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Judge Moves Fee Dispute from Arbitration to Court

February 17, 2017 | Posted in : Fee Agreement, Fee Dispute, Fee Dispute Litigation / ADR, Quantum Meruit, Unpaid Fees

A recent New York Law Journal story by Christine Simmons, “Boies Claims Win After Judge Moves Fee Fight to Court,” reports that a Manhattan judge has stayed an arbitration brought by Boies Schiller Flexner seeking legal fees from an ex-client, coffee machine manufacturer Scanomat A/S, citing language in the engagement letter that didn't provide for arbitration.

However, the judge, Supreme Court Justice Kathryn Freed, said Boies Schiller's counterclaims against Scanomat for $427,481 can proceed in litigation.  Boies Schiller partner and general counsel Nicholas Gravante said the firm was pleased with the result even though it had fought the stay, and "we look forward to the case proceeding full speed ahead."  He added that, in general, firms that want to have client disputes resolved through arbitration must make sure language in the engagement letter is bullet-proof.

According to arbitration papers filed in court, after the ex-client's CEO claimed to be friends with chairman David Boies, the firm moved quickly to handle the company's case.  But the client refused to pay, claiming it was "just a European company" with no understanding of the U.S. legal system, the firm said.  Scanomat filed suit against Boies Schiller in November to stay arbitration.

Freed ruled that the engagement letter provides that disputes between the parties "relating to any matter other than [the firm's] fees... shall be settled by binding, confidential arbitration."  The judge said the facts "strongly militate in favor" of granting the stay.  Freed also found Boies Schiller failed to include in its arbitration demand the requisite statutory language warning Scanomat that it had 20 days to move for a stay.

However, Freed said she recognized that staying the arbitration "will have a practical effect of impeding" Boies Schiller from collecting what it claims are legitimate fees, and she converted the breach of contract and quantum meruit counterclaims into their own lawsuit.