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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 6, 2019

Arbitration Clause in Law Firm Engagement Letter Covers Dispute With Client Arising After Engagement Ended

On May 23, 2019, Justice Cohen of the New York County Commercial Division issued a decision in Guo Wengui v. Schiller, 2019 NY Slip Op. 31436(U), holding that an arbitration clause in a law firm engagement letter covered a dispute arising after the engagement ended, explaining:

Here, while the specific conduct of which Plaintiff complains took place after the attorney-client relationship ended, the claims in this case plainly arise out of and relate to Plaintiff’s engagement of Defendants as his counsel. Absent the attorney-client relationship between the parties, Plaintiff would have no claim for legal malpractice or breach of fiduciary duty. As such, the claims are covered by the broad arbitration provision in the Engagement Agreement.

Kwok’s contention that the arbitration agreement is applicable only to disputes over attorneys’ fees is meritless. The arbitration clause is broad and unequivocally refers to a dispute that arises from or relates to the Engagement, without any substantive limitation. Although the arbitration paragraph provides for a different arbitration option if the dispute relates to fees involving a sum between $1,000 and $50,000, which is not applicable here, it nowhere suggests that the arbitration right is limited to such disputes.

Kwok’s argument that the arbitration provision is applicable only to disputes with the law firm, and not individual partners such as Mr. Schiller, is frivolous. Kwok cites no authority for that proposition, which if accepted would essentially negate the Engagement Letter’s terms by permitting a client to sue individual partners rather than the firm. Mr. Schiller was not separately retained by Kwok. The claims against Mr. Schiller arise out of and relate to work done by the firm pursuant to the Engagement Letter, and thus are subject to the same terms and conditions that are applicable to Kwok’s claim against the firm.

(Internal quotations and citations omitted).

Complex commercial litigation involves more than courts. Disputes often are–by agreement–decided by private arbitrators. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a dispute that is subject to an arbitration agreement.

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