This appeal stems from the dissolution of Williams Cuker Berezofsky, a law firm that operated on a contingency fee basis. In 2017, the three named partners—Esther Berezofsky, Mark Cuker, and Gerald Williams—executed a Dissolution Agreement that divided open cases and outlined a dispute resolution process requiring mediation followed by arbitration. Disputes arose over the fee distribution for three specific matters: the Medtronic Pain Pump case, the Benicar case, and the Hoosick Falls case. After mediation failed, Cuker and Williams initiated arbitration. During the proceedings, the arbitration panel awarded Cuker and Williams additional fees for the Medtronic matter and structured a split for the Benicar matter, while declining to rule on the Hoosick Falls matter because the parties had not yet mediated that specific dispute. Berezofsky petitioned to vacate the award in district court, arguing the panel ignored the law, acted arbitrarily, and committed misconduct. The district court confirmed the award, and Berezofsky appealed to the Third Circuit.
The Third Circuit applied an extremely deferential standard of review, noting that vacatur of an arbitration award is permitted only under exceedingly narrow circumstances, such as corruption, evident partiality, or misconduct. The court addressed four specific arguments raised by Berezofsky. First, regarding the Medtronic fees, Berezofsky argued the panel manifestly disregarded the law by awarding fees to Cuker and Williams who were not parties to the original contingency agreements. The court rejected this, stating that while professional conduct rules require written contingency agreements, no clearly established law prohibits a lawyer who is a party to a valid agreement from sharing fees with a non-signatory lawyer. Second, concerning the Benicar fees, Berezofsky claimed the panel ignored the Dissolution Agreement by not dividing the entire award equally. The court found no manifest disregard because the panel had reviewed the agreement and evidence, and the partial equal distribution of the initial award, combined with the additional payment based on contract principles like quantum meruit, showed the panel did not totally disregard the contract. Third, regarding the Hoosick Falls matter, the court found no misconduct because the panel correctly declined jurisdiction; the Dissolution Agreement required mediation before arbitration, and the record showed this step had not been completed for that claim. Finally, on fees and costs, the court noted the arbitration award's language requiring each party to pay its own fees was virtually identical to the Dissolution Agreement, meaning the panel did not disregard the agreement. The court emphasized that a reviewing court will not sustain a claim of manifest disregard unless the arbitrator appreciated a clearly governing legal principle and decided to ignore it, a standard not met here.
The district court's order confirming the arbitration award stands, finalizing the fee distribution for the dissolved law firm partners. The decision reinforces the high bar for challenging arbitration awards in the Third Circuit, particularly regarding claims of manifest disregard of the law. It clarifies that arbitrators have broad discretion to allocate fees among partners even when they were not direct signatories to the underlying contingency agreements, provided the agreements themselves are valid. The ruling also confirms that panels may properly decline jurisdiction over claims that have not satisfied mandatory procedural prerequisites like mediation.
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