Leber v. CitiGroup, Inc. et al
Filing
309
OPINION AND ORDER re: 304 MOTION for Pre-Arbitration Relief and Distribution of Attorneys Fees Beyond Reasonable Dispute by McTigue Law LLP. filed by Sara L Kennedy, Marya J. Leber. The Court therefore denies McTigue' s motion for pre-arbitration relief. The parties are directed to proceed with mediation and, if necessary, arbitration. The mediation shall take place on April 2, 2019, as the firms have agreed. (Bailey & Glasser' s Opp. at 7, Doc. 307; McTigue' s Reply at 2, Doc. 308.) If mediation fails, the firms shall proceed immediately to arbitration pursuant to Section 8 of the Co-Counsel Agreement. SO ORDERED. (Signed by Judge Sidney H. Stein on 3/25/2019) (kv)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Leber, et al.,
Plaintiffs,
-against-
07-Cv-9329 (SHS)
OPINION & ORDER
Citigroup, Inc., et al.,
Defendants.
SIDNEY H. STEIN, U.S. District Judge.
I.
BACKGROUND
This “Motion for Pre-Arbitration Relief and Distribution of Attorneys
Fees Beyond Reasonable Dispute” by co-lead class counsel McTigue Law LLP
arises out of a dispute between it and Bailey & Glasser LLP, its co-lead class
counsel in this longstanding ERISA class action. (Doc. 304.) The
disagreement between co-counsel concerns the proper distribution of $2.3
million in attorneys’ fees that the Court awarded on January 3, 2019 at the
time it approved the settlement agreement in this action. (Doc. 294.) That
attorneys’ fee award is currently being held in an escrow account
administered by the settlement administrator pending authorization from
both class counsel firms for its distribution. (McTigue’s Feb. 12, 2019 Letter at
2, Doc. 295.)
After the Court entered its order approving the settlement and awarding
attorneys’ fees, Bailey & Glasser informed McTigue that it will not consent to
the distribution of any amount of attorneys’ fees until a dispute between it
and McTigue is resolved. Id. Bailey & Glasser represents that it is
withholding consent because it was allegedly forced to cover a greater
portion of the litigation expenses than was required under the “Agreement
Between Law Firms Regarding Co-Counseling” (the “Co-Counsel
Agreement,” Doc. 297 Ex. A) that both firms entered into in 2009. (Bailey &
Glasser’s Feb. 13, 2019 Letter at 2, Doc. 296.)
In a letter dated February 12, 2019, McTigue informed the Court of its
intention to file a motion seeking an order allocating attorneys’ fees among
class counsel, or, in the alternative, simply ordering the distribution of the
fees based on the firms’ lodestar percentages set forth in the Co-Counsel
Agreement. (McTigue’s Feb. 12, 2019 Letter at 1, Doc. 295.) In response,
Bailey & Glasser called the Court’s attention to that Agreement’s arbitration
clause, which requires the two firms to attempt to resolve “any dispute
arising under or relating to the terms of this Agreement” through mediation
and, if that fails, through arbitration. (Bailey & Glasser’s Feb. 13, 2019 Letter
at 1, Doc. 296.)
The Court held a telephone conference with the two firms on February
21, 2019, during which it encouraged class counsel to resolve the dispute
themselves but stated that it would accept appropriate motions if that proved
2
impossible. One week later, Bailey & Glasser filed a motion to compel
arbitration (Doc. 299) but withdrew that motion shortly thereafter (Doc. 301).
On March 5, 2019, McTigue filed this motion for pre-arbitration relief.
In its motion, McTigue requests that the Court order the immediate
distribution of all but $250,000 of the $2.3 million attorneys’ fees award on the
grounds that “most of the attorneys fees [are] beyond reasonable dispute.”
(McTigue’s Mem. at 3, Doc. 305.) In its opposition, Bailey & Glasser reiterates
its belief that the dispute must be submitted to mediation and arbitration
pursuant to the Co-Counsel Agreement.
II. DISCUSSION
McTigue’s motion raises two issues: first, whether the dispute need be
resolved through mediation and arbitration; and second, whether the Court
should grant the pre-arbitration relief that McTigue requests. For the
following reasons, the Court (1) finds that the dispute must be resolved
through the alternative dispute resolution mechanisms set out in the CoCounsel Agreement and (2) declines to grant the requested pre-arbitration
relief.
A. The Dispute Must Be Resolved Through the Alternative Dispute
Resolution Procedures Set Out in the Co-Counsel Agreement.
When deciding whether a dispute must be submitted to arbitration
pursuant to an arbitration clause, a district court must first “determine
3
whether the parties agreed to arbitrate; second, it must determine the scope
of that agreement.” Mehler v. Terminix Intern. Co., 205 F.3d 44, 47 (2d Cir.
2000); see also Campaniello Imps., Ltd. v. Saporiti Italia S.p.A., 117 F.3d 655, 666
(2d Cir. 1997). McTigue has not contested the existence or the validity of the
Co-Counsel Agreement itself or the arbitration clause contained within it.
Therefore, the Court moves directly to the second question: the scope of that
agreement.
The U.S. Court of Appeals for the Second Circuit has written that a
district court faced with this question should decide at the outset whether the
arbitration agreement is broad or narrow. In Collins & Aikman Products Co. v.
Building Systems, Inc., it wrote as follows:
[I]f the arbitration clause is broad, there arises a presumption of
arbitrability; if however, the dispute is in respect of a manner that,
on its face, is clearly collateral to the contract, then a court should
test the presumption by reviewing the allegations underlying the
dispute and by asking whether the claim alleged implicated issues
of contract construction or the parties’ rights and obligations under
it. If the answer is yes, then the collateral dispute falls within the
scope of the arbitration agreement.
58 F.3d 16, 23 (2d Cir. 1995); see Norcom Electronics Corp. v. CIM USA Inc., 104
F. Supp. 2d 198, 203 (S.D.N.Y. 2000).
The arbitration clause in the Co-Counsel Agreement provides that “[i]n
the event of any dispute arising under or relating to the terms of this
Agreement, it is agreed that the dispute is to be first mediated. If no
4
agreement is reached after mediation, then the parties agree to participate in
binding arbitration.” (McTigue’s Feb. 19, 2019 Letter, Ex. A § 8, Doc. 297.)
This language is a classic example of a broad arbitration clause. Collins &
Aikman Products, 58 F.3d at 20 (stating that a clause “submitting to arbitration
‘[a]ny claim or controversy arising out of or relating to th[e] agreement,’ is the
paradigm of a broad clause.”). Therefore, this dispute is subject to a
“presumption of arbitrability” as set forth in Collins & Aikman Products. Id. at
23.
Furthermore, the disagreement involves an issue that is squarely
addressed by the terms of the Co-Counsel Agreement. Section 4 of the
contract is titled “Attorney Fees and Expenses” and expressly addresses the
method of disbursement of attorneys’ fees “recovered through the Matter”
including “in a class action settlement.” (McTigue’s Feb. 19, 2019 Letter, Ex.
A § 4, Doc 297.) McTigue’s and Bailey & Glasser’s current dispute over the
disbursement of attorneys’ fees therefore is a dispute “arising under or
relating to the terms of th[e] Agreement.” Id. § 8.
In addition, federal substantive law of arbitrability, which governs the
determination of an arbitration agreement’s scope, counsels that “questions
of arbitrability must be addressed with a healthy regard for the federal policy
favoring arbitration . . . . The [Federal] Arbitration Act establishes that, as a
5
matter of federal law, any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration.” Progressive Cas. Ins. Co. v. C.A.
Reaseguradora Nacional De Venezuela, 991 F.2d 42, 48 (2d Cir. 1993) (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626
(1985)). “Indeed, unless it can be said ‘with positive assurance that the
arbitration clause is not susceptible of an interpretation that covers the
asserted dispute,’ the dispute should be submitted to arbitration.” Concourse
Village, Inc. v. Local 32E, Service Employees Int'l Union, 822 F.2d 302, 304 (2d
Cir. 1987) (quoting United Steelworkers of America v. Warrior & Gulf Navigation
Co., 363 U.S. 574, 582-83 (1960)); Nat'l City Golf Fin. v. Higher Ground Country
Club Mgmt. Co., 641 F. Supp. 2d 196, 208-09 (S.D.N.Y. 2009). Accordingly,
“federal policy favoring arbitration requires [courts] to construe arbitration
clauses as broadly as possible.” Genesco, Inc. v. Kakiuchi & Co., 815 F.2d 840,
847 (2d Cir. 1987).
McTigue argues that “most of the attorneys fees are beyond reasonable
dispute, [so] there is no just reason to delay the distribution of the amount
beyond reasonable dispute any longer.” (McTigue’s Mem. at 3, Doc. 305.)
However, McTigue cannot unilaterally decide that some portion of the fees is
not in dispute. Bailey & Glasser has chosen to contest the division of the
entire attorneys’ fee award by withholding its consent to distribution. The
6
dispute therefore extends to the entire $2.3 million and the firms must honor
the agreement they made to resolve “any dispute arising under or relating to
the terms of [the Co-Counsel] Agreement” through mediation and
arbitration. (McTigue’s Feb. 19, 2019 Letter, Ex. A § 4, Doc 297.) McTigue
urges that the entire disagreement is one ginned up by Bailey & Glasser, the
substantially larger firm, as a means of exerting economic pressure on
McTigue by depriving McTigue of a significant amount of fees in the hope of
coercing McTigue to agree to Bailey & Glasser’s proposed modification of the
split in fees. (McTigue’s Mem. at 4, Doc. 305.) Regardless of the alleged
motivation, the agreement to arbitrate will be honored and the arbitrator will
be able to hear all appropriate arguments and decide accordingly.
B. The Court Declines to Grant the Pre-Arbitration Relief McTigue
Requests.
McTigue styles its request as one for “pre-arbitration relief.” A review of
relevant Second Circuit case law reveals that district courts may indeed grant
pre-arbitration relief, but that relief appears to be in the form of an injunction
to preserve the status quo when a dispute is subject to mandatory arbitration
pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. Benihana, Inc. v.
Benihana of Tokyo, LLC, 784 F.3d 887, 895-96 (2d Cir. 2015) (“Where the parties
have agreed to arbitrate a dispute, a district court has jurisdiction to issue a
preliminary injunction to preserve the status quo pending arbitration.”)
7
(internal quotations omitted); Blumenthal v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 910 F.2d 1049, 1051-54 (2d Cir. 1990); CHARLES ALAN WRIGHT &
ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 3569 (3d ed.); see also
Aggarao v. MOL Ship Management Co., 675 F.3d 355, 376 (4th Cir. 2012); Merrill
Lynch, Pierce, Fenner & Smith, Inc. v. Salvano, 999 F.2d 211 (7th Cir. 1992).
Courts are permitted to issue pre-arbitration injunctive relief in order to
aid the arbitration process because “[a]rbitration can become a hollow
formality if parties are able to alter irreversibly the status quo before the
arbitrators are able to render a decision in the dispute.” Blumenthal, 910 F.2d
at 1053. The standard for such an injunction is the same as for preliminary
injunctions generally: the party seeking the injunction must demonstrate “(1)
a likelihood of success on the merits or . . . sufficiently serious questions
going to the merits to make them a fair ground for litigation and a balance of
hardships tipping decidedly in the plaintiff's favor; (2) a likelihood of
irreparable injury in the absence of an injunction; (3) that the balance of
hardships tips in the plaintiff's favor; and (4) that the public interest would
not be disserved by the issuance of an injunction.” Benihana, 784 F.3d at 896.
The pre-arbitration relief that McTigue seeks is an order directing the
settlement administrator to distribute all but $250,000 of the attorneys’ fee
award prior to arbitration. A preliminary injunction to that effect manifestly
8
would not preserve the status quo; rather, it would disturb the status quo by
distributing the funds that are in dispute. Therefore, an injunction ordering
the disbursement of these funds would not serve to "preserve the
meaningfulness of the arbitration." Blumenthal, 910 F.2d at 1053.
The Court therefore denies McTigue' s motion for pre-arbitration relief.
The parties are directed to proceed with mediation and, if necessary,
arbitration. The mediation shall take place on April 2, 2019, as the firms have
agreed. (Bailey & Glasser' s Opp. at 7, Doc. 307; McTigue' s Reply at 2, Doc.
308.) If mediation fails, the firms shall proceed immediately to arbitration
pursuant to Section 8 of the Co-Counsel Agreement.
Dated: New York, New York
March 25, 2019
9
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?