Calomiris v. Calomiris .

• Decision Date: 09 September 2010
• Docket Number: No. 09-CV-325.,09-CV-325.
• Citation: 3 A.3d 1186
• Parties: George William CALOMIRIS, Appellant, v. Charles William CALOMIRIS, et al., Appellees.
• Court: D.C. Court of Appeals

3 A.3d 1186

George William CALOMIRIS, Appellant,

v.Charles William CALOMIRIS, et al., Appellees.

No. 09-CV-325.

District of Columbia Court of Appeals.

Argued April 20, 2010.

Decided Sept. 9, 2010.

COPYRIGHT MATERIAL OMITTED.

Ziad P. Haddad, with whom David C. Tobin, Washington, DC, was on the brief, for appellant.

Anthony J. Pagano, with whom Brian Schwalb, Seth J. Rosenthal, Steven P. Hollman, Dana Carver Boehm, and Michael D. Kass, Washington, DC, were on the brief, for appellees, Katherine Calomiris Tompros, and Jenifer and Charles W. Calomiris.

J. Bradford McCullough, with whom Stanley J. Reed, Bethesda, MD, was on the brief, for appellee, K.J.G.C. Associates, LLC.

Before REID, FISHER, and OBERLY, Associate Judges.

REID, Associate Judge:

Appellant, George William Calomiris (“George”), brought a suit against appellees, Charles William Calomiris (“Charles”), Katherine Calomiris Tompros (“Katherine”), Jenifer Calomiris (“Jenifer”), and K.J.G.C. Associates, LLC (“KJGC”) (collectively referred to as “appellees”), alleging breach of contract and breach of fiduciary duty. On appeal, George contends that the trial court erred by dismissing his claims on the grounds that they were barred by the doctrine of res judicata and Super. Ct. Civ. R. 54(d)(2). We are constrained to agree that George's claims for breach of contract and breach of fiduciary duty are not barred by res judicata or Rule 54(d)(2). Accordingly, we reverse the trial court's judgment and remand the case for further proceedings on George's breach of contract and breach of fiduciary duty claims.

FACTUAL SUMMARY

The First Lawsuit

The record reveals that, in 1975, George, and his siblings, Katherine, Charles, and Jenifer (the “Siblings”), formed a Virginia general real estate partnership known as K.J.G.C. Associates. The Partnership Agreement provided each sibling with a twenty-five percent interest in the Partnership and a right of first refusal in the event the other three siblings decided to sell any of the partnership property. In 1995, George and his siblings decided to convert the partnership into a limited liability company (“LLC”) under the laws of the District of Columbia in order to take advantage of certain tax benefits and to limit the liability of each partner. The partners executed an Operating Agreement for the newly formed LLC on July 31, 1996, which was designed generally to incorporate the provisions of the prior Partnership Agreement. However, whereas the right of first refusal in Paragraph 17(A) of the Partnership Agreement applied to the purchase of any property owned by the company, Paragraph 19 of the Operating Agreement restricted its application to the purchase of the “entire real property” of the company. In early 2006, the Siblings entered into a contract for the sale of a commercial building owned by KJGC without first affording George the right of first refusal. Around February 27, 2006, George noticed that the right of first refusal provision in Paragraph 19 of the Operating Agreement only applied to the purchase of the entire real property of the company. He believed that the law firm responsible for drafting the Operating Agreement had made a mistake in Paragraph 19; consequently, he filed a lawsuit in the Superior Court of the District of Columbia seeking to reform that provision so that it mirrored the same provision of the prior Partnership Agreement. On January 11, 2008, following a bench trial, the Honorable Gerald I. Fisher concluded that a mistake had occurred in drafting the right of first refusal provision of the Operating Agreement, and he entered a judgment reforming the Agreement so that it mirrored Paragraph 17(A) of the Partnership Agreement. KJGC unsuccessfully appealed Judge Fisher's ruling. ¹

The Second Lawsuit

On August 25, 2008, George requested reimbursement from KJGC for the attorneys' fees and costs he incurred as a result of the litigation required to reform the Operating Agreement (“Reformation Action”). His request was made pursuant to paragraph seven of the Operating Agreement, which requires KJGC to indemnify its members for attorneys' fees and costs arising out of the management of company affairs. On August 27, 2008, KJGC denied George's request for reimbursement.

After the denial of his reimbursement request, George filed a two-count complaint in the trial court on October 3, 2008. In count one, he alleged breach of contract on the ground that KJGC and his siblings failed to indemnify him, as required by the company's Operating Agreement, for the costs he incurred in litigating the Reformation Action. In count two, George alleged that his siblings and KJGC breached their fiduciary duty by denying his request for reimbursement of attorneys' fees while granting their own request for reimbursement. In response to George's complaint, the Siblings and KJGC filed a motion to dismiss pursuant to Super. Ct. Civ. R. 12(b)(6). On February 27, 2009, the Honorable Anita M. Josey-Herring held a hearing and granted the motion to dismiss both counts of the complaint on the grounds that the claims were barred by res judicata and Rule 54(d)(2). The court concluded that George could have brought his claim for attorneys' fees as part of the Reformation Action. On March 9, 2009, George filed a notice of appeal.

ANALYSIS

George argues that the trial court erred by ruling that his claims for breach of contract and breach of fiduciary duty were barred by the doctrine of res judicata and Rule 54(d)(2). He contends that they are not barred by res judicata because the cause of action for each claim did not accrue until the Reformation Action was completed and KJGC denied his request for reimbursement. He also maintains that it would have been premature to pursue his claim for attorneys' fees in the Reformation Action because, based on the terms of the indemnification provision of the Operating Agreement, KJGC had no obligation to indemnify him until there was a “finally-adjudicated legal proceeding.”

George maintains that Rule 54(d)(2) does not apply to this case because he is not seeking attorneys' fees as a prevailing party; rather, he is seeking attorneys' fees under the indemnification provision of the Operating Agreement. He asserts that the Advisory Committee Notes to the Federal Rules of Civil Procedure and the words used in Super. Ct. Civ. R. 54(d)(2) (which is based on the federal rule), affirm the view that Rule 54(d)(2) does not apply when the claim for attorneys' fees is founded upon the terms of a contract rather than upon prevailing party status.

The Siblings and KJGC respond that George's claims are either barred by his failure to file motions in accordance with Rule 54(d)(2) or by principles of res judicata. They assert that, unless the substantive law governing the Reformation Action provided that recovery of attorneys' fees was an element to be proved at trial, George was required to file a motion to recover such fees within fourteen days of the entry of judgment in accordance with Rule 54(d)(2). If, however, the substantive law governing the action provided that recovery of attorneys' fees be proved at trial, then George's claims are barred by res judicata because he was required to assert them in the Reformation Action. Under this theory, the Siblings contend that a claim for attorneys' fees arising out of a contractual provision must be brought in the lawsuit that gave rise to the claim for attorneys' fees and cannot be deferred to a second lawsuit.

Standard of Review

This court reviews dismissal of a claim pursuant to a 12(b)(6) motion de novo, “presuming the complaint's factual allegations to be true and construing them in the light most favorable to [the plaintiff].” Bleck v. Power, 955 A.2d 712, 715 (D.C.2008). Similarly, this court reviews de novo the application of the doctrine of res judicata. Elwell v. Elwell, 947 A.2d 1136, 1139 (D.C.2008).

The Res Judicata Issue

The doctrine of res judicata-or claim preclusion-“ ‘precludes relitigation of the same claim between the same parties.’ ” Elwell, 947 A.2d at 1139-40 (citing Borger Mgmt., Inc. v. Sindram, 886 A.2d 52, 59 (D.C.2005)). “The doctrine operates to bar in the second action not only claims which were actually raised in the first, but also those arising out of the same transaction which could have been raised.” Patton v. Klein, 746 A.2d 866, 870 (D.C.1999). In determining whether res judicata applies, “[w]e consider (1) whether the claim was adjudicated finally in the first action; (2) whether the present claim is the same as the claim which was raised or which might have been raised in the prior proceeding; and (3) whether the party against whom the plea is asserted was a party or in privity with a party in the prior case.” Elwell, supra, 947 A.2d at 1140 (quoting Patton, supra, 746 A.2d at 870) (internal quotation marks and other citation omitted).

George brought the first lawsuit, the Reformation Action, to reform the Operating Agreement and to enjoin KJGC from proceeding with the sale of property owned by the company. In the present suit, George claims that the Siblings and KJGC breached the company's Operating Agreement and their fiduciary duty by refusing to indemnify him for the attorneys' fees and costs he incurred in litigating the Reformation Action. George asserts that his claim for attorneys' fees is not barred by res judicata because, based on the language of the indemnification provision, his claim did not ripen until the Reformation Action was finally adjudicated. The pertinent portion of the Operating Agreement's indemnification provision reads:

The indemnification authorized by this Section 7C shall include, but not be limited to, payment of (i) reasonable attorneys' fees or other expenses incurred in connection with settlement or in any finally-adjudicated legal proceeding[.]

Operating Agreement Section 7(C). George contends that this provision only authorizes indemnification “in...