Novak Druce Connolly Bove + Quigg owes $36,000 in unpaid wages to two of its former partners, a Delaware Superior Court judge ruled Monday, scolding the defunct intellectual property boutique for creating a “labyrinth” to avoid paying its debts.
The default judgment, entered by Judge Eric M. Davis, faulted the Houston-based firm for purposely avoiding service on the departed partners’ demands that Novak Druce produce wages that went unpaid two years.
Novak Druce had argued in court filings that the firm’s neglect was excusable and that the attorneys’ claims were time barred, under a one-year statute of limitations for recovering wages.
But according to Davis’ ruling, Novak Druce and its registered agent in Delaware ignored multiple attempts at service by Curt Lambert and Zhun Lu, who both had worked as nonequity partners at the firm, and the firm only responded to the complaint after five months, when the plaintiffs moved for judgment by default.
“The court finds this case very troubling,” Davis wrote in a 10-page memorandum opinion.
“Novak Druce, apparently, created a scheme during its winding down process that made it almost impossible for a creditor to effect service of process.”
Davis said that it appeared Novak Druce had tried to violate laws in Delaware and Texas requiring companies to maintain registered agents and addresses within the states.
In Houston, Novak Druce had shuttered its offices, and the bulk of its partnership, including named partner Gregory V. Novak, joined Polsinelli in early 2016. However, Davis said, Novak Druce never registered an agent or address in the state, and Polsinelli—which is now operating out of the firm’s old office space—has instructed its employees not to accept mail addressed to Novak Druce.
The opinion also said that Novak Druce never authorized former partner Jeffrey B. Bove to accept service of process in Delaware, despite listing Bove as its registered agent with the state’s Division of Corporations. Bove said in an affidavit that he never agreed to act in such a capacity, and he had told counsel for Lambert and Lu that he would not accept service of the complaint.
“A creditor seeking to enforce valid claims should be able to rely on Novak Druce’s public representation that Mr. Bove is its registered agent for service of process in Delaware,” Davis wrote.
Novak did not return a call to his office at Polsinelli on Tuesday, and Bove, now with RatnerPrestia, declined to comment on the opinion.
According to court documents, Novak Druce is continuing to wind down its business and is still operating with three employees.
Lambert and Lu sued to recover the wages last December, after Novak Druce stopped making payments in September 2015. Both men resigned from the firm in May 2014, two years after a doomed merger between Houston-based Novak Druce and Connolly Bove Lodge & Hutz.
Since disbanding, Novak Druce has been accused of not compensating partners, and it is facing challenges from creditors in federal court, including a suit by Citibank demanding repayment of $3.2 million on a $10 million loan the firm’s co-founders underwrote in 2013.
Davis on Monday rejected Novak Druce’s defenses, finding the firm owes $20,920 and $15,398 to Lambert and Lu, respectively.
“Despite its obligations to maintain registered agents or offices, Novak Druce failed to abide by the law,” he wrote. “Counsel for Mr. Lambert and Mr. Lu labored through this and provided valid notice of the complaint.”
Brian M. Gottesman, a Berger Harris attorney representing Lambert and Lu, said Tuesday in a written statement that he was pleased with the ruling.
“Lu and Lambert, as employees of Novak Druce, were entitled to receive wages for the work they performed, and that a sophisticated law firm should not be permitted to avoid payment of those wages by stratagems designed to avoid service of process,” Gottesman said.
The case was captioned Lambert v. Novak Druce Connolly Bove and Quigg.