(CN) - A Florida soda tycoon does not have to pay his former attorney $4 million for the advice and counsel he received during an unsuccessful attempt to sell his company, a federal judge ruled.
Nick A. Caporella is the CEO and majority shareholder of the National Beverage Corp., a Fort Lauderdale-based soda company that manufactures and distributes soft-drinks brands such as Faygo and Shasta, as well as vitamin water and energy drinks.
According to the company's most recent annual report, it's revenues topped $600 million last year.
In a lawsuit filed in the federal court in Fort Lauderdale, Caporella's former attorney, David Mursten, claims his former client failed to compensate him for "advice and counsel" during an ultimately failed attempt to sell the company to a foreign entity.
Mursten, who says he viewed Caporella "as something of a father figure," claims the two men met early in the morning at a Ft. Lauderdale Ritz Carlton Hotel in 2010 and discussed the deal.
In return for Mursten's help, he claims, Caporella would pay the lesser of $10 million or 2 percent of the transaction amount. The attorney also claims that Caporella promised him $4 million of stock in National Beverage if the buy-out fell through.
Mursten says the two referred to the agreement as the "Dr. Pepper Deal," because the $10 million-2 percent-$4 million framework of the deal echoed a bygone advertising campaign encouraging consumers to drink Dr. Pepper at 10 a.m, 2 p.m. and 4 p.m.
But the purported agreement was never put in writing, and when the acquisition fizzled a year later and Caporella refused to pay the $4 million in stock, Mursten said.
After the attorney sued his former client, Caporella said he never agreed to anything remotely resembling the "Dr. Pepper Deal," and that the entire thing was a figment of Mursten's imagination.
Ultimately, it was Mursten's own words doomed his claim. Jude Cohn said.
In testimony, Mursten admitted to working as Caporella's attorney in the past and during the alleged oral contract. Yet, the Florida Bar's Rules of Professional Conduct prohibits entering into oral business contracts without putting the terms in writing. Other courts have found oral agreements that do not follow the Florida Bar's guidelines cannot be enforced, Cohn said.
And while Mursten later attempted to walk back his earlier testimony to deny an attorney-client relationship existed, the judge found these attempts unconvincing.
"The Court thus finds that Caporella has established that Mursten acted as his attorney, both immediately before and during the term of the alleged Dr. Pepper Deal. Mursten's statements in his declaration that he did not act as a lawyer when he was drafting litigation documents or reviewing contracts not only fail to crate an issue for trial, but also raise the question of just what Mursten thinks lawyers do with their days," Cohn wrote.
He continued: "The case at bar illustrates that a failure to observe the Rule may result in the breakdown of a client's trust in his attorney, and circumstance in which an attorney's intricate involvement in the business and personal affairs of a client complicate and intensify what would otherwise be an ordinary business dispute. To avoid these an related problems, the Rules of Professional Conduct establish safeguards and requirements, expressed in Rule 4-1.8, that must be followed in the course of business transactions between attorneys and clients. Allowing attorneys to enforce agreements contravening these requirements would run contrary to the public policy considerations leading to the adoption of the Rules in the first place."
As a result, Cohn held that whatever agreement existed between the two men is "void and unenforceable" by Mursten.
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