Clear Blue Specialty Insurance Company v. OZY MEDIA, INC.

Background

Clear Blue Specialty Insurance Company brought this action seeking to rescind a Directors & Officers Employment Practices Liability and Fiduciary Liability Policy issued to OZY Media, Inc. Ford O’Brien Landy LLP had entered into a retainer agreement with OZY Media under New York law and represented the company in several related investigations and lawsuits, including this action. Although Ford O’Brien was not counsel of record, the firm said it helped oversee the defense, worked with counsel for Carlos Watson, and submitted declarations supporting a request for preliminary injunctive relief.

The court later ordered Clear Blue to advance Watson’s defense costs under the policy, which made insurance proceeds available for his defense. Ford O’Brien then sent notice of a charging lien under New York Judiciary Law § 475. A charging lien is an attorney’s claimed right to receive payment from money or property obtained for a client through the attorney’s work. After the court denied Clear Blue’s request to amend its complaint to add an interpleader-type claim, Ford O’Brien moved to intervene to enforce the lien. Watson opposed the motion.

Intervention

The court considered both intervention as of right under Federal Rule of Civil Procedure 24(a) and permissive intervention under Rule 24(b). It found that the motion was timely because Ford O’Brien moved after circumstances changed: the firm obtained an unpaid judgment against Watson, the defendants sought advancement of defense costs, Clear Blue was ordered to advance costs, and the court denied Clear Blue’s amendment request. The case had not advanced far enough to make intervention improper because no discovery or depositions had occurred and only one substantive ruling had been entered.

The court did not decide whether Ford O’Brien had a legally protectable interest sufficient for intervention as of right. Instead, it concluded that permissive intervention was appropriate. The firm’s claimed lien was connected to the insurance proceeds because OZY Media and Watson had sought advancement of defense costs under the policy. The court also found that excluding Ford O’Brien could practically impair its ability to recover fees, particularly because the firm had been unable to collect its state-court judgment and represented that OZY Media had little or no remaining assets.

The court further found that intervention would not cause undue prejudice. Although Watson argued that intervention would delay payments needed for his criminal defense, no pending motions or proceedings would be delayed in the adjudication of this case. The court balanced the temporary pause in the remaining insurance payments against Ford O’Brien’s asserted unpaid fees and expenses of approximately $1.25 million. It also found that the existing parties did not adequately represent Ford O’Brien’s concrete economic interests.

Charging Lien

The court held that Ford O’Brien’s charging lien was enforceable. Under New York Judiciary Law § 475, an attorney who appears for a client may have a lien that attaches to a favorable judgment or other recovery and its proceeds. The court found that Ford O’Brien had appeared for Watson in this action because the firm submitted declarations supporting the injunction motion and had played a substantial, although informal, role in coordinating the joint defense and helping secure counsel and strategy in this case.

The court also found an affirmative recovery in Watson’s favor: the preliminary-injunction order required Clear Blue to advance Watson’s defense costs under the policy. Based on those findings, the court concluded that Ford O’Brien was entitled to recover legal fees through the charging lien.

Disposition

The court GRANTED Ford O’Brien’s motion to intervene and enforced Ford O’Brien’s charging lien. The parties were ordered to meet and confer about distributing the remaining insurance proceeds and to file a status report with any proposed resolution or briefing schedule by November 13, 2023. The stay on Clear Blue’s payments was extended until November 17, 2023.