Alters Firm Says Former Shareholder Relinquished Stock
Prominent Miami attorney Jeremy Alters did not appear to make much headway Monday in persuading the Third District Court of Appeal he should get another shot at proving a former law partner is not entitled to a share of the firm.
The Alters Law Firm was sued in 2011 by Robert B. Brown III, now with Whitfield Bryson & Mason in Coral Gables. While with Alters, Brown was involved in Chinese drywall product liability litigation.
Miami-Dade Circuit Judge Diane Ward dismissed the case in Brown's favor in 2012 and denied Alters' motion for rehearing in April 2013, stating: "Brown's resignation from the defendant law firm did not change his status as a shareholder. There is no record evidence ... that at any time (Brown) relinquished his shares of stock."
Arguing for him, attorney Lauri Waldman Ross of Ross & Girten in Miami claimed Brown relinquished his shares when he did not object to a change in his schedule K-1 form, a federal profit-loss tax document used in partnerships.
Ross said Brown received a K-1 in 2009 that showed a profit at the firm. He was allocated earnings based on his 10 percent share. But in 2010, he was sent a K-1 that decreased his interest to 4.1 percent based on his June 30, 2010, departure from the firm. In addition, the 2010 K-1 showed a loss.
Ross argued that because Brown did not protest the changes in the K-1, by implication he relinquished his shares.
The Alters Law Firm had no shareholder agreement with Brown.
The Third District panel of Judges Barbara Lagoa, Vance Salter and Thomas Logue repeatedly came back to that.
"And yet, lawyers are still not writing shareholder agreements," Logue observed.
Absent a written agreement, Logue said he could accept a verbal agreement, but there would have to be evidence of that. Logue expressed doubt that—were the case to be tried—a partner's lack of response to a tax form constituted relinquishment.
Todd Legon of Legon Fodiman in Miami, arguing for Brown, said, "If you're going to argue summary judgment, to me a lone K-1 prepared by a firm accountant doesn't create a genuine issue of fact to defeat summary judgment."
Alters also appealed the trial court decision granting discovery. Brown wants access to the firm's financial records. Ross argued the discovery demand was far more extensive than necessary.
Legon reminded the court that the discovery request was made when Alters was under investigation by The Florida Bar for alleged trust account irregularities.
"The whole issue here is about money," Legon said. "What cases did he have where money was coming in."
Ward's 2012 order stated Brown demonstrated "proper purpose for inspection of defendant's books and financial records ... in order to ascertain the value of the stocks, communicate with other shareholders and determine whether corporate affairs are being properly administered."
Ross argued the discovery request was not sufficiently limited. Rather, it was a "stalking horse for a shareholder's derivative suit," an attempt to exercise control over management.
And this was going on while Brown was trying to syphon off business, she argued.
"Here we have proof on this record of direct competition, trying to get cases away from the law firm," Ross said.
Alters has been sued by numerous former partners, and he said he has settled most of them. Alters is now a partner with Morelli Alters Ratner, which has offices in New York and Miami.