If there's a contract between the two of them it may not be cybersquatting. Even if that contract is oral in nature. Since they did some business together, your friend may have licensed the right to the developer to use the domain.
He can revoke the license but you havent given enough facts.
If he really wants to do this as cheap as possible without protracted litigation and it really is cybersquatting then go with ICANN's UDRP --
http://www.icann.org/en/udrp/udrp.htm
It will cost him about $2000 and can file without an attorney...