Law 360 Article: First-to-File Rule Cited by Judge in Granting Relief for SKS Clients in Complex Business Case
On September 29, 2023, Law 360 published an article in relation to recent developments in a complex business dispute involving clients of SKS Legal Group co-founder, Robert C. Streit, Esq., who manages the firm’s Ft. Lauderdale office, and partner, Justin S. Miller, of the firm’s Coral Gables office. The article is provided below.
Law360, Miami (September 29, 2023, 9:05 PM EDT) -- A Florida state court judge halted proceedings Friday in a lawsuit accusing two businessmen of stealing financial records detailing $81 million worth of investments, citing the first-to-file rule regarding a prior federal case brought by the pair, who allege fraud and withheld compensation. During a remote hearing in Miami, Eleventh Judicial Circuit Court Judge Thomas Rebull stayed the lawsuit brought by six companies accusing David Feingold and Michael Dazzo of failing to return the records of business investments they managed for those companies and attempting to covert the assets for their own benefit. The case is stayed until the Third District Court of Appeal decides whether to halt proceedings until the federal lawsuit is resolved.
"I don't see that there was ever an initial case management conference or a trial date set, or a scheduling order," Judge Rebull said. "In light of all of that, I think the prudential thing to is to stay the case and see what the Third District Court of Appeal has to say regarding the first-to-file rule."
Court records show that in February 2022, Feingold and Dazzo initiated federal action against Richard Cardinale, with whom they formed Alternative Global Management LLC: the parent company to six limited-liability companies started by Dazzo and Feingold. The six limited-liability companies are named Alternative Global (numbered one through six); each pursues different types of investments or businesses, such as real estate, cash merchant businesses and fast-food companies, according to the federal suit. Under the Alternative Global Management agreement, the plan was to have Feingold and Dazzo borrow money from L3 Capital Income Fund, a hedge fund formed by Cardinale. With the six Alternative Global companies paying back the loans to L3 Capital, income would be generated for the Alternative Global Management company, benefiting Feingold, Dazzo, Cardinale and L3 investors.
Additionally, Cardinale was named as part owner of the six Alternative Global entities provided he disclosed all conflicts of interest and compensation to the 132 investors of his L3 Capital fund, among other conditions, court records show. But the arrangement fell apart, according to the federal lawsuit, with Feingold and Dazzo alleging unscrupulous practices by Cardinale, including hiding $10 million from his investors and fraudulent billing of more than $1.3 million of expenses paid by Feingold and Dazzo, who believed Cardinale was using the money for administrative expenses and to maintain records. Nearly a year later, a state court lawsuit was filed by the six Alternative Global companies, alleging Feingold and Dazzo abruptly resigned from their positions as co-managing members and ran off with their books and records.
Feingold and Dazzo, defendants in the state court lawsuit, tried to compel arbitration and have the case stayed or dismissed, but the court denied their request in May. They've since requested the court reconsider their motion, and have also challenged the denial to the Third District Court of Appeal. They said the state court ignored the longstanding first-to-file rule that deals with cases that are substantially the same, according to the motion to reconsider.
Bill Palmer of Florida Appeals, representing Feingold and Dazzo, said the parties, claims and information sought in the subpoenas are the same, and the cases have other similarities as well. Alternatively, Palmer argued the court should hold an evidentiary hearing on whether the case should be stayed due to arbitration. "If you review the complaint in the federal case, you review the complaint in this case, you'll see a great amount of similarity relates for both," Palmer said. "They both arise out of allegations regarding the mismanagement, the breach of fiduciary duty and the thefts related to the AG entities, as well as disputes over the books and records of those entities, including both the numbered entities and AG Management."
Avi Benayoun of Greenberg Traurig LLP (https://www.law360.com/firms/greenberg-traurig), representing the AG companies in the state lawsuit, told Judge Rebull that Feingold and Dazzo are trying to delay the case and the court should deny their motion. Benayoun said Feingold and Dazzo received extensions to respond to his clients' lawsuit, and they responded by flooding the court with 1,300 pages that included various motions and affidavits.
"Normally when you get a motion to compel arbitration, it's a very simple, straightforward motion," Benayoun said. Benayoun added that the state case is a "simple case," and that comparing the state and federal cases are like "comparing apples and oranges." He said the state case needs to proceed to trial as soon as possible, as sales for some of the real estate assets of AG entities are already occurring. "We need a ruling, judge, and they're going to put up every road block imaginable to stop you from doing that," Benayoun said.
Judge Rebull said that "it's hard to argue that it wouldn't be a tremendous waste of resources" if he denied Feingold's and Dazzo's motion and allowed them to keep litigating, only for the Third District Court of Appeal to rule they should have had an evidentiary hearing or that the court should have granted a motion to compel arbitration. "Isn't that not a pretty bad outcome?" Judge Rebull said. "I don't even see a scheduling order, I don't see a trial date currently set in this case."
The Alternative Global companies are represented by Avi Benayoun and John L. McManus of Greenberg Traurig LLP.
Feingold and Dazzo are represented by Lorne E. Berkeley of Daniels Rodriguez Berkeley Daniels Cruz PA (https://www.law360.com/firms/daniels-rodriguez), Robert C. Streit of SKS Legal Group (https://www.law360.com/firms/sks-legal-group) and Bill Palmer of Florida Appeals.
The state case is Alternative Global One LLC et al. v. Feingold et al., case number 2023-000688-CA-01, in the Eleventh Judicial Circuit Court of Florida. The federal case is Feing old et al. v. Cardinale et al., case1:22-cv-20375 (https://www.law360.com/cases/620105e9f9ad1e033a4dd5aa), in the U.S. District Court for the Southern District of Florida (https://www.law360.com/agencies/u-s-district-court-for-the-southern-district-of-florida)