AP NEWS

Former partner in Minneapolis accounting firm loses millions in noncompete dispute

July 8, 2018

When Neil Lapidus retired in 2014 after 36 years at the Minneapolis accounting firm then known as Lurie Besikof Lapidus Co., he was entitled to nearly $11 million in retirement benefits over the next decade.

The retirement benefits, accrued by eligible partners in the firm, consisted mostly of deferred compensation. Lapidus lost the benefit when a Hennepin County District Judge determined in 2017 he violated a restated partnership agreement with his former firm that included a noncompete clause.

It’s an agreement that Lapidus played a key role in developing, according to a June ruling by a panel of the Minnesota Court of Appeals that affirmed the lower-court finding.

Hennepin County District Judge M. Jacqueline Regis had found that Lapidus violated the post-employment agreement and financially harmed the Lurie firm by working with Lurie clients after he retired to Naples, Fla.

“The fourth agreement was created after the noncompete provisions of the previous agreement were not enforced in arbitration against a former Lurie employee who went to work for a competitor,” Chief Judge Edward Cleary of the Court of Appeals wrote in an unpublished decision last month. “All partners, including Lapidus, signed the [2005 agreement].”

Lurie, which shortened its name after Lapidus retired, sued Lapidus in Hennepin County District Court in 2015 after it determined that the work he was doing for former clients violated the 2005 partnership agreement.

Those clients included Border Foods, a Minnesota-based franchisee of Taco Bell, and Twin City Fan, a Minneapolis-based manufacturer of industrial fans.

“Lapidus controlled whether he would continue to receive monthly post-retirement payments of approximately $90,000 from Lurie and refrain from rendering professional services to former clients or render professional service to former clients and forfeit his right to those monthly payments,” Cleary wrote in 21-page decision. “Under the [noncompete] agreement, an agreement which he developed and recommended for adoption, he could not do both.”

Lapidus was the biggest revenue producer at Lurie, bringing in $2.6 million to $4.9 million annually between 2007 and 2014, according to court documents.

Michael Ciresi, an attorney for Lapidus, declined to comment about the case last week, other than to say an appeal to the Minnesota Supreme Court is planned for this month.

Seth Leventhal, a Minneapolis attorney and legal blogger who followed the case blogged recently: “Readers may point out that Defendant Neil Lapidus and his formidable trial team can still take this to the Minnesota Supreme Court, and maybe they will. On the other hand, it seems to us that Lapidus not only lost at the court of appeals; he lost [decisively]. We see no strong arguments for Supreme Court review, let alone reversal, but of course you never know.”

Asked last week about the case, Leventhal said in an e-mail: “Neil Lapidus’ case appears to be a story of arrogance and greed. As I see it, the case breaks no new ground in Minnesota law regarding noncompetition agreements. Lapidus simply got caught violating his noncompete when he kept working after retiring from the Lurie firm. Doing so, Lapidus sacrificed $11 million that he otherwise would have been paid by Lurie over a 10-year period per the firm’s partnership agreement.”

The lawyers for Lapidus argued that the district judge erred in key ways, including interpretation of Minnesota case law and that the noncompete provisions were unreasonable in their broad scope and duration. They also argued that the remedies called for in the agreement were disproportionate and unenforceable.

Cleary’s decision noted that Lapidus was an owner of the accounting firm, sophisticated and an architect of the agreement he violated.

“While the 10-year term is relatively long, it was not unreasonable for Lurie to expect Lapidus to adhere to the terms of the agreement while he continued to receive approximately $90,000 per month in exchange for his continued loyalty,” the appellate decision said.

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.