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Former Client Sues High Profile Lawyer Over Fees

October 19, 2010 | Posted in : Contingency Fees / POF, Ethics & Professional Responsibility, Fee Agreement, Fee Dispute, Fee Dispute Litigation / ADR, Hourly Rates

A recent law.com story, “Boies Schiller Sued by Former Client Over Fees” reports that high profile lawyer David Boies has been sued by a former client.  The former client, G.K. Las Vegas Limited Partnership is seeking to force Boies’ firm, Boies Schiller & Flexner, to arbitrate a fee dispute before the American Arbitration Association (AAA) and to place more than $5.04 million in disputed fees in escrow.  G.K. claims that it has already paid the firm $5 million and disputes its obligation to pay another $5.04 million.  It alleges Boies attended to other major cases and neglected to perform his duties as lead counsel.  G.K. claims that Boies immediately turned over the matter to less experienced and more junior associates.  As a result of the lack of senior partner attention, G.K. in 2007 bought in Davis Polk & Wardwell, which billed more than $7.6 million.

The underlying litigation involves a commercial dispute arising out of the sale of its interest in a Las Vegas shopping center.  Boies agreed to handle the case in 2003.  Boies Schiller set up an alternative fee arrangement, according to a copy of its retainer letter (pdf).  The firm earned a nonrefundable engagement fee of $250,000 and hourly fee discounted to 80 percent of normal rates.  If a recovery resulted, the firm would get a varying share of the proceeds, from 10 percent of less than $200 million to 30 percent of a $400 million recovery if the result was accomplished in two years, according to the retainer letter.

According to the complaint, G.K. Las Vegas Limited Partnership v. Boies Schiller & Flexner (pdf), G.K. told Boies Schiller that it did not deserve the full amount of hourly and contingent fees because the firm “had neglected its obligation as counsel.”   Boies Schiller insists that the settlement agreement include a clause specifying that the $5.04 million fee be paid out of the settlement amount and be wired directly to the firm.  The fee agreement does not mandate AAA resolution.  G.K. wants the fee dispute resolved by AAA, while Boies Schiller wants retired federal judge Layn Phillip of Irell & Manella to resolve the fee dispute.