Can Retaining Liens Attach to eDiscovery Databases?

Recovering attorney’s fees and costs is one of the more unpleasant aspects of the practice of law. In situations where an attorney has not been paid, a retaining lien gives “the attorney the right to retain possession of the client’s documents and files which come into the attorney’s hands during the course of employment until the balance due for the attorney’s services is paid.” Cronin & Co., Ltd. v Richie Capital Mgmt., LLC, 2014 IL App (1st) 131892-U, ¶¶ 21-32 [2014], citing In re Liquidation of Coronet Insurance Co., 298 Ill. App. 3d 411, 415, 698 N.E.2d 598, 232 Ill. Dec. 507 (1998).

An attorney has to be in continued possession of the client’s property in order to maintain the lien. Id.

Future-Review

Can a retaining lien be held over client data in an online review application hosted by a service provider?

The answer appears to be yes.

While the case facts are substantially detailed, here are the basic events: Attorney is retained as counsel and the attorney retained an eDiscovery service provider to host client files for review. The service provider was contracted to work for the clients, however, it took created the database and took directions from the attorney, thus imputing control to the law firm. Cronin & Co., Ltd., P22-23.

The fact the client information was given to the service provider for hosting did not mean the attorney surrendered possession of that information, which would have destroyed the retaining lien. Cronin & Co., Ltd., P23.

As one can imagine, most lawsuits do not have issues with retaining liens unless there is a dispute. The short story of what happened is representation ended, there was a dispute,  and the attorney sought the client information from the service provider. This put the service provider into a very unpleasant situation on what to do, where the attorney sought injunctive relief to have the client information retained to the lawyer (the facts in the opinion are very detailed, so this is an abridged version).

Whether or not the District Court abused its discretion in granting a temporary restraining order or preliminary injunction was a large part of the case analysis in ordering the service provider to turn the database over to the attorney. The Court vacated and remanded with instructions for the District Court to enter findings the preliminary injunction factors in regards to the balancing of hardships. Cronin & Co., Ltd., P31.

Bow Tie Thoughts

Disputes over fees with clients are not fun. The idea of being a service provider stuck in the middle of a fight between a client and an attorney is extremely undesirable.

I discussed with an attorney who represented a service provider in a fee dispute over hosting fees against a law firm. The lawyer had a novel concept of arguing the work product doctrine did not apply to the attorney work product in the database because his client’s agreement with the law firm was vague, thus they would seek a lien on the server with the client data and attorney work product, and then sell the information to the opposing party in the lawsuit.

This was the single worst idea for conflict resolution I have ever heard. No lawyer would ever work with a service provider that argued work product was not protected by the work product doctrine. Moreover, the idea of selling client information and attorney work product would ensure a service provider is forever on every law firm’s black list in the country. Such tactics would likely violate ethical rules of conduct, the Stored Communication Act, plus possibly other laws.

The current case is extremely different. It will be interesting to see the balancing of hardship analysis on remand.

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