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Krantz & Berman, LLP v. Dalal

May 12, 2010

KRANTZ & BERMAN, LLP, PLAINTIFF,
v.
SANDEEP DALAL, DEFENDANT.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

This action concerns efforts by plaintiff, Krantz & Berman, LLP ("K&B"), to recover legal fees it claims it is owed by its former client, defendant Sandeep Dalal ("Dalal"), for services rendered in separate litigation before this Court. K&B alleges that Dalal never paid the legal fees to which K&B claims it was entitled pursuant to a retainer agreement. On November 30, 2009, Dalal filed a motion to dismiss or, in the alternative, for summary judgment. On January 29, 2010, K&B filed a cross-motion to compel arbitration and to stay this action. For the following reasons, Dalal's motion to dismiss is denied, K&B's motion to compel arbitration is granted, and the action is stayed pending the outcome of the arbitration.

BACKGROUND

The following facts are taken from the complaint and documents referenced therein.*fn1 On March 7, 2002, K&B and Dalal entered into a retainer agreement (the "Retainer Agreement") pursuant to which K&B agreed to represent Dalal in connection with a contract dispute with India.com, Inc., India Holdings, Inc., and EasyLink Services Corp. (collectively, "EasyLink"). K&B agreed to defend Dalal in the suit filed by EasyLink and to file a counterclaim against EasyLink on Dalal's behalf.

The Retainer Agreement provided that K&B would be compensated for its services by a payment of "a flat fee of $10,000 plus an additional fee equivalent to 1/3 of the gross value of any settlement or judgment recovered" on Dalal's behalf (less the $10,000 flat fee). The Retainer Agreement further provided that in the event Dalal discharged K&B "before the completion of [the] representation and the payment of all fees due under [the Retainer Agreement]," Dalal would "immediately become liable to pay the full amount of all the firm's time charges... and disbursements incurred in [the] representation from the beginning through the date of discharge." Further, if after Dalal discharged K&B, "the litigation continue[d] to a judgment or settlement in [Dalal's] favor," K&B would "be entitled to its 1/3 portion of the judgment or settlement calculated on a pro-rata basis, less all amounts previously paid by [Dalal] for services rendered."*fn2 The Retainer Agreement contains an arbitration provision, which provides:

In the event that a dispute concerning fees arises under this agreement, any such dispute shall be resolved by arbitration and each party specifically waives its right to a jury trial. The arbitration shall be brought in New York County and the laws of the State of New York shall apply to any dispute.

The Retainer Agreement does not, however, designate a specific arbitral forum.

Following execution of the Retainer Agreement, K&B represented Dalal in the EasyLink litigation, which culminated in a bench trial before this Court in December 2002. At the conclusion of the bench trial, judgment was entered in Dalal's favor for $931,364, including interest, on December 17, 2002 (the "December 2002 Judgment"). Following two rounds of post-trial Rule 59 motion practice, EasyLink appealed the judgment to the Second Circuit on September 24, 2003 and Dalal cross-appealed. Initially, K&B represented Dalal in the cross-appeals, but was allegedly discharged by Dalal on November 6, 2003. On November 14, 2003, K&B, who was still counsel of record, filed a motion with the Second Circuit to be relieved as Dalal's attorney. K&B's withdrawal motion, which was unopposed, was granted by the Second Circuit on December 30, 2003.

On November 11, 2003, K&B sent an invoice to Dalal for legal services rendered and for unreimbursed expenses. The invoice detailed more than 800 hours expended by K&B and demanded payment of $288,264.50 for services rendered. By e-mail dated November 13, 2003, Dalal refused to pay K&B's invoice. To date, Dalal has made no payment toward the November 11, 2003 invoice. On March 2, 2004, K&B filed a Demand for Arbitration with the American Arbitration Association ("AAA"). Because the Retainer Agreement did not designate the AAA as the arbitral forum, the AAA required Dalal's consent in order to process K&B's demand. Dalal did not consent, and on March 14, 2004, the AAA closed its file.

The litigation between Dalal and EasyLink continued. On June 20, 2005, the Second Circuit reversed the December 2002 Judgment in favor of Dalal, set aside the damages award, and remanded. On remand, judgment was entered in favor of EasyLink on April 26, 2006 (the "April 2006 Judgment"). Dalal appealed. On April 28, 2009, the Second Circuit reversed the April 2006 Judgment and remanded for entry of judgment in Dalal's favor and determination of damages. On December 31, 2009, judgment was entered in Dalal's favor for $1,482,346.75, including interest. See India.com, Inc. v. Dalal, No. 02 Civ. 111 (DLC), 2009 WL 5171734 (S.D.N.Y. Dec. 30, 2009). On January 29, 2010, EasyLink filed a notice of appeal of the damages award. The appeal is pending.

K&B filed a complaint against Dalal on November 10, 2009. The complaint asserts claims for breach of contract, quantum meruit, and for a charging lien pursuant to N.Y. Judiciary Law § 475. On November 30, Dalal filed a motion to dismiss or, in the alternative, for summary judgment. Dalal argues that the complaint should be dismissed: (1) for insufficient service of process pursuant to Fed. R. Civ. P. 12(b)(5); (2) for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) because the Retainer Agreement contains a mandatory arbitration clause; and (3) for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) because K&B's claims are barred by the relevant statutes of limitations. On January 29, 2010, K&B filed its opposition to Dalal's motion, as well as a cross-motion to compel arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. On March 1, Dalal filed his reply and opposition to K&B's cross-motion to compel arbitration. In his opposition, Dalal argues that K&B's arbitration demand is untimely because its underlying claims are time-barred. The motions became fully submitted on March 5.*fn3

DISCUSSION

1. Service of Process

"Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied." Dynegy Midstream Servs. v. Trammochem, 451 F.3d 89, 94 (2d Cir. 2006). "[W]hen a defendant moves to dismiss under Rule 12(b)(5), the plaintiff bears the burden of proving adequate service." ...


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