STATE OF MINNESOTA COUNTY OF HENNEPIN

DISTRICT COURT FOURTH JUDICIAL DISTRICT Court File No. 27-CV-15-17320

Lurie LLP, Plaintiff, vs.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER

Neil N. Lapidus, Undercliff LLC, Defendants. The above-captioned matter came on for court trial, commencing November 21, 2016 and concluding November 30, 2016, upon Plaintiff’s Complaint. William Pentelovitch, Martin Fallon, and John Duffey of Maslon LLP appeared on behalf of Plaintiff. Michael Ciresi and Barry Landy of Ciresi Conlin LLP appeared on behalf of Defendants. Introduction and Summary of Decision Plaintiff Lurie LLP (“Lurie” or “Plaintiff”) commenced this action by filing a Complaint on October 5, 2015. Lurie seeks a declaratory judgment pursuant to Minn. Stat. Section 555.01 et seq. that Defendant Neil Lapidus (“Lapidus”) has breached the Fourth Restated Partnership Agreement (“Fourth Agreement”) set forth in Trial Exhibit 1 that Lurie and its Partners including Lapidus entered into on May 1, 2005. The alleged breach is based on Lurie’s allegations that Lapidus after January 1, 2015 rendered accounting and consultingrelated services to at least three of Lurie clients and solicited a Lurie employee in violation of the Fourth Agreement. Lurie also seeks a declaratory judgment that Lapidus has forfeited any further compensation under Articles 11 through 14 of the Fourth Agreement, and a declaratory judgment that Lapidus must: pay Plaintiff for five years 25% of any fees Lapidus or its affiliates earned, pay damages for breach of contract including liquidated damages, make accounting of all fees, monies and compensation Defendants received and disgorgement to Plaintiff of all monies Defendants received. Lurie also seeks an order requiring Lapidus to return any retirement benefits wrongfully received. (Tr. Ex. 3 at TX003-011-013.) At issue is whether Lapidus, a retired partner of Lurie, violated Lurie’s Fourth Agreement, which prohibits a former partner from rendering Professional Services to certain Lurie clients (“Lurie Client(s)”), which as defined in the Fourth Agreement are those clients Lurie serviced during the two years prior to the former partner’s retirement. The Fourth Agreement generally defines the term Professional Services to include any services Lurie performs or will perform in the future and specifically included on Exhibit 2 attached to and incorporated into Trial Exhibit 1 of the Fourth Agreement. Exhibit 2 to Trial Exhibit 1 (“Exhibit 2”) is a list of services and/or categories of services Lurie provides or will provide in the future to the Lurie Clients. The dispute between the parties concerns whether work Lapidus and Defendant Undercliff, LLC (“Undercliff”) performed at three of Lurie Clients as an inhouse employee and/or contractor that fits the categories listed on Exhibit 2 constitutes a violation of the covenants not to compete (“noncompete(s)”) provisions in the Fourth Agreement. Lurie takes the position that the performance of any tasks that fit any of the categories listed on Exhibit 2 violates the Fourth Agreement. Lapidus on the other hand suggests that the Fourth Agreement permits him to work in-house at a Lurie Client and that the Fourth 1

Agreement was meant to protect Lurie from former partners like Jeffrey Polinchok (“Polinchok”) who went to work for a competitor and took Lurie Clients with him and away from Lurie. Lapidus also argues that the noncompete provisions in the Fourth Agreement are unenforceable because they are overbroad and that the provisions for liquidated damages and forfeitures are unenforceable penalties. Based on the totality of the evidence in the record and the relevant language in the Fourth Agreement and as further explained below, the Court concludes that: • • • •

• •

The noncompete clauses in the Fourth Agreement are enforceable under applicable Minnesota law; The parties intended to prohibit a former partner from rendering any financial services that materially interfere with Plaintiff’s legitimate business interests including specifically Lurie’s independence and reduction in Lurie’s business; The Fourth Agreement prohibits a retired partner from working in-house or under contract at a Lurie Client in any financial capacity or in any position relating to or interfacing with financial and/or public accounting-related work; Under the terms of the Fourth Agreement a retired partner cannot, without securing Lurie’s prior written consent, work in-house or under contract in any financial and/or public accounting-related capacity, advisory or otherwise and including “coordinating the flow” of financial information at a Lurie Client; Lapidus violated the noncompete provisions in the Fourth Agreement between January 2015 and July 2015. The evidence is insufficient to conclude that Lapidus violated the non-solicitation of Lurie employees provision in Section 17.1(c)

Based upon all of the files, records, and proceedings herein, the Court makes the following Findings of Fact, Conclusions of Law, and Order for Judgment. FINDINGS OF FACT The Parties 1.

Lurie was founded in 1940 and is a Minnesota limited liability partnership whose principal office is located at 2501 Wayzata Boulevard, Minneapolis, Minnesota. Lurie is one of the 120 largest accounting firms in the United States and employs approximately 150 employees including 17 partners at its office. (11/29 PM Tr. 49:550:5.) Lurie provides accounting, auditing, consulting, tax, and other services to a large and diverse client base of local and national business entities and individuals. (11/29 PM Tr. 80:25-82:9; Trial Ex. 1, at Ex. 2, TX001-034; Compl. ¶ 1; Trial Ex. 3 at TX003001.)

2.

Lapidus, currently a resident of Naples, Florida, is a certified public accountant licensed to practice in the State of Minnesota. (11/21 AM Tr. 55:15-24.) Lapidus is a former partner at Lurie, where he practiced accounting for thirty-six years and four months until his retirement from the firm on April 30, 2014. (11/21 AM Tr. 56:20-57:4.)

3.

Lurie and Lapidus will be referred in this Order collectively as the “Parties.”

4.

Defendant Undercliff LLC (“Undercliff”) is a Florida limited liability company, which Lapidus formed in July 2014. (11/21 AM Tr. 56:3-5; 11/21 PM Tr. 85:5-18; Trial Ex. 20 at TX020-001.) Lapidus has been a manager and member of Undercliff since its formation. (11/21 AM Tr. 55:25-56:2; 11/21 PM Tr. 85:25-86:3, 87:8-10; Trial Ex. 21 at TX021-001.) Lapidus’ wife is also a member of Undercliff. (11/21 PM Tr. 86:4-6.) 2

Lapidus’ Tenure at Lurie 5.

Lapidus joined Lurie on January 2, 1978. (11/21 AM Tr. 56:16-19.) He became a partner on May 1, 1981 (11/21 AM Tr. 56:20-23) and ultimately became a named partner in Lurie. During the years leading up to his retirement on April 30, 2014, the firm was known as Lurie, Besikof, Lapidus & Co. (11/21 AM Tr. 56:24-57:2, 57:1924; Trial Ex. 1 at TX001-001.)

6.

As a Lurie partner, Lapidus provided a variety of accounting and consulting related services. (11/21 AM Tr. 64:6-21.) He specialized in complex audit engagements, litigation services, and litigation support, including work as an expert witness. (11/21 AM Tr. 64:1-16, 64:18-21.) He also consulted on tax compliance and structures, as well as other business advisory engagements. (11/21 AM Tr. 64:5-16.)

7.

Lapidus served as the billing partner for many of Lurie’s key clients, including Border Foods, Inc. (“Border Foods”), Delaget LLC (“Delaget”), and Twin City Fan Companies, Inc. (“Twin City Fan”). (11/21 PM Tr. 32:6-11, 33:18-34:2; 11/28 AM Tr. 106:5-14.) Lurie serviced Border Foods, Delaget, and Twin City Fan during the two years immediately prior to Lapidus’ retirement on April 30, 2014. (11/21 PM Tr. 56:1857:2.) Border Foods, Delaget, and Twin City Fan are all located within a fifty mile radius of Lurie’s office: Border Foods is located in New Hope, Minnesota (11/21 PM Tr. 36:18-22); Delaget is headquartered in St. Louis Park, Minnesota (11/28 PM Tr. 14:14-24); and Twin City Fan is located in Plymouth, Minnesota (11/21 PM Tr. 37:712).

8.

During the latter part of his tenure at Lurie, Lapidus controlled the largest amount of business measured in dollar volume of any Lurie partner. From 2007 until 2014, he was responsible for billings ranging from approximately $2.6 million to nearly $4.9 million annually. (11/29 PM Tr. 64:9-65:17; see also Trial Ex. 148.)

9.

While a Lurie partner, Lapidus served as the firm’s Administrative Partner and as a member of the firm’s Partnership Committee (“Executive Committee”). (11/21 AM Tr. 57:25-58:19.) Lapidus had control of Lurie along with another Lurie partner named Marshall Besikof (“Besikof”) until Besikof retired in 2007. (11/28 AM Tr. 9:20-15:14; 11/29 PM Tr. 53:19-25.)11

10.

As the firm’s Administrative Partner, Lapidus was responsible for: (a) managing the business and affairs of Lurie; (b) supporting Lurie’s managing partner and other Lurie partners; and (c) administering and managing Lurie’s relationships with its legal counsel, banks, health insurance carriers, and professional liability insurance carriers. (11/21 AM Tr. 58:20-62:1, 63:3-9; 11/28 AM Tr. 7:22-8:24; Trial Ex. 655 at TX655001.) In addition as a member of Lurie’s Executive Committee, Lapidus shared responsibility for guiding the direction of the firm. (See, 11/21 AM Tr. 63:10-13.)

11.

Prior to his retirement, Lapidus had been the partner with primary responsibility for Border Foods, as well its owners—the Engler family—and their other business endeavors, including Delaget. (11/21 PM Tr. 33:11-20; 11/28 AM Tr. 116:6-17.) By that point, Border Foods had been a Lurie Client for over a decade. (11/21 PM Tr. 33:18-20.) During the transition period in the final year leading to Lapidus’ retirement, Lurie asked Lapidus to help finalize the transfer of Border Foods relationship to Todd Lifson (“Lifson”), now Lurie’s managing partner. (11/28 AM Tr. 106:5-14.)

12.

Prior to his retirement on April 30, 2014, Lapidus did not inform Lurie that he intended to continue working for Border Foods after the transition period closed on December 31, 2014. (11/28 AM Tr. 108:6-9.) 3

The Contracts Lurie Third Restated Partnership Agreement 13.

Prior to signing the Fourth Agreement in effect at the time of his retirement and at issue in this action, Lapidus was a party to Lurie’s Third Restated Partnership Agreement (“Third Agreement”), which was in effect from November 1, 1999 until April 30, 2005. (See Trial Ex. 500 at TX500-001.) Lurie’s attorneys at the law firm of Fredrikson & Byron, P.A. (“Fredrikson”) drafted Lurie’s Third Agreement. (11/28 AM Tr. 17:618:24.) Lapidus served as a member of Lurie’s Executive Committee and functioned as Lurie’s Administrative Partner while Fredrikson drafted the Third Agreement and throughout the period that the Third Agreement was in effect. (See 11/21 AM Tr. 57:25-58:19.)

Payments to Former Partners under the Third Agreement 14.

Under the Third Agreement, Lurie agreed to make certain monthly payments to Lurie partners following their withdrawal or retirement from the firm. (Trial Ex. 500 §§ 13.4, 13.5, 14.1, 14.2 at TX500-012, TX500-014, TX500-016.) The Third Agreement expressly conditioned Lurie’s obligation to make such payments on the former partner’s compliance with the noncompete obligations imposed by the Third Agreement. (Trial Ex. 500 §§ 17.2, 17.3(f) at TX500-022 & TX500-024.)

Noncompete Obligations under the Third Agreement 15.

The Third Agreement contained three covenants not to compete (“noncompetes”) in Sections 17.1(a), 17.1(b), and 17.3(f). (Trial Ex. 500 at TX500-021 & TX500-024.) These noncompetes restricted the manner in which Lurie partners could render “Public Accounting Services” and engage in the “Practice of Public Accounting” following their withdrawal or retirement from the firm. (See, e.g., Trial Ex. 500 §§ 17.1(a), 17.1(b), 17.3(f) at TX500-021 & TX500-024.)

16.

The Third Agreement defined “Public Accounting Services” and the “Practice of Public Accounting” using the same language: “[T]he performance of any accounting services, income or related tax services, management advisory services, or other services being provided by the Partnership or any of its divisions or subsidiaries.” (See, e.g., Trial Ex. 500 §§ 17.1(a), 17.1(b), 17.3(f) at TX500-021 & TX500-024.)

17.

The noncompete in Section 17.1(a) of the Third Agreement restricted to whom former Lurie partners could render Public Accounting Services in the two-year period following their withdrawal or retirement. (Trial Ex. 500 § 17.1(a) at TX500-021.)

Polinchock Arbitration 18.

In 2003, a dispute arose between Lurie and one of its former partners, Jeffrey Polinchock (“Polinchock”), concerning the noncompetes and related forfeiture provisions contained in the Third Agreement. (Trial Ex. 674 at TX674-002.) During his tenure at Lurie, Polinchock specialized in the area of employee benefit plans. (11/21 PM Tr. 3:2-4.) While the Third Agreement was still in effect, Polinchock withdrew from Lurie and went to work for a competing firm in Minneapolis doing the same type of employee benefits work he had done at Lurie. (11/21 PM Tr. 3:5-22; Trial Ex. 674 at TX674-012.) At his new firm, Polinchock also began servicing several of his former Lurie Clients with respect to employee benefits matters. (11/21 PM Tr. 3:5-22.) 4

19.

Lurie believed that Polinchock’s work at his new firm violated his noncompete obligations, and commenced an arbitration proceeding against Polinchock pursuant to the Third Agreement’s arbitration clause (“Polinchock Arbitration”). (Trial Ex. 674 at TX674 at 002.) In that proceeding, Lurie asserted claims that Polinchock had breached Section 17.1(a) by rendering Public Accounting Services to Lurie Clients and Section 17.1(b) by engaging in the Practice of Public Accounting within a fifty-mile radius of Lurie’s office. (Trial Ex. 674 at TX674-012.) Lurie sought, among other things, enforcement of the forfeiture provisions contained in Sections 17.2(a)(i) and 17.2(b) of the Third Agreement. (Trial Ex. 674 at TX674-039.)

20.

In an Award dated November 21, 2003, the arbitrator ruled that Lurie could not sustain its claims against Polinchock for breach of either Section 17.1(a) or Section 17.1(b) of the Third Agreement. (Trial Ex. 674 at TX674-040.) The arbitrator found that the employee benefits work Polinchock engaged in at his new firm did not fall within the scope of the activity restricted by the Third Agreement’s noncompetes. (Trial Ex. 674 at TX674-039 & TX674-040.) The arbitrator based his finding on two grounds (Trial Ex. 674 at TX674-039 & TX674-040): (a) the definitions for “Public Accounting Services” and the “Practice of Public Accounting” did not expressly identify employee benefits work as being included within them; and (b) the catchall language used in those definitions (“other services being provided by the Partnership or any of its divisions or subsidiaries”), which presumably included employee benefits work, was impermissibly “vague and overly broad.” (Trial Ex. 674 at TX674-039 & TX674-040.)

21.

The arbitrator also found that the forfeiture provisions in Sections 17.2(a)(i) and 17.2(b) of the Third Agreement were unenforceable as “liquidated damages” provisions. (Trial Ex. 674 at TX674-040.) The arbitrator based this finding on his conclusion that the forfeiture provisions imposed a penalty for breaching the noncompetes. (Trial Ex. 674 at TX674-040.)

Lurie’s Steps to Address Issues Raised in Polinchock Arbitration Award 22.

Lurie and Lapidus in particular as Administrative Partner at Lurie were disappointed with the result of the Polinchock Arbitration. (11/21 PM Tr. 7:16-23; 11/28 AM Tr. 17:6-18:19.) Lapidus told Farley Kaufmann (“Kaufmann”), Lurie’s managing partner at the time that Fredrikson was responsible for ensuring that Lurie’s noncompetes and related forfeiture provisions were enforceable and that Fredrikson should have advised Lurie to change them if they were not. (11/28 AM Tr. 17:6-18:19.) Lapidus instructed Kaufmann to tell Fredrikson that Lurie expected Fredrikson to revise the Third Agreement for Lurie to remedy the issues upon which the arbitrator ruled against Lurie in its attempt to enforce the Third Agreement’s noncompetes and related forfeiture provisions. (11/28 AM Tr. 17:6-18:19.) Fredrikson agreed to do the work, and the end result was Lurie’s Fourth Agreement. (11/28 AM Tr. 17:6-18:22.)

Lurie’s Fourth Restated Partnership Agreement 23.

The Fourth Agreement went into effect on May 1, 2005 and all of Lurie’s partners at that time, including Lapidus, signed the Fourth Agreement. (Trial Ex. 1 at TX001-001 & TX001-030.) Like the Third Agreement, the Fourth Agreement contains noncompetes and related forfeiture provisions because Lurie and its partners sought to maintain the same underlying bargain struck in the Third Agreement—i.e., Lurie’s agreement to make payments to each partner following retirement or withdrawal in exchange for each partner’s agreement not to compete with Lurie while receiving those 5

payments. (11/28 AM Tr. 20:20-22:11, 90:11-91:9; 11/29 PM Tr. 4:10-6:5, 6:10-16, 7:1-4, 7:8-8:4, 60:10-61:9; Trial Ex. 1 §§ 13.4, 13.5, 17.1, 17.2, 17.3(b), 17.3(e) at TX001-012, TX001-013, TX001-022, TX001-023, TX001-025.) 24.

In an effort to ensure that the terms of this bargain were enforceable, the Fourth Agreement’s noncompetes and related forfeiture provisions contain revised language intended to address the concerns raised in the Polinchock Arbitration. (11/21 PM Tr. 26:5-27:7; 29:17-30:17; 11/28 AM Tr. 26:23-32:4; 11/29 PM Tr. 60:10-61:9; Trial Ex. 1 §§ 17.1, 17.2 at TX001-022 & TX001-023.)

Lapidus’ Role in Drafting the Fourth Agreement 25.

Lapidus and Kaufmann were responsible for the drafting of the Fourth Agreement and Lapidus played a central role in formulating and approving the revisions made to the Third Agreement’s noncompetes and related forfeiture provisions. (11/28 AM Tr. 17:620:1, 27:12-31:2.)

26.

During the drafting of the Fourth Agreement, Kaufmann facilitated communications between Lurie and Fredrikson, so that most of Lurie’s communications with Fredrikson on that subject were made to, or through, Kaufmann. (11/28 AM Tr. 18:25-19:16.) Kaufmann served as an intermediary between Fredrikson and Lapidus, reporting substantive communications that he had with Fredrikson to Lapidus for Lapidus’ review and comment, including Fredrikson’s recommendations for what changes should be made to the Third Agreement in order to make the noncompetes and related forfeiture provisions enforceable. (11/28 AM Tr. 18:25-19:16.)

27.

When Lapidus had instructions for Fredrikson or questions regarding Fredrikson’s advice, Lapidus relayed them to Fredrikson through Kaufmann. (11/28 AM Tr. 19:1222.) Lapidus also had direct communications with Fredrikson regarding the drafting of the Fourth Agreement, including at meetings he attended with Fredrikson during this period. (11/28 AM Tr. 19:23-20:9; Trial Ex. 655 at TX655.001.)

28.

Lapidus along with Kaufmann and others drafted some of the revisions to the Third Agreement—including the “Family of Services” set forth in Exhibit 2. The Family of Services would be “specifically include[d]” within the scope of the activities restricted by the noncompetes in the Fourth Agreement. (11/28 AM Tr. 27:12-28:9; Trial Ex. 1, at Ex. 2, TX001-034.) Lapidus did not object to the revisions made to the noncompetes and related forfeiture provisions because he believed that they cured the issues raised in the Polinchock Arbitration regarding the enforceability of those provisions. (11/28 AM Tr. 28:3-32:4; 11/29 PM Tr. 60:10-61:9.)

29.

When the Fourth Agreement was presented to the Executive Committee and later to the Partnership, Lapidus advocated for its adoption. (11/28 AM Tr. 19:12-22, 33:5-34:1.)

Payments to Former Partners under the Fourth Agreement 30.

The post-retirement payments that Lurie agreed to make under the Fourth Agreement are outlined in Article 13. (Trial Ex. 1, at Art. 13, TX001-012.) Lurie’s purpose in offering these payments to its partners is to incentivize those partners to remain loyal to Lurie following their retirement. (11/28 AM Tr. 20:24-21:20, 90:16-91:9.) Lurie designed these post-retirement payments in the hope of turning each retired partner into a “cheerleader” and “goodwill ambassador” for Lurie, “somebody who would help” if Lurie needed and asked for such help, and someone who “would not interfere with the business of the firm in any capacity.” (11/28 AM Tr. 20:24-21:20.) 6

31.

The post-retirement payments include the payout of the former partner’s Accrual Basis Capital Account, as well as monthly payments of “Retirement Benefits” for up to ten years following retirement (and adjusted for inflation on an annual basis), followed by de minimis monthly payments of Retirement Benefits during the remaining years of the former partner’s life. (Trial Ex. 1 §§ 13.4, 13.5 at TX001-012 & TX001-013.)

32.

Section 13.5 provides the formula used to calculate a former partner’s Retirement Benefits under the Fourth Agreement, the primary component of which is the former partner’s “Total Deferred Compensation.” (Trial Ex. 1 § 13.5(a) (ii) at TX001-013.)

33.

A former partner’s “Total Deferred Compensation” is calculated based on the former partner’s historical earnings at Lurie, which in turn are directly related to the value of the book of business for which the former partner was the billing partner. (11/21 AM Tr. 67:4-14; Trial Ex. 1 §§ 11.3(b)(i)-(ii), 13.5(a)(ii) at TX001-009 & TX001-013.) The use of the term “Total Deferred Compensation” in the Fourth Agreement does not indicate that a former partner’s Retirement Benefits consist of income deferred by, or profits withheld from, the former partner while the former partner was working at Lurie. (11/28 AM Tr. 24:16-26:12, 91:10-19; see also 11/21 AM Tr. 79:6:-81:21; 11/29 PM Tr. 75:16-76:6.)

34.

Lurie has not deferred compensation or withheld profits from a partner to fund its future payment of Retirement Benefits to that partner. (11/28 AM Tr. 24:16-25:13.) Instead, Lurie has always provided its partners their compensation—which takes the form of a salary plus a share of Lurie’s profits—in full on a current basis each year. (11/28 AM Tr. 24:16-25:13; see also 11/21 AM Tr. 79:6:-81:21.) During cross-examination Lapidus conceded that he received his compensation in full every year he was a Lurie partner. (11/21 AM Tr. 87:4-14 (same); 11/29 PM Tr. 75:16-76:6.) To the extent Lurie has had profits to distribute in a given year, it has distributed those profits to its partners and held none back. (11/28 AM Tr. 24:16-25:13; 11/21 AM Tr. 79:25-80:8, 81:5-21.)

35.

A former partner’s Retirement Benefits under Article 13 of the Fourth Agreement do not represent compensation that the former partner has already earned, but has yet to receive. (11/28 AM Tr. 24:16-26:12, 91:10-19; 11/29 PM Tr. 75:16-76:6.) Lurie’s payments of Retirement Benefits to its former partners under the Fourth Agreement are unfunded. (11/28 AM Tr. 22:24-23:20, 91:10-19.) There are no provisions in the Fourth Agreement for funding a partner’s Retirement Benefits prior to the partner’s retirement. (11/28 AM Tr. 23:8-12.)

Relationship between the Noncompetes and Lurie’s Ability to Make Payments to Former Partners 36.

Because Lurie does not use previously deferred compensation or withheld profits to fund the post-retirement payments outlined in Article 13, Lurie pays these amounts out of its current and future cash flow. (11/28 AM Tr. 23:13-16.) Lurie relies primarily on the revenues it receives from the Lurie Clients with whom the former partners worked to fund its payment of Retirement Benefits to former partners. (11/28 AM Tr. 121:9-13; 11/29 PM Tr. 75:22-76:2.) Continued and uninterrupted revenues from the Clients of former partners are necessary for Lurie to make post-retirement payments to those former partners. (11/28 AM Tr. 23:13-16; 121:9-13; 11/29 PM Tr. 75:22-76:2; Trial Ex. 1 §§ 17.2(a)(i), 17.2(b) at TX001-023 & TX0001-024.)

37.

Because it disrupts the revenue streams used to fund these post-retirement payments, competition from former partners with respect to their former Lurie Clients impairs the 7

economic viability of the post-retirement payments program. (11/28 AM Tr. 91:10-19.) Competition from former partners interferes with Lurie’s revenue streams regardless of whether the competition from the former partner results from the former partner providing services to the Lurie Client through a new firm, as a consultant, or as an employee of the Lurie Client. (11/28 AM Tr. 35:16-36:11, 38:3-41:17.) 38.

To ensure that Lurie’s post-retirement payments program remains viable from an economic perspective, the Fourth Agreement links a former partner’s continued receipt of post-retirement payments from Lurie to that partner’s compliance with the Fourth Agreement’s noncompetes. (11/28 AM Tr. 91:10-19; 11/29 PM Tr. 75:16-76:6.) The Fourth Agreement establishes this link through the forfeiture provisions, which specify that a former partner forfeits the right to any remaining post-retirement payments from Lurie at the moment the former partner breaches any of the Fourth Agreement’s noncompetes. (Trial Ex. 1 §§ 17.2(a)(i), 17.2(b), 17.3(e) at TX001-023, TX001-024, TX001-025.) The maintenance of this link is fundamental to the viability of the postretirement payments program, as well as Lurie’s continuation as a firm. (See, e.g., 11/28 AM Tr. 35:16-36:11, 38:3-41:17, 90:11-92:13; 11/29 PM Tr. 11:10-22, 75:16-76:2.) Each signatory to the Fourth Agreement made similar acknowledgements in the text of the Agreement itself. (See, e.g., 11/21 PM Tr. 37:13-40:8, 28:10-30:17, 54:10-55:16; 11/21 PM Tr. 53:9-54:3, 56:2-17; Trial Ex. 1 §§ 17.2(a)(i), 17.2(b), 17.3(e) at TX001023, TX001-024, TX001-025.)

Noncompete Obligations under the Fourth Agreement 39.

Like the Third Agreement, the Fourth Agreement contains three covenants not to compete. (Trial Ex. 1 §§ 17.1(a), 17.1(b), 17.3(e) at TX001-022, TX001-025.) The parameters of these noncompetes are largely the same as in the Third Agreement. (Compare Trial Ex. 1 §§ 17.1(a), 17.1(b), 17.3(e) at TX001-022, TX001-025, with Trial Ex. 500 §§ 17.1(a), 17.1(b), 17.3(f) at TX500-021 & TX500-024.)

40.

Lurie, however, attempted to address the specificity and vagueness concerns expressed by the arbitrator in the Polinchock Arbitration (see Trial Ex. 674 at TX674-039 & TX674-040) by revising how the activity restricted by these noncompetes was defined in the Fourth Agreement. (Compare Trial Ex. 1 § 17.1(a) (definition of “Professional Services” at TX001-022), with Trial Ex 500 §§ 17.1(a), 17.1(b) (definitions of “Public Accounting Services” and “Practice of Public Accounting” at TX500-021). See 11/21 PM Tr. 26:5-27:25.) To define the restricted activity, the Fourth Agreement does not employ the terms “Public Accounting Services” and “Practice of Public Accounting,” or the definitions that the Third Agreement used for these terms. (Trial Ex. 1 § 17.1(a) at TX001-022.)

41.

Instead, the Fourth Agreement’s noncompetes utilize the term “Professional Services,” which the Fourth Agreement defines as follows: [T]he performance of any of the services being provided by the Partnership or any of its divisions or subsidiaries and without limiting the generality of the foregoing, specifically includes those services listed on Exhibit 2 and any other services which the Partnership may provide in the future, but is not yet providing on the date of execution of [the Fourth Agreement]. (Trial Ex. 1 § 17.1(a) at TX001-022 (emphasis added).)

8

42.

Exhibit 2 1 to the Fourth Agreement (referenced in the bolded language above) represents the primary difference between the definitions of restricted activity in the Fourth Agreement. (Compare Trial Ex. 1 § 17.1(a) & Ex. 2 at TX001-022 & TX001034, with Trial Ex. 500 § 17.1(a) at TX500-021.) Instead of relying solely upon catchall language like that used in the Third Agreement, the Fourth Agreement provides a specific list of the services (i.e., Exhibit 2) that fall within the scope of the restricted activity. (Compare Trial Ex. 1 § 17.1(a) & Ex. 2 at TX001-022 & TX001-034, with Trial Ex. 500 § 17.1(a) at TX500-021.)

43.

Following the Polinchock Arbitration, Lapidus and Kaufmann developed Exhibit 2, which is titled “Family of Services.” (11/28 AM Tr. 27:12-28:9; Trial Ex. 1, at Ex. 2, TX001-034.) Exhibit 2 lists 110 of the services that Lurie provided when the Fourth Agreement went into effect. (11/29 PM Tr. 80:25-81:9; Trial Ex. 1, at Ex. 2, TX001034; see also 11/21 PM Tr. 19:10-14.) By “specifically includ[ing]” these 110 services

1

9

within the definition of Professional Services, such services fall within the scope of the activity restricted by the Fourth Agreement’s noncompetes. (Trial Ex. 1 § 17.1(a) & Ex. 2 at TX001-022 & TX001-034; see also 11/21 PM Tr. 26:5-27:25.) The Fourth Agreement utilizes this definition of Professional Services for all three of its noncompetes. (See, e.g., Trial Ex. 1 §§ 17.1(a), 17.1(b), 17.3(e) at TX001-022 & TX001-025.) 44.

The noncompete contained in Section 17.1(a) of the Fourth Agreement restricts to whom former Lurie partners may render Professional Services in the two-year period following their withdrawal or retirement. (Trial Ex. 1 § 17.1(a) at TX001-022.)

45.

At the time of Lapidus’ retirement in April 2014, the Fourth Agreement was in effect and governs the terms of Lapidus’ retirement. (Trial Ex. 1 at TX001-001.) The Fourth Agreement restricts a former partner from rendering certain Professional Services in the years following his/her retirement within a fifty-mile radius of Lurie’s office and to Lurie’s Clients regardless of the location. Lapidus agreed to the noncompetes in the Fourth Agreement. (Trial Ex. 1 §§ 17.1(a), 17.1(b), 17.3(e) at TX001-022 & TX001025; 11/21 AM Tr. 74:24-75:13; 11/21 PM Tr. 34:20-36:17.) Section 17.1(c) of the Fourth Agreement further prohibits a former Partner from soliciting, inducing or encouraging Lurie’s personnel to terminate their employment with Lurie without Lurie’s prior consent.

46.

In return, Lurie agreed to make monthly payments to Lapidus, totaling approximately $11 million, during the ten years following his retirement from the firm. (11/21 AM Tr. 91:8-93:1, 93:11-18; Trial Ex. 1 §§ 13.5, 17.3(e) at TX001-013 & TX001-025.) In the event Lapidus breached his noncompete obligations under the Fourth Agreement, he agreed that such breach would result in the automatic forfeiture of his right to receive further post-retirement payments from Lurie, and would also obligate him to pay certain amounts to Lurie as liquidated damages if the breach involved a Lurie Client and occurred within two years of his retirement. (11/21 PM Tr. 28:1-30:17, 38:5-40:12, 54:10-55:16, 56:2-14; Trial Ex. 1 §§ 17.2, 17.3(e) at TX001-023 & TX001-025.)

47.

The noncompete contained in Section 17.3(e) of the Fourth Agreement restricts to whom former Lurie partners may render Professional Services following their withdrawal or retirement, but extends the term of that restriction to run for as long as the former Lurie partner is receiving post-retirement payments from Lurie pursuant to Article 13, which can be for up to ten years: If at any time during the term the Partnership is paying accrual basis capital or deferred compensation, a former Partner directly or indirectly renders any Professional Services to any clients who were serviced by the Partnership during the two years immediately prior to the withdrawal or retirement, that former Partner shall forfeit any and all rights to receive any remaining payments from the Partnership. (Trial Ex. 1 § 17.3(e) at TX001-025.)

48.

Neither the noncompete in Section 17.1(a) nor the noncompete in Section 17.3(e) limits the applicability of Section 17.3(e) to situations where the former partner is working at another accounting firm, as an independent consultant, or as an employee. (See 11/29 PM Tr. 78:8-17; Trial Ex. 1 §§ 17.1(a), 17.3(e) at TX001-022 & TX001-025; see also 11/22 AM Tr. 2:18-3:13 (Lapidus admitting that he is unaware of any provision in the

10

Fourth Agreement that limits the restriction imposed by Section 17.1(a) to working for a third-party as opposed to working directly for the Lurie Client).) 49.

Although the Fourth Agreement does not explicitly prohibit a retired partner from working in-house at a Lurie Client, by their terms, both noncompetes restrict a former partner from rendering Professional Services to a Lurie Client in any capacity, including as a direct employee of the Lurie Client. (11/28 AM Tr. 35:2-36:11, 38:3-41:17; 11/29 PM Tr. 78:8-17; see also 11/22 AM Tr. 2:18-3:13.)

50.

The noncompete in Section 17.1(b) of the Fourth Agreement restricts where former Lurie partners may render Professional Services in the two-year period following their withdrawal or retirement. (Trial Ex. 1 § 17.1(b) at TX001-022.)

Contractual Remedies for Breach of the Noncompetes in the Fourth Agreement 51.

Like the Third Agreement, the Fourth Agreement specifies the remedies that result from breaches of the noncompetes contained in Sections 17.1(a), 17.1(b), and 17.3(e). (Trial Ex. 1 §§ 17.2, 17.3(e) at TX001-023 & TX001-025.)

Forfeiture Provisions 52.

Both the Fourth and Third Agreements contain provisions that result in forfeiture of a partner’s right to receive post-retirement payments under Article 13 in the event of a breach of the noncompete clauses. (Compare Trial Ex. 1 §§ 17.2(a)(i), 17.2(b), 17.3(e) at TX001-23, TX001-024, TX001-025, with Trial Ex. 500 §§ 17.2(a)(i), 17.2(b), 17.3(f) at TX500-022, TX500-23, TX500-024.) Lurie, however, added language to Sections 17.2(a)(i) and 17.2(b) to address the arbitrator’s decision in the Polinchock Arbitration regarding the Third Agreement’s forfeiture provisions. (11/28 AM Tr. 26:23-32:4; 11/29 PM Tr. 60:10-61:9; Trial Ex. 1 §§ 17.2(a)(i), 17.2(b) at TX001-023 & TX001024.) Sections 17.2(a)(i) and 17.2(b) of the Fourth Agreement, which respectively govern breaches of the noncompetes contained in Sections 17.1(a) and 17.1(b), use identical language to describe the forfeiture remedy. (Trial Ex. 1 §§ 17.2(a)(i), 17.2(b) at TX001-023 & TX001-024.)

53.

The forfeiture provision contained in Section 17.3(e) of the Fourth Agreement is substantively the same as its counterpart in the Third Agreement and reads as follows: If at any time during the term the Partnership is paying accrual basis capital or deferred compensation, a former Partner directly or indirectly renders any Professional Services to any clients who were serviced by the Partnership during the two years immediately prior to the withdrawal or retirement, that former Partner shall forfeit any and all rights to receive any remaining payments from the Partnership. (Trial Ex. 1 § 17.3(e) at TX001-025.)

54.

The forfeiture remedy added in Sections 17.2(a)(i) and 17.2(b) describes what happens when a partner decides to repudiate the bargain struck between Lurie and the partner with respect to post-retirement payments: When the partner stops providing the consideration the partner agreed to give Lurie (i.e., compliance with the noncompetes), Lurie is no longer obligated to continue providing the partner post-retirement payments. (Trial Ex. 1 §§ 17.2(a)(i), 17.2(b) at TX001-023 & TX001-024.)

11

Payment Provision 55.

Like the Third Agreement, the Fourth Agreement contains a liquidated damages provision as an additional remedy for any breach of the noncompete contained in Section 17.1(a). (Compare Trial Ex. 1 § 17.2(a)(ii) at TX001-023, with Trial Ex. 500 § 17.2(a)(ii) at TX500-023.) Section 17.2(a)(ii) of the Fourth Agreement provides that a former partner who renders Professional Services to a Lurie Client within two years of withdrawal or retirement is obligated to pay Lurie certain amounts as liquidated damages. (Trial Ex. 1 § 17.2(a)(ii) at TX001-023.)

Non-solicitation Obligations under the Fourth Agreement 56.

The Fourth Agreement also contains a non-solicitation covenant, which restricts how former partners can interact with partners and employees of Lurie following their retirement or withdrawal from the firm. (Trial Ex. 1 § 17.1(c) at TX001-022.) As with the noncompetes, the Fourth Agreement also specifies the remedy that results from a partner’s breach of the non-solicitation covenant. (Trial Ex 1 § 17.2(c) at TX001-024.)

Consideration Received by Lurie Partners 57.

In addition to Lurie’s promise to make post-retirement payments, each partner received other forms of consideration for executing the Fourth Agreement and agreeing to the restrictive covenants and their related remedies. (11/29 PM Tr. 8:23-10:22; Trial Ex. 1 §§ 17.3(b), 17.3(c) at TX001-025.) For example, in Section 17.3(b) of the Fourth Agreement, the partners acknowledged the personal benefit each would receive from signing the Agreement, as well as from the noncompetes and non-solicitation covenant contained therein. (Trial Ex. 1 § 17.3(b) at TX001-025.)

58.

Lurie also made “consideration payments” to each partner that signed the Fourth Agreement. (11/28 AM Tr. 41:18-42:14; Trial Ex. 1 § 17.3(c) & Ex. 1 at TX001-025 & TX001-032.) Lurie funded these payments with a special allocation from Lurie’s profits. They were distributed to the partners as additions to their capital accounts, which the partners could then subsequently withdraw as cash. (11/28 AM Tr. 43:244:20.)

59.

Lapidus and Besikof each received $5,000 for signing the Fourth Agreement, and the other Lurie partners each received $3,000. (Trial Ex. 1, at Ex. 1, TX001-032; 11/28 AM Tr. 42:2-14.) Lapidus and Besikof received more because Lurie believed that “the importance of their adher[ence] to the terms of the [Fourth Agreement] was more important than everybody else’s.” (11/28 AM Tr. 42:9-19.) Lapidus informed Kaufmann that he was agreeable with this amount as consideration for signing the Fourth Agreement. (11/28 AM Tr. 42:20-43:1.)

Partners Retiring or Withdrawing under the Fourth Agreement 60.

Prior to Lapidus’ retirement from Lurie on April 30, 2014, the following four partners retired or withdrew from Lurie while the Fourth Agreement was in effect: Besikof; Geoff Wold (“Wold”); Mark Ziesmann (“Ziesmann”); and Marshall Lehman (“Lehman”). (11/21 PM Tr. 57:24-58:16; 11/29 PM Tr. 109:3-23, 114:11-117:11.) To Lurie’s knowledge, Besikof, Wold, Ziesmann, and Lehman have fully complied with their noncompete obligations under the Fourth Agreement. (11/29 PM 109:18-23, 111:15-25, 115:3-8, 116:23-117:4.) As a result, Lurie has made post-retirement or post-

12

withdrawal payments to each since their departure from Lurie. (11/29 PM Tr. 109:3-23, 114:11-117:11.) 61.

Besikof’s post-retirement payments have been the most substantial, totaling approximately $8 million since his retirement from Lurie in 2007. (11/29 PM Tr. 110:14-23.) Of this approximately $8 million, $725,000 was the result of the cost of living adjustment provision in Section 13.5(c). (11/29 PM Tr. 110:24-111:14.)

62.

In addition to the four partners referenced above, another Lurie partner also withdrew under the Fourth Agreement prior to Lapidus’ retirement: Max Wyman (“Wyman”). (11/29 PM Tr. 109:3-7.) Wyman left Lurie to join another firm, at which he continued to provide Professional Services to many of his former Lurie Clients in violation of his noncompete obligations under the Fourth Agreement. (11/29 PM Tr. 112:1-17; Trial Ex. 717 at TX717-002.) Lurie enforced the Fourth Agreement’s forfeiture provisions against Wyman and did not pay Wyman the post-withdrawal benefits to which he otherwise would have been entitled under Article 14. (11/29 PM Tr. 112:1-17, 113:810; Trial Ex. 717 at TX717-016.)

63.

Lurie also enforced the payment remedy contained in Section 17.2(b)(ii) of the Fourth Agreement against Wyman, pursuant to which Wyman paid Lurie approximately $280,000 in liquidated damages as the “purchase price” for the Lurie Clients at issue. (11/29 PM Tr. 112:1-17, 113:11-15.) Lapidus was Administrative Partner and an Executive Committee member during Lurie’s dispute with Wyman (11/21 PM Tr. 62:11-63:1), and advocated for Lurie’s enforcement of Sections 17.2(b)(i) and 17.2(b)(ii) against Wyman (11/29 PM Tr. 113:21-114:7). Lapidus personally benefited from such enforcement, receiving his pro rata share of both the money that Lurie received from Wyman as liquidated damages and the money that Lurie saved from not having to make post-withdrawal payments to Wyman because of the forfeiture. (11/29 PM Tr. 113:11-114:10.)

Lurie’s Fifth Restated Partnership Agreement 64.

Lurie later revised aspects of the Fourth Agreement after it had been in effect for several years based on Lurie’s determination that changed business circumstances called for such changes. (11/29 PM Tr. 134:18-135:15.) Fredrikson served as Lurie’s counsel to assist in drafting these revisions, (11/29 PM Tr. 134:2-6) which resulted in Lurie’s Fifth Restated Partnership Agreement (“Fifth Agreement”). The Fifth Agreement went into effect on May 1, 2014, the day after Lapidus retired from the firm. (Trial Ex. 550 at TX550-001.) Lapidus was never a party to the Fifth Agreement. (11/29 PM Tr. 47:1248:8.)

Key Differences between the Fourth and Fifth Agreement Noncompete Obligations under the Fifth Agreement 65.

Section 17.2 of the Fifth Agreement restricts partners from soliciting and rendering services to Lurie’s current and prospective clients following their withdrawal or retirement. (Trial Ex. 550 § 13.5(f) at TX550-014.) (Trial Ex. 550 § 17.2(a) at TX550023.)

66.

Section 13.5(f) in the Fifth Agreement restricts a retired partner from working as an employee of a current Lurie client unless the partner notifies Lurie in advance regarding such employment and Lurie’s Executive Committee determines that such employment will not harm Lurie’s independence with respect to that client. 13

67.

In the present lawsuit, Defendants alleged that Lurie made these revisions to the partners’ noncompete obligations because Fredrikson had advised Lurie that the noncompetes contained in the Fourth Agreement were unenforceable under Minnesota law. (See, e.g., Defs.’ Pre-Trial Br. 7-9.) The record does not support this assertion. Both Joseph Sokolowski and Ms. Holter—the two Fredrikson attorneys that Defendants called as witnesses—testified that they never advised anyone at Lurie that they believed the Fourth Agreement’s noncompete and forfeiture provisions were unenforceable. (11/29 PM Tr. 41:13-42:16; Holter Tr. 180:24-181:12, 181:14-18, 181:20, 183:5-23, 183:25.) Lifson and Beth Leonard (“Leonard”) —both of whom were members of Lurie’s Executive Committee at the time the Fifth Agreement was drafted and executed—testified credibly that no one at Fredrikson advised Lurie that the Fourth Agreement’s noncompete and forfeiture provisions were unenforceable. (11/28 AM Tr. 44:21-45:17; 11/28 PM Tr. 32:12-33:6; 11/29 PM Tr. 79:20-24, 134:7-17.)

68.

Therefore, the Court finds that Defendants have failed to prove their assertions that Lurie revised the Fourth Agreement because Fredrikson had advised Lurie that the Fourth Agreement noncompete and forfeiture provisions were unenforceable.

Fifth Agreement Post-Retirement Payments Program 69.

The post-retirement payments program under the Fifth Agreement differs in several ways from its counterpart in the Fourth Agreement. (See, e.g., Trial Ex. 550 §§ 11.3(b)(i), 13.5 at TX550-009 & TX550-012.). The Fifth Agreement: (a) eliminated the inflation adjustment provision contained in Section 13.5(c) of the Fourth Agreement (11/29 PM Tr. 16:21-24; 135:3. Compare Trial Ex. 550 § 13.5 at TX550-012, with Trial Ex. 1 § 13.5 at TX001-013); (b) shortened the lookback period for calculating Total Deferred Compensation from ten years to seven years (11/29 PM Tr. 17:6-11, 135:910. Compare Trial Ex. 550 § 11.3(b)(i) at TX550-009, with Trial Ex. 1 § 11.3(b)(i) at TX001-009); and (c) lowered the cap on the aggregate amount of Lurie’s net profits that could be paid out as post-retirement benefits each year to former partners. (11/29 PM Tr. 135:11-136:8. Compare Trial Ex. 550 § 15.1 at TX550-017, with Trial Ex. 1 § 15.1 at TX001-018.)

Fifth Agreement Two-Tiered Partnership Structure 70.

The Fourth Agreement did not specifically cover income partners. Lurie added provisions in the Fifth Agreement on that subject. Article 3 and Sections 9.3 and 11.3(b)(ii) in the Fifth Agreement, among others, address the rights of Lurie’s income partners and their relationship to Lurie’s equity partners. (Trial Ex. 550 Art. 3 & §§ 9.3, 11.3(b) (ii) at TX550-002, TX550-007, TX550-010.)

Lapidus Declined to Sign the Fifth Agreement 71.

During the drafting of the Fifth Agreement, Lapidus had discussions with members of Lurie’s Executive Committee regarding the revisions being considered. (11/29 PM Tr. 12:2-13:20, 14:5-8, 47:3-8.) In these discussions, Lapidus communicated that he would not sign the Fifth Agreement if it included changes to the Fourth Agreement that would reduce the post-retirement payments that he was set to receive pursuant to the Fourth Agreement. (11/29 PM Tr. 12:2-18, 47:3-8.) Specifically, Lapidus objected to the elimination of the cost-of-living adjustment provision contained in Section 13.5(c) of the Fourth Agreement and the shortening of the lookback period from ten years to seven. (11/29 PM Tr. 13:5-17.) 14

72.

Because Lapidus was unwilling to sign the Fifth Agreement, Sokolowski advised Lurie during a meeting in September 2013 that it should delay adopting and signing the Fifth Agreement until after Lapidus’ retirement. (11/29 PM Tr. 41:20-42:8.) Following this September 2013 meeting, Lurie informed Lapidus that it would be following Fredrikson’s advice and that Lapidus would not be a party to the Fifth Agreement. (11/29 PM Tr. 47:12-48:2.) Lapidus did not object and did not ask to sign the Fifth Agreement. (11/29 PM Tr. 48:3-8.)

Lapidus’ Retirement and Subsequent Transition Agreement 73.

Under the terms of the Fourth Agreement, Lapidus was required to retire from Lurie on April 30, 2014. (11/28 AM Tr. 93:14-16; Trial Ex. 1 § 13.1 at TX001-012.) In anticipation of Lapidus’ retirement, Lurie began the process of transitioning the client relationships Lapidus managed to other Lurie partners. (11/28 AM Tr. 93:14-94:12.) This transition process was intended to be a collaborative effort by Lurie and Lapidus. (11/28 AM Tr. 93:17-94:12.)

74.

Lurie created a list of the 137 Client relationships (comprised of approximately 1,000 separate client files) for which Lapidus was responsible. (11/28 AM Tr. 93:22-94:1, 95:2-17.) Because the transition of the Clients was not complete by April 30, 2014, the date on which Lapidus retired, Lurie entered into a transition agreement with Lapidus pursuant to which Lurie agreed to pay Lapidus an additional $150,000 from May 1, 2014 to December 31, 2014 to further assist with the transition. (11/21 PM Tr. 2:1021; 11/28 AM Tr. 94:18-95:1, 106:5-10.)

75.

Of these 137 Client relationships, the top twenty in terms of revenue accounted for over three-fourths of Lapidus’ billings, and the top two—Border Foods and Twin City Fan— accounted for over one-third. (11/28 AM Tr. 97:18-19, 97:23-98:9.)

Fourth Agreement Non-Solicitation Provision and Lapidus’ Activities Non-solicitation. 76.

Brian Axness (“Axness”), a Lurie employee, sought assistance sometime in April 2014 from employment agencies to find another position. (Axness 96:7–19.) Through these agencies Axness identified several positions, including one at Divine Scherzer Brody (“DS+B”). (Id. 97:11–15.) In early June 2014, Axness had a conversation with Lapidus about the possible DS+B opportunity (Id. 99:9–10.) Based on his conversation with Lapidus, Axness decided to “table” his search for another position. (Id. 29:3–9.) He asked Lapidus to keep their conversation confidential. Lapidus did not inform Lurie of the content of his conversation with Axness. Lapidus stated as justification for not informing Lurie that: “I gave him [Axness] my word.”

77.

Sometime in August or September 2014, DS+B approached Axness again with a “significant offer.” (Id. 29:10–13.) Axness again talked with Lapidus about the opportunity. (Id. 29:23–25.) Lapidus encouraged him to go “in house” to a Lurie Client instead of to a competitor firm and suggested that Axness reach out to Jeff Engler, an owner of the Border Foods companies. (Id.; Axness 30:3–7.) Axness was going to leave Lurie and made that decision before he talked with Lapidus on the subject. (11/22 AM 112:22–116:11 (Lapidus).) Axness had left the firm once before and returned shortly thereafter (Id.; Axness 8:15–21.) (Axness 103:13–104:1.)

78.

Axness approached Engler about a position at Delaget and ultimately took a job there. (Id. 27:22–28:5.) Axness testified that Lapidus did not induce, solicit or encourage 15

Axness to leave Lurie. (Axness 102:11–19; see also 11/22 AM 112:11–116:11 (Lapidus).) Leonard on the other hand testified that Axness told her in a meeting that Lapidus served as Axness’ agent in securing the position at Delaget. Based on the totality of the circumstances, the Court finds the evidence insufficient to conclude that Lapidus induced, solicited or encouraged Axness to leave Lurie. Lapidus’ Work with Lurie Clients after December 31, 2014 Border Foods 79.

Lurie did not expect and did not intend that Lapidus would have any role with Lurie Clients after the transition period ended. (11/28 AM Tr. 98:11-23; 11/29 PM Tr. 83:2023, 84:5-87:10, 87:16-19, 87:21-88:6; 11/28 AM Tr. 98:14-23.) Lurie did not give Lapidus explicit permission to perform any services for any of Lurie Clients after December 31, 2014 (11/29 PM Tr. 83:20-23, 84:5-87:10, 87:16-19, 87:21-88:6), and Lapidus never requested permission to perform services for any of Lurie Clients after December 31, 2014. (11/29 PM Tr. 86:12-14, 87:3-6, 87:23-88:2.).

80.

On December 30, 204, through a telephone conversation between Lifson and Barry Zelickson, Senior Vice-President of Administration for Border Foods, Lurie learned that Lapidus was the supervisor of Craig Wallin (“Wallin”), then Director of Financial Operations for Border Foods. (11/28 AM Tr. 110:6-111:4; Trial Ex. 15 at TX015-010.)

81.

On December 31, 2014, Lifson spoke to Wallin by telephone. Wallin told Lifson that Lapidus “was his supervisor as of a week ago” and that Lapidus “calls him daily.” (Tr. Ex. 15 at 7809; 11/28 AM 111:5-17 (Lifson).) (Tr. Exs. 15 at 7810; 11/28 AM 108:3-5 (Lifson); 11/29 PM 88:15-20 (Leonard).) The extent and nature of Lapidus’ work with Border Foods, however, were unclear to Lurie.

82.

On January 8, 2015, in a telephone conversation, Lifson and Lapidus talked about Lapidus’ activities at Border Foods. (Tr. Ex. 15 at TX015-008; 11/28 AM 112:9– 113:10 (Lifson); 11/28 PM 59:21–60:10 (Lifson); 11/29 AM 14:24–16:9 (Lifson).) (Tr. Ex. 15 at 7808.) Lifton’s notes 2 about this telephone conversation state that Lapidus told him that he was putting Wallin on a performance enhancement plan and that he was in the process of organizing a meeting with Border Foods’ Human Resources personnel to communicate said plan to Wallin. Lapidus told Lifson that Lapidus was getting paid by Jeff and Lee Englers for his services starting in 2015. (11/28 AM Tr. 112:9-113:10, 121:23-122:7; Trial Ex. 15 at TX015-008.) Lifson confirmed that he communicated to Leonard his January 8, 2015 conversation with Lapidus. (11/28 PM 50:21–60:25 (Lifson); 11/30 44:6–21 (Leonard).)

83.

Lurie through Lifson became concerned about Lapidus’ supervision of Wallin. Because Wallin was Border Foods’ Director of Financial Operations, a “key financial person” at Border Foods, Lurie’s primary concern was whether Lapidus’ supervision of Wallin was an indication that Lapidus himself was in a Key Position at Border Foods. (11/28 AM Tr. 113:11-24.) If Lapidus were in a Key Position, Lurie was concerned that

2

Lifson’s notes of January 8, 2015 telephone call with Lapidus state: “Spoke to NNL – indicated he was Craig’s supervisor; NNL was going to put him on a performance improvement plan; NNL was in the process of organization HR to meet with Craig/NNL next week to comm plan to Craig; Told NNL I do not currently understand or was unsure how our independence would be effected; He told me he was getting paid by Jeff/Lee starting in 2015; and He also told me he was planning on making a $500K investment in a new Co. with Jeff/Lee were starting.”

16

Lapidus’ role at Border Foods could impact Lurie’s independence as a CPA firm performing audits of Border Foods’ 2014 Financial statements. (11/28 AM Tr. 113:1324.) (11/28 AM Tr. 111:18-112: 8 ;) (11/28 AM Tr. 113:11-24; Trial Ex. 15 at TX015008.) 84.

Independence is a public accounting concept that requires public accountants undertaking certain audit work for their clients to be independent of those clients and in a position to render an audit that is objective and reflecting no financial interest in the outcome. (Trial Ex. 563 at TX563-045.) When an accounting firm is undertaking an audit, it must remain independent in order to issue a valid independent audit opinion. (11/29 PM Tr. 92:12-21.)

85.

An accounting firm’s independence can be jeopardized when a client retains a former partner of the firm to serve in a “Key Position” for the client. (11/30 AM Tr. 28:19-25; Trial Ex. 563 at TX563-017 & TX563-083.) As the term is defined by the American Institute of Certified Public Accountants (AICPA), a “Key Position” is one in which the individual has: (a) primary responsibility for significant accounting functions that support material components of the financial statements; (b) primary responsibility for the preparation of the financial statements; or c) the ability to exercise influence over the contents of the financial statements, including when the individual is a member of the board of directors or similar governing body, chief executive officer, president, chief financial officer, chief operating officer, general counsel, chief accounting officer, controller, director of internal audit, director of financial reporting, treasurer, or any equivalent position. (Trial Ex. 563 at TX563-017; 11/30 AM Tr. 29:13-30:6.)

86.

It was difficult for Lurie to evaluate the extent of the potential threat to Lurie’s independence that Lapidus’ continued work for Border Foods posed for Lurie without information from Lapidus about what he was actually doing. (11/28 AM Tr. 119:24120:1.) In this context, Lifson stated to Lapidus in their January 8, 2015 telephone conversation: “Told [Lapidus] I did not currently understand or was unsure how [Lurie’s] independence would be effected [sic].” (Trial Ex. 15 at TX015-008.)

87.

Lapidus was not forthcoming with information regarding what he was doing at Border Foods (see, e.g., 11/29 PM Tr. 91:8-9, 95:23-96:4). Based upon the limited information it had, Lurie decided to seek legal advice regarding the independence issues immediately following the January 8, 2015 call. (Trial Ex. 15 at TX015-008.)

88.

On January 27, 2015, Lifson emailed Lapidus and stated: “I wanted to check back with you to see if we can get together to continue our discussion regarding your role at Border. We want to make sure we are in alignment and focus on our mutual best interest.” (Tr. Exs. 16 at 6146, 110; 11/28 PM 66:4–72:22 (Lifson).)

89.

During a subsequent call with Lapidus on January 23, 2015, Lifson discussed the preliminary conclusions that Lurie’s legal counsel had reached, informing Lapidus that his supervision of Wallin posed an “[i]ssue.” (Trial Ex. 15 at TX015-006.) Lifson also asked Lapidus to provide a job description or a list of duties for his work at Border Foods in the hope of gaining further understanding regarding “what [Lapidus] was doing or what he wasn’t doing.” (11/28 AM Tr. 119:9-120:1; Trial Ex. 15 at TX015006.) Lapidus told Lifson that he did not have a job description or a list of duties. (11/28 AM Tr. 120:2-4; Trial Ex. 15 at TX015-006.) Lifson followed up in an email dated 17

January 27, 2015, asking Lapidus again for information regarding his role at Border Foods. (11/28 AM Tr. 120:13-121:18.) 90.

On February 2, 2015, Lifson, Leonard, and Lapidus participated in a telephone conference to discuss Lapidus’ role at Border Foods. (Tr. Ex. 581; 11/21 PM 92:12– 94:8 (Lapidus); 11/22 AM 3:15–4:17 (Lapidus); 11/29 AM 11:19–12:23 (Lifson).) Lapidus informed Lifson and Leonard that he would be working at Border Foods and “wanted to let them know the status of [his] employment.” (92: 12-94:8 (Lapidus).) Lapidus during this phone conversation informed Leonard and Lifson that he would be “coordinating the flow of information” between Delaget and Border Foods and special projects for Border Foods. (Id.; 11/22 AM 58:17–59:9 (Lapidus); Tr. Ex. 65). Lapidus did not provide Lurie with any other specific detail about what he was doing at Border Foods. Lapidus, however, represented to Lurie that he was doing nothing to impact Lurie’s independence. (11/29 PM Tr. 89:6-90:12, 95:23-96:4; Trial Ex. 581.)

91.

Between January and April 2015 Lurie through Lifson continued to communicate with Lapidus in his role at Border Foods on a regular basis daily or weekly in February, March, and April 2015. (11/28 PM 73:6–75:7, 78:25–79:12 (Lifson).)

92.

In an email dated February 25, 2015 and another dated April 17, 2015, Lifson again asked Lapidus to provide a written description of his “roles and responsibilities” at Border Foods. (Trial Exs. 114 at 1 & 120 at 1.) Lifson requested this written description from Lapidus because it was a required component of the representation letters that Border Foods’ management needed to sign in order for Lurie to complete its audit of Border Foods’ 2014 financial statements. (Trial Ex. 120 at 1.) These representation letters were important to ensuring Lurie’s independence, since they indicated that Lapidus was not in a Key Position at Border Foods.

93.

In an email to Lifson dated April 17, 2015, Lapidus ultimately provided Lurie a written description of his role at Border Foods (11/28 PM Tr. 3:20-4:10), stating his “roles and responsibilities” were as follows: “[C]oordinate the accounting and financial functions with their director of financial operations and their third party business processing group. [S]pecial projects as set forth by the shareholders with no financial authority or decision making responsibility.” (Trial Ex. 121 at 1; see also Trial Ex. 65 at TX065-001.)

94.

The written description Lapidus provided on April 17, 2015, as well as his prior representations, led Lurie to believe—as of mid-April 2015—that Lapidus was not in a Key Position at Border Foods and that he was not making any management decisions. (11/28 PM Tr. 4:11-18; 11/29 PM Tr. 93:11-94:15.) Based on the written description Lapidus provided and his prior representations, Lurie concluded that its concerns regarding its independence were mitigated enough to enable it to complete its audit of Border Foods’ 2014 financial statements. (11/28 PM Tr. 4:11-18; see also 11/29 PM Tr. 93:11-94:15.)

95.

In April 2015 Lurie sent Border Foods a representation letter for Border Foods’ signature confirming that Lapidus posed no independence issue and explaining Lapidus’ role at Border Foods as: “[c]oordinating the accounting and financial functions with the director of financial operations and third party business processing group [DelaGet]” and “[s]pecial projects as set forth by the stakeholders with no financial authority or decision making responsibility.” (Tr. Exs. 122 at 10072; 11/29 AM 9:21–12:23 (Lifson).) Border Foods signed the representation letter, and Lurie ultimately completed Border Foods’ 2014 audit. (Tr. Exs. 122, 631.) 18

Nature of Lapidus’Activities at Border Foods and Delaget from January–April 2015 96.

As of April 2015, Lurie’s knowledge of what Lapidus was actually doing at Border Foods was based primarily on Lifson’s communications with Lapidus starting in January 2015. (11/28 PM Tr. 3:20-5:5; Trial Ex. 15 at TX015-001; see also 11/29 PM Tr. 88:10-90:12, 95:23-96:7.) Lurie knew that Lapidus: (a) was supervising Wallin (11/29 PM Tr. 93:23-94:15); (b) had assumed an intermediary role between Lurie and Border Foods with respect to some matters (see, e.g., Trial Exs. 62 at TX062-001 & 63 at TX063-001; see also Trial Ex. 115 at 1.); (c) was asked by Border Foods to review the budget proposed by Lurie; (Trial Ex. 62 at TX062-001; see also Trial Ex. 115 at 1.); and (d) instructed Lurie on behalf of the Englers to hold off on completing certain tax work. (Trial Exs. 62 at TX062-001 & 63 at TX063-001; 11/28 AM Tr. 124:23125:15.)

97.

While Lurie knew that Lapidus was working at Border Foods in some capacity while Lurie continued to inquire about the nature of Lapidus’ work at Border Foods, Lurie did not at any point give its explicit consent for Lapidus to work for Border Foods or to serve as an intermediary between Border Foods and Lurie. (11/29 PM Tr. 88:3-6; Trial Ex. 169 at 1.) Lurie’s communications with Lapidus from January through midApril 2015 focused primarily on the impact Lapidus’ role at Border Foods might have on Lurie’s legitimate business interests. (See, e.g., Trial Exs. 15 at TX015-006, TX015007, TX015-008, 120 at 1, 121 at 1; 11/29 PM Tr. 91:5-17.)

Content of Lapidus’ Lurie Email Account 98.

In mid-April 2015, Lurie’s Executive Committee learned that Lapidus’ Lurie email account had remained active since Lapidus’ transition agreement ended December 31, 2014, and that Lapidus had continued to use his Lurie’s email account to conduct his non-Lurie business affairs, including those related to Border Foods. (11/28 PM Tr. 4:19-5:20; 11/29 PM Tr. 96:8-97:25.) Lurie exercised its right to review material on its email server and reviewed Lapidus’ Lurie email account.

Lapidus’ Formation of Undercliff and Undercliff’s Consulting Agreement with Border Foods 99.

Lurie learned from Lapidus’ Lurie email account that Lapidus formed a limited liability company in Florida named Undercliff LLC. (11/28 PM Tr. 5:9-20; 11/21 PM Tr. 85:218.) On July 9, 2014, Lapidus filed Undercliff’s articles of incorporation and listed Lapidus as Undercliff’s registered agent. (Trial Ex. 20 at TX020-001; 11/21 PM Tr. 85:5-18.) Undercliff entered into a consulting agreement with Border Foods effective January 1, 2015, (Trial Ex. 19 at TX019-001; see also Trial Ex. 22 at TX022-001.) (Tr. Ex. 12.) The consulting agreement states that it was “made and entered into as of the 1st day of January, 2015, by and between Border Foods, Inc., a Minnesota corporation (the “Corporation”) and Undercliff, LLC, a Florida Limited liability company (the “Consultant”).” (Trial Ex. 19 at TX019-001; 11/28 PM Tr. 5:9-20; 11/21 PM Tr. 92:47.) Lapidus signed this consulting agreement on behalf of Undercliff. (Trial Ex. 19 at TX019-005; 11/21 PM Tr. 89:24-90:3.) (Trial Ex. 21 at TX021-001, TX021-011, TX021-015; 11/21 PM Tr. 85:19-87:23.)

100.

In addition, Lapidus purchased Accountants professional liability insurance coverage for both himself and Undercliff. (Trial Ex. 52 at TX052-001; 11/28 PM Tr. 5:9-20; 11/21 PM 87:24-88:3.) An “Accountants Professional Liability Policy,” dated February

19

13, 2015, lists the named insureds as “Neil N. Lapidus &/or UnderCliff LLC.” (Trial Ex. 52 at TX052-001; 11/28 PM Tr. 5:9-20.) 101.

The consulting agreement states that “[c]onsultant will provide consulting and advisory services to the Corporation and its affiliates (including Delaget, LLC) as requested by the Board of Directors, President or Executive Vice President (collectively, ‘Senior Management’) of the Corporation.” (Tr. Ex. 12.) (Id. ¶ 2.) The consulting agreement further states that Border Foods “acknowledges that in its capacity hereunder, Consultant may render certain financial advisory services, but it shall not be engaged to render, nor shall it render, public accounting services, which services shall continue to be provided by the [Border Foods’] public accounting firm [Lurie] through independent CPA’s.” (Id. ¶ 6 (emphasis added); 11/21 PM 94:20–95:16 (Lapidus).) 102. Paragraph 3(c) of the Undercliff consulting agreement states that Lapidus is the “primary individual performing” these services on Undercliff’s behalf. (Trial Ex. 19 ¶ 3(c) at TX019-002.) Exhibit A of the consulting agreement specifies that Border Foods would pay Undercliff for Lapidus’ services $125,000 per year. (Trial Ex. 19, at Ex. A, TX019-006.) (Trial Ex. 19, at Ex. A, TX019-006.) Notwithstanding the compensation provision in Undercliff’s consulting agreement, Lapidus maintains that Lapidus and Undercliff have not as of the trial dates in this matter received compensation from Border Foods for work performed under this consulting agreement or for Lapidus’ services during the period between January 2015 and the discontinuation of Lapidus’ work at Border Foods in July 2015. (11/21 PM at 89:24– 90:23 (Lapidus); 11/22 PM 21:12–13 (Lapidus).)

Lapidus’ March 2015 Trip to Delaget’s Nixa, Missouri Facility 103.

In early 2015, Lapidus performed an internal control project for Border Foods and Delaget. (11/28 PM Tr. 5:9-20, 12:15-13:7, 13:13-17; 11/22 AM Tr. 37:9-38:1; see also Trial Exs. 25 at TX025-008, 27 at TX027-001, 28 at TX028-001, 29 at TX029-001, 60 at TX-060-001, 75 at TX076-001, 90 at TX090-001.) Delaget is owned principally by the Engler family, which also owns Border Foods. Delaget has been a Lurie Client for many years. (11/28 PM Tr. 5:21-24; 11/29 AM Tr. 39:17-24.) Delaget provides Border Foods and other entities with business process outsourcing services, which generally consist of back-office work related to accounting and accounts payable. (11/28 PM Tr. 5:25-6:20.) To perform these services, Delaget must accumulate and compile financial and business information that is generated by the business activities of its customers. (11/22 AM Tr. 39:3-40:1.)

104.

For several years, Border Foods had not been receiving information from Delaget in a timely manner, and the problem accelerated in 2014. (11/22 AM Tr. 40:2-41:7.) In early 2015, Border Foods asked Lapidus to investigate why the flow of information between Delaget and Border Foods was not working smoothly. (11/22 AM Tr. 38:2-6.) Lapidus determined that the best way for him to understand and, be able to recommend how to coordinate the flow of information was to travel to Delaget’s facility in Nixa, Missouri to see what was done there. (11/22 AM Tr. 38:7-11.)

105.

Lapidus developed the agenda for this trip with Axness, the former Lurie employee serving as Delaget’s Controller. (Trial Ex. 60 at TX060-001; 11/22 AM Tr. 35:3-18.) Lapidus took this trip in mid-March 2015, accompanied by Axness and another Delaget employee named Keith Adams (“Adams”). (Trial Ex 60 at TX060-001.) The purpose of Lapidus’ March 2015 Nixa visit was to meet with Delaget’s management to 20

understand Delaget’s processes. At this meeting, Lapidus was concerned from an internal standpoint with whether there could be “point people designated or appointed to be responsible for keeping the information flowing from Delaget to Border.” (11/22 AM 42:7-12 (Lapidus). 106.

Following the March 2015 Nixa meeting, Lapidus sent an email on March 18, 2015 with the subject line “priorities from my nixa trip” to Jeff Engler and Lee Engler, copying Axness and Adams. (Trial Ex. 27 at TX027-001.) The purpose of the list of priorities in the March 18, 2015 email was to discuss priorities to improve the communications between Delaget and Border Foods. (Tr. Ex. 27; 11/22 AM 42:2243:15.)

107.

On March 20, 2015, Adams forwarded an email from Gidget Donovan (“Donovan”), a Delaget employee, to Lapidus. (Trial Ex 28 at TX028-001.) In the email, Ms. Donovan stated that Delaget was now “using the P13 ‘Lapidus’ method – which we love.” (Trial Ex. 28 at TX028-002.) At trial, Lapidus described this method. 3 (11/22 AM Tr. 46:247:9.)

108.

In an email dated March 23, 2015, Lapidus received three attachments related to his trip to Delaget the previous week: “Nixa to Do List – 20150323.xlsx”; “Challenges & Opportunities – 20150319.xlsx”; and “2015 BPO Metrics – 20150323.pptx.” (Trial Ex. 29 at TX029-001; 11/22 AM Tr. 47:10-22; see also Trial Ex. 66 at TX066-001.) The “Nixa to Do List” spreadsheet designated Lapidus as the owner of several of the listed tasks. (11/22 AM Tr. 51:11-19.)

109.

Under cross-examination, Lapidus agreed that all the work he did in connection with his March 2015 trip to Delaget’s Nixa facility was for the “purpose of evaluating and improving the business office procedures and policies at Delaget as it related to Border.” (11/22 AM Tr. 52:3-9.) Lapidus also agreed during cross-examination that the evaluation and improvement of business office procedures is one of the services listed as a Professional Service on Exhibit 2 to Trial Exhibit 1, the Fourth Agreement. (11/22 AM Tr. 52:22-25.)

110.

Based on his review of the emails related to Lapidus’ March 2015 trip to Delaget’s Nixa facility, Lifson concluded that Lapidus engaged in “internal control” and “business process improvement” which are listed on Exhibit 2 to the Fourth Agreement as services Lurie provides. (11/28 PM Tr. 12:20-13:7, 13:13-17.)

111.

Because the work Lapidus performed in connection with his March 2015 trip are the type of services that Lurie provides to its clients, (11/28 PM Tr. 13:19-22) his efforts constituted “Professional Services” under the Fourth Agreement because they fall within the following categories on Exhibit 2: Internal Control Evaluations; Evaluation and Improvement of Business Office Procedures and Policies; Organizational and

3

Lapidus states: “one of the issues that I found at Border Foods was that banks… And this was holding up the processing for Border Foods. I was very surprised to find out that this had not been done for two years, very concerned given the flow of cash running through Border Foods accounts. And, therefore, the question that I asked is, if it’s not a material difference in reconciling the banks, if you’re just not finding the reason why they do not reconcile and it’s a small number, it might be a bank charge or a very small difference, maybe you should call the client, whoever that happens to be, and ask them permission to make a journal entry, an immaterial amount of money that would allow you to reconcile the bank accounts, so that a bank charge was missed. It might be an error by the bank, it might be an error by the specific customer. That was it. And that would expedite the work and it seems like it’s slowing everything down for a very small amount of money… That they would -- well, not necessarily a journal entry, but they would put the banks in reconciliation with the financial statements.”

21

Operation Assessment and Improvement. (11/28 PM Tr. 13:23-14:13; see also 11/23 AM Tr. 54:13-59:10, 61:23-63:13, 69:3-72:15.) Recruiting and Onboarding a New Director of Operations 112.

Lapidus assisted Border Foods in its search for someone to replace Wallin as the Director of Financial Operations. (Trial Ex. 25 at TX025-009, TX025-014; see also Trial Exs. 45 at TX045-001 & 49 at TX049-001.) This assistance included: (a) reviewing a draft of the job posting (Trial Ex. 49 at TX049-001; 11/22 AM Tr. 16:413.); (b) discussions with search firms Border Foods retained; (c) screening review of resumés; (d) interviewing candidates; and (e) making recommendations on the candidates interviewed. (11/22 AM Tr. 15:9-16:3, 17:7-12; Trial Ex. 25 at TX025-009, TX025-014). Lapidus interviewed Patsy Williams (“Williams”), the person Border Foods ultimately hired for the position, and advised Border Foods that she was qualified for the position. (11/22 AM Tr. 21:7-15.)

113.

Lapidus also supervised Williams during her onboarding process and continued to have daily communications with her through July 2015 about topics related, for example, to: (a) the third-party information flow from Delaget; (b) Lurie’s audit of Border Foods; (c) the financial statements Williams was preparing for the audit; (d) the covenant certificates that banks required; (e) third-party information from Delaget Border Foods needed; (f) information to be provided to Border Foods’ investment bankers; (g) answering Williams’ accounting questions; and (h) Williams’ concerns about personal expenses of a Border Foods’ employee. (11/22 AM Tr. 23:24-25:24; see also 11/22 AM Tr. 14:25-15:8; Trial Ex. 25 at TX025-009.)

114.

Lapidus’ recruitment and onboarding of Williams are the types of services that Lurie provides to its clients, (11/28 AM Tr. 137:2-17, 142:13-21) and Lurie was involved in the recruitment of Wallin when Border Foods hired Wallin as its Director of Financial Operations. (11/28 AM Tr. 137:15-17, 143:6-9.)

115.

Lapidus’ recruitment and onboarding of Williams constitute Professional Services under the Fourth Agreement because they fall within the following categories listed on Exhibit 2 to Trial Exhibit 1: Business Consulting; Management Advisory Services. (11/28 AM Tr. 135:2-137:14; see also 11/23 AM Tr. 46:23-48:13, 49:12-50:12, 52:1554:9.)

116.

In an email to Lapidus and others dated January 6, 2015, Jeff Engler wrote: “Plz have Neil review all accounting & attorney bills prior to paying. Also, Neil will work with Todd [Lifson] on the 2015 audit budget.” (Trial Ex. 41 at TX041-001.) During the first half of 2015, Lapidus reviewed Border Foods’ accounting and attorney bills and made recommendations to Jeff Engler about those bills before they were paid. (11/22 AM Tr. 7:6-8:3.) On February 3, 2015, Barb Schneider (“Schneider”), the Vice President of Development at Border Foods, forwarded an email chain to Lapidus, discussing whether certain real estate taxes had been paid for one of Border Foods’ properties. (Trial Ex. 44 at TX044-001.)

117.

Lapidus provided input to Border Foods on various accounting and financial matters during the first half of 2015 (see, e.g., Trial Exs. 41 at TX041-001, 44 at TX044-001, 48 at TX048-001; see also Trial Ex. 25 at TX025-008, TX025-009.), including sending an email to Wallin to make sure that Border Foods was paying its tax bill. (11/22 AM Tr. 14:11-19.)

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118.

In February 2015, Lapidus reviewed an issue related to an incorrect 1099 “because refund not credited properly and duplicate payments” (Trial Ex. 48 at TX048-001; (Trial Ex. 48 at TX048-001 & TX048-002.) and communicated with Delaget’s accounting operations about steps to resolve the issue. (Trial Ex. 48 at TX048-001; 11/22 AM Tr. 26:16-25.) The 1099 issue is an example of compliance with tax laws, and Lurie has listed Compliance with Tax Laws on Exhibit 2 to the Fourth Agreement. (11/22 AM Tr. 27:1-15; see also 11/23 AM Tr. 16:18-19:7.)

Lapidus’ Other Activities at Border Foods and Delaget from January-April 2015 119.

Lurie learned through discovery in the present action that the scope of Lapidus’ work for Border Foods and Delaget from January through April 2015 went beyond what Lurie uncovered during its review of Lapidus’ Lurie email account, and that Lapidus provided direction on accounting and financial matters. 4 Lapidus: a) gave instruction as to how he wanted certain expenses to be coded; b) recommended how an invoice related to a loan should be processed and how that invoice should be split between two Border Foods-affiliated entities; and c) gave guidance in March 2015 regarding how certain payables of Border Foods should be funded. (Trial Ex. 57 at TX057-001; 11/22 AM Tr. 32:4-33:4.) ; (Trial Ex. 56 at TX056-001; 11/22 AM Tr. 32:1-3; Trial Ex. 58 at TX058-001; 11/22 AM 33:12-34:6.) Consultation on accounting and financial matters constitutes a Professional Service under the Fourth Agreement because it falls within the following categories listed on Exhibit 2: Special Accounts Examinations, Business Consulting, and Management Advisory Services. (11/28 PM Tr. 21:1-8.)

Accounting and Financial Personnel 120.

4

Direction of accounting and financial personnel is a Professional Service under the Fourth Agreement because it falls within the following categories listed on Exhibit 2: Management Advisory Services, Business Consulting, Tax Law Compliance, and Preparation of Tax Returns. (11/28 PM Tr. 22:12-23:14.) (11/28 PM Tr. 21:9-22:9.) Lapidus engaged in direction of accounting and financial personnel in the following instances: a) on March 16, 2015, Lapidus sent the following email to Williams 5 asking her to follow up on audit items and business tax estimates; and b) documents show that Lapidus directed the actions of key accounting and financial personnel at Border Foods and Delaget. (See, e.g., Trial Exs. 32 at TX032-001, 35 at TX035-001, 36 at TX036001, 60 at TX060-001.)

(See, e.g., Trial Exs. 25 at TX025-006 - TX025-015; 27 at TX027-001, 28 at TX028-001, 29 at TX029-001, TX029-003, TX029-004, TX029-005, 51 at TX051-001, 54 at TX054-001, 55 at TX055-001, 56 at TX056-001, 57 at TX057-001, 58 at TX058-001, 59 at TX059-001, 60 at TX060-001, 61 at TX061-001, 64 at TX064-001, 75 at TX075-001,76 at TX076-001, 82 at TX082-002, 90 at TX090-003.) (See, e.g., Trial Exs. 25 at TX025008, TX025-009, 55 at TX055-001, 56 at TX056-001, 57 at TX057-001, 58 at TX058-001, 59 at TX059-001, 60 at TX060-001.)

5 “patsy, can you please follow up on the open audit items, 4KE, and business tax estimates . . . and begin to understand the real estate [sic] tax payments for may. we have lots of new locations so we should understand the procedures and cash flow. . . . can you try and figure out the complete P2 and 3 financial statement with all admin expense, etc. you and i could take a shot at doing a tax projection for Lee and jeff, first quarter” (Trial Ex. 60 at TX060-001; 11/22 AM Tr. 35:19-37:8.)

23

Operations-Related Matters 121.

Operations-related matters constitute a Professional Service under the Fourth Agreement because it falls within: Business Consulting, Management Advisory Services (11/28 PM Tr. 27:12-19.) Review of operations-related matters is the type of service that Lurie provides to its clients. (11/28 PM Tr. 26:14-27:11.). Lapidus engaged in operations-related matters when in in an email chain dated April 23-24, 2015 Lapidus stated to Delaget that he did not believe their systems were adequate enough to allow Delaget to accept new business. (Trial Ex. 76 at TX076-001; 11/28 PM Tr. 26:1-27:7.)

Monitoring of Financial Reports Analysis of Business Opportunities 122.

Lapidus received daily and monthly reports detailing the financial status of Border Foods and its affiliated entities. (See, e.g., Trial Exs. 33 at TX033-001, 51 at TX051001; see also Trial Ex. 25 at TX025-008, TX025-009.) Lapidus’ analysis of Delaget’s business opportunities constitutes a Professional Service under the Fourth Agreement because it falls within the following categories listed on Exhibit 2: Analysis of Business Opportunities and/or Investment Opportunities, Organizational and Operations Assessment and Improvement, Business Consulting, and Management Advisory Services. (11/28 PM Tr. 24:19-25:4; see also 11/23 AM Tr. 74:4-75:20.) One document shows that Lapidus was asked to review and provide feedback on four “new/ incremental revenue opportunities” that had been identified for Delaget. (Trial Ex. 64 at TX064-001; 11/22 AM Tr. 57:16-24; 11/28 PM Tr. 24:1-11.)

123.

Lapidus’ analysis of Delaget’s business opportunities is the type of service on Exhibit 2 to the Fourth Agreement that Lurie provides to its clients. (11/28 PM Tr. 24:1-18.)

Lurie’s Notice of Breach Letter to Lapidus 124.

Lurie sent a letter to Lapidus on April 30, 2015, 6 (Trial Ex. 26 at TX026-004 & TX026005), stating that Lapidus has breached the Fourth Agreement. (Tr. Exs. 13, 26.). The letter communicated that: Lapidus has been performing Professional Services for Border Foods “in violation of Sections 17.1(a) and 17.1(b) of the Agreement” (Id.); Lapidus “did not bill the clients for your services through the Partnership as you were required to do” between May and December 31, 2014; (Id.) and that Lapidus violated the Fourth Agreement’s personnel non-solicitation clause. (Id.)

125.

Lapidus received the letter on the day it was sent. (Trial Ex 26 at TX026-001; 11/22 AM Tr. 66:19-67:2.) Lapidus did not provide Lurie the written certification demanded in the letter, (11/22 AM 67:3-68:22.), did not terminate his relationship with Border Foods and any affiliated companies within fourteen days of receiving Lurie’s letter

6

The letter (Trial Ex. 26 at TX026-005.) reads as follows in relevant parts: “The Partnership hereby demands that within fourteen calendar days from the date of this letter that you cure your breaches by providing us written certification under oath (a) that you have terminated your relationship (and the relationship of any entity in which you have an ownership interest which performs Professional Services) with Border Foods and any affiliated companies . . . and for any other clients of the Partnership with which you have had any form of business relationship since May 1, 2014, and (b) that you have ceased to render Professional Services to any person within a fifty mile radius of the Partnership’s office, and (c) that you will not engage in further solicitation of Partners or employees of the Partnership prior to the expiration of your non-solicitation obligations.” (Trial Ex. 26 at TX026-005.)

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(11/22 AM Tr. 67:25-68:3.), and did not meet with Lurie during the fourteen-day period to discuss Lurie’s letter. (11/22 AM Tr. 69:17-21.) 126.

After the close of the fourteen-day period, Lurie subsequently met with Lapidus and his legal counsel, Michael Ciresi, to discuss the dispute. (11/29 PM Tr. 103:4-8.) The meeting did not result in Lapidus agreeing to terminate his relationship with Border Foods or any of Border Foods’ affiliated companies. (11/29 PM Tr. 103:9-11.)

Lapidus’ Activities Following Service of this Action 127.

Following service of this action, Lapidus continued to provide services that Lurie defined as Professional Services to Border Foods and Delaget in June and July of 2015. 7 At trial, however, Lapidus explained that after he resigned from Border Foods on June 30, 2015 and “given the abrupt nature of his resignation,” he received follow-up questions and continued to answer questions from Williams at Border Foods. (See Tr. Exs. 30–37; 11/22 AM 77:2–19 (Lapidus).

128.

In an email dated June 18, 2015, Lapidus informed Lifson that Border Foods had asked him to do “a special project related to internal control and banking” and asked that Lifson let him know “if that represents an issue.” (Trial Ex. 169 at TX169-002.) Lapidus further testified the reason he did not call Lurie when he learned of this issue is that in previous correspondence with Lifson, Lifson informed him that communications with Lurie should take place through counsel. (11/22 PM 39:11–19 (Lapidus); see also Tr. Exs. 168–169.)

129.

Lifson passed the email onto Lurie’s counsel. (Trial Ex. 168 at TX168-001.) In an email dated June 22, 2015, Lurie’s counsel responded, asking Lapidus’ counsel to “let [Lapidus] know that Lurie does not consent to [Lapidus] performing any services for Border or its related companies.” (Trial Ex. 169 at TX169-001.) Lapidus nonetheless subsequently performed the special project for Border Foods, which involved a second trip to Delaget’s facility in Nixa, Missouri. (11/22 AM Tr. 70:21-71:8.)

130.

Lapidus testified that the internal control failure that Border Foods asked him to review should have been discovered during Lurie’s audit of Border Foods’ financial statement. (11/22 PM 37:4–13 (Lapidus).) He further stated that, “you would also look at the audit program to see if any steps might—if steps are missed.” (Id.) Lapidus also stated he was concerned because of “the close personal friendship of Lifson and Zelikson and the fact that’s why things like that might be overlooked or they wouldn’t be asked.” (11/22 PM 38:19–22 (Lapidus).)

Lapidus’ June 2015 Trip to Delaget’s Nixa, Missouri Facility 131.

Lapidus’ purpose of this special project during his Nixa trip in June 2015 was to accomplish the following: a) open the flow of communication and introduce Williams as part of her on-boarding so that she would be able to correspond and transact business and had relationships and names of people; b) participate in work for change of banks with the third-party investment bankers who were involved in helping Border Foods select the new banking relationships. (11/22 AM Tr. 70:21-73:5, 74:1-3.)

7

See, (11/22 AM Tr. 70:21-73:5, 74:1-3; see also 11/29 PM Tr. 103:14-104:1; Trial Exs. 30 at TX030-001, 31 at TX031-001, 32 at TX032-001, 33 at TX033-001, 34 at TX034-001, 35 at TX035-001, 36 at TX036-001, 37 at TX037-1, 169 at TX169-002.)

25

Lapidus’ Resignation from Border Foods 132.

Lapidus claims that he resigned from Border Foods “effective immediately” on either June 29, 2015 or June 30, 2015 (11/22 AM Tr. 75:12-16.) following his trip to Delaget’s facility in Nixa, Missouri. (11/22 AM Tr. 93:10-20). Lapidus, however, has not terminated the consulting agreement between Undercliff and Border Foods. (11/22 AM Tr. 74:12-18; Trial Ex. 19 at TX019-001.)

Lapidus’ Activities at Border Foods after His Resignation 133.

For several weeks after his June 2015 trip to Delaget, Lapidus continued to communicate with Williams and provide input to her and others on accounting and financial matters related to Border Foods and Delaget. (See, e.g., Trial Exs. 30 at TX030-001, 31 at TX031-001, 32 at TX032-001, 33 at TX033-001, 34 at TX034-001, 35 at TX035-001, 36 at TX036-001, 37 at TX037-001.) On July 13, 2015, Williams emailed Lapidus to provide him with a status update regarding certain tasks her team was undertaking in relation to the pending sale of four Pizza Hut properties. (Trial Ex. 30 at TX030-001.)

134.

The next day, Williams emailed Lapidus and Matthew Brown (“Brown”) of Lurie regarding a sales and use tax audit. (Trial Ex. 31 at TX031-001.) In her email, Williams informed Brown that she would be letting Lapidus decide how to proceed and then asked Lapidus for his input: “Neil, your thoughts? In short, as there may be a possibility of sheltering some or all of this SKY liability, do we want to discuss with the bankruptcy attorney now or wait until final assessment?” (Trial Ex. 31 at TX031-001; 11/22 AM Tr. 76:6-19.)

135.

Lapidus also emailed Williams separately on July 14, 2015, continuing an email chain between the two of them discussing Border Foods’ banking processes. (Trial Ex. 32 at TX032-001; 11/22 AM Tr. 76:20-77:1.) In his email, Lapidus wrote: “i will call you shortly…banking, as jeff stated we want to change all banking to the 4 of you, regardless of the bank, so we are we done with venture too. not sure about wyoming. we should also follow on bank change. looking forward to template… (Trial Ex. 32 at TX032-001.) On July 16, 2015, Williams emailed Lapidus to ask for his approval to add someone to the email distribution list receiving Daily Cash Review reports for Border Foods. (Trial Ex. 33 at TX033-001; 11/22 AM Tr. 78:3-11.)

136.

Lapidus responded the following day, copying Jeff Engler, and wrote: “good idea. no problem on my end.” (Trial Ex 33 at TX033-001; 11/22 AM Tr. 78:12-14.) Lapidus met with Williams on July 16, 2015. (Trial Ex. 34 at TX034-001.) On July 17, 2015, Williams sent an email to Lapidus with the subject “BF Companies FY15Q2 Compliance Package: Prelim 07-17-2015.” (Trial Ex. 35 at TX035-001.) In her email, Williams asked Lapidus to review the accounting calculation that she provided. (Trial Ex. 35 at TX035-001.) Lapidus responded that he would call Williams back. (Trial Ex 35 at TX035-001.)

137.

On July 21, 2015, Lapidus emailed Williams and Jeff Engler about certain notes (Trial Ex. 36 at TX036-001.) and in his email, Lapidus provided instructions to Williams concerning reclassifying equity contribution as subordinated debt. (Trial Ex. 36 at TX036-001; 11/22 AM Tr. 79:19-80:5.) Also on July 21, 2015, Williams asked Lapidus and others for their “review and approval” of Delaget Monthly Services Invoices. (Trial Ex. 37 at TX037-001.) Lapidus responded later that day with a question: “patsy, what

26

does video integration mean????? just curious.” (Trial Ex. 37 at TX037-001; 11/22 AM Tr. 80:6-11.) Lurie’s Audit of Border Foods’ 2015 Financial Statements 138.

By mid-July 2015, Lurie had concerns that Lapidus would continue working for Border Foods throughout the rest of the year and that his role at Border Foods would continue to expand. (See Trial Ex. 39 at TX039-001; 11/29 PM Tr. 105:18-106:19) Lurie was also concerned that Lapidus’ role at Border Foods at the end of the year would jeopardize Lurie’s ability to perform an independent audit of Border Foods’ financial statements. (See Trial Ex. 39 at TX039-001; 11/29 PM Tr. 105:18-106:19.)

139.

Based on Lurie’s concern, Leonard and Lifson hand-delivered a letter to Jeff Engler and Lee Engler on July 21, 2015, informing them that Lurie would be resigning as Border Foods’ independent auditor. (Trial Ex. 39 at TX039-001; 11/29 PM Tr. 105:18-25) Leonard and Lifson also met with the Englers to further explain the reasoning behind Lurie’s resignation. Lurie stated that after evaluation, because of the escalating role that Lapidus was playing at Border Foods, Lurie was unable to manage on a daily basis what Lapidus was doing to interfere with Lurie’s independence. Lurie communicated to the Englers that Lurie wanted to continue working with them on their tax compliance and on anything else, but that Lurie would not be able to do the audit of Border Foods for 2015, and out of respect for the longevity of that relationship Lurie wanted to give them enough notice for them to find a new auditor. (11/29 PM Tr. 106:1-11.)

140.

At trial, Leonard testified that it was difficult for her and Lifson to communicate this message to the Englers: Well, first of all, to be in a position that we have to resign from a client who has been a tremendous part of, you know, our client portfolio for a long time. They are wonderful people, and we had done work for them for over 10 years, and they were definitely part of the Lurie family of clients. (11/29 PM Tr. 108:2-10.)

141.

Nothing the Englers said at the meeting, however, gave Lurie reason to believe that Lapidus had resigned from Border Foods or that he had otherwise ceased working for Border Foods. The Englers inquired from Leonard and Lifson: “If [Lapidus is] no longer here, would you be able to do the audit?” Lurie replied that: “we would have to evaluate what we would need to do in order to ensure that there was no override of -or undue influence so that Mr. Lapidus was in a key position that we couldn’t have safeguards against in order to prevent our independence from being impaired by the end of the year.” (11/29 PM Tr. 107-23.)

142.

During that meeting with the Englers on July 21, 2015, the Englers never told Leonard and Lifson that Lapidus was no longer working at Border Foods. (11/29 PM Tr. 106:1619, 107:4-108:1.) Following the July 21, 2015 meeting, one of the Englers telephoned Lifson to inform him that Lapidus was no longer working with Border Foods. (11/29 PM Tr. 108:11-25.)

143.

Following this call, Lurie consulted with its legal counsel about whether it could now perform an independent audit of Border Foods’ financial statements for 2015. (11/29 PM Tr. 108:18-21.) After consulting with its legal counsel, Lurie informed Border

27

Foods that it could perform the 2015 audit since Lapidus had ceased working there. (11/29 PM Tr. 108:22-25.) Twin City Fan 144.

Twin City Fan is a Lurie Client, and Lapidus served as its billing partner from the time it became a Lurie Client until Lapidus’ retirement. (11/29 PM Tr. 84:16-25.) The Barry Family owns Twin City Fan. In addition to Twin City Fan, the Barry Family also has extensive business holdings and investments. Lurie has not provided services to the Barry Family concerns apart from Twin City Fan. (11/29 PM Tr. 86:4-9.)

145.

Prior to Lapidus’ retirement, Mike Barry—one of the owners of Twin City Fan— contacted Leonard to see if Lurie had any objection to Lapidus assisting the Barry family with its family office matters during his retirement. (11/29 PM Tr. 85:3-20.)

146.

After speaking at length about what Lapidus could and could not do following his retirement, Leonard responded that Lurie had no issue with Lapidus working for the Barry family—so long as Lapidus was providing services only with respect to family office matters and would not be doing anything related to the accounting or business of Twin City Fan. (11/29 PM Tr. 85:3-86:11.) Leonard also communicated this message to Lapidus. (11/29 PM Tr. 86:23-25.)

147.

In July 2016, after the close of discovery in this action, (11/29 PM Tr. 130:2-17.) Lurie learned that Lapidus did not limit his work to family office matters, but instead assumed a significant role within Twin City Fan’s business. (11/29 PM Tr. 130:2-14.) At that time, Lurie was finalizing its audit of Twin City Fan’s 2015 financial statements and needed representation letters from three of Twin City Fan’s officers stating that Lapidus did not have a Key Position at Twin City Fan. At least two of the officers—Twin City Fan’s CEO and CFO—declined to make this representation, despite the fact that they had done so a year earlier in connection with Lurie’s audit of Twin City Fan’s 2014 financial statements. The Court notes, however, that there is indication in an unrelated legal action, Barry v. Twin City Fan Companies, Ltd. And Melanie Barry (Court File 27-CV-16-15719) that a dispute exists between the owners of Twin City Fan. (Trial Ex. 719.) Lapidus argues that this dispute and not Lapidus’ position at Twin City Fan explains the divided decision of the owners regarding a representation letter to Lurie.

148.

Because Twin City Fan did not provide Lurie a representation letter that Lapidus was not in a Key Position at Twin City Fan, Lurie’s independence was compromised and, therefore, Lurie could not serve as an independent auditor of Twin City Fan’s 2015 financial statements. (11/29 PM Tr. 130:2-131:5; 11/30 AM Tr. 65:20-66:11.) As a result, Twin City Fan retained another accounting firm to re-audit the work that Lurie had already done. (11/29 PM Tr. 130:24-131:5.) Because of this issue, Twin City Fan has also informed Lurie that Lurie will not be performing the audit of Twin City Fan’s 2016 financial statements. (11/29 PM Tr. 130:2-17, 131:6-8.)

149.

The Court finds that the breach occurred because of Lapidus’ Key Position at Twin City Fan regardless of whether Twin City Fan provided Lurie with a representation letter.

Harm to Lurie 150.

Lapidus’ conduct violates the Fourth Agreement’s noncompetes and “have caused, and will continue to cause, harm to Lurie.” (11/29 PM Tr. 117:12-129:19; see also 11/28 AM Tr. 35:2-36:11, 38:4-40:2, 41:6-17.) Lurie further maintains that Lapidus has “damaged Lurie’s relationships with Border Foods, Delaget, and Twin City Fan.” 28

(11/29 PM Tr. 117:12-129:19; see also 11/28 AM Tr. 35:2-36:11, 38:4-40:2, 41:6-17; 11/28 PM Tr. 17:4-13, 19:4-20:7.) Lurie no longer performs audit and tax work for Delaget (11/28 PM Tr. 16:10-18; 11/29 PM Tr. 129:8-19.) and no longer performs audit work for Twin City Fan. (11/29 PM Tr. 130:2-131:8.) In addition, due to Lapidus’ conduct working at Border Foods, Delaget, and Twin City Fan, Lurie was denied opportunities to grow and expand its relationships to those Clients. (11/29 PM Tr. 127:14-129:3; see also 11/28 PM Tr. 17:4-13, 19:4-20:7, 114:18-115:17; Trial Ex. 1 § 17.2(a)(ii) at TX001-023.) 151.

The extent of the harm that Lapidus’ conduct caused to Lurie’s client relationships is difficult, if not impossible, to quantify. (11/29 PM Tr. 127:14-129:3.) At trial, Leonard explained the difficulty of quantifying the harm as follows: “[O]ur relationships are annuity relationships, so there is compliance work -- we start the year kind of knowing all the compliance work that we are going to do. We also have consulting work. We don’t have any idea how a client is going to expand, what the opportunities are.” As an example, Leonard explained that a client transitioned from Besikof to Lifson 11 years ago was a $34,000-a-year client and that the same client is now a $270,000-ayear client “with a proposal out for another quarter million dollars.” (11/29 PM Tr.118:24-119-20.) The damages cannot be quantified because Lurie does not know how the relationships are going to expand or whether a client will leave, and those are the reasons Lurie has a forfeiture provisions in the Fourth Agreement.

152.

The Fourth Agreement does not provide for actual damages, but specifies that any breach of the noncompetes contained in Sections 17.1(a), 17.1(b), and 17.3(e) results in the forfeiture of the breaching partner’s right to further post-retirement payments. (11/29 PM Tr. 129:4-7.) The Fourth Agreement also specifies that any breach of the noncompete contained in Section 17.1(a) also obligates the breaching partner to pay Lurie liquidated damages as the purchase price for the client or clients at issue. (11/29 PM Tr. 129:4-7.) Lapidus agreed to the specific remedies provided in the Fourth Agreement and did not object to the enforceability of these specific remedies prior to this dispute.

153.

The Court finds that Lurie suffered harm as a result of Lapidus’ work at Border Foods, Delaget and Twin City Fan.

Post-Retirement Payments to Lapidus 154.

Lurie has continued to make post-retirement payments to Lapidus during the pendency of this lawsuit. Lurie calculated Lapidus’ post-retirement payments pursuant to Sections 13.4 and 13.5 of the Fourth Agreement. (11/29 PM Tr. 68:10-75:14.) In addition, as of the date of his retirement on April 30, 2014, Lapidus’ Accrual Basis Capital Account contained $1,277,376.72. (11/29 PM Tr.74:3-17.) Pursuant to Section 13.4, Lurie distributed these funds to Lapidus in monthly payments occurring between May 2014 and April 2015. (11/29 PM Tr.74:3-17.)

155.

Retirement Benefits. Lurie calculated Lapidus’ Retirement Benefits using the formula specified in Section 13.5 for Lapidus’ “Basic Retirement Benefit.” The first step in this calculation was determining Lapidus’ “Average Annual Earnings,” which is the average of Lapidus’ earnings from the highest three years of his last ten years as a Lurie partner. For Lapidus, this was fiscal years 2008, 2009, and 2010, in which he earned $3,339,554.11, $2,706,612.80, and $2,452,376.55 respectively. (11/29 PM Tr. 69:1670:8;) (Trial Ex. 148 at 1.) Lapidus’ Average Annual Earnings equaled $2,832,847.82. (Trial Ex. 148.) 29

156.

The second step in the Retirement Benefits calculation was determining Lapidus’ “Total Deferred Compensation,” which is his Average Annual Earnings multiplied by three. Lapidus’ Total Deferred Compensation equaled $8,498,543.46. (Trial Ex. 148.) Because he had more than twenty-five “Years of Credited Service,” Lapidus qualified to receive the full amount of his Total Deferred Compensation. This amount was subsequently increased in 2016 due to the inflation adjustment provision in Section 13.5(c), and again in 2017. (11/29 PM Tr. 75:2-9.)

157.

Lurie’s Post-Retirement Payments to Lapidus to Date. As of the start of the trial on November 21, 2016, the total amount Lapidus has received equals $2,767,075.47. Of this amount, $736,000.00 was paid to Lapidus prior to January 1, 2015, and the remaining $2,031,075.47 has been paid to him since January 1, 2015. Lurie is continuing to pay Lapidus at the rate of $89,871.88 per month through April 2017 and $91,363.12 starting May 2017. (11/29 PM Tr. 73:6-75:14.) CONCLUSIONS OF LAW

The Non-compete Clauses in the Fourth Agreement are Enforceable Business Transactions’ Standard 1.

Lapidus maintains that the noncompete clauses in the Fourth Agreement are not enforceable because they are overly broad. Lapidus further urges this Court to evaluate the noncompete clauses in the context of an employment relationship between Lurie and Lapidus. For the reasons set for the below the Court disagrees and concludes that the noncompetes in the Fourth Agreement are enforceable and that the clauses must be evaluated using the business transaction and not the employment relationship standard.

2.

Under Minnesota law, a covenant not to compete is enforceable so long as it serves a legitimate business interest and does not impose restrictions that are broader than reasonably necessary to protect that interest. Kallok v. Medtronic, Inc., 573 N.W.2d 356, 361 (Minn. 1998). Legitimate business interests include a company’s confidential information and trade secrets, as well as its customer relationships and goodwill. See, e.g., Boston Scientific Corp. v. Duberg, 754 F. Supp. 2d 1033, 1039 (D. Minn. 2010); Roth v. Gamble-Skogmo, Inc., 532 F. Supp. 1029, 1032 (D. Minn. 1982); Walker Employment Servs., Inc. v. Parkhurst, 219 N.W.2d 437, 441 (Minn. 1974); Overholt Crop Ins. Co. v. Bredeson, 437 N.W.2d 698, 703 (Minn. Ct. App. 1989). Restrictions imposed to protect such interests are no broader than necessary so long as they are reasonable in scope, duration, and geographic reach in light of the circumstances. Bennett v. Storz Broadcasting Co., 134 N.W.2d 892, 899 (Minn. 1965).

3.

Minnesota courts evaluate the enforceability of noncompetes arising from business transactions differently from those arising in the context of an employment relationship. B & Y Metal Painting, Inc. v. Ball, 279 N.W.2d 813, 815 (Minn. 1979). Generally, restrictive covenants in employment agreements are disfavored in cases when such covenants: 1) unfairly prevented the restricted party from earning a livelihood, or 2) arose in circumstances in which the restricted party lacked equal bargaining power with the party benefiting from the covenant. Medtronic v. Hedemark, 2009 WL 511760, at *4 (Minn. Ct. App. March 3, 2009); Bennett, 134 N.W.2d at 898. The “fundamental reason” covenants not to compete are “looked upon with disfavor” is that their enforcement can limit the right of the restricted party to work and earn a livelihood.

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Hedemark, 2009 WL 511760, at *4. Such situations 8 arise when the remedy provided for breaching the noncompete is something other than an injunction compelling the restricted party to abide by the restrictions imposed by the noncompete. See, e.g., Roth, 532 F. Supp. at 1032; Kunin v. Kunin, No. CO-99-206, 1999 WL 486814, at *3 (Minn. Ct. App. July 13, 1999). 4.

In cases, however, where a former employee retains ultimate control over compliance with the restriction, such restrictions have been upheld. Such was the case in Kunin, 1999 WL 486814, at *3, in which in connection with the sale of a business by one of its former owners, a consulting agreement contains a noncompete clause. Id. at *1, 3. The noncompete restricted the former owner from participating in the hair salon business anywhere in the United States for a period of eleven years. Id. at *1. If the former owner complied with this restriction he would receive approximately $915,000, paid out monthly over the first six years of the noncompete’s term. Id. In the event of breach, the noncompete specified that the remedy would be the forfeiture of the former owner’s right to receive the balance of what remained to be paid. Id. at *2 & n.2. The Minnesota Court of Appeals upheld the noncompete, finding that the restriction it imposed was reasonable in light of the fact that the former owner remained in control over whether or not he complied with the restriction. Id. at *3.

5.

When covenants not to compete are designed to protect legitimate business interests and impose reasonable restrictions to accomplish these goals, Minnesota courts have consistently upheld such covenants. See Bennett, 134 N.W.2d at 899.

6.

In this case, the Court finds that: the noncompete clauses in the Fourth Agreement are designed to protect Lurie’s legitimate business interests; the restrictions imposed are reasonable; and there is significant consideration in exchange for Lapidus’ compliance with the restrictions.

7.

Moreover, the Fourth Agreement does not provide Lurie with an express contractual right to an injunction to compel Lapidus’ compliance with those noncompetes See Roth, 532 F. Supp. at 1032, Kunin, 1999 WL 486814, at *2-3. Under the Fourth Agreement, however, following his retirement Lapidus retained complete control over his compliance with the Fourth Agreement’s noncompete clauses. Lapidus’ control over his compliance with the Fourth Agreement’s noncompetes and the substantial compensation Lapidus has received and stands to receive for such compliance weigh in favor of enforceability in this case.

8.

Noncompete clauses entered into in the context of business transactions are subject to less scrutiny by Minnesota courts than those involved in an employment relationship. See, Bess v. Bothman, 257 N.W.2d 791, 794 (Minn. 1977). Minnesota courts generally show greater deference to the decisions made by sophisticated parties to enter into restrictive covenants in connection with business transactions. Unless there is evidence of unequal bargaining power or oppressive circumstances, these types of restrictive

8

This point is illustrated clearly in Roth v. Gamble-Skogmo, Inc., 532 F. Supp. 1029, 1030-1032 (D. Minn. 1982). Roth, who was a former CEO of a large grocery and drug store chain, brought an action to challenge the enforceability of the restrictive covenant and forfeiture provision in his employment agreement, which operated in a similar manner to those at issue in the present case. Id. at 1031. Following his termination, Roth was eligible to receive five years of post-termination payments, totaling three times his prior annual salary. Id. at 1030-31. Pursuant to the restrictive covenant and forfeiture provision in his employment agreement, Roth had to refrain from working for a competitor of his former employer for five years in order to receive these post-termination payments in full. Id. at 1031. If he worked for a competitor, he would “forfeit” any right to receive the balance of what remained to be paid. Id. The court upheld that restrictive covenant and forfeiture provision. Id. at 1032.

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covenants are subject to less scrutiny than those arising out of employment relationships. See B&Y Metal, 279 N.W.2d at 815; Yonak v. Hawker Well Works, 2015 WL 1514166, at *5 (Minn. Ct. App. Apr. 6, 2015). See, e.g., Kunin, 1999 WL 486814, at *3. 9.

In B&Y Metal Painting, the Minnesota Supreme Court explained the rationale behind this standard in cases involving business transactions, stating that “[m]any of the grounds for imposing a stricter test of reasonableness in the context of an employment relationship . . . are not present” in the context of a covenant not to compete in connection with a business transaction, so long as there is “no contention that there was unequal bargaining power or oppressive circumstances.” Id. at 815; see also Lemon v. Gressman, No. C8-00-1739, 2001 WL 290512, at *2 (Minn. Ct. App. Mar. 27, 2001) (stating that the rule that noncompetes are strictly construed is “less applicable in the case of a sale of a business”).

10.

Given the nature of the relationship between Lurie and Lapidus, the Court finds that the noncompete clauses in the Fourth Agreement at issue in this case arose in the context of a business transaction and not in the context of an employment relationship. There are no issues of unequal bargaining power or oppressive circumstances in Lurie’s and Lapidus’ transaction set forth in the Fourth Agreement. See Yonak, 2015 WL 1514166, at *5. Lapidus, as the Administrative Partner in charge of the firm at the time, oversaw the drafting of the Fourth Agreement, and he later executed it. Given the influence and authority of Lapidus during the drafting of the Fourth Agreement, Lapidus had the highest level of bargaining power compared to other Lurie partners at that time: • • • • •

•

11.

Lapidus was an owner of Lurie, having been a Lurie partner for at least two decades before the Fourth Agreement was signed. (Findings ¶ 5.) Lapidus was the highest paid partner at Lurie and exercised a great deal of influence over its business and affairs. (Findings ¶¶ 8, 25-29.) Lapidus was a member of Lurie’s Executive Committee and served as the firm’s Administrative Partner for more than a decade before the Fourth Agreement was drafted and signed. (Findings ¶ 9.) Lapidus managed Lurie’s relationship with Fredrikson & Byron, P.A., Lurie’s legal counsel. (Findings ¶ 22.) Lapidus was responsible, along with Kaufmann, for drafting the Fourth Agreement and communicated with Fredrikson about the noncompetes and related remedies provisions contained in the Fourth Agreement. (Findings ¶¶ 25-28.) Lapidus participated in the Executive Committee’s decision to recommend that the Lurie partners sign the Fourth Agreement; and Lapidus participated in making that recommendation to the partners. (Findings ¶ 29)

Under these facts, the appropriate standard for evaluating the Fourth Agreement’s noncompetes is the standard applicable to business transactions. Legitimate Business Interests

12.

The noncompetes contained in Sections 17.1(a), 17.1(b), and 17.3(e) each serve to protect Lurie’s legitimate business interests and the restriction are reasonable and no broader than necessary to do so.

13.

Section 17.1(a). The noncompete contained in Section 17.1(a) protects Lurie’s confidential information, which constitutes a legitimate business interest under Minnesota law. See Roth, 532 F. Supp. at 1032. Section 17.1(a) also protects Lurie’s goodwill and 32

the relationships it has with its clients, which constitute legitimate interests under Minnesota law. See Boston Scientific, 754 F. Supp. 2d at 1039; Overholt Crop Ins., 437 N.W.2d at 703. Section 17.1(a) further restricts former partners, like Lapidus, from rendering Professional Services to the Lurie Clients for two years. 14.

Minnesota courts have enforced client-based restrictions in similar contexts, recognizing that client-based restrictions are sufficiently narrow to serve as a reasonable substitute for geographic limits. See, e.g., Commodities Specialists, Co. v. Brummet, 2002 WL 31898166, at *8 (D. Minn. Dec. 27, 2002); Cherne Indus., Inc. v. Ground & Assocs., Inc., 278 N.W.2d 81, 92-93 (Minn. 1979) (upholding two-year restriction); see also Dynamic Air, Inc. v. Bloch, 502 N.W.2d 796, 800 (Minn. Ct. App. 1993). Courts have also upheld client-based restrictions with two year terms. See, e.g., Overholt Crop Ins., 437 N.W.2d at 703.

15.

The provisions contained in Section 17.1(a) of the Fourth Agreement are enforceable against Lapidus under Minnesota law.

16.

Section 17.1(b) restricts former partners, like Lapidus, from rendering Professional Services within a fifty-mile radius of Lurie’s office for two years. Minnesota courts have found that the scope, term, and geographic reach of the restriction imposed by Section 17.1(b) are reasonable to protect confidential information. See, e.g., Roth, 532 F. Supp. at 1031-1032 (upholding five year restriction that prohibited former employee from working for competitors in the six states where the employer operated); Twin City Catering, Inc. v. Lafond, No. C2-01-886, 2001 WL 1335685, at *1, 5 (Minn. Ct. App. Oct. 30, 2001) (upholding two year restriction that prohibited former employee from working as a salesperson or event manager for a competing catering company within a thirty mile radius of where the employer operated); Kunin, 1999 WL 486814, at *3 (upholding eleven year nationwide restriction); see also Medtronic, Inc. v. Advanced Bionics Corp., 630 N.W.2d 438, 445 (Minn. Ct. App. 2001) (upholding two year restriction); Overholt Crop Ins. Serv. Co. at 703.

17.

The noncompete clause in Section 17.1(b) is enforceable against Lapidus.

18.

Section 17.3(e). Except for its term, the noncompete in Section 17.3(e) has the same parameters as the one in Section 17.1(a). These shared parameters are reasonable and enforceable under Minnesota law for the same reasons discussed above. The term of the noncompete in Section 17.3(e) coincides with the length of time Lapidus receives postretirement payments from Lurie pursuant to Article 13 of the Fourth Agreement. This type of temporal scope was found reasonable and enforceable in both Roth, 532 F. Supp. at 1032, and Kunin, 1999 WL 486814, at *3. In both cases, the restricted party agreed to refrain from competing with the covenantee during the period in which he was receiving significant post-termination payments. Roth, 532 F. Supp. at 1032; Kunin, 1999 WL 486814, at *3. And in both cases, the court enforced the noncompete at issue, holding that it was reasonable for the noncompete’s restrictions to be coterminous with the restricted party’s receipt of post-termination payments because such payments constitute consideration for the restricted party’s continued loyalty and adherence to the noncompete’s restrictions. Roth, 532 F. Supp. at 1032; Kunin, 1999 WL 486814, at *3.

19.

The Court finds the temporal scope of Section 17.3(e) is reasonable for the same reasons as the court in Roth, 532 F. Supp. at 1032, and Kunin, 1999 WL 486814, at *3, and concludes that Minnesota law permits Lurie to enforce the noncompete contained in Section 17.3(e) of the Fourth Agreement against Lapidus.

33

Statutory and Contractual Duty of Loyalty 20.

The Fourth Agreement’s noncompetes are consistent with the statutory and contractual duty of loyalty that a partner owes to a continuing partnership. Partners in a partnership owe one another a fiduciary duty of loyalty, and under the Minnesota Uniform Partnership Act (“MUPA”), that duty of loyalty includes the duty “to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership.” Minn. Stat. § 323A.0404(b)(3).

21.

The MUPA statutory requirement is reflected in the language of Section 16.2 of the Fourth Agreement, which imposes noncompete obligations on Lurie partners while they are still part of the firm and which provides that “[a] Partner shall not render accounting services or consulting services for the Partner’s own account or for the account of any person or company other than the Partnership.” (Trial Ex. 1 § 16.2.)

22.

The post-retirement noncompetes in the Fourth Agreement also require loyalty from a former partner during retirement, but in a less restrictive form than statutorily or contractually required of him while an active partner. (Compare Trial Ex. 1 §§ 17.1(a), 17.1(b), 17.3(e), with Minn. Stat. § 323A.0404(b)(3), and Trial Ex. 1 § 16.2.)

23.

Under Article 13 of the Fourth Agreement, Lurie agreed to pay Lapidus more than $89,000 monthly post-retirement payments for a period of approximately ten years totaling in approximately $11 million so long as Lapidus complied with his noncompete obligations. These payments constitute consideration for Lapidus’ loyalty. The noncompetes and their related forfeiture provisions address the same fairness concerns underlying the statutory duty of loyalty and Section 16.2. Since Lapidus is receiving consideration for his loyalty, it would be disruptive of his economic bargain with his former partners, and it would be unfair for him to continue receiving these payments if he simultaneously competes with Lurie.

24.

Lapidus’ post-retirement noncompetes are reasonable when compared to the restrictions imposed on Lapidus while he was still a partner by both the statutory duty of loyalty and Section 16.2 of the Fourth Agreement. Prior to his retirement, Lapidus had restrictions, which lacked any geographic, client, or product or service line limitations. (See Minn. Stat. § 323A.0404(b)(3); Trial Ex. 1 § 16.2.) While a partner, Lapidus could compete nowhere. Under his post-retirement noncompetes, Lapidus’ restrictions are limited to a defined group of Professional Services, to a limited geographic region, and to a defined group of clients. (See Trial Ex. 1 §§ 17.1(a), 17.1(b), 17.3(e).) He can compete with Lurie anywhere in the world outside the fifty-mile radius extending from Lurie’s office, so long as he did not provide Professional Services to any person or entity which was a Lurie Client during the last two years he was a partner.

25.

The Court finds that the covenants not to compete in the Fourth Agreement are reasonable, consistent with the statutory duty of loyalty, and prohibit Lapidus from directly or indirectly providing Professional Services to any person or entity which was a Lurie Client.

26.

The noncompetes in the Fourth Agreement are enforceable and they protect Lurie’s legitimate business interests. The evidence in the record shows that Lapidus’ choice as a retired partner to work in house or under contract at a Lurie Client in a financial or financial-related capacity has indeed impaired Lurie’s legitimate business interests. As Lurie through Leonard’s testimony explained, the damages to Lurie cannot be quantified because of the nature of Lurie’s business. This is precisely why Lurie in the Fourth

34

Agreement under the leadership of Lapidus himself sought to protect its legitimate business interests in exchange for valuable consideration. 27.

In evaluating the intent of the parties the Court in this case looked to the specific relevant language in the Fourth Agreement as well as the general nature of the Agreement. In the context of determining the general nature of the Agreement, the Court finds the following facts relevant: a) The Fourth Agreement between Lurie and Lapidus is enforceable because it was an arms’ length bargained-for business transaction between parties with equal bargaining power. By Lapidus’ own admission, Lurie has paid Lapidus all the compensation that was due for his services over the years and Lurie did not owe Lapidus deferred compensation for past services. Lurie relies on revenue from its Clients to fund Lapidus’ retirement benefits since Lapidus had received all his compensation during his tenure as a partner. b) In exchange for his compliance with the terms in the Fourth Agreement, Lapidus stood to receive consideration of more than $89,000 monthly retirement payments for a period of approximately ten years. In addition to the agreed-upon retirement benefits, Lurie entered into a separate agreement with Lapidus and paid consideration in an additional amount of $150,000 for Lapidus to transfer his Lurie Clients to other members of the firm. Lapidus also received additional monetary retirement benefits. c) Lapidus has been a member of the firm for 36 years, and an influential part of Lurie’s leadership that crafted, advocated for and ultimately executed the Fourth Partnership Agreement. d) Lapidus did not disclose his plans and intentions to work at Border Foods to Lurie. When Lurie requested that Lapidus provide details of his work at Border Foods, although Lapidus communicated with Lurie, Lapidus at least initially was reluctant to provide Lurie the details of the work he was performing despite Lurie’s repeated requests. Lapidus eventually gave assurances to Lurie that he was not performing work that would implicate Lurie’s independence. (11/29 PM Tr. 89:6-90:12, 95:23-96:4; Trial Ex. 581.) Breach of Contract

28.

The Court now turns to the analysis of the facts that form the basis of Lurie’s claim that Lapidus breached the Fourth Agreement by rendering Professional Services listed on Exhibit 2.

29.

Border Foods. There is no dispute that Lapidus shortly after his retirement from Lurie went to work in-house at Border Foods, one of Lurie Clients. Between January and July 2015 Lapidus engaged in the performance of various projects for Border Foods as set forth in the Findings of Fact section above.

30.

The parties, however, disagree as to the characterization of the services Lapidus provided to Border Foods. Lurie maintains that the services Lapidus engaged in included the review and evaluation of procedures related to the flow of information between Delaget and Border Foods, are listed on Exhibit 2 to the Fourth Agreement, and therefore constitute Professional Services within the meaning of those terms in the Fourth Agreement. Lapidus on the other hand maintains that “he coordinated the flow of information between Border Foods and Delaget and worked on special projects” as requested, and that such activities are not prohibited by the Fourth Agreement. Both parties, however, agree that the Fourth Agreement prohibits Lapidus from engaging in 35

work for a Lurie Client that would result in Lurie’s loss of independence in performing audits for such Clients. (See, 11/29 PM Tr. 89:6-90:12, 95:23-96:4; Trial Ex. 581.) 31.

Based on the totality of the evidence, including Lapidus’ own admission, regarding Lapidus’ supervision of Wallin, Border Foods’ Director of Finance, the Court finds that Lapidus acted as the supervisor of Border Foods’ Director of Financial Operations. As a supervisor of a Key Position, Border Foods’ Director of Financial Operations, Lapidus was in a Key Position, and that fact is a strong indicator that Lapidus engaged in work at a Lurie Client that could materially disrupt Lurie’s legitimate business interests including but not limited to Lurie’s independence.

32.

Lapidus was not initially forthcoming or transparent with Lurie concerning the nature of his work at Border Foods. Lurie was concerned about its independence in performing Border Foods’ audit. Ultimately, after learning that Lapidus “resigned” from Border Foods, Lurie determined it could complete its 2014 audit of Border Foods.

33.

Undercliff. Lapidus caused Undercliff to enter into a consulting agreement with Border Foods to provide “consulting and advisory services to the Corporation and its affiliates as requested . . . .” The consulting agreement Lapidus caused Undercliff to enter into with Border Foods violates the Fourth Agreement because the consulting agreement listed Professional Services prohibited under the Fourth Agreement that Lapidus through Undercliff planned on performing for Border Foods.

34.

Based on the totality of the circumstances, the Court finds that Lapidus performed Professional Services at Border Foods in violation of the Fourth Agreement.

35.

Lurie did not waive any breach of any terms as Lapidus suggests. The elapsed time between December 2014 when Lurie first learned that Lapidus was working at Border Foods and April 30, 2015, the date of Lurie’s letter to Lapidus, was only about three to four months. Given the magnitude of the consequences of this breach, Lurie showed considerable restraint and prudence in inquiring and investigating further during those three to four months to ascertain the nature of Lapidus’ work at Border Foods before concluding that a breach had occurred.

36.

Lurie argues that no waiver of breach of any terms can occur under the Fourth Agreement because of the non-waiver provision in Section 23.4 (Trial Ex. 1 § 23.4). The plain meaning of the language in this non-waiver provision is that Lurie may waive a breach of any terms, but that in the event Lurie does waive “any breach of any of the terms . . .” such waiver does not operate as a waiver of “any other breach of any other terms . . . .” The Court agrees that by the very terms of the Fourth Agreement in the non-waiver clause in Section 23.4 of the Fourth Agreement, Lurie, by not taking immediate action between December 2014 and March 2015, did not waive any future breach of any terms certainly as of April 30, 2015.

37.

Delaget. The work Lapidus performed at Delaget was an extension of the work for Border Foods given the relationship between the two entities, including the partial commonality of ownership. Delaget, however, was a separate Lurie Client. Lurie ultimately lost the business opportunity of performing Delaget’s tax work. The Court finds that the evidence supports a conclusion that Lapidus rendered Professional Services in violation of the Fourth Agreement in connection with his March and June 2015 trips to Delaget’s facility in Nixa, Missouri.

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38.

Non-solicitation. Based on the totality of the evidence in the record including the unrefuted fact that Axness had retained employment agencies and planned on leaving Lurie’s employment prior to his conversation with Lapidus, the Court finds that the evidence is insufficient to conclude that Lapidus solicited Axness within the meaning of Section 17.1(c) of the Fourth Agreement.

39.

Twin City Fan. In connection with Lurie’s performing an audit of Twin city Fan, Lurie sought a representation letter from the owners of Twin City Fan. Twin City Fan owners, however, declined to provide Lurie the representation letter. There is evidence that the representation letter, when given by a client, establishes for the particular audit Lurie’s independence, a necessary requirement for a Certified Public Accounting firm such as Lurie to perform an independent audit. As a result of Twin City Fan owners’ decision not to provide Lurie with a representation letter in connection with the independence issue, Lurie was unable to complete Twin City Fan’s 2015 audit and the 2016 audit has also been cancelled.

40.

The circumstances involving Twin City Fan suggest a pattern of conduct on the part of Lapidus that can lead to material disruption of Lurie’s legitimate business interests. The Court notes Lapidus’ argument that there is a dispute between the owners of Twin City Fan and that one of the owners declined to provide Lurie with a representation letter while the other owner did. The Court finds, however, that Lapidus violated the terms of the Fourth Agreement’s noncompete provisions because he directly or indirectly renders Professional Services to a Lurie Client. Lapidus does not dispute that Lurie provided services to a part of Twin City Fan, which is a Lurie Client as defined in the Agreement.

41.

The Fourth Agreement prohibits a retired partner from working at a Lurie Client in any financial and/or public accounting-related capacity, whether advisory or otherwise, including “coordinating the flow” of financial information at a Lurie Client unless said retired partner secured prior written authorization from Lurie. ORDER IT IS HEREBY ORDERED that judgment shall be entered in favor of Plaintiff and against Defendants, and each of them, as follows: 1. The Court declares that Lapidus has breached Sections 17.1(a), 17.1(b), and 17.3(e) of the Fourth Agreement; and 2. The Court declares that Lurie has no further liability of any kind or nature to Lapidus pursuant to the Fourth Agreement, and that Lurie is not required to make any further payments to Lapidus pursuant to the Fourth Agreement; and 3. A money judgment for damages shall be entered against Lapidus in the amount of $2,210,819.23 plus an additional $179,743.76 to compensate Lurie for the postretirement payments it has made to Lapidus since the date of the first breach of the Fourth Agreement’s noncompetes on January 1, 2015, with interest thereon at the legal rate on each monthly payment made to Lurie by Lapidus from the date of such payment to the date of entry of judgment; and 4. The Court declares that Lapidus shall pay Lurie twenty five percent (25%) of all amounts paid to him or to Undercliff on his behalf for services Lapidus rendered 37

himself or rendered by Undercliff on Lapidus’ behalf to Border Foods or Delaget between December 31, 2015 and December 31, 2019, as well as for services rendered to Twin City Fan or any other Lurie Client between December 31, 2014 and December 31, 2019. 5. Costs are awarded in favor of Lurie and against Lapidus. LET JUDGMENT BE ENTERED ACCORDINGLY FORTHWITH Dated: April 14, 2015

BY THE COURT: Regis, Jacqueline 2017.04.14 10:24:25 -05'00'

______________________ M. Jacqueline Regis Judge of District Court

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