ONCOLOGY ASSOCIATES OF OCEAN COUNTY, LLC., MODERN RADIATION AND ONCOLOGY OF OCEAN COUNTY, LLC, AND DOVER REAL ESTATE HOLDINGS, LLC.
MEMORANDUM ORDER Granting the United States' application for funds; Denying the Frank Firm and TD Bank's applications; further Ordering the United States to prepare and submit an appropriate form of order. Signed by Judge Michael A. Shipp on 6/10/2015. (eaj)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
Civil Action No. 14-228 (MAS)
IN RE ONCOLOGY ASSOCIATES OF
OCEAN COUNTY, LLC, et al.,
This case arises from the interpleader action based on the deposit of$75,000 with the Court
as a result of a settlement reached in an underlying bankruptcy action to which three creditors have
asserted an interest. The three creditors are Alan L. Frank (the "Frank Firm") (ECF No. 2), TD
Bank, N.A. ("TD Bank") (ECF No. 3), and the United States of America (the "United States")
(ECF No. 7). The Court has carefully considered the parties' submissions and decided the matter
without oral argument pursuant to Local Civil Rule 78.1.
In an underlying bankruptcy action, Barbara Schneider reached a settlement with the
bankruptcy trustee appointed to oversee her former employer's Chapter 11 bankruptcy. The
Honorable Michael B. Kaplan, U.S.B.J., approved the settlement, in the amount of $75,000;
however, the three creditors claimed an interest in the proceeds to Schneider. The parties could
not reach an agreement as to how the funds should be distributed, and as a result, Judge Kaplan
ordered that the funds be deposited with the District Court. On or about July 3, 2014, the
bankruptcy trustee deposited $75,000 with the District Court. 1 (ECF No. 1.)
The Frank Firm asserts it has been assigned the right to collect the $75,000 and the Court
should enforce an attorney's fees lien on the funds pursuant to N.J.S.A. 2A:13-5. The United
States argues the funds should be paid to it, as its federal tax lien has a higher priority than the
On April 23, 2015, this case was reassigned to the Undersigned. (ECF No. 9.)
other creditors' interests. TD Bank argues that it has an interest in the funds based on a writ of
execution but does not argue that its priority is higher than that of the United States.
While an attorney's lien can trump a federal tax lien, it can only do so to the extent that the
lien exists under local law. 26 U.S.C. § 6323(b)(8). Further, the transfer of property by assignment
subsequent to the attachment of a lien does not affect the lien, but instead is made subject to the
lien. See United States v. Bess, 357 U.S. 51, 57 (1958). Under New Jersey law, "an attorney's
right to assert an attorney's lien against any proceeds derived from that attorney's services comes
into existence at the time the attorney commences services on behalf of that client." Hoffman &
Schreiber v. Medina, 224 B.R. 556, 563 (D.N.J. 1998). However, an attorney who wants to assert
an attorney's lien must file a petition with the court and issue a pre-action notice to the client. See
Cole, Schatz, Bernstein, Meisel & Forman, P.A. v. Owens, 292 N.J. Super. 453, 459 (App. Div.
1996). If these procedural requirements are not satisfied, "the right to an attorney's lien remains
unperfected." Hoffman & Schreiber, 224 B.R. at 564.
Here, the United States filed its notice of federal tax liens in 2010 and 2012. The Frank
Firm executed an assignment with Schneider for its attorney's fees on November 11, 2013, and
executed an amended assignment on February 11, 2014. The Frank Firm has not shown that it has
satisfied the procedural requirements to perfect its attorney's fees lien under N.J.S.A. 2A: 13-5.
Therefore, the Frank Firm only holds an assignment that is subject to the United States' tax lien.
Additionally, in November 2013, TD Bank obtained a judgment against Schneider and served a
writ of execution in June 2014. Accordingly, as the United States obtained its lien first, it has a
higher priority than TD Bank's interest.
Accordingly, for the reasons set forth above, and other good cause shown,
IT IS on this
/L/ day of June 2015, ORDERED that:
The United States' application for the funds is GRANTED, and the Frank Firm and
TD Bank's applications are DENIED; and
The United States shall prepare and submit an appropriate form of order.
UNITED STATES DISTRICT JUDGE
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