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Beach TV Properties Inc. v. Soloman

United States District Court, District of Columbia

October 14, 2016

BEACH TV PROPERTIES, INC., et al., Plaintiffs,
HENRY A. SOLOMON, et al., Defendants. Re Document Nos. 24, 25, 27, 28


          RUDOLPH CONTRERAS United States District Judge.

         Two days before the world bid farewell to the twentieth century, attorney Henry Solomon filed seemingly-routine paperwork with the Federal Communications Commission. Little did he know that omissions on a one-page form would have his client claiming that he lost it hundreds of millions of dollars almost seventeen years later. Plaintiffs allege that Mr. Solomon was negligent both in his filing of the FCC form and in how he handled the administrative appeals. They also seek to hold his employers-Haley Bader & Potts at the time he filed the form and Garvey, Schubert & Barer when he appealed-liable for his malpractice.

         Defendants' motions to dismiss present several disparate issues ranging from the purely procedural to the purely substantive. The now-defunct Haley Bader & Potts asks the Court to identify to what extent it is possible for an attorney to practice before a federal agency, yet remain beyond the reach of District of Columbia courts. Garvey, Schubert & Barer asks the Court to resist widening the scope of successor liability vis a vis legal malpractice claims. The same defendant also asks the Court to wade through a web of “what-ifs” hidden in Plaintiffs' theories of causation. Piggy-backing off of his co-defendants' motions, Henry Solomon asks the Court to determine which plaintiff may maintain this action, in light of one plaintiff's attempted assignment of these claims to the other plaintiff. Although these are only four of the many issues that Defendants ask the Court to address, they are sufficient for the Court to resolve the motions before it. The Court will dismiss Plaintiffs' claims against Haley Bader & Potts, P.L.C. for lack of personal jurisdiction, and against Garvey, Schubert & Barer for failure to state cognizable claims. The court will dismiss Plaintiffs' claims pertaining to negligent appeals in Count Two against Henry A. Solomon, and further dismiss all claims made by Beach TV Properties for lack of standing. The sole remaining plaintiff following this order is The Atlanta Channel, and its sole remaining claim is in Count One against Henry Solomon, for filing a defective Statement of Eligibility.

         I. BACKGROUND

         A. The WTHC-LD License Application

         Plaintiffs in this case, Beach TV Properties, Inc. (“Beach TV”), and The Atlanta Channel, Inc. (ACI), allege that defendant Henry Solomon and his former law firms, defendants Haley Bader & Potts, P.L.C. (“Haley Bader”) and Garvey, Schubert & Barer (“Garvey”), committed legal malpractice in connection with Plaintiffs' application for an FCC Low-Power Television (“LPTV”)[1] class A license. See Am. Compl. ¶¶ 122-137, ECF No. 21. Specifically, Plaintiffs allege that, in 1999, Mr. Solomon failed to adequately complete the required Statement of Eligibility, which would have entitled ACI to a class A license. Id. ¶¶ 24-27. They also allege that Mr. Solomon committed malpractice throughout the administrative appeal process for failing to raise procedural errors committed by the FCC. Id. ¶ 125. Plaintiffs seek to hold Haley Bader and Garvey jointly and severally liable for the allegedly deficient application and appeals through theories of respondeat superior, and, in the case of Garvey, successor liability. See Id. ¶¶ 126-137.

         In 1999, Congress enacted the Community Broadcasters Protection Act (“CBPA”), codified at 47 U.S.C. § 336(f), to preserve LPTV community broadcasting. The CBPA required the FCC to promulgate regulations to establish a class A license for LPTV qualifying stations. See 47 U.S.C. § 336(f)(1)(A). It also required the FCC to, “[w]ithin 30 days after November 29, 1999 . . . send a notice to the licensees of all [LPTV] licenses that describes the requirements for class A designation.” See 47 U.S.C. § 336(f)(1)(B). Then, “[w]ithin 60 days after November 29, 1999, [2] licensees intending to seek class A designation shall submit to the Commission a certification of eligibility based on the qualification requirements, ” and, “[a]bsent a material deficiency, the Commission shall grant certification of eligibility to apply for class A status.” Id.

         On December 27, 1999, Beach TV signed six Statements of Eligibility and sent them to Mr. Solomon for review and filing with the FCC. Am. Compl. ¶ 22. That same day, ACI also sent a Statement of Eligibility for its WTHC-LD license to Mr. Solomon for review and filing. Id. ¶ 23. Two days later, Mr. Solomon, employed by Haley Bader, filed the Statements of Eligibility with the FCC, but failed to complete Parts 3 or 4-the only portions pertaining to the applicant's substantive eligibility-of the five-part, one-page form[3] for ACI's WTHC-LD license. See Id. ¶ 24-25; Pls.' Am. Compl. Ex. A, ECF No. 21-1. In early June, 2000, the Mass. Media Bureau of the FCC issued class A licenses to Beach TV's six LPTV stations. Am. Compl. ¶ 29. A week later on June 9, despite ACI meeting all eligibility requirements, the Mass. Media Bureau dismissed ACI's Statement of Eligibility for WTHC-LD on the grounds that it contained a “material deficiency” because Part 3 of the form was not filled out. Id. ¶¶ 30-32.

         Shortly after the dismissal, Mr. Solomon filed a petition for reconsideration with the Mass. Media Bureau, submitting an “amended” ACI statement with all parts complete. Id. ¶ 50. In November, 2000, the Bureau denied ACI's petition because the original Statement of Eligibility was “patently defective.” Id. ¶ 52. The Bureau reasoned that “the January 28th[, 2000] certification deadline was statutory [so] the Commission [did] not have general authority to waive or extend the deadline, absent extraordinary circumstances.” Id. ¶ 53. Mr. Solomon applied for review by the full FCC. Id. ¶ 65. Nearly ten years later in November, 2012, finding that the Mass. Media Bureau was reasonable in interpreting “material deficiency” to include “the complete omission of the required certifications, regardless of whether the licensee actually met the statutory qualifications at the time of filing, ” the FCC rejected ACI's application for review. Id. ¶ 67. Garvey then unsuccessfully petitioned for reconsideration, which the FCC denied on October 7, 2014. Id. ¶¶ 70-72.

         Later that year, Beach TV, represented by new counsel, appealed to the United States Court of Appeals for the District of Columbia Circuit. See Id. ¶ 73; Mot. of Def. Garvey Schubert Barer to Dismiss Am. Compl. Under Rule 12(b)(6) (“Garvey Mot. to Dismiss”) Ex. 13, ECF No. 24-14. Beach TV argued that the FCC's interpretation of “material deficiency” and assertion that it could not extend the deadline absent “extraordinary circumstances” constituted legislative rulemaking under the Administrative Procedure Act (“APA”), and that the FCC had not followed APA requirements. See Garvey Mot. to Dismiss Ex. 12, ECF No. 24-13; Am. Compl. ¶¶ 53-55. The D.C. Circuit, per curiam, ruled that it did not have jurisdiction to address Beach TV's new legislative-rulemaking claims. See Garvey Mot. to Dismiss Ex. 13., at 3; Beach TV Properties, Inc. v. FCC, 617 F. App'x 10, 11 (D.C. Cir. 2015). The court further held that the FCC was not arbitrary or capricious in concluding that ACI's failure to complete Parts 3 and 4 of the Statement of Eligibility constituted a material deficiency, and that the statutory deadline of 60 days “is unequivocal.” See Beach TV Properties, Inc., 617 F. App'x at 11.

         Plaintiffs allege that they would have received a class A license had Defendants made any of the following four arguments during the WTHC-LD administrative appeals, see Am. Compl. ¶¶ 68, 76: first, that Plaintiffs were entitled to formal adjudication under the APA, 5 U.S.C. § 558(c), because they were applying for a license, see Id. ¶¶ 36-37; second, that the FCC's interpretations of “material deficiency” and statutory deadline constituted rulemaking under the APA, id. ¶ 51; third, assuming that such interpretations constituted rules, that they must have first been published prior to taking effect, id. ¶ 64; fourth, that the “rules” were unlawfully retroactively applied, id.

         B. The Relationship Between Mr. Solomon, Haley Bader, and Garvey

         In March, 2000, before filing ACI's first petition for reconsideration, Mr. Solomon moved from Haley Bader to Garvey. Am. Compl. ¶ 83-89. He did so along with “all of the attorneys and support staff of the Haley firm, ” and continued providing legal advice to Plaintiffs throughout his transition. Id. ¶ 88(c). Shortly thereafter, Haley Bader stopped functioning as a law firm and continued solely to wind up its affairs. See Id. ¶ 89; Am. Compl. Ex. B, ECF No. 21-2. Garvey expressly disclaimed responsibility for Haley Bader's accounts receivable, accounts payable, and all liabilities other than certain library subscriptions. Am. Compl. Ex. B, at ¶¶ 6-8. Although Haley Bader received no consideration for its dissolution, Am. Compl. ¶ 87, Garvey did hire all seven of Haley Bader's members as “of counsel.” Am. Compl. Ex. B, ¶ 2. These seven members would each become eligible for an ownership interest in the firm “at a future date that is not less than two years” after being employed at Garvey. Id. ¶ 4. Until that time, they would not be entitled to a vote in Garvey management or attend firm-wide ownership meetings. See id.; Am. Compl. Ex. C, at ¶ 1. Garvey conditioned the offers of employment on Haley Bader showing evidence of tail insurance, id. ¶ 7, and all seven members of Haley Bader accepting, id. ¶ 12. At the end of 2005, Haley Bader was cancelled by operation of law due to failure to pay its annual registration fee. See Def. Haley Bader & Potts P.L.C.'s Br. in Supp. of Rule 12(b) Mot. to Dismiss Am. Compl. (“Haley Mot. to Dismiss”) Ex. A, ECF No. 27-2.

         Mr. Solomon is a citizen of the District of Columbia. Am. Compl. ¶ 5. Haley Bader was a Virginia Professional Limited Liability Company, and was served process in Virginia pursuant to Virginia law. Id. ¶ 8; Aff. of Service by Haley Bader & Potts P.L.C., ECF No. 8. Garvey is a Washington state law partnership of corporations, none of which are citizens of Florida or Georgia. Am. Compl. ¶ 10. Mr. Solomon is licensed to practice law in the District of Columbia, and “has held himself out . . . as a specialist in FCC law . . . .” Id. ¶ 7. Haley Bader and Garvey have also allegedly held themselves out as specialists in FCC law. Id. ¶¶ 9, 11. According to Mr. Solomon, he sent the Statement of Eligibility from Haley Bader's office in Virginia, and Haley Bader performed all work on the Statement in Virginia. See Haley Mot. to Dismiss Ex. B ¶¶ 5-6, ECF No. 27-3. Neither Mr. Solomon nor any attorney from Haley Bader appeared before the FCC in the District of Columbia in connection with the WTHC-LD Statement. Id. ¶¶ 7-9.

         Plaintiffs allege that Haley Bader does not have sufficient assets to pay the full amount of damages alleged in the Complaint. Am. Compl. ¶ 91.

         C. The Relationship Between ACI and Beach TV

         On Mr. Solomon's advice, ACI assigned the WTHC-LD license to Beach TV in 2009. Am. Compl. ¶¶ 92-94. Mr. Solomon had not advised either party that ACI had potential malpractice claims, nor that assigning the license could harm ACI's malpractice lawsuit. Id. ¶ 97. However, Plaintiffs do not seek recovery on this basis. See Id. ¶¶ 122-37. In 2015, ACI assigned its malpractice claims to Beach TV “as of the date of the assignment of the WTHC-LD License.” Id. ¶ 100. The Amended Complaint does not specify where the assignment was negotiated or executed, but does allege that Mr. Solomon-a D.C. resident then employed by Garvey in Virginia-advised on the assignment. See Id. ¶¶ 92-101.

         Beach TV is a Florida corporation with its principal place of business in Florida. Id. ¶ 1. ACI is a Florida corporation with its principal place of business in Georgia. Id. ¶ 2. WTHC-LD broadcasts in Atlanta, Georgia. Id. ¶ 111.

         II. ANALYSIS

         The Court will first consider Haley Bader's motion to dismiss for lack of personal jurisdiction. Because Haley Bader has neither “continuous and systematic contacts” with the District of Columbia nor sufficient contacts arising from their allegedly negligent representation of ACI, the Court will grant the motion and dismiss all counts against Haley Bader. The Court will then turn its attention to Garvey's motion to dismiss for failure to state a claim. Because Garvey's employment agreements with Haley Bader's former partners did not rise to the level of a de facto merger or a mere continuation of the entity Haley Bader, the Court will dismiss Count Six. The Court will also dismiss Counts Two, Four and Five against both Garvey and Mr. Solomon, because Plaintiffs' theories of malpractice during the administrative appeal are not legally plausible. Finally, with only Count One remaining against Mr. Solomon, the Court will address whether ACI's attempted transfer of these claims to Beach TV was effective. Because Virginia law applies, it was not, and only ACI has standing to maintain this action.

         This is a diversity action brought under 28 U.S.C. § 1332. See Am. Compl. ¶ 12. The parties are diverse and the amount in controversy exceeds $75, 000. See Id. ¶¶ 1-12, 122-137.

         A. Personal Jurisdiction over Haley Bader

         The plaintiff bears the burden of establishing personal jurisdiction over each defendant. Crane v. N.Y. Zoological Soc'y, 894 F.2d 454, 456 (D.C. Cir. 1990). And, although the court must resolve any factual discrepancies in favor of the plaintiff, Crane, 894 F.2d at 456, “[b]are allegations and conclusory statements are insufficient.” Johns v. Newsmax Media, Inc., 887 F.Supp.2d 90, 95 (D.D.C. 2012); see also Second Amendment Found. v. U.S. Conference of Mayors, 274 F.3d 521, 524 (D.C. Cir. 2001). A court may consider evidence outside of the pleadings to resolve questions of personal jurisdiction. See Mwani v. bin Laden, 417 F.3d 1, 7 (D.C. Cir. 2005).

         “A personal jurisdiction analysis requires that a court determine whether jurisdiction over a party is proper under the applicable long-arm statute and whether it accords with the demands of due process.” United States v. Ferrara, 54 F.3d 825, 828 (D.C. Cir. 1995); accord GTE New Media Servs. Inc. v. BellSouth Corp., 199 F.3d 1343, 1347 (D.C. Cir. 2000). There are two distinct types of personal jurisdiction: general jurisdiction, whereby a court can entertain claims against the defendant regardless of the claim's relationship to the forum, and specific jurisdiction, where jurisdiction is based on acts by the defendant that touch and concern the forum. D'Onofrio v. SFX Sports Grp., Inc., 534 F.Supp.2d 86, 90 (D.D.C. 2008). General jurisdiction “sets a high bar, ” requiring that the defendant have “continuous and systematic” contacts with the forum state. Id. Specific jurisdiction, in comparison, requires only sufficient “‘minimum contacts' with [the forum], ” but requires that the plaintiffs' claims arise from those contacts. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). For claims brought pursuant to courts' specific jurisdiction, the relationship between the defendant, the forum, and the litigation “is the essential foundation of [personal] jurisdiction.” Id.

         In a diversity-jurisdiction case, “the federal district court's personal jurisdiction over the defendant is coextensive with that of a District of Columbia court.” Helmer v. Doletskaya, 393 F.3d 201, 205 (D.C. Cir. 2004). Accordingly, an assertion of personal jurisdiction here must comply with Due Process and District of Columbia law. Under D.C. law, “personal jurisdiction is determined as of the commencement of an action.” Roz Trading Ltd v. Zeromax Grp., Inc., 517 F.Supp.2d 377, 384 (D.D.C. 2007).

         Defendant Haley Bader argues that this Court lacks personal jurisdiction, because Plaintiffs have shown neither “continuous and systematic” contacts between Haley Bader and the District of Columbia, nor any specific set of contacts with an adequate nexus to Plaintiffs' claims. The Court will address these contentions in order.

         1. General Jurisdiction

         District of Columbia courts may exercise general jurisdiction “over a person domiciled in, organized under the laws of, or maintaining his or its principal place of business in” the District of Columbia. D.C. Code § 13-422. D.C. Code § 13-334(a) also authorizes the exercise of general jurisdiction over “a foreign corporation doing business in the District.” Gorman v. Ameritrade Holding Corp., 293 F.3d 506, 509 n.1 (D.C. Cir. 2002). However, jurisdiction under § 13-334(a) requires “that personal service be made within the District of Columbia.” See Everett v. Nissan Motor Corp. in U.S.A., 628 A.2d 106, 108 (D.C. 1993). Here, Plaintiffs allege that Haley Bader was a Virginia Professional Limited Liability Company.[4] Am. Compl. ¶ 8. They do not dispute that Haley Bader dissolved in 2005. See Pls.' Mem. of Law in Opp'n to Mot. of Def. Haley Bader & Potts, PLC to Dismiss the Am. Compl. (“Pls.' Opp'n to Haley Mot.”) at 7, ECF No. 36. Nor do they deny that Haley Bader was served in Virginia pursuant to Virginia law. See Id. at 6 n.5.

         Plaintiffs nonetheless contend that Haley Bader is subject to the court's personal jurisdiction because the firm “had continuous and systematic contacts with the District of Columbia by practicing law before the FCC up until 2000, ” and waived any defects related to service of process in this case.[5] See Id. at 6 n.5, 7. They further contend that “‘continuous and systematic contacts' cannot be determined . . . solely on the basis of a snapshot at one particular point in time, such as the filing of the complaint.” See Id. at 7.

         Plaintiffs' syllogism is flawed in three critical respects. First, Haley Bader's waiver of service of process defects does not estop it from asserting a defense based on a statutory prerequisite for personal jurisdiction. In Everett, the plaintiffs served the out-of-state defendants pursuant to a District of Columbia Superior Court rule authorizing service of process by certified mail. 628 A.2d at 108. The District of Columbia Court of Appeals concluded that by serving the defendant outside of the District of Columbia, the plaintiffs “failed to comply with [§ 334]'s mandate, and . . . thus [were] foreclosed from benefitting from its jurisdictional protection.” See Id. The court highlighted the difference between general provisions for service of process and the specific jurisdictional requirements prescribed by statute. See Id. Here, it does not matter that Haley Bader waived defects to service of process, because they need not assert that there was a procedural defect with it. Instead, the sole inquiry is whether the plaintiffs, by virtue of meeting the service requirements of D.C. Code § 13-334, became entitled to assert it as a basis for jurisdiction. Because they did not, D.C. law precludes the Court from asserting general personal jurisdiction over Haley Bader.

         Second, Haley Bader's 2005 dissolution precludes the Court from finding general jurisdiction. In Roz Trading Ltd. v. Zeromax Grp., Inc., the plaintiffs alleged that the defendant U.S. Zeromax-a group of companies subject to personal jurisdiction in the District of Columbia-was an “alter ego” of the foreign Zeromax GmbH, making the latter subject to general jurisdiction under § 334. 517 F.Supp.2d at 383-84. The court dismissed without reaching the alter ego issue because U.S. Zeromax was dissolved prior to the date of the complaint, and “personal jurisdiction is determined as of the commencement of an action.” See Id. at 384. The facts here are analogous. Haley Bader has been dissolved for over a decade, leaving the Court without power to confer general jurisdiction, regardless of Plaintiffs' claim that it merged with Garvey. In an attempt to distinguish these facts from Roz Trading, Plaintiffs boldly assert that the court there found a lack of personal jurisdiction “because the plaintiffs failed to allege that the defendants acted within the District of Columbia at any time.” See Pls.' Opp'n to Haley Mot. at 6-7. Plaintiffs' argument conflates general jurisdiction with specific jurisdiction. See Id. at 6 (citing to page 387 of Roz Trading); Roz Trading, 517 F.Supp.2d at 387 (addressing specific jurisdiction). It is true that the Roz Trading court found that the plaintiffs failed to meet their burden of showing personal jurisdiction because the complaint merely “parrot[ed] the relevant statutory language, proffering no factual allegations whatsoever, ” see 517 F.Supp.2d at 387, but it did so with respect to specific jurisdiction.

         Third, Plaintiffs are incorrect in their assertion that the filing of the complaint is merely one possible data point that could show that the court has general jurisdiction. To be sure, analyzing general jurisdiction often requires retrospective analysis of events connecting the party with the forum. See, e.g., In re Orshansky, 804 A.2d 1077, 1091 (D.C. 2002). But the past connections between a party and a forum matter only insofar as they shed light on whether, at the time of filing, the contacts are sufficiently “continuous and systematic” to justify the assertion of jurisdiction over any claim-whether related to those contacts or not-against the party. See Roz Trading, 517 F.Supp.2d at 384-85; Gorman v. Ameritrade Holding Corp., 293 F.3d 506, 509- 10 (D.C. Cir. 2002).

         Haley Bader was not domiciled in the District of Columbia or organized under District of Columbia law, and did not maintain its personal place of business here. It was not served in the District Columbia, and did not exist as an entity when the Complaint was ...

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