White Lilly, LLC v. Balestriere PLLC

Background

White Lilly, LLC and Jonathan Bernstein sued to stop an arbitration proceeding brought by Balestriere PLLC, Balestriere Fariello, John Balestriere, The Law Offices of Adina G. Storch, and Adina Storch. The arbitration concerned fees for Balestriere’s nearly four-year representation of White Lilly. John Balestriere had taken $1.4 million from escrow funds to partially satisfy fees owed to Balestriere Fariello.

The parties later agreed to stay the federal case while the arbitration proceeded. The arbitrator issued an award on July 23, 2021. The parties then filed cross-motions asking the court to modify the award and confirm it as modified. Balestriere also asked the court to issue an attachment, a provisional remedy that can seize or restrain property to help secure payment of a potential judgment.

Motions to Modify the Arbitration Award

The Federal Arbitration Act permits a court to vacate or modify an arbitration award only in limited circumstances, such as fraud, arbitrator bias, serious misconduct, or the arbitrator’s exceeding the granted authority. The court explained that judicial review is highly deferential and that a party seeking to vacate an award faces a high burden.

Both sides argued that the arbitrator’s treatment of fee forfeiture was legally improper. Balestriere argued that New York law required a causal connection between the misconduct and the fee forfeiture. Bernstein argued that awarding any fees violated public policy because of Balestriere’s disciplinary violations.

The court rejected the challenge. It stated that, under New York law, an attorney who violates professional-discipline rules is not entitled to legal fees for services rendered. The parties did not dispute the arbitrator’s finding that Balestriere’s conduct violated New York’s professional-discipline rules, including Rule 1.15(a) of the New York Rules of Professional Conduct. The court therefore held that complete fee forfeiture was within the arbitrator’s authority and did not have to result directly from the misconduct.

The court also rejected the parties’ challenges to the arbitrator’s damages calculation. It found that the arbitrator had substantially analyzed the facts and the appropriate fee remedy, and that neither party showed a sufficiently serious error to justify vacating the award.

Motion for an Attachment

Bernstein argued that Balestriere’s attachment request was barred by issue preclusion, which prevents a party from relitigating an issue that was fully and fairly decided in an earlier proceeding. The court disagreed, explaining that the earlier state-court decision occurred before the arbitration ended, while the federal request came after the arbitrator had issued a sixty-four-page decision. The court therefore found no bar to Balestriere’s seeking an attachment.

The court explained that New York law requires a party seeking an attachment connected to an arbitration award to show, among other things, a valid claim, a probability of success, that the amount sought exceeds known counterclaims, and that the award could become ineffective without the attachment. Balestriere argued that Bernstein’s alleged history of lying under oath and interfering with official proceedings made it likely that he could impede satisfaction of the award. Bernstein did not address those arguments. In the discussion, the court described Balestriere’s arguments as persuasive and expressed concern about whether Bernstein would attempt to delay satisfaction of the award.

Disposition

The court nevertheless ordered that Balestriere’s motion for an attachment be denied. It affirmed the arbitration award and denied both parties’ motions to modify it. The clerk was directed to terminate the identified docket entries and close the case. Judge Andrew L. Carter, Jr. signed the opinion and order.