In a split-the-baby style dispute, two lawyers who represented an energy company are asking if they can hand over their client files to a Travis County district court after being embroiled in a fight between two shareholders.
Plaintiffs Mark Cohen and Jeff Carruth, former attorneys for the biogas-manufacturing company Cru Energy Inc., claim that they can't tell which shareholder — Michael Torres or Jeffrey Tre Krueger — should get the client files. So, the attorneys have filed an interpleader action, asking a court to decide.
"[I]t took a lot of thinking to figure out what to do," says Cohen, who says he's been a lawyer for 40 years. "I didn't know what else to do and still be ethical about it."
Cohen and Carruth's July 3 Stakeholder's Petition in Interpleader in Cohen, et al v. Krueger, et al. explains the reasons for the two lawyers' unusual decision.
As company president, Torres "has been directing litigation in the name of Cru," alleges the interpleader.
It says that, "Krueger claims to have held a shareholder's meeting and elected a new board of directors who elected him president," and terminated Torres. But Torres alleges the shareholder meeting was "invalidly called" and the elections "were in violation of the bylaws."
The plaintiffs claim they can't determine whether Torres or Krueger are entitled to the files. Among other things, they want to "deposit" the files with the court, and for Torres and Krueger to interplead their claims to the files.
Torres denied the plaintiffs' allegations "that there is a valid dispute regarding the legality" of the shareholders' meeting, according to a July 18 Original Answer, Crossclaim and Application for Appointment of Receiver. He asks the court to order that the client files be turned over to him, as Cru's "only validly appointed and elected President and Chairman of the Board of Directors."
Among other things, he alleges that he asked to inspect the books and financial records of Cru, and he wants the court to order "that he be given access." He also claims that Cru is "a candidate for the appointment of a receiver."
Krueger denied all of Cohen and Carruth's allegations in his Aug. 26 Defendant Jeffrey Tre Krueger's Original Answer to Plaintiffs' Original Petition. A few days later, he filed a notice of notice of removal in the interpleader action.
Attached to that Aug. 29 notice is the actual notice of removal that Krueger filed in the U.S. Bankruptcy Court for the Western District of Texas in Austin. It says Krueger plans to transfer the interpleader to the U.S. District Court for the Northern District of Texas in Fort Worth, which is hearing his bankruptcy case.
Krueger alleges the bankruptcy court has proper jurisdiction over the interpleader because it involves "the books and records of Cru Energy" and because Torres asked "the Travis County Court to appoint a receiver over Cru."
Previously, Cohen represented Cru Energy and Torres in a case involving a dispute between Torres and Krueger over the number of Cru Energy shares that both those shareholders own. That case was stayed because of Krueger's bankruptcy filing. There are now adversarial proceedings involving Torres and Krueger in the bankruptcy case, involving a dispute over the ownership of Cru Energy. Cohen and Carruth, a bankruptcy lawyer, represented Cru Energy in that case, says Cohen.
Cohen, an Austin solo, says he no longer represents any party in any of the litigation. Carruth, senior counsel at Weycer, Kaplan, Pulaski & Zuber in Arlington, writes in an email he no longer represents anyone in the bankruptcy case. He didn't return two telephone calls seeking further comment.
David Miller, Krueger's lawyer in the interpleader, says that interpleading the client files may have been appropriate, but he thinks Cohen and Carruth should have filed the interpleader in bankruptcy court, where the bankruptcy case is pending.
"Everybody knows where the fight is taking place. . . ." says Miller, partner in Schneider & Miller in Richardson.
But Cohen says he doesn't think the bankruptcy court would have jurisdiction over the interpleader.
"I'm not a party to the bankruptcy, and this was something that occurred after the bankruptcy, so it's not stayed by the bankruptcy filing. . . . I just filed it here because it was more convenient to me, and all the files are located here, and one of the defendants is located here," Cohen explains.
Bogdan Rentea, Torres' lawyer, says he thinks the attorney-client privilege is at issue in the interpleader, since two separate people claim they're in charge of the client and they're making "competing demands" for the client file. Cohen and Carruth "are doing the only thing they can do" by asking a court to decide what to do with the files, he says.
"Once you waive the attorney-client privilege, if you were mistaken, you are the one that would be disciplined. I'm supposed to go to my grave to protect the attorney-client privilege," says Rentea, owner of Rentea & Associates in Austin.