United States District Court, District of Columbia
D. BATES, UNITED STATES DISTRICT JUDGE
Gerson, the defendant and an attorney, contracted with Zvi
Shtauber, the plaintiff, for Shtauber to provide services to
assist Gerson in a lawsuit. Their contract specified a
fee-sharing arrangement, where Gerson would share with
Shtauber a portion of any contingency fee he earned from the
lawsuit. Shtauber alleges that Gerson failed to pay, and now
sues for enforcement of that contract, or alternatively for
recovery in quantum meruit, and for a declaratory
judgment that he is entitled to a portion of Gerson's
fees in the future. Gerson moves to dismiss, arguing that the
contract is unenforceable as contrary to public policy
because a fee-sharing contract between a lawyer and a
nonlawyer violates the D.C. Rules of Professional Conduct,
and that Shtauber cannot pursue a claim for quantum
meruit when there is a contract between the parties. The
Court will deny Gerson's motion.
facts relating to the contract's formation are largely
undisputed, although it seems that the facts regarding
performance on the contract are hotly disputed. What follows
is the plaintiff's version of events. According to
Shtauber, Allan Gerson is a well-known D.C. attorney.
Complaint [ECF No. 1] ¶ 5. In 2004, Gerson explored the
possibility of suing Arab Bank and other financial
institutions “on behalf of victims of genocide and
terrorism in Israel and in territories administered by the
Palestinian Authority.” Id. Gerson hired
Shtauber to assist in the lawsuit. Id. ¶ 6.
Shtauber, a resident of Israel, has experience in relevant
fields of national security and has served as both the
Foreign Policy Advisor to the Israeli Prime Minister and as
Israel's Ambassador to the United Kingdom. Id.
Shtauber connected Gerson to an Israeli attorney, David Mena,
to help litigate the case against Arab Bank, and provided
additional “consulting services” in connection
with Gerson's suit. Id. ¶ 7.
and Shtauber entered into an Agreement on April 21, 2005
regarding payment for Shtauber's services. Id.
¶ 8; see Agreement [ECF No. 1-2]. The Agreement
provides that Gerson and another attorney (together, the
“Gerson Group”) had entered into a joint counsel
arrangement with another law firm, Motley Rice LLC, to
litigate the claims against Arab Bank. Agreement ¶ 2;
Compl. ¶ 9. The Agreement acknowledges that Shtauber had
provided valuable services already, and states that
“Shtauber's primary responsibility in the future
shall be . . . consultative work with regard to
investigative/political/public affairs aspects” of the
case, and to “assist in liaising with” Mena.
Agreement ¶ 3; Compl. ¶¶ 10-11. The Agreement
also states that Shtauber is entitled to 20% of any
contingent fees paid to the Gerson Group from claims referred
to them by Mena. Agreement ¶¶ 3-4; Compl. ¶
12. It also requires Gerson to provide monthly status reports
to Shtauber regarding the fees, and states that Shtauber was
not required to incur any expenses. Agreement ¶¶ 8,
10; Compl. ¶¶ 15-16.
alleges that Gerson has breached the Agreement by failing to
pay him the required fees. Id. ¶ 18. (The
underlying litigation against Arab Bank reached a partial
settlement in 2016, and thus Gerson and his co-counsel are
entitled to fees. Def.'s Mot. to Dismiss [ECF No. 5] at
2. Further, Shtauber alleges that Gerson has failed to
provide the required status reports, and has required
Shtauber to incur expenses (namely, legal fees) in breach of
the Agreement. Compl. ¶¶ 19-20. In Count I,
Shtauber seeks to recover damages under the contract, which
he estimates at $160, 000 plus interest. Id. ¶
23. In Count II, he seeks quantum meruit, i.e.
compensation for the reasonable value of his services,
estimated at $720, 000 plus interest. Id. ¶ 29.
In Count III, he seeks a declaratory judgment that he is
entitled to 20% of all contingent fees that the Gerson Group
is paid on claims referred by Mena. Id. ¶ 34.
unsurprisingly, disputes Shtauber's claims. He has filed
a motion to dismiss for failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6). Gerson agrees that
the two entered into a contract for Shtauber to provide
consulting services related to Gerson's litigation
against Arab Bank. He argues, however, that Counts I and III
must be dismissed because the contract is unenforceable as
against public policy because the D.C. Rules of Professional
Conduct for attorneys bar fee-sharing with non-lawyers.
See Mot. to Dismiss at 3 (citing D.C. Rules of Prof.
Conduct Rule 5.4(a) (2005)). Count II, he argues, must be
dismissed as well because it is not plead with sufficient
particularity, and because under D.C. law quantum
meruit can only be sought when there is no valid
contract. Id. at 5, 7.
considering a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), a court presumes the truth of a
complaint's factual allegations, though it is “not
bound to accept as true a legal conclusion couched as a
factual allegation.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (internal quotation
marks omitted). The court then asks whether the facts alleged
suffice “to state a claim to relief that is plausible
on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (internal quotation marks omitted). On a motion to
dismiss, the court considers “facts alleged in the
complaint, any documents either attached to or incorporated
in the complaint and matters of which [the court] may take
judicial notice.” Mpoy v. Rhee, 758 F.3d 285,
291 n.1 (D.C. Cir. 2014) (internal quotation marks omitted).
Because the Agreement was attached to Shtauber's
complaint, it will be considered in connection with
Gerson's motion to dismiss.
the District of Columbia's contract law applies, as per
the terms of the Agreement. See Agreement ¶ 11.
“When deciding state-law claims under diversity or
supplemental jurisdiction, federal courts apply the
choice-of-law rules of the jurisdiction in which they
sit.” Mastro v. Potomac Elec. Power Co., 447
F.3d 843, 857 (D.C. Cir. 2006) (internal quotation marks
omitted). Under District of Columbia law, the parties to a
contract may agree upon the law they wish to apply, so long
as there is some reasonable relationship with the state
specified. Ekstrom v. Value Health, Inc., 68 F.3d
1391, 1394 (D.C. Cir. 1995) (citing Norris v.
Norris, 419 A.2d 982, 984 (D.C. 1980)). Despite some
quibbling over this issue in the parties' briefs, the
contract itself clearly states that it “shall be
governed by the law of the District of Columbia.”
Agreement ¶ 11.
Counts I and III
argues that the fee sharing arrangement is forbidden by the
D.C. Rules of Professional Conduct (“Rules”) in
effect at the time, and therefore is unenforceable as against
public policy. Shtauber responds that the Agreement is not
contrary to the Rules, but even if it is, it's still
Agreement was signed in 2005. At the time, Rule 5.4(a) of the
D.C. Rules of Professional Conduct stated: “A lawyer or
law firm shall not share legal fees with a nonlawyer”
and then provided four exceptions.See also D.C. Code
§ 11-2501 (attorneys admitted to the D.C. bar are
subject to the Rules). The first two exceptions concern
payments to an attorney's estate after death. The third
exception states a “lawyer or law firm may include
nonlawyer employees in a compensation or retirement plan,
even though the plan is based in whole or in part on a profit
sharing arrangement.” Rule 5.4(a)(3). The fourth states
that fee sharing “is permitted in a partnership or
other form of ...