Jacobsen v. Oliver

• Citation: 451 F.Supp.2d 181
• Decision Date: 08 September 2006
• Docket Number: Civil Action No. 01-1810 (PLF).
• Parties: David P. JACOBSEN, et al., Plaintiffs, v. James J. OLIVER, et al., Defendants.
• Court: U.S. District Court — District of Columbia

451 F.Supp.2d 181

David P. JACOBSEN, et al., Plaintiffs, v. James J. OLIVER, et al., Defendants.

Civil Action No. 01-1810 (PLF).

United States District Court, District of Columbia.

September 8, 2006.

Emil Hirsch, Paul L. Knight, O'Connor & Hannan, L.L.P., Washington, DC, for Plaintiffs.

Charles Henry Carpenter, Stephen M. Truitt, Pepper Hamilton LLP, George Alexander Lehner, U.S. Department of State, Washington, DC, David Richman, Pepper Hamilton, LLP, Philadelphia, PA, for Defendants.

OPINION

PAUL L. FRIEDMAN, District Judge.

This legal malpractice lawsuit arises out of the successful representation of plaintiff David Jacobsen by his former attorneys, James J. Oliver, Carla E. Connor, and Barbara A. Barnes, and their law firm, Murphy Oliver Caiola & Gowen, P.C. (collectively "defendants"), in two actions against the Islamic Republic of Iran. Jacobsen sued Iran in this Court, alleging that it had provided material support and resources to the terrorists who kidnaped him in Beirut, Lebanon in May 1985 and held him captive for 532 days. After Iran failed to appear, through counsel or otherwise, Judge Thomas Penfield Jackson entered a default judgment in favor of Jacobsen on August 27, 1998 awarding him nine million dollars in compensatory damages. Jacobsen recovered the judgment in full after Congress passed legislation in 2000 that permitted hostage victims who had secured judgments prior to July 20, 2000, to recover all of their compensatory damages. Dissatisfied with this recovery, Jacobsen brought this suit, claiming that the defendants committed legal malpractice by not seeking punitive damages and that the defendants' 35 per cent contingent fee was unreasonable and excessive.

Jacobsen faults the defendants for failing to seek an award of punitive damages under either of two separate theories that he contends were available during the pendency of his lawsuit before Judge Jackson. First, according to Jacobsen, defendants erred by not advising him to add the Iranian Ministry of Information and Security ("MOIS") as an additional defendant in his suit. According to Jacobsen, MOIS was an "agency or instrumentality" of the Iranian government that was subject to punitive damages under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1601, et seq. The failure to add MOIS as a defendant allegedly precluded Jacobsen from receiving substantial punitive damages. Second, Jacobsen claims that punitive damages also would have been recoverable had defendants moved under Rule 60(b) of the Federal Rules of Civil Procedure to set aside his nine million dollar judgment and seek recovery under an amendment to the FSIA enacted by Congress on October 21, 1998, which authorized the award of punitive damages against foreign sovereigns. According to this theory, defendants' negligent representation of Jacobsen foreclosed an opportunity for Jacobsen to recover punitive damages directly against Iran in addition to the compensatory damages he was awarded. Both theories of damages arising from defendants' alleged legal malpractice rest on the ability of Jacobsen to collect punitive damages for his injuries in the underlying action.

Defendants filed three separate motions for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. The first two motions separately attack Jacobsen's alternative theories for recovering punitive damages, arguing that (1) the ability to recover punitive damages against Iran under the October 21, 1998 amendment to the FSIA was precluded by President Clinton's executive waiver of the punitive damages provision; and (2) MOIS was not subject to punitive damages, as it was neither an "agency" nor an "instrumentality" of Iran but rather the state itself. Defendants' final motion offers broader defenses against the entire malpractice claim.

On March 30, 2006, this Court entered an order granting defendants' partial motions for summary judgment on both of plaintiff's legal malpractice claims. Defendants' third motion for summary judgment was denied as moot, except with respect to the issue of excessive fees, which was denied without prejudice.¹ The reasoning underlying the Court's March 30, 2006 order is set forth in this opinion.

I. BACKGROUND

Many of the facts relevant to the disposition of this case were detailed in an earlier opinion issued in this case by Judge Ellen Segal Huvelle:

This lawsuit traces back to events in [Lebanon], when in 1985 the terrorist organization, the Hezbollah, abducted David Jacobsen along with Terry Anderson, Thomas Sutherland and Reverend Lawrence Jenco. The Hezbollah held Jacobsen as a hostage for 532 days until November 2, 1986. In 1992, Jacobsen and another former hostage, Joseph Cicippio, and his wife engaged defendant James Oliver and his law firm to pursue legal remedies for their injuries and losses caused by the Hezbollah's actions. At the time, the availability of legal remedies was problematical, because the [FSIA] granted immunity from lawsuits to foreign states with only limited exceptions. Nonetheless, defendants brought suit in this Court in October 1992 on behalf of Jacobsen, Cicippio, and Cicippio's wife against the Islamic Republic of Iran under the FSIA. Cicippio v. Islamic Republic of Iran, No. 92-cv-2300 (D.D.C.1992) (hereinafter "Cicippio I"). In 1993, Judge Jackson dismissed the suit without prejudice, concluding that defendants had not presented a viable legal claim under the FSIA. Cicippio v. Islamic Republic of Iran, 1993 WL 730748 (D.D.C.1993), aff'd, 30 F.3d 164 (D.C.Cir.1994), cert. denied, 513 U.S. 1078, 115 S.Ct. 726, 130 L.Ed.2d 631 (1995).

Subsequent to this dismissal, Jacobsen and defendants actively lobbied Congress and the Clinton administration to pass legislation that would allow for lawsuits against foreign states that sponsored terrorism. Ultimately, these efforts were successful. In April 1996, Congress passed the Anti-Terrorism and Effective Death Penalty Act of 1996 (hereinafter "AEDPA"), Pub.L.No. 104-132, codified at 28 U.S.C. § 1605(a)(7), which amended the FSIA to allow for lawsuits against foreign states that sponsor terrorism. Jacobsen then signed a second engagement letter, and in July 1996, defendants reified their suit against Iran on behalf of Jacobsen, Cicippio and his wife, and former hostage Frank Reed and his wife (hereinafter "Cicippio II"). The complaint sought compensatory damages of $100 million plus punitive damages against Iran only, but did not name any "agents or instrumentalities" of Iran.

Subsequent to the filing of Cicippio II, in September 1996, Congress enacted the "Flatow Amendment" ... See Civil Liability for Acts of State Sponsored Terrorism Act, Pub.L.No. 104-208 § 589, codified at 28 U.S.C. § 1605 note [hereinafter "Flatow Amendment"]. The Amendment provided in relevant part:

(a) An official, employee, or agent of a foreign state designated as a state sponsor of terrorism designated under section 6(j) of the Export Administration Act of 1979 [section 2405(j) of the Appendix to Title 50, War and National Defense] while acting within the scope of his or her office, employment, or agency shall be liable to a United States national or the national's legal representative for personal injury or death caused by acts of that official, employee, or agent Tor which the courts of the United States may maintain jurisdiction under section 1605(a)(7) of title 28, United States Code [subsec. (a)(7) of this section] for money damages which may include economic damages, solatium, pain, and suffering, and punitive damages if the acts were among those described in section 1605(a)(7) [subsec. (a)(7) of this section].

The Flatow Amendment expressly provided victims of terrorism with a statutory basis for pursuing legal actions directly against agents and instrumentalities of Iran....

In Cicippio II, Iran did not appear to contest the claims, and in November 1997, Judge Jackson entered a default and agreed to schedule individual trials for each of the Cicippio II plaintiffs. Prior to Jacobsen's trial, the Honorable Royce C. Lamberth issued his ruling in Flatow v. Islamic Republic of Iran, in which he held that the Flatow Amendment allowed for punitive damages to be collected directly from a foreign state .... Disagreeing with Flatow, Judge Jackson ruled that the FSIA precluded an award of punitive damages against a foreign state, but he offered the Cicippio plaintiffs an opportunity to delay the trial so as to amend their complaint to name agents or instrumentalities.

Jacobsen v. Oliver, 201 F.Supp.2d 93, 96-97 (D.D.C.2002).

Jacobsen and defendants present different versions of how Judge Jackson's offer of a delay in the trial to permit an amendment to the complaint was considered. See Defendants' Motion for Summary Judgment (9/25/03) ("Mot.S.J.(9/25/03)") at 7; Plaintiffs Memorandum in Opposition to. Defendants' Motion for Summary Judgment (11/28/03) ("Opp.Mot.S.J.(11/28/03)") at 4-7. It is agreed, however, that Jacobsen and his co-plaintiffs declined to amend their complaint to add MOIS as a defendant in their suit and instead withdrew their claims for punitive damages against Iran.

On August 27, 1998, Judge Jackson awarded Jacobsen compensatory damages against Iran in the amount of nine million dollars. Cicippio v. Islamic Republic of Iran, 18 F.Supp.2d 62, 70 (D.D.C.1998). Jacobsen was insulted by the size of the judgment. See Jacobsen Dep. 341; Mot. S.J. (9/25/03), Ex. 27 (Letter from Jacobsen to Oliver dated 9/28/98). Before trial, he believed that he was "looking at a potential individual award[] somewhere between $85 million and $250 million." Mot. S.J. (9/25/03), Ex. 11 (Fax from Jacobsen to Oliver dated 5/18/98). In addition, Judge Jackson's award of compensatory damages to Jacobsen was about half the amount awarded to either Reed or Cicippio. Cicippio v. Islamic Republic of Iran, 18 F.Supp.2d at 70 (awarding damages of $16 million to Reed and $20 million to Cicippio). In...