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Cuneo Law Group, P.C. v. Joseph

November 19, 2009

THE CUNEO LAW GROUP, P.C., AND JONATHAN W. CUNEO, PLAINTIFFS,
v.
JOEL D. JOSEPH, DEFENDANT.



The opinion of the court was delivered by: Reggie B. Walton United States District Judge

Memorandum Opinion

The Cuneo Law Group and Jonathan Cuneo ("the plaintiffs") initiated this action for a declaratory judgment against Joel Joseph ("the defendant") for the alleged material breach of parties' settlement agreement. First Amended Complaint for Declaratory Relief ("Am. Compl.") ¶¶ 43 -45. The defendant denies breaching the settlement agreement and has filed a counterclaim seeking, inter alia, a declaration from the Court that it was in fact the plaintiffs who breached the settlement agreement. First Amended Counterclaim; Jury Trial Demanded ("Am. Countercl.") ¶¶ 37-42. Currently before the Court is the plaintiffs' motion for summary judgment and the defendant's cross-motion for partial summary judgment pursuant to Federal Rule of Civil Procedure 56(c), and the plaintiffs' motion to dismiss Counts I, III, IV, V, VI, and VII of the defendant's counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6). Upon careful review of the pleadings filed by the parties, their motions, and all memoranda and exhibits submitted in support of those motions, for the reasons that follow, the Court will grant summary judgment to the plaintiffs and deny the defendant's cross-motion for partial summary judgment. The Court will also grant the plaintiffs' motion to dismiss Counts I, III, IV, V, VI, and VII of the defendant's counterclaim.

I. Factual Background*fn1

A. The Relationship Between the Parties

The parties' underlying relationship began in 2001 when the plaintiffs, a law firm and Mr. Cuneo, who "holds an interest in [the firm,]" initially employed the defendant as one of the firm's staff attorneys, Am. Compl. ¶ 12; Verified Answer to the First Amended Complaint and Counterclaim*fn2 ("Verified Answer") ¶ 12; Memorandum of Points and Authorities in Support of Plaintiffs' Motion for Summary Judgment as to their Action for Declaratory Judgment and Plaintiffs' Motion to Dismiss and/or for Summary Judgment as to Defendant Joseph's Counterclaims ("Pls.' Mem. I") ¶ 2,*fn3 and later as an independent contractor, Pl.'s Mem. I, Affidavit of Jonathan W. Cuneo ("Cuneo Aff.") ¶ 2. While employed by the plaintiffs, the defendant worked on "the preliminary stages" of three contingency fee cases, the Gold Train, Leatherman, and Kwikset cases. Pls.' Mem. I, Cuneo Aff." ¶ 2; Am. Compl. ¶ 20; Pls.' Mem. I at 1. The relationship between the plaintiffs and the defendant began to deteriorate for a variety of reasons and was ultimately terminated when the defendant filed a lawsuit against the plaintiffs on August 20, 2001 (the "2001 Lawsuit"). Pls.' Mem. I, Cuneo Aff. ¶ 3 & Exhibit ("Ex.") A (Complaint, Joseph v. Cuneo Law Group, P.C., No. 1:01CV01755, Oct. 3, 2001) ("2001 Compl."). In the 2001 Lawsuit, the defendant alleged, inter alia, that the plaintiffs: (1) were liable for breach of the employment contract between him and the law firm, and (2) that the plaintiffs were guilty of unjust enrichment and conversion. Pls.' Mem. I, Cuneo Aff. ¶ 3 & Ex. A, ("2001 Compl."). Furthermore, the defendant demanded payment of any money that the plaintiffs owed him. Am. Compl. ¶ 15; Verified Answer ¶ 15. The plaintiffs refused to pay the funds being requested by the defendant because they had received a garnishment notice from the District of Columbia, which required that any payment owed to the defendant be delayed.*fn4 Am. Compl. ¶¶ 13-14; Verified Answer ¶¶ 13-14. While the 2001 Lawsuit was in litigation, the defendant filed liens in the plaintiffs' pending cases and contacted the plaintiffs' various co-counsel in those cases. Am. Compl. ¶ 16; Verified Answer ¶ 16. Ultimately, the parties entered into a settlement agreement on March 15, 2002, resolving the defendant's 2001 Lawsuit. Pls.' Mem. I, Cuneo Aff. ¶ 4 & Ex. B (Agreement of Release) (the "2002 Settlement Agreement").

B. The 2002 Settlement Agreement

The 2002 Settlement Agreement "provided that [the defendant] was to receive 20 percent (20%) of Cuneo's net fees, if any, in three (3) then-pending plaintiffs' contingency fee cases, referred to as the Gold Train Case, the Leatherman Case, and the Kwikset Case." Am. Compl. ¶ 20; Verified Answer ¶ 20. The parties included a noninterference clause in the 2002 Settlement Agreement, which states that "[the defendant] shall make no attempt to interfere with the pending cases or cases that follow, nor shall he attempt to file liens or notices of claims, or correspond with the litigants. If [the defendant] does he has breached the agreement and waives his percentages." Pls.' Mem. I, Cuneo Aff. ¶ 5 & Ex. B (2002 Settlement Agreement). The defendant "also agreed in writing to 'release all liens' and 'not file any independent fee applications' and to 'cooperate' with [the plaintiffs] 'reasonably in the prosecution of [the three pending contingency fee] cases.'" Am. Compl. ¶ 22; Verified Answer ¶ 22.

C. The Defendant's Alleged Breach of the 2002 Settlement Agreement

The plaintiffs allege that in January 2006, payment was received for the Gold Train case,*fn5 Am. Compl. ¶ 23, and from those funds the plaintiffs paid and the defendant accepted $240,895 in accordance with the 2002 Settlement Agreement.*fn6 Pls.' Mem. I, Cuneo Aff. ¶ 7; Am. Compl. ¶ 24; Verified Answer ¶ 24. However, despite accepting this payment and in disregard of the 2002 Settlement Agreement, the defendant contacted the plaintiffs' co-counsel in the Gold Train case, demanding an additional 20% "finders fee" for his work on that case. Am. Compl. ¶ 26; Verified Answer ¶ 26, 31; Pls.' Mem. I, Cuneo Aff. ¶ 8.*fn7 Upon receipt of the defendant's demand letter, the plaintiffs' co-counsel in the Gold Train case notified the plaintiffs of the defendant's demand, Pls.' Mem. I at 2; Cuneo Aff. ¶ 8 & Ex. E (Letter to the defendant from the plaintiffs' counsel, Jan, 19, 2006.), and the plaintiffs informed the defendant that his conduct constituted a material breach of the 2002 Settlement Agreement, id. Then, on February 24, 2006, the defendant filed a complaint against the plaintiffs' co-counsel seeking one-third of their fees from the Gold Train case. Pl.'s Mem. I, Cuneo Aff. ¶ 9 & Ex. F (Complaint, Joseph v. Dubbin, No. 06-20464, Feb. 24, 2006). On December 22, 2006, the case against the plaintiffs' co-counsel was dismissed with prejudice, which Joseph appealed. Id., Cuneo Aff. ¶ 9 & Ex. H (Docket, Joseph v. Dubbin, No. 06-20464). The parties to that lawsuit then engaged in negotiations, which resulted in a settlement, and the case was dismissed with prejudice on March 15, 2007. Id.

On February 12, 2008, the plaintiffs "received payment in the Leatherman Case." Am. Compl. ¶ 41. The plaintiffs promptly filed the present lawsuit claiming that the defendant had "lost . . . entitlement to any share [of] the fee in the Leatherman Case" due to his prior interference in the Gold Train case. Id. ¶ 42. Consequently, pursuant to the terms of the 2002 Settlement Agreement, the plaintiffs refused to release any of the proceeds from the Leatherman case to the defendant on the ground that he "waived his entitlement to a percentage of the Leatherman fee . . . ." Pls.' Mem. I, Cuneo Aff. ¶13.

D. The Current Dispute

On February 15, 2008, the plaintiffs filed their initial complaint in this case, and on February 26, 2008, they filed their amended complaint. After filing an initial answer and counterclaim on March 5, 2008, on May 22, 2008, the defendant filed an amended counterclaim and answer asserting claims of legal malpractice; breach of the settlement agreement; quantum meruit; unjust enrichment; unfair trade practices under the District of Columbia Consumer Protection Procedures Act; intentional infliction of emotional distress; and conversion. Am. Countercl. On June 11, 2008, the plaintiffs filed their motion for summary judgment as to their request for declaratory judgment and their motion to dismiss or, in the alternative, for motion for summary judgment on the defendant's counterclaim. The defendant then filed a memorandum on June 23, 2008, in opposition to the plaintiffs' motions and also a separate cross-motion for partial summary judgment.

II. Legal Analysis

A. The Plaintiffs' Summary Judgment Motion

To grant a motion for summary judgment under Rule 56(c), this Court must find that "the pleadings, the discovery, and disclosure materials on file, and any affidavits 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). The Court must also view the evidence in the light most favorable to the non-moving party. Bayer v. U.S. Dept. of the Treasury, 956 F.2d 330, 333 (D.C. Cir. 1992). However, the nonmoving party cannot rely on "mere allegations or denials . . . but . . . must set forth specific facts showing that there [are] genuine issue[s] for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (citation omitted) (some alterations in original). Therefore, under Rule 56(c), if a party fails to "establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," summary judgment is warranted. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). However, the party moving for summary judgment bears the burden of establishing that there is insufficient evidence to support the non-moving party's case. Id. at 325.

1. The Plaintiffs' Breach of the Settlement Agreement Claim

The plaintiffs contend that they are entitled to summary judgment on their settlement breach claim, arguing that the defendant materially breached the 2002 Settlement Agreement by interfering with the then-pending contingency fee cases, filing a lawsuit against the plaintiffs' co-counsel in one of those cases, and corresponding with the litigants in that case, which violated the terms of the settlement agreement's noninterference clause. Am. Compl. ¶¶ 44-45. The defendant responds that he did not materially breach the 2002 Settlement Agreement because he contacted only "co-counsel" and not the actual parties. Verified Answer ¶¶ 2, 25-26, 31. He further asserts that "even if he did [breach the agreement], the paragraph in question [in the 2002 Settlement Agreement] . . . constitute[s] an illegal liquidated damages clause and [is therefore] invalid." Verified Answer ¶¶ 2, 31, 42, 44. The Court's first task is to determine what the parties intended when they executed the non-interference clause of the 2002 Settlement Agreement.

a. The Terms of the Non-Interference Clause of the 2002 Settlement Agreement

The parties dispute the meaning of the terms litigants and pending contained in the 2002 Settlement Agreement. The defendant contends the term "litigants" does not include lawyers and the term "pending" means a case that has not been "settled."*fn8

Defendant's Opposition to the Motion for Summary Judgment and the Motion to Dismiss the Counterclaim and Statement of Points and Authorities in Support of the Motion for Partial Summary Judgment ("Def.'s Opp'n I") at 3.*fn9 On the contrary, the plaintiffs argue that "the term 'litigants' was intended to include [both the] parties and their attorneys" because "[n]one of the defendants in the pending cases were natural persons[,]" as "[t]hey were the United States and two corporations," and therefore, the only way the defendant "could have corresponded with a party defendant would be through its attorney." Pls.' Mem. I at 10. Furthermore, the plaintiffs contend that the term "pending" includes all cases covered by the settlement agreement, even if a case was "administratively closed,"*fn10 so long as the settlement remained outstanding and the case was still under the Court's jurisdiction, which was the status of the case the parties had agreed to settle. Id. at 10-11.

Settlement agreements "are in the nature of contracts." America v. Preston, 468 F. Supp. 2d 118, 122 (D.D.C. 2006) (quoting Makins v. District of Columbia, 277 F.3d 544, 546-47 (D.C. Cir. 2002) (applying contract law to a settlement agreement dispute)). Thus, "[t]he enforceability of a settlement agreement is governed by [ ] principles of contract law." Village of Kaktovik v. Watt, 689 F.2d 222, 230 & n.62 (D.C. Cir. 1982) (referring to United States v. ITT Cont'l Banking Co., 420 U.S. 223, 238 (1975)); see also Lloyd v. Mukasey, 568 F. Supp. 2d 2, 16 (D.D.C. 2008); Simon v. Circle Assocs., Inc., 753 A.2d 1006, 1012 (D.C. 2000).

When construing a contract to determine whether an interpretation of its terms is reasonable, courts "consider[] the intent of the parties entering the agreement and whether a reasonable person in the position of the parties, knowing the circumstances surrounding the agreement and the usages that either party knew or should have known, would find it reasonable." C&E Servs., Inc. v. Ashland Inc., 498 F. Supp. 2d 242, 265 (D.D.C. 2007). "A court must honor the intentions of the parties as reflected in the settled usage of the terms they accepted in the contract . . . and will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity." Unfoldment, Inc. v. D.C. Contract Appeals Bd., 909 A.2d 204, 209 (D.C. 2006) (internal citation and quotation marks omitted).

Whether a contract is ambiguous is a question of law. Id. A contract is "not ambiguous where the court can determine its meaning without any other guid[ance] than a knowledge of the simple facts on which, from the nature of language in general, its meaning depends." Wash. Props., Inc. v. Chin, Inc., 760 A.2d 546, 548 (D.C. 2000) (internal citation and quotation marks omitted). On the other hand, "if there is more than one interpretation that a reasonable person could ascribe to the contract, while viewing the contract in context of the circumstances surrounding its making, the contract is ambiguous." Gryce v. Lavine, 675 A.2d 67, 69 (D.C. 1996).

Here, the issue of whether the parties intended the terms litigants to include lawyers and pending to include the implementation stage of the settlement distribution must be derived from the language of the 2002 Settlement Agreement and what a reasonable person in the position of the parties would have intended each term to mean. The pertinent part of the 2002 Settlement Agreement states: "Joel Joseph shall make no attempt to interfere with the pending case or cases that follow, nor shall he attempt to file liens or notices of claim, or correspond with the litigants. If he does he has breached the agreement and waives his percentages." Pl.'s Mem. I, Cuneo Aff. ¶ 4 & Ex. B (2002 Settlement Agreement).

The plaintiffs' argument that the parties intended the term "litigants" to also include the attorneys representing the parties is persuasive. The three lawsuits covered by the 2002 Settlement Agreement involved class action suits against the United States and two corporations. Plaintiffs' Reply in Support of their Motion for Summary Judgment as to their Action for Declaratory Judgment and Motion to Dismiss and/or for Summary Judgment as to Defendant Joseph's Counterclaims ("Pls.' Reply I") at 4.*fn11

Therefore, the only plausible means of corresponding with the defendants would necessarily have been through their attorneys. Consequently, a reasonable person in the position of either the plaintiffs or the defendant, all of whom were attorneys, would have understood that the term litigants included the attorneys representing the parties. The defendant's assertion that the term litigants excluded the attorneys, absent any such exclusionary language, totally lacks credibility.

Additionally, the plaintiffs' argument that the parties intended the term "pending cases" to include "administratively closed" cases covered by the 2002 Settlement Agreement while the settlement remained outstanding is equally persuasive. Pls.' Mem. I at 10-11. The context in which the 2002 Settlement Agreement was executed is an important consideration. See C&E Servs., 498 F. Supp. 2d at 265 (stating that a court must consider "the intent of the parties entering the agreement and whether a reasonable person in the position of the parties, knowing the circumstances surrounding the agreement and the usages that either party knew or should have known, would find [the term pending cases] reasonable.") (emphasis added) (citations omitted). Both parties were aware of the cases that were covered by the agreement, Pl.'s Mem. I, Ex. B (Cuneo Aff.) ¶ 7 ("The terms set forth in the attached exhibits are part of this release") & Ex. A (listing "the Gold Train, Leatherman, and Kwikset cases as well as any directly related litigation" as the cases covered by the settlement agreement), and there is no indication in the agreement that some unspecified event would exempt any of these cases from the agreement's coverage. Therefore, any reasonable person would interpret the term pending cases to include all three cases until such time as the conditions of the settlement agreement were satisfied. The defendant's efforts to inject non-existent limiting language, specifically that a case that has been settled and closed is no longer "pending," Def's Opp'n I at 3, into the agreement echo the efforts of the plaintiff in Howell ex rel. D.H. v. District of Columbia and must be rejected for the same reason here. See 522 F. Supp. 2d 57, 63 (D.D.C. 2007) (noting that "[t]he plaintiff bases her entire breach of contract argument on language that simply does not appear in the settlement agreement . . . .").

In Howell, the court rejected the plaintiff's claim that the defendant breached a settlement agreement. Id. While the settlement agreement itself did not include a specific time frame during which the defendant would provide the agreed-to services, the notes of the resolution meeting indicated that the defendant would require "at least 90 days" to provide the services. Id. The court stated that, "although the [language in the] settlement agreement [] ma[de] no mention" or express limitation of the time frame during which the defendant would provide the services, the court would accept the "settled usage" of the express terms that the parties memorialized ...


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