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The ongoing $1.2 million fee dispute between law firm Fitch Even Tabin & Flannery LLP and former client LED Wafer Solutions (LWS) has taken a dramatic turn, as an Illinois federal judge suggested Tuesday that the fight may be sent to arbitration — potentially pausing the firm’s push to block the alleged diversion of funds tied to the case.

At a tense status hearing, U.S. District Judge Steven Seeger said the firm’s breach of contract and fraud claims appear to fall under a sweeping arbitration clause in Fitch Even’s retention agreement with LWS. The late-night motion to stay litigation, filed by LWS on Monday, brought the proceedings “an inch away from a ruling,” the judge remarked.

Arbitration Looms Over Fee and Fraud Allegations

The dispute stems from unpaid legal bills Fitch Even claims to have earned while representing LWS in a patent infringement suit against Samsung involving LED technology. LWS, which secured financing from Validity Finance, allegedly failed to pay multiple invoices — leading the Chicago-based firm to sue both LWS and Validity’s CEO Ralph Sutton in September.

Sutton also filed a motion Monday arguing that any claims against him should likewise go to arbitration, citing Validity’s investment agreement with LWS. Judge Seeger, however, voiced skepticism, noting that Fitch Even was not a party to that contract, though he conceded there might still be procedural grounds to pause the case.

“I’m concerned about litigating an issue with Mr. Sutton if arbitration between Fitch Even and LWS is moving forward,” Seeger said. “They both cover similar factual terrain, and I don’t want to get ahead of the arbitration.”

The judge granted Fitch Even one week to respond to the motions before any official ruling, emphasizing that the filings were “just hours old.”

A Race Against Time Over Frozen Funds

Fitch Even’s lawsuit, filed last month, accused LWS and Sutton of diverting or depleting escrowed funds set aside for the firm’s fees — allegedly using them to pay a different law firm to handle the ongoing Samsung litigation.

The firm had requested a temporary restraining order (TRO) to halt any such transfers. However, Judge Seeger warned that even if arbitration applies, the unavailability of emergency relief there is “not a reason to unwind” an arbitration clause.

“If you gave up your right to seek that relief in court,” he told the firm’s attorneys, “then that’s how it goes. You signed the agreement.”

Should the court deny LWS’s arbitration motion, Seeger added, both defendants will face a “short fuse” to respond to Fitch Even’s TRO request.