Wiatt v. Winston & Strawn LLP

• Decision Date: 17 January 2012
• Docket Number: Civil Action No. 10–6608 (JLL).
• Citation: 838 F.Supp.2d 296
• Court: U.S. District Court — District of New Jersey
• Parties: James A. WIATT and Elizabeth Rieger Wiatt, Plaintiffs, v. WINSTON & STRAWN LLP, et al., Defendants.

838 F.Supp.2d 296

James A. WIATT and Elizabeth Rieger Wiatt, Plaintiffs,

v.WINSTON & STRAWN LLP, et al., Defendants.

Civil Action No. 10–6608 (JLL).

United States District Court, D. New Jersey.

Jan. 17, 2012.

Amy Walker Wagner, Robert A. Magnanini, Stone & Magnanini LLP, David S. Stone, Short Hills, NJ, for Plaintiffs.

Thomas F. Campion, Jr., Frank F. Velocci, Drinker, Biddle & Reath, LLP, Florham Park, NJ, for Defendants.

OPINION

JOSE L. LINARES, District Judge.

This matter arises out of allegations made by Plaintiffs James A. Wiatt and Elizabeth Rieger Wiatt (“Plaintiffs” or “the Wiatts”) that their former financial advisor, Kenneth Starr and attorney, Jonathon Bristol (“Bristol”), a Capital Partner at Winston & Strawn, LLP, conspired to steal $2 million of Plaintiffs' funds by unlawfully transferring such funds through Bristol's Attorney Trust Account. Defendant Winston & Strawn, LLP (“Defendant” or “Winston & Strawn”) has filed a Motion to Dismiss twelve claims in Plaintiffs' Amended Complaint as against it for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). [Docket Entry No 94]. The Court has considered the submissions of the Parties in support of and in opposition to the instant motion, and decides the motion on the papers pursuant to Fed.R.Civ.P. 78. For the reasons stated herein, Defendant's Motion is granted in part and denied in part. Plaintiffs are granted leave to file a Second Amended Complaint, within sixty (60) days, which cures the pleading deficiencies discussed in this Opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff James Wiatt, a California resident, is a former executive of a talent agency and is now a consultant for a leading global web services company. (Am. Compl., ¶¶ 19, 33). Plaintiff Elizabeth Wiatt, also a California resident, is a businesswoman and entrepreneur. ( Id., ¶¶ 20, 34). Defendant Winston & Strawn is a multi-national law firm with offices in New Jersey, New York, and around the globe, and is an Illinois limited liability partnership. ( Id., ¶ 3). From 2008 to around May 2010, Defendant Bristol, also a named defendant in this matter, was a Capital Partner at Winston & Strawn whose clients included Kenneth Starr and various Starr entities, including Starr & Company, LLC and Starr Investment Advisors, LLC. Defendants Starr, the named Starr entities and Arlene Graff, a Starr & Co. principal (the “Starr Defendants”), are alleged by Plaintiffs to have “knowingly conspired to use, and did use, Bristol's Attorney Trust Account to steal and launder the Wiatts' money.” ( Id., ¶ 14).

The Starr Defendants

The Starr Defendants have not joined in Defendant Winston & Strawn's current Motion to Dismiss. However, facts alleged regarding the Starr Defendants' conduct towards Plaintiffs is relevant for the instant motion as Plaintiffs' Amended Complaint turns on a pattern of activity and a conspiracy linking the Starr Defendants' illegal activity with the law firm of Winston & Strawn through its Capital Partner, Jonathon Bristol. Plaintiffs had engaged the services of the Starr Defendants from August 2003 until late May 2010, for the purpose of managing their personal finances and providing financial advice as well as to assist in selecting and utilizing other professionals such as bankers, realtors and lawyers. ( Id., ¶¶ 2, 21–25, 35). The Starr Defendants specifically provided the Wiatts with the following services: accounting, business management, investment management, investment advice, financial consulting, financial planning, and tax advice. ( Id., ¶ 35). For these services, Plaintiffs paid the Starr Defendants a substantial professional service fee on a monthly basis. ( Id., ¶ 36). Officials of the Starr Entities had signatory authority over the Wiatts' bank and/or investment accounts as well as trusts and corporate entities that the Wiatts controlled. ( Id., ¶ 37).

The Winston & Strawn Defendants

Prior to becoming a partner at Winston & Strawn, Defendant Bristol provided legal representation to Starr and his companies since at least 2007, at which time he served as a partner at the law firm of Thelen, LLP. ( Id., ¶ 43). In or about November 2008, Bristol accepted an offer to become a Capital Partner at Winston & Strawn, and he brought with him the Stan-clients, whom he represented on general corporate matters; in connection with Starr's multimillion dollar dispute with Neil Simon concerning Simon's claim that Starr had improperly invested his money; and in connection with an SEC investigation into Starr's investment practices in July 2009. ( Id., ¶¶ 44, 46, 48, 50). For this work representing his Starr clients, Bristol generated over $1 million in legal fees for Winston & Strawn in 2009 alone. ( Id., ¶ 51). Bristol also utilized his Attorney Trust Account to make two $100,000 payments to Winston & Strawn for services Bristol purportedly rendered on behalf of Starr. ( Id., ¶¶ 111, 115). Plaintiffs' Amended Complaint alleges that Bristol was aware that such funds transferred to Winston & Strawn through his Attorney Trust Account belonged to defrauded clients of Starr. ( Id.).

In October 2009, Starr referred Plaintiff Jim Wiatt to Bristol as a good friend and partner at Winston & Strawn after Wiatt requested legal advice in connection with his business and investment activities. ( Id., ¶ 52). On October 29, 2009, Plaintiff Jim Wiatt engaged Bristol and Winston & Strawn to provide him with general legal representation in connection with his “business and investment interests, including specifically his service on the board of directors for public and private companies.” ( Id., ¶ 54). Wiatt and Bristol confirmed the engagement by phone and e-mail, and Bristol used his Winston & Strawn office and e-mail account for those communications. ( Id.). From the time of his engagement by Plaintiffs until May 2010, Bristol provided the Wiatts with the following legal services: (1) legal advice to Jim Wiatt relating to his separation agreement from his former employer, William Morris Agency; (2) monitoring and advising the Wiatts with respect to their investment activities, including his investments with Starr; (3) legal advice to Jim Wiatt relating to an indemnification agreement with OneCast, Inc.; (4) legal advice to Jim Wiatt relating to his responsibilities as a potential board member for public and private companies; and (5) legal advice to Jim Wiatt relating to potential consulting agreements. ( Id., ¶ 56). Bristol also served as Jim Wiatt's attorney in his communications and interview with the SEC during the SEC's investigations into Starr and his companies. ( Id., ¶¶ 83–92).

Plaintiffs' Amended Complaint alleges specific facts in a month-by-month overview of the services Bristol provided them from November 2009 until May 2010. ( Id., ¶¶ 61–93). In November 2009, Bristol activelymonitored the Wiatts' business and investment activities and advised them in connection with those activities. ( Id., ¶ 61). On November 3, 2009, Bristol reached out to Graff about the Wiatts' investment activities and requested an investment summary, which Graff sent to him. ( Id., ¶ 62). Also on that date, at Jim Wiatt's request, Bristol reviewed an offer letter for a consulting agreement, and advised Jim Wiatt on issues relating to the value of his stock option rights and exposure to liability. ( Id., ¶ 64). In December 2009, Bristol reviewed documents and provided Plaintiff Jim Wiatt with legal advice in connection with a Google/YouTube Inbound Services Agreement, giving Wiatt additional advice on a proposed consulting agreement and potential stock warrants that Wiatt would receive under that agreement. ( Id., ¶ 65, 66).

In January 2010, Bristol continued to provide legal advice, including: (1) advice and analysis on Wiatt's separation and release agreement; (2) advice relating to a potential consulting agreement with a private company, including the potential for an investment stake in the company, copying Starr on at least one e-mail; and (3) advice on a potential deal with OneCast, Inc., including advice relating to a stock option agreement, shareholder rights, and an indemnification agreement. ( Id., ¶ 68–73). Bristol also prepared at least two legal memoranda for Jim Wiatt on said separation agreement written on Winston & Strawn letterhead, designated as “Attorney–Client Privileged” materials, and saved on Winston & Strawn's network with the firm's DocsOpen software. ( Id., ¶¶ 69–70).

In February 2010, Bristol continued to provide legal advice to the Wiatts in connection with general corporate and investment matters, as well as in connection with the OneCast agreement and other potential consulting agreements. ( Id., ¶ 75). On February 2, 2010, Bristol proposed filings with the State of California for Wiatt's limited liability company. ( Id., ¶ 76). Bristol also revised a proposed indemnification agreement between Jim Wiatt and OneCast, saving numerous drafts on Winston & Strawn's network, and sending those revisions to Wiatt and Starr. ( Id., ¶ 77). The OneCast agreement identified Bristol as a party to be copied on any notice or communication with Jim Wiatt related to the agreement, and listed his contact information at Winston & Strawn, including his office address, e-mail and phone number. ( Id., ¶ 78).

In March 2010, aside from general legal advice to the Wiatts on Jim Wiatt's employment agreements and limited liability filing, Bristol provided the Wiatts with legal advice and services relating to the Wiatts' investment activities with Starr. ( Id., ¶¶ 80–81). Specifically, Jim Wiatt notified Bristol that he was dissatisfied with one of his investments that Starr had arranged, and Bristol told him that he would try to get his money back from Starr, asking specifically which of Wiatt's investments he wished to recover. ( Id., ¶ 81).

In May 2010, prior to Starr's arrest on May 27, 2010, Bristol continued to provide legal advice and services to the Wiatts. ( Id., ¶...