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Derma Pen, LLC v. 4Everyoung Ltd.

United States District Court, D. Utah, Central Division

September 1, 2017

DERMA PEN, LLC, Plaintiff,
v.
4EVERYOUNG LIMITED, BIOSOFT AUST PTY LTD d/b/a DERMAPENWORLD, EQUIPMED INTERNATIONAL PTY LTD d/b/a DERMAPENWORLD, and STENE MARSHALL d/b/a DERMAPENWORLD, Defendants.

          MEMORANDUM DECISION AND ORDERGRANTING [1060]DENYING [1059]FINDING MOOT [1053] AND [1061]

          David Nuffer, District Judge.

         The facts in this case are provided in detail in the Findings of Fact and Conclusions of Law.[1] The plaintiff Derma Pen, LLC and Michael Anderer were awarded judgment against the defendants.[2] Magleby Cataxinos & Greenwood (MCG)[3] has an attorney's lien against defendant Equipmed International in MCG's collection action against defendants.[4] While MCG was representing defendants, $140, 000 was deposited by defendants in the court's registry for injunction security.[5] Also during MCG's representation, Anderer was found to be in civil contempt and ordered to pay defendants' related attorneys' fees, totaling $50, 137.38.[6] Because Anderer's appeal of the contempt orders was pending, the money deposited by defendants totaling $50, 137.38 was placed in the court's registry.[7]

         To collect the $140, 000.00, Derma Pen and Anderer each filed applications for writs of garnishment[8] and, as an alternative means, applications for writs of execution.[9] MCG filed a notice of filing indicating that it had also applied for writ of garnishment in its case against the defendants.[10] Anderer's writ of garnishment and writ of execution also seeks to collect the $50, 137.38.[11]

         For the reasons stated below, Derma Pen's application for writ of garnishment is GRANTED, Anderer's application for writ of garnishment is DENIED, and both parties' applications for writs of execution are MOOT.

         DISCUSSION

         MCG states that it is entitled to the funds held in the court's registry because its “lien has priority over Derma Pen's alleged rights, including because MCG has had a perfected attorney's lien against defendants, which is attached specifically to the Bond Funds, for over a year, and Derma Pen has been on notice of MCG's lien for at least that same time period.”[12] Derma Pen responds that MCG is not entitled to the $140, 000.00 because it “does not represent the fruits” of MCG's labor and because a judgment has priority over the losing party's attorney's lien.[13]

         Additionally, Anderer argues that “in light of [his] right to offset judgment, the Court also should return the $50, 137.38 to [him] immediately.”[14] Anderer reasons that regardless of how the Tenth Circuit rules on the pending appeal, he “would be entitled to return of the $50, 137.38, so there is no need to wait for the Tenth Circuit to rule before so doing.”[15]

         1. Because Derma Pen's judgment has priority, Derma Pen is entitled to the $140, 000 injunction security.

         Derma Pen's judgment has priority over MCG's attorney's lien. Utah Code § 38-2-7 states in relevant part that an “attorney shall have a lien for the balance of compensation due from a client on any money or property owned by the client that is the subject of or connected with work performed for the client.”[16] It may be that under Section 38-2-7 a lien only attaches if the matter or action resolves “in the client's favor.”[17] But even if not, Derma Pen's judgment has priority over MCG's lien.

         Derma Pen makes the correct intuitive argument that to give the losing party's attorney's lien priority over the prevailing party's judgment would be absurd:

[C]onstruing the Lien Statute so as to give a losing party's attorney lien rights that supersede the rights of the winning party is an absurd result . . . . Indeed, such a result effectively would punish a prevailing party for a losing party's failure to pay its legal bills.[18]

         Derma Pen is the prevailing party. Even though Derma Pen and Anderer were not wrongfully enjoined, [19] as the prevailing party, Derma Pen's judgment is accorded priority over MCG's attorney's lien. The injunctions related to one of the core issues in the litigation, i.e., ownership and control of the intellectual property. Therefore, to now give the losing party's attorney's lien priority would, as Derma Pen argues, punish the prevailing party. Derma Pen's judgment has priority as toward the $140, 000.00 held in the court's registry as injunction security.

         2. Because the $50, 137.38 relates to an ancillary issue, it will remain in the court's registry until resolution of Anderer's appeal.

         Anderer does not have offset priority as to the $50, 137.38. Anderer cites the Missouri Court of Appeals for the proposition that when

different claims arise in the course of the same suit, or in relation to the same matter, it is undoubtedly equitable and just that these equities should be arranged between the parties without reference to the solicitor or attorney's lien[, ] [which] lien is only on the ...

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