A state appellate court ruled against bankruptcy trustee and fiduciary Barry Mukamal in his suit against his former firm, Marcum LLP, and chairman and CEO Jeffrey Weiner.
The court compelled arbitration of Mukamal's claims of a $5 million fraud at his former firm, ordering him to abide by the arbitration contract in his partnership agreement.
Mukamal was a partner from 1997 at defunct accounting firm Rachlin LLP, which merged with New York-based Marcum in 2009. His partnership agreements with Marcum required signatories to settle all disputes via final and binding arbitration in New York's Nassau County. He also signed a rider or attachment that covered compensation, benefits, share distribution, termination and other provisions. That rider also required arbitration.
But in 2016, Mukamal sued the company for fraud, alleging he'd learned four years earlier that his old firm, Rachlin, had made more than $5 million in undisclosed pre-merger payments to its in-house counsel, marketing director and Florida office chief. He claimed Marcum principals paid unapproved severance to Rachlin's former managing partner when the payments came to light, but forced all the other former Rachlin partners to cover the expense. He also alleged Marcum's leadership had a "secret bonus structure," and "changed the way bonuses were calculated and distributed to hurt the partners in Miami (and help those in New York)," according to a Third District Court of Appeal ruling issued July 12.
Mukamal raised the issues with Marcum's executive committee, which took no action, prompting his resignation and two subsequent lawsuits. In the first suit, he alleged fraud by the company and Weiner. In another, he launched arbitration proceedings by filing a statement of claim, alleging Marcum breached its partnership agreement and related documents.
Marcum and Weiner moved to stay the case and compel the fraud claim into arbitration, based on provisions in the partnership agreement.
Miami-Dade Circuit Judge Michael Hanzman granted the request "in a well-reasoned order," according to the Third DCA, which upheld his decision.
"The parties have not argued the legal implications of Mukamal, on the one hand, invoking the arbitration clauses to litigate breach of contract disputes and on the other hand, arguing in this court that the language of the addendum is an intent to cancel or abandon the right to arbitrate his fraud claim against Marcum LLP," Judge Robert Luck wrote for the appellate court. "For that reason, we too will not address this irony."