Alex Shnaider
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Canadian billionaire Alex Shnaider can have a client file held by his former lawyers at Boies Schiller Flexner, but he'll first have to pony up $860,000 and place it in escrow because of an ongoing unpaid legal fees dispute, a New York judge has ruled.

In a decision dated Tuesday, Manhattan-based state Supreme Court Judge Debra James ordered Boies Schiller to hand over a client file to Shnaider, who the firm previously represented in a federal court dispute with a former business partner in a venture to sell private jets. But she also said Shnaider must put $860,000 into an escrow account in light of Boies Schiller's claim that it's owed roughly that much in legal fees from its time representing the businessman.

The state judge's decision stems from a dispute that came before her earlier in October, when Shnaider, now represented by Kasowitz Benson Torres, filed a state court petition seeking the return of his client file. Boies Schiller had previously represented Shnaider as he pursued the jet lawsuit in federal court, but after about two years, a federal judge allowed the firm to withdraw from the case amid an irreconcilable dispute over legal fees.

With a trial scheduled in the jet case for early December, Shnaider's lawyers at Kasowitz argued that the billionaire wouldn't be able to adequately mount a defense without the client file from Boies Schiller, which contains discovery material from the jet litigation.

Boies Schiller, on the other hand, asserted a retaining lien on the client file and argued that otherwise, it would lose its leverage to recover the money that it believes Shnaider owes. Boies Schiller has said in court filings that Shnaider owes a little less than $870,000 plus interest, bringing the total to near $1 million.

James' ruling on Tuesday falls in line with a compromise that Boies Schiller proposed a few weeks ago. At an Oct. 12 hearing, Boies Schiller partner Nicholas Gravante Jr. indicated the firm would be willing to return the client file as long as Shnaider agreed to put money in escrow until the fee dispute could be formally resolved.

A lawyer representing Shnaider at that hearing declined to accept that offer, however, leaving James to hold another hearing on Monday and, ultimately, issue her ruling. If the two sides fail to resolve the fee dispute, the judge will hold an additional hearing in mid-April, according to her ruling.

Karen Chesley, a Boies Schiller partner who has represented the firm in the fee dispute, said she views James' decision as a favorable one because it protects the firm's ability to seek payment for the legal work it performed on Shnaider's behalf. The firm never intended to restrict Shnaider's ability to defend himself in the federal jet litigation as long as Boies Schiller could also protect its rights, she added.

“We are very pleased that Judge James recognized the well-established rule in New York that a client is not entitled to his legal files unless he provides security for his unpaid fees,” Chesley said.

A Kasowitz partner who is representing Shnaider, Michael Bowen, did not immediately respond to a request for comment.

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