Glassman, Edwards, Wade v. Wolf, Haldenstein Adler

• Decision Date: 10 March 2009
• Docket Number: No. 08-2336 D/P.,08-2336 D/P.
• Citation: 601 F.Supp.2d 991
• Parties: GLASSMAN, EDWARDS, WADE & WYATT, P.C. and Audet & Partners, LLP, Plaintiffs, v. WOLF HALDENSTEIN ADLER FREEMAN & HERZ, LLP; Kaplan, Fox & Kilsheimer, LLP; and Preti, Flaherty, Beliveau & Pachios, LLP, Defendants.
• Court: U.S. District Court — Western District of Tennessee

601 F.Supp.2d 991

GLASSMAN, EDWARDS, WADE & WYATT, P.C. and Audet & Partners, LLP, Plaintiffs, v. WOLF HALDENSTEIN ADLER FREEMAN & HERZ, LLP; Kaplan, Fox & Kilsheimer, LLP; and Preti, Flaherty, Beliveau & Pachios, LLP, Defendants.

No. 08-2336 D/P.

United States District Court, W.D. Tennessee, Western Division.

March 10, 2009.

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John D. Richardson, Teresa A. Boyd, The Richardson Law Firm, Memphis, TN, for Plaintiffs.

Paul Kent Bramlett, Bramlett Law Offices, Nashville, TN, Thomas H. Burt, Wolf Haldenstein Alder Freeman & Herz LLP, New York, NY, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS PURSUANT TO RULES 12(b)(6), 12(b)(2), AND 12(b)(7) OF THE FEDERAL RULES OF CIVIL PROCEDURE

BERNICE BOUIE DONALD, District Judge.

Before the Court is Defendants' Motion to Dismiss Pursuant to Rules 12(b)(6), 12(b)(2), and 12(b)(7) of the Federal Rules of Civil Procedure, filed under seal on June 17, 2008. (D.E. 10.) Plaintiffs filed a response in opposition on July 17, 2008, and Defendants filed a reply on September 8, 2008. The parties filed supplemental declarations relating to personal jurisdiction on February 13, 2009.¹

For the following reasons, the Court DENIES Defendants' Motion to Dismiss.

I. BACKGROUND FACTS²

Plaintiffs Glassman, Edwards, Wade & Wyatt, P.C. ("Glassman firm") and Audet & Partners, LLP ("Audet firm") are law firms located in Memphis, Tennessee and San Francisco, California, respectively.³ (Compl. ¶¶ 1-2.) Defendants Wolf, Haldenstein, Adler, Freeman & Herz, LLP ("Wolf firm") and Kaplan, Fox & Kilsheimer, LLP ("Kaplan firm") are New Yorkbased law firms, and defendant Preti, Flaherty, Beliveau & Pachios, LLP ("Preti firm") is a law firm located in Portland, Maine. (Compl. ¶¶ 3-5.)

According to the complaint, on or before April 7, 2006, Mary Jane Fait, a partner in the Wolf firm's Chicago, Illinois office, approached B.J. Wade ("Wade"), an attorney with the Glassman firm, and William, M. Audet ("Audet") of the Audet firm, to form a "joint venture" to serve as co-counsel for the plaintiffs in anti-trust lawsuits filed in the United States District Court for the Western District of Tennessee, styled PoolPak Technologies Corp. v. Outokumpu Oyj et al. (Civ. No. 2:06-cv-02207-BBD-tmp, filed on April 7, 2006) and United Coolair Corp. v. Outokumpu Oyj et al. (Civ. No. 2:06-cv-02211-SHM-tmp, filed on April 11, 2006). (Compl. ¶ 8.) The purpose of the joint venture was to undertake the prosecution of the above-styled actions by contributing equity in the form of attorneys' fees, expenses or costs advanced in the prosecution of these actions, to control and litigate the direction of these two actions, and to equitably share any attorney's fees derived from successful prosecution of these two actions by the three firms. (Compl. ¶ 9.) As a result of the joint venture between Plaintiffs and the Wolf firm, these parties allegedly had a fiduciary duty to each other for acts taken in furtherance of the joint venture. (Compl. ¶ 10.)

Pursuant to the agreement, the parties commenced prosecution of the litigation in the above-referenced complaints. Thereafter, on April 19, 2006, an additional action was filed relating to the two actions listed above, styled Twinco Supply Corporation v. Outokumpu Oyj et al. (Civ. No. 2:06-cv-02225-BBD-tmp). Plaintiffs and the Wolf firm continued to prosecute all three actions as a joint venture, and subsequently filed a motion to consolidate the three related actions and for appointment of interim lead and liaison counsel. (Compl. ¶ 11.) On May 25, 2006, United States Magistrate Judge Tu M. Pham entered a Report and Recommendation on Plaintiffs' motion, recommending that the Wolf, Audet, Glassman, and Preti firms be appointed as interim co-lead counsel in the consolidated action, styled In re ACR Copper Tubing Litigation (Master File no. 06-1107-D/P) ("ACR Litigation"). The Magistrate Judge further recommended that the Paul Bramlett Law Offices ("Bramlett firm") be appointed as interim liaison counsel. (Compl. ¶ 12.)

After May 25, 2006, and in furtherance of the joint venture agreement, Plaintiffs drafted memoranda, motions, and proposed orders; drafted, edited, and filed various court documents; and participated in numerous telephone conferences with the law firm defendants in the present case and with counsel for the ACR defendants in the ACR Litigation. In addition, Plaintiffs expended considerable out of pocket costs and assisted with common benefit costs advanced on behalf of the clients. All of the filings for the clients in the underlying actions were handled by the Glassman firm, and all hearings convened in the case were attended by at least one of the Plaintiffs in this case. (Compl. ¶ 13.)

On July 26, 2007, this Court entered an order granting the ACR defendants' Motions to Dismiss filed in the ACR Litigation, based on lack of subject matter jurisdiction. (Compl. ¶ 14.) Pursuant to the joint venture agreement, Plaintiffs and Defendants filed a Notice of Appeal to the United States Court of Appeals for the Sixth Circuit. The Glassman firm was listed as counsel for Plaintiffs in the action on appeal. (Compl. ¶ 15.) In December of 2007, Fait participated in a telephone call with attorneys Audet and Wade, at which time she stated that she had asked attorneys for the ACR plaintiffs to dismiss their cases on appeal. Fait further stated to Audet and Wade that if these attorneys dismissed their actions, it was her intent not to pay the Glassman and Audet firms for the services rendered. (Compl.¶ 16.) Thereafter, in or around December of 2007, Fait, on behalf of the Wolf firm, participated in a mediation session without notice to the Glassman and Audet firms, and purported to settle the case on behalf of all the plaintiffs in the ACR Litigation. (Compl. ¶ 17.) Fait's purpose in mediating the case on appeal without notice to the Glassman and Audet firms was to deprive these firms of attorney's fees for legal services rendered in the ACR Litigation.⁴ (Compl. ¶ 18.) After Plaintiffs received notice that Fait executed Orders of Dismissal in the actions pending on appeal in the Sixth Circuit, Plaintiffs filed a lien on the recovery on March 17, 2008, and filed an Amended Notice of Lien on March 24, 2008. (Compl. ¶¶ 20-21.)

On March 28, 2008, Plaintiffs filed the present lawsuit against the Wolf, Kaplan, and Preti firms. Counts I, II, and III assert claims only against the Wolf firm, whereas Counts IV and V assert claims against all three defendants. In Count I of the complaint, Plaintiffs allege that the Wolf firm, by settling the ACR Litigation on appeal without notice to the Plaintiffs and without compensating Plaintiffs for their legal services, breached its fiduciary relationship with the Plaintiffs. Count II seeks the imposition of a constructive trust on the non-client portion of the settlement proceeds, based on the Wolf firm's breach of fiduciary duty.⁵ In Count III, Plaintiffs allege that the Wolf firm breached the implied covenant of good faith and fair dealing, based on the oral agreement between Plaintiffs and the Wolf firm.

Count IV seeks a declaratory judgment against all three defendants. Count V alleges that in the event the Court determines that neither a joint venture nor an oral agreement existed, Plaintiffs should be entitled to a recovery from the Defendants in quantum meruit for their legal services rendered and expenses incurred in the prosecution of the ACR Litigation.

In the present motion, Defendants seek to dismiss the complaint pursuant to Fed. R.Civ.P. 12(b)(6), 12(b)(2), and 12(b)(7). First, under Rule 12(b)(6), Defendants contend that the complaint fails to state a claim against the Wolf firm because the alleged joint venture between Plaintiffs and the Wolf firm violates Rule 1.5(e) of the Tennessee Rules of Professional Conduct; Plaintiffs fail to allege the existence of a contract; and Plaintiffs are not entitled to recover under the theory of quantum meruit because they "provided nothing of value in this case" and did not participate in the mediation sessions that resulted in the settlements on appeal. Second, Defendants contend that the complaint must be dismissed because Plaintiffs failed to join the ACR defendants and attorney Bramlett as required under Fed. R.Civ.P. 19. Third, Defendants argue that this Court lacks personal jurisdiction over them. Fourth, Defendants claim that the complaint should be dismissed because this action violates the "first to file" doctrine.

II. LEGAL ANALYSIS

A. Motion to Dismiss for Failure to State a Claim Under Rule 12(b)(6).

A defendant may bring a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6). This motion only tests whether the plaintiff has pleaded a cognizable claim. Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988). Essentially, it allows the Court to dismiss, on the basis of a dispositive issue of law, meritless cases which would otherwise waste judicial resources and result in unnecessary discovery. See, e.g., Neitzke v. Williams, 490 U.S. 319, 326-27, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989).

To determine whether a motion to dismiss should be granted, the Court must examine the complaint. The complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed.R.Civ.P. 8(a)(2), and it must provide the defendant with "fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir.1976). While a complaint need not present detailed factual allegations, to be cognizable it must provide more than "labels and conclusions, and a formulaic recitation of a cause of action's elements will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007)(citing Papasan v....