Dormant judgment gobbles up lawyer’s fee
This stinks. A lawyer labors long and hard to win his client’s case and, just as pay day is set to arrive, a long-forgotten judgment creditor swoops in and takes his client’s settlement — along with his 40 percent contingent fee.
How appropriate that this tale of woe begins with a scheme to make a tourist attraction out of a played-out gold mine in Alaska.
Lorimer and Pamela McLaughlin had a dream: create the perfect Alaskan tourist destination.
Take a historic gold camp to attract the guys, and build an “Aurorium” at the site so that the gals can ooh and ah over the Northern Lights. You could just imagine the money rolling in.
To make that dream a reality, the McLaughlins first purchased a historic gold camp outside Fairbanks in 1982. Then they got foreign investor Masayoshi Okumura to buy in to their dream.
But then reality struck like a club over the noggin.
The McLaughlins discovered that in 1990 they had lost title to the gold camp via foreclosure. This disaster was the result of the malpractice of the McLaughlins’ attorney, Arthur Robson.
Robson compounded the McLaughlins’ troubles by proceeding to lose a fraud lawsuit brought by Okumura.
The $1 million judgment obtained by Okumura in 1993 forced the McLaughlins into bankruptcy.
Gluttons for punishment, the McLaughlins kept Robson to represent them in the bankruptcy case. Predictably, the McLaughlins’ debt to Okumura was not discharged in bankruptcy because it was deemed to have resulted from fraud.
Coming to their senses, the McLaughlins eventually sued Robson for malpractice, subject to a court-approved agreement that any recovery would be split evenly between them and their bankruptcy estate.
Attorney Michael MacDonald represented the McLaughlins in the malpractice suit under a 40 percent contingency fee agreement. MacDonald did his job, obtaining a $3.6 million judgment against Robson in 2001.
Unfortunately, by this time Robson’s liability insurance had been exhausted and the only amount that could be recovered was $160,000 from a law firm and lawyers associated with Robson.
Now, MacDonald wasn’t looking at a big payday because the $160,000 was subject to a contingent fee owed to the bankruptcy estate’s attorney, but he thought he would at least get something for representing the McLaughlins.
That was until 2006 when Okumura got wind of the settlement and resurrected his 1993 fraud judgment by obtaining a new writ of execution against the McLaughlins.
MacDonald filed a motion requesting that 40 percent of the McLaughlins’ $44,000 share of the Robson malpractice settlement released directly to him as attorney’s fees rather than being subject to execution by Okumura.
But the Alaska Supreme Court last week decided that MacDonald was out of luck.
First, the court concluded that Okumura’s lengthy delay in executing on his 1993 fraud judgment was justified because the McLaughlins had moved out of state and Okumura had lost track of their whereabouts.
Second, the court questioned the propriety of allowing MacDonald to collect his contingency fee after a contingency fee had been taken by the attorney representing the bankruptcy estate in the Robson malpractice case.
Most importantly, the court concluded that MacDonald had failed to perfect his attorney lien under state law.
“The only ‘attorney’s lien’ in the record is inexplicably captioned with Okumura’s original 1992 lawsuit against the McLaughlins rather than the McLaughlins’ lawsuit against Robson, and it was apparently recorded rather than filed with the clerk of court,” the court explained. “MacDonald had the burden of showing that he had a valid, properly perfected attorney’s lien that would cover the [malpractice] settlement proceeds. He did not do so.” (McLaughlin v. Okumura)
— Pat Murphy
patrick.murphy@lawyersusaonline.com
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