Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. v. Torino Jewelers, Ltd.

• Decision Date: 30 October 2007
• Docket Number: 9056.
• Citation: 44 A.D.3d 581,844 N.Y.S.2d 242,2007 NY Slip Op 08117
• Parties: EISEMAN LEVINE LEHRHAUPT & KAKOYIANNIS, P.C., Appellant, v. TORINO JEWELERS, LTD., et al., Respondents.
• Court: New York Supreme Court — Appellate Division

44 A.D.3d 581

844 N.Y.S.2d 242

2007 NY Slip Op 08117

EISEMAN LEVINE LEHRHAUPT & KAKOYIANNIS, P.C., Appellant, v. TORINO JEWELERS, LTD., et al., Respondents.

9056.

Appellate Division of the Supreme Court of the State of New York, First Department.

Decided October 30, 2007.

Order, Supreme Court, New York County (Carol Edmead, J.), entered May 19, 2006, which, granted defendants' motion to stay the action pending arbitration, reversed, on the law, with costs, the motion denied, and the matter remanded for further proceedings.

On April 8, 2005, plaintiff Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. (ELLK) was retained by defendants, Torino Jewelers, Ltd., Gili Vaturi, Tiran Sinai, and Nirit Sinai, to represent them as defendants in a lawsuit in the United States District Court in the Southern District of New York. The retainer agreement provided for an initial payment of $25,000 and monthly payments "anticipated" in the aggregate, not to exceed $60,000, for preliminary representation and the preparation and filing of a motion to dismiss the complaint. The retainer agreement also provided: "Please be advised that, should a fee or cost dispute arise between us concerning an amount between $1,000 and $50,000, you may select to resolve the dispute through arbitration proceedings in New York City in accordance with 22 NYCRR 137. New York law will govern the dispute." On May 27, 2005, ELLK filed a motion to dismiss the complaint in the federal action on defendants' behalf. The federal complaint was amended and ELLK drafted and served a second motion to dismiss. On March 22, 2006, the federal court dismissed that action as against defendant Torino Jewelers, but not as against the other defendants.

Also on March 22, 2006, ELLK met with defendants to discuss their continued representation. The parties agree that as of that date, defendants owed ELLK $49,424.80 in legal fees. However, they sharply dispute what happened at the meeting. Defendants contend that they instructed ELLK to stop working on their case. ELLK denies that it was instructed to stop its work, and on March 23, 2006, ELLK, by Eric Levine Esq., faxed a letter to defendants setting forth proposed fees for discovery, the next phase of the federal litigation. The final sentence of the letter states: "Please acknowledge your acceptance of these terms by signing below and returning a signed copy to me." Gili Vaturi, the defendant to whom the letter was sent, did not sign or return the letter.

On March 31, 2006, ELLK wrote to the district court judge to request a 30-day extension for defendants to file their answer. In that letter Mr. Levine stated:

"Yesterday morning I was informed by my clients that I was to cease immediately doing any further work on the matter. They informed me that they had decided to retain new counsel .... Knowing that an answer to the complaint was due early next week, I immediately contacted my adversary, Donald Kravet, and left him a voice mail message in which I asked for his consent to adjourn our time to answer by thirty days to allow my clients the time to retain new counsel, and to afford the new counsel time to sufficiently familiarize himself with the case. As you can see from his attached response, he declined.

"Yesterday afternoon ... I received a telephone call from a Ryan Goldstein who identified himself to me as the defendants' new counsel ... Mr. Goldstein told me ... that he would be responsible for filing and serving the answer, he would contact Mr. Kravet directly, and that he would provide me with a substitution of counsel. As of this morning I have not received a substitution of counsel form ... respectfully request that the Court grant a thirty day extension in which to file an answer." The district court gave defendants until April 21, 2006 to file the answer in that action.

On March 31, 2006, ELLK faxed defendants an invoice for $60,404.60. This included the $49,424.80 which had been incurred in March prior to the meeting on the 22nd, and $10,979.80 for legal services provided between March 22 and March 29, 2006. A three page, itemized breakdown of the services provided to substantiate the $10,979.80 in fees was attached to the invoice. Defendants made no payment.

ELLK then commenced this action. In lieu of filing an answer, defendants moved for a stay of the action and an order compelling the parties to proceed to arbitration. The court granted defendants' motion, stating that arbitration is strongly favored in this state (Matter of Nationwide Gen. Ins. Co. v Investors Ins. Co. of Am., 37 NY2d 91 [1975]), and that the dispute came within the scope of the subject arbitration agreement (Matter of Smith Barney Shearson v Sacharow, 91 NY2d 39, 49-50 [1997]). Plaintiff unsuccessfully moved for reargument, which was summarily denied. This appeal ensued.

The law is settled that whether a controversy is properly subject to arbitration is initially one for the courts to determine (see Matter of Primex Intl. Corp. v Wal-Mart Stores, 89 NY2d 594, 598 [1997]). The proponent of arbitration has the burden of demonstrating that the parties agreed to arbitrate the dispute at issue (Gerling Global Reins. Corp. v Home Ins. Co., 302 AD2d 118, 123 [2002], lv denied 99 NY2d 511 [2003]). An arbitration clause, as a component of a contractual agreement, must be enforced according to its terms (see Greenfield v Philles Records, 98 NY2d 562, 569 [2002]; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]). Moreover, "a court will not order a party to submit to arbitration absent evidence of that party's unequivocal intent to arbitrate the relevant dispute and unless the dispute falls clearly within that class of claims which the parties agreed to refer to arbitration" (Primavera Labs. v Avon Prods., 297 AD2d 505, 505 [2002] [citations and internal quotation marks omitted]).

Here the parties agreed to arbitrate disputes between $1,000 and $50,000 consistent with New York's "Fee Dispute Resolution Program," codified at Rules of the Chief Administrator of the Courts (22 NYCRR) part 137. The State's Rules specifically provide that they do not apply where the amount in controversy is "more than $50,000," unless the parties consent to arbitration (22 NYCRR 137.1 [b] [2]). Although it is defendants' contention that the amount in controversy here is $49,424.80, this is not an uncontroverted fact. In fact, it is ELLK's position that $60,404.60 is at issue, as previously billed, and they do not consent to arbitration. In the absence of a claim of overreaching or overbearing, the retainer agreement executed by the parties should be enforced as written (see Ermiger v Black, 36 AD3d 1053, 1054 [2007]; Agip Petroleum Co. v 666 Fifth Ave. Ltd. Partnership, 297 AD2d 483, 485 [2002], lv denied 99 NY2d 504 [2002]; see Matter of Woolfson, 158 Misc 928, 931 [1936]). Thus, arbitration pursuant to part 137 of the Rules of the Chief Administrator of the Courts cannot be compelled (Borovina & Marullo, PLLC v Structured Assets Sales Group, LLC, 17 AD3d 387 [2005]). Accordingly, we reverse the order appealed and deny defendants' motion.

Concur — Mazzarelli J.P., Andrias, Sullivan and Nardelli, JJ.

McGuire, J., dissents in a memorandum as follows:

The arbitration provision in the retainer agreement between the parties sheds little light on how to resolve the arbitrability dispute that is central to this appeal. Nonetheless, we must resolve it and do so in accordance with principles of contract interpretation. Because that provision reflects and refers to an arbitration provision that is mandated by law, it also is appropriate to consider the public policy considerations that inform both arbitration generally and the attorney-client relationship. I respectfully dissent because I believe the majority's resolution of the arbitrability dispute is not consistent with principles of contract interpretation or public policy considerations.

In April 2005 defendants Torino Jewelers, Ltd., Gili Vaturi, Tiran Sinai and Nirit Sinai (the Torino defendants) retained plaintiff Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. (ELLK) to represent the Torino defendants in a civil action commenced against them in federal court. The Torino defendants signed a retainer letter prepared by ELLK in which it was agreed "that, should a fee or cost dispute arise between us concerning an amount between $1,000 and $50,000, you [i.e., the clients] may select to resolve the dispute through arbitration proceedings in New York City in accordance with 22 NYCRR 137. New York law will govern the dispute."

Part 137 of the Rules of the Chief Administrator of the Courts "establishes the New York State Fee Dispute Resolution Program [the Program], which provides for the informal and expeditious resolution of fee disputes between attorneys and clients through arbitration and mediation. In accordance with the procedures for arbitration, arbitrators shall determine the reasonableness of fees for professional services" (22 NYCRR 137.0). The Program "appl[ies] where representation ... commenced on or after January 1, 2002, to all attorneys admitted to the bar of the State of New York who undertake to represent a client in any civil matter" (22 NYCRR 137.1 [a]). It does not apply, however, to "amounts in dispute involving a sum of less than $1,000 or more than $50,000" (22 NYCRR 137.1 [b] [2]), unless the parties agree otherwise. If the dispute is subject to the Program, arbitration is mandatory for an attorney if requested by the client (22 NYCRR 137.2 [a]).

Arbitration awards under the Program are not necessarily or automatically binding upon the parties. Rather "[d]e novo review" is available to either party as of right (22 NYCRR 137.8). Thus, "[a] party aggrieved by the arbitration award may commence an action on the merits of the fee dispute in a court of competent jurisdiction within 30 days after the arbitration award has been mailed" (22 NYCRR 137.8 [a]). If no such action is...