Jackson v. Reed Smith LLP (In re Jackson)

• Docket Number: 3:21-cv-00911(VLB),Bankruptcy Court 15-21233(AMN)
• Decision Date: 30 June 2023
• Parties: In re Curtis James Jackson III, Debtor v. Reed Smith LLP, and Peter Raymond, Appellees Curtis James Jackson III, Appellant Adv. Pro. No. 17-02005 (AMN)
• Court: U.S. District Court — District of Connecticut

1

In re Curtis James Jackson III, Debtor

Curtis James Jackson III, Appellant
v.
Reed Smith LLP, and Peter Raymond, Appellees

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

No. 3:21-cv-00911(VLB)

Bankruptcy Court No. 15-21233(AMN)

United States District Court, D. Connecticut

June 30, 2023

MEMORANDUM OF DECISION

Hon. Vanessa L. Bryant, United States District Judge.

This appeal arises from an adversary proceeding connected to appellant Curtis James Jackson, III's Chapter 11 bankruptcy petition. After Jackson-better known as the rapper, 50 Cent-filed for bankruptcy in 2015, appellees Reed Smith, LLP and one of its former partners, Peter Raymond filed a proof of claim, contending that Jackson owed them $609,235.41 in attorneys' fees and costs. Jackson lodged five counterclaims against Reed Smith and Raymond for legal malpractice and breach of fiduciary duty. (AP ECF 1 (Obj. & Countercl.).)^[1]

The counterclaims' underlying facts concern Appellees' representation of Jackson in a lawsuit filed by Lastonia Leviston, a woman depicted in a sexually explicit video (“Video”). She alleged Jackson's publication of the Video without her consent violated New York state law and constituted intentional infliction of emotional distress (“IIED”). Jackson terminated Appellees a few months before

2

trial. With replacement counsel, the jury returned a $7,000,000 verdict in favor of Leviston.

Appellees moved to dismiss Jackson's operative counterclaims. The bankruptcy court dismissed nearly all counterclaims except a portion of Count 2: whether Appellees committed legal malpractice by failing to conduct and preserve discovery of three witnesses, which, if conducted, would have mitigated or absolved Jackson's damages. (AP ECF 62 (Dec. Mot. Dismiss) at 23.) After discovery concluded, Appellees moved for summary judgment on the remaining counterclaim. The bankruptcy court granted summary judgment in favor of Appellees. (AP ECF 395 (Dec. Mot. Summ. J.) at 58.)^[2]This appeal followed.

I. BACKGROUND

The Court presumes familiarity with the facts and evidence but includes this Background for the reader's benefit. Because this appeal involves the bankruptcy court's decisions on the motion to dismiss and motion for summary judgment, the Court will first cite to the pleadings and transition in section I.C to discussing evidence relevant to the appeal.

A. The Parties and their Attorney-Client Relationship

Appellant Curtis James Jackson, III, also known as 50 Cent, is a well-known rap music performer, entertainer, and entrepreneur. (AP ECF 22 (Am. Obj. & Countercl.) ¶ 6.) On February 2, 2004, Jackson entered into a retainer agreement

3

with Appellees Reed Smith LLP and one of its partners, Peter Raymond (together, “Appellees”), to represent him on certain legal matters (“Retainer”).^[3](Id. ¶ 42.) This Retainer is the only fee agreement between the parties. (AP ECF 22 ¶ 24.) Appellees represented Jackson until they were terminated on March 27, 2015. (Id. ¶ 108.)

The Retainer contemplated the scope of representation and discharge. The first sentence indicates, “We are pleased that you desire to have us represent you in connection with certain of your activities in the entertainment business and with respect to third party claims and lawsuits that have been filed against you.” (AP ECF 22-8 at 1.) Either party could terminate the agreement “at any time by written notice, subject to [Jackson's] obligation to pay [Appellees'] fees as described below and subject on [Appellees'] part to applicable rules of professional conduct.” (Id.)

The Retainer also explained Appellees' co-counsel relationship with Jackson's attorney, Theodor K. Sedlmayr of Sedlmayr & Associates. (Id. at 3.) Namely, “Reed Smith LLP has agreed to compensate Mr. Sedlmayr for his services as liaison to Reed Smith” for his services connected to Reed Smith's billings. (Id. at 3-4.)

B. The Leviston Action

On February 24, 2010, Lastonia Leviston filed a complaint against Jackson in New York state court, alleging he unlawfully posted a “sexually explicit

4

videotape” depicting Leviston “without her knowledge or consent.”^[4] (AP ECF 224 (Am. Obj. & Countercl. Ex. D, Leviston Compl.) ¶ 1.) According to the Complaint, Leviston and Maurice Murray were in a romantic relationship and videotaped themselves “engaging in sexually explicit activities” on June 30, 2008. (Id. ¶¶ 46.) She intended the Video to be private and thereafter explicitly asked Murray to destroy it. (Id.) However, around March 1, 2009, Murray gave or sold the Video to Jackson without Leviston's knowledge or consent. (Id. ¶ 7.) Jackson then edited the Video; narrated and appeared in the edited version; published it; and then publicly described Leviston as a “call girl,” “Brooke,” and the mother of a child with his rival, William A. Robert II, also known as Rick Ross (“Rick Ross”). (Id. ¶¶ 7-13.) Leviston asserted three counts- (1) violation of sections 50-51 of the New York Civil Rights Law, (2) IIED, and (3) defamation-and sought compensatory, special and punitive damages. (Id. ¶ 1.)

Jackson alleges that Appellees did not obtain certain discovery key to his defense. First, Appellees did not subpoena documents from NING Interactive Inc., the internet provider that hosted the website owned by Rick Ross where the Video was allegedly first published (“Internet Provider”). (Id. ¶ 16.) Second, Appellees did not interview or depose Rick Ross, Murray or the Internet Provider (collectively, “Three Uncalled Witnesses”). (Id. ¶¶ 17, 61.) Instead, on February 22, 2012, Appellees entered into a binding stipulation agreement with Leviston's counsel in which they agreed not to call any witness to testify who had not previously been

5

disclosed and deposed.^[5] (Id. at ¶¶ 17, 63; AP ECF 22-6 (Am. Obj. & Countercl. Ex. F, Stip.) ¶¶ 8-10.) Because Appellees never identified any of the Three Uncalled Witnesses, he was not permitted to call them to testify. (Id. ¶ 68.) Jackson alleges that these witnesses were “material, relevant, and critical” to his defense concerning liability and damages. (See id. ¶¶ 85,93, 101.)

On March 27, 2015, Jackson terminated Appellees. (See id. ¶ 108.) According to Jackson, Appellees “represented that they would cooperate with and provide all the material, documentation, and information to Jackson's new counsel, Bickel & Brewer, but failed and refused to cooperate with new trial counsel, which was to the detriment and prejudice of Jackson and caused him to be subject to an unfavorable jury verdict.” (Id. ¶ 20.) Replacement counsel sought to reopen discovery to depose the key witnesses, but the court denied the request. (See Id. ¶ 103.) Trial commenced, concluded, and the jury awarded actual and punitive damages in the sum of $7,000,000. (Id. ¶ 21.)

C. Chapter 11 Bankruptcy Proceedings

On July 13, 2015, Jackson filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. (Id. ¶ 1.) Reed Smith filed its Proof of Claim on November 3, 2015, claiming Jackson owes the firm $609,235.41. (See AP ECF 22-1 (Am. Obj. & Countercl. Ex. A, Proof of Claim).) Jackson lodged objections on October 18, 2016. (AP ECF 22 ¶ 2.)

6

1. The Pleadings

On January 27, 2017, Jackson initiated an adversary proceeding against Appellees, (see AP ECF 1 ¶¶ 2, 30-32). Appellees moved to dismiss Jackson's Counterclaims on April 17, 2017. (See AP ECF 16 (Mot. Dismiss).) On May 22, 2017, Jackson timely filed Amended Counterclaims, which constitute the operative pleading in this case. ^[6](See AP ECF 22.)

There are five Amended Counterclaims with the following titles: (1) “first cause of action for malpractice, breaching a fiduciary duty in having an unwaivable conflict of interest and failing to exercise due diligence in representing Jackson;” (2) “second cause of action for breaching a fiduciary duty and malpractice in failing to conduct reasonably competent pre-trial investigation and discovery of key material witnesses and engaging in other conduct prejudicial to Jackson's defense;” (3) “third cause of action for breach of fiduciary duty and malpractice by charging excessive legal fees;” (4) “fourth cause of action for breach of fiduciary duty and malpractice for pursuing litigation on a matter for which [Appellees] believed Jackson did not have a viable defense for and failing to engage in meaningful settlement negotiations to seek expedited resolution of the matter;” and (5) “fifth cause of action for breach of fiduciary duty and malpractice in failing to develop a reasonably competent defense to Leviston's claims against Jackson made pursuant to New York Civil Rights Law Sections 50 & 51 and Intentional Infliction of Emotional Distress.” (Id. at Causes of Action.) In summary, each count

7

asserts a legal malpractice claim and a breach of fiduciary duty claim for a specific set of facts.

Appellees filed its second Motion to Dismiss the adversary proceeding on June 19, 2017. (See AP ECF 27 (Mot. Dismiss).) The bankruptcy judge held a hearing on May 23, 2018 and ordered supplemental briefing. (See AP ECF 48 (Audio File).) The motion was fully briefed by June 28, 2018. (See AP ECF 59 (2d Supp. Br.).)

On March 1, 2019, the bankruptcy court issued its decision on the motion to dismiss. (AP ECF 62 (Dec. on Mot. Dismiss).) At the outset, the bankruptcy court dismissed all breach of fiduciary duty claims that arose from Appellees' representation of Jackson during the Leviston case, concluding that they were duplicative because they were based on the same facts and alleged the same damages. (Id. at 16-17.) The only breach of fiduciary claim the bankruptcy court did not dismiss as duplicative was part of Count 2-Appellees' failure to cooperate with replacement counsel-on the grounds the alleged breach arose after Jackson terminated Appellees. (Id. at 17.) The bankruptcy court nonetheless dismissed the Count 2 breach of fiduciary duty claim for failure...