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NYRA Seeks Holding That It Had the Unilateral Right to Fire Outside Counsel for Excessive Fees

The New York Racing Association’s (NYRA) legal problems have been well documented in recent years. In addition to the ongoing bankruptcy and reorganization of the company, the association is also in a battle for fees by terminated outside counsel.

NYRA maintained outside counsel until March 2011 when the outside counsel firm was fired over a fee dispute that went unresolved for over a year. The outside counsel firm was under a five year contract with eighteen months left at the time the relationship terminated. NYRA’s ground for removal was based on their state franchise agreement that they act with “the highest degree of integrity.”

Since as early as 2010 the retainer agreement between NYRA and its outside counsel was under scrutiny and criticized by the New York State Comptroller. The comptroller’s audit recommended that NYRA trim the legal expenses under the contract because the audit showed that the firm was paid for hours it did not work and had promised the performance of those services at a later point in time. Further, the audit revealed that the outside counsel received a minimum of $125,000 a month and that they were paid a cumulative total of $2.2 million over seventeen months. The audit showed that based on the firm’s hourly rate that the cumulative fee should be reduced by $451,691. The audit suggested a review of the fees under the contract to make sure it was beneficial to both parties in order to maintain mutual objectives of the counsel and the financial stability of NYRA.

This battle over attorney’s fees has made its way into NYRA’s bankruptcy proceedings in its request to the court to hold that they had the right to unilaterally fire its outside counsel “as a way to head off litigation over the matter.” The outside counsel rejects this argument and insists that they are still owed compensation under the five-year contract with NYRA. Following the firing of outside counsel, NYRA has employed new outside counsel. According to the New York State Comptroller, the new outside counsel contract with NYRA is more cost effective.

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