Based on a story in the Wall Street Journal, March 23, 1994, By Wade Lambert
You may have thought that the escalation auction in class, where your instructor
auctioned a $1 bill to the highest bidder, but made the top two bidders pay for
it was amusing, but contrived. Could anything like this ever happen in the real
world? Listen up!
Ever Hear the One About the Lawyers and the Window Bars
How a $909 Dispute Generated $100,000 in Legal Fees
The story began when New York passed a law requiring window bars for
apartments with children under 10. The governing board of a co-op housing unit
at 360 W. 36th Street , a converted zipper factory in the garment district,
voted to charge the equipment to those residents who needed it, rather than to
divide the costs among all residents.
Alec and Suzi Diacou, who lived in a ninth floor loft with a small child,
were billed by the co-op for $909, the cost of installing the window bars. They
refused to pay.
Under the ownership contract of the co-op apartments, if there was a dispute
between the co-op and the unit's owner, the loser would have to reimburse the
winner's legal fees.
The co-op board asked its lawyers to look into the matter. The calendar of
legal procedings recorded in the article is as follows:
- October, 1987--The co-op's lawyers bill the co-op for $315.
- June, 1988--After various failed attempts to reach an out-of-court
settlement, the co-op's lawyers billed the co-op for $1015. Although this was
more than the cost of the window bars, the co-op reasoned that if the Diacou's
were not forced to pay, this would set a costly example for other residents to
- By November, 1988, the co-op's lawyers had filed suit and the co-op's
legal fees had reached $5504.
- On January 26, 1989, New York Civil Court Judge Richard Lane found that
"logic and substantial justice," as well as the terms of the lease required
the Diacous to pay the $909. By this time, the co-op's legal bill for the case
had reached almost $10,000.
- The Diacous responded with an appeal to a higher court.
- By March, 1990, the co-op's total legal bill had reached $19,328, and an
appeals court overruled Judge Lane's verdict, saying the cost of the window
bars should be shared among all apartment residents.
- The co-op responded with an appeal to a still higher court. By December
1990, the co-op's total legal expenses were $43,099.
- In February, 1991, the higher court ruled in favor of the co-op.
- The Diacou's did not challenge the higher court's decision on the window
bars. BUT they sued to prevent their being assessed with the co-op's legal
- The legal fight over who was obliged to pay the co-op's legal fees
continued until June 1993, at which time the co-op's total legal fees were
$73,547. At this point, the two sides agreed to an arrangement whereby the
Diacous would pay $30,000 of the co-op's legal fees and the co-op would pay
the remaining $43,547.
- In addition to owing the co-op $30,000 for its legal fees, the Diacous
have paid their own lawyers $30,000 for handling the case, and of course owe
the $909 for the window bars.
David Berkey, a lawyer for the co-op, is quoted as saying "I think the
expenditures here were appropriate and were kept pretty much to a minimum." He
said that his client is pleased with the outcome. "Every step of the way they
had an idea of what was going on... There were no surprises in this case."
YES, FOLKS, He really said that.
Mr. Diacou is quoted as saying "I am a man converted. Anything you can
possibly do to avoid a lawsuit, do it. "