Dickstein Shapiro Former offices of Dickstein Shapiro in Washington, D.C. Photo: Diego M. Radzinschi/NLJ

Shuttered law firm Dickstein Shapiro is suing Estee Lauder Inc. and Reed Smith over $1.42 million in legal fees, claiming they have failed to honor a prior payment contract and a fee-sharing arrangement executed before Dickstein collapsed.

Dickstein, represented by bankruptcy attorneys at Klestadt Winters Jureller Southard & Stevens, has been in liquidation since February 2016, following significant partner defections.

Dickstein had represented Estee Lauder in the cosmetic company’s long-running lawsuit against OneBeacon Insurance Group in Manhattan Supreme Court. Under a 2012 payment agreement between Estee Lauder deputy general counsel George Martini and then-Dickstein insurance partner John Schryber, the law firm was to be paid a contingency fee from any settlement or judgment in the case, and any settlement proceeds were to be paid into a law firm escrow account.

In 2013, Schryber left Dickstein to join Reed Smith, and as a result, Estee Lauder transferred its file on the lawsuit to Reed Smith and engaged Reed Smith in place of Dickstein. At that point, Dickstein said, the firm and Reed Smith signed a fee sharing agreement, in which the firms agreed to calculate and pay fees due to Dickstein after the transfer of representation.

The underlying lawsuit resolved in December 2016, resulting in a $5.69 million settlement for Estee Lauder, according to Dickstein.

In a March 8 complaint filed in federal district court in Manhattan, Dickstein claims that under the terms of its payment agreement with Estee Lauder and the fee-sharing agreement, it is entitled to about $1.42 million, which it said consists of a $492,528 contingent fee and $928,221 in supplemental fees.

Dickstein’s liquidation attorneys said the firm did not receive any notice of the settlement of the OneBeacon lawsuit, the payment of the settlement proceeds nor notice of the payment of legal fees to Reed Smith.

In June 2017, upon learning of the settlement and assuming that the settlement proceeds would be held in escrow before any disbursement, Dickstein wrote to Schryber, demanding payment. The next month, Reed Smith acknowledged that it collected and owed certain fees to Dickstein, which it calculated as $492,528 (the amount of the contingent fee), without saying when these fees were collected or how they were being held or applied, Dickstein said.

Then in October, Dickstein attorneys said they learned from Reed Smith that the settlement proceeds were apparently paid directly to Estee Lauder, rather than to Reed Smith’s escrow account.

Dickstein said it “has made numerous demands” to Estee Lauder and Reed Smith to pay the outstanding balance, but they “have failed to make full payment.”

Dickstein is claiming breach of contract, unjust enrichment and quantum meruit against Estee Lauder, seeking $1.42 million from the past client. Meanwhile, in a breach of contract claim against Reed Smith, Dickstein said the firm must pay the amount of the contingency fee, $492,528.

A Reed Smith spokeswoman said the firm was “unable to comment.” Schryber, who is not a named defendant in the suit, declined to comment. Representatives for Estee Lauder did not immediately respond to requests for comment.

John Jureller Jr., a partner at Klestadt Winters representing Dickstein, said the defunct firm is nearing the end of the process of liquidation and winding up. He said the timing will depend on this action and a couple of additional pending matters, adding, “This is one of the assets we’re attempting to collect for the estate.”