Jackson v. Reed Smith LLP (In re Jackson)

• Decision Date: 21 June 2021
• Docket Number: Case No.: 15-21233 (AMN),Adv. Pro. No. 17-02005 (AMN)
• Citation: 630 B.R. 700
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: IN RE: Curtis James JACKSON III, Debtor. Curtis James Jackson III, Plaintiff, v. Reed Smith LLP, and Peter Raymond, Defendants.

630 B.R. 700

IN RE: Curtis James JACKSON III, Debtor.

Curtis James Jackson III, Plaintiff,

v.Reed Smith LLP, and Peter Raymond, Defendants.

Case No.: 15-21233 (AMN)

Adv. Pro. No. 17-02005 (AMN)

United States Bankruptcy Court, D. Connecticut.

Signed June 21, 2021

Imran H. Ansari, Joseph P. Baratta, Baratta, Baratta & Aidala, LLP, 546 Fifth Avenue, 6th Floor, New York, NY 10036, John L. Cesaroni, Zeisler & Zeisler PC, 10 Middle Street, 15th Floor, Bridgeport, CT 06604, Counsel for Curtis James Jackson, III, Plaintiff

Thomas G. Rohback, Axinn, Veltrop & Harkrider, 90 State House Square, 9^th Floor, Hartford, CT 06103, Craig M. Reiser, Axinn, Veltrop & Harkrider LLP, 114 West 47th Street, New York, NY 10036, Counsel for Reed Smith LLP and Peter Raymond, Defendants

Re: AP-ECF Nos. 22, 300, 335, 356

MEMORANDUM OF DECISION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT, IN PART, AND DENYING MOTION FOR SUMMARY JUDGMENT AS TO PROOF OF CLAIM

Ann M. Nevins, United States Bankruptcy Judge

I. INTRODUCTION

This decision addresses whether the defendants – a law firm and one of its lawyers – are entitled to summary judgment denying legal malpractice claims asserted by their former client. As in many legal malpractice disputes, the amount of fees owed to the law firm (if any) is also in dispute.

The client – plaintiff Curtis James Jackson, III, also known as "50 Cent" ("plaintiff" or "Mr. Jackson") – filed a voluntary Chapter 11 bankruptcy petition on July 13, 2015 ("Petition Date"), commencing case number 15-21233 (the "Main Case"). Mr. Jackson is an internationally recognized recording artist, actor, and entrepreneur. ECF No. 19.¹ The bankruptcy filing occurred during a contentious New York state court jury trial, leading to a short delay in concluding the trial.

Within the umbrella of the Main Case, Mr. Jackson commenced this adversary proceeding against Reed Smith LLP ("Reed Smith") and Peter Raymond (collectively, the "defendants"), his trial attorneys until he fired them just eleven (11) weeks before the New York state court jury trial started. Mr. Jackson alleged (broadly speaking) pre-petition legal malpractice claims against the defendants and objected to Reed Smith's proof of claim filed in the Main Case for unpaid legal fees. The parties agreed the dispute would be resolved within this adversary proceeding. AP-ECF No. 22, ¶ 5; ECF Nos. 759, 762. Familiarity with the court's earlier decision limiting the issues remaining in this adversary proceeding is assumed (the "Dismissal Decision"). See , Memorandum of Decision and Order, AP-ECF No. 62.

With discovery complete, the defendants seek summary judgment as to both the plaintiff's malpractice claim and Mr. Jackson's objection to their Proof of Claim 18 (the "Proof of Claim" or "POC 18"). AP-ECF Nos. 299-304 (collectively, "Summary Judgment Motion"). The plaintiff objects. AP-ECF Nos. 333-335, 356.² The parties submitted competing statements of fact consistent with D.Conn.L.Civ.R. 56 and oral argument on the Summary Judgment Motion was held on April 13, 2021. See , AP-ECF Nos. 362, 372.

II. JURISDICTION AND VENUE

The parties consented to entry of a final order or entry of judgment by this Court, subject to traditional appeal rights. AP-ECF No. 28, p. 9, n. 1; AP-ECF No. 367; see , Fed.R.Bankr.P. 7008, 7012(b).

This court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(b), and the United States District Court for the District of Connecticut's General Order of Reference dated September 21, 1984. This adversary proceeding includes core and non-core claims. To the extent the adversary proceeding includes an objection to a proof of claim it is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A) (matters concerning administration of the estate) and (B) (allowance or disallowance of claims). To the extent the adversary proceeding includes a pre-petition claim by a now-reorganized Chapter 11 debtor (Mr. Jackson) against a creditor of the bankruptcy estate (Reed Smith) and Mr. Raymond, it is a non-core proceeding because the resolution of the claim cannot affect the estate's pool of assets to distribute to other creditors.³

Venue is properly in this District pursuant to 28 U.S.C. § 1409 because this adversary proceeding arises under or is related to the Main Case.

III. NATURE OF THE PROCEEDINGS

For over a decade the defendants represented Mr. Jackson and his companies in several litigation matters. During the period from 2010 through early 2015, this work included defending tort claims brought by Lastonia Leviston ("Ms. Leviston") against Mr. Jackson in a New York state court case captioned Lastonia Leviston v. Curtis James Jackson, III , New York State Supreme Court, Index No. 102499/2010 (the "Leviston Case"). Approximately eleven (11) weeks before the jury trial in the Leviston Case was to begin, Mr. Jackson fired the defendants and hired new attorneys to take the case to trial. The new attorneys abandoned the defendants' original trial strategy centered on Mr. Jackson's testimony. Mr. Jackson did not attend or testify during the trial, resulting in a missing witness instruction to the jury.

Ultimately, the jury returned a verdict against Mr. Jackson, finding him liable for $7,000,000 in compensatory and punitive damages. Within the Main Case here, Mr. Jackson reached a compromise with Ms. Leviston to resolve her claims and paid her approximately $4,300,000, consistent with his confirmed Chapter 11 Plan. As part of the compromise, Mr. Jackson abandoned his efforts to appeal the jury verdict and withdrew a separate lawsuit seeking contribution against another individual.

IV. RELEVANT PROCEDURAL HISTORY

a. The Pending Complaint

Mr. Jackson claims the defendants breached their duty to him because they failed to investigate, depose, and preserve the ability to call at trial in the Leviston Case three potential witnesses: William A. Roberts II, a/k/a "Rick Ross" ("Mr. Roberts"), an internet provider NING Interactive, Inc. ("Internet Provider"), and Maurice Murray ("Mr. Murray")(collectively, the "Three Uncalled Witnesses"). The plaintiff alleged other theories of liability, but they were dismissed in the earlier Dismissal Decision. See, AP-ECF No. 62.

According to the plaintiff's surviving theory, the failure to investigate and depose the Three Uncalled Witnesses and to preserve the ability to call them at trial was a proximate cause of at least a portion of the plaintiff's damages in the Leviston Case, in an ascertainable amount.

The plaintiff also objected to the majority of the defendants' legal fees arguing the fees are: (i) unreasonable under 11 U.S.C. § 502(b)(4) ;⁴ and, (ii) unenforceable due to Reed Smith's failure to provide a written letter of engagement consistent with Part 1215 to Title 22 of the Official Compilations of Codes, Rules and Regulations of the State of New York⁵ ("22 NYCRR 1215-1"). ECF Nos. 660, 832; see also, AP-ECF No. 22⁶ ("Amended Complaint"). Reed Smith's POC 18 in the Main Case sets forth its claim for legal fees totaling $609,235.91 for work performed in the Leviston Case and for work performed in an unrelated appeal to the United States Court of Appeals for the Second Circuit (the "Second Circuit Case"). See, POC 18, pp. 6-7, Schedules 1-3.

Pursuant to the Dismissal Decision, what remains of this adversary proceeding is to determine:

(1) Whether defendants committed malpractice by failing to conduct and preserve discovery of the Three Uncalled Witnesses, which, if conducted and preserved, would have mitigated the amount of damages awarded against Mr. Jackson in the Leviston Case, and

(2) Whether the Proof of Claim should be allowed, and if so, whether it should be reduced due to an alleged violation of 22 NYCRR 1215.1, an alleged conflict of interest, and/or alleged excessiveness.

AP-ECF No. 62, pp. 3-4, 27, 32-33.

b. The Motion for Summary Judgment

In the Summary Judgment Motion, the defendants argue the record presents no genuine issue of material fact and requires a conclusion they were not negligent in their representation of Mr. Jackson. See , AP-ECF No. 299-304. Defendants rely primarily on the common law principle called the "attorney judgement rule," arguing they cannot be liable for malpractice when they chose among reasonable trial strategies to create a trial defense plan focused on plaintiff's testimony rather than the testimony of the Three Uncalled Witnesses. Mr. Jackson's disagreement with this strategy, they argue, does not transform their conduct into negligence. See, AP-ECF No. 300, pp. 5-11, 19-23.

Even if they were negligent, defendants argue any breach of the duty owed Mr. Jackson was not a proximate cause of the jury's verdict against him, or any other damage resulting from the verdict. They contend multiple factors broke the chain of causation, including: (i) Mr. Jackson's replacement of trial counsel before trial; (ii) the new counsel's change of trial strategy so that Mr. Jackson did not attend most of the trial and did not testify as to liability; and, (iii) Mr. Jackson's post-trial settlement with Ms. Leviston and abandonment of any appeal. AP-ECF No. 300, pp. 26-28, 31-32. Further, even if the defendants' negligence caused Mr. Jackson's loss, defendants assert the amount of loss from any negligence is not ascertainable. AP-ECF No. 300, p. 18.

With limited discussion, the defendants assert they are entitled to summary judgment as to POC 18 because Mr. Jackson failed to produce evidence rebutting the prima facie validity of the fees or establishing the fees were excessive. AP-ECF No. 300, p. 35. The defendants' Summary Judgment Motion fails to address Mr. Jackson's argument there was a violation of 22 NYCRR 1215.1 or an alleged conflict of interest.⁷ See , AP-ECF No. 300. The defendants assert Mr. Jackson's failure to disclose an expert as to their fees' reasonableness or evidence contesting reasonableness of the fees entitles them to summary judgment. AP-ECF No. 300, p. 35.

Mr. Jackson...