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Kotchen & Low LLP v. Precision Discovery, Inc.

United States District Court, District of Columbia

September 28, 2016



          Gladys Kessler United States District Judge

         Plaintiff Kotchen & Low LLP ("Plaintiff" or "K&L") and Defendants Precision Discovery, Inc. ("Precision") and Jerry Barbanel (together, "Defendants") are currently arbitrating Precision's claims for over $3 million in unpaid bills for electronic data processing, hosting, and related charges, costs and fees. Plaintiff K&L filed this action seeking declaratory judgment that Precision's arbitration claims are barred by the doctrines of res judicata and issue preclusion and that they are not subject to arbitration. Defendants have moved to stay proceedings before this Court in favor of ongoing arbitration.

         This matter is presently before the Court on Defendant's Motion to Stay Proceedings and Compel Arbitration or in the Alternative to Dismiss ("Motion to Compel Arbitration") [Dkt. No.18], Defendant's Motion to Stay Proceedings and Compel Arbitration or in the Alternative to Dismiss the Amended Complaint ("Am. Motion to Compel Arbitration") [Dkt. No. 21], Defendant's Motion to Stay Rule 2 6 Obligations Pending Determination on Arbitrability ("Mot. to Stay") [Dkt. No. 26], and Plaintiff's Motion for Rule 16 Scheduling Conference ("PL's Mot.") [Dkt. No. 29].

         Upon consideration of the Motions, Oppositions, and Replies, the entire record herein, and for the reasons stated below, Defendants' Motion to Compel Arbitration is denied as moot. Defendants' Amended Motion to Compel Arbitration and Motion to Stay is granted in part and denied in part. Defendant's Motion to Stay is denied as moot, and Plaintiff's Motion is denied.

         I. BACKGROUND

         A. Factual Background

         This dispute stems from a contractual agreement reached between the parties in relation to a separate suit, In re Delta/AirTran Baggage Fee Antitrust Litig., MDL 09-2089 (N.D.Ga.) ("Delta Litigation"). On November 19, 2012, the judge in the Delta Litigation issued a decision finding discovery misconduct by Delta, the defendant in that case. See In re Delta/AirTran Baggage Fee Antitrust Litig., 09-md-2089, 2015 WL 4635729, at *5 (N.D.Ga. August 3, 2015). As a remedy, the judge ordered plaintiff's counsel, K&L, to retain a discovery expert to investigate Delta's misconduct, and for Delta to pay the expert. Id.

         On November 25, 2012, K&L signed a retainer letter with Precision. PL's Ex. G ("Retainer Agreement") [Dkt. No. 22-7]. The Retainer Agreement stated that Precision had been hired, "to perform computer forensic services in the matter of In Re Delta/AirTran Baggage Fee Antitrust Litigation, MDL 2089, " and that "[Precision] will need to perform those procedures that [it] consider[s] necessary to express a professional conclusion." Id. at 1. The Retainer Agreement added that, "The scope of services may change during the course of this engagement."

         The arbitration clause of the Retainer Agreement states that,

Any controversy or claim arising out of, or relating to services provided by Precision Discovery and covered by this letter for Counsel or at its request (including any such matter involving any parent, subsidiary, affiliate, successor in interest, of Counsel or of Precision Discovery) shall be submitted first to voluntary mediation, and if mediation is not successful, then to binding arbitration, in accordance with the dispute resolution procedures set forth in the attachment to this letter.

         In addition, the Retainer Agreement attached and incorporated by reference Dispute Resolution Procedures, which contained an additional arbitration clause. Id. at 6. The clause states that, "

If a dispute has not been resolved within 90 days after the written notice beginning the mediation process (or a longer period, if the parties agree to extend the mediation), the mediation shall terminate and the dispute shall be settled by arbitration. The arbitration will be conducted in accordance with the procedures in this document and the Rules for Non-Administered Arbitration of the CPR Institute for Dispute Resolution ("Rules") as in effect on the date of the engagement letter, or such other rules and procedures as the parties may designate by mutual agreement. . .
Any issue concerning the extent to which any dispute is subject to arbitration, or concerning the applicability, interpretation, or enforceability of these procedures, including any contention that all or part of these procedures are invalid or unenforceable, shall be governed by the Federal Arbitration Act and resolved by the arbitrators.

         In January 2013, Precision asked K&L for authorization to perform E-discovery services. PL's Opp. to Defs.' Mot. to Stay Proceedings and Compel Arbitration, or to Dismiss at 5 ("PL's Opp.") [Dkt. No. 22]. On January 4, 2013, Precision sent K&L a proposed E-discovery Statement of Work ("SOW"). PL's Ex. E [Dkt. No. 22-5] . K&L never signed the SOW. PL's Opp. at 6. Instead, K&L authorized Precision by email to proceed with a limited amount of E-discovery. PL's Ex. B ¶¶ 5-7 ("Low DecL") [Dkt. No. 22-2].

         Between November 2012 and March 2013, Precision billed $797, 481 for computer forensic services and $4, 102, 020 for E-discovery services. PL's Opp. at 7; PL's Ex. C [Dkt. No. 22-3]. On May 20, 2013, Precision "request[ed] the Court's assistance in ordering Delta to. . . pay for the services rendered by Precision Discovery." PL's Ex. K, ("Pixley Report") [DKt. No. 22-11].

         On May 28, 2013, Delta requested a hearing on Precision's fees before the judge in the Delta Litigation. PL's Opp. at 8. On July 24, 2013, the Delta Litigation court held a full-day evidentiary hearing. Id. In an Order dated September 25, 2013, the Delta Litigation court ruled that Precision's fees were not reasonable. PL's Ex. P [Dkt. No. 22-16]. The court ordered Delta to reimburse $655, 635 in fees advanced by plaintiff's counsel, and to pay Precision an additional $1, 794, 116 in fees. Id. at 38. Together, these amounts represented a 5 0 percent reduction in Precision's fees. Id.

         In June 2013, Precision sent Delta a hard drive containing approximately 3 71, 000 documents that had been collected by Precision for Delta's review. Low Decl. ¶ 16. In late 2013, one of Precision's Vice Presidents left Precision to start his own company, Pixley Forensics Group ("Pixley"). Id. at ¶ 13. Thereafter, K&L discontinued its use of Precision and retained Pixley as its expert witness. Id.

         In December 2013, the Delta Litigation court ordered Precision to make all data, including the hard drive with 371, 000 documents, available to Pixley. PL's Opp. at 11. Instead of sending a hard drive to Pixley with the documents, Precision provided Pixley with a password to an online database of approximately 8 million documents hosted by Precision, which included but did not identify the 371, 000 documents. Id.

         On May 21, 2014, Precision sent K&L an invoice for approximately $70, 00 0 for hosting charges. PL's Ex. T [Dkt. No. 22-20]. K&L refused to pay the invoice. Low Decl. ¶ 17. Precision now seeks to recover from K&L "under theories of unjust enrichment and quantum meruit for the $485, 558 in fees incurred for the hosting and related services." PL's Ex. D at 3 [Dkt. No. 22-4].

         B. ...

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