Former Leeds boss Kevin Blackwell is preparing to sue the Elland Road club for wrongful dismissal.
Blackwell left Leeds in September
Chairman Ken Bates refused to enter into compensation talks with the League Managers Association after Blackwell was sacked two months ago.
"We have no option but to put the matter in the hands of our lawyers," said LMA chief John Barnwell.
Leeds will also consult their legal advisors according to a statement released on their club website.
Blackwell refused to comment on the matter when contacted by BBC Radio Leeds.
The former Elland Road boss arrived at the club as coach in the summer of 2003 when Peter Reid was in charge.
Reid was sacked after eight months and then successor Eddie Gray lasted just six months before Blackwell took over the reins.
Blackwell led the Yorkshire side to the brink of the Premiership but they missed out after losing 3-0 to Watford in the play-off final.
The 47-year-old was sacked on 20 September following a 1-0 defeat away against Coventry.