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