A New York judge has ruled that a bitter dispute over whether an upstart litigation shop ousted a founder partner in order for him to claim his share of a cryptocurrency asset must be settled at trial. The issues at the heart of the case have been strongly disputed and need to be investigated, with US District Judge John Koeltl saying in a Nov. 24 decision that there are “genuine issues of material fact.”
The decision sets the stage for a court trial in the Southern District of New York. Freedman Normand Friedland, the company in question, has removed its founder partner, Jason Cyrulnik, in 2021. The company claims it was done due to Cyrulnik’s abusive behaviour and is seeking a declaration that it lawfully did so under the terms of a memorandum of understanding created upon the firm’s formation.
Cyrulnik, meanwhile, has pursued allegations that his partners conspired with him to remove him in order to seize his portion of a cryptocurrency asset the firm received as compensation for legal services, AVAX, the token, which has seen its value spike in recent months. Cyrulnik’s firing, with the firm’s entire share equating to roughly $130 million.
This case provides a window into the pitfalls of starting a boutique, as well as the consequences of accepting a digital currency for legal services. Freedman Normand Friedland was originally known as Roche Cyrulnik Freedman, and the group of Boies Schiller Flexner alums focused on new areas like crypto and cannabis litigation. In February 2021, some of the firm’s partners voted to remove Cyrulnik, citing a pattern of abusive behaviour, such as seeking to “undermine the intent of the MOU and marginalize other founding partners,” according to court records.
Cyrulnik countersued, alleging his fellow cofounders, Kyle Roche, Devin Freedman, orchestrated a plan to remove him from the company to take over his stake in the Ava Labs coin. The firm had agreed to give the firm 2.16 million tokens, of which Cyrulnik had a 25% stake, according to the firm’s memorandum of understanding. The memorandum is a legally binding document, but it was not clear whether Cyrulnik’s removal for “cause” was lawful, a “vigorously disputed issue of fact that cannot be decided on a motion for summary judgment.” The firm’s other claims to be resolved at trial include Cyrulnik’s alleged breach of his fiduciary duty to the firm.
Cyrulnik’s surviving counterclaims include breach of contract, breach of covenant and good faith, breach of fiduciary duty. Judge Koeltl dismissed the charges of civil conspiracy, breach of unjust enrichment, and breach of unjust enrichment, on the basis that they repeat allegations in Cyrulnik’s previous allegations. The case is Roche Freedman LLP v. Cyrulnik, S.D.N.Y., No. 21-CV-1746, 11/24/2023.