BROOKLYN, N.Y. (Legal Newsline) – Father-and-son owners of a coffee business have prevailed in their lawsuit against lawyers who claimed they were owed a part of their business.
U.S. Magistrate Judge James Orenstein sided with Steven and Eugene Schreiber, owners of Two Rivers Coffee in New Jersey. They filed suit last year against the Nelkin & Nelkin law firm, arguing they did not owe the fees because the firm was discharged for cause.
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 Nelkins diligently served the Schreibers for years in litigating a difficult case and bringing it to the brink of a resolution that well served their clients' interests. If, at that point, their disagreement with the Schreibers over the amount of a reasonable fee had led them to withdraw, I would not question either their decision or their right to try to vindicate their desire to secure a fee that others might find excessive,” Orenstein ruled.
“But rather than seeking to assert their rights in an orderly fashion that need not have prejudiced their clients' right – a process that could and should have begun with the Nelkins seeking leave to withdraw long before August 30, 2018 – the Nelkins improperly and unethically resorted to self-help regardless of the risk to their clients.
“By doing so, they earned a discharge for cause and forfeited their right to collect a fee.”
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, their motion to vacate 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."