In re All Individual Kugel Mesh Cases
| Decision Date | 22 October 2020 |
| Docket Number | "Master Docket" PC-2008-9999 |
| Parties | IN RE: ALL INDIVIDUAL KUGEL MESH CASES |
| Court | Rhode Island Superior Court |
DECISION
Before this Court is a Motion to Stay Proceedings (the Motion) brought by Steven M. Johnson and the Law Offices of Steven M. Johnson, P.C., d/b/a The Johnson Law Firm (collectively, Defendants or JLF) concerning disputes between Defendants and Attorney John Deaton (Plaintiff or Deaton), who together represented multiple claimants in the Kugel Mesh litigation before this Court. Defendants seek to stay this case (the Rhode Island proceedings) in favor of pending arbitration in Texas (the Texas arbitration). Plaintiff opposes Defendants' Motion, arguing that Defendants have not met their burden to mandate a stay and compel arbitration. Jurisdiction is pursuant to 9 U.S.C. §§ 2 and 3, as well as G.L. 1956 §§ 8-2-14, 10-3-2, and 10-3-3.
Defendants are a Texas attorney and law firm that represent over 300 claimants in multiple forums pressing personal injury claims based on the allegation that Kugel Mesh implants manufactured by Davol, Inc., a Rhode Island entity, were defective. (Defs.' Mot. Stay 3.) Defendants signed Attorney Representation Agreements (ARAs) with each of their clients, which included contingency fee, Texas choice of law, and mandatory Texas arbitration provisions. Beginning in 2008, Defendants engaged Plaintiff, a Rhode Island attorney, to serve as local representation for 176 Kugel Mesh cases filed in this Court. JLF also engaged Plaintiff to serve as trial counsel in an additional case in the United States District Court for the District of Rhode Island, Patton v. Davol, Inc., C.A. No. 08-2316ML (Patton). For the 176 cases filed in this Court and for Patton, Defendants agreed to pay Plaintiff a percentage of the contingency fees recovered under the ARAs.
The Rhode Island proceedings went through an extended mediation process before this Court and a global settlement agreement was reached in June 2014. Defs.' Mot. Stay 4; see Deaton v. Johnson, No. 20-78WES, 2020 WL 4673834, at *3 (D.R.I. Aug. 12, 2020). To facilitate that agreement, a Qualified Settlement Fund (QSF) was created pursuant to Internal Revenue Code § 468B. (Deposit Order (Mar. 11, 2016) (Gibney, P.J.).) The venue for all disputes related to the settlement was established as the "Superior Court of Rhode Island[,]" and the global settlement agreement explicitly provided that all "Counsel and/or Co-Counsel hereby submit himself, herself, itself or themselves to the personal jurisdiction of the Superior Court of Rhode Island." Deaton, 2020 WL 4673834, at *3.
It is an understatement to say that a dispute then arose between the parties. At base, however, the dispute concerns Plaintiff's contractual claim of entitlement to his share of the attorneys' fees generated by the Kugel Mesh cases where he served as co-counsel. See Pls.' Mot. Compel (Mar. 7, 2016); Pl.'s Mot. Enforce (Jan. 24, 2020); Pl.'s Mem. Opp'n Mot. Stay (Aug. 31, 2020) (Pl.'s Mem.) 1 ("Deaton seeks the disbursement to pay him the attorney fees to which he is entitled for having represented multiple claimants in the Kugel Mesh litigation."). Both Plaintiff and Defendants have cast aspersions on each other's work, character, and conduct before this and other courts.
On March 7, 2016, Plaintiff filed a motion to compel Defendants to disclose the settlement amounts and allocations and to enforce an attorneys' lien on the QSF. (Pl.'s Mot. Compel (Mar. 7, 2016).) Acknowledging the work by Attorney Deaton witnessed by this Court and performed relative to the mediation overseen by this Court, an order was entered on March 11, 2016 providing that $1 million be segregated within the QSF to be distributed only upon further order of this Court. Deposit Order (Mar. 11, 2016) (Gibney, P.J.); see Deaton, 2020 WL 4673834, at *4. As part of those proceedings, Defendants were also ordered to provide to Plaintiff the information regarding the JLF Kugel Mesh case settlements Defendants had previously withheld. (Deposit Order (Mar. 11, 2016) (Gibney, P.J.).)
Meanwhile, in Texas, two separate disputes arising from the Kugel Mesh litigation proceeded toward arbitration. The Patton and Moreno arbitration matters each have their own intricate travel and facts but are relevant here as justification for Defendants' argument to stay proceedings. Both the Dallas and Fort Worth Courts of Appeals have held that Plaintiff is a party to those arbitrations. See Deaton v. Johnson, No. 05-16-01221-CV, 2017 WL 2991939 (Tex. App. July 14, 2017); Deaton v. Moreno, No. 02-16-00188-CV, 2017 WL 4683940, at *5 (Tex. App. Oct. 19, 2017) (). But see Patton v. Johnson, No. 17-259WES, 2018 WL 3655785, at *3 (D.R.I. Aug. 2, 2018), aff'd, 915 F.3d 827 (1st Cir. 2019) ().
Plaintiff filed a motion with this Court for disbursal from the QSF on January 24, 2020, seeking an order that the entire segregated portion of the QSF be disbursed to him. (Pl.'s Mot.Enforce.) This claim was based on Plaintiff's share of the contingency fees for the 176 Rhode Island Kugel Mesh cases and the Patton case, and also as reimbursement for what Plaintiff spent supporting Patton's post-settlement suit against JLF. Defendants filed a motion to intervene, which was granted, and then attempted to remove the disbursal motion to federal court on February 13, 2020. (Defs.' Mot. Intervene (Feb. 7, 2020); Order (Feb. 11, 2020); Notice Removal (Feb. 13, 2020).) Plaintiff filed his motion to remand, which the District Court granted because that court decided it was not a "civil action" pursuant to 28 U.S.C. § 1441(a) and lacked diversity pursuant to 28 U.S.C. § 1332. Deaton, 2020 WL 4673834, at *9. Additionally, the District Court found that the motion for disbursal "amounts to the latest chapter - a quintessential 'continuation' - of the ongoing Superior Court proceeding" and that Plaintiff's entitlement to his share of the attorneys' fees was "inextricably intertwined with the proceedings over which the Superior Court has already presided, including ordering discovery and issuing preliminary rulings about Deaton's fee entitlement." Id., at *8.
Defendants argue that the dispute between the former co-counsel as to Deaton's entitlement to attorneys' fees and other amounts should properly be part of the pending Texas arbitrations. (Defs.' Mot. Stay 3.) Plaintiff contends that JLF does not meet any of the three requirements for a mandatory stay of court proceedings in favor of arbitration. (Pl.'s Mem. 2-8.) In response, Defendants attempt to invoke the equitable doctrine of estoppel in support of the imposition of a duty to arbitrate in this case, despite the absence of an arbitration agreement between the parties. (Defs.' Reply Mem. Supp. Mot. Stay (Defs.' Reply) 1-3.)
Defendants argue that Plaintiff's entitlement to the segregated funds should be determined through the pending Texas arbitration, under the Rhode Island Arbitration Act (RIAA) and the Federal Arbitration Act (FAA). (Defs.' Mot. Stay 2-3.) Defendants contend that this Court is required to issue a statutorily mandated stay in these proceedings as a result. Id. at 3, 7-8.
Plaintiff responds that Defendants have not met their burden to establish the three requirements for a mandatory stay of court proceedings under the RIAA and FAA. (Pl.'s Mem. 2-8.) First, Plaintiff claims that there is no arbitration agreement between him and Defendants. Id. at 3-5. Second, Plaintiff argues that their dispute cannot fall within the scope of an arbitration agreement that does not exist. Id. at 5-6. Finally, Plaintiff claims that JLF waived its right to seek arbitration by showing its intention to litigate through forum-shopping when it attempted to remove the matter to federal court. Id. at 6-8.
Under Section 3 of both the FAA and the RIAA, this Court is required to stay its proceedings and compel arbitration provided it makes certain findings as to the arbitrability of the dispute in question. See 9 U.S.C. § 3; § 10-3-3; see also Baggesen v. American Skandia Life Assurance Corp., 235 F. Supp. 2d 30, 32 (D. Mass. 2002); Brennan v. King, 139 F.3d 258, 264-67 (1st Cir. 1998). The Court's inquiry is "limited to ascertaining the existence of an agreement to arbitrate and the viability of the arbitration clause." Baggesen, 235 F. Supp. 2d at 32 (citing PrimaPaint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 403-04 (1967)). "A party who attempts to compel arbitration must show that a valid agreement to arbitrate exists, that the movant is entitled to invoke the arbitration clause, that the other party is bound by that clause, and that the claim asserted comes within the clause's scope." InterGen N.V. v. Grina, 344 F.3d 134, 142 (1st Cir. 2003); see Baggesen, 235 F. Supp. 2d at 32 (). However, "courts should be extremely cautious about forcing arbitration in 'situations in which the identity of the parties who have agreed to arbitrate is unclear.'" InterGen N.V., 344 F.3d at 143 (quoting McCarthy v. Azure, 22 F.3d 351,...
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