By default, every Skype for Business contact list has two groups named 'Favorites' and
When the web tool tries to migrate a group called 'Favorites' to Skype for Business, it
"You can’t do that. You already have a group named Favorites!"
What’s confusing is that 'Favorites' group has a display name of 'Pinned Contacts'.
So when you see 'Pinned Contacts' in Skype for Business, just read it as 'Favorites'.