After three day trial, the bankruptcy court issued a judgment invalidating an alleged attorney's lien on the proceeds of real property which had been sold by the Chapter 7 Trustee.  The attorney appealed, and the BAP affirmed the judgment of the bankruptcy court.

Debtor represented multiple defendants in a state court lawsuit involving in part the alleged fraudulent transfer of certain real property lots.  The defendant clients signed an engagement agreement which provided for a lien in favor of the attorney on the real property to secure payment of his fees.  Under Cal. R. Prof. Conduct 3-300, to enter into a transaction adverse to the client (such as obtaining a lien on the clients' property), the attorney must show that the agreement is fair, and the clients must be given notice of the potentially adverse nature of the transaction and opportunity to obtain independent counsel to review the proposed transaction.  The bankruptcy court found that the attorney failed to comply with the first two requirements, and as a result that any alleged lien was invalid.  The bankruptcy court also reduced the attorney's claim amount to only those fees shown to have been incurred representing the debtor in that case, and not the interests of the other defendants.