Milberg LLP v. Drawrah Limited

Background

Milberg LLP, a law firm, represented the respondents in litigation seeking recovery on Argentine bonds. The parties’ retainer agreements required arbitration of disputes concerning the engagement. In 2016, the respondents discharged Milberg under the agreements’ early-termination provisions. The respondents later settled with Argentina for $162.3 million on the same settlement terms that Milberg had obtained shortly before being discharged, but refused to pay Milberg contingency fees.

Milberg began arbitration in 2017, seeking fees based on the value of the services it had provided. In 2019, the arbitration panel rejected the respondents’ defenses but declined to award Milberg any fees. The award was delivered to the parties’ counsel on February 5, 2019. Milberg filed this proceeding on May 6, 2019, seeking to vacate the portion of the award denying fees and to send the matter back to the arbitration panel with instructions to calculate a fee.

Rule 12(b)(1) Motion: Subject-Matter Jurisdiction

Milberg relied on diversity jurisdiction under 28 U.S.C. § 1332(a). Because the respondents were citizens of foreign countries, Milberg had to establish that it was a citizen of a U.S. state and that no partner was a non-U.S. citizen for purposes of the diversity statute. The court explained that the citizenship of a limited liability partnership depends on the citizenship of each partner and must be determined when the case begins.

Milberg’s second amended petition alleged that it had two or more partners and that all of its partners were, or had been, citizens of a U.S. state “at all times relevant.” The court found that this allegation did not specifically establish that all partners were U.S. state citizens when the proceeding began. The court therefore found the petition facially defective because diversity jurisdiction had not been pleaded with sufficient detail.

Milberg submitted a declaration from Michael C. Spencer, who was described as “Of Counsel” to Milberg. The declaration stated that Milberg had two partners when the proceeding began: Ariana Tadler, a New York citizen, and Glenn Phillips, a Washington citizen. The court found the declaration insufficient because it did not show that Spencer had personal knowledge of the partners’ citizenship or of the facts relevant to domicile, including physical presence and intent to make a state a home. The court concluded that Milberg had not carried its burden of establishing diversity jurisdiction and granted respondents’ motion to dismiss under Rule 12(b)(1).

Rule 12(b)(6) Motion: Timeliness of Service

The court also considered respondents’ argument that Milberg’s petition was untimely served. Under 9 U.S.C. § 12, notice of a motion to vacate an arbitration award must be served on the opposing party or the opposing party’s attorney within three months after the award is delivered or filed. The court treated this deadline as strict and not subject to extension.

Because the award was delivered on February 5, 2019, the deadline to serve notice expired no later than May 6, 2019. Milberg filed the petition on May 6, but its counsel only emailed respondents’ counsel that evening to ask whether counsel was authorized to accept service. Respondents’ counsel said it was not. The court held that this inquiry was not proper service because an attorney who is not authorized to accept service cannot be served on behalf of the attorney’s client.

The court rejected Milberg’s request to excuse the late service. It found no common-law exception to the statutory deadline and declined to recognize equitable tolling. The court also found that amendment or later proper service could not cure the defect, so leave to amend was not warranted. The court granted respondents’ motion under Rule 12(b)(6) and dismissed the petition with prejudice.

Disposition

Judge Analisa Torres granted respondents’ motions to dismiss under Rules 12(b)(1) and 12(b)(6). Because amendment would be futile, the petition was dismissed with prejudice. The Clerk was directed to terminate the motions and close the case.