Tuesday, February 9, 2010

Need Not Arbitrate

The New York Appellate Division for the First Judicial Department modified an order dismissing a suit for allegedly unpaid legal fees in a matrimonial action. The attorney and client had executed three retainer agreements that provided notice of rights to arbitration of fee disputes. The attorney thereafter sued for over $155,000 in fees. The supreme court concluded that the case should be dismissed for non-compliance with rules governing arbitration of fee disputes in matrimonial cases. The court stated the issue:

Characterizing the issue before it as "one of pure contract interpretation," the Supreme Court dismissed the complaint, finding that plaintiff breached the unambiguous retainer agreements by failing to give defendant 30 days' notice of her right to fee arbitration prior to commencing suit. We now consider whether in performing its analysis, the Supreme Court erred when it held that the retainer agreements may be construed without reference to the matrimonial rules governing retainers, fee disputes and arbitration in domestic relation matters that were in effect at the time the retainer agreements were executed.

The court concluded that the arbitration rules did not apply where the amount at issue exceeded $100,000 and reinstated the claim:

Here, in accordance with the matrimonial rules, plaintiff presented executed written retainer agreements which contain a fee arbitration provision and attached a copy of the statement of client's rights and responsibilities. In his complaint, plaintiff alleged "[t]hat neither Part 136, nor Part 137 of the Uniform Rules is applicable because of the amount in controversy, and, as to the latter Part, also because representation of Poster commenced in 1997." Given that it is undisputed that the amount in dispute exceeds $100,000, the parties' fee dispute is not subject to arbitration under the matrimonial rules, and plaintiff's complaint states a valid cause of action that should not have been dismissed on the basis of his failure to give defendant notice of her right to arbitrate.

The court affirmed the denial of the plaintiff attorney's motion for summary judgment. (Mike Frisch)


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