Zuckerman Spaeder argues in a reply brief submitted to the U.S. Court of Appeals for the D.C. Circuit that its dispute with a former client over allegedly unpaid fees should not be moved into arbitration because the client has been an active participant in litigation stemming from the dispute.
Zuckerman alleges that James Auffenberg Jr. has failed to pay for work the firm performed for him after he was indicted in 2007 for allegedly dodging millions in federal taxes. After winning an acquittal for Auffenberg last year, Zuckerman filed a suit against him, alleging in its April 27, 2009, complaint that he hadn’t paid more than $834,000 in legal fees.
Auffenberg has argued throughout the case that Zuckerman told him he would have to pay no more than $1.5 million for the firm to represent him but then sent him a bill for an additional $834,299 after the acquittal.
In January, almost a year into the litigation, Auffenberg, who is being represented by Thomas Duckenfield III and David Holzworth of Yoss LLP, moved to stay the case pending arbitration before the D.C. Attorney/Client Arbitration Board. D.C. Bar rules generally require lawyers to arbitrate fee disputes at the client's request.
Last month, Auffenberg argued in his brief before the D.C. Circuit that the trial court erred by denying his motion for arbitration because, despite the fact that he did not mention arbitration in his initial answer to Zuckerman’s lawsuit, he “communicated his intention to arbitrate early and often.” He also draws a distinction between the litigation that progressed over his counterclaim of malpractice and the effort to move the case into arbitration.
But Zuckerman contends that Auffenberg’s argument that he had informed the firm of his intent to move the case into arbitration was “simply untrue.”
Francis Carter, a Zuckerman partner handling the dispute, cites in the firm’s Nov. 22 brief several benchmarks in the fee dispute litigation at which point Auffenberg could have requested arbitration but failed to do so. Carter cites as examples Auffenberg’s three answers to the initial complaint and its subsequent amended complaints, the joint request for a 14-month case schedule, his participation in mediation and his decision to file and oppose motions to dismiss the case.
Carter also notes that Zuckerman has incurred “substantial” costs as a result of the litigation and carrying the allegedly outstanding fee and would be “prejudiced by restarting the litigation before the [Attorney/Client Arbitration Board].”
According to Carter’s brief, the first time Auffenberg said he was considering arbitration was in discussing a Dec. 11, 2009, offer by Magistrate Judge John Facciola of the U.S. District Court for the District of Columbia to personally arbitrate the dispute. Auffenberg didn’t state that he planned to file an ACAB petition until Jan. 27, the brief says. By then, the case had been litigated for almost a year.
“Auffenberg refers on many occasions to the federal policy favoring arbitration. To ‘favor’ arbitration, however, does not require turning a blind eye to conduct inconsistent with the arbitration right. Indeed, the preservation of arbitration as a robust alternative to litigation requires a firm rejection of the gamesmanship practiced here,” Carter writes in the brief.
Auffenberg has until Dec. 6 to file his reply. Final briefs in the case are due on Dec. 27. The D.C. Circuit has not set the case for oral argument.