Roche Cyrulnik Freedman LLP v. Cyrulnik
| Decision Date | 27 January 2022 |
| Docket Number | 21-cv-1746 (JGK) |
| Citation | 582 F.Supp.3d 180 |
| Parties | ROCHE CYRULNIK FREEDMAN LLP, Plaintiff, v. Jason CYRULNIK, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Eric Samuel Rosen, Roche Freedman LLP, Sean Hecker, Kaplan Hecker and Fink LLP, New York, NY, for Plaintiff.
Marc E. Kasowitz, Gavin Douglas Schryver, Michael Andrew Hanin, Kasowitz, Benson, Torres LLP, New York, NY, for Defendant.
The plaintiff, Roche Cyrulnik Freedman LLP ("RCF" or the "Firm"), brought this action against Jason Cyrulnik for declaratory judgment, breach of fiduciary duty, and intentional interference with contract. Cyrulnik now moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and, in the alternative, urges the Court to abstain from exercising jurisdiction over the claims in favor of a state court action that is currently stayed in Florida (the "Florida action").1
For the reasons that follow, Cyrulnik's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) is denied , and his request for the Court to otherwise abstain is denied .
The following facts are accepted as true for the purposes of this motion.
On August 1, 2019, lawyers Kyle Roche and Velvel Freedman formed Roche Freedman LLP ("RF"). Am Compl. ¶ 12, ECF No. 31.2 Their goal in forming RF was to "create a cutting-edge litigation boutique that would handle high end cryptocurrency, cannabis, and commercial litigation matters," id., and that would be "more collaborative, collegial, and transparent than many traditional large law firms," id. ¶ 3.
Over the course of October and November 2019, Roche and Freedman began negotiating an agreement to have Amos Friedland, Nathan Holcomb, Edward Normand, and Jason Cyrulnik join RF as founding partners of a new firm, RCF. Id. ¶ 15. On December 27, 2019, "after significant negotiations and oral understandings and agreements had been reached," Roche, Freedman, Cyrulnik, Normand, Friedland, and Holcomb (collectively, the "Founding Partners") executed a memorandum of understanding (the "MOU") "for the purposes of building a high-end litigation law firm to be named Roche Cyrulnik Freedman LLP." Id. ¶ 17. RCF was — and continues to be — registered as a limited liability partnership ("LLP") in Florida. Id. ¶ 7.
The MOU memorializes portions of the agreements preliminarily reached between the Founding Partners. Id. ¶ 17. The MOU provides that Id. ¶ 26. The MOU also provides a specific mechanism for calculating what RCF would owe to a withdrawing partner (the "withdrawal provision"). Id. ¶ 27.
But the MOU was "never intended to be a comprehensive document that embodied all of the partners’ negotiated terms." Id. ¶ 23. Instead, as provided in the MOU itself, id. ¶ 25, the Founding Partners contemplated that a formal partnership agreement (the "Partnership Agreement") would be negotiated and made effective on or around January 1, 2020, id. ¶¶ 23, 25. However, a formal agreement was never finalized. Id. ¶ 18.
RCF alleges that, after the MOU was signed and RCF commenced operations, "Cyrulnik began engaging in a pattern of abusive behavior that impeded Firm governance" and that "escalated over time." Id. ¶ 29. For example, RCF argues that Cyrulnik:
screamed at other partners; refused to allow other partners to weigh in on Firm administrative matters; concealed financial information from other Founding Partners (and commanded the Firm's Director of Operations to do the same); caused associates to tell Firm partners they would quit the Firm if forced to continue working on his matters; single-mindedly attempted to reallocate Firm profit to himself in a manner that required intervention to prevent harm to Firm clients, associates, staff, and other partners; and attempted to assume total control over the Firm's management decisions – yelling at partners that they were "going rogue" when they did not obtain his "permission" prior to making decisions, despite partner emails and calls expressly addressing the decisions at issue.
Id.; see also id. ¶¶ 30–40. RCF alleges that Cyrulnik's conduct "made it impossible to carry on Firm governance with Cyrulnik as a partner." Id. ¶ 41.
Beginning in January 2020 and throughout the following year, Cyrulnik allegedly refused to engage in conversations about drafting the Partnership Agreement as required by the MOU. Id. ¶ 43. RCF alleges that this refusal was intended by Cyrulnik to "leverage gaps in the incomplete document to try to seize power and a financial advantage to the detriment of the Firm." Id. As 2020 continued, Cyrulnik allegedly began taking steps to "hide financial information from other partners," id. ¶ 45, and his "attempts to exercise ... unilateral, unauthorized control" over the Firm allegedly increased, id. ¶ 48. His behavior soon "escalated to the point of threatening the Firm's ability to service a client, had resulted in more abusive interactions with partners, and had placed an associate in an absolutely untenable and high-stress position." Id. ¶ 61.
By early 2021, it "became obvious" to the other Founding Partners of RCF that "it was no longer possible for RCF to carry on Firm governance with Cyrulnik as a Firm partner." Id. ¶ 64. On February 10, 2021, Roche, Freedman, Friedland, Holcomb, and Normand "affirmatively and unanimously voted to remove Cyrulnik for cause ... to protect the interests of clients, associates, staff, and the remaining partners of the Firm." Id. ¶ 66. On February 12, Roche wrote an e-mail to Cyrulnik informing him of this decision. Id. ¶ 67. In response, over a phone call later that day, Cyrulnik allegedly "demanded [that] the Firm retract the letter and claimed there were no grounds to remove him for cause." Id. ¶ 68. Cyrulnik also apparently stated that "he would be open to working out a peaceful departure if the Firm committed to give him (1) everything ‘owed’ to him under the 2019 MOU and (2) everything ‘owed’ to him pursuant to a side letter agreement between the Named Partners." Id.
In the time since this February 12 call, Cyrulnik has apparently "refused to accept that he is no longer a partner at the Firm," id. ¶ 70, claiming that his removal was pretextual, id. ¶ 69. On February 26, Cyrulnik's attorney contacted the Firm and "threatened" that if the Firm did not give Cyrulnik "immediate unfettered access" to the Firm's bank accounts and the right to bring in new matters, it would "guaranty" litigation "to protect [Cyrulnik's] unquestioned partnership rights." Id. ¶ 72.
On February 27, 2021, RCF commenced this action in this Court. ECF No. 1. RCF's original complaint alleged only a claim for a declaratory relief as to the propriety of Cyrulnik's removal from RCF and a declaration that he was therefore entitled only to the amount provided in the withdrawal provision of the MOU. See id. Ten days later, on March 9, 2021, Cyrulnik commenced the Florida action against the Firm and the remaining Founding Partners, bringing claims for dissolution, buyout, accounting, breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, conversion, and civil conspiracy on the basis of his allegedly improper removal. See Cyrulnik v. Roche et al., No. 2021-005837-CA-01 (Fla. 11th Cir. Ct. filed Mar. 9, 2021). On March 12, 2021, Cyrulnik formed a new law firm, Cyrulnik Fattaruso LLP. Rosen Decl. Exs. 6, 7, ECF Nos. 50-6, 50-7.
On March 24, 2021, as this litigation and the litigation in the Florida action were ongoing, RCF requested that Cyrulnik submit billable time records for services that he rendered as an RCF partner in 2021. Am. Compl. ¶ 75, ECF No. 31. Cyrulnik's attorney responded that "Cyrulnik would not be providing the records unless numerous conditions were met," id. ¶ 76, and "to this day, Cyrulnik has still not provided his billable time records," id. ¶ 78. RCF also alleges that clients that Cyrulnik originated at the Firm have failed to pay their invoices since Cyrulnik's departure. Id. ¶¶ 81–82. RCF claims that these clients owe the Firm over $3.3 million dollars in unpaid invoices. Id. ¶ 82.
On July 2, 2021, RCF amended its complaint in this Court, adding claims for breach of fiduciary duty and intentional interference with contract on the basis of Cyrulnik's alleged failure to facilitate the Firm's collection of money owed to it by Cyrulnik's clients and his purported encouragement or inducement of his clients to withhold such payment. ECF No. 31. On August 13, 2021, Cyrulnik brought this motion to dismiss. ECF No. 36.
On December 15, 2021, the Florida action was stayed pending disposition of this federal action on RCF's motion. Roche, No. 2021-005837-CA-01, Dkt No. 56; see also Roche v. Cyrulnik, No. 3D21-1741, 337 So.3d 86 (Fla. Dist. Ct. App. Nov. 10, 2021) ().
Cyrulnik first argues that RCF's claims should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. For the following reasons, this motion is denied .
The plaintiff bears the burden of proving the Court's subject matter jurisdiction by a preponderance of the evidence. Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005). In considering such a motion, the Court generally must accept the material factual allegations in the complaint as true. See J.S. ex rel. N.S. v. Attica Cent. Schs., 386 F.3d 107, 110 (2d Cir. 2004). The Court does not, however, draw all reasonable inferences in the plaintiff's favor. Id. Where jurisdictional facts are disputed, the Court has "the power and the obligation to consider matters outside the pleadings, such as affidavits [and] documents, ... to determine whether subject matter jurisdiction...
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