United States District Court, S.D. Florida
ORDER REVERSING BANKRUPTCY COURT ORDER AND
G. COOKE UNITED STATES DISTRICT JUDGE.
MATTER is before me on Appellant Stok Folk Kon, P.A.'s
(“SFK”) appeal of the bankruptcy court's
Order Denying SFK's Motion to Quash Subpoena and for
Protective Order (“Bankruptcy Order”).
See Notice of Appeal, ECF No. 1. For the reasons
stated below, I reverse the ruling of the bankruptcy court
and remand for further proceedings consistent with this
case arises out of a fee dispute between a law firm and its
former client. SFK represented Appellee Fusion Homes, LLC
(“Fusion”) in a state court proceeding in which
Fusion attempted to foreclose on two properties located in
Hollywood, Florida, to which it owned the notes and
mortgages. See SFK Br., ¶¶ 2-3, 5. While
the foreclosure case was pending, the defendant in the state
court proceeding, Daniel Alessi, filed a bankruptcy petition.
Id. at ¶ 8. SFK participated in Mr.
Alessi's bankruptcy proceeding on behalf of Fusion,
contesting and filing motions. Id. at ¶¶
8-9. Mr. Alessi subsequently filed an adversary proceeding
against Fusion. Id. at ¶ 10. At some point
after the adversary proceeding began, Fusion obtained new
counsel. Id. at ¶¶ 9-10. As part of the
adversary proceeding, Mr. Alessi issued Requests for
Production to Fusion. Id. Believing SFK still
possessed documents responsive to Mr. Alessi's discovery
requests, Fusion's new counsel sent the requests to SFK,
along with a subpoena pursuant to Rule 45. Id. at
¶¶10-11. SFK objected to Fusion's subpoena on
the ground that Fusion had not fully paid SFK for its
representation, asserted a retaining lien, and moved to quash
the subpoena and for a protective order. Id. The
bankruptcy court held a hearing on SFK's Motion to Quash
and denied the Motion. Id. at ¶ 11. At the
hearing, no evidence was taken, but the bankruptcy court gave
two reasons for its denial of the motion. Id. at
¶ 11; Hearing Tr., ECF No. 7, 30:1-31:12. First, the
court found the existence of a common law or contractual
retaining lien is not a specified defense to compliance with,
nor a basis for quashing or modifying, a subpoena under Rule
45(d)(3). Hearing Tr., 30:1-6. Second, the court found
sufficient allegations of SFK's misconduct in the
adversary proceeding to create an exception to the retaining
lien based on the court's own observations, including
that “Mr. Stok has been as uncooperative and unhelpful
as possible.” Id. at 30:13-31:12. However, the
court specifically declined to make a finding of misconduct.
Id. at 30:14-15. In the subsequent written
Bankruptcy Order, SFK was ordered to produce the responsive
documents within seven days, while Fusion was not required to
post an interim bond as security. Bankruptcy Order, ECF No.
timely filed its Notice of Appeal of the Bankruptcy Order.
See ECF No. 1. SFK also filed an Emergency Motion
for Stay Pending Appeal in the adversary proceeding. SFK Br.,
¶ 13. The bankruptcy court denied the Motion for Stay,
so SFK filed an Emergency Motion to Stay Order Pending Appeal
in district court. See No. 17-61379, ECF No. 1. I
referred the Motion to U.S. Magistrate Judge Jonathan
Goodman, who granted SFK's Motion to Stay. Id.,
ECF No. 15.
bankruptcy court's legal conclusions and application of
the law to the facts of a given case are reviewed de
novo, and its factual findings for clear error.”
HDR Architecture, P.C. v. Maguire Grp. Holdings, 523
B.R. 879, 885 (S.D. Fla. 2014) (citing Carrier Corp. v.
Buckley (In re Globe Mfg. Corp.), 567 F.3d 1291, 1296
(11th Cir. 2009)). De novo review is warranted here
since the bankruptcy court based its decision on a legal
basis and explicitly declined to make findings of fact.
contests both of the bankruptcy court's grounds for
denying its Motion to Quash. SFK argues that allowing a Rule
45 subpoena to override a retaining lien is improper and
would essentially vitiate the common law right to a retaining
lien. Fusion has conceded this point, so I will not address
it. SFK's next argument is that the bankruptcy court
could not create an exception to the retaining lien based on
misconduct without taking any evidence, and doing so violated
its due process rights. If a hearing is to be held on the
issue, SFK requests that the reference be withdrawn so it can
be heard in district court in the first instance.
Standard for Retaining Liens
law governs attorney retaining liens. In re Beverly Mfg.
Corp., 841 F.2d 365, 368 (11th Cir. 1988). “No
statutes outline the requirements for valid attorney's
liens in Florida. Rather, case law acts as the sole guide for
both attorneys and courts as to these liens.”
Daniel Mones, P.A. v. Smith, 486 So.2d 559, 561
(Fla. 1986) (citing Sinclair, Louis, Siegel, Heath,
Nussbaum & Zavertnik, P.A. v. Baucom, 428 So.2d 1383
(Fla. 1983); St. Ana v. Wheeler Mattison Drugs,
Inc., 129 So.2d 184 (Fla. Dist. Ct. App. 1961)).
“In Florida an attorney has a right to a retaining lien
upon all of the client's property in the attorney's
possession, including money collected for the client.”
Id. (citing Dowda & Fields, P.A. v.
Cobb, 452 So.2d 1140, 1142 (Fla. Dist. Ct. App. 1984)).
The purpose of a retaining lien is to cover the balance due
for all legal work performed on behalf of the client.
Id. “An attorney's retaining lien . . .
holds until the fee has been paid or until adequate security
for payment has been posted.” Andrew Hall &
Assocs. v. Ghanem, 679 So.2d 60, 61 (Fla. Dist. Ct. App.
1996). “The pressure exerted by a retaining lien is
directly proportional to the client's need and desire for
the things in the attorney's possession.”
Id. at 62. “Any requirement to produce the
file would destroy the effectiveness of the lien.”
Foreman v. Behr, 866 So.2d 705, 706 (Fla. Dist. Ct.
App. 2003) Id. (citing Wintter v. Fabber,
618 So.2d 375 (Fla. 4th DCA 1993)).
a  court is asked to order disclosure of an attorney's
file that is subject to a valid retaining lien, it should not
order the attorney to turn over the file until it has
provided for the client's payment of delinquent fees or
arranged for the client to post adequate security for the
outstanding balance due.” Id. “Only
under rare circumstances will the files be released without
payment or the furnishing of adequate security: where there
is a clear necessity in a criminal case and a defendant
cannot post security or where the lawyer's misconduct
caused his withdrawal.” Andrew Hall &
Assocs., 679 So.2d at 62.
Exception to Retaining Lien
undisputed that SFK has a valid retaining lien. Where
SFK's and Fusion's views differ is on the manner in
which an exception to the retaining should be determined.
Fusion contends the bankruptcy court had enough information
before it to make a finding of misconduct and to compel SFK
to produce the requested documents without Fusion posting any
security. In support, Fusion goes through the information
relayed at the June 28, 2017 hearing. SFK contends that the
information in the record was merely the argument of counsel
and does not constitute evidence. Either way, the bankruptcy
court specifically stated it was “not making any
determination that there has been misconduct.” Hearing
Tr., 30:14-15. Absent such a determination, an order
compelling SFK to hand over its files without adequate
security was a departure from the requirements of the law.
See Conde & Cohen, P.L. ...