Friday, August 16, 2013

Falling Out Leads To Passionate Litigation

The New Jersey Appellate Court has issued a 105 page opinion in a case involving former friends and business partners who "pursued their respective claims against each other with the same passion and zeal that once characterized their success in business."

The defendant and plaintiff met in 1997. At first, defendant was plaintiff's personal attorney. He later became the chief operating officer as well as general counsel to business entities of the plaintiff.

The court notes that he was also an entertainment lawyer who had represented Bette Midler, Rod Stewart, Neil  Sedaka, Andrew Lloyd Webber and the Bee Gees.

The plaintiff has risen from a limited eduction to great success. The defendant (who is admitted in New York but not New Jersey) was alleged to have engaged in self-dealing as well as lavish personal spending on the company dime.

In particular, the court describes a three-night, all expenses paid (by the company) trip to Las Vegas.

While the lesser mortals stayed elsewhere, the defendant had a penthouse at the Bellagio Hotel. He brought the gang back from dinner (where he let the company pick up the tab), along with "three young ladies" that he introduced as his "friends."

At the penthouse, the friends performed with, as a witness testified, "nothing on, nude show, did things to each other, that sort of stuff..." The witness was particularly impressed by the fact that the penthouse had a grand piano.

The court affirmed the rescission of the defendant's ownership interests in three entities. Further, the court affirmed legal malpractice and civil fraud claims against the defendant as in-house and general counsel as well as personal attorney for the plaintiff. Awards of counsel fees and punitive damages to the plaintiff were reversed.

The court squarely rejected the defendant's contention that RPC 1.8(a) (the business transactions with clients rule) did not apply to him as an in-house counsel.

As a sidelight, the litigation also led to the censure of the first trial judge.

The censured judge had violated judicial ethics by attending court proceedings after his recusal, a situation that did not create an issue for the court:

...we are satisfied that Judge Nugent's role as fact-finder and legal arbiter was not compromized by [former] Judge Perskie's conduct. Although we have disagreed with some of the legal rulings he made in the case, Judge Nugent's integrity as a jurist is beyond reproach.

The court departed from its usual pratice of not identiying the trial judge by name and noted that the judge had already been named in publicity generated by the case. (Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2013/08/the-new-jersey-appellate-court-has-issued-a-105-page-opinion-in-a-case-of-former-friends-and-business-partners-gone-awry-th.html

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