The legal showdown between the partners of TD International, which the BLT first reported on last week, is quickly shaping up into a cautionary tale of sorts. The moral? Sign your paperwork.
To quickly review, on May 11, TD International, a Washington, D.C.-based consulting firm, filed a complaint accusing partner Steven Fleischmann of diverting $626,000 in payments from one of its clients into his personal bank account. He then allegedly lied when pressed on why the client had not paid its bills.
Since then, Fleischmann has hired a defense team from Baker Botts, which includes litigation partner Michael Barta, and filed a response to the suit asserting that everything he did was within his legal rights. Fleischmann acknowledges setting up a side company called Tertium Datum International (spelling out the abbreviation in TD International's name) and had clients pay bills to the new company.
But other partners had similar setups, he says, which let them take advantage of the TD brand while doing work outside the firm.
At a motions hearing today at the U.S. District Court for the District of Columbia, it quickly became clear that the two sides didn't agree even on basic facts.
The most basic question: is Fleischmann still a partner with the firm? Fleischmann signed a partnership agreement in 2004, in which he agreed that all of his work time would be devoted to TD International. But Fleischmann says he was let go from the partnership in 2008, freeing him to set up his own company. His allegedly former partners say they had talked about kicking him out, but never did. Unfortunately, neither the original partnership agreement, nor the document saying he was released, appear to have been signed.
At today's motion hearing, TD International asked Judge Richard Leon for an injunction freezing the account Fleischmann set up for his side company. The firm's lawyer, Greenberg Traurig partner Sanford Saunders, said it was necessary to keep Fleischmann from spending the money before the court ruled on the case.
Judge Leon, for his part, was skeptical. "This sounds like a [civil] dispute over money between parties," he said, noting that the D.C. Circuit did not normally freeze accounts in those cases.
"We are talking about the actual proceeds from the illegal action," Saunders responded. "This is no different than if someone steals a car and wants to sell it."
While stressing that Fleischmann had done nothing wrong, Barta argued that even if he had, the amount of money in his account wasn't enough to merit an injunction. He also said the money made up almost all of Fleischmann's savings.
"They have to show that it will threaten the very existence of their business" to justify a freeze, Barta said. "They have not begun to do so."