WASHINGTON (CN) — A federal judge ruled that a former Israeli ambassador can pursue claims that a high-profile District of Columbia attorney stiffed him on money he earned helping with a lawsuit against a bank for supporting “genocide and terrorism in Israel.”
Zvi Shtauber, once Israel’s ambassador to the United Kingdom, agreed in 2005 to consult with Washington, D.C. attorney Allan Gerson on a lawsuit Gerson brought against Arab Bank and other financial groups “on behalf of victims of genocide and terrorism in Israel and in territories administered by the Palestinian Authority,” the Friday ruling by U.S. District Judge John Bates.
In exchange for connecting Gerson to an Israeli attorney and helping recruit class members, Shtauber says, Gerson agreed to pay him 20 percent of Gerson’s fees. But Gerson never paid, even after Arab Bank agreed to a partial settlement in 2016. Shtauber sued Gerson last year for $880,000 in damages and as compensation for his services.
Gerson sought dismissal, saying District of Columbia professional conduct rules bar attorneys from entering into fee-sharing agreements with people who are not lawyers. He also said called Shtauber’s attempts to be paid fair value for his work invalid because such claims can be brought only when no valid contract exists.
Bates initially agreed with Gerson, saying the Washington rules governing attorney conduct do prohibit agreements like the one between Shtauber and Gerson. However, Bates was sympathetic to Shtauber’s argument that the agreement is enforceable even though the contract is against public rules.
Bates predicted that although the D.C. Court of Appeals hasn't ruled directly on whether such contracts are enforceable, it would likely use a case-by-case consideration similar to the one used in New York. He based his ruling on the D.C. Court of Appeals' decision in Landise v. Mauro, which largely echoed the logic behind a New York Court of Appeals ruling in a similar case.
“Based on the reasoning in Landise, this court believes that if the D.C. Court of Appeals were to consider this issue, it would follow New York's flexible approach and hold that while the rules express D.C.'s public policy, a court must evaluate the particular circumstances to determine whether the contract is unenforceable,” Bates wrote.
Because Gerson would benefit greatly from ignoring the contract and should have been aware of the rules when he entered the agreement, Bates said, the contract should be enforceable.
“We're very pleased with the decision,” said Meredith Kinner, an attorney with Kinner McGowan, who represents Shtauber.
However, John McGowan, who also worked on the case, said Bates’ decision could spur an appeal from Gerson on the open question of how to evaluate contracts that violate public policy, such as the professional conduct guidelines.
In 1988 Gerson was the first attorney to bring a suit against Libya on behalf of victims of the Lockerbie bomber, according to his website, a case that led to legislation that allowed private citizens to sue foreign governments for their roles in terrorist attacks.
Steven Schneebaum, who represents Gerson, said he is “disappointed” by Bates’ ruling, but said he and his client are prepared to move to discovery, where they hope to show that Shtauber did not perform the duties mentioned in the agreement.
Schneebaum said that Shtauber was meant to identify clients for litigation and serve as a liaison between clients and attorneys in Israel and Gerson, but did these jobs poorly or in some cases not at all.
Schneebaum said Gerson was not trying to “pull the wool” over the eyes of a normal person during negotiations with Shtauber, and that he hammered out the agreement with Shtauber’s attorney in Israel. This undercuts the purpose of the rule prohibiting such agreements between lawyers and non-lawyers, Schneebaum suggested.
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