Jackson v. Bellsouth Telecommunications, Inc.

Decision Date17 September 2001
Docket NumberNo. 00-7558 CIV.,00-7558 CIV.
Citation181 F.Supp.2d 1345
PartiesSandra JACKSON, et al., Plaintiffs, v. BELLSOUTH TELECOMMUNICATIONS, INC., d/b/a Bellsouth, et al., Defendants.
CourtU.S. District Court — Southern District of Florida

Daniel S. Rosenbaum, Danielle K. Brewer, Becker & Poliakoff, West Palm Beach, FL, for plaintiffs.

Martin B. Goldberg, Jessica Lima Leyva, Lash & Goldberg, Miami, FL, Miriam R. Nemetz, Mayer Brown & Platt, Washington, DC, Lawrence S. Robbins, Robbins, Russell Englert Orseck & Untereiner, Washington, DC, for Bellsouth Telecommunications.

Miriam R. Nemetz, Mayer Brown & Platt, Washington, DC, Lawrence S. Robbins, Robbins, Russell Englert Orseck & Untereiner, Washington, DC, for Francis B. Semmes.

Deborah Sampieri Corbishley, Pamela I. Perry, Brian F. Spector, Kenny Nachwalter Seymour Arnold Critchlow & Spector, Miami, FL, for Ruden McClosky Smith Schuster & Russell, P.A., Barry Arnold Mandelkorn.

ORDER ON DEFENDANTS' MOTION TO DISMISS

MIDDLEBROOKS, District Judge.

THIS CAUSE comes before the Court on motions to dismiss filed by Defendants Bellsouth Telecommunications, Inc., Francis Semmes, and Keith Kochler (together, the "Bellsouth defendants") (DE# 110) and by Defendants Ruden McClosky Smith Schuster & Russell, P.A., and Barry A. Mandelkorn (together, the "Ruden McClosky defendants") (DE# 122). A hearing on the motions was held before this Court on September 5, 2001. The Court has reviewed the record, considered submissions of counsel, and is otherwise fully advised in the premises.

I. Background and Procedural History

The fifty-four plaintiffs in this case consist primarily of former plaintiffs in the underlying action of Linden Adams, et al. v. Bellsouth Telecommunications, Inc., Case No. 96-2473-Civ-Middle-brooks/Brown, but also number among them other individuals who were not officially parties to the Adams case, but who claim to have had their unfiled claims against Bellsouth foreclosed by the settlement of that case. The gravamen of the underlying Adams action involved claims of racial discrimination in employment practices taken by Bellsouth Telecommunications against its African American employees and applicants.

The plaintiffs in the Adams case were represented by, among others, the present Ruden McClosky defendants, who negotiated and completed in August of 1997 a global settlement of that case with those who are at present the Bellsouth defendants. Several serious ethical issues concerning the process and substance of this settlement were subsequently brought to the attention of this Court by the Adams plaintiffs, leading this Court to sanction several attorneys involved and further to rule that the individual plaintiffs were entitled to set aside their settlement of the case and prosecute their original claims. However, this allowance was predicated on the express condition that "a plaintiff must first disgorge all benefits either already received or due to be received under the terms of the settlement." Adams, Omnibus Order on Magistrate's Report and Recommendations, at 26 (S.D.Fla. Jan. 29, 2001). To date, there is no record evidence that the plaintiffs have in fact disgorged any of the proceeds of the Adams settlement, which was not refuted by counsel's representations at argument.

Instead, on October 20, 2000, plaintiffs filed their original complaint in this case. Named as defendants were the BellSouth defendants, the Ruden McClosky defendants, the Law Office of Norman Ganz (one of the plaintiffs' counsel in Adams), and Brian Neiman (individually and as an agent of Norman Ganz).1 The original complaint asserted claims for violations of 42 U.S.C. § 1981, 18 U.S.C. §§ 1961-1962 (RICO), 18 U.S.C. §§ 1341-1343 (scheme to defraud by use of mails and wire), misrepresentation (fraud in the inducement), negligent misrepresentation, breach of fiduciary duty, conversion, negligent retention, training and supervision, and intentional infliction of emotional distress.

Plaintiffs amended their original complaint as of right before service and filed their Amended Complaint on October 31, 2000. The Amended Complaint asserted claims under seven theories against the Ruden McClosky defendants: (1) violation of 42 U.S.C. § 1981; (2) conspiracy to defraud; (3) violation of 18 U.S.C. §§ 1341-1343; (4) misrepresentation/fraud in the inducement; (5) malpractice; (6) breach of fiduciary duty; and (7) conversion. The Amended Complaint also asserted numerous claims against the Bellsouth defendants, including (1) violation of 42 U.S.C. § 1981; (2) conspiracy to defraud; and (3) violation of 18 U.S.C. §§ 1341-1343. On January 2, 2001, the Bellsouth defendants moved to dismiss the Amended Complaint; on January 12, 2001, the Ruden McClosky defendants also moved to dismiss all seven claims against them. Rather than respond to the motions to dismiss, plaintiffs moved on February 1, 2001 for leave to file a Second Amended Complaint. Leave to amend was granted by Order dated February 20, 2001, and the Second Amended Complaint was deemed filed as of that date.

The Second Amended Complaint contained in total six counts against the various defendants: (1) violation of 42 U.S.C. § 1981; (2) violation of 18 U.S.C. §§ 1961-1962 (RICO); (3) misrepresentation/fraud in the inducement; (4) malpractice; (5) breach of fiduciary duty; and (6) conversion. On March 23, 2001, the Bellsouth defendants moved this Court to dismiss the Second Amended Complaint and on April 12, 2001, the Ruden McClosky defendants again followed suit, moving to dismiss Counts I, II and III of the Second Amended Complaint. On April 30, 2001, plaintiffs, without responding to the motion to dismiss, again moved for leave to amend their complaint. By Order dated May 14, 2001, the Court once again generously granted leave for plaintiffs to file a Third Amended Complaint, but this time stated:

Any claim asserted in any of the prior three complaints, that has been reasserted in the third amended complaint and attacked by pre- or post-answer motion to dismiss, will be subject to dismissal with prejudice. Absent extraordinary circumstances, no extensions will be granted to Plaintiffs to respond to any future motions to dismiss.

(italics in original; emphasis added).

On May 18, 2001, plaintiffs filed their Third Amended Complaint, which is the subject of the defendants' current motions to dismiss. The Third Amended Complaint includes claims against both the Bellsouth and Ruden McClosky defendants for violations of: 42 U.S.C. § 1981 (Count I); three federal RICO violations under 42 U.S.C. § 1962(b), (c) and (d) (Counts II through IV); three Florida RICO counts under Fla. Stat. ch. 772.103(2), (3) and (4) (Counts V through VII); and conspiracy to defraud (Count IX). The Third Amended Complaint contains a claim against the Bellsouth defendants alone for tortious interference with advantageous contractual and business relationships (Count XV), as well as claims against the Ruden McClosky defendants alone for fraud in the inducement (Count VIII); breach of contract (Count X); breach of implied duties of good faith and fair dealing (Count XI); breach of fiduciary duty (Count XII); legal malpractice (Count XIII); and conversion (Count XIV).2

On June 5, 2001, the Bellsouth defendants moved to dismiss the Third Amended Complaint in its entirety, and on June 14, the Ruden McClosky defendants moved to dismiss Counts I through IX of the Third Amended Complaint while simultaneously answering the other counts. Plaintiffs filed their memoranda of law in opposition to the motions to dismiss, and the defendants then each filed a reply memorandum in support of their motion. On September 5, 2001, the Court heard oral argument on the motions.

II. Facts

Plaintiffs here base their allegations in the Third Amended Complaint on the "fraudulent and collusive activities of Defendants during the settlement of the Adams Case." 3d Am. Compl. ¶ 15. More specifically, they allege that the Bellsouth defendants and the Ruden McClosky defendants worked in concert to cause plaintiffs to enter into a settlement agreement and final release of claims that was well below the actual value of their claims, to defraud the plaintiffs out of a large percentage of the settlement proceeds, and to prevent these and other future plaintiffs from bringing other legal action against the Bellsouth defendants. The plaintiffs also claim that the defendants' actions were based in large part on the fact that all save one of the plaintiffs are African Americans.

In August of 1997, the parties to the Adams case entered into a settlement agreement drafted by Bellsouth counsel, Francis Semmes and Keith Kochler, and which provided for the payment by Bellsouth of $1,600,000.00; plaintiffs now claim this amount to be well below the fair value of these original claims. At the time of the settlement, each plaintiff was contacted and told that a "confidential settlement" had been reached and were asked to appear at the law offices of the Ruden McClosky defendants in order to sign a "general release" of all claims against Bellsouth in exchange for a monetary amount of the settlement sum. There, Barry Mandelkorn, an attorney for Ruden McClosky Smith Schuster & Russell, P.A. and one of the current Ruden McClosky defendants, told each plaintiff that the total amount of the settlement could not be disclosed, and further advised each plaintiff that the release required him or her not to discuss the amount he or she received under the agreement. At the Bellsouth defendants' insistence, the general release also included a provision stating that breach of this confidentiality provision could result in termination of employment at Bellsouth. Plaintiffs claim that the defendants inserted this addendum to "conceal the fraudulent activities of Defendants and to keep the amount and terms of the settlement secret from Plaintiffs in order to...

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