Risk Update

Lawyer Conflicts Fights — Client Contract Versus Conflict, DQ on the Menu

Posted Dan Bressler

“Appeals Court Says ‘Gentleman’s Agreement’ Between Law Firm and Client Does Not Outweigh Contract” —

  • “The New Jersey Appellate Division has rejected Basil Law Group’s claim that it is due $400,000 in fees and additional work promised in a ‘gentleman’s agreement’ with Noah Bank, after the bank’s CEO stepped down amid criminal charges.”
  • “Shin asked Basil to reduce the fixed fee balance of $550,000 in exchange for a $250,000 fee, an oral promise the firm would remain primary counsel for all litigation matters, and a promise the board would pay the firm to perform in an advisory capacity. The agreement was only verbal, which Basil claimed in a deposition was at Shin’s request. Basil stated that Shin said that he would pay off the additional $400,000 but could not put it in writing, according to the opinion.”
  • “In what Shin called ‘a gentleman’s agreement’ during his deposition, Noah would not have to pay the full agreement price of $650,000 in exchange for providing additional legal work, the opinion said. He also admitted to stating that he would pay the $400,000 if ‘he were able to do so’ or if there was ‘a merger transaction in which everybody hit the lottery.'”
  • “Noah’s chairman of the board, Edwin Lloyd, asked Basil to conduct an internal investigation into the criminal allegations to protect Noah’s interests. However, James learned that Basil was also assisting Shin with his criminal defense. Basil requested and received a waiver of conflict from James to proceed with Shin’s representation, according to the opinion.”
  • “After consulting with outside counsel, James recommended Noah terminate Basil’s services for the company citing a conflict of interest. Basil was terminated from all pending litigation and future work. In a discussion with the board, all were in agreement that a conflict existed. However, Lloyd testified that Noah terminated Basil because of cost and because the services were no longer needed, the opinion said.”
  • “In August 2019, Basil attempted to collect the additional $400,000 in fees and asserted that Noah’s reason for terminating the firm was strategic and demanded payment within 30 days. The bill went unpaid and Basil brought this action in Bergen County Superior Court. The trial court found ‘no ambiguity’ in the 2019 contract and therefore concluded that there was no breach of contract, according to the appeals court’s opinion.”
  • “On the final claim regarding termination of Basil’s services by Noah, the trial court found nothing that indicated ‘malice or ill motive.’ James received advice from counsel that indicated a conflict existed and the board no longer felt satisfied with Basil’s services once he represented Shin in the criminal matter.”
  • “‘Basil conceded defendant could terminate plaintiff under the oral agreement if defendant became dissatisfied with plaintiff’s representation,’ the appeals court said. ‘Therefore, defendant did not breach the implied covenant in terminating plaintiff’s services. We see no reason to disturb the court’s order finding no breach of the covenant of good faith and fair dealing.'”

“Atty DQ Bid Takes Back Seat In Restaurant Ownership Fight” —

  • “A Georgia state judge said the issue of ownership must be decided before he could determine whether an attorney can represent both a business and its CEO in a dispute over the corporate ownership of a metro Atlanta sushi restaurant and possible breaches of fiduciary duties.”
  • “Ryan Isenberg of Isenberg & Hewitt PC, who represents Yijae and Lee, contended that Moore couldn’t represent both defendant Dongin Kim and EJ & Don as a necessary nominal party in the suit because a corporation’s attorney can’t represent an individual shareholder in a case in which his interests are adverse to those of other shareholders.”
  • “Moore contended that he should be able to represent both the company and Kim at least until the issue of ownership is decided.”
  • “‘I think this motion puts the cart before the horse,’ Moore said. ‘I think we have to first determine who is a shareholder. That’s a fundamental merit-based argument. We don’t believe that Lee or Yijae are shareholders based on the evidence. That’s a merit-based argument, and if it’s true, they have no standing to contest whether I can represent the organization and its CEO.'”
  • “Judge Davis agreed with Moore, saying the dispute at the heart of the case is whether Yijae and Lee are shareholders in the company at all and that issue must be decided before he could determine whether Moore can represent both Kim as CEO and EJ & Don.”
  • “Yijae and Lee first filed suit against Kim in January after they said he claimed they were merely lenders, not shareholders, in EJ & Don and asked them to refrain from coming on the premises of the restaurant. They sought a declaratory judgment that they are actually the controlling shareholders of the company and that they are entitled to a preliminary and permanent injunction barring Kim from exercising control over it.”