Guo Wengui v. Clark Hill, PLC

• Decision Date: 20 February 2020
• Docket Number: Civil Action No. 19-3195 (JEB)
• Citation: 440 F.Supp.3d 30
• Parties: GUO WENGUI, Plaintiff, v. CLARK HILL, PLC, et al., Defendants.
• Court: U.S. District Court — District of Columbia

440 F.Supp.3d 30

GUO WENGUI, Plaintiff,

v.CLARK HILL, PLC, et al., Defendants.

Civil Action No. 19-3195 (JEB)

United States District Court, District of Columbia.

Signed February 20, 2020

Ari Scott Casper, The Casper Firm, LLC, Baltimore, MD, for Plaintiff.

Kali N. Bracey, Jessica Ring Amunson, Jenner & Block LLP, Washington, DC, John R. Storino, Leigh J. Jahnig, Jenner & Block LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

This case features an asylum-application process gone awry, accompanied by alleged professional misconduct, foreign-government cyber hacking, and social-media propaganda campaigns. After Plaintiff Guo Wengui, a Chinese businessman and prominent political dissident, retained the services of the law firm Clark Hill, PLC to assist him with an asylum petition, someone — whom the parties presume to be associated with the Chinese government — hacked into the firm's computer servers. The hacker thereby gained access to Plaintiff's confidential information and then published that information on the Internet. Compounding Wengui's problems, the firm withdrew its representation in response to the attack. Plaintiff asserts that in making his information vulnerable to a targeted hacking and subsequently withdrawing from the matter, Defendants Clark Hill and its attorney Thomas Ragland are liable for legal malpractice, breach of fiduciary duty, and breach of contract. Defendants now move to dismiss all claims.

To succeed on his tort claims, Wengui must "point to an act (or omission)" that "resulted in a loss" to him. See Seed Co., Ltd. v. Westerman, 840 F. Supp. 2d 116, 127 (D.D.C. 2012). Plaintiff has successfully pleaded that the alleged mishandling of his information and subsequent cyber attack resulted in damages. The withdrawal, however, may have added insult, but it did not add injury. In addition, he cannot establish that the withdrawal breached Defendants' contractual obligations to him. The Court therefore will dismiss all of Plaintiff's claims to the extent they rely on the theory that Defendants' withdrawal constituted a legally remediable wrong, but it will permit those claims to go forward that allege misrepresentations surrounding and mishandling of his confidential information. Finally, it dismisses the demand for punitive damages, as Plaintiff has not satisfied the high bar necessary for seeking such relief.

I. Background

A. Factual Background

As it must at this juncture, the Court draws the facts from the Complaint. See Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000). Plaintiff is a "highly successful businessman" and "well-known Chinese dissident." ECF No. 1 (Complaint), ¶ 10. While living in China, he exposed "systemic corruption" and "widespread abuse of human rights" being perpetrated by the Communist Party of China (CCP), China's ruling political party. Id., ¶ 15. These activities naturally caught the attention of the CCP, which allegedly threatened his livelihood and that of his family in order to put an end to his subversive activities. Id., ¶¶ 18–19. Fearing further persecution, Plaintiff fled his native country in 2015, and he now resides in New York. Id., ¶ 10. Wengui's escape from China has not prevented further harassment. The Chinese government has, for example, sent emissaries to demonstrate against him outside of his home as part of a larger "malicious negative propaganda campaign" organized against him. Id., ¶¶ 23–24. In response to this cross-continental maltreatment, Plaintiff set about applying for political asylum in the United States.

The source of this dispute dates back to Plaintiff's negotiations with Defendant Thomas Ragland, an attorney and partner at Defendant Clark Hill, PLC — a firm comprising about 650 lawyers — regarding potential assistance with his asylum petition. Id., ¶¶ 11–12. Hoping to secure Plaintiff as a client, Ragland assured him that both he and the firm more broadly "were qualified, capable, and competent to represent plaintiff and to protect his interests fully and professionally." Id., ¶ 28. At a subsequent meeting in August 2016, Wengui conveyed to Ragland and other Clark Hill attorneys "his standing and visibility as a prominent Chinese political dissident" and "the risks associated with and attendant to plaintiff's position as a prominent visible critic of the Chinese regime." Id., ¶ 31. Plaintiff also "warned of the persistent and relentless cyber attacks that he and his associates had endured." Id.

In further meetings with the firm, Wengui continued to warn Defendants that they should "expect to be subjected to sophisticated cyber attacks." Id., ¶ 32. In taking on Plaintiff's case, Defendants accordingly agreed to "take special precautions to prevent improper disclosure of plaintiff's sensitive confidential information." Id., ¶ 33. These precautions would include distinct measures to impede or evade cyber attacks, by, for example, "not placing any of plaintiff's information on the firm's computer server," as doing so would make the information more vulnerable to hackings. Id. Relying on the firm's commitments regarding the protection of his confidential information, Plaintiff hired Defendants, executing a letter of retention and paying the firm a retainer fee of $10,000. Id., ¶ 36.

Unfortunately for all parties involved, Plaintiff's warnings of a cyber attack, apparently as unheeded as Cassandra's, proved prescient. On September 12, 2017, the firm's computer system was "hacked" — again, both parties assume that the hacking was orchestrated by the Chinese government — "apparently without great difficulty." Id., ¶ 41. The hacker obtained a substantial amount of Plaintiff's and his spouse's personal information, such as their passport identification numbers, as well as Plaintiff's application for political asylum. Id., ¶ 43. This information, including the contents of Wengui's asylum petition, was then published and disseminated on social media. Id., ¶ 44.

Following the attack, the parties' relationship quickly dissolved. On September 19, Clark Hill's General Counsel, Edward Hood, informed Plaintiff that the firm was terminating its involvement with his case. Id., ¶ 49. Hood explained that the attack might require Ragland, along with other members of the firm, to serve as witnesses at Plaintiff's asylum proceeding, as the hacking provided evidence of the political persecution from which Plaintiff sought asylum in the United States. Id. Hood posited that because the Rules of Professional Conduct bar attorneys from playing the dual role of witness and advocate, Defendants were required to withdraw from the matter. Id., ¶¶ 49–50. At the time of that withdrawal, Plaintiff had filed an asylum application and was awaiting a hearing. Id., ¶ 51.

B. Procedural History

On September 19, 2019, Wengui filed this action against Defendants in the Superior Court of the District of Columbia. Defendants then removed the case to this Court on diversity-jurisdiction grounds. See ECF No. 1 (Notice of Removal) at 1–2. Plaintiff's Complaint asserts four counts: (1) breach of fiduciary duty; (2) breach of contract; (3) legal malpractice; and (4) punitive damages. See Compl., ¶¶ 66–93. Defendants now move to dismiss all counts, maintaining that they fail to state plausible claims for relief.

II. Legal Standard

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of an action where a complaint fails to "state a claim upon which relief can be granted." Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation omitted).

In evaluating Defendants' Motion to Dismiss, the Court must "treat the complaint's factual allegations as true and must grant plaintiff ‘the benefit of all inferences that can be derived from the facts alleged.’ " Sparrow, 216 F.3d at 1113 (citation omitted) (quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979) ) (citing Leatherman v. Tarrant Cty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993) ). The Court need not accept as true, however, "a legal conclusion couched as a factual allegation" nor an inference unsupported by the facts set forth in the Complaint. See Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ). Finally, even at the Rule 12(b)(6) stage, a court can review "documents attached as exhibits or incorporated by reference in the complaint" or "documents upon which the plaintiff's complaint necessarily relies." Ward v. D.C. Dep't of Youth Rehab. Servs., 768 F. Supp. 2d 117, 119 (D.D.C. 2011) (internal quotation marks and citations omitted).

III. Analysis

In seeking dismissal here, Defendants argue that neither the cyber attack nor the withdrawal constitutes a ground for a viable claim of legal malpractice, breach of fiduciary duty, or breach of contract. In particular, they assert that their conduct surrounding these two events did not breach any duty owed to Plaintiff. They also argue that their actions, even if improper, did not cause him to suffer any actual damages. The Court will consider the two relevant events in turn, examining the separate counts in that context, albeit slightly out of sequence.

A. The Cyber Attack

As recounted above, the Complaint alleges that: Plaintiff warned Defendants of the risk of an impending cyber attack; Defendants misrepresented the manner in which they would protect Plaintiff's confidential information from such an attack; and Defendants then failed to protect this information, allowing it to be retrieved and then publicly...