Wilson Sonsini Goodrich & Rosati. Photo: Jason Doiy/ALM

A group of Israeli real estate investors sued Wilson Sonsini Goodrich & Rosati on Thursday in an effort to stop an arbitration initiated by the firm over $480,000 in unpaid legal fees. The former clients claim Wilson Sonsini tricked them into signing an engagement letter with the firm and then blew past billing benchmarks.

The investors' suit, filed in Manhattan Supreme Court by Rafael Barouch Elkaim and his co-plaintiffs, seeks to halt an arbitration that Wilson Sonsini initiated last month against them over unpaid fees.

The four men hired Wilson Sonsini last year on behalf of dozens of investors who alleged in a separate lawsuit that they were defrauded out of $20 million by two Brooklyn real estate developers. Most of that suit had been sent to arbitration by the time the four men reached out to Wilson Sonsini. Elkaim said he resisted signing a Wilson Sonsini engagement agreement until law firm partner Moe Fodeman assured him that “all attorneys” required fee disputes be arbitrated.

“Had petitioners been aware that Fodeman's description of the universal practice of New York attorneys to include arbitration provisions in their engagement letters was false, they would not have agreed to the arbitration provision or entered into the engagement agreement,” the suit said.

Elkaim and his fellow investors said Wilson Sonsini started working on their case in April 2018 and gave them the engagement agreement in May, which said it was “contemplated” that the firm would use an initial retainer of $100,000 on pre-litigation research into the facts and law of their real estate dispute. The retainer was paid later that month, and in June, Wilson Sonsini met with three of the men to discuss the firm's analysis.

At that meeting, the lawsuit against the firm alleges, one of the plaintiffs, Binyomin Halpern, took Fodeman aside and told him to not do more than $200,000 in billable work until he could give an estimate for what work was left to be done. Later that month, however, it was revealed that Wilson Sonsini billed $161,000 in May alone, and by the end of June, the firm had racked up more than $400,000 in fees, the lawsuit claims.

The plaintiffs said they believe the arbitration agreement was meant “to hide [Wilson Sonsini's] billing shenanigans from the public record.” They filed the engagement agreement and Wilson Sonsini's demand for arbitration as exhibits to their suit; they show that the firm agreed to a 10 percent discount that brought its lead partners' hourly rates to $865 and $880 per hour.

Yitzchak Eliezer Soloveichik, a lawyer at Bronstein, Gewirtz & Grossman who represents the plaintiffs, didn't respond to a request for comment. A spokesman for Wilson Sonsini declined to discuss the allegations in detail, saying his firm would do so in court.

“We don't comment on ongoing litigation,” the spokesman said. “Nevertheless, we're going to aggressively defend and contest the allegations.”