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Equitas Disability Advocates, LLC v. Bryant

United States District Court, D. Columbia

September 29, 2015

DAVID A. BRYANT et al., Defendants

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         For DAVID A. BRYANT, FREDERICK DALEY, Defendants: Autumn Rose Agans, Kenneth Gordon Stallard, Randell Hunt Norton, LEAD ATTORNEYS, THOMPSON O'DONNELL, LLP, Arlington, VA.

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         Judge Royce C. Lamberth.

         Before the Court are defendants' Motion [19] to Dismiss the plaintiff's Second Amended Complaint and plaintiff's Motion [15] for Leave to Take Jurisdictional Discovery. Upon consideration of the motions, oppositions, replies, the entire record in this case, and the applicable law, the Court will GRANT defendants' Motion [19] to Dismiss the Amended Complaint and DENY plaintiff's Motion [15] for Leave to Take Jurisdictional Discovery.

         I. BACKGROUND

         At the center of this dispute is a valuable compilation of insurance documents plaintiff refers to as the " Archive." Second Am. Compl. [12] ¶ 13, Nov. 3, 2014. The Archive was developed by Brian Abeles after he worked for decades in the insurance industry as an insurance broker, benefits consultant and claims consultant. Id. at ¶ 11. Abeles planned to the license the Archive's contents to disability insurance lawyers who were in the business of bringing claims against insurance companies to secure the appropriate recovery for their clients. Id. at ¶ 11, 13. Fulcrum Law Group, PLLC (" FLG" ), a corporation Abeles formed and managed, ultimately entered into two agreements to license the Archive's contents to Daley, DeBofsky & Bryant P.C., (" DDB" ), an Illinois-based professional corporation that dissolved in 2013. Id. at ¶ 31, 108. The plaintiff now alleges that defendants breached those contracts and carried out an elaborate fraud to gain access to the Archive. Id. at ¶ ¶ 22, 84-98.

         The plaintiff in this case is Equitas Disability Advocates, LLC, (" Equitas" ) a limited liability company based in Washington, D.C. and co-founded by Brian Abeles and Joshua N. Rose. Id. at ¶ ¶ 2, 10. Equitas is the successor-in-interest to FLG and

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the holder of the " Archive." Id. at ¶ 2. Abeles, then through FLG, and David Bryant of DDB began negotiations to license the Archive in the summer of 2007. Id. at ¶ 14. Defendants Daley, DeBofsky, and Bryant were all members of DDB, which " never practiced and was never organized as a partnership." Defs.' Mem., [19-2] Ex. A, Bryant Deck, ¶ 4. Now dissolved, David Bryant incorporated DDB as a professional corporation under Illinois law in July 2002. Id. at Ex. E (providing proof of DDB's incorporation).

         In June 2007, Abeles met defendant Bryant and Jonathan Feigenbaum, a non-party in this litigation, at a disability litigation conference in Boston, Massachusetts, where Bryant first learned of and expressed interest in the Archive. Second Am. Compl. [12] ¶ 14. Later that month, Abeles took the first of his many trips to Chicago, where he, Bryant, the other members of DDB, and Feigenbaum discussed the possibility and potential terms of licensing portions of the Archive. Id. at ¶ ¶ 15-19. Abeles stressed that he could not discuss the details of the Archive until DDB signed a non-disclosure agreement relating primarily to the use of the Archive's confidential information, which Bryant signed on behalf of DDB in June 2007. Id. at ¶ ¶ 14-15.

         The next phase of negotiations centered on how best to compensate Abeles for access to his archive in light of his status as a non-lawyer. Id. at ¶ ¶ 23-27. The parties determined that although most jurisdictions prohibited lawyers from sharing fees with non-lawyers, Washington D.C. was an exception; the District of Columbia Rules of Professional Conduct permit non-lawyers to have a financial stake in law firms so long as a number of specific conditions are satisfied. Id. at ¶ 24 (citing D.C. Rules of Prof'l Conduct 5.4(b)). As such, the parties decided the " solution" was to create a Washington D.C.-based law firm, " in which Mr. Abeles would have a minority interest." Id. at ¶ 25. Abeles's newly created law firm would then serve as co-counsel with DDB or Feigenbaum in various disability insurance cases, effectively permitting a fee sharing scheme to govern the underlying licensing agreements. Id. DDB supported this idea, so long as Abeles obtained an ethics opinion stating that such fee sharing was proper under applicable D.C. law. Id. at ¶ 31; Defs.' Mem., [19-2] Ex. A, Bryant Aff., ¶ ¶ 20-23.

         In connection with obtaining an ethics opinion, Bryant, Abeles, and an array of lawyers met in Washington, D.C. in October 2007. Second Am. Compl. [12] ¶ 28. The specific purpose of the meaning was to " creat[e] the mechanisms by which Mr. Bryant, and through him, DDB, and Mr. Feigenbaum would do business with Plaintiff in Washington, D.C., and obtain access to the Archive from Plaintiff in Washington." Id. at ¶ 29. After the parties agreed that a " formal opinion would be obtained from a leading expert on legal ethics," Mr. Abeles formed FLG in November 2007 for the purpose of doing business with DDB and Mr. Feigenbaum. Id. at ¶ 31. Accordingly, after Mr. Abeles obtained two expert opinions concluding that the prospective fee-sharing agreement was legally permissible, DDB expressed that they were prepared to enter into the licensing agreements with plaintiff. Id. at ¶ 37.

         Next, FLG, DDB, and Jonathan Feigenbaum entered into two separate agreements for the licensing of the Archive. Id. at ¶ ¶ 44-66. The first was the Strategic Alliance Co-Counsel Agreement (" SACCA" ), providing " for the joint representation and prosecution of disability claims." Id. at ¶ ¶ 44-45. Under the terms of the agreement, DDB and Feigenbaum would separately gain access to the Archive when

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prosecuting insurance claims, and in return, FLG would serve as co-counsel. Id. The SACCA contained a somewhat complex fee splitting formula to divide the fees between either DDN or Feigenbaum and FLG. Id. at ¶ ¶ 48-49. It also provided for special fee calculations for class actions and marking to potential class action clients. Id. at ¶ ¶ 50-51. Lastly, the parties agreed that each would be " subject to an audit" upon ten days prior written notice provided by " the Firm or Firm [sic] who are not first chair on the subject claims or litigation." Id. at ¶ 52 (citing SACCA ¶ 4(c)). Importantly, the contract was signed by defendant Bryant on behalf of " Daley, DeBofsky & Bryant," not " Daley, DeBofsky & Bryant, P.C." Id. at 56; see also Pl.'s Mem. [21] at 27.

         In addition to SACCA, at the same time, the parties entered into the Fulcrum-Alliance Archive Sublicense Agreement (" FAASA" ), which granted a sublicense to DDB to the Archive in connection with claims or litigation subject to the SACCA. Second Am. Compl. [12] ¶ ¶ 59-62. The agreement made clear that DDB did not have " any right to use any [documents] from the Archive except for claims or litigation subject to the [SACCA] and the fee sharing terms and conditions thereof." Id. at ¶ 63 (citing FAASA ¶ 2). Lastly, in signing FAASA, DDB also expressly agreed not to take any action that would tend to destroy or diminish the goodwill or value associated with the Archive. Similar to the SACCA, the FASSA was signed by defendant Bryant on behalf of " Daley, DeBofsky & Bryant," not " Daley, DeBofsky & Bryant, P.C." Pl.'s Mem. [21] at 27.

         After signing these agreements and receiving access to the Archive, plaintiff alleges DDB used the Archive without compensating FLG according to the terms of its agreement. Second Am. Compl. [12] ¶ 70. Specifically, a lawsuit that DDB filed in Ohio settled in August 2011 for more than $1,000,000--none of which was remitted to FLG under the terms of SACCA and FAASA. Id. Defendant additionally points to several other cases in which " DDB also failed and refused to remit the amounts owed to Plaintiff under the fee allocation provisions of the SACCA." Id. at ¶ ¶ 71-72.

         In connection with these alleged acts of deception, plaintiff brings nine separate causes of action--mostly relating to fraud and breach of contract--and seeks to hold the members of Daley, DeBofsky & Bryant, P.C. personally liable. Id. at ¶ ¶ 73-83. Primarily, plaintiff argues that the defendants should bear personal liability because they " held themselves out as a partnership." Id. at ¶ 73. In addition to claims of fraud and breach of contract, plaintiffs also have brought claims for breach of implied covenant of good faith and fair dealing; a claim under the Business Corporation Act; a claim for fraudulent transfer; a claim for unjust enrichment; a claim for an audit under FAASA and SACCA; and a claim for injunctive relief to prohibit defendants' future use of the Archive. Id. at ¶ ¶ 99-123.

         The procedural history of the case is somewhat complex. This lawsuit was originally filed on February 10, 2014 in District of Columbia Superior Court. On April 7, 2014, plaintiff filed an Amended Complaint, and defendants filed a notice of removal to the federal district court on October 1, 2014. Seven days later, on October 7, the defendants filed a motion to dismiss the Amended Complaint. In response, on November 3, plaintiff filed a Second Amended Complaint, and later that month, defendants filed a motion to dismiss that complaint pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(6), one of the two motions currently before the Court. Additionally, plaintiff filed a Motion for

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Leave to Take Jurisdictional Discovery on November 3, 2014.


         A motion to dismiss is appropriate when a complaint fails " to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). To overcome this hurdle, a complaint must contain " a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations omitted). The Court must " accept as true all of the factual allegations contained in the complaint," Atherton v. D.C. Office of the Mayor, 567 F.3d 672, 681, 386 U.S.App.D.C. 144 (D.C. Cir. 2009), and grant a plaintiff " the benefit of all inferences that can be derived from the facts alleged." Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276, 305 U.S.App.D.C. 60 (D.C. Cir. 1994). However, the Court may not " accept inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint." Id. In other words, " only a complaint that states a plausible claim for relief survives a motion to dismiss." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009); see also Atherton, 567 F.3d at 681.


         The viability of several of plaintiff's claims depends on whether or not the defendants may be held personally liable for debts incurred by DDB, a professional corporation in which they were members. The legal standards governing this inquiry are found in D.C. Code § 29-603.08(a)(b) and the common law's approach to piercing the corporate veil.

         A) D.C Code Section 29-603.08 (a)(b): Liability of a ...

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