Friday, July 24, 2020

Notice Of Arbitration Rights Must Proceed Suit For Fees

The New York Appellate Division for the First Judicial Department affirmed the dismissal of a claim for legal fees where the attorney had failed to provide timely notice to the former clients of their arbitration rights

In this appeal we are called upon to determine whether Supreme Court correctly found that plaintiff's failure to serve, pursuant to Part 137 of the Rules of the Chief Administrative Judge, a notice of right to arbitrate within two years of rendering legal services barred his contract action for unpaid fees.

Facts

In June 2010, defendants retained plaintiff to provide legal services for the benefit of 1885-93 7 Avenue HDFC, a cooperative corporation of which all defendants were shareholders. The agreed upon scope of services were representation concerning issues of proper governance of the cooperative corporation, improper acts by members of the board of directors, and invalid acts or resolutions of said board of directors. It was contemplated that the services provided would [*2]include litigation. The retainer agreement also included a provision that defendants may have the right to arbitration of a dispute concerning attorney's fees.

It is undisputed that plaintiff continued the representation until 2015. At that time, defendants ceased paying plaintiff. It is undisputed that the last day on which plaintiff rendered legal services was June 2, 2015.

The attorney sent the notice to arbitrate more than three years later to the Joint Committee on Fee Disputes and Conciliation

The Committee subsequently denied arbitration of the claim. By letter dated August 30, 2018, the Committee noted that the last day plaintiff rendered legal services was more than two years earlier. As such, under its own rules, it denied the request to arbitrate.

Arbitration is the client's right

Fee arbitration is mandatory if requested by a client or a former client. It is a right of the client. Where, as in this case, an attorney, through their own delay deprives the client of that right, the attorney cannot in good faith claim compliance with the procedures of Part 137. Not only would this effectively give counsel the option of whether to arbitrate, because counsel could control whether the dispute began in two years or less, it would also be directly contrary to the rules, which provide that it is the client's choice.

Thus the fee claim was properly dismissed

The loss of the right to arbitrate that resulted from plaintiff's delay sufficiently supported the defense of laches (see Matter of Linker, 23 AD3d 186, 189 [1st Dept 2005]). Finally, by the aforementioned conduct, we find that plaintiff waived his right to initiate an action in court (Jefpaul Garage Corp. v Presbyterian Hosp. in City of N.Y., 61 NY2d 442, 446 [1984]).

Accordingly, the order of Supreme Court, New York County (Andrew Borrok, J.), entered on or about May 28, 2019, which, inter alia, denied plaintiff's motion to strike affirmative defenses and granted defendants' cross motion to dismiss the complaint should be affirmed, without costs.

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2020/07/the-new-york-appellate-division-for-the-first-judicial-department-in-this-appeal-we-are-called-upon-to-determine-whether-sup.html

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