.

Client shall have no liability for any expenses in connection with the
preparation, prosecution and administration of the claim, the above provision
relating solely to the computation of the attorneys’ fee. The Attorneys will, under
no circumstances, represent to any vendor, supplier of services or contractor with
regard to services, that they are incurring expenses on behalf of or chargeable to the
credit of the Client and all such expenses shall be the sole obligation of the
Attorneys and not in any manner the legal obligation of the Client. Under no
circumstances shall any part of the attorneys’ fee be considered to be a loan from
the Attorneys to the Clients. The fees due the Attorneys shall constitute a lien upon
any proceeds realized having priority before all other liens on any sums realized
from this claim.

Client understands that Fay & Perles are lead counsel and co-counsel in a
number of actions against the lslamic Republic of Iran, that most of these cases
have judgments, and all are in a more advanced procedural posture than this case.
Client further understands that although the Attorneys have been successful in the
past in prosecuting cases under the Foreign Sovereign Immunities Act, collection
may depend upon factors beyond their control, including, but not limited to,
statutory amendments and the foreign relations of the United States. Attorneys will
assert their best efforts but cannot guarantee success.

Fay and Perles Contingent Retainer Agreement [ECF No. 539-2]. Fay and Perles argue that this
agreement authorized them to employ other attorneys to assist them in their efforts, but did not
authorize counsel to obligate the plaintiffs to pay fees of any other attorney employed. Pls.’ Mem.

in Supp. of Em. Mot. to Quash Cook’s Lien 3 [ECF No. 539-1].

F ay and Perles engaged J ay Glenn to prove the plaintiffs’ damages to a Special Master. Glenn
asserts that, pursuant to a Written agreement signed in 2003, Fay and Perles agreed to pay Glenn
3% of the gross amounts collected on judgments for plaintiffs represented before the Special
Master. Decl. of Glenn Exhibit 1 [ECF No. 546-1]. Further, Glenn asserts that Fay and Perles
orally agreed to pay an additional one-third of amounts collected on plaintiffs referred by Glenn.
Decl. of Glenn 11 11 [ECF No. 546]. Glenn claims to have represented 103 plaintiffs before the
Special Master, resulting in a combined award of over $309 million. Mem. in Opp’n to Em. Mot.
to Quash Glenn’s Lien 2 [ECF No. 545]. The referred plaintiffs were allegedly awarded
$111,750,000.00. Decl of Glenn Exhibit 10 at p. 3 [ECF No. 546-16]. In contrast, Fay and Perles
claim Glenn’s only agreement was with Fay and Perles themselves; they deny that the oral
agreement existed and argue that Glenn is not entitled to a charging lien. Mem. in Support of Pls.’
Em. Mot to Quash Glenn’s Lien 3 [ECF No. 542-1] (“Glenn has no contract with Plaintiffs and no

lien in [sic] can exist.”).

Fay and Perles similarly engaged David Cook “to represent the [p]laintiffs above referred to
in order to effect a collection of the amounts due [in this action].” See Cook Agreement 11 3 [ECF
No. 539-3]. Cook agreed to bear all expenses while pursuing collection on the judgment Ia'. 11 6.
“To the extent of the recovery by the Collection Service, the recovery shall first be subject to
reimbursement of costs and expenses, and thereafter, subject to the fees due the Collection
Service.” Ia'. According to the agreement, the fee due the collection service was “a contingency
fee of 10% on any net recovery, as received.” Id. 1[ 7. “Net recovery is defined as the total recovery
less costs of enforcement incurred by the Collection Service.” Id. “In the event of any collection,
the funds shall be remitted to a joint escrow account from which the contracting parties will

disburse funds as they deem fit, however, the Collection Service shall be able to deduct their fees

and expenses before remitting the funds to [Fay and Perles] who serve as the agent and repository
for any collections.” Ia'. 11 9. “In the event of any disputes by and among any of the attorneys, or
all of the same, and the clients, and all of the same, such disputes shall be resolved by way of

binding arbitration . . . .” la'. 115.

Glenn and Cook each filed a notice of charging lien asserting a property interest in the QSF
trust. Specifically, Glenn asserts a charging lien “for the purpose of securing Glenn’s fee claims
of: (a) 3% of the respective gross amounts collected on behalf of the 103 plaintiffs in this action
. . . to which Glenn is entitled pursuant to an agreement between Glenn and [Fay and Perles]; and
(b) 11.11% of the respective gross amounts collected on behalf of the 40 plaintiffs in this action
. . . to which Glenn is entitled pursuant to agreements between Glenn, [Fay and Perles], and the
respective plaintiffs; plus (c) unreimbursed costs and expenses due Glenn of $15,288.56.” Glenn’s
Am. Notice of Charging Lien [ECF No. 53 8]. Cook also asserts a charging lien “for the purposes
of securing the fee claim of 10% of the gross proceeds guaranteed under that certain written
contract dated April 5 and 6, 2008 by and between [Cook] and the Plaintiffs.” Cook’s Notice of

Charging Lien [ECF No. 533].

Fay and Perles moved to quash those charging liens. Specifically, Fay and Perles argue that
this Court does not have jurisdiction over the liens or funds at issue here because the corpus_the
QSF trust-is being administered in New York pursuant to orders issued by the SDNY court. Em.
Mot. to Quash Glenn’s Lien 2 [ECF No. 542]; Em. Mot. to Quash Cook’s Lien 3 [ECF No. 539].
Further, they argue that Glenn’s lien should be quashed because no agreement existed between
Glenn and the plaintiffs here. Em. Mot. to Quash Glenn’s Lien 2 [ECF No. 542]. Thus, because
this is a dispute between attorneys rather than a dispute between attorneys and client, a charging

lien is improper. la'. Similarly, Fay and Perles argue that Cook’s lien should be quashed because

he never appeared in the SDNY case that lead to recovery, and instead was terminated for
incompetence Em. Mot. to Quash Cook’S Lien 2, 11 4 [ECF No. 539]. Further, Fay and Perles
argue that “Cook has no right to lien any property of the Plaintiffs because he does not have a
written agreement with the Plaintiffs.” Mem. in Support of Pls.’ Em. Mot. to Quash Cook’s Lien

6 [ECF No. 539-1].

Glenn argues that his charging lien is valid because he represented the 103 plaintiffs pursuant
to the 2003 written agreement, an additional oral agreement, and the 40 retainer agreements he
executed on behalf of Fay and Perles. Mem. in Opp’n to Pls.’ Em. Mot. to Quash Glenn’s Lien 4-
6 [ECF No. 545]. Cook argues that, while he did not appear in the SDNY action, he retained New
York attorneys to secure the Bank Markazi assets. Id. at 8. Cook also argues, similarly to Glenn,
that the plaintiffs here were also parties to Cook’s retainer agreement with F ay and Perles. Mem.
in Opp’n to Pls.’ Mot. to Quash Cook’s Lien 9-14 [ECF No. 543]. In other words, Cook argues
that plaintiffs authorized Fay and Perles to hire third-party service providers who would be paid
an additional contingency fee out of the recovered judgment. Id. at 10-11. Thus, Cook argues he
had a contingency agreement with plaintiffs themselves and not merely with Fay and Perles. Id. at
16. Finally, Cook argues that the question of whether Cook is entitled to some or all of his fee
should be decided by an arbitrator pursuant to the arbitration clause in the retainer agreement, Id.
at 5; Counter Mot. and Mot. to Compel 5 [ECF No. 544]. Cook asks this Court to compel
arbitration of his claims against Fay and Perles, order the appearance of plaintiffs at that arbitration,
and order the QSF trustee to withhold 10% of the funds from distribution pending the outcome of

the arbitration. Id. at 19.

III. STANDARDS

The existence and effect of an attorney’s lien is governed by the law of the place in which the
contract between the attorney and client is to be performed. 7 Am. Jur. 2d Attorneys at Law § 351
(1980). The District of Columbia has no statute setting out attorney’s liens; rather, D.C. relies on
the common law. See Wolfv. Sherman, 682 A.2d 194, 197 (D.C. 1996). The “charging lien” arises
when an attorney obtains a judgment or decree for a client, and has been characterized as “merely
a claim to the equitable interference by the court to have that judgment held as Security for his debt
[the attorneys' charges against the client].” Id. at 197 (quoting Lyman v. Campbell, 182 F.2d 700,
701-02 (D.C. Cir. 1950)). Unlike the retaining lien, the charging lien is not dependent on

possession of a corpus. Id.

In order for a charging lien to attach, “it is indispensable that there exist between the client and
his attorney an agreement from which the conclusion may reasonably be reached that they
contracted with the understanding that the attorney’s charges were to be paid out of the judgment
recovered.” Ia'. Whether written or verbal, an unmistakable contingency agreement between a
client and his attorney gives rise to an equitable attorney’s charging lien. See District of Columbia
Rea'evelopment Land Agency v. Dowdey, 618 A.2d' 153, 160 (D.C. 1992) (finding an undisputed
oral contract between an attorney and his clients that the attorney would be paid out of the
recovered funds sufficient to support an equitable lien). However, if no agreement exists between
a client and an attorney, there is no basis for inferring the intent necessary giving rise to such an
equitable lien. See Democratic Cent. Comm. v. Washington Metro Area Transit Comm ’n, 941 F.2d
1217 (D.C. 1991) (finding that an associate counsel with no agreement with the client could not

satisfy the common law requirements for an attorney’s lien).

“Attorney’s liens are asserted by counsel against the client.” Ia'. The trend of modern decisions
“is to protect the right of the attorney to receive compensation [from a client] for his services.”
Wolf 682 A.2d at 201 (quoting Elam v. Monarch Life Ins. Co, 598 A.2d 1167, 1170 (D.C. 1991)).
While “[d]ebts payable by clients to attorneys should in general be subject to the same rules that
normally apply to other debtor-creditor relationships,” the D.C. Court of Appeals has been clear:

an underlying client-attorney agreement is “indispensable.” Id.

The Federal Arbitration Act (FAA) declares arbitration agreements in contracts involving
commerce “valid, irrevocable, and enforceable,” unless the terms are unenforceable under general
contract doctrine. 9 U.S.C. § 9; Doctor’s Assocs. Inc. v. Casarotl'o, 517 U.S. 681, 687 (1996). The
FAA therefore evinces a strong policy in favoring arbitration, requiring courts to “rigorously
enforce agreements to arbitrate, even if the result is ‘piecemeal’ litigation ” Dean Witter Reynolds,
lnc. v. Byrd, 470 U.S. 213, 221 (1985). “The FAA thereby places arbitration agreements on an
equal footing with other contracts and requires courts to enforce them according to their terms.”
Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68 (2010) (internal citations omitted). Critically,
however, “arbitration is a matter of contract and a party cannot be required to submit to arbitration
any dispute which he has not agreed to submit.” United Steelworkers of Am. v. Warrior & Gulf
Navigalion Co., 363 U.S. 574, 582 (1960); see also Volt lnfo. Scz`ences, Inc. v. Bd. of T rs. of Lelana'
Stanfora'./unior Univ., 489 U.S. 468, 478 (1989) (“[T]he FAA does not require parties to arbitrate
when they have not agreed to do so.”). “Accordingly, the first task of a court asked to compel
arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute.”

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985).

Iv. ANA_LYSIS

At the outset, this Court notes that the merits of Glenn and Cook’s claims regarding whether
or how much they should be compensated for their work, or Fay and Perles’ claims that Glenn and
Cook did not fulfill their obligations, are not before this Court. To reiterate, this Court does not
now determine whether 0r how much the attorneys here Will be compensated What i_s before
this Court is l) the question of whether Glenn and/or Cook are entitled to an equitable interest in
plaintiffs’ recovery, and 2) the question of whether Cook may compel arbitration of his disputes

with Fay and Perles. This Court takes those questions_and only those questions_in turn.

a. Motions to Quash

Before this Court may address the assertion of liens here, it must address Fay and Perles’
claim that this Court lacks jurisdiction because QSF trust exists in New York. Quoting Thurston
v. Bullowa, Fay and Perles claim that a charging lien “can only be enforced against a fund in the
control of the court, recovered in the cause in which the attorney's fees are incurred.”3 Thus, they
argue, no lien can arise in the District of Columbia because there are no funds under the control of
the court. Pls.’ Reply to Glenn’s Mem in Opp’n to Pls.’ Mot to Quash Glenn’s Lien 6 [ECF No.

551]. This Court disagrees.

The lien in Thurston was “no longer under the control of the court” because it had been
wrongfully assigned to another attorney in satisfaction of a judgment. Thurstorl, 42 App. D.C. at
23. “No judgment was entered and no money paid into court as the result of the compromise; hence
there was nothing against which an attorney’s lien could be enforced.” Ia'. Here, though, this Court

entered judgment against Iran, and the QSF trust consists of funds seized for the satisfaction of

3 42 App. D.C. 18, 23-24 (D.C. Cir. 1914), overruled on other grounds, Pink v. Farrington, 92 F.2d 465 (D.C. Cir.
1937).

that judgment. This Court rejects the argument that this Court is precluded from enforcing an
otherwise proper attorney’s charging lien because the funds to satisfy that judgment were seized

in another jurisdiction

lt is well settled that federal courts generally have ancillary jurisdiction over attorney fee
disputes, which may be adjudicated after a dismissal or final judgment in the original underlying
action. See, e.g., Chesley v. Uniorz Carbide Corp., 927 F.2d 60, 66 (2d Cir. 1991). Further, the
rationale for permitting attorneys to assert a charging lien is to protect an attorney’s claim of
compensation for services rendered before the court. Wolf, 682 A.2d at 198. It
is “merely a claim to the equitable interference by the court to have that judgment held as a security
for his debt.” Id. This Circuit has long allowed attorneys to intervene in the underlying case to
protect their interests, recognizing that charging liens “arise[] out of the underlying action and
relate[] back to the inception of the action.” Martens v. Hadley Memorial Hosp., 753 F. Supp. 371
(D.D.C. 1990) (citing Frz`edrncm v. Harris, 158 F.2d 187 (D.C. Cir. 1946); accord, Continental
Casualty C0. v. Kelly, 106 F.2d 841 (D.C. Cir. 1939)). The D.C. Circuit has also recognized a
“continuing jurisdictional basis premised upon this Court’s inherent power to affect the
distribution of judgment proceeds.” Id. Therefore, the true question is whether there are any
properly asserted claims before the Court. This Court addresses those claims below, but it is not
prepared to generally relinquish the jurisdictional authority to determine attorney fee disputes or
to enforce a properly asserted attorney’s lien, particularly when the power to enforce such liens

exists to protect the attorneys who have litigated before this Court.

The Court now considers Glenn and Cook’s charging liens, and the accompanying motions

to quash, in turn.

10

i. This Court must quash Glenn’s notice of lien because Glenn has not
established an agreement between himself and the plaintiffs here,

Glenn claims that he was retained by Fay and Perles as a damages attorney pursuant to a
written agreement that provided Glenn would be paid 3% of the gross amount collected from
defendants referred to Glenn, and an amount equal to the necessary expenses incurred by Glenn.
Mem. in Opp’n to Pls.’ Em. Mot. to Quash Glenn’s Lien 4 [ECF No. 545]. Indeed, Fay and Perles
do not seem to deny that such an agreement existed. Mem. in Supp. of Pls.’ Em. Mot. to Quash
Glenn’s Lien 1-2 [ECF No. 542-1] (“Glenn was engaged as such a ‘damages attorney’ to collect
evidence with respect to damages sustained by plaintiffs . . . .”). Rather, they argue Glenn failed
to perform under that agreement and cannot properly assert a charging lien because no contract

existed between Glenn and plaintiffs here. Id. at 3.

As noted above, an attorney’s lien is asserted by counsel against the client. An underlying
agreement between an attorney and a client is necessary for the attachment of an attorney’s lien.
An associate counsel is only entitled to an attorney’s lien if the client authorized or ratified his
employment by the principal attorney and agreed to have that associate’s fee paid from the
judgment See Democratic Cem‘. Comrn. v. Washirlgtorl Metro Area Transit Comrn’n, 941 F.2d
1217 (D.C. 1991) (citing Hahn v. Oregon Physiciarzs'Service, 786 F.2d 1353, 1355 (9th Cir. 1985).
ln Hahn, lead counsel hired an associate attorney as expressly authorized by a retainer agreement
With his client. 786 F.2d at 1354. The associate would be paid 25% of the lead counsel’s recovery
under the retainer agreement Id. The associate asserted an attorney’s lien based on both his retainer
with the lead counsel and as a party to the original retainer agreement, since that agreement allowed
the lead counsel to employ other attorneys to assist in the litigation. Id. The Ninth Circuit held that
the associate had a claim against the lead counsel, but not the clients. Id. at 1355. “[B]ecause no

independent contract between [associate counsel] and [clients] ever existed, [associate counsel]

ll

does not have a right to a lien.” ]d. That finding was cited with approval by the District of Columbia
Court of Appeals, and this Court finds no authority allowing a departure from the rule. Therefore,
without an independent contract with the plaintiffs, an associate counsel is not entitled to a lien

under the laws of the District of Columbia.

Here, Glenn seems to have filed an attorney’s lien based on agreement between himself
and Fay and Perles, and not based on an agreement between himself and the plaintiffs. Specifically,
the 2003 agreement was a retainer agreement between Fay and Perles, as lead counsel, and Glenn,
as “Associate Counsel.” Decl. of Glenn Exhibit 1 [ECF No. 546-1]. Further, Glenn seems to admit
that his fee “could only come from Fay and Perles’ own 33 1/3% fee.” Ia'. This Court finds that no

independent contract existed between Glenn and plaintiffs here.

Glenn further claims to have executed independent engagement agreements with at least
40 plaintiffs, whom he then referred to Fay and Perles. Decl. of Glenn 11 12 [ECF No. 546]. Glenn
claims this was pursuant to an oral agreement with F ay and Perles in which he would receive an
additional one-third of Fay and Perles’ one-third contingency (or 11.11% of the gross recovery).
Mem. in Opp’n to Pls.’ Em. Mot. to Quash Glenn’s Lien 6 [ECF No. 545]; Decl. of Glenn 11 11
[ECF No. 546]. Whether that oral agreement existed or not-on which this Court does not opine_
that agreement was again only between Fay and Perles and Glenn, their associate counsel. This is

insufficient to establish an underlying attorney-client agreement justifying a charging lien.

Glenn finally points to 33 executed agreements4 signed by both Glenn and Fay as evidence

of an agreement between Glenn and plaintiffs. See Glenn Decl. Exhibits 2A-2G [ECF No. 546].

4 Glenn argues these are indicative of the agreements to all 40 plaintiffs referred to Fay and Perles, but sates he has
“not yet been able to locate the executed agreements with the remaining seven Plaintiffs.” Decl. of Glenn 11 12 n. 2
[ECF No. 546].

|2

He claims to have executed those agreements and forwarded them to F ay along with a “Family

Information Sheet” acknowledging his entitlement to the additional fee:

l located and executed Attorney Client Contracts for [names indicated on
Family lnformation Sheet]. In accordance with prior discussions, l am entitled to
an additional contingent fee of 11.11% of any recovery/interest for these [_]
claims.

Glenn Decl. Exhibit 4 [ECF No. 546-10].

On the surface, these appear to satisfy the requirement that there must be an attorney-client
agreement for an attorney’s lien to attach. To justify a charging lien, however, such an agreement
must also give rise to the reasonable conclusion “that they contracted with the understanding that
the attorney’s charges were to be paid out of the judgment recovered.” Wolf, 682 A.2d at 702.
Here, while Glenn signed the contingent retainer agreements, those agreements named only Fay
and Perles as recipients of a contingency fee. See, e.g., Decl. of Glenn Exhibit 2A [ECF No. 546-
2] (“[Clients] hereby retain and employ Thomas Fortune Fay, Esq. and Steven R. Perles, Esq.
(Attorneys) to represent us in the prosecution and recovery or settlement of all claims and causes
of action against [Iran].”). Further, there is no indication that any client signed, affirmed, or
otherwise acknowledged the additional 11.11% contingency fee referenced in the Family
Information Sheets. Finally, Glenn claims that his additional fee came out of Fay and Perles’

contingency fee, and not the plaintiffs’ recovery.

Based on these observations, this Court finds that Glenn’s relationship with the plaintiffs
here was similar to that of an associate counsel. Because no underlying agreement exists between
Glenn and plaintiffs, this Court finds that Glenn is not entitled to an attorney’s lien. While Glenn
may have a claim against F ay and Perles based on their agreement, he can assert no charging lien

against plaintiffs here, Accordingly, Glenn’s notice of charging lien will be quashed.

13

ii. This Court must also quash Cook’s notice of lien because Cook has not
established an agreement between himself and the plaintiffs here.

Cook similarly claims that he entered into a written agreement with plaintiffs to provide
collection services in exchange for a contingency fee. Mem. in Opp’n to Pls.’ Mot. to Quash
Cook’s Lien 1-2 [ECF No. 543]. While the retainer agreement is only signed by the attorneys_
Fay and Perles and Cook_Cook points to language suggesting that plaintiffs themselves are

parties to the agreement:

WHEREAS, Plaintiffs in the above referred to action [the Peterson Plaintiffs],

through counsel, are desirous of employing the Services of David J. Cook dba

Cook Collection Attorneys, San Francisco, California, hereafter referred to as

“Cook Collection Services” working with Thomas Fortune Fay, Esq., Fay Law,

P.A., Steven R. Perles, Esq., Perles Law Firm, P.C., Allen Rothenberg, Esq., the

Law Offices of Allen Louis Rothenberg and Anthony LaSpada, Esq., hereafter

referred to as “Litigation Attorneys.”
Mem. in Opp’n to Pls. Mot. to Quash Cook’s Lien Exhibit D 11 3 [ECF No. 543-4] (emphasis
added). Cook further argues that the retainer agreement provides that Cook Will be paid his fee
from the collected funds before any distribution. Mem. in Opp’n at 4 [ECF No. 543]. Together
with the argument that plaintiffs here are parties to the agreement, Cook argues that this constitutes
an agreement between attorney and client “from which the conclusion may reasonably be reached
that they contracted with the understanding that the attorney's charges were to be paid out of the
judgment recovered.” Wolf, 682 A.2d at 197.

Fay and Perles counter that there were only three parties to the Cook agreement: Fay,
Perles, and Cook. ln other words, they argue that “Cook has no right to lien any property of the
Plaintiffs because he does not have a written agreement with the Plaintiffs.” Mem. in Supp. of Pls.’

Em. Mot. to Quash Cook’s Lien 6 [ECF No. 539-1]. This Court agrees. While the language quoted

by Cook seems to suggest that plaintiffs were parties to the Cook agreement, that language is

14

merely a prefatory clause to the actual terms of the agreement, Other language in the agreement

makes it clear that the only parties were the attorney-signatories:
(15) Communications.
The parties shall use their best efforts to keep each other fully informed of all
actions being taken as quickly as possible and shall not unduly delay any
communication By separate cover, the parties shall provide each other with e-mail
addresses, phone numbers, fax numbers, cell phone numbers or any other means of
communication The Collection Service shall keep Litigation Counsel apprised of
all matters and shall consult with such counsel. All parties covenant to endeavor to
remain in close contact and return calls or respond to emails as expeditiously as
circumstances may require. Emails with the notation of “High Value” or “Prompt
Response Required” indicate an immediate response for the benefit of all parties,
but this title shall be reserved only to matters of great importance.

(16) Miscellaneous.
This agreement binds all parties hereto, their successors and assigns.

lN WITNESS WHEREOF, the parties have set their hands and caused their seals
to be affixed on the day, month and year below set forth.

Mem. in Opp’n to Pls. Mot. to Quash Cook’s Lien Exhibit D 11 3 [ECF No. 543-4]. The only
parties to “set their hands and cause[] their seals to be affixed” were Fay, Perles, and Cook. Those
were the only parties to this agreement,

lt seems clear to this Court that this agreement was intended to be a retainer agreement
between attorneys, setting out the duties and responsibilities that Cook would undertake in service
to the litigation attorneys, Fay and Perles. Again citing Democratic Central Committee of the
District of Columbia, 941 F.2d 1217 (D.C. 1991), Fay and Perles argue that this agreement is best
viewed as an agreement to hire associate counsel. Mem. in Supp. of Pls.’ Em. Mot. to Quash

Cook’s Lien 5-6 [ECF No. 539-1]. This Court agrees.

Cook seems to argue that D.C. law permits associate attorneys hired by lead counsel to
assert a charging lien when they were hired pursuant to authorization from the clients. However,

DC precedent is clear: “_An associate counsel can only obtain an attorney's lien if the client

15

authorizes or ratifies his employment by the principal attorney and the client agreed to have his
associate's fee paid from the judgment.” Democrall`c Cerllral Commillee of lhe District of
Columbia, 941 F.2d at 1219 (citing Hahn v. Oregon Physicians'Service, 786 F.2d 1353, 1355 (9th
Cir. 1985)). As noted above, this Court has found no authority allowing a departure from the rule.
Therefore, without an independent contract with the plaintiffs, an associate counsel is not entitled

to a lien under the laws of the District of Columbia.

Cook argues that the Cook agreement did include plaintiffs and that the terms state the
Cook was to be paid a contingency fee. However, based on this Court’s analysis of the Cook
agreement, the only parties to the agreement were Cook, Fay, and Perles. Therefore, no
independent contract existed between Cook and plaintiffs. Further, this Court finds that Cook
failed to show that plaintiffs here authorized or ratified Cook’s employment or agreed to have

Cook’s fee paid from their judgment.5 Accordingly, Cook is not entitled to an attorney’s lien

b. Cook’s motion to compel is improper because plaintiffs did not agree to
arbitrate potential disputes with Cook.

Cook also filed a Counter Motion to Compel Arbitration [ECF No. 544] requesting this Court
to compel arbitration of the disputes between Cook and plaintiffs regarding compensation under
the Cook retainer agreement Cook also requests an interim stay of 10% of the QSF trust funds
from Fay and Perles’ share of the proceeds, pending a determination by the arbitrator Fay and

Perles respond that they are currently arbitrating their own dispute with Cook, but that plaintiffs

5 The contract Was terminated by letter dated October 3, 2011. Cook argues this was a ratification of the contract and
the contingency fee therein Mem. in Opp’n to Pls. Mot. to Quash Cook’s Lien 13-14 [ECF No. 543]. This is
nonsensical. Further, even if this termination letter did ratify the contract that it purported to terminate_an argument
that this Court is surprised Cook was willing to submit in Writing_that letter was sent by F ay (cc’d to Perles), on Fay
letter head, and signed solely by Fay. Because Cook has failed to show a ratification by the plaintiffs, this Court rejects
Cook’s argument

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should not be bound to an arbitration agreement to which they were not party. For the reasons

already stated, this Court agrees with F ay and Perles.

As noted above, “[t]he first task of a court asked to compel arbitration of a dispute is to
determine whether the parties agreed to arbitrate that dispute.” Milsubishl` Motors Corp. v. Soler
Chrysler-Plymoulh, Irlc., 473 U.S. 614, 626 (1985). For the reasons previously discussed, this
Court finds that the Cook retainer agreement was an agreement for collection services between
Fay and Perles, as litigation counsel, and Cook, as associate counsel. Plaintiffs here were not
parties to that agreement and therefore did not agree to arbitrate any potential disputes between
Cook and plaintiffs. Plaintiffs here are not required to arbitrate a dispute when they have not agreed

to do so.

il
However, Cook also argues that even if plaintiffs were not parties to the agreement, they should

be bound under the law of agency. In short, Cook argues that Fay and Perles had both the actual
authority and apparent authority to bind plaintiffs to the arbitration agreement. Mem. in Supp. of
Counter Mot. to Compel Arbitration 13-14 [ECF No. 544-1]. Fay and Perles, in contrast, appear
to argue that they had the authority to employ other attorneys to assist in the litigation but did not
have the authority to bind plaintiffs to arbitration or an additional contingency fee. Mem. in Opp’n

to Cook’s Request to Compel 7 [ECF No. 547]. This Court again agrees with Fay and Perles.

Actual authority is “the power of the agent to do an act or to conduct a transaction on account
of the principal which, with respect to the principal, he is privileged to do because of the principal's
manifestations to him.” RESTATEMENT (SECOND) § 7. Unlike actual authority, apparent
authority does not depend upon any manifestation from the principal to her agent, but rather from
the principal to the third party. RESTATEMENT (SECOND) § 27, cmt. A (1958). Cook argues

that by authorizing Fay and Perles to employ other attorneys, plaintiffs manifested the power to

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bind plaintiffs to the terms of that retainer. But if plaintiffs’ retainer agreement with Fay and Perles
made such manifestations, they did so only by implication This Court finds no evidence that
plaintiffs manifested, either to Fay and Perles or to Cook, the power to bind plaintiffs to an
arbitration agreement Thus, Cook has failed to establish actual or apparent authority to bind
plaintiffs to an arbitration agreement This Court cannot enforce an arbitration agreement to which

plaintiffs did not agree and were not otherwise bound.

Finally, even if plaintiffs here were bound to the arbitration agreement, it is unclear if Cook
actually has a dispute with plaintiffs. Under the FAA, a court is empowered to compel arbitration
of a matter pending before it if there is an arbitration agreement governing that dispute. 9 U.S.C.
§ 3. Similarly, “[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate
under a written agreement for arbitration may petition any United States district court [with
original jurisdiction] for an order directing that such arbitration.” 9 U.S.C. § 4. But there are no
such disputes or petitions before this Court. Rather, Cook has injected a motion to compel
arbitration after asserting a right to a charging lien against plaintiffs Even if plaintiffs were subject
to an arbitration agreement, this Court could not compel arbitration until those claims are properly

before this Court. Accordingly, this Court refuses to compel arbitration

V. CONCLUSION

In sum, the contracts here are between attorneys, not between attorneys and plaintiffs. This
Court finds that no agreement existed between the plaintiffs here and the attorneys from which a
conclusion may reasonably be reached that they contract with the understanding that the attorney’s
charges were to be paid out of the judgment recovered. Accordingly, Glenn and Cook are not

entitled to charging liens under the law of the District of Columbia.

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Regarding Cook’s motion to compel arbitration, Cook’s dispute here is with Fay and Perles,
and not with plaintiffs. No agreement existed between plaintiffs and Cook, and there are no
disputes or petitions before this Court which could justify an order to compel arbitration

Therefore, this Court declines to compel plaintiffs’ appearance at arbitration

Finally, this Court unfortunately finds it necessary to remind the parties here that this Court
has not decided the merits of any contractual obligations, if they exist, between the plaintiffs and
the various attorneys involved in this case. This Court’s decision regarding the existence of an
equitable lien has no bearing on the enforceability of Glenn or Cook’s agreements The Court’s
decision here should not be taken as an opportunity to delay plaintiffs’ recovery further by twisting

the Court’s findings into some determination of those claims.

This Court has only determined questions regarding the assertions of equitable attorney’s liens

and the arbitration agreement A separate order shall issue regarding those determinations

KZ\“C._;€_MZC

Ro§'de C. Lamberth

United States District Judge
DATE; \'*-/<- /' V

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