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Accountant to the Stars Loses Legal Fight with Breakaway Partner

A judge has ruled against one of Hollywood’s top business management firms, blocking it from enforcing a non-compete agreement against a former partner.

The case involves a high-stakes fight within NKSFB, which provides accounting and business management services to Hollywood stars, athletes and musicians. The company, led by Mickey Segal, has accused ex-partner Wayne Kamemoto of trying to poach clients and staffers when he left the firm earlier this year.

Kamemoto is a veteran music business manager, with clients including Rage Against the Machine and Cypress Hill. He alleges that NKSFB has sidelined him since January, scaring off prospective employers by threatening to enforce the invalid non-compete agreement.

Kamemoto filed suit in February. Earlier this month, a Los Angeles Superior Court judge granted an injunction that bars NKSFB from enforcing the provision. NKSFB has appealed, and is separately seeking $20 million in damages from Kamemoto in arbitration.

Charles Jung, Kamemoto’s attorney, told Variety that his client feels vindicated by the judge’s ruling.

“It couldn’t be clearer in the law that non-compete agreements are just flatly void,” Jung said. “It’s not right that large companies can use their legions of highly paid lawyers to tie up an employee with threats of legal fees, in order to achieve through bullying what they couldn’t achieve through the law.”

Kamemoto worked at David Weise & Associates from 2005 through 2018, when the company was sold to NKSFB for $28 million. As part of the sale, Kamemoto signed an agreement stating that he would not compete with NKSFB or solicit its clients. According to Kamemoto’s complaint, NKSFB’s principals threatened to ruin him financially if he dared to leave the firm and work elsewhere.

The complaint quotes David Weise as telling him last fall that the company would “bankrupt” him. Later, Weise allegedly conceded that the non-compete was unenforceable, but said that did not mean that the company “won’t come after you,” the complaint alleges.

“He also told Kamemoto to think about his children, since they would be impacted financially by the legal action the firm would certainly take against Kamemoto if he chose to compete,” the complaint states.

Segal, the managing partner of NKSFB, is also quoted in the complaint as warning Kamemoto to “get ready for two-and-a-half years of litigation and spending $750,000.”

Segal and Weise have each denied making any such statements.

According to NKSFB’s demand for arbitration, Kamemoto was making a base salary of $450,000 at David Weise & Associates. He earned a $750,000 bonus in 2018, and was paid $1.75 million as part of the sale to NKSFB, according to the demand. Kamemoto had 49 clients at the time of his departure, and his clients brought in millions of dollars to the firm, accounting for 21% of David Weise & Associates’ business, according to his attorney.

Kamemoto alleges that Weise coerced him into signing the non-compete provision as part of the sale in late 2018. When he initially balked, he said that Weise subjected him to a “loud, profanity-laden tirade over the phone while he was with his family.”

Kamemoto signed, but became disaffected under the new firm. According to a letter sent by Jung, Kamemoto was particularly concerned that the company was steering its clients to an insurance brokerage that was partially owned by NKSFB. Kamemoto believed it was “unethical and illegal” to direct clients to the broker, who he deemed “grossly inexperienced” in music and entertainment. He was rebuffed when he raised concerns about potential liability, according to the letter. NKSFB has denied the allegations.

He was later told that he would receive no bonus for 2019, according to the letter. Kamemoto raised concerns about his compensation, but efforts to renegotiate stalled, according to the arbitration demand. Kamemoto began plotting his departure from the firm in June 2020, according to the demand.

“His actions since that time demonstrate that he sought to take Claimants’ employees and clients with him to his next firm, which directly violates the previously mentioned non-solicitation, confidentiality and non-competition provisions in the agreements with Claimants,” the demand states.

Kamemoto’s attorneys have argued that he was an employee — with no equity in the company — and therefore cannot be bound to a non-compete agreement under long-standing California law.

In his ruling on April 5, Judge Robert Draper agreed with Kamemoto, and issued the injunction.

“These clauses, on their face, are void and illegal,” Draper wrote, “and Kamemoto has clearly established that he is likely to succeed on the merits of this action.”

According to the suit, Kamemoto was in talks to join a rival firm in January. But that broke down when NKSFB demanded a $4 million “buyout” from the new firm to allow him to leave. He alleges that the ongoing battle with his former employer has clouded his prospects with other firms as well, though NKSFB denies that it has prevented him from working.

Since February, Kamemoto’s income has been cut to zero, and he has been sidelined.

“All of my former clients are being forced to replace me with other business managers,” Kamemoto said in a declaration. “In this line of work, clients cannot go without a business manager for even a week. The longer a client who wants to work with me has to work with another business manager instead, the less likely it is that I will be able to re-build my book of business.”

Patty Glaser, the attorney who represents NKSFB, said the case will continue in arbitration and before the appeals court.

“We have the merits on our side,” she said. “We believe he does not have the merits on his side.”

Written by kinq

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