Roche Freedman LLP v. Cyrulnik

• Docket Number: 21-cv-1746 (JGK)
• Decision Date: 24 November 2023
• Parties: ROCHE FREEDMAN LLP, Plaintiff, v. JASON CYRULNIK, Defendant. JASON CYRULNIK, Counterclaim-Plaintiff, v. ROCHE FREEDMAN LLP, ET AL., Counterclaim-Defendants.
• Court: U.S. District Court — Southern District of New York

1

ROCHE FREEDMAN LLP, Plaintiff, v. JASON CYRULNIK, Defendant.

JASON CYRULNIK, Counterclaim-Plaintiff, v. ROCHE FREEDMAN LLP, ET AL., Counterclaim-Defendants.

No. 21-cv-1746 (JGK)

United States District Court, S.D. New York

November 24, 2023

OPINION AND ORDER

John G. Koeltl United States District Judge

The plaintiff, Roche Freedman LLP (the "Firm") brought this action for a declaratory judgment, breach of fiduciary duty, and intentional interference with contract against Jason Cyrulnik ("Cyrulnik"), a founding partner of the Firm.^[1]See ECF No. 31.

Jurisdiction is based on diversity of citizenship. See 28 U.S.C. § 1332. Cyrulnik then brought a host of statutory and common-law counterclaims against the Firm and five of its then-attorneys -Kyle Roche, Devin Freedman, Amos Friedland, Nathan Holcomb, and Edward Normand (the “Individual Counterclaim-Defendants” and with the Firm, the “Counterclaim-Defendants”) -- arising from what Cyrulnik alleges was his wrongful removal from the Firm. See ECF No. 73 ¶¶ 103-74.^[2]In a Memorandum Opinion and Order dated March 28, 2023, this Court granted in part and denied in part the Individual Counterclaim-Defendants' motions to dismiss the counterclaims. See Roche Freedman LLP v Cyrulnik, No. 21-cv-1746, 2023 WL 2663648, at *1, *10 (S.D.N.Y. Mar. 28, 2023)(“March 2023 Opinion”) ECF No. 374.^[3]

Cyrulnik's surviving counterclaims include the following: (1) dissolution pursuant to Florida Statutes § 620.8801; (2) statutory buyout against the Firm pursuant to Florida Statutes § 620.8701; (3) an accounting pursuant to Florida Statute § 620.8403; (4) breach of contract (against the Individual Counterclaim-Defendants); (5) breach of the covenant of good faith and fair dealing (against the Individual Counterclaim-Defendants); (6) breach of fiduciary duty (against the Individual Counterclaim-Defendants); (7) conversion; (8) unjust enrichment; (9) promissory estoppel (against the Individual Counterclaim-Defendants); and (10) civil conspiracy (against the Individual Counterclaim-Defendants). See March 2023 Opinion, at *1, *10; ECF No. 72 ¶¶ 103-74.

The parties have now filed cross-motions for summary judgment. In its motion for summary judgment, the Firm and the four remaining partners seek summary judgment on the first claim for a declaratory judgment that Cyrulnik was lawfully removed. See ECF No. 416, at 3, 44. The Firm asserts that Cyrulnik was terminated for "cause" and thereby "withdrew" from the Firm. Id. at 9, 34. They also seek summary judgment dismissing Cyrulnik's counterclaims. Id. at 9-10, 44.

Cyrulnik, in turn, seeks summary judgment dismissing the three claims by the Firm, see ECF No. 432 at 25, 38, and granting judgment on all of his counterclaims, see id. at 25, 31-32 n.11, 33. He also seeks summary judgment dismissing a separate claim by Roche that claims fraudulent inducement in connection with Cyrulnik's alleged representation to Roche and Freedman that he had a competing offer from the law firm Patterson Belknap Webb & Tyler LLP (the “Patterson Offer”). See id. at 38-42; ECF No. 385 at 30-33. Cyrulnik also moves for summary judgment that he is entitled to a portion of the contingency interest in any recovery from the “Kleiman litigation,” see ECF No. 385 at 5-6, 11, which is based on an agreement memorialized in the “Side Letter,” ECF No. 510 ¶ 17; Declaration of Jason Cyrulnik, ECF No. 434 (“Cyrulnik Decl.”), Ex. 7 (the “Side Letter”). The Side Letter represents an agreement by Roche and Freedman to give Cyrulnik 25% of recoveries from the Kleiman v. Wright litigation “should Roche, Freedman, Roche Freedman LLP, or RCF be entitled to any contingent recovery in connection with” that litigation. Cyrulnik Decl. Ex. 7 at 3.

I.

The standard for granting summary judgment is well established. “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Gallo v. Prudential Residential Servs. L.P., 22 F.3d 1219, 1223 (2d Cir. 1994).

“[T]he trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are any genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution.” Gallo, 22 F.3d at 1224. However, “disputed legal questions . . . present nothing for trial and are appropriately resolved on a motion for summary judgment.” Flair Broad. Corp. v. Powers, 733 F.Supp. 179, 184 (S.D.N.Y. 1990).^[4]

When, as in this case, both parties seek summary judgment, “the Court must assess each of the motions and determine whether either party is entitled to judgment as a matter of law.” Ramos v. N.Y.C. Dep't of Educ., 447 F.Supp.3d 153, 155 (S.D.N.Y. 2020). And, “[b]ecause this case involves enforcement of an alleged contract, the intentions of the parties are at issue. While this is frequently a source of persistent disputes of fact, where a question of intention is determinable by written agreements, the question is one of law, appropriately decided on a motion for summary judgment.” Brown v. Cara, 420 F.3d 148, 152-53 (2d Cir. 2005).

II.

The following facts are based on the parties' Local Civil Rule 56.1 statements, counterstatements, and supporting papers, and are undisputed unless otherwise noted. The Court also assumes familiarity with the March 2023 Opinion, including its extensive description of the facts of this case. See March 2023 Opinion, at *1-4.

A.

In 2004, Cyrulnik graduated from law school and joined the law firm Boies Schiller Flexner LLP ("BSF"). ECF No. 507 ¶ 1; ECF No. 521 ¶ 1. In summer 2019, Roche and Freedman, two more junior attorneys at BSF, left BSF to form Roche Freedman LLP, a law firm focusing on cryptocurrency and other specialized practice areas. ECF No. 515 ¶ 1; ECF No. 72 ¶ 1. They registered Roche Freedman LLP as a Florida limited liability partnership. ECF No. 515 ¶ 1. Among the Firm's early clients was a technology startup (the "Startup") that agreed to pay the Firm for its legal services with cryptocurrency known as "Tokens." ECF No. 507 ¶ 7; ECF No. 515 ¶ 96-97.

Throughout summer and fall 2019, Roche Freedman LLP tried to recruit Cyrulnik, who alleged that he was being recruited by several national law firms. ECF No. 507 ¶ 5; ECF No. 521 ¶ 1, 5. In exchange for Cyrulnik's agreement to leave BSF, Roche and Freedman promised him significant stakes in what they described as their high-upside contingency work, including the Kleiman litigation, and in certain assets they had secured. ECF No. 521 ¶¶ 7, 11. After negotiations, Cyrulnik agreed to leave BSF to form the law firm Roche Cyrulnik Freedman LLP ("RCF"), a Florida limited liability partnership. Id. ¶ 6. On December 27, 2019, RCF's six founding partners -- name partners Cyrulnik, Roche, and Freedman, together with Friedland, Holcomb, and Normand -signed a Memorandum of Understanding to govern the partnership. See ECF No. 510 ¶ 9; ECF No. 507 ¶ 14; see also Declaration of Jonathan Bach, ECF No. 425 (“Bach Decl.”), Ex. 21 (the "MOU"). A seventh partner was added to RCF in January 2020 - Paul Fattaruso - although he was not added to the MOU. See ECF No. 507 ¶ 16; Cyrulnik Decl. ¶ 20.

The MOU's "Compensation Model” set forth distribution methodologies for revenue earned through hourly and contingency matters. MOU § III; see ECF No. 507 ¶ 12. Beyond compensation from these matters, the MOU also entitled Cyrulnik to 27% of the Firm's equity, the largest share, plus 25% of a fixed allocation of the Tokens to be issued by the Startup. MOU §§ II (Equity in the Firm), IV(A) (Finance Agreement - Tokens).

Two provisions of the MOU governed the departure of a Founding Partner from the Firm. Id. §§ VI(C), (G). Under the first section, "Withdrawal from Firm,” a Founding Partner who withdrew from the Firm within 18 months of the Firm's formation would be entitled only to compensation under the Firm's Compensation Model and would be required to return his equity "to the balance of the firm's equity partners pro-rata.” Id. § VI(C) (the "Withdrawal Provision”); see also ECF No. 507 ¶ 12.

The second section, “Partner Removal,” provided that a “Founding Partner cannot be removed without cause” and that, even if cause arose to remove a Founding Partner, that removal would require a two-thirds vote of the Firm's equity partners. MOU § VI(G) (the “Removal Provision”); ECF No. 507 ¶ 12. In contrast to the Withdrawal Provision, the Removal Provision did not expressly provide that an involuntary removal would result in the forfeiture of any compensation, interests, or assets owed or allocated to a partner under the MOU. See MOU § VI(G).

B.

A week after signing the MOU, on January 4, 2020, Roche, Cyrulnik, and Freedman executed the Side Letter. ECF No. 507 ¶ 18; ECF No. 515 ¶ 17; Side Letter.^[5]The Side Letter provided that Roche will pay Cyrulnik and Freedman in four installments for the privilege of being listed first in the name of RCF, although such payments would be forfeited if either recipient is “terminated for cause” before a payment is due. See Side Letter; ECF No. 507 ¶ 18. The Side Letter also provided that Cyrulnik would receive a 25% interest in the Firm's anticipated recovery in the Kleiman litigation. See Side Letter; ECF No. 507 ¶ 19.

C.

In January 2021, the Tokens issued by the Startup escalated in value. ECF No. 507 ¶ 30. At this point, Cyrulnik alleges, his partners no longer needed the revenue from his client base to fund the Firm's operations, and they schemed to remove him. See id. ¶¶ 34-39. On February 10, 2021...