Admiralty — No Salvage Award for Lawyer

Recovery Limited Partnership v. The Wrecked & Abandoned Vessel S.S. Central America(Lawyers Weekly No. 001-113-15, 23 pp.) (Niemeyer, J.) No. 14-1950, June 22, 2015; USDC at Norfolk, Va. (Smith, J.) 4^th Cir.

Holding: A former lawyer for Columbus America Discovery Group, which was involved in a salvage operation for the gold-laden wreck of the S.S. Central America off the coast of South Carolina, cannot assert a valid salvage claim based on his attorney’s lien under Ohio law; the 4^th Circuit affirms the trial court holding that the lawyer had an ethical obligation to turn over to his former client the materials on which he based his claim.

The trial court concluded the lawyer, who was licensed to practice law in both Virginia and Ohio, had a duty under Virginia Rule of Professional Conduct 1.16(e) to supply the materials to his former client within a reasonable time of the termination of his representation of the salvor and therefore his action was not “voluntary.”

The lawyer contends the district court inappropriately went beyond the four corners of his verified statement of claim because its allegations did not include the facts necessary for the court to reach its conclusion as to “voluntariness.” The district court, however, did not go beyond the claim except to note the lawyer had been counsel of record for Columbus-America and Recovery Limited and therefore he owed a duty to return the materials relating to the salvage operation to his former clients. Courts are entitled to consider such matters of public record in relying on motions to dismiss.

Modern Ethics Rules

Modern standards of professional conduct preclude the lawyer from exercising a retaining lien in these circumstances. Virginia ethics rules require a lawyer to return to a former client documents furnished by the client and attorney work product, whether or not the client has paid the fees and costs owed to the lawyer.

Although the lawyer contends the trial court should have applied the contrasting Ohio law, we need not decide whether the ethics rules of Virginia or Ohio apply, because the lawyer’s claim would fail under the rules of either jurisdiction. Despite the fact that an intermediate court in Ohio once recognized the common law retaining lien for lawyers, it appears the Ohio Rules of Professional Conduct, which subsequently were adopted by the Ohio Supreme Court, have displaced the retaining lien by obligating an attorney to turn over files to the client upon termination of the representation.

In any event, attorneys in Ohio and elsewhere are prohibited from asserting retaining liens when doing so would cause foreseeable prejudice to the client. By the lawyer’s own admission, the documents he provided to the receiver, including maps and navigational charts, saved Recovery Limited in excess of $600,000 in its efforts to relocate the wreck.

The lawyer also contends his return of documents stored in the portion of property he leased to a related entity, EZRA, which owed him rent, was voluntary because he, not his clients, owned the documents. This claim fails for four reasons: 1) the lawyer points to no Ohio law that would have entitled him to engage in self-help repossession of the property upon default of his tenant, and he has made no claim that he repossessed the property through judicial proceedings; 2) he conceded the documents stored at the property were not his, but rather his clients’; 3) he acquiesced in the receiver’s demand for the company files and said they were client-owned files; and 4) any ownership of the files through EZRA’s abandonment of them would not overcome the lawyer’s overarching ethical duty to return the files.

The fact that the lawyer now raises a competing claim against his former clients for his own salvage award, based on having “voluntarily” returned client files, raises a disquieting question. Nonetheless, we affirm dismissal of the lawyer’s verified statement of claim.