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Headfirst Baseball LLC v. Elwood

United States District Court, D. Columbia.

November 22, 2013

HEADFIRST BASEBALL LLC, et al., Plaintiffs,
v.
ROBERT ELWOOD, et al., Defendants. ROBERT ELWOOD, Counterclaim Plaintiff,
v.
BRENDAN V. SULLIVAN III, and HEADFIRST PROFESSIONAL SPORTS CAMP, LLC, Counterclaim Defendants

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[Copyrighted Material Omitted]

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For HEADFIRST BASEBALL LLC, HEADFIRST CAMPS LLC, BRENDAN V. SULLIVAN, III, Plaintiffs: Robert Madison Cary, WILLIAMS & CONNOLLY, Washington, DC; Simon A. Latcovich, Michael Shobe Sundermeyer, WILLIAMS & CONNOLLY LLP, Washington, DC.

For ROBERT ELWOOD, STACEY ELWOOD, Defendants, Counter Claimants: Caroline Petro Gately, James Douglas Baldridge, Moxila A. Upadhyaya, LEAD ATTORNEYS, VENABLE LLP, Washington, DC.

For BRENDAN V. SULLIVAN, III, Counter Defendant: Michael Shobe Sundermeyer, LEAD ATTORNEY, WILLIAMS & CONNOLLY LLP, Washington, DC.

For HEADFIRST PROFESSIONAL SPORTS CAMPS, LLC, Counter Defendant: Daniel Sage Ward, LEAD ATTORNEY, Ward & Ward, PLLC, Washington, DC.

OPINION

REGGIE B. WALTON, United States District Judge.

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MEMORANDUM OPINION

The plaintiffs, Headfirst Baseball LLC, Headfirst Camps LLC (" the companies" ),

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and Brendan V. Sullivan III (" Sullivan" ), have filed this action against the defendants, Robert Elwood (" Elwood" ) and his wife Stacey Elwood, alleging (1) conversion; (2) breach of fiduciary duty; (3) fraud in the inducement; and (4) tortious interference, and seeking (5) a declaration of a constructive trust. See First Amended Complaint (" First Am. Compl." ) ¶ ¶ 206-28. Defendant Robert Elwood has filed a counterclaim against Sullivan and a third company, Headfirst Professional Sports Camps, LLC, alleging (1) breach of contract; (2) violations of the District of Columbia Uniform Limited Liability Company Act; (3) promissory estoppel; (4) breach of fiduciary duty; and (5) defamation, and seeking (6) a declaration that Robert Elwood has a partnership interest in an alleged " Headfirst Partnership" ; (7) an accounting and compelled purchase of Elwood's partnership interest in the alleged Headfirst Partnership; and (8) punitive damages. See Counterclaim Against Brendan V. Sullivan III and Headfirst Professional Sports Camps LLC (" Countercl." ) ¶ ¶ 85-141. Currently before the Court are the Plaintiffs' Motion for Leave to File Second Amended Complaint (" Pls.' Mot." ), and the Elwoods' Motion to Disqualify Williams & Connolly LLP as Plaintiffs' Counsel and Memorandum in Support (" Defs.' Mem." ) of their disqualification motion. After carefully considering the parties' submissions [1] and their oral arguments presented to the Court on October 24, 2013, the Court concludes for the following reasons that it must grant the plaintiffs' motion to amend their complaint, and deny without prejudice the defendants' motion to disqualify Williams & Connolly as plaintiffs' counsel.

I. BACKGROUND

All of the claims and counterclaims in this case arise out of the soured business and personal relationships of Brendan Sullivan III and Robert Elwood. The plaintiff companies, who along with Sullivan have brought this action, provide athletic summer camp programs for several thousand children, First Am. Compl. ¶ 12; Countercl. ¶ 6, and the counterclaim defendant company, Headfirst Professional Sports Camps LLC, " is the official provider of summer [youth] camps for the Washington Nationals, Boston Red Sox, Chicago Cubs and New York Yankees in the District of Columbia, Boston, Chicago, and New York Metropolitan areas," Countercl. ¶ 24, at which " [c]ampers ages 5-13 enjoy a 'Major League Experience' with first-rate coaching, VIP tours and the opportunity to meet a[] [Major League Baseball] player," Countercl., Exhibit (" Ex." ) E (Screenshot of Headfirst Website) at 4. The plaintiffs' first amended complaint asserts that Sullivan is the " founder and President of Headfirst," while Elwood was the " 'second in command' of the business under Sullivan." First Am. Compl. ¶ 13. The plaintiffs allege that it was discovered

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in 2012 that Robert Elwood had misappropriated hundreds of thousands of dollars from the plaintiff companies over several years, First Am. Compl. ¶ ¶ 1, 14, and that Stacey Elwood participated in the misappropriation, as well as its cover-up, id. ¶ 2. " As a result, on December 28, 2012, Sullivan advised Elwood in writing that" his position with the plaintiff companies " was terminated effective December 31, 2012." Id. ¶ 202.

The defendants present a markedly different story, alleging that Elwood is a partner who co-owns the " Headfirst Partnership." Countercl. ¶ ¶ 6, 22. The counterclaim alleges that the Headfirst companies have been operating under the umbrella of a de-facto partnership--one that Elwood helped develop and in which he has now been wrongfully denied participation. Countercl. ¶ ¶ 1-2, 34-36. According to the counterclaim, " the Headfirst Partnership was formed" in 2001 when " Elwood and Sullivan began, as co-owners," managing the " Headfirst business as a whole." Id. ¶ 22. Elwood further alleges that Sullivan " authorized, was a participant in, and was the architect of the very conduct [Sullivan] now alleges is wrongful." Id. ¶ 36.

One week after filing their counterclaim, the defendants filed the motion to disqualify Williams & Connolly as plaintiffs' counsel in this case. The defendants allege that Elwood and Sullivan sought and obtained legal advice from Sullivan's father, Brendan V. Sullivan, Jr., and the law firm at which the elder Sullivan is a partner, Williams & Connolly. See Defs.' Mem. at 3-4; see also Defs.' Mem., Ex. 1 (Declaration of Robert Elwood (" Elwood July Decl." )) ¶ ¶ 9, 20. The defendants allege further that Williams & Connolly " became general counsel to Headfirst," and that " Elwood and Sullivan also received legal advice from Williams & Connolly on personal issues." Defs.' Mem. at 4; see also Defs.' Mem., Ex. 1 (Elwood July Decl.) ¶ 9. In addition to the elder Sullivan, the defendants represent that Stephen Sorenson, a former Williams & Connolly partner, also provided advice " on a variety of issues, some of which are central to the dispute in this lawsuit." Defs.' Mem. at 4; id., Ex. 1 (Elwood July Decl.) ¶ ¶ 10-18. The plaintiffs oppose the defendants' motion to disqualify Williams & Connolly.

The plaintiffs also recently filed a motion for leave to file a second amended complaint to include further allegations concerning their tortious interference claim, as well as to add a claim under the Stored Communications Act, 18 U.S.C. § § 2701-2712 (2012). Pls.' Mot. at 4. The defendants oppose the motion on the ground that the proposed amendments are futile. Defs.' Opp'n at 1.

II. STANDARDS OF REVIEW

A. Motion to Disqualify Counsel

Although " [i]t is true of course that disqualification of an attorney is a matter which rests within the sound discretion of the trial court," it is also true that " [d]isqualification of an attorney is a serious step." Derrickson v. Derrickson, 541 A.2d 149, 152 & n.6 (D.C. 1988); see also Groper v. Taff, 717 F.2d 1415, 1418, 230 U.S.App. D.C. 358 (D.C. Cir. 1983). This is because " [d]isqualification may severely affect the monetary interest and reputation of an attorney," and also " negates a client's right to freely choose his counsel." Derrickson, 541 A.2d at 152 n.6 (citation omitted).

In re Rail

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Freight Fuel Surcharge Antitrust Litig., 965 F.Supp.2d 104, 110, *26, 2013 WL 4714334, at *5 (D.D.C. 2013) (citation omitted). " Any motion to disqualify faces the extraordinarily high burden articulated by the . . . [Circuit] in Koller v. Richardson, Merrell Inc., 737 F.2d 1038, 1056, 237 U.S.App. D.C. 333 (D.C. Cir. 1984), vacated on other grounds, 472 U.S. 424, 105 S.Ct. 2757, 86 L.Ed.2d 340 (1985)," in which the Circuit concluded that " unless the attorney's conduct will tend to taint the trial and actually have the potential to affect its outcome, disqualification is impermissible." Cauderlier & Assocs., Inc. v. Zambrana, No. 05-1653, 2006 WL 3445493, at *2 (D.D.C. Oct. 6, 2006). As the Circuit stated:

[D]isqualification is warranted only rarely in cases where there is neither a serious question as to counsel's ability to act as a zealous and effective advocate for the client, nor a substantial possibility of an unfair advantage to the current client because of counsel's prior representation of the opposing party, or prior responsibility as a government official. Except in cases of truly egregious misconduct likely to infect future proceedings, other means less prejudicial to the client's interest than disqualifying the counsel of [his or her] choice are ordinarily available to deal with ethical improprieties by counsel.

Koller, 737 F.2d at 1056 (citations omitted).

B. Motion to Amend

" A party may amend its pleading once as a matter of course" before the adverse party has filed a responsive pleading. Fed.R.Civ.P. 15(a). However, after a responsive pleading has been filed, the initial pleading may be amended " only with the opposing party's written consent or the court's leave." Id. 15(a)(2). While the Court has sole discretion to grant or deny leave to amend, " [l]eave to amend a [pleading] should be freely given in the absence of undue delay, bad faith, undue prejudice to the opposing party, repeated failure to cure deficiencies, or futility." Richardson v. United States, 193 F.3d 545, 548-49, 338 U.S.App. D.C. 265 (D.C. Cir. 1999) (citing Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962)). The rationale for this perspective is that " [i]f the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits." Foman, 371 U.S. at 182.

III. LEGAL ANALYSIS

A. The Defendants' Motion to Disqualify

The defendants ask the Court to disqualify Williams & Connolly as plaintiffs' counsel in this case on the grounds that the law firm's continued involvement would violate three District of Columbia Rules of Professional Conduct: Rule 1.7, Rule 1.9, and Rule 3.7. Defs.' Mem. at 3. The Court will address each potential basis for disqualification in turn.

1. Whether Plaintiffs' Counsel's Representation Violates Rule 1.7

Rule 1.7 states:

(b) Except as permitted by paragraph (c) below, a lawyer shall not represent a client with respect to a matter if:
(1) That matter involves a specific party or parties and a position to be taken by that client in that matter is adverse to a position taken or to be taken by another client in the same matter even though that client ...

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