Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

Dominic Novak, et al. v. Douglas A. Lines

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA


February 14, 2012

DOMINIC NOVAK, ET AL. PLAINTIFFS
v.
DOUGLAS A. LINES, P.C., ET AL. DEFENDANTS

The opinion of the court was delivered by: Justin M. Flint

DEFENDANTS' MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION, OR, IN THE ALTERNATIVE, TO ABSTAIN

Defendants Douglas A. Lines, P.C. and Douglas A. Lines, Esq., by and through their attorneys, Aaron L. Handleman, Justin M. Flint, Christopher F. Copenhaver, and Eccleston and Wolf, P.C., hereby file their Motion to Dismiss Plaintiffs Dominic Novak (hereinafter "Novak"), Regan Zambri & Long, P.L.L.C. (hereinafter "RZL"), and Patrick M. Regan, Esq.'s (hereinafter "Regan") Complaint for Lack of Subject Matter Jurisdiction, or, in the Alternative, to Abstain, pursuant to Federal Rule of Civil Procedure 12(b)(1) and Local Rule 7, and in support thereof states as follows:

1. Plaintiffs bring claims for Breach of Fiduciary and Ethical Duties (Count I), Breach of Contract (Count II), and Quantum Meruit (Count III).

2. However, Plaintiffs fail to allege that they have suffered an actual injury. As such, Plaintiffs lack Article III standing to bring Counts I and II, therefore, they should be dismissed.

3. Further, Plaintiffs' claims are unripe and, therefore, not justiciable at this time. This action is contingent upon the outcome of the parallel action first filed in Chesterfield County, Virginia (hereinafter "the Virginia action"), and as such this action is premature and need not occur at all.

4. Alternatively, a careful weighing of the factors set forth by the Supreme Court in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) and later in Moses H. Cone Memor'l Hosp. v. Mercury Const. Corp., 460 U.S. 1 (1983) indicates that this Court should abstain from exercising its jurisdiction over Counts I and II in favor of the parallel Virginia action.

5. Similarly, to the extent that this Court finds that Count III has properly sets forth a claim for declaratory relief, the Court should exercise its "substantial discretion" and abstain from exercising its jurisdiction over Count III in favor of the parallel Virginia action. See Wilton v. Seven Falls Company, 515 U.S. 277, 286 (1995).

6. This is a dispositive motion and therefore LCvR 7(m) is inapplicable.

7. Defendants hereby incorporate the attached Memorandum of Points and Authorities. WHEREFORE, for the reasons set forth in this Motion, as well as, the attached Memorandum of Points and Authorities, Defendants Douglas A. Lines, P.C. and Douglas A. Lines, Esq. respectfully request that this Court dismiss Plaintiffs' Complaint for lack of subject matter jurisdiction, or, in the alternative, abstain from exercising its jurisdiction over Plaintiffs' claims in favor of the parallel Virginia action.

REQUEST FOR ORAL ARGUMENT

The Defendants, by and through undersigned counsel, respectfully request that the Court hear oral arguments regarding this Motion to Dismiss for Lack of Subject Matter Jurisdiction, or in the Alternative, to Abstain.

Justin M. Flint

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on this 31st day of August, 2011, a copy of the aforegoing Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction, or in the Alternative, to Abstain, Memorandum of Point and Authorities, and proposed Order was served via the PACER ECF/electronic filing system on: Patrick M. Regan (#336107)

Paul Cornoni (#489398) Regan Zambri & Long, PLLC 1919 M Street, NW, Suite 350 Washington, DC 20036 Tel: (202) 463-3030 Fax: (202) 463-00667 pregan@reganfirm.com pcornoni@reganfirm.com Counsel for Plaintiffs

/s/ Justin M. Flint

Justin M. Flint

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

DOMINIC NOVAK, et al. Plaintiffs v. DOUGLAS A. LINES, P.C., et al. Defendants

CASE NO: 1:11-cv-00468(JMF)

DEFENDANTS' MEMORANDUM OF POINT AND AUTHORITIES

IN SUPPORT OF THEIR MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION, OR IN THE ALTERNATIVE TO ABSTAIN

Defendants Douglas A. Lines, P.C. and Douglas A. Lines, Esq., by and through their attorneys, Aaron L. Handleman, Justin M. Flint, Christopher F. Copenhaver, and Eccleston and Wolf, P.C., hereby file this Memorandum of Points and Authorities in Support of their Motion to Dismiss Plaintiffs Dominic Novak's (hereinafter "Novak"), Regan Zambri & Long, P.L.L.C.'s (hereinafter "RZL"), and Patrick M. Regan, Esq.'s (hereinafter "Regan") Complaint for Lack of Subject Matter Jurisdiction, or in the Alternative, to Abstain, pursuant to Federal Rule of Civil Procedure 12(b)(1) and Local Rule 7, and in support thereof states as follows:

I. Introduction

Plaintiffs bring claims for Breach of Fiduciary and Ethical Duties (Count I), Breach of Contract (Count II), and Quantum Meruit (Count III). However, Plaintiffs lack Article III standing to bring Counts I and II, therefore, they should be dismissed. Further, all of Plaintiffs' claims are unripe and, therefore, not justiciable at this time. As such, the Court should dismiss this action in favor of the parallel Virginia action. Alternatively, to the extent this Court finds that it has jurisdiction over any of Plaintiffs' claims, this Court should abstain from exercising that jurisdiction.

II. Statement of Facts

Underlying this action is a lawsuit filed in the United States District Court for the District of Columbia on or around January 8, 2001, styled Novak v. Capital Management, et al., Civil Action No. 01-00039 (HHK/JMF) (herinafter "the Novak litigation"). Compl. ¶ 15. The Novak litigation, brought by Plaintiff Dominic Novak, concerned injuries he received when he was assaulted while leaving the Zei Club in Washington D.C. Id. ¶ 10.

Plaintiffs allege that "[i]n approximately 2000, Plaintiff Novak originally retained attorney E. Wayne Powell and the law firm of Powell & Parrish, P.C. to represent him in his claims for damages against the owners and operators of the Zei Club for failing to provide reasonable security for patrons as they exited the club." Id. ¶ 12. The Plaintiffs further allege that "[o]n or around January 7, 2001, Mr. Powell chose to associate with the Lines Defendants with respect to the representation of Plaintiff Novak and another individual, George D. Valdivia, for injuries suffered as a result of the violent attack outside the Zei Club on March 22, 1998." Id.

¶ 14. It is undisputed that Novak agreed that attorney's fees associated with Novak litigation would be paid on a contingency basis.

Plaintiffs claim that "[i]n approximately June 2002, Mr. Powell and/or Defendant Douglas Lines, Esq. contacted Plaintiff Patrick M. Regan . . . and requested that Regan and his law firm enter its appearance and take over the representation of Mr. Novak and Mr. Valdivia in this matter." Id. ¶ 20. Plaintiffs claim that "[i]n June of 2003, and as a result of the difficult and complex nature of the litigation, as well as the complete failure of Douglas A. Lines, Esq. to perform any legal work, Plaintiffs Dominic Novak, RZL and Patrick M. Regan, as well as Wayne E. Powell, entered into a supplemental retainer agreement." Id. ¶ 23. "The Novak litigation was ultimately tried to a jury in May 2007 and resulted in a verdict of $4,111,772.00. Following an appeal to the United States Court of Appeals for the District of Columbia, the verdict was upheld in August 2009." Id. ¶ 17.

Plaintiffs further claim that,

[d]espite Plaintiff Novak's entering into the new agreement with Plaintiffs Patrick

M. Regan and RZL, which discharged Douglas Lines from the case in 2003, Douglas Lines has now attempted to unethically assert claims for several hundred thousand dollars of legal fees for work allegedly performed on a case pending in a jurisdiction in which he was not licensed to practice law.

Id. ¶ 29. Plaintiffs assert that "[t]he Lines Defendants have filed a frivolous lawsuit in Chesterfield, Virginia seeking legal fees to which they are not entitled" and that this lawsuit "represents a breach of the Lines Defendants' fiduciary, contractual and ethical duties to Plaintiff Dominic Novak since they are seeking to obtain a fee from Novak to which they are not entitled." Id. ¶¶ 30, 31. The Virginia action was filed on August 24, 2010, see Ex. A, and is styled as Douglas A. Lines, P.C., et al. v. Patrick M. Regan, et al., CL10-2380. See Ex. B. Novak is not a party to the Virginia action. See id.

Plaintiffs further allege that they "have placed sufficient funds in a trust account in an amount more than adequate to compensate Defendant Lines, on a quantum meruit basis . . . ." Id. ¶ 33. In fact, all but $69,000 dollars of the proceeds of the Novak litigation have been dispersed from Plaintiff RZL's client trust account. See Ex. C at 8-9. Plaintiffs state that "to the extent that this Court ultimately determines that Lines is entitled to any of the funds in the escrow account, any remaining funds are to be distributed directly to Plaintiff Dominic Novak." Id. ¶ 33.

Plaintiffs Regan and RZL were served with the complaint in the Virginia action on March 2, 2011. See Ex. D. Plaintiffs filed this action on the following day, alleging that "[j]urisdiction is vested in this Court pursuant to 28 U.S.C. 1332 as complete diversity exists between all adverse parties and the claims herein exceed the jurisdictional amount." Compl. ¶ 1.*fn1 In Count I of their Complaint, the Plaintiffs state that "notwithstanding the ethical and fiduciary duties the Defendants owed to Plaintiff Novak, Defendants breached the applicable fiduciary and ethical duties owed to Plaintiff." Id. ¶ 38. In support of Count I, Plaintiffs allege that Defendants breached the duties owed to Plaintiff Novak by "seeking to obtain a legal fee which Defendants did not earn and are not entitled to under the law and the D.C. Rules of Professional Conduct." Id. ¶ 39. Plaintiffs further allege that, as a direct and proximate result of the Defendants' combined breaches of their fiduciary and ethical duties, the Plaintiffs suffered financial harm, including but excluding, the withholding of settlement funds until the fee dispute is resolved; loss of opportunity to use the aforementioned settlement funds; monetary interest on such financial compensation running from August of 2009; legal fees and costs surrounding the fee dispute; as well as any and all related economic harms thereto.

Id. ¶ 40.

In Count II, Plaintiffs allege that Defendants breached contractual duties owed to Novak. In support of Count II, Plaintiffs allege that "the Lines Defendants contracted with Plaintiff Novak to provide competent legal services for Plaintiff Novak's benefit in exchange for good and valuable consideration." Id. ¶ 41. Plaintiffs go on to allege that, the Lines Defendants breached the contract with Plaintiff Novak by attempting to seek a legal fee which was not earned, failing to perform any substantive legal services and by attempting to seek a legal fee which was not earned or proper under the District of Columbia Rules of Professional Conduct, as well as the substantive law of the District of Columbia.

Id. ¶ 46. Plaintiffs further claim, that as a direct and proximate result of the Defendants' combined breaches of the contract, the Plaintiffs suffered financial harm, including but excluding, the withholding of settlement funds until the fee dispute is resolved; loss of opportunity to use the aforementioned settlement funds; monetary interest on such financial compensation running from August of 2009; legal fees and costs surrounding the fee dispute; as well as any and all related economic harms thereto.

Id. ¶ 47.

In Count III, Plaintiffs bring a claim for quantum meruit. In support of this claim, Plaintiffs, allege and plead in the alternative that the [sic] should this Court determine that despite his unethical and illegal conduct, Defendant Lines and or his law firm are entitled to some legal fee from Plaintiff Novak, or any of the other Plaintiffs, any such legal feel [sic] should be limited to quantum meruit based upon the fact that Defendant Lines failed to perform any substantive legal work during the 7 years prior to the successful conclusion of the claim.

Id. ¶ 48.

III. Standard of Review

"Plaintiff bears the burden of proving subject matter jurisdiction by a preponderance of the evidence." Bazarian Int'l Fin. Assocs., L.L.C. v. Desarrollos, 2011 U.S. Dist. LEXIS 66324 at *7 (June 22, 2011) (citation omitted). It is "presumed that federal courts lack jurisdiction unless the contrary appears affirmatively from the record." Renne v. Geary, 501 US 312, 316 (1991) (citation omitted). "It is the responsibility of the complainant clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute and the exercise of the court's remedial powers." Id. "A court must dismiss a case when it lacks subject matter jurisdiction." Bazarian, 2011 U.S. Dist. LEXIS 66324 at *7 (citation omitted).

"The Court must be assured that it is acting within the scope of its jurisdictional authority and therefore must give the plaintiff's factual allegations closer scrutiny when resolving a Rule 12(b)(1) motion than would be required for a Rule 12(b)(6) motion for failure to state a claim." Bazarian, 2011 U.S. Dist. LEXIS 66324 at *8 (citations omitted). "In evaluating subject matter jurisdiction, the Court, when necessary, may look outside the Complaint to undisputed facts evidenced in the record, or the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Id. (citations omitted).

IV. Standing

"[T]hose who seek to invoke the jurisdiction of the federal courts must satisfy the threshold requirement imposed by Art. III of the Constitution by alleging an actual case or controversy." Los Angeles v. Lyons, 461 U.S. 95, 101 (1983) (citation omitted)*fn2 . To meet the requirement for Article III constitutional standing, the plaintiff must establish (1) that he "personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant" and (2) that the injury "fairly can be traced to the challenged action," and (3) "is likely to be redressed by a favorable decision." Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472 (1982) (citation omitted).

a. Counts I and II

In support of Count I, Plaintiffs allege that Defendants breached fiduciary and ethical duties owed to Novak. See Compl. ¶¶ 38, 39. However, Plaintiffs fail to allege that Defendants breached fiduciary or ethical duties owed to RZL or Regan. See generally id. In support of Count II, Plaintiffs allege that Defendants breached contractual duties owed to Novak. See Compl. ¶¶ 41, 46. Again, however, Plaintiffs fail to allege that Defendants breached any contractual duty owed to RZL or Regan. See generally id. As such, Plaintiffs RZL and Regan fail to bring claims in Counts I and II, let alone allege facts sufficient to establish the requisite standing to do so. Therefore, Counts I and II should fail as to Plaintiffs RZL and Regan. However, even if it could be argued that Plaintiffs RZL and Regan have pled a claim in Counts I and II, these claims otherwise fail for lack of standing.

i. Plaintiffs RZL and Regan fail to allege that they have suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant.

To show Article III standing, Plaintiffs Regan and RZL must establish that they have some "personal stake in the outcome" of each claim. Lyons, 461 U.S. at 101 (citation omitted). In support of Counts I and II, Plaintiffs state that they "have suffered financial harm, including but excluding, the withholding of settlement funds until the fee dispute is resolved; loss of opportunity to use the aforementioned settlement funds; monetary interest on such financial compensation running from August of 2009 . . . ." Compl. ¶¶ 40, 47. Regan has confirmed that all but $69,000 dollars of the proceeds of the Novak litigation have been dispersed from Plaintiff RZL's client trust account. See Ex. C at 8-9. However, Plaintiffs state that "to the extent that this Court ultimately determines that Lines is entitled to any of the funds in the escrow account, any remaining funds are to be distributed directly to Plaintiff Dominic Novak." Id. ¶ 33.

Plaintiffs RZL and Regan have made no claim to these funds, nor have they claimed that they had any expectancy that they would be able to utilize these funds. See generally id. As such, Plaintiffs RZL and Regan fail to allege that they have been denied the use of the settlement funds or that they have they suffered some actual or threatened financial injury resulting from the withholding of the settlement funds. Therefore, Plaintiffs RZL and Regan fail to allege some actual or threatened injury.

Plaintiffs further state that they "have suffered financial harm, including . . . legal fees and costs surrounding the fee dispute." Id. ¶ 40, 47. However, Plaintiffs fail to allege that their claim for legal fees falls within any valid exception to the American rule. See generally Compl. The District of Columbia does not recognize an exception to the American rule regarding legal fees and costs "in defending against an action for fees or prosecuting a professional malpractice or breach of fiduciary duty claim against his former attorney." Shapiro, Lifschitz & Schram v. Hazard, 24 F. Supp. 2d 66, 73 (D.D.C. 1998). As such, Plaintiffs RZL and Regan have failed to allege that they have suffered a legally cognizable harm and they lack standing to bring this claim. Therefore, to the extent that Plaintiffs Regan and RZL attempt to bring claims in Counts I and II, they lack standing to do so.

ii. Plaintiff Novak fails to allege that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the Defendants.

Plaintiffs state that they "have suffered financial harm, including . . . legal fees and costs surrounding the fee dispute." Compl. ¶40, 47. However, Novak is not a party to the Virginia action. See Ex. B. Therefore, Novak cannot allege that he has incurred legal fees or expenses in relation to the Virginia action. Further, even if Plaintiff Novak has incurred legal fees and costs related to the underlying fee dispute, they do not represent a legally cognizable harm. See Hazard, 24 F. Supp. 2d at 73. As such, Plaintiff Novak has failed to allege that he has suffered a legally cognizable harm and he lacks standing to bring this claim.

b. Count III

In Count III, Plaintiffs bring a claim for quantum meruit. The concept of quantum meruit provides the basis for and measurement of damages in cases of (1) breach of implied contract or (2) compensation in quasi-contract. See TVL Assocs. v. A & M Constr. Corp., 474 A.2d 156, 159 (D.C. 1984) (citation omitted). A claim for quantum meruit requires the plaintiff to prove (1) that plaintiff performed valuable services for the defendant, (2) that the defendant accepted, used, and enjoyed plaintiff's services, and (3) that the circumstances reasonably put defendant on notice that plaintiff expected to be paid by defendant. See Fischer v. Estate of Flax, 816 A.2d 1, 10-11 (2003) (citation omitted). Therefore, a claim for quantum meruit belongs to the party seeking compensation for valuable services conferred upon another party. Here, Plaintiffs do not attempt to recover compensation for valuable services conferred upon Defendants. See Compl.¶ 48. Rather, Plaintiffs attempt to assert a claim that belongs to Defendants. Id. Plaintiffs have no standing to assert such a claim on the Defendants' behalf. As such, Count III fails to state a claim for which relief may be granted.

V. Ripeness

"Ripeness is a justiciability doctrine drawn both from Article III limitations on judicial power and from prudential reasons for refusing to exercise jurisdiction." In re Aiken County, 2011 U.S. App. LEXIS 13384 at *11 (D.C. Cir. July 1, 2011) (citation omitted). Courts have described these as two related, but distinct, inquiries: constitutional ripeness and prudential ripeness. See Simmonds v. INS, 326 F.3d 351, 357 (2d Cir. 2003); Wyo. Outdoor Council v. United States Forest Serv., 165 F.3d 43, 48 (D.C. Cir. 1999) ("[A]n Article III court cannot entertain the claims of a litigant unless they are 'constitutionally and prudentially ripe.'" (citation omitted)).

"Constitutional ripeness is a doctrine that, like standing, is a limitation on the power of the judiciary." Simmonds, 326 F.3d at 357. This inquiry therefore, "goes, in a fundamental way, to the existence of jurisdiction." Id. Prudential ripeness, on the other hand, "is a more flexible doctrine of judicial prudence, and constitutes an important exception to the usual rule that where jurisdiction exists a federal court must exercise it." Id.

a. Constitutional Ripeness "Just as the constitutional standing requirement for Article III jurisdiction bars disputes not involving injury-in-fact, the ripeness requirement excludes cases not involving present injury." Wyo. Outdoor Council, 165 F.3d at 48. As was stated above, Plaintiffs lack standing to bring Counts I and II because they have failed to allege that they personally have suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant. For same reasons Plaintiffs' lack standing to bring Counts I and II, Plaintiffs' fail to meet the standard for constitutional ripeness and Counts I and II should be dismissed. See supra section IV.

b. Prudential Ripeness "The ripeness doctrine, even in its prudential aspect, is a threshold inquiry that does not involve adjudication on the merits and which may be addressed prior to consideration of other Article III justiciability doctrines." In re Aiken County, 2011 U.S. App. LEXIS 13384 at *12 (D.C. Cir. 2011) (citation omitted). When analyzing prudential reasons for refusing to exercise jurisdiction, courts apply a two-pronged balancing test to determine whether a case is ripe for adjudication. In doing so, courts must evaluate both "the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration." Texas v. United States, 523 U.S. 296, 300-01 (1998).

i. Fitness for Judicial Review (Counts I and II)

Determining whether a claim is fit for judicial review "requires a weighing of the sensitivities of the issues presented and whether there exists a need for further factual development." Murphy v. New Milford Zoning Comm'n, 402 F.3d 342, 347 (2d Cir. 2005) (citing Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 581 (1985)). "A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all." Texas v. United States, 523 U.S. 296, 300 (1998) (citation omitted).

In Terra Nova Ins. Co. v. Distefano, 663 F. Supp. 809 (D.R.I. 1987), the district court was presented with the question of "whether an independent federal action, whose viability is contingent upon the outcome of parallel state court proceedings, is ripe for adjudication?" Id. at 809. Prior to the initiation of the federal court action, defendants filed suit against their insurer, Terra Nova, in state court alleging that it acted in bad faith when it refused to pay the full amount of their claims arising out of a construction accident. Id. at 810. Subsequently, Terra Nova filed suit against defendants in federal court, alleging that the insurance claim "was one incident in a pattern of racketeering activity violative of RICO." Id.

The district court found that Terra Nova's RICO action was contingent upon the outcome of issues which may be decided in the state court action and, therefore, was not ripe for adjudication. Id. at 810-11. Specifically the district court found that if the defendants were successful in "their bad-faith claims in state court, then it would have been determined that Terra Nova acted in bad faith in refusing to pay defendants under the policy." Id. The district court, therefore, found that a "finding of bad faith on the part of Terra Nova . . . necessarily would imply that the [defendants] proceeded against the company in good faith or non-fraudulently" thereby, foreclosing Terra Nova's ability to allege that it was injured as result of the defendants' claim. Id. at 811. As such, the district court found that Terra Nova's federal court action was unripe and not fit for judicial review because the action before the district court "may not occur at all." Id.

Here, the same logic applies. In Counts I and II Plaintiffs allege that, as a direct and proximate result of the Defendants' combined breaches of their fiduciary and ethical duties, the Plaintiffs suffered financial harm, including but excluding, the withholding of settlement funds until the fee dispute is resolved; loss of opportunity to use the aforementioned settlement funds; monetary interest on such financial compensation running from August of 2009; legal fees and costs surrounding the fee dispute; as well as any and all related economic harms thereto.

Compl. ¶¶ 40, 47. As these allegations indicate, Plaintiffs seek compensation for damages incurred as a result of the fee dispute and the resulting Virginia action, which they allege is "frivolous." Id. ¶ 30. However, if Defendants are successful in the Virginia action, it would necessarily imply that the Virginia action was not frivolous and, further, that Defendants proceeded in good faith in seeking fees for work performed in the Novak litigation. As such, Plaintiffs would be foreclosed from bringing a claim for damages resulting from the fee dispute or the Virginia action. As such, Counts I and II are unripe and not fit for judicial review at this time.

ii. Fitness for Judicial Review (Count III)

Defendants deny that Count III constitutes a properly pled claim for declaratory relief, however, to the extent that the Court finds it is sufficient, Count III is not ripe for judicial review. "While the Declaratory Judgment Act allows a court to issue a judgment before an injury is accomplished, there must be an actual controversy at issue." Permanent Gen. Assur. Corp. v. Moore, 341 F. Supp. 2d 579, 581 (D.S.C. 2004) (citation omitted). A declaratory judgment may not be given for a purely hypothetical situation or as an advisory opinion. Bazarian, 2011 U.S. Dist. LEXIS 66324 at *9-10 (citations omitted).

In Permanent Gen. Assur. Corp. v. Moore, 341 F. Supp. 2d 579 (D.S.C. 2004), plaintiff Permanent General sought a declaratory judgment stating that it had not acted in bad faith when it declined to settle a claim against one of its insureds. Prior to the filing of the federal court action, Permanent General rejected a claimant's offer to settle a claim he had brought against one of Permanent General's insured for the policy limits. Id. at 580. In response to Permanent General's rejection of his settlement offer, the claimant filed suit against the insured in state court. Id. Permanent General then offered to settle for the policy limits but was rebuffed by the claimant who claimed that Permanent General acted in bad faith in rejecting the previous settlement offer. Id. Aware that an insurer could be held liable for the amount of a judgment in excess of the policy limits if it is determined that that the insurer acted in bad faith in not settling the claim, Permanent General filed for a declaratory action in federal court seeking a declaration that it had not acted in bad faith. Id. But the district court dismissed the action as unripe, concluding that the action was premature because a judgment had not been entered in the state action that exposed the insured to a verdict in excess of the insurance policy limits. Id. at 581.

Here, the same logic applies. To the extent that the Court resolves that Plaintiffs, through Count III, seek a declaration that Defendants are not entitled to some or all of the attorney's fees which they seek, the action is premature. Plaintiffs do not allege that any judgment has been issued in the Virginia action which awards Defendants fees. See generally Compl. Nor do Plaintiffs otherwise allege that Defendants have been paid any fees in relation to the Novak litigation. See generally id. Further, if Defendants are unsuccessful in the Virginia action, any need for a declaration that Defendants are not entitled to some or all of the attorney's fees which they seek would be rendered moot. As such, to the extent Count III could possibly be interpreted as a prayer for declaratory relief, it is premature and not fit for judicial review.

iii. Hardship (Counts I and II)

The doctrine of prudential ripeness also requires consideration of "the hardship to the parties of withholding court consideration." Texas v. United States, 523 U.S. 296, 300-01 (1998). In Distefano, Terra Nova contended that its hardship would be great because it would continue to incur legal expenses and costs in defending the state court action. Distefano, 663 F. Supp. at 812. The district court was not persuaded by this argument, noting that Terra Nova did not file its RICO action until three years after the original harm. Id. The district court found that if Terra Nova had been suffering such a hardship it would not have waited so long to bring its RICO action. Id. (noting that it "is painfully clear that Terra Nova filed its RICO action when it did, merely to coerce a settlement from [defendants] in the state court proceedings").

Here, Plaintiffs claim that they have "suffered financial harm, including but excluding, the withholding of settlement funds until the fee dispute is resolved; loss of opportunity to use the aforementioned settlement funds; monetary interest on such financial compensation running from August of 2009; legal fees and costs surrounding the fee dispute . . . ." Compl. ¶ 40, 47 (emphasis added). However, not until the day after Plaintiffs Regan and RZL were served with the Virginia complaint in March of 2011 did Plaintiffs file the instant action. See Ex. D. It is, therefore, apparent, as it was in Distefano, that the hardship being suffered by Plaintiffs is slight and does not outweigh the hypothetical and contingent nature of Plaintiffs claims. As such, this action is unfit for judicial review.

VI. Abstention Doctrine

The Supreme Court has stated that a "district court may abstain from exercising jurisdiction in certain exceptional circumstances of parallel, duplicative litigation in the interest of sound 'judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.'" Foster-El v. Beretta U.S.A. Corp., 163 F. Supp. 2d 67, 70 (D.D.C. 2001) (quoting Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)).

a. Counts I and II

In Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) and later in Moses H. Cone Memor'l Hosp. v. Mercury Const. Corp., 460 U.S. 1 (1983), the Supreme Court articulated six factors that inform a district court's discretionary decision whether to abstain from exercising its jurisdiction for reasons of wise judicial administration. As are relevant here*fn3 , these considerations include: (1) the desirability of avoiding piecemeal litigation;

(2) the order of jurisdiction in the concurrent forums; (3) whether the case involves federal law; and (4) whether the state-court proceeding can adequately protect the parties' rights. Foster-El v. Beretta U.S.A. Corp., 163 F. Supp. 2d 67, 71 (D.D.C. 2001) (citing Moses H. Cone Memor'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-26 (1983)). An examination of these factors overwhelmingly weighs heavily in favor of abstention.

i. The desirability of avoiding piecemeal litigation. "Piecemeal litigation occurs when different tribunals consider the same issue, thereby duplicating efforts and possibly reaching different results." Foster-El v. Beretta U.S.A. Corp., 163 F. Supp. 2d 67, 71 (D.D.C. 2001) (citation omitted). In Foster-El, the district court found that abstention was appropriate, relying in part on the fact that the federal case and the state case were not "mirror actions" in that a decision by the federal court would not necessarily dispose of "all the parties claims in the [state] suit." Id. at 72 (citation omitted). The Court also noted that the parties to the two suits were not identical and that even if the proceedings continued in the federal case, any decision would not necessarily be binding on all of the state court parties. Id. The Court concluded that "allowing the proceedings to continue in [federal] court would result in a messy, piecemeal litigation because the parties would litigate identical questions of law applied to identical facts in two separate forums." Id. (citation omitted).

Here, piecemeal litigation would certainly ensue if the Court were to exercise jurisdiction. In the Virginia action, Defendants have made claims against E. Wayne Powell and Jonathan Halperin, neither of whom are parties to this action. See Ex. B. Therefore, any determination made in this action would not necessarily be determinative of the rights as between Defendants on the one hand and Powell or Halperin on the other. Further, while the parties in the two actions are not identical, many, if not all, of the legal and factual issues are common to both. In the Virginia action, Defendants assert several claims in an attempt to recover attorney's fees earned as a result of work performed in relation to the Novak litigation. See Ex. B. In the instant action, Plaintiffs allege that Defendants have breached certain duties by seeking fees in relation to the Novak litigation to which they are not entitled. See generally Compl. Whether Defendants are entitled to the legal fees sought in the Virginia action is, therefore, at issue in both the instant action and the Virginia action. As such, the possibility of piecemeal litigation weighs heavily in favor of abstention.*fn4

ii. The order of jurisdiction in the concurrent forums.

Defendants filed the Virginia action on August 24, 2010. See Ex. A. Plaintiffs Regan and RZL were served with the Complaint in the Virginia action on March 2, 2011. See Ex. D. Plaintiffs filed the instant action the following day on March 3, 2011. Therefore, the order of jurisdiction favors abstention in this action.*fn5

iii. Whether the case involves federal law.

Plaintiffs have not asserted federal question jurisdiction. See Compl. ¶¶ 1-2. Nor do Counts I or II raise any issues of federal law. See generally Compl. As such, this Court is in no more favorable position than the state court to adjudicate the relevant questions of state law. While the absence of federal law does not always warrant abstention, Foster-El, 163 F. Supp. 2d at 73, here, the lack of a federal question, taken into consideration with the other factors, counsels in favor of abstention.

iv. Whether the state-court proceeding can adequately protect the parties' rights.

In finding that the parties' rights would be adequately protected, the Court in Foster-El, noted that the federal case involved only issues of state law and, therefore, the state court would be in no less a position to protect the parties rights than would the federal court. Foster-El, 163 F. Supp. 2d at 73. See also 1442 Chapin Street, LP, 718 F. Supp. 2d at 85. The court also noted that the more comprehensive nature of the state case favored abstention. Foster-El, 163 F. Supp. 2d at 73.

The instant action involves only issues of state law and, therefore, the state court in Virginia is in a no less advantageous position to protect the parties' rights than would this Court. Also, in the Virginia action, Defendants have made claims against E. Wayne Powell and Jonathan Halperin, neither of whom, are parties to this action. See Ex. B. Therefore, any determination made in this action would not necessarily be determinative of the rights as between Defendants on the one hand and Powell or Halperin on the other. As such, the Virginia action would provide a more comprehensive adjudication of the issues.

Further, even though Plaintiff Novak is not a party to the Virginia action, Plaintiffs cannot assert that his rights will not be adequately protected in that action. While Plaintiffs Regan and RZL are parties to both the instant action and the Virginia action, they also serve as counsel for Novak in the instant action. Plaintiffs Regan and RZL would be duty bound as his attorneys in the instant action to protect the rights of Plaintiff Novak in the Virginia action to the extent that the $69,000 held in escrow is at issue in the Virginia action, as well as, to refrain from knowingly taking a position adverse to their client's asserted interests in this action. Therefore, this Court should exercise its discretion and abstain from exercising its jurisdiction over Counts I and II.

b. Count III (Quantum Meruit)

Again, Defendants do not concede that Count III constitutes a properly pled claim for declaratory relief, nor do Defendants concede that the Court has subject matter jurisdiction over any such claim. However, to the extent that the Court finds that Count III has sufficiently pled an action for declaratory relief and that the Court has subject matter jurisdiction over it, the Court should, nevertheless, abstain from exercising that jurisdiction.

"Since its inception, the Declaratory Judgment Act has been understood to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants." Wilton v. Seven Falls Company, 515 U.S. 277, 286 (1995). "[T]here is nothing automatic or obligatory about the assumption of jurisdiction by a federal court to hear a declaratory judgment action." Wilton v. Seven Falls Company, 515 U.S. 277, 287 (1995) (citation omitted). The Supreme Court has "repeatedly characterized the Declaratory Judgment Act as an enabling Act, which confers discretion on the courts rather than an absolute right upon the litigant." Id. at 287 (citation omitted).

In Wilton v. Seven Falls Company, 515 U.S. 277 (1995), the Supreme Court was asked to review a district court's order which stayed an action brought under the Declaratory Judgment Act in favor of parallel state court litigation. In granting the stay, the district court observed that the state court action encompassed the same issues raised in the federal declaratory judgment action and determined that a stay was warranted to avoid piecemeal litigation and to bar plaintiff's attempt at forum shopping. Id. at 280. Plaintiff appealed, arguing that the district court should have applied the "exceptional circumstances" test set forth in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), and Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983).

The Court granted certiorari "to resolve Circuit conflicts concerning the standard governing a district court's decision to stay a declaratory judgment action in favor of parallel state litigation." Wilton, 515 U.S. at 281. In doing so, the Court concluded that the "discretionary standard" set forth in Brillhart v. Excess Ins. Co. of America, 316 U.S. 491 (1942), and not the "exceptional circumstances" test developed in Colorado River and Moses, governs a district court's decision to stay a declaratory judgment action during the pendency of parallel state court proceedings. See Wilton, 515 U.S. at 289-90. The Court further found that a district court's decision to stay a declaratory action in favor of parallel state court litigation can only be reviewed for abuse of discretion. Id.

The Wilton Court found that "Brillhart makes clear that district courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites." Id. at 282. The Court noted that "[o]n its face, the statute provides that a court 'may declare the rights and other legal relations of any interested party seeking such declaration,'" Id. at 286 (quoting 28 U.S.C. § 2201(a)), and that this "textual commitment to discretion, and the breadth of leeway [the Supreme Court] ha[s] always understood it to suggest, distinguish the declaratory judgment context from other areas of the law in which concepts of discretion surface." Id. at 286-87 (citations omitted).

Under Brillhart "[t]he question for a district court presented with a suit under the Declaratory Judgment Act . . . is 'whether the questions in controversy between the parties to the federal suit, and which are not foreclosed under the applicable substantive law, can better be settled in the proceeding pending in the state court.'" Id. at 282(quoting Brillhart,316 U.S. at 495). Here, to the extent the Court finds that Plaintiffs have properly pled an action under the Declaratory Judgment Act, the Court should apply its discretion and abstain from exercising jurisdiction. In adjudicating the Virginia action, the state court will be required to determine the extent to which Defendants are entitled to legal fees relating to the Novak litigation. If Defendants are unsuccessful in the Virginia action, any possible utility that this Court could provide by asserting jurisdiction over Count III would be eviscerated.

The United States Court of Appeals for the District of Columbia Circuit has also listed several relevant factors to be considered when deciding whether to exercise jurisdiction over a claim for declaratory relief:

[W]hether a [declaratory judgment] would finally settle the controversy between the parties; whether other remedies are available or other proceedings pending; the convenience of the parties; the equity of the conduct of the declaratory judgment plaintiff; prevention of "procedural fencing"; the state of the record; the degree of adverseness between the parties; and the public importance of the question to be decided.

Swish Mktg., Inc. v. F.T.C., 669 F. Supp. 2d 72, 76-77 (D.D.C. 2009) (quoting Hanes Corp. v. Millard, 531 F.2d 585, 591 n.4 (D.C. Cir. 1976). An examination of these factors*fn6 overwhelmingly weighs in favor of abstention.

i. Whether a declaratory judgment would finally settle the controversy between the parties.

To the extent that the Court finds Plaintiffs have pled a claim for declaratory relief, it cannot be assumed that Plaintiffs will prevail in such a claim. The Court might rule that Defendants are entitled to all of the attorney's fees they are seeking. To the extent that the Court were to declare that the Defendants are entitled to fees in excess of the $69,000 held in escrow, issues regarding liability for that amount would be raised but not resolved. In the Virginia action, Defendants have also made claims for punitive, treble, and statutory damages. See Ex. B at 13-14. Therefore, piecemeal litigation would ensue.

ii. Prevention of procedural fencing.

Another important consideration is whether Plaintiffs are engaged in "procedural fencing, or forum-shopping." Swish, 669 F. Supp. 2d at 78. "The Declaratory Judgment Act is not a tactical device." Gov't Emples. Ins. Co. v. Rivas, 573 F. Supp. 2d 12, 15 (D.D.C. 2008). Thus, in examining whether to resolve a declaratory judgment action, "courts take a dim view of declaratory plaintiffs who file their suits mere days or weeks before the coercive suits filed by a natural plaintiff and who seem to have done so for the purpose of acquiring a favorable forum." Swish, 669 F. Supp. 2d at 78 (citation omitted). Here, Plaintiffs' motives are even more apparent. Plaintiffs filed this action the day after they were served with the complaint in the Virginia action. See Ex. D.

In the Virginia action, Defendants seek fees earned as a result of work performed in relation to the Novak litigation. While it is unclear what Count III asks of the Court, at most it is asking the Court to determine that Defendants are entitled to something less than what they seek. See Compl. ¶ 48. Therefore, to the extent that the Court finds that Count III properly pleads a claim for declaratory relief, it asserts what is essentially an affirmative defense to the claims brought in the Virginia action. The fact that granting declaratory relief would require the resolution of an affirmative defense weighs against exercising jurisdiction. See Swish Mktg., Inc. v. FTC, 669 F. Supp. 2d 72, 79 (D.D.C. 2009) (citing BASF Corp. v. Symington, 50 F.3d 555, 559 (8th Cir. 1995) ("It is our view that where a declaratory plaintiff raises chiefly an affirmative defense, and it appears that granting relief could effectively deny an allegedly injured party its otherwise legitimate choice of the forum and time for suit, no declaratory judgment should issue.")).

iii. Whether other remedies are available or other proceedings pending. Whether Defendants' are entitled to the fees they seek will undoubtedly be at issue in the Virginia action. In the Virginia action, Plaintiffs Regan and RZL will be able to raise the same arguments that Plaintiffs have allegedly pursued in Count III. See Swish Mktg., Inc., 669 F. Supp. 2d at 79 (quoting AmSouth Bank v. Dale, 386 F.3d 763, 787 (6th Cir. 2009) ("Where a pending coercive action, filed by the natural plaintiff, would encompass all the issues in the declaratory judgment action, the policy reasons underlying the creation of the extraordinary remedy of declaratory judgment are not present, and the use of that remedy is unjustified.")). As such, a much more appropriate forum exists and the Court should abstain from exercising its jurisdiction.

iv. The degree of adverseness between the parties.

The adverseness between the parties cannot be disputed. Defendants have filed suit in Virginia against Plaintiffs Regan and RZL. See Ex. B. In response, Plaintiffs Regan and RZL, along with Plaintiff Novak, filed this action. See Compl. ¶¶ 30-31. As was discussed above, the fact that Plaintiffs RZL and Regan act as counsel for Plaintiff Novak in the instant action assures that their interest are aligned with regard to the Virginia action. Therefore, the Plaintiffs' interests are aligned and are all directly adverse to Defendants in both actions. This adverseness weighs in favor of the exercise of discretion. See Swish Mktg., Inc., 669 F. Supp. 2d at 80. v. The equity of the conduct of the declaratory judgment plaintiff.

In the Virginia action, Defendants seek several hundred thousand dollars in attorney's fees. See Ex. B. However, in response to this fee dispute, Plaintiffs Regan and RZL have placed only $69,000 in escrow. See Ex. C. Further, Plaintiffs filed this action the day after they were served with the complaint in the Virginia action. See Ex. B. While this could be mere coincidence, it is unlikely, especially when one considers that Plaintiffs' Complaint expressly states that the filing of the Virginia action constituted a breach. Compl. ¶ 30-31. It is, therefore, obvious that Plaintiffs have filed this lawsuit merely to gain a tactical advantage.

vi. The state of the record.

Both this action and the Virginia action are in the early stages of litigation and have conducted limited discovery. Neither party would be prejudiced if the Court chose not to exercise jurisdiction over Count III. As such, the relevant factors overwhelmingly weigh in favor of abstention.

VII. Conclusion

Plaintiffs fail to allege that they have suffered some actual harm, therefore, Plaintiffs lack

Article III standing to bring Counts I and II and they should be dismissed. Further, all of Plaintiffs' claims are contingent upon issues that may be resolved in the first filed Virginia action and are, therefore, unripe and not justiciable at this time. As such, the Court should dismiss this action in favor of the parallel Virginia action. Alternatively, to the extent this Court finds that it has jurisdiction over any of Plaintiffs' claims, this Court should abstain from exercising that jurisdiction.

WHEREFORE, for the reasons set forth in this Memorandum of Points and Authorities, Defendants Douglas A. Lines, P.C. and Douglas A. Lines, Esq. respectfully request that this Court dismiss Plaintiffs' Complaint for lack of subject matter jurisdiction, or in the alternative abstain from exercising its jurisdiction over Plaintiffs' claims in favor of the parallel Virginia action.

Respectfully submitted, ECCLESTON & WOLF, PC /s/ Justin M. Flint Aaron L. Handleman (#48728) Justin M. Flint (#491782) Christopher F. Copenhaver (pro hac vice) 1629 K Street, NW Suite 260 Washington, DC 20006 Tel: (202) 857-1696 Fax: (202) 867-0762 handleman@ewdc.com flint@ewdc.com copenhaver@ewdc.com Counsel for Defendants


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.