{"id":159698,"date":"2026-08-06T12:51:53","date_gmt":"2026-08-06T20:51:53","guid":{"rendered":"https:\/\/xira.com\/p\/2026\/08\/06\/biglaw-firm-facing-rico-claims-loses-motion-to-compel-arbitration\/"},"modified":"2026-08-06T12:51:53","modified_gmt":"2026-08-06T20:51:53","slug":"biglaw-firm-facing-rico-claims-loses-motion-to-compel-arbitration","status":"publish","type":"post","link":"https:\/\/xira.com\/p\/2026\/08\/06\/biglaw-firm-facing-rico-claims-loses-motion-to-compel-arbitration\/","title":{"rendered":"Biglaw Firm Facing RICO Claims Loses Motion To Compel Arbitration"},"content":{"rendered":"

Reed Smith pointed to the arbitration clause in its engagement letter hoping it could bump the civil RICO suit out of court. It did not. <\/p>\n

Bankruptcy Judge John P. Mastando III denied the firm\u2019s motion to compel arbitration and its alternative motion to dismiss<\/a> on Monday, in a 96-page opinion that also disposed of a parallel motion from Eletson Holdings\u2019 former shareholders. The civil RICO claims will now proceed into discovery against the firm and its Head of International Litigation, Louis Solomon.<\/p>\n

Eletson is a Greek gas shipping company dragged into involuntary Chapter 11 by its noteholders, presumably for angering Poseidon. A creditors\u2019 plan came together in November 2024, but the former owners declined to accept that result, launching instead into a sustained and creative response that has resulted in multiple sanctions orders, contempt findings, bench warrants, and an SDNY ruling vacating the underlying arbitration award on clear and convincing evidence of fraud. Reed Smith was debtor\u2019s counsel through most of it. There was even Greek court proceeding to install a \u201cprovisional board\u201d that Judge Lewis Liman later described as a fiction. <\/p>\n

A Greek company created a false shell in an effort to trick its adversaries? Still playing the hits after all these years!<\/p>\n

Reed Smith\u2019s engagement letters contain a clause reaching \u201c[a]ny controversy, claim or dispute arising out of or relating to our agreement.\u201d Nice, broad language. The problem, according to the court, is the neighborhood it lives in. The clause appears under the bolded heading, \u201cNew York Arbitration Clause,\u201d right after language about the right to arbitrate fee disputes under Part 137 of the New York rules.<\/p>\n

As Judge Mastando explained:<\/p>\n

\n

The express purpose of this section, then, is to address fee disputes, \u201cincluding any fee dispute which would otherwise be subject to Part 137,\u201d id., but also including other fee disputes that are not subject to Part 137 \u2014 for example, fee disputes for less than $1,000 or greater than $50,000.<\/p>\n<\/blockquote>\n

To read it as a catch-all to escape liability for racketeering would amount to \u201cburying this purported waiver of important rights inside a misleading fee-dispute wrapper.\u201d<\/p>\n

It\u2019s not even clear that this clause was even signed. The engagement letters condition the arbitration clause on the client separately signing a consent form called \u201cAttachment 2.\u201d The court went and looked:<\/p>\n

\n

And the initials of Lascarina Karastamati and Vasilis Hadjeleftheriadis \u2014 what the Reed Smith Defendants argue are valid and binding signatures \u2014 do not appear on the same page as Attachment 2, or next to Solomon\u2019s undated signature, but instead on the bottom righthand corner of the next page, which is otherwise entirely blank. The same initials also appear, in the same fashion, on the bottom righthand corner of every other alternating page of the 2022 Agreement.<\/p>\n<\/blockquote>\n

The court ultimately declined to resolve whether the attachments were properly executed, but noted the signatures were \u201cat best unclear.\u201d It then held that even assuming perfect execution, there was no \u201cmeeting of the minds and a manifestation of mutual assent\u201d to arbitrate fraud, RICO, and fiduciary-duty claims through clauses \u201cwhich focus so heavily on fee disputes.\u201d<\/p>\n

Reed Smith also argued that petitioning the government, courts included, is protected under Noerr-Pennington<\/em>, and that doctrine\u2019s sham-litigation exception requires objective baselessness \u2014 and Reed Smith claimed that its positions weren\u2019t hopeless. Mastando rejected the premise, ruling that the plaintiffs\u2019 argument in the alternative made more sense, as \u201cthe First Amendment does not protect fraud.\u201d<\/p>\n

The third argument was Kim v. Kimm<\/em>, the Second Circuit\u2019s holding that a single frivolous lawsuit can\u2019t serve as a RICO predicate act. Reed Smith read that as a general rule immunizing litigation conduct:<\/p>\n

\n

This is a unique situation where the District Court has already concluded that fraud was committed in the Preferred Shares Arbitration, and that the Reed Smith Defendants\u2019 conduct crossed the line between aggressive advocacy and false statements.<\/p>\n<\/blockquote>\n

In January, vacating the arbitration award, Judge Liman wrote that he need not decide whether Reed Smith was complicit \u201ceither directly or through a wink and a nod or instead was incredulous and was its clients\u2019 innocent dupe,\u201d because \u201c[a]t a minimum, it was the vehicle through which a fraud was committed.\u201d <\/p>\n

Reed Smith and Solomon now face discovery on nine counts, including into internal communications \u2014 a category that has already lost some protection, since Judge Liman found sufficient reason to trigger the crime-fraud exception back in September.<\/p>\n

Ken White likes to remind us all that, generally speaking, \u201cIt\u2019s Not RICO<\/a>.\u201d But this one is going to have to get through discovery first.<\/p>\n

(Order on the next page\u2026)<\/em><\/p>\n

\n

\"Headshot\"Joe Patrice<\/a>\u00a0is a senior editor at Above the Law and co-host of Thinking Like A Lawyer<\/a>. Feel free to\u00a0email<\/a> any tips, questions, or comments. Follow him on\u00a0Twitter<\/a>\u00a0or Bluesky<\/a> if you\u2019re interested in law, politics, and a healthy dose of college sports news.<\/em><\/strong><\/p>\n<\/p>\n

The post Biglaw Firm Facing RICO Claims Loses Motion To Compel Arbitration<\/a> appeared first on Above the Law<\/a>.<\/p>\n

Reed Smith pointed to the arbitration clause in its engagement letter hoping it could bump the civil RICO suit out of court. It did not. <\/p>\n

Bankruptcy Judge John P. Mastando III denied the firm\u2019s motion to compel arbitration and its alternative motion to dismiss<\/a> on Monday, in a 96-page opinion that also disposed of a parallel motion from Eletson Holdings\u2019 former shareholders. The civil RICO claims will now proceed into discovery against the firm and its Head of International Litigation, Louis Solomon.<\/p>\n

Eletson is a Greek gas shipping company dragged into involuntary Chapter 11 by its noteholders, presumably for angering Poseidon. A creditors\u2019 plan came together in November 2024, but the former owners declined to accept that result, launching instead into a sustained and creative response that has resulted in multiple sanctions orders, contempt findings, bench warrants, and an SDNY ruling vacating the underlying arbitration award on clear and convincing evidence of fraud. Reed Smith was debtor\u2019s counsel through most of it. There was even Greek court proceeding to install a \u201cprovisional board\u201d that Judge Lewis Liman later described as a fiction. <\/p>\n

A Greek company created a false shell in an effort to trick its adversaries? Still playing the hits after all these years!<\/p>\n

Reed Smith\u2019s engagement letters contain a clause reaching \u201c[a]ny controversy, claim or dispute arising out of or relating to our agreement.\u201d Nice, broad language. The problem, according to the court, is the neighborhood it lives in. The clause appears under the bolded heading, \u201cNew York Arbitration Clause,\u201d right after language about the right to arbitrate fee disputes under Part 137 of the New York rules.<\/p>\n

As Judge Mastando explained:<\/p>\n

\n

The express purpose of this section, then, is to address fee disputes, \u201cincluding any fee dispute which would otherwise be subject to Part 137,\u201d id., but also including other fee disputes that are not subject to Part 137 \u2014 for example, fee disputes for less than $1,000 or greater than $50,000.<\/p>\n<\/blockquote>\n

To read it as a catch-all to escape liability for racketeering would amount to \u201cburying this purported waiver of important rights inside a misleading fee-dispute wrapper.\u201d<\/p>\n

It\u2019s not even clear that this clause was even signed. The engagement letters condition the arbitration clause on the client separately signing a consent form called \u201cAttachment 2.\u201d The court went and looked:<\/p>\n

\n

And the initials of Lascarina Karastamati and Vasilis Hadjeleftheriadis \u2014 what the Reed Smith Defendants argue are valid and binding signatures \u2014 do not appear on the same page as Attachment 2, or next to Solomon\u2019s undated signature, but instead on the bottom righthand corner of the next page, which is otherwise entirely blank. The same initials also appear, in the same fashion, on the bottom righthand corner of every other alternating page of the 2022 Agreement.<\/p>\n<\/blockquote>\n

The court ultimately declined to resolve whether the attachments were properly executed, but noted the signatures were \u201cat best unclear.\u201d It then held that even assuming perfect execution, there was no \u201cmeeting of the minds and a manifestation of mutual assent\u201d to arbitrate fraud, RICO, and fiduciary-duty claims through clauses \u201cwhich focus so heavily on fee disputes.\u201d<\/p>\n

Reed Smith also argued that petitioning the government, courts included, is protected under Noerr-Pennington<\/em>, and that doctrine\u2019s sham-litigation exception requires objective baselessness \u2014 and Reed Smith claimed that its positions weren\u2019t hopeless. Mastando rejected the premise, ruling that the plaintiffs\u2019 argument in the alternative made more sense, as \u201cthe First Amendment does not protect fraud.\u201d<\/p>\n

The third argument was Kim v. Kimm<\/em>, the Second Circuit\u2019s holding that a single frivolous lawsuit can\u2019t serve as a RICO predicate act. Reed Smith read that as a general rule immunizing litigation conduct:<\/p>\n

\n

This is a unique situation where the District Court has already concluded that fraud was committed in the Preferred Shares Arbitration, and that the Reed Smith Defendants\u2019 conduct crossed the line between aggressive advocacy and false statements.<\/p>\n<\/blockquote>\n

In January, vacating the arbitration award, Judge Liman wrote that he need not decide whether Reed Smith was complicit \u201ceither directly or through a wink and a nod or instead was incredulous and was its clients\u2019 innocent dupe,\u201d because \u201c[a]t a minimum, it was the vehicle through which a fraud was committed.\u201d <\/p>\n

Reed Smith and Solomon now face discovery on nine counts, including into internal communications \u2014 a category that has already lost some protection, since Judge Liman found sufficient reason to trigger the crime-fraud exception back in September.<\/p>\n

Ken White likes to remind us all that, generally speaking, \u201cIt\u2019s Not RICO<\/a>.\u201d But this one is going to have to get through discovery first.<\/p>\n

(Order on the next page\u2026)<\/em><\/p>\n

\n

\"Headshot\"Joe Patrice<\/a>\u00a0is a senior editor at Above the Law and co-host of Thinking Like A Lawyer<\/a>. Feel free to\u00a0email<\/a> any tips, questions, or comments. Follow him on\u00a0Twitter<\/a>\u00a0or Bluesky<\/a> if you\u2019re interested in law, politics, and a healthy dose of college sports news.<\/em><\/strong><\/p>\n

1<\/strong> 2<\/a>Next \u00bb<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Reed Smith pointed to the arbitration clause in its engagement letter hoping it could bump the civil RICO suit out of court. It did not. Bankruptcy Judge John P. Mastando III denied the firm\u2019s motion to compel arbitration and its alternative motion to dismiss on Monday, in a 96-page opinion that also disposed of a […]<\/p>\n","protected":false},"author":3,"featured_media":159658,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[16],"tags":[],"class_list":["post-159698","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-above_the_law"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/xira.com\/p\/wp-content\/uploads\/2026\/08\/Headshot-300x200-HBwG41.jpg?fit=300%2C200&ssl=1","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/159698","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/comments?post=159698"}],"version-history":[{"count":0,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/159698\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media\/159658"}],"wp:attachment":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media?parent=159698"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/categories?post=159698"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/tags?post=159698"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}