Norton v. Ruebel.
2024COA108. No. 23CA1030. Attorneys and Clients—Retaining Liens—Legal Malpractice—Discovery Dispute—Files in Attorney’s Possession—Summary Judgment.
October 3, 2024
Ruebel represented One Stop Construction and Landscapes, Inc. (One Stop), a corporation owned by Alfaro. The Norton parties purchased stock in One Stop and subsequently became its the controlling shareholders, officers, and directors. One Stop defaulted on a $2.5 million line of credit from Bank of Colorado, which the Norton parties and Alfaro had guaranteed. One Stop and the guarantors then entered into a forbearance agreement. But counsel for Bank of Colorado subsequently informed Ruebel that One Stop was in default of the line of credit and asked Ruebel which borrowers and guarantors he represented. Ruebel said that he represented One Stop, Alfaro, and the Norton parties, and he negotiated on their behalf an addendum to the forbearance agreement. Pursuant to the addendum, SALMAC LLC and McAllister purchased One Stop’s assets in exchange for a promissory note payable to One Stop, which note was endorsed to Bank of Colorado. SALMAC and McAllister stopped making payments on the note, so Bank of Colorado filed suit seeking replevin and money judgments, later obtaining a money judgment against One Stop and certain other defendants for $912,213.82.
The Norton parties, who were not parties to the Bank of Colorado’s lawsuit, allege that after Bank of Colorado took steps to enforce its judgment, One Stop was left with no assets and was dissolved. The Norton parties then brought a legal malpractice action against Ruebel, asserting negligence and breach of fiduciary duty, and seeking a judgment for approximately $1.4 million, which was the sum they allegedly lost through their investment in One Stop. During the litigation, the Norton parties requested that Ruebel produce his files regarding One Stop (the subject files). Ruebel refused, and his counsel advised the Norton parties that Ruebel asserted a retaining lien against the subject files under CRS § 13-93-115 on grounds that One Stop owed him approximately $100,000 in unpaid legal fees. The Norton parties filed a notice of discovery dispute, moving for a determination of the effect of the retaining lien on their request for the subject files. Ultimately, the district court granted summary judgment in favor of Ruebel and his counsel.
On appeal, the Norton parties contended that the court erred by concluding that Ruebel’s assertion of a retaining lien against One Stop preempted discovery regarding the subject files. As relevant here, § 13-93-115 grants an attorney a retaining lien on a nonpaying client’s papers that the attorney possesses in the course of their professional employment. The court of appeals agreed with the Tenth Circuit that, after a court determines that an attorney has a retaining lien, the court must determine whether assertion of the lien conflicts with important principles such that it must be relinquished when balanced against public policy considerations. Here, the court failed to consider all factors relevant to deciding that the Norton parties were not entitled to the subject files, including the threshold issue of whether the Norton parties were clients or former clients of Ruebel who owed attorney fees to him. The court thus misinterpreted the law when it analyzed the scope and applicability of Ruebel’s retaining lien.
The Norton parties also argued that Ruebel waived his claim to a retaining lien when, at Michelle Norton’s request, Ruebel provided her with a portion of the subject files without claiming that the documents were subject to a retaining lien. However, the court held that an attorney’s release of some but not all of the documents covered by a retaining lien does not result in a waiver of the entire lien.
Lastly, because the court decided to remand on whether Ruebel is entitled to withhold the subject files from the Norton parties, it could not determine whether disputed issues of material fact exist regarding whether Ruebel’s actions caused the Norton parties’ alleged damages.
The grant of summary judgment was reversed and the case was remanded for reconsideration of the Norton parties’ requests for the subject files.