Ira Kleiman attorneys involved in ugly internal legal battle

Yet another layer of intrigue has been heaped onto the already dense Kleiman v Wright litigation. The law firm representing Ira Kleiman, Roche Cyrulnik Freedman LLP (RCF), is embroiled in a bitter internal struggle that has now resulted in the filing of two separate lawsuits in Florida and New York and one named founding partner requesting that the firm be dissolved.

The suits are between RCF founding partner Jason Cyrulnik and his co-founders, who have recently voted to remove Cyrulnik from the partnership. Cyrulnik says that this was a pretext in order to avoid paying him compensation that was agreed when the partnership was established. The rest of RCF maintain that Cyrulnik has been obsctructionist, abusive and unprofessional, and having been forcibly removed is now attempting to shake the firm down for additional compensation.

The New York suit was filed by RCF against Cyrulnik; the Florida suit was filed by Cyrulnik against RCF and its partners, both collectively and individually.

The dispute

Roche and Freedman (as with Cyrulnik and three others) had recently left another New York-based litigation firm, and both had jointly established Roche Freedman LLP (RF). Five months later, Roche and Freedman would be joined by Cyrulnik and the other founding partners with the intent to establish a successor firm to RF – Roche Cyrulnik Freedman (RCF).

The New York suit was filed first and sets the stage as to the state of affairs within the firm: “This case is about a law firm refusing to tolerate the unprofessional, obstructionist, and abusive conduct of one of its partners who elevated his own interests over the interests of the firm.”

The complaint details Cyrulnik’s problematic behavior, claiming (among other things) that he  –

  • Was verbally abusive toward other partners ‘punctuated by screaming fits of rage directed towards those who disagreed with him’;
  • Mocked and belittled attempts by the other partners to increase diversity within the firm;
  • Instructed a firm employee to withhold the firm’s financial information from other equity partners within the firm;

According to the suit, the founding partners of the firm unanimously voted to remove Cyrulnik as a result of his conduct, but “rather than accept payment for his work and focus on ensuring a smooth transition, this expelled partner now refuses to leave, attempting to shake down his former firm for millions of dollars he did not earn and to which he is not entitled.”

The compensation seems to be a main source of the current conflict. At the firm’s founding, a memorandum of understanding (MOU) was signed which set out the compensation each founding partner would be entitled to. It included provision for the equity of RCF to be divided among the partners once a formal partnership agreement was entered into, as well as ‘formula compensation’ involving the distribution of RCF’s profits and in particular, the assignment of assets that belonged to RF, the predecessor firm.

Included among these assets are some amount of digital currency, which RF had accepted as payment for representing a small start-up, which under the MOU was to be mostly split between Roche, Freedman and Cyrulnik only, as they were the three founding partners expected to service the client. The partners apparently agreed that the distribution would be revisited if the work was allocated differently than expected. This is what ended up happening, with Cyrulnik not working on the matter. According to Roche and Freedman, an unspecified redistribution was proposed (and not objected to by Cyrulnik) over email in July 2020. However, Cyrulnik claims that co-founder Roche attempted to strong-arm Cyrulnik out of his share of the assets, threatening to withhold support for other changes to the firm’s compensation mechanisms proposed by Cyrulnik and others.

As of 2021, the coins in question have appreciated in value, meaning they’re now worth substantially more than they were originally. Meanwhile, the formal partnership agreement, which was meant to be finalized after the signing of the MOU, never materialized. According to RCF’s lawsuit, this was intentional on the part of Cyrulnik “in order to leverage gaps in the incomplete [MOU] to try to seize power and a financial advantage to the detriment of the firm.”

Cyrulnik v RCF

Cyrulnik feels that the other partners have conspired to remove him to gain control of his share of the coins. However, the suit maintains that Cyrulnik’s behavior grew steadily worse after the partners did not agree to Cyrulnick’s proposed changes to the formula compensation set out in the MOU, escalating to the point that the partners voted to remove him.

RCF seeks a declaratory judgment that Cyrulnik was validly removed for cause and that the compensation he is entitled to is limited to that specified in the MOU.

Down in Florida, Cyrulnik’s suit is equally unimpressed with the conduct of his former partners, accusing Roche and Freedman of orchestrating a ‘deplorable scheme’ to ‘illegally oust Cyrulnik from the firm they jointly founded, RCF, so that they could try to take for themselves his rightful share of the firm”—including the aforementioned digital asset tokens.

Cyrulnik maintains that the reasons for his removal were absurd and purely pretextual, aimed at stripping him of his entitlements under the MOU and specifically, his entitlements to the digital asset tokens.

He also introduces accusations relating to the conduct of Roche and Freedman, with the former apparently insufficiently recorded billable hours and the latter manipulating the firm’s compensation model by insisting the firm pay referral fees negotiated between Freedman and a third party attorney. 

Cyrulnik is asking that the Court dissolves RCF as a result of his improper removal, or alternatively, for an order that he be bought out of his interest in RCF by the other partners. He also asks for damages, including those arising from Roche and Freedman’s breach of contract (the MOU) and the breach of fiduciary duties that Cyrulnik’s partners owed to him.

Chaos

Both suits are dense with detail. They also provide occasional and amusing windows into what appears to be a highly bitter dispute which has been building in the background of the Kleiman v Wright litigation.

For example, Cyrulnik’s suit goes into great detail about the courtship process in which Roche and Freedman attempted to recruit him (“[Roche and Freeman] had spent months convincing Cyrulnik, a highly accomplished lawyer with a long-standing, robust and growing practice, to leave his equity partnership at a prominent national law firm to transform their fledgling firm into a stable and respected litigation practice”).

Later, Cyrulnik regales the Court with a story from early in RCF’s life: “Given his reputation, seniority, and equity stake in the new Firm, Cyrulnik was the natural choice for the first-named partner. But Roche – consumed with securing that recognition for himself – agreed to pay Cyrulnik $850,000 to allow Roche to be listed first.”

For RCF’s part, they paint Cyrulnik as a bitter, angry, selfish partner willing to prejudice client interests at his own enrichment. For example, they say that Cyrulnik would often demand urgent resources away from urgent work for other clients in favor of his own.

Given the nature of the dispute and the relationship between Cyrulnik and his co-founders, it doesn’t seem likely to be resolved anytime soon—certainly not amicably. With the potential outcomes ranging from a quiet exit for Cyrulnik to the total dissolution of the firm, it’s fair to wonder what the future might hold for Roche Freedman LLP, which has been involved in a number of the digital asset industry’s high profile cases.

Kleiman v Wright is currently scheduled to go to trial in June.

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