United States District Court, District of Columbia
TIMOTHY D. NAEGELE, Plaintiff,
DEANNA J. ALBERS, et al., Defendants.
AMY BERMAN JACKSON, District Judge.
Plaintiff Timothy D. Naegele brought this diversity action against Deanna J. Albers and Raymond H. Albers ("the Albers defendants"), former defendant Lloyd J. Michaelson,  and unnamed individuals "Does 1-10" ("the Doe defendants"), asserting thirteen common law claims sounding in contract and tort. 2d Am. Compl. [Dkt. # 109]. The Albers defendants have moved to dismiss, contending that several of plaintiff's claims are barred by res judicata in light of the decision of the California Court of Appeals in Albers v. Naegele, No. B240455, 2013 WL 5945676 (Cal.Ct.App. Nov. 6, 2013). Defs.' Mot. for an Order of Dismissal [Dkt. # 140] ("Defs.' 3d Mot. to Dismiss"); Defs.' Mem. of P. & A. in Supp. of Defs.' 3d Mot. to Dismiss [Dkt. # 140] ("Defs.' Mem.") at 2. The Albers defendants further argue that the Court lacks subject matter jurisdiction over the remaining claims against them and that there is no basis for exercising personal jurisdiction over them in the District of Columbia. Defs.' Mem. at 3-7. Plaintiff opposed the motion, Pl.'s Resp. to Court's Order [Dkt. # 143] ("Pl.'s Opp."), and at the Court's direction, he also filed a supplemental pleading regarding the applicability of the res judicata doctrine to his claims. Pl.'s Resp. to Court's Order [Dkt. # 138].
Upon review of the parties' pleadings, the prior decisions in this and related cases, and the relevant case law, the Court will grant the Albers defendants' motion and dismiss Counts I through VI against them as precluded by res judicata. Further, the Court finds no basis for the exercise of personal jurisdiction over the Albers defendants with regard to the remaining claims against them. And because the Court finds that Counts V and VII through XIII of the second amended complaint fail to state a plausible claim against the Doe defendants, it will dismiss those counts pursuant to Federal Rule of Civil Procedure 12(b)(6). Accordingly, the case will be dismissed in its entirety.
This action, which began in 2003, has a long and complex factual and procedural history which has been discussed at length in prior opinions of this court and others. See, e.g., Naegele v. Albers ( Naegele III ), 940 F.Supp.2d 1, 2-6 (D.D.C. 2013); Naegele v. Albers ( Naegele IV ), 958 F.Supp.2d 17, 19-22 (D.D.C. 2013); Albers, 2013 WL 5945676, at *2-*6. The Court takes judicial notice of its own docket and it also relies upon those prior opinions for the purpose of recounting the history of this action. See Covad Commc'ns Co. v. Bell Atl. Corp., 407 F.3d 1220, 1222 (D.C. Cir. 2005) (stating that, in deciding a motion to dismiss, a court may take "judicial notice of facts on the public record'" by "consult[ing] the relevant opinions" in prior cases), quoting Marshall Cnty. Health Care Auth. v. Shalala, 988 F.3d 1221, 1228 (D.C. Cir. 1993). The Court also provides the relevant statutory framework for background.
I. Statutory Framework
This case arises out of an attorney-client fee dispute between plaintiff and the Albers defendants related to a lawsuit filed by plaintiff on the Albers defendants' behalf in California federal court. Such fee disputes are governed by the California Mandatory Fee Arbitration Act ("MFAA"), Cal. Bus. & Prof. Code § 6200 et seq., and the provisions of that statute form part of the backdrop of this case:
The MFAA was first proposed by the Board of Governors of the State Bar of California in 1976 when, finding that disputes concerning legal fees were the most serious problem between members of the bar and the public, the board sought to create a mechanism for arbitrating disputes over legal fees and costs. Recognizing the disparity in bargaining power in attorney fee matters which favors the attorney in dealings with infrequent consumers of legal services, that many clients could not afford hiring additional counsel to litigate fee disputes in the civil courts, and that previous schemes that called for voluntary arbitration were ineffective, the Legislature enacted the MFAA.
Schatz v. Allen Matkins Leck Gamble & Mallory LLP, 198 P.3d 1109, 1113 (Cal. 2009) (internal citations and quotation marks omitted).
Under the MFAA, "when there is a fee dispute between an attorney and a client, the client may choose to submit the matter to arbitration by a local bar association." Id. at 1111. "[A] client may invoke the MFAA and proceed to arbitration despite the absence of any prior agreement to do so." Id. at 1114. Section 6200(c) of the MFAA provides that "arbitration under this article shall be voluntary for a client and shall be mandatory for an attorney if commenced by a client." Cal. Bus. & Prof. Code § 6200(c). "In other words, whereas a client cannot be forced under the MFAA to arbitrate a dispute concerning legal fees, at the client's election an unwilling attorney can be forced to do so." Schatz, 198 P.3d at 1114.
Pursuant to the MFAA, an "arbitration will be binding... only if the attorney and client so agree in writing after the dispute has arisen." Id. at 1111; see also Cal. Bus. & Prof. Code § 6204(a). "Otherwise, either party may request a trial de novo within 30 days after the arbitration has concluded." Schatz, 198 P.3d at 1111; see also Cal. Bus. & Prof. Code § 6204(a). But the right to a trial de novo is subject to an important exception: a "party shall not be entitled to a trial after arbitration" if that party "willfully fails to appear at the arbitration hearing in the manner provided by the rules adopted by the board of trustees." Cal. Bus. & Prof. Code § 6204(a). "The determination of willfulness shall be made by the court, " and "[t]he party who failed to appear at the arbitration shall have the burden of proving that the failure to appear was not willful." Id. In making its determination, the court may consider any findings made by the arbitrators on the subject of a party's failure to appear." Id.
II. Factual and Procedural History
Plaintiff Naegele is an attorney, litigating this case pro se, who formerly represented the Albers defendants in a lawsuit in the United States District Court for the Central District of California, and later, on appeal before the Ninth Circuit ("the California litigation"). 2d Am. Compl. ¶¶ 3, 7-9. The parties entered into a fee agreement, subject to three written addenda, with respect to the California litigation. Id. ¶ 8; see also Attach. A to Decl. of Timothy D. Naegele in Supp. of Pl.'s Opp. to Def.'s Mot. to Dismiss [Dkt. # 42-1] ("Fee Agreement"). The Fee Agreement and the addenda each state that the "venue for any disputes or litigation arising out of this agreement shall be in a court of the District of Columbia and/or in the United States District Court for the District of Columbia, " and that the Albers defendants "hereby consent to the jurisdiction of such court or courts with respect to any disputes or litigation arising out of this agreement." Fee Agreement at ECF 4, 8, 11, 16.
A. The Albers defendants seek mandatory fee arbitration pursuant to the MFAA.
A dispute arose between the parties regarding the fees plaintiff charged for the California litigation, and the Albers defendants invoked their statutory right to mandatory fee arbitration under the MFAA. Naegele III, 940 F.Supp.2d at 2. The Albers defendants were represented by former defendant Michaelson in the fee arbitration, and he notified plaintiff by a letter dated August 28, 2003 of the Albers defendants' intention to arbitrate the fee dispute. Id. at 2-3. The Los Angeles County Bar Association Dispute Resolution Services ("DRS") - the entity tasked with administering fee arbitrations under the MFAA - forwarded a copy of arbitration petition to plaintiff on September 22, 2003. Id. at 3. Plaintiff acknowledged receipt of the Michaelson letter and the DRS notice via email on October 3, 2003. Naegele IV, 958 F.Supp.2d at 20.
B. Plaintiff files this federal action against the Albers defendants in the District of Columbia.
The initiation of fee arbitration pursuant to the MFAA precludes the concurrent prosecution of any court action surrounding the fee dispute, and any judicial action that was pending prior to the commencement of fee arbitration is "automatically stayed until the award of the arbitrators is issued or the arbitration is otherwise terminated." Cal. Bus. & Prof. Code § 6201(c). Despite this requirement and with the knowledge that the Albers defendants had initiated arbitration proceedings, plaintiff filed the complaint that launched the instant case in this court on December 8, 2003, on the grounds that the forum selection clause in the Fee Agreement provided that "any disputes or litigation arising out of this agreement shall be in a court of the District of Columbia and/or in the United States District Court for the District of Columbia." Naegele III, 940 F.Supp.2d at 3; see also 2d Am. Compl. ¶ 8; Fee Agreement at ECF 4. In response, on January 5, 2004, the Albers defendants and former defendant Michaelson sought an automatic stay of the District of Columbia proceedings pursuant to California Business and Professions Code § 6201(c). Notices of Automatic Stay Under Cal. Bus. & Prof. Code § 6201(c) [Dkt. ## 2-4].
Shortly thereafter, on April 20, 2004, plaintiff filed an amended complaint, Am. Compl. [Dkt. # 7], which caused the Albers defendants and Michaelson to file a second round of requests for an automatic stay on May 3, 2004. Notices of Automatic Stay Under Cal. Bus. & Prof. Code § 6201(c) [Dkt. ## 19-21].
On June 18, 2008, while those requests were pending, plaintiff was ordered to show cause that the court had subject matter jurisdiction over the dispute, in light of questions raised as to the diversity of citizenship between the parties. Order (June 18, 2004) [Dkt. # 35]. On January 3, 2005, after the parties had briefed the issue, the court ruled that it could properly exercise subject matter jurisdiction over the dispute based on the record before it, but it dismissed defendant Michaelson for lack of personal jurisdiction and it granted the Albers defendants' request for a stay pending the outcome of the California arbitration proceedings. Naegele v. Albers ( Naegele I ), 355 F.Supp.2d 129 (D.D.C. 2005).
C. The arbitration panel issues an award in the Albers defendants' favor.
Meanwhile, the fee arbitration proceedings in California had commenced. Naegele III, 940 F.Supp.2d at 3. Naegele objected to the DRS panel's exercise of jurisdiction over the fee dispute on the grounds that the forum selection clause in the Fee Agreement gave the District of Columbia exclusive jurisdiction. Id. at 3 n.2. DRS overruled plaintiff's objection and concluded that it had jurisdiction to arbitrate the dispute under the MFAA. Id. Plaintiff appealed that finding of jurisdiction to the California Supreme Court, which denied his petition for review on February 16, 2005. Id.
The DRS panel held an arbitration hearing on November 17, 2004, and Naegele failed to appear, although he was represented by an attorney. Naegele IV, 958 F.Supp.2d at 21. The panel issued an award in the Albers defendants' favor on January 14, 2005. Naegele III, 940 F.Supp.2d at 3-4. It reviewed the reasonableness of the fees paid to plaintiff in connection with the California litigation, which amounted to $735, 481.32, along with the $82, 000.00 promissory note plaintiff had secured from the Albers defendants in anticipation of his work on the appeal before the Ninth Circuit. Id. The panel made the following determinations:
1. The panel finds that the total amount of fees and other costs which should have reasonably and necessary [sic] been charged in this matter are $8500.00 (20 hours at $425/hr.).
2. The clients (Albers) have overpaid (Naegele) $726, 981.32 ($735, 481.32-$8500.00).
3. Naegele shall refund clients (Albers) the sum of $726, 981.32 forthwith.
4. The panel finds Naegele willfully failed to appear at the hearing for nonbinding arbitration and produce documents as required under the Rules, and should not be entitled to a new trial after arbitration pursuant to Rule 40 of the Rules For Conduct of Arbitration of Fee Disputes and Other Related Matters for the Los Angeles County Bar Association Dispute Resolution Services, Inc.
5. All arbitration related fees and costs shall be paid or reimbursed by Respondent Naegele.
Id. at 4, quoting Ex. D to Decl. of Raymond H. Albers, II in Supp. of Defs.' Mot. for Order of Dismissal [Dkt. # 92-3] ("Arb. Award") at 10-11. The panel concluded that plaintiff's failure to appear personally at the arbitration hearing was willful. Id., quoting Arb. Award. at 10 ("The conduct of Naegele upon learning of the decision... that this panel did have jurisdiction to adjudicate the fee dispute between Albers and Naegele, in not appearing as he was compelled to do... was willful.'").
D. Plaintiff files a rejection of the arbitration award and a request for trial in the District of Columbia case.
On February 22, 2005, back in the District of Columbia proceedings, plaintiff filed a document entitled, "Rejection of Arbitration Award and Request for Trial, " invoking California Business and Professions Code § 6204(b). Rejection of Arb. Award & Request for Trial [Dkt. # 64]. Plaintiff asserted that "the arbitration award is a nullity as a matter of law" because "the arbitrators had no jurisdiction ab initio owing to a valid and binding forum-selection clause that provides for the District of Columbia's exclusive jurisdiction with respect to any disputes or litigation' arising between Plaintiff and the Albers." Id. at 2. Shortly thereafter, on April 20, 2005, the Albers defendants filed a motion to dismiss for lack of subject matter jurisdiction, arguing that complete diversity between the parties was absent because plaintiff and the Albers defendants were both residents of California, and for lack of personal jurisdiction. Defs.' Mot. for Order of Dismissal [Dkt. # 68]. On August 8, 2005, the court denied plaintiff's request for a trial for the time being: "Because the court is on notice of the plaintiff's objection to the arbitration award, and in light of the defendants' pending motion to dismiss, the court denies without prejudice the plaintiff's motion for trial." Minute Order (Aug. 8, 2005).
On May 11, 2006, while the Albers defendants' motion to dismiss was still pending, plaintiff filed a motion to stay the District of Columbia case in light of criminal bankruptcy fraud charges brought against him by the United States Attorney for the District of Columbia relating to alleged misstatements plaintiff made in his bankruptcy filings. Mot. to Stay [Dkt. # 87]. The court granted the motion on June 6, 2006. Order (June 6, 2006) [Dkt. # 89]. Plaintiff was eventually acquitted of the criminal charges on February 27, 2008. United States v. Naegele, 537 F.Supp.2d 36 (D.D.C. 2008).
On April 14, 2008, the Albers defendants moved to lift the stay, and after no action was taken for more than nine months, they re-filed the motion. Motion to Lift Stay [Dkt. ## 90, 91]. The stay was vacated on June 17, 2009. Minute Order (June 17, 2009). Nine more months passed without any developments until the Albers defendants renewed their still-pending motion to dismiss on March 31, 2010. Defs.' Mot. for Order of Dismissal [Dkt. # 92] ("Defs.' 2d Mot. to Dismiss"). Less than two weeks later, plaintiff sought leave to file a second amended complaint, asserting five additional counts against the Albers defendants, the Doe defendants, and former defendant Michaelson stemming from their alleged involvement in the initiation of the criminal bankruptcy fraud proceedings against plaintiff. Pl.'s Opp. to Defs.' 2d Mot. to Dismiss, Mot. for Sanctions, & Mot. for Leave to File 2d Am. Compl. [Dkt. # 93]; 2d Am. Compl. ¶¶ 49-64.
E. The Albers defendants petition the California Superior Court to confirm the arbitration award, and plaintiff seeks injunctive relief in this court.
On January 13, 2009, while their request to lift the stay was still pending in this District, the Albers defendants petitioned the California Superior Court to confirm their arbitration award. Naegele III, 940 F.Supp.2d at 5. Almost three years later, on December 23, 2011, plaintiff sought injunctive relief in this court, seeking a stay of the California action until the case in this District was resolved. Mot. for Stay of State Court Proceedings & for Permanent Inj. Relief [Dkt. # 99]. In plaintiff's words, his delay in seeking injunctive relief was due to the fact that the confirmation proceedings "effectively sat dormant until a new judge was assigned to the case." Id. at 5.
On February 16, 2012, before the court could rule on the injunction, plaintiff sought a temporary restraining order for the same relief. App. for Temporary Restraining Order [Dkt. # 102] ("TRO Mot."). By that date, the California Superior Court had already confirmed the Albers defendants' arbitration award, and it had directed them to submit a proposed judgment by no later than February 28, 2012. Naegele III, 940 F.Supp.2d at 5. Plaintiff asserted that the temporary restraining order was necessary to prevent the entry of judgment in the California action, and he averred that "[o]nce the Albers and Michaelson have a judgment in hand, there will be no way to stop them and the Plaintiff will be irreparably injured." Proposed Scheduling Order for Briefing on TRO Mot. [Dkt. # 103] at 2.
The court denied plaintiff's motion for a temporary restraining order on February 21, 2012, finding that he had failed to demonstrate a likelihood of success on the merits and that he was unable to articulate the requisite irreparable harm. Naegele v. Albers ( Naegele II ), 843 F.Supp.2d 123, 127-29 (D.D.C. 2012). Plaintiff did not appeal. Two days later, the Albers defendants filed a motion asking the court to rule on their motion to dismiss, which had been pending since March 31, 2010. Request that the Court Rule on Defs.' 2d Mot. to Dismiss [Dkt. # 106]. Instead, on March 9, 2012, the court granted plaintiff's motion for leave to file a second amended complaint, and it denied the motion to dismiss as moot on the grounds that "plaintiff's amended complaint supersedes the original complaint." Mem. Order (Mar. 9, 2012) [Dkt. # 107]; Minute Order (Mar. 9, 2012).
F. The California Superior Court enters judgment in the Albers defendants' favor and plaintiff appeals to the California Court of Appeals.
Back in California, on February 24, 2012, the Superior Court confirmed the arbitration award and entered a judgment of $781, 831.25 in favor of the Albers defendants, which included their arbitration fees and court costs. Naegele III, 940 F.Supp.2d at 5-6. Plaintiff appealed that decision to the California Court of Appeals on April 16, 2012. Id. at 6.
G. The District of Columbia court denies plaintiff's renewed request for trial and stays the federal action pending the resolution of the California appeal.
On April 9, 2012, plaintiff moved for reconsideration of the District of Columbia court's denial of his rejection of the arbitration reward and request for a new trial. Mot. for Reconsid. [Dkt. # 110]. The case was then transferred to a new District judge who, on April 18, 2013, ordered plaintiff to show cause "as to why the Court should not stay this action in its entirety pending the resolution of [the] parallel and/or overlapping California state court litigation surrounding the same fee dispute at the center of this action." Naegele III, 940 F.Supp.2d at 2. The court also ordered plaintiff to show cause "as to why the Court should not find that he willfully fail[ed] to appear at the arbitration hearing' before [DRS], within the meaning of California Business and Professions Code § 6204(a)." Id., quoting Cal. Bus. & Prof. Code § 6204(a).
On July 18, 2013, after the parties had briefed the issues, the court denied plaintiff's motion for reconsideration. Naegele IV, 958 F.Supp.2d at 26. It found that plaintiff "willfully failed to appear at the arbitration hearing on November 17, 2004, which means that he is unable to pursue a trial de novo and that the award rendered by the arbitration panel is binding." Id., citing Cal. Bus. & Prof. Code §§ 6203(b), 6204(a) ("[I]f either party willfully fails to appear at the arbitration hearing in the manner provided by the rules... that party shall not be entitled to a trial after arbitration."). The court then ordered the District of Columbia action stayed in its entirety ...