City of Oronoco vs. Fitzpatrick Real Estate, LLC, et al.
Filed: August 10, 2016, Office of Appellate Courts (2016)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under Minnesota Statute § 481.13, subdivision 1(a)(1), an attorney's lien on a cause of action attaches at the commencement of the proceeding and has priority over subsequent third-party creditor claims without the need for the attorney to file a notice of the lien.
Facts:
- Whitney National Bank (Whitney) obtained a judgment in Florida against Daniel Fitzpatrick and his business entities (Fitzpatrick).
- In a separate matter, the City of Oronoco (the City) sued Fitzpatrick.
- The law firm O’Brien & Wolf, L.L.P. (O’Brien) represented Fitzpatrick in a counterclaim against the City.
- Fitzpatrick, represented by O'Brien, obtained a judgment for $120,440.40 against the City.
- After the judgment was final, Whitney served a garnishment summons on the City to collect the judgment proceeds to satisfy its own judgment against Fitzpatrick.
- Eleven days after Whitney served its garnishment summons, O’Brien sent Whitney notice of its attorney’s lien on the judgment proceeds.
- Two days after that, O'Brien filed a UCC Financing Statement to provide public notice of its lien.
Procedural Posture:
- Whitney obtained a judgment against Fitzpatrick in Florida and docketed it as a foreign judgment in Olmsted County District Court.
- Following a dispute over the priority of claims to Fitzpatrick's separate judgment against the City, O'Brien filed a motion in Olmsted County District Court to establish the priority of its attorney's lien.
- The district court held that Whitney’s garnishment lien was superior to O’Brien’s attorney’s lien because O'Brien had not perfected its lien by filing notice before Whitney served its garnishment summons.
- O'Brien (appellant) appealed the decision to the Minnesota Court of Appeals.
- The Court of Appeals reversed, holding that a cause-of-action attorney's lien does not require notice to have priority over third parties and was therefore superior to Whitney's lien.
- Whitney (petitioner) was granted review by the Minnesota Supreme Court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does Minnesota Statute § 481.13, subdivision 1(a)(1), require an attorney to file notice of a cause-of-action lien for it to have priority over a subsequent third-party garnishment lien?
Opinions:
Majority - Lillehaug, Justice
No. Minnesota Statute § 481.13, subdivision 1(a)(1), does not require an attorney to file notice of a cause-of-action lien for it to have priority over a subsequent third-party lien. The court reasoned that the statute creates two distinct types of attorney's liens: a cause-of-action lien under subdivision 1(a)(1) and a property-interest lien under subdivision 1(a)(2). The statutory phrase requiring notice to third parties—'and, as against third parties, from the time of filing the notice of the lien claim'—modifies only the second type of lien. The court based this conclusion on three points of statutory construction: 1) The notice requirement is textually part of subdivision 1(a)(2) and is not separated by punctuation that would suggest it applies to subdivision 1(a)(1) as well; 2) The 'last antecedent canon' of grammar dictates that a limiting phrase ordinarily modifies only the clause that it immediately follows, which in this case is the property-interest lien; and 3) The phrase 'as provided in this section' within the notice clause refers to procedures in subdivision 2 of the statute that detail how to perfect a property-interest lien but are silent on perfecting a cause-of-action lien. Therefore, O'Brien's cause-of-action lien attached when it commenced the proceeding for Fitzpatrick, giving it priority over Whitney's later-filed garnishment lien.
Analysis:
This decision clarifies a significant ambiguity in Minnesota's attorney's lien statute, solidifying the priority of a cause-of-action lien over subsequent creditors. It effectively establishes that this type of lien is a 'secret lien,' as it attaches and gains priority automatically upon the commencement of litigation without any public filing. While this provides attorneys with strong protection for their fees, it creates a risk for other creditors who may perform due diligence but remain unaware of an attorney's superior, unrecorded claim to the litigation proceeds. This ruling reinforces the policy of ensuring attorneys are compensated for their services, which enables clients to obtain representation.
Unlock the full brief for City of Oronoco vs. Fitzpatrick Real Estate, LLC, et al.