Time entries often are the bane of a practicing lawyer’s existence. The best lawyers build habits and systems to capture their time accurately and contemporaneously. The less disciplined among us fall behind, reconstruct days from emails and calendars, and wind up with incomplete or inaccurate bills.
This week’s post starts with a dispute over time entries, but it quickly gives us much more. In yet another law firm business divorce—and yet another law firm operating without a robust owners’ agreement in place (see here, here, and here)—we are treated to dueling summary judgment motions and enough business-divorce lessons to fill a course syllabus.
Here we go. . .
Shoddy Billing Practices and a Clumsy Exit
Ballon Stoll, P.C. is a New York law firm. Avraham “Avi” Cutler joined the firm’s predecessor as an intern in 2006 and became a shareholder in April 2021; by December 2022 he owned 30% of the firm. Despite that substantial ownership interest, he and the other shareholders never signed a written shareholders’ agreement. But the firm had at least some history of paying out departing shareholders: two shareholders were paid out in 2020.
The relationship between Cutler and the firm began to fray over Cutler’s billing practices.
Ballon Stoll alleged that, beginning in March 2022, Cutler failed to timely report substantial amounts of billable time and related work descriptions, impairing the firm’s ability to invoice clients and collect fees. Cutler denied intentionally withholding time, but admitted that he routinely fell months behind and that the problem worsened as his practice grew. The firm eventually assigned an employee to help him reconstruct and complete his time entries.
At the same time, Cutler was planning his departure—including by coordinating with others at the firm regarding a new partnership. In November 2022, he announced that he would leave the firm the following month and open his own practice. In that same resignation email, he promised to focus on getting his billing caught up before he left.
Things Quickly Deteriorate
When Ballon Stoll asked Cutler to bill and collect on several matters, Cutler disclosed that he had received $95,663 from two firm clients. Rather than turn the money over, he said he intended to apply it against compensation he claimed Ballon Stoll owed him—funding his own payout. He explained that he did not want to leave the firm while trusting that it would later pay him the hundreds of thousands of dollars he believed he was due.
The billing cleanup collapsed as well. After accusing the other shareholders of making false allegations against him, Cutler texted that there would be “no more timesheets,” revoked the billing assistant’s access to his records, and later acknowledged that there would be “no further cooperative completion and clean-up of the timesheet process.”
The Lawsuit, Counterclaims
Ballon Stoll sued Cutler and his new firm in January 2023, asserting claims including breach of fiduciary duty, conversion, unjust enrichment, tortious interference, and an accounting. Cutler counterclaimed for, among other things, unpaid compensation, an accounting, and judicial dissolution under BCL 1104-a. He also asserted derivative claims against Ballon Stoll’s managing shareholder, Vano Haroutunian, for breach of fiduciary duty, unjust enrichment, and an accounting based upon alleged diversion of firm revenues.
The Notice to Admit
During discovery, Ballon Stoll served Cutler with requests for admission under Federal Rule 36. Cutler failed to timely respond, resulting in a critical fact being deemed an admission: effective upon his December 22, 2022 departure, he had “tendered” and “relinquished” his ownership interest in Ballon Stoll.
Cutler later moved to withdraw those admissions, insisting that although he left the firm, he never surrendered his 30% shareholder interest.
Dueling Summary Judgment Motions
After discovery closed, Ballon Stoll and Haroutunian moved for summary judgment. Ballon Stoll argued that Cutler breached his fiduciary duties by withholding billing information and cooperation necessary to collect firm receivables and by retaining client payments that belonged to the firm.
Cutler and his new firm cross-moved and Cutler separately sought relief from the deemed admissions. Cutler sought dismissal of all of the firm’s claims—arguing principally that his billing delays were unintentional and violated no written firm policy—while pressing for summary judgment on his own claims for compensation, an accounting, dissolution, and derivative relief against Haroutunian.
A Smorgasbord of Business Divorce Takeaways
Judge Edgardo Ramos’s September 4, 2026 decision, Ballon Stoll v Cutler, 23-cv-366, 2026 WL 2620794, at *1 (SDNY Sept. 4, 2026) produced a mixed bag of rulings. For business-divorce practitioners, four stand out:
Self-Help to Fund a Buyout Doesn’t Fly
Back in 2022, we published the clumsily-named post: Never the Twain Shall Meet: Damages Claims Do Not Offset the Purchase Price in Buy-Sell Agreements. The upshot of that post, discussing a then-recent case from Manhattan Commercial Division Justice Borrok, is that while courts ordinarily are inclined to enforce contractual buy-sell agreements in business divorce cases, they have little patience for self-help-style adjustments to the purchase price based on alleged claims of misconduct. Pay the buyout according to its terms, and then litigate the misconduct claims.
Judge Ramos resoundingly agreed. The Court rejected Cutler’s attempt to apply client payments made directly to him—funds to which Ballon Stoll was entitled—against the compensation he claimed the firm owed him. Whatever payout Cutler felt he was entitled to, Cutler was required to pursue it through the legal process, not use firm revenues to fund his own exit.
Lawyer Billing and Fiduciary Duties
In 2011, Weir v Holland & Knight LLP held that a departing law firm partner may breach his fiduciary duty by failing “to record, or to facilitate the firm’s collection of fees for, billable hours for work performed while a partner at the firm.”
Cutler tried to distinguish his conduct by emphasizing that Ballon Stoll could point to no written policy governing the submission of timesheets, recording of time, or billing deadlines. Judge Ramos was unpersuaded. The fiduciary-duty claim, he explained, was not about the mere “clerical duty” of timely submitting timesheets; it was about intentionally frustrating the firm’s ability to bill and collect its revenues.
In other words, falling behind on billing is one thing. Weaponizing that backlog against the firm is another.
With that distinction planted, the timing and substance of Cutler’s own statements doomed his defense. Once relations deteriorated, Cutler admittedly cut off the billing-cleanup process, withdrew access to information needed to complete his time entries, and stated that there would be “no further cooperative completion and clean-up” of the process. On that record, Judge Ramos held as a matter of law that Cutler breached his fiduciary duties to Ballon Stoll.
An Ignored Notice to Admit Tanks Derivative Standing
The Court dedicated considerable effort to deciding whether Cutler should be permitted to walk back his deemed admission that he had “tendered” and “relinquished” his shares upon leaving the firm.
Judge Ramos declined to do so. Cutler’s own statements were hardly consistent with his later insistence that he remained a shareholder, and Ballon Stoll had relied on the admission through the close of discovery. Allowing Cutler to reverse course at that stage, the Court concluded, would cause substantial prejudice.
The result calls to mind our recent discussion of Ribeiro v Libutti, where a careless pleading shortcut produced an outcome-determinative admission.
For Cutler, the consequence was fatal: once bound by the admission that he relinquished his shares before suit, Cutler lost standing to pursue derivative claims.
For the rest of us, the lesson is simple: Courts strongly prefer resolving cases on the merits, but they have little patience for perceived shortcuts or attorney inattention. When those interests collide, severe substantive consequences can result.
The Burford Abstention Doctrine is Alive and Well
When we last covered Burford abstention here, Peter Mahler discussed a then-recent decision that arguably suggested that the doctrine—once a formidable roadblock to litigating business-divorce disputes in federal court—might be eroding at the margins.
If so, Ballon Stoll welcomes it back in full force.
Judge Ramos explained that judicial dissolution implicates New York’s strong interest in regulating the governance and existence of its own business entities, and that federal courts in this Circuit have “routinely, and almost uniformly,” abstained from dissolution claims on that basis. He then raised Burford abstention sua sponte and dismissed Cutler’s dissolution claim without prejudice.
Business divorce litigants often include a dissolution claim as a point of leverage—the specter of dissolution raises the stakes and, at least in theory, can bring an unwilling adversary to the bargaining table. That lever carries considerably less force in federal court, where Burford abstention takes dissolution off the table altogether.
Conclusion
Altogether, Ballon Stoll gives us several reminders that self-help, seeking leverage through acts detrimental to the business (here, frustrating the firm’s ability to collect its revenues), and procedural missteps can complicate—and materially worsen—an already messy business divorce.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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