Charlie's Story

Charlie had a great idea. He had spent the years since high school trying to develop a successful business to make a good life for his family. While he was hampered by lack of a higher education, he never let that hold him back from trying hard to make a go of it.

He had been involved in trucking mulch for local dealerships. For a time he also had transported municipal waste to landfills. Yet, it seemed to him, with the country's growing emphasis on re-cycling, that there ought to be a better way to connect generators of certain kinds of materials with end-users of those materials.

Charlie reached out to people he had done business with over the years. He found George, a local environmental lawyer, to help on the legal side. In turn, George recommended that they bring in Larry, who was supposed to have prior experience in a recycling business of his own.

The three men developed a business model with Charlie on the outside, Larry on the inside and George providing all legal services for the new company. In late summer, 2006, they were able to connect all the dots and pretty soon they had a reliable supplier furnishing material for use by a reliable end-user. By late fall of that year, Charlie had found additional end-users and the company's prospects were looking good.

By the middle of 2007, clouds appeared on the horizon. Larry was not reimbursing him for routine business expenses that had been meticulously documented. Bank records disclosed instead that Larry had George on the company's weekly payroll, even though George was outside counsel and should only have been paid for occasional services. Moreover, Larry had found a new supplier whose materials should have been producing weekly receipts for the company. After a few months, however, none of those receipts were showing up in the firm's bank account.

Charlie found himself in a dilemma. He had devoted his best efforts to the new business. Yet, even though he had brought in most of the company's customers, he was sharing his profits with an outsider and was not even being reimbursed his expenses. In fact, he wasn't even making a basic living at a time when the business should have been taking off. He needed to find a way to separate himself from Larry, continue to work with some of his old customers and develop new business as well. Without resolving his dispute with Larry, that was going to be difficult, if not impossible.

Charlie consulted Pinnola & Bomstein in October, 2007. In his first meeting with Mike Bomstein, he laid out his history in the business and went on to tell Mike the problems he was having with his partner. He badly needed advice on how to move on without facing the prospect of his partner tying him up in litigation for years and trying to take a piece of Charlie's future business.

Together, Charlie and Mike developed a plan. Charlie' goal was to be able to move on. After speaking with Mike Bomstein, Charlie was prepared to give up any monies due to him so long as his partner was willing to close the company and let Charlie take his own clients as part of his future business. It seemed a reasonable strategy and a way to avoid expensive and drawn-out litigation.

Bomstein learned the name of Larry's attorney and made repeated efforts to resolve the matter amicably. The lawyer, however, ignored his phone calls and his correspondence and made no effort to advance his own proposals to settle the parties' differences. It was clear that Larry had no intentions of reaching an amicable resolution.

In late 2007, Bomstein's firm filed suit against Larry, alleging that he had improperly diverted the company's funds to line his own pockets at Charlie's expense. The complaint also asked the court to close down the business and let Charlie go ahead with his new company.

Larry's attorney answered the complaint. He also joined Charlie's major supplier as a defendant, forcing him to hire his own attorney. Larry denied that Charlie was due any reimbursements whatsoever. He denied that payments to the outside lawyer were improper. Further, he claimed that Charlie owed him money from the work Charlie had been doing with new customers under his own, newly-formed business.

The local court then directed the parties to submit to mandatory mediation in the offices of an experienced attorney. In May, 2008, the parties spent the better part of a day in mediation. Mike saw this as an opportunity to achieve Charlie's goals in a cost-effective way without prolonged, expensive litigation.

By late afternoon, it was agreed that Larry and Charlie's business was history. Significantly, Larry gave up any claims to future involvement or profit from Charlie's new recycling firm. Charlie was free to take his old customers and expand his new company. Charlie agreed to pay Larry a modest sum within two weeks; the amount was significantly less than anticipated attorney's fees. He was finally able, after eight months, to put the matter behind him. He now had control of the business that he had created and he look forward to tapping new markets throughout the region.