One of the most prolific filers of lemon lawsuits against auto makers has countersued a former partner in a dispute involving more than $2 million in attorney fees.
Knight Law Group (KLG) filed the complaint against Hackler Daghighian Martino & Novak (HDMN), formerly known as the Law Offices of Michael H. Rosenstein, and others, alleging misappropriation of trade secrets, conspiracy, fraud, intentional interference with contractual relations, prospective economic advantage and breach of contract.
The suit filed last month in Los Angeles Superior Court claims the defendants stole clients, cases and employees to form a new venture, to the detriment of KLG. The counterclaim was in response to a suit filed by Rosenstein against KLG arguing that payments had stopped despite an oral contract that required a division of fees.
Knight Law Group, owned by attorney Steve Mikhov, has filed more than 4,000 lemon lawsuits under the Song Beverly Warranty Act against automakers in California.
Many of its cases target Ford Motor Co. over allegedly defective transmissions in Fiesta and Focus vehicles and Volkswagen involving clean diesel emissions violations. This past year, KLG has suffered several court losses: verdict reversals, having to pay defense costs, questionable fees slashed and minuscule jury verdicts.
“Disputes between lawyers happen often, but they are generally able to be settled privately without resorting to public filings,” Nicole Clark, a Los Angeles business litigation attorney, said. “That such prolific litigants are now fighting each other is evidence of the massive business of lemon law claims and the significant value of leads and referral fees to those in the industry.”
The cross-defendant in KLG's suit claims they are owed in excess of $2 million, plus some $125,000 for non-associated cases and $48,000 in unreimbursed costs.
“The fact that a single firm could file and handle so many cases seems to demonstrate that the majority of these cases will get settled relatively quickly making these complaints a volume-based business calculus for the filing attorney,” Clark told the Southern California Record.
KLG alleges it was induced into sharing trade secrets, clients, and valuable cases all while the cross-defendant surreptitiously siphoned off its most valuable contacts in an effort to launch their own separate and competing lemon law firm.
“Knight is not arguing that an oral agreement to pay referral fees to Rosenstein’s law firm was never entered into,” Clark, founder of judicial analytics platform Trellis, said. “Instead, Knight argues that the oral agreement is itself unenforceable because the oral nature of the agreement violates rules of professional conduct for fee sharing and client notice requirements.”
According to the complaint, KLG noticed that Sepehr Dayan Daghighian’s relative, Kevin Yaghoubzadeh – who changed his last name in 2018 to Jacobson and who worked as a lawyer for HDMN in KLG's offices – would linger around the lobby and other areas of the office and try to talk with clients and prospective clients of KLG.
Additionally, KLG claims that Rosenstein’s Law Office intentionally avoided taking KLG's cases to trial in order to avoid referral fees and instead put effort and energy into the cases and leads which were funneled away from KLG.
“These allegations not only indicate a breach of contractual obligations but also breaches of Rosenstein’s law office’s professional obligations to always put the client's interest ahead of the attorneys professional and/or monetary interests,” Clark said. “It’s surprising to see allegations of direct fraud and attorney-in-fighting laid out so publicly particularly when it puts at issue each firm's duties to their clients.”