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SHAPIRO v. HAZARD

September 30, 1998

SHAPIRO, LIFSCHITZ & SCHRAM, P.C., Plaintiff,
v.
R.E. HAZARD, JR., a California Limited Partnership, et al., Defendants. R.E. HAZARD, JR., a California Limited Partnership, et al., Counter-Plaintiffs, v. SHAPIRO, LIFSCHITZ & SCHRAM, P.C., et al., Counter-Defendants.



The opinion of the court was delivered by: HARRIS

Before the Court are a motion to dismiss for lack of personal jurisdiction submitted by defendants Colleen Coffman ("Colleen") and Coffman Specialties, Inc. ("Specialties"); a motion to transfer pursuant to 28 U.S.C. § 1404(a) submitted by defendants James Coffman ("James"), Coffman Construction, Inc. ("Construction"), and R.E. Hazard, Jr., a California limited partnership ("Hazard"); plaintiff's motion to dismiss defendants' counterclaim; and related pleadings. *fn1" The Court defers its consideration of the motion to dismiss for lack of personal jurisdiction pending the resolution of essential evidentiary questions. The Court denies defendants' motion to transfer without prejudice. Finally, the Court dismisses Counts I, II, III, V, VI, VII, X, XI, and portions of Count IX of defendants' counterclaim.

 BACKGROUND2

 On May 10, 1996, plaintiff, a Washington, D.C., law firm, filed a two-count complaint attempting to recover attorney's fees allegedly owed by defendants. The first count alleges that defendants breached the parties' retainer agreement by failing to pay fees owed thereunder. The second count is for recovery in quantum meruit. The retainer agreement was signed by defendant James in his individual capacity, as president of Construction, and as the authorized representative of Hazard, and provided that plaintiff would represent Hazard in connection with litigation over a construction contract with a school district in California (the "School Litigation"). Defendants filed an eleven-count counterclaim asserting claims for professional malpractice, breach of fiduciary duty, breach of contract, rescission, and "money had and received."

 ANALYSIS

 I. Motion To Dismiss for Lack of Personal Jurisdiction

 Defendants assert that the Court does not have personal jurisdiction over Colleen or Specialties because neither has enough of a connection with this jurisdiction. District of Columbia law controls the extent to which the Court may exercise personal jurisdiction over a nonresident defendant. See Crane v. Carr, 259 U.S. App. D.C. 229, 814 F.2d 758, 762 (D.C. Cir. 1987). D.C. Code § 13-423(a)(1) provides that the Court "may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person's . . . transacting any business in the District of Columbia." This provision provides for jurisdiction to the fullest extent permissible under the due process clause of the United States Constitution. See Schwartz v. CDI Japan, Ltd., 938 F. Supp. 1, 4 (D.D.C. 1996); Fisher v. Bander, 519 A.2d 162, 163 (D.C. 1986). Accordingly, the relevant inquiry is whether Colleen and Specialties had "minimum contacts" with the District so that the exercise of personal jurisdiction would not offend the "traditional notions of fair play and substantial justice." See International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154 (1945).

 This "minimum contacts" requirement must be met with respect to each defendant. See Rush v. Savchuk, 444 U.S. 320, 332, 62 L. Ed. 2d 516, 100 S. Ct. 571 (1980); First Chicago Int'l v. United Exchange Co., 267 U.S. App. D.C. 27, 836 F.2d 1375, 1378 (D.C. Cir. 1988); Schwartz, 938 F. Supp. at 4. Ordinarily, a defendant corporation's contacts with a forum may not be attributed to shareholders, affiliated corporations, or other parties. See Rush, 444 U.S. at 332; Wiggins v. Equifax, Inc., 853 F. Supp. 500, 503 (D.D.C. 1994). An exception exists, however, where affiliated parties are "alter egos" of a corporation over which the Court has personal jurisdiction; in that case the corporation's contacts may be attributed to the affiliated party for jurisdictional purposes. See Minnesota Mining & Mfg. Co. v. Eco Chem., Inc., 757 F.2d 1256, 1265 (Fed. Cir. 1985) ("If the corporation is [the defendant's] alter ego, its contacts are his and due process is satisfied.") (internal quotation omitted); Color Sys., Inc. v. Meteor Photo Reprographic Sys., Inc., 1987 W.L. 11085, *4 (D.D.C. May 8, 1987); Chase v. Pan-Pacific Broadcasting, Inc., 617 F. Supp. 1414, 1425 (D.D.C. 1985); see also El-Fadl v. Central Bank of Jordan, 316 U.S. App. D.C. 86, 75 F.3d 668, 676 (D.C. Cir. 1996). Accordingly, plaintiff may demonstrate the Court's jurisdiction over Colleen and Specialties if it proves that they are "alter egos" of Construction of Hazard (which do not contest jurisdiction). *fn3" If Colleen and Specialties are not found to be alter egos, plaintiff must present evidence of their individual contacts with the District of Columbia to establish the requisite "minimum contacts."

 Although ordinarily a plaintiff need only establish a prima facie case that personal jurisdiction exists in order to survive a motion to dismiss, see Crane v. New York Zoological Soc'y, 282 U.S. App. D.C. 295, 894 F.2d 454, 458 (D.C. Cir. 1990), in situations where the parties are permitted to conduct discovery on the jurisdictional issue a plaintiff must prove personal jurisdiction by a preponderance of the evidence. Landoil Resources Corp. v. Alexander & Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d Cir. 1990). On September 10, 1997, the Court granted plaintiff's request to engage in jurisdictional discovery. See El-Fadl, 75 F.3d at 676; see also Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 2d § 1351 (1990). During the December 4, 1997, hearing on pending motions, plaintiff indicated that the discovery revealed additional facts supporting its alter ego theory. Accordingly, the Court concludes that an evidentiary hearing on the personal jurisdiction issue is warranted. See Celotex Corp. v. Rapid American Corp., 124 F.3d 619, 628 (4th Cir. 1997) ("When . . . a court's power to exercise personal jurisdiction over a non-resident defendant is challenged by a [Rule 12(b)(2)] motion . . . 'the jurisdictional question thus raised is one for the judge, with the burden on the plaintiff ultimately to prove the existence of a ground for jurisdiction by a preponderance of the evidence.'") (quoting Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)); FDIC v. Oaklawn Apartments, 959 F.2d 170, 174 (10th Cir. 1992); Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984). The Court defers its consideration of Colleen's and Specialties' motion to dismiss for lack of personal jurisdiction until the completion of an evidentiary hearing.

 II. Motion To Transfer

 Defendants James, Construction, and Hazard contend that this action should be transferred to the Southern District of California pursuant to 28 U.S.C. § 1404(a), which provides that "for the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." In order to succeed on their motion, defendants have the heavy burden of establishing that plaintiff's choice of forum is inappropriate. See Pain v. United Technologies Corp., 205 U.S. App. D.C. 229, 637 F.2d 775, 783 (D.C. Cir. 1980), cert. denied, 454 U.S. 1128, 71 L. Ed. 2d 116, 102 S. Ct. 980 (1981); *fn4" Air Line Pilots Ass'n v. Eastern Air Lines, 672 F. Supp. 525, 526 (D.D.C. 1987); International Bhd. of Painters and Allied Trades Union v. Best Painting and Sandblasting Co., 621 F. Supp. 906, 907 (D.D.C. 1985).

 Although the Court has broad discretion to adjudicate motions for transfer under § 1404(a), Norwood v. Kirkpatrick, 349 U.S. 29, 32, 99 L. Ed. 789, 75 S. Ct. 544 (1955), the Court may not transfer a case "from a plaintiff's chosen forum simply because another forum, in the court's view, may be superior to that chosen by the plaintiff." Pain, 637 F.2d at 783. In determining the propriety of transfer pursuant to § 1404(a), the Court considers both the private interests of the parties and the public interests of the courts:

 
The private interest considerations include: (1) the plaintiffs' choice of forum, unless the balance of convenience is strongly in favor of the defendants; (2) the defendants' choice of forum; (3) whether the claim arose elsewhere; (4) the convenience of the parties; (5) the convenience of the witnesses . . ., but only to the extent that the witnesses may actually be unavailable for trial in one of the fora; and (6) the ease of access to sources of proof. The public interest considerations include: (1) the transferee's familiarity with the governing laws; (2) the relative congestion of the calendars of the potential transferee and transferor courts; and (3) the local interest in deciding local controversies at home.

 Trout Unlimited v. Department of Agric., 944 F. Supp. 13, 16 (D.D.C. 1996) (footnotes omitted).

 Plaintiff's choice of forum is due substantial deference. Int'l Bhd. of Painters, 621 F. Supp. at 907; see also Gross v. Owen, 95 U.S. App. D.C. 222, 221 F.2d 94, 95 (D.C. Cir. 1995) ("It is almost a truism that a plaintiff's choice of a forum will rarely be disturbed and, so far as the private interests of the litigants are concerned, it will not be unless the balance of convenience is strongly in favor of the defendant."). This is particularly true where, as here, plaintiff is a resident of the chosen forum and the activities forming the basis of the suit have a significant connection with the forum. See Nichols v. United States Bureau of Prisons, 895 F. Supp. 6, 8 (D.D.C. 1995); Eastern Air Lines, 672 F. Supp. at 526. Plaintiff is a D.C.-based law firm. Its action for breach of contract and for recovery in quantum meruit has a strong connection to this forum because James contacted plaintiff at its D.C. offices to retain it as legal counsel; James negotiated and agreed to the terms of the retainer agreement on behalf of himself and Construction and Hazard, and plaintiff signed the agreement, in the District of Columbia; a large proportion of the work done pursuant to the retainer agreement was performed in the District of Columbia; and James traveled to the District on several occasions to discuss the progress of the case.

 The remaining private factors do not outweigh the deference due plaintiff's choice of forum. Defendants' choice of forum (California) is also connected to the events underlying plaintiff's action and defendants' counterclaims: defendants reside in California, the object of the contract was plaintiff's legal representation of defendants in California, and the payment (or lack thereof) of plaintiff's bills occurred in California. However, although substantial, the connections to California are no more significant than those to the District of Columbia. Likewise, the "convenience of the parties" factor does not favor either side -- both would face significant inconvenience if the case were tried in the competing forum.

 Defendants' strongest argument for transfer is that the District of Columbia is an inconvenient forum for third-party witnesses who, defendants claim, are essential to their defense and counterclaim. They assert that their professional malpractice counterclaim and defense are governed by California law, which requires them to conduct a "case within a case" to demonstrate that they would have prevailed against and recovered payment from the school district had they had competent counsel. See United Community Church v. Garcin, 231 Cal. App. 3d 327, 282 Cal. Rptr. 368, 373 (Ct. App. 1991); Campbell v. Magana, 184 Cal. App. 2d 751, 8 Cal. Rptr. 32, 34-36 (Ct. App. 1960). Defendants claim that they will need third-party witnesses to establish the following parts of their "case within a case": (1) that Hazard should have been compensated by the school district for costs associated with the removal and installation of certain roof tiles; (2) that plaintiff was negligent in failing to include language in the settlement providing that a subcontractor's arbitration award against Hazard would be paid by the school district; and (3) that plaintiff violated its obligations to defendants by forcing settlement, resulting in the forfeiture of an alleged contractual right to receive attorney's fees as the prevailing party at trial. Defendants further contend that these third-party witnesses are not subject to compulsory process in the District of Columbia, but they are in California.

 The Court concludes that defendants' asserted need for third-party witnesses residing in California does not overcome the other factors favoring plaintiff's chosen forum. As an initial matter, although defendants' counterclaim contains several counts based on professional negligence, only the second potentially will require defendants to demonstrate that they would have prevailed on the merits of the School Litigation. *fn5" Defendants state that the potential witnesses residing in California are beyond the subpoena power of this Court, but they do not suggest that these witnesses will refuse to appear if the trial is held in the District of Columbia. See Minstar, Inc. v. Laborde, 626 F. Supp. 142, 148-49 (D. Del. 1985) (noting that when defendants do not indicate that their third-party witnesses will be unwilling to attend trial voluntarily, the court may "disregard[] the availability of compulsory process as a factor"); Houk v. Kimberly-Clark Corp., 613 F. Supp. 923, 931 (W.D. Mo. 1985) (same); Independent Petrochemical Corp. v. Aetna Casualty & Surety Co., 1984 W.L. 3656 at *2 (D.D.C. 1984). Nor do defendants' complaints about the expense of transporting those witnesses to this forum carry much weight; were the case transferred, plaintiff would face similar transportation expenses for its witnesses. Finally, defendants have not shown that the third-parties' testimony could not be obtained by other means, such as written or videotaped depositions. See, e.g., Minstar, 626 F. Supp. at 149.

 The public interest factors also favor denying defendants' motion to transfer. The Court concludes that District of Columbia law applies to most of the claims asserted by both plaintiff and defendants. *fn6" Because defendants have provided the Court with no information regarding the level of congestion of the transferee court, the Court cannot conclude that this factor weighs in their favor. Finally, both jurisdictions have an interest in regulating the conduct of attorneys practicing law within their jurisdictions. If anything, the District of Columbia's interest is stronger because defendants initiated the events resulting in the pending claims by reaching within this jurisdiction for the specific purpose of retaining counsel. Cf. Fisher, 519 A.2d at 164. Accordingly, the Court finds that defendants have failed to meet the heavy burden of demonstrating that transfer is warranted and thus denies defendants' motion to transfer without prejudice. *fn7"

 III. Plaintiff's Motion To Dismiss Counterclaim

 On October 7, 1996, James, Construction, and Hazard filed an eleven-count counterclaim against plaintiff and unknown or unnamed individuals who hold an interest in plaintiff. *fn8" Counts I through IV assert that plaintiff committed professional malpractice by (1) charging excessive fees and performing unnecessary tasks, (2) forcing the premature settlement of the School Litigation by charging excessive fees, (3) attempting to acquire and enforce an attorney's lien, and (4) "self dealing" by withholding legal representation after a payment dispute. Counts V-VIII are claims for breach of fiduciary duty based on the aforementioned conduct. Count IX asserts that plaintiff breached the retainer agreement by failing to exercise the reasonable care expected of an attorney. Finally, in Counts X and XI defendants contend that the retainer agreement should be rescinded and that defendants are entitled to money "had and received" as a result of that rescission.

 Plaintiff filed a Rule 12(b)(6) motion to dismiss each count of the counterclaim. In evaluating plaintiffs motion to dismiss, the Court considers only the facts alleged in defendants' counterclaim, any documents either attached to or incorporated in the counterclaim, and matters of which the Court may take judicial notice. See EEOC v. St. Francis Xavier Parochial School, 326 U.S. App. D.C. 67, 117 F.3d 621, 624 (D.C. Cir. 1997). Defendants' factual allegations must be presumed true and liberally construed in their favor. Phillips v. Bureau of Prisons, 192 U.S. App. D.C. 357, 591 F.2d 966, 968 (D.C. Cir. 1979) (citing Miree v. Dekalb County, 433 U.S. 25, 27 n.2, 53 L. Ed. 2d 557, 97 S. Ct. 2490 (1977)). "However, legal conclusions, deductions or opinions couched as factual allegations are not given a presumption of truthfulness." 2A Moore's Federal Practice, § 12.07, at 63 (2d ed. 1986) (footnote omitted); see also Haynesworth v. Miller, 261 U.S. App. D.C. 66, 820 F.2d 1245, 1254 (D.C. Cir. 1987). Dismissal is appropriate only if it appears beyond doubt that no set of facts proffered in support of defendants' counterclaim would entitle them to relief. St. Francis Xavier, 117 F.3d at 624; Haynesworth, 820 F.2d at 1254. Although "findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12," Fed. R. Civ. P. 52(a); Summers v. Department of Justice, 140 F.3d 1077, 1079-80 (D.C. Cir. 1998), the Court nonetheless sets forth its reasoning.

 A. Choice of Law

 Because of an apparent disagreement between the parties, the Court first addresses the question of which jurisdiction's law governs defendants' counterclaim for the purpose of the motion to dismiss. This is a diversity case, so the Court applies the District of Columbia's choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941), cert. denied, 316 U.S. 685, 86 L. Ed. 1757, 62 S. Ct. 1284 (1942); GEICO v. Fetisoff, 294 U.S. App. D.C. 279, 958 F.2d 1137, 1141 (D.C. Cir. 1992). The District of Columbia applies a modified "interest analysis" to resolve choice of law questions GEICO, 958 F.2d at 1141. Under this approach, the Court first determines whether a "true conflict" exists between the laws of the competing jurisdictions. Id. If there is a true conflict, the Court determines which of the relevant jurisdictions has the "more substantial interest" in having its law applied. Id. where no true conflict exists, the Court applies the law of the District of Columbia by default. See id. (citing Fowler v. A & A Co., 262 A.2d 344, 348 (D.C. 1970)). This analysis is applied to individual claims rather than to the action as a whole. See Nelson v. Nationwide Mort. Corp., 659 F. Supp. 611, 615 (D.D.C. 1987).

 With one exception, as noted below, the Court concludes that no true conflict exists between the relevant laws of the competing jurisdictions. The relevant D.C. and California laws are the same or, where slightly different, would result in the same outcome when applied to the facts of this case. See Greaves v. State Farm Ins. Co., 984 F. Supp. 12, 14 (D.D.C. 1997). Accordingly, the Court applies the laws of the District of Columbia to the counterclaims, with reference to California's ...


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