Haire v. Smith, Currie & Hancock LLP

• Decision Date: 28 February 2013
• Docket Number: Civil Action No. 12–749 (JDB).
• Citation: 925 F.Supp.2d 126
• Court: U.S. District Court — District of Columbia
• Parties: Dirk D. HAIRE and Reginald M. Jones, Plaintiffs, v. SMITH, CURRIE & HANCOCK LLP, Defendant.

925 F.Supp.2d 126

Dirk D. HAIRE and Reginald M. Jones, Plaintiffs,

v.SMITH, CURRIE & HANCOCK LLP, Defendant.

Civil Action No. 12–749 (JDB).

United States District Court,

District of Columbia.

Feb. 28, 2013.

Eric N. Heyer, Schwartz & Associates PLLC, Washington, DC, for Plaintiffs.

Everette L. Doffermyre, Doffermyre, Shields, Canfield, Knowles & Devine, Atlanta, GA, Gary Edward Mason, Whitfield Bryson & Mason LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION

JOHN D. BATES, District Judge.

Dirk Haire and Reginald Jones (collectively “plaintiffs”) initiated this action in the Superior Court of the District of Columbia against their former law firm, Smith Currie & Hancock, LLP (“Smith Currie” or “defendant”), alleging conversion and breach of contract claims. They also seek declaratory relief that neither of them violated the Smith Currie Partnership Agreement; that the liquidated damages clause of the agreement is unenforceable as violative of public policy; and that the arbitration provision of the Partnership Agreement does not apply to their claims. Haire also seeks a declaration that he is entitled to retain all the funds paid to him by Smith Currie prior to his withdrawal from the partnership. Compl. ¶ 1. Before the Court is Smith Currie's motion to dismiss or to stay and compel arbitration. For the reasons discussed below, Smith Currie's motion to compel arbitration will be granted and the case will be dismissed.

BACKGROUND

Smith Currie is an Atlanta-based law firm with several offices around the country, including one in Washington, D.C. Id. ¶ 4, 8. Haire, an attorney who specializes in construction law, was an equity partner at Smith Currie from January 1, 2011 through August 31, 2011. He has been a partner with the law firm Fox Rothschild since September 1, 2011. Id. ¶ 2. Jones specializes in government contracts, and was an equity partner with Smith Currie from 2006 through August 31, 2011. He is also now a partner with Fox Rotshchild since September 1, 2011. Id. ¶ 3.

Smith Currie's Washington, D.C. office consisted of plaintiffs, one additional partner, five associates, and five staff members. Id. ¶ 8. In 2011, Haire and Jones grew concerned about the firm's financial condition and their levels of compensation compared to their contributions. They claimed that they were among the firm's top performers for hours billed and revenues collected, and that few of the firm's equity partners were on pace to bill the required hours. Plaintiffs repeatedly requested that the firm adjust its compensation plan to reflect their contributions to the firm's revenues and productivity, but these requests were rejected. Id. ¶¶ 13, 15–16. Hence, in August 2011, plaintiffs announced they would leave Smith Currie to join Fox Rothschild. Id. ¶ 16. Ultimately, Fox Rothschild hired the associates and staff members in Smith Currie's Washington, DC office and took over the lease from Smith Currie for the office space. Id. ¶ 19.

Smith Currie and plaintiffs had signed a Partnership Agreement, which governed their relationship. Id. ¶ 10. The Partnership Agreement sets forth the duties of partners, how distributions were made, and terms relating to changes in the partnership. It also contains an arbitration provision, which states the following in relevant part:

(b) Arbitration. Any dispute (not resolved by mediation) arising out of or relating to this Agreement, or any alleged breach hereof, or arising out of or relating to the Partners and the Partnership, shall be settled by voluntary arbitration conducted in Georgia. Partnership Agreement Art. X § 10.2(b).

The arbitration provision also states that the arbitration “shall follow the Commercial Arbitration Rules of the AAA, as amended and in effect on the date a Demand for Arbitration is filed.” Id. It further provides that “[t]he arbitrator(s) shall be governed by and shall apply the substantive law of the State of Georgia in making its or their award.” Id.

Plaintiffs claim that when they terminated their partnership, they were told that their capital contributions would be returned. Compl. ¶ 17. However, Smith Currie informed plaintiffs by letter that it would seek damages for their alleged breaches of the Partnership Agreement and for breach of fiduciary duty. Id. ¶ 21. Smith Currie also claimed that plaintiffs owed certain allocated amounts for fees associated with the Washington, DC office and that it could use plaintiffs' capital contributions to offset those obligations. Id. It also sought return of $166,105 in “overpayments” that Haire had received as compensation. Id. ¶ 22.

On April 18, 2012, plaintiffs filed this action in the Superior Court of the District of Columbia. It was subsequently removed to this Court. The complaint contains three counts. The first two counts allege conversion and breach of contract claims against Smith Currie, based on its alleged refusal to return plaintiffs' capital contributions and its demand that Haire return alleged “overpayments.” Compl. ¶¶ 25–34. Plaintiffs also seek a declaratory judgment that the arbitration provision is inapplicable to plaintiffs' claims; that they did not violate the Partnership Agreement; that they could keep any funds paid to them prior to their withdrawal from the partnership; and that the liquidated damages provision of the Partnership Agreement is void and unenforceable as contrary to public policy. Compl. ¶¶ 35–39. Smith Currie has moved to dismiss or to stay and compel arbitration. See Def.'s Mot. to Dismiss or to Stay and Compel Arb. [ECF 2] (“Def.'s Mot.”). Plaintiffs oppose the motion, arguing that, as former partners, they ceased to be bound by the arbitration provision in the Partnership Agreement.¹

DISCUSSION

I. Standard of Review

When considering a motion to compel arbitration, “the appropriate standard of review for the district court is the same standard used in resolving summary judgment motions” pursuant to Federal Rule of Civil Procedure 56(c), “as if it were a request for summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate.” Aliron Int'l, Inc. v. Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C.Cir.2008) (internal citation and quotation marks omitted); see also Brown v. Dorsey & Whitney, LLP, 267 F.Supp.2d 61, 67 (D.D.C.2003). The party seeking to compel arbitration must “present ‘evidence sufficient to demonstrate an enforceable agreement to arbitrate.’ ” Hill v. Wackenhut Servs. Int'l, 865 F.Supp.2d 84, 89 (D.D.C.2012) (quoting and citing SmartText Corp. v. Interland, Inc., 296 F.Supp.2d 1257, 1263 (D.Kan.2003)). The burden then shifts to plaintiffs to show that there is a genuine issue of material fact as to the making of the agreement. Id. (internal citation and quotation marks omitted). “The Court will compel arbitration if the pleadings and the evidence show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fox v. Computer World Servs. Corp., 920 F.Supp.2d 90, 96, 2013 WL 385610, at *3 (D.D.C.2013) (internal quotation marks and citation omitted).

II. Applicable Law

As an initial matter, it is not entirely clear what law applies. There are three potential candidates: federal law, the law of the District of Columbia, and Georgia law. Smith Currie maintains that this case is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). Plaintiffs do not appear to dispute the application of the FAA, and indeed, rely on federal law in their briefs; however, they initially filed this action in the Superior Court of the District of Columbia, and they also rely on District of Columbia law.

The FAA is clearly relevant to this case. Arbitration agreements relating to interstate commerce, regardless of whether the challenge is brought in state or federal court, are governed by the FAA. See Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 447–48, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006). The FAA “create[s] a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). To the extent there are conflicts between state arbitration law and the FAA that would contravene the pro-arbitration policies embodied in the FAA, the FAA applies and preempts such state laws. See Preston v. Ferrer, 552 U.S. 346, 360–63, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008).

The “central purpose of the FAA is to ensure that private agreements to arbitrate are enforced according to their terms.” Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 458, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (internal citations and quotations omitted). The FAA states that:

A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... or the refusal to perform the whole or any part thereof, ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. This section “declare[s] a national policy favoring arbitration of claims that parties contract to settle in that manner.” Preston, 552 U.S. at 352, 128 S.Ct. 978 (citing Southland Corp., 465 U.S. at 10, 104 S.Ct. 852). Any doubts regarding the scope of arbitrable issues should be resolved in favor of arbitration. Moses H. Cone, 460 U.S. at 24–25, 103 S.Ct. 927. The FAA also provides for a court to stay its proceedings when an issue is referable to arbitration and for a party to apply for an order to compel arbitration as provided for in the arbitration agreement. 9 U.S.C. §§ 3–4.

Although the FAA applies, the issue of whether a matter should proceed to arbitration also relies on certain state law...