Two Rivers Coffee owners allege they do not owe fees to Texas law firm because it was discharged for cause

By Tomas Kassahun | Mar 18, 2019

BROOKLYN, N.Y. (Legal Newsline) – A father and son who own a New Jersey business are making a case for why they don’t owe legal fees to a Texas law firm that represented the business in a lawsuit.

Eugene and Steven Schreiber, owners of Two Rivers Coffee LLC, allege that the Nelkin & Nelkin law firm should not be entitled to payment of any legal fees because it was discharged for cause.

After Nelkin & Nelkin P.C filed a complaint on Aug. 30 in the U.S. District Court Eastern District of New York, the Schreibers filed a memorandum in support of motion for finding counsel was discharged for cause and to vacate a charging lien on March 7 in that court. 

According to the Schreibers, the law firm manipulated its clients, put its own interests over those of its clients, prejudiced its own clients' interests and engendered conflicts of interest.

“The Nelkin firm was discharged by orders of this court entered on Aug. 30 and 31, 2018,” the motion stated. “By this motion, Eugene, Steven and Two Rivers seek a determination that the Nelkin firm and its attorneys Jay Nelkin, Esq. and Carol Nelkin, Esq. were discharged 'for cause.'” 

According to the motion, the Nelkins’ charging lien should be vacated and the Nelkin firm should not be entitled to payment of any legal fees.

“The Nelkins’ repeated violations of the Rules of Professional Conduct ('RPCs') and self-created conflict of interest with their own clients – warrant a finding that the Nelkin firm was discharged 'for cause' and thus its charging lien should be vacated,” the motion stated. 

The motion states that the Schreibers sought the law firm’s services after feeling concerned about the motives of Emil Friedman, an investor who was given equity in Two Rivers.

The Schreibers conferred with the Nelkin firm because they feared that Friedman was actually misappropriating funds and converting company assets for himself, the motion stated.

The case against Friedman ended with a "settlement in principle that involved Friedman paying a sum of money and surrendering his membership stake in Two Rivers," the motion stated.

“As settlement in principle became more likely, the Schreibers engaged in ongoing discussion of what the Nelkins expected to be paid as counsel fees,” the motion stated. “The Nelkins’ proposal for resolving their claim for fees was, in the Schreibers’ view, wholly unsupported by the actual value of the settlement reached.”

"The Schreibers were concerned about Nelkins’ lofty demand due to a number of factors," according to the motion.

"On June 8, 2018, the Nelkins proposed an alternative settlement proposal by which Jay (Nelkin) and Carol (Nelkin) each would be granted a ‘non-dilutable, non-voting, non-participating 14.25 percent equity interest in Two Rivers," the motion stated.

“In lieu of a cash payment for its fees, the Nelkin firm attempted to leverage their own clients by taking an ownership interest in Two Rivers,” the motion stated. 

"The Nelkins could have sought leave to withdraw or otherwise sought the court’s intervention in the fee dispute," the motion states. “Instead, they opted for the worst possible (and ethically untenable) option for their clients – they threatened to withdraw if the matter was brought before the court for consideration,” the motion states.

The Schreibers added in the motion that the law firm "accused their own clients of bad faith and fraudulent conduct; sued their own clients; and appeared in court as counsel of record having sued their clients only hours earlier."

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