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JACOBSEN v. OLIVER

April 29, 2002

DAVID P. JACOBSEN, ET AL., PLAINTIFFS
V.
JAMES J. OLIVER ET AL., DEFENDANTS



The opinion of the court was delivered by: Ellen Segal Huvelle, United States District Judge.

  MEMORANDUM OPINION

Plaintiff David Jacobsen was kidnapped in 1985 in Beirut, Lebanon and held hostage for 532 days by a terrorist group that had been funded, supported, and controlled by the Iranian government. He, like several other hostages, sued in this Court. After entering a default against Iran, the Honorable Thomas Penfield Jackson entered judgment in the amount of $9 million, all of which Jacobsen recovered after Congress passed legislation in 2000 that permitted hostage victims, who had secured judgments prior to July 20, 2000, to recover compensatory damages in full. Now Jacobsen has sued 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"), complaining that his lawyers did not sue the Iranian Ministry of Information and Security (hereinafter "MOIS") for punitive damages and that their 35% contingent fee was unreasonable and excessive. In his complaint, he alleges legal malpractice (Count I), breach of fiduciary duty for charging excessive fees (Count II), and breach of an implied covenant of good faith and fair dealing (Count III). David Jacobsen's three adult children, Eric and Paul Jacobsen and Diane Jacobsen Martinez (hereinafter the "Jacobsen Children"), have also brought suit, alleging malpractice (Count IV) and negligent misrepresentation (Count V) arising from defendants' failure to include them in their father's lawsuit.

Defendants have moved to dismiss, arguing that as a matter of law, defendants were not negligent because it was not foreseeable at the time of Jacobsen's suit that punitive damages would be recoverable, or alternatively, as a matter of public policy, damages are not available in a legal malpractice action to compensate plaintiffs for punitive damages that arguably would have been available in the underlying action. Defendants also argue that the claim regarding attorneys' fees is barred by res judicata, or alternatively, it should be dismissed because the fees are reasonable as a matter of law. With respect to the Jacobsen Children, defendants claim that this Court lacks personal jurisdiction, venue is improper, their claims are barred by the statute of limitations, and there was no attorney-client relationship between the Jacobsen Children and defendants.

For the reasons set forth below, the Court will deny the motion to dismiss as to David Jacobsen's claims in Counts I and II, but will grant the motion as to Count III. With respect to the Jacobsen Children's claims, the Court will grant the motion on the grounds that these claims are time-barred, and therefore, Counts IV and V will be dismissed.

FACTUAL BACKGROUND

This lawsuit traces back to events in Iran, 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. (Defendant's Memorandum in Support of Defendants' Motion to Dismiss at 3 [hereinafter "Def.'s Mem."].) At the time, the availability of legal remedies was problematical, because the Foreign Sovereign Immunities Act, 28 U.S.C. § 1605, (hereinafter "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.*fn1 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 (1995).

Subsequent to the filing of Cicippio II, in September 1996, Congress enacted the "Flatow Amendment," which offered new causes of actions to victims of terrorism. See Civil Liability for Acts of State Sponsored Terrorism Act, Pub.L. No. 104-208 § 589, codified at 28 U.S.C. § 1605 note. 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 for 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 addition, the Flatow Amendment provided a statutory basis for recovery of "solatium" damages (i.e., compensation for "hurt feelings or grief," including mental anguish, bereavement, and grief. BLACK'S LAW DICTIONARY 1397 (7th ed. 1999)). Subsequent to passage of the Flatow Amendment, courts have allowed spouses and relatives in direct lineal relationship to victims of terror to pursue legal actions to recover solatium damages. See, e.g., Flatow v. Islamic Republic of Iran, 999 F. Supp. 1, 29-33 (D.D.C. 1998); Jenco v. Islamic Republic of Iran, 154 F. Supp.2d 27 (D.D.C. 2001); Sutherland v. Islamic Republic of Iran, 151 F. Supp.2d 27 (D.D.C. 2001); Anderson v. Islamic Republic of Iran, 90 F. Supp.2d 107 (D.D.C. 2000).

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 and awarded solatium damages to family members of Alisa M. Flatow. 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. The Cicippio plaintiffs declined to amend their complaint, but instead, they withdrew their claim for punitive damages against Iran. (Def.'s Mem. at 7-8.) On August 27, 1998, the Court awarded Jacobsen compensatory damages in the amount of $9,000,000 against Iran.

After trial, efforts were directed at trying to collect on the judgments. On October 28, 2000, the Victims of Trafficking and Violence Protection Act of 2000 became law. See Pub.L. No. 106-386, 114 Stat. 1541 (2000). It established procedures for collecting on judgments against terrorist states by allowing a victim of terrorism, who held, as of July 20, 2000, a final judgment against a terrorist state to receive compensation directly from the United States government. Section 2002(a)(1)(A) of the Act permitted a victim of terrorism to collect "110 percent of compensatory damages" provided he or she "relinquish all rights and claims to punitive damages," and section 2002(a)(1)(B) allowed compensation of "100 percent of compensatory damages," but permitted a victim to continue to pursue the recovery of punitive damages that had been awarded. See Flatow v. Islamic Republic of Iran, 201 F.R.D. 5, 10-11 (D.D.C. 2001).

It is against this backdrop that Jacobsen and his children bring this action. In their complaint, David Jacobsen complains that defendants were negligent in failing to sue agents or instrumentalities of Iran for punitive damages, and the Jacobsen Children claim that defendants negligently advised them, via their father, that they had no legal basis to be joined as plaintiffs in the Cicippio litigation.

LEGAL ANALYSIS

I. DAVID JACOBSEN'S CLAIMS

This Court first considers defendants' motion to dismiss the counts brought on behalf of Jacobsen — Count I alleging professional malpractice, Count II alleging breach of fiduciary duty, and Count III alleging breach of implied covenant of good faith and fair dealing.*fn2

A. Standard of Review

Because this Court need not rely on any materials outside the pleadings — other than matters of public record — in making its determination, this matter will be decided as a motion to dismiss, not a motion for summary judgment. Under Rule 12(b)(6), dismissal is appropriate only where a defendant has "show[n] `beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" In re Swine Flu Immunization Products Liability Litigation, 880 F.2d 1439, 1442 (D.C. Cir. 1989) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1955)). In deciding a motion to dismiss, the Court "must accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiffs." Fitts v. Federal Nat'l Mortgage Ass'n, 44 F. Supp.2d 317, 321 (D.D.C. 1999). However, the Court need not accept plaintiffs' legal conclusions as true. See Artis v. Greenspan, 158 F.3d 1301, 1306 (D.C. Cir. 1998). If the Court determines that "no relief could be granted under any set of facts that could be proved consistent with [plaintiffs'] allegations," the case must be dismissed under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).

B. Applicable Law

Before determining whether Jacobsen has stated a claim, this Court must determine what state's law applies. "When deciding state-law claims under diversity or supplemental jurisdiction, federal courts apply the choice-of-law rules of the jurisdiction in which they sit." Ideal Electronic Security Co., Inc. v. International Fidelity Ins. Co., 129 F.3d 143, 148 (D.C. Cir. 1997). In resolving choice of law questions, the District of Columbia employs a governmental interests approach, which balances the competing interests of the jurisdictions. Estrada v. Potomac Elec. Power Co., 488 A.2d 1359, 1361 n. 2 (D.C. 1985). To determine the jurisdiction with the greater interest, the Court considers four factors: (i) the place of the injury, (ii) the place where the conduct occurred, (iii) the domicile of the parties, and (iv) the place where the relationship between the parties is centered. Myers v. Gaither, 232 A.2d 577, 583 (D.C. 1967). See also Estrada, 488 A.2d at 1361 n. 2 (citing Restatement (Second) of Conflicts § 145).

In applying these factors to the instant facts, this Court finds that out of the three jurisdictions that have an interest in this case, the District of Columbia has the greatest interest. While the place where Jacobsen's injury would have occurred was California, where he lived, and certain conduct allegedly causing the injury, specifically advice given via telephone, occurred in Pennsylvania, where defendants reside and practice law, the District of Columbia has the most substantial relationship to Jacobsen's claims. The District, which was the locus of both Cicippio actions, can fairly be said to be the place where the relationship between the parties was centered. Defendant Oliver was twice admitted to the District pro hac vice, and defendants made numerous court filings and appearances in the Cicippio cases, including representing Jacobsen at his trial in this Court. Jacobsen and defendants met in the District to discuss the case, and as defendants concede, "the final key conversation — when Jacobsen agreed not to pursue individuals as defendants — took place in the courthouse in Washington, DC." (Def.'s Mem. at 13.) Furthermore, as plaintiff argues, the action necessary to correct an alleged omission of not joining an "agency or instrumentality" of Iran would have been to file an amended complaint in the District. (Plaintiffs' Memorandum in Opposition to Defendants' Motion to Dismiss for Failure to State a Claim for which Relief May Be Granted at 8 [hereinafter "Pl.'s Opp."].)

In reaching this conclusion, the Court finds the case cited by plaintiff, David B. Lilly Co. Inc. v. Fisher, 18 F.3d 1112 (3d Cir. 1994), to be instructive, since it, like the instant case, involved "relational strands span[ning] several states." Id. at 1120. Nonetheless, the Third Circuit concluded that locations where allegedly negligent attorneys performed their legal work structuring a transaction (i.e., Washington, D.C. and New York) had "little relationship to either the alleged legal malpractice or the parties." Id. Instead, the court found significance in the "purpose of the relationship" between the law firm and its client, which was to facilitate an acquisition of a Delaware corporation and concluded ultimately that Delaware had the most significant relationship to the malpractice claim and the parties. Id. Here, the purpose of the relationship was to bring an action under the FSIA in the District, and thus, the District has the most significant relationship to Jacobsen's claims.

Moreover, while Pennsylvania admittedly has an interest in regulating the conduct of its attorneys, the District has a compelling and overriding interest in regulating the conduct of attorneys who practice within its borders. See Crossland Savings FSB v. Rockwood Insurance Co., 692 F. Supp. 1510, 1512 (S.D.N.Y. 1988) (holding that interest of New York in regulating conduct within its borders outweighs interest of Texas in regulating professionals licensed to practice in Texas) (citing, inter alia, Machleder v. Diaz, 801 F.2d 46, 52 (2d Cir. 1986)). Moreover, even if Pennsylvania's interest is equal to that of the District, the District's laws are to be applied in accordance with this Circuit's conflict of law principles. "`Where each state would have an interest in application of its own law to the facts, . . . the law of the jurisdiction with the stronger interest will apply.' . . . `If the interests of the two jurisdictions in the application of their law are equally weighty, the law of the forum will be applied.'" Williams v. First Government Mortgage & Investors Corp., 176 F.3d 497, 500 (D.C. Cir. 1999) (citing Bledsoe v. Crowley, 849 F.2d 639, 641, 641 n. 1 (D.C. Cir. 1988)).

C. Is There Compensable Injury?

Defendants argue that punitive damages cannot be assessed as a matter of public policy against "someone who has not acted in an outrageous manner, unless doing so will deter others from engaging in like conduct." (Def.'s Mem. at 16.) Plaintiff responds that he is not prohibited from recovering as compensatory damages in a legal malpractice case for the loss of ...


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