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Friedman Siegelbaum, LLP v. Pribish

April 7, 2009

FRIEDMAN SIEGELBAUM, LLP, PLAINTIFF-RESPONDENT,
v.
JOHN J. PRIBISH, DEFENDANT-APPELLANT.



On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-5850-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 2, 2008

Before Judges Fuentes, Gilroy and Chambers.

Plaintiff Friedman Siegelbaum, LLP, commenced this action in the Law Division against defendant John J. Pribish alleging:

(1) breach of the covenant of good faith and fair dealing; (2) breach of fiduciary duty; (3) tortious interference with a contractual relationship; and (4) conversion*fn1 regarding the accounts receivable of Krista Cicalese and Spencer Gaines.*fn2 The matter came for adjudication before the trial court by way of a bench trial conducted between October 22, 2007 and November 5, 2007. The court found in favor of plaintiff, awarding it $84,850.08 in damages.*fn3

Defendant now appeals arguing that the trial court committed reversible error when it found that: (1) he breached a fiduciary duty to plaintiff; (2) his conduct violated an implied covenant of good faith and dealing; (3) he tortiously interfered with plaintiff's contractual relationship with two former clients; and (4) he converted property belonging to plaintiff.

We reject these arguments and affirm. We derive the following facts from the evidence presented at trial.

I.

Marc Friedman and Joseph Siegelbaum founded the law firm Friedman Siegelbaum in 1977. They were the firm's only equity partners. Before joining the firm, defendant had a private law practice with Adrienne Rogove and several other attorneys. Based on the needs of his growing clients, defendant left his private practice and entered into negotiations to join plaintiff as a contract partner. These negotiations led to a Letter Agreement dated August 24, 1999.

The pertinent portions of this Agreement read as follows:

This Letter Agreement confirms the terms and the arrangement pursuant to which you will join our firm as a contract partner.

1. Effective November 1, 1999 . . . you [defendant] shall become a contract partner of our firm [plaintiff].

2. This Agreement shall continue in effect until the first to occur of your death, disability . . . or upon six (6) months written notice from the [plaintiff] firm or you [defendant].

3. Your compensation shall be determined and paid as follows:

(a) For matters generated by clients for which you are the originating attorney, you shall receive 30% of the gross legal fees when collected.

(b) For legal services which you render to other firm clients, you shall receive, as additional compensation, 30% of the time billed by you on a monthly basis.

4. You will receive an annual draw payable on the first and fifteenth of each month, of One Hundred Eighty Thousand ($180,000)

Dollars to be credited against the compensation due to you pursuant to paragraph 3(a) hereof. At the end of each three (3) month period, an accounting of the activity during such period shall be prepared and, (a) in the event that additional compensation is due to you, based upon the difference between the compensation due to you pursuant to paragraph 3(a) and the draw paid to you during such period, the amount of such additional compensation will be paid to you; or (b) in the event that your activity during such three (3) month period results in the compensation due to you during such three (3) month period pursuant to paragraph 3(a) hereof, being less than the draw paid to you during such period, the amount of the shortfall shall be applied against further additional compensation due to you. (Emphasis added.)

The Agreement also required plaintiff to hire Rogove as an associate in the firm, and concluded by expressing the expectation that the parties were "sincerely looking forward to a long, and prosperous relationship." Defendant began working at the firm on November 1, 1999.

Early in the spring of 2000, Siegelbaum, on behalf of plaintiff, began looking for additional office space in New York. In the process of ascertaining the availability of office space at the firm of Goodwin Procter ("GP"), Siegelbaum began exploring a possible merger between the two firms. Given the sensitive nature of the discussions, plaintiff entered into a confidentiality agreement with GP. Despite these measures, GP breached the agreement and allowed the possibility of a merger to become public knowledge.

Other than Siegelbaum and Friedman, no attorney at the firm had knowledge of the possible merger. In fact, Siegelbaum assured the firm's management committee that any discussions of a merger would be posed to the committee before negotiations proceeded. At the time GP breached the confidentiality agreement, the merger discussions had not reached the point of "hard negotiations."

Both sides to this litigation agree that news of the possible merger created chaos at the firm, and consequently expedited the merger process. According to Friedman, "[b]ecause of this [premature] disclosure and because of the disarray that resulted and because people were scrambling around to figure out what was happening[,] [i]t really became necessary to bring certainty to the situation as quickly as possible. . . ."

Under the terms of the formal merger agreement, GP would acquire plaintiff's technology department and plaintiff would cease practicing law at the end of May 2000. Of the attorneys in the firm, "some 30 or 40" who practiced in different areas were offered positions at GP. These lawyers included many of the firm's seventeen (non-equity) partners, six of whom accepted positions. Defendant was not extended an offer to join GP.

After the merger was announced, Siegelbaum and Friedman did not hold a meeting or have any formal discussion with the contract partners about how to collect the accounts receivables or the procedures to be used for the winding down of business. According to defendant, he and other attorneys in the firm were highly critical of the way Siegelbaum and Friedman, (as the two equity partners) had mishandled the merger. These attorneys perceived the merger as a "clandestine maneuver," designed to benefit the equity partners at the expense of all of the other attorneys in the firm. As a result, defendant characterized matters at the firm as a departure from "business as usual."

Plaintiff ceased operating as a law firm on May 31, 2000. As of that date, plaintiff had paid defendant approximately $68,000 more in draw than plaintiff had collected from his clients. After separating from plaintiff, defendant joined the firm of Saul Ewing, LLP as an equity partner.

II.

As plaintiff's managing partner, Siegelbaum was responsible for the firm's accounts receivable. Defendant was solely responsible for managing the "relationships" with Gaines and Cicalese, two of the clients that he brought to the firm. With respect to these two clients, defendant had the ultimate responsibility for the accounts receivables. This included reviewing the clients' bills, presenting the bills to the clients, writing off ...


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