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Jacobsen v. Oliver

May 16, 2008

DAVID P. JACOBSEN, PLAINTIFF,
v.
JAMES J. OLIVER, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Paul L. Friedman United States District Judge

OPINION

This attorneys' fees dispute 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. The matter came before the Court on two motions for summary judgment: one on behalf of Mr. Oliver, Ms. Connor and Ms. Barnes (the "individual defendants"), and one on behalf of Murphy, Oliver, Caiola & Gowen P.C. (the "law firm").*fn1 The Court heard oral argument on the motions on November 7, 2007. Upon consideration of the papers that have been filed with respect to these motions, the arguments presented orally by counsel, and the entire record in this case, the Court granted summary judgment in favor of defendants in an Order and Judgment issued on March 28, 2008. This Opinion explains the reasoning behind that Order.

I. BACKGROUND

The nature and origin of this dispute have been described at length on at least two occasions. See Jacobsen v. Oliver, 451 F. Supp. 2d 181, 183-86 (D.D.C. 2006) (Friedman, J.); Jacobsen v. Oliver, 201 F. Supp. 2d 93, 96-98 (D.D.C. 2002) (Huvelle, J.). A short summary will suffice for present purposes.

In 1992, Mr. Jacobsen hired defendants to seek legal relief against Iran, which Mr. Jacobsen alleged had provided material support and resources to the terrorists who kidnapped him in Beirut, Lebanon in May 1985 and held him captive for 532 days. At the outset of their relationship, the parties agreed to a contingent fee arrangement under which Mr. Jacobsen would pay 35% of any recovery to the defendants. See Firm Mot., Defendants' Statement of Material Facts ¶ 4 ("Defs.' Facts"). See also Firm Mot., Ex. H, Contingent Fee Agreement at 1 (1996) (the "Contract").*fn2 As Judge Huvelle explained, the parties then embarked on a long and complicated legal odyssey:

At the time [of plaintiff's initial suit], the availability of legal remedies was problematical, because the Foreign Sovereign Immunities Act granted immunity from lawsuits to foreign states with only limited exceptions. Nonetheless, defendants brought suit in this Court in October 1992 on behalf of [Mr. Jacobsen and others] 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 (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 . . . which amended the FSIA to allow for lawsuits against foreign states that sponsor terrorism. . . . [I]n July 1996, defendants refiled their suit against Iran on behalf of [plaintiff and others] (hereinafter "Cicippio II").

Jacobsen v. Oliver, 201 F. Supp. 2d at 96-97.

After Iran failed to appear in Cicippio II, and following an evidentiary hearing, Judge Jackson entered a default judgment in favor of Mr. Jacobsen, awarding him nine million dollars in compensatory damages. See Cicippio II, 18 F. Supp. 2d 62, 70 (D.D.C. 1998). Mr. Jacobsen recovered this 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. See Victims of Trafficking and Violence Protection Act of 2000, Pub. L. 106-386, 114 Stat. 1464 ("VTVPA"); Defs.' Facts ¶¶ 16-17.*fn3

Mr. Jacobsen was dissatisfied with the size of his recovery and the quality of defendants' services. He was so dissatisfied in fact that he sued defendants, claiming that they committed legal malpractice and breached their fiduciary duty of loyalty. Mr. Jacobsen faulted defendants "for failing to seek an award of punitive damages under either of two separate theories that he contend[ed] were available during the pendency of his lawsuit before Judge Jackson," Jacobsen v. Oliver, 451 F. Supp. 2d at 183, and he argued that defendants breached their fiduciary duty of loyalty by charging an unreasonable fee and violating certain ethical rules. See id. at 200-01. On September 8, 2006, this Court dismissed all of these claims except the breach of fiduciary duty claim. See id. at 187-200. The Court ordered the parties to engage in settlement negotiations with respect to that claim. See id. at 201.

The parties were unable to settle the fiduciary duty claim. On July 17, 2007, defendants moved for summary judgment on that claim, arguing that (1) only the law firm is a proper defendant in this dispute, and (2) the contingent fee is reasonable. Defendants also argue that (3) the fee issue is now res judicata because, as discussed below, Judge Jackson entered a charging lien in defendants' favor in Cicippio II. Mr. Jacobsen disputes all three points, and further contends that (1) the parties' Contract is void as contrary to public policy, and thus Mr. Jacobsen should not be required to pay the contingent fee, and (2) defendants breached their fiduciary duty of loyalty in myriad ways, all of which require full or partial disgorgement of the fee.*fn4 The Court concludes that plaintiff has failed to identify a genuine dispute of material fact necessitating trial, and therefore enters summary judgment in favor of defendants.

II. SUMMARY JUDGMENT STANDARD

Summary judgment may be granted only if "the pleadings, the discovery and disclosure materials on file, and any affidavits [or declarations] show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006). "A fact is 'material' if a dispute over it might affect the outcome of a suit under the governing law; factual disputes that are 'irrelevant or unnecessary' do not affect the summary judgment determination." Holcomb v. Powell, 433 F.3d at 895 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. at 248). An issue is "genuine" if the evidence is such that a reasonable factfinder could return a verdict for the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. at 248; Holcomb v. Powell, 433 F.3d at 895. When a motion for summary judgment is under consideration, "the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in [his or her] favor." Anderson v. Liberty Lobby, Inc., 477 U.S. at 255; see also Mastro v. Potomac Electric Power Co., 447 F.3d 843, 849-50 (D.C. Cir. 2006); Aka v. Washington Hospital Center, 156 F.3d 1284, 1288 (D.C. Cir. 1998) (en banc); Washington Post Co. v. Dep't of Health and Human Services, 865 F.2d 320, 325 (D.C. Cir. 1989). On a motion for summary judgment, the Court must "eschew making credibility determinations or weighing the evidence." Czekalski v. Peters, 475 F.3d 360, 363 (D.C. Cir. 2007).

The non-moving party's opposition, however, must consist of more than mere unsupported allegations or denials and must be supported by affidavits, declarations or other competent evidence, setting forth specific facts showing that there is a genuine issue for trial.

FED. R. CIV. P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). He is required to provide evidence that would permit a reasonable factfinder to find in his favor. Laningham v. U.S. Navy, 813 F.2d 1236, 1242 (D.C. Cir. 1987). If the non-movant's evidence is "merely colorable" or "not significantly probative," summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. at 249-50; see Scott v. Harris, 127 S.Ct. 1769, 1776 (2007) ("[W]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is 'no genuine issue for trial.'") (quoting Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). To defeat a motion for summary judgment, a plaintiff must have more than "a scintilla of evidence to support [his] claims." Freedman v. MCI Telecomm. Corp., 255 F.3d 840, 845 (D.C. Cir. 2001).

III. DISCUSSION

A. Choice of Law

Both parties assume that the Court should apply District of Columbia law to Mr. Jacobsen's claims that the Contract is unenforceable and that defendants breached their duty of loyalty. See Firm Mot. at 4-10; Firm Mot. Opp. at 4-8. The Court is under no obligation to question these assumptions, and so it will assume that District of Columbia law applies to the issues addressed in this Opinion. See CSX Transp., Inc. v. Commercial Union Ins. Co., 82 F.3d 478, 482-83 (D.C. Cir. 1996) (parties may waive choice of law arguments); In re Korean Air Lines Disaster of Sept. 1, 1983, 932 F.2d 1475, 1495 (D.C. Cir. 1991) (courts need not address choice of law questions sua sponte).*fn5

B. Is the Fee Issue Res Judicata?

As noted above, defendants argue that a decision has been made on the issue of the fee's reasonableness which is res judicata and it therefore cannot be revisited now. According to defendants, after Mr. Jacobsen sent defendants a letter discharging them as his counsel on April 4, 2000 -- that is, after entry of judgment in Mr. Jacobsen's favor in Cicippio II -- defendants successfully moved for a charging lien before Judge Jackson. See Firm Mot. at 2-4.*fn6 Defendants apparently believe that Judge Jackson decided the issue of the fee's reasonableness when he granted defendants a lien in the amount contemplated by the parties' contingent fee agreement. See id. at 2. The Court disagrees.

As the D.C. Circuit has explained:

Under the claim preclusion aspect of res judicata, a final judgment on the merits in a prior suit involving the same parties or their privies bars subsequent suits based on the same cause of action. . . . Claim preclusion prevents parties from relitigating issues they raised or could have raised in a prior action on the same claim.

NextWave Personal Communications Inc. v. FCC, 254 F.3d 130, 143 (D.C. Cir. 2001) (citation and internal quotation marks omitted). The doctrine of res judicata may bar a claim if: (1) there was a final judgment on the merits in the first action; (2) the present claim is the same as a claim that was raised or that might have been raised in the first proceeding; and (3) the party against whom res judicata is asserted was a party or in privity with a party in the previous case. See Jacobsen v. Oliver, 201 F. Supp. 2d at 102-03.

Judge Jackson's Order did not address the validity of the underlying Contract, the reasonableness of the fee, or any other arguments for reducing or eliminating the fee. Thus, his Order granting the charging lien is not a "final judgment on the merits" with respect to Mr. Jacobsen's claims. Moreover, defendants concede that the parties to Cicippio II and the parties to this action are not identical. See, e.g., Firm Mot. at 3. Defendants' invocation of the doctrine of res judicata therefore fails. See Jacobsen v. Oliver, 201 F. Supp. 2d at 103.

C. Plaintiff's Contract Claims

Mr. Jacobsen argues that the Contract he signed with defendants -- including the clause providing for a 35% fee in the event of recovery -- is contrary to public policy and therefore void and unenforceable. See Firm Mot. Opp. at 8-11. Mr. Jacobsen claims that the Contract is contrary to public policy because (1) it includes a clause requiring him to seek defendants' consent before accepting a settlement offer (thereby violating the public policies embodied in D.C. Rule of Professional Conduct 1.2(a)), see Firm Mot. Opp. at 9; (2) it includes a clause requiring him to pay all fees and costs before discharging defendants (thereby violating the public policies embodied in D.C. Rule of Professional Conduct 1.16(a)(3)), see id.; and (3) it contemplates lobbying services (thereby violating the District of Columbia's public policy against contingent fee contracts for certain lobbying services). See id. at 10-12.

It is accepted law that "[a] promise or other term of an agreement is unenforceable on grounds of public policy if . . . the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms." RESTATEMENT (SECOND) OF CONTRACTS § 178 at 6 (1981). This general rule applies to contingent fee contracts between attorneys and their clients. See, e.g., Brown v. Gessellschaft Fur Drahtlose Telegraphie, 104 F.2d 227, 229 (D.C. Cir. 1939) ("Brown II") (declaring contingent fee agreement void because it contemplated lobbying activities contrary to public policy); Chang v. Louis & Alexander, Inc., 645 A.2d 1110, 1116 n.11 (D.C. 1994) (champertous fee agreement void as against public policy); Marshall v. Bickel, 445 A.2d 606, 609 (D.C. 1982) (declaring ...


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