This dispute arises from a thirteen-year-old lawsuit where True the Vote, Inc. sued the Internal Revenue Service. Over the years, multiple law firms represented the non-profit, including Foley & Lardner and the Bopp Law Firm. After the underlying claims were resolved, the district court awarded attorney's fees to True the Vote under the Equal Access to Justice Act, totaling nearly $789,000. A conflict emerged regarding how to distribute this award among the competing firms. Both the former attorneys and Bopp claimed an equitable charging lien, which would allow them to be paid directly from the fee award rather than through the client. The district court recognized the former attorneys' lien but denied Bopp's motion, concluding that Bopp failed to prove an agreement to be paid from the fund under Indiana law. Bopp appealed, arguing the district court applied the wrong legal standard.
Circuit Judge Walker, writing for the panel, analyzed the validity of the charging lien under Indiana law, which governs the dispute due to a choice-of-law provision in Bopp's fee agreement. The court relied on the Indiana Supreme Court's framework established in Koons v. Beach, which sets out two distinct ways an attorney can establish an equitable charging lien. First, an attorney may show that their services created the fund, entitling them to a lien in good conscience. Second, an attorney may show that the client agreed, either expressly or by implication, that compensation would come from the fund, creating an equitable assignment. The court emphasized that these are alternative requirements, not cumulative ones. The district court erred by requiring Bopp to satisfy both prongs of the test. The appellate court noted that while other jurisdictions might combine these tests, Indiana law maintains the distinction. The court found no Indiana Supreme Court decision that had altered this long-standing framework. Consequently, the district court's denial was based on a legal error, as it required Bopp to prove an agreement when it might only have needed to prove that its efforts secured the fund.
The district court's order is vacated, and the case is remanded for further proceedings. The lower court must now re-evaluate Bopp's motion to enforce its lien under the correct Indiana legal standard, which requires only one of the two prongs to be met. The remand also opens the door for the district court to determine the priority of liens if both the former attorneys and Bopp are found to have valid claims. Additionally, the court noted that the district court may need to address whether Bopp is entitled to the full amount it seeks, which exceeds the portion of the EAJA award calculated based on its specific billing submissions. The appellate court expressed no view on the merits of these remaining factual questions, leaving them for the district court to resolve.
Podcast (federal-narrative-summaries): Play in new window | Download