West Palm Beach attorneys from Mrachek Fitzgerald Rose Konopka Thomas & Weiss won a $3.17 million verdict and defeated a counterclaim by New York-based investment group, Reliance Agency Network LLC.

Shareholders Gregory S. Weiss and Alan B. Rose represented Michael Buza, who sued Reliance over its purchase of his insurance business in Florida.

Buza owned 12 insurance agencies the investors agreed to purchase for $18.8 million, according to the amended complaint filed in March 2017. The parties set the sale price based on the business' 2015 profits, and held $3.3 million of the purchase price in escrow to cover any unexpected expenses that arose after the deal closed.

Buza said he'd spent years building the business by acquiring independent agencies across Florida. His lawyers say the buyers approached Buza with what he thought was a cash offer. But they say through evidence at trial, he later learned Reliance took a $16 million loan.

The loan bolstered Buza's claims the buyers were too cash-strapped to run their new acquisition, and had no capital for the transition.

“They didn't have funds set aside to operate the business after closing,” Weiss said. “Not only that, but they closed or consolidated a couple of the offices that we had established.”

In other words, Buza claimed the New York buyers knew little about the Florida market, and lost money by mismanaging the business. He claimed the purchase agreement included a provision for Reliance to keep him on board as consulting manager for 12 months at a $500,000 salary.

But the deal started to unravel within weeks, and Reliance canceled Buza's consulting contract after the first month.

“What they told our client and what came out at trial is they basically could not afford to pay him his salary because they were cash-strapped,” Weiss said.

Reliance painted a different picture. It filed 12 affirmative defenses and a counterclaim, alleging breach of contract against Buza, whom it claimed misrepresented the companies' profitability.

Defense counsel, Zachary Glaser and David Adams of Bennett Jacobs & Adam in Tampa, did not respond to requests for comment by press time.

But their court pleadings show the buyer claimed Buza inflated the earnings and revenue used to calculate the sale price by as much as $9 million. They argued Reliance purchased the business in June 2016, only to learn the revenue for the second half of the year fell far short of what Buza had led them to expect.

Reliance then moved to collect the money held in escrow, plus claimed the seller owed it about $6 million more for overstating revenue.

Weiss and Rose argued the allegations were part of a negotiating ploy.

“This was, in our view, their plan all along,” Rose said.

Weiss added: ”Our belief is they were attempting to renegotiate the purchase price after closing by taking the money from the escrow, by firing him a month into his 12-month consulting agreement, and by filing a counterclaim saying their was false or inaccurate representation in the 2015 net income.”

Palm Beach Circuit Judge Edward A. Garrison adjudicated the breach of contract suit. He sided with the plaintiff after a bench trial. He awarded Buza $3.17 million from the escrow account, after deducting post-closing expenses.

“Our client was very happy. He felt fully vindicated through the result,” Weiss said. ”It was a very stressful time for him, because he had built this business himself over more than a decade, and he was very personally invested in (its) success. … We were very happy to be able to get him made whole in the end.”

Case: Florida Insurance Advisory Group LLC, Florida Insurance Advisory Group II LLC, MRB & Associates II LLC, MRB & Associates III LLC, Florida Property & Casualty Insurance Agency LLC, and Insurance Advisors of South Florida LLC v. Reliance Agency Network LLC and DeSoto Moulton LLC
Case No.: 502016CA013264XXXXMB
Description: Breach of contract
Filing date: Nov. 29, 2016
Verdict date: March 14, 2018
Judge: Palm Beach Circuit Judge Edward A. Garrison
Plaintiff attorneys: Gregory Weiss and Alan Rose, Mrachek Fitzgerald Rose Konopka Thomas & Weiss, West Palm Beach
Defense attorneys: Zachary Glaser and David Adams, Bennett Jacobs & Adams, Tampa
Verdict amount: $3.17 million