United States District Court, District of Columbia
ERIC N. HEYER, Plaintiff,
SCHWARTZ & ASSOCIATES PLLC, et al., Defendants.
L. FRIEDRICH, UNITED STATES DISTRICT JUDGE.
Heyer brings claims for breach of contract, breach of
fiduciary duty, and negligent misrepresentation against
Schwartz & Associates and its sole member, Christopher
Schwartz. Before the Court is the defendants' Motion to
Dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the
Federal Rules of Civil Procedure. Dkt. 7. For the reasons
that follow, the Court will grant the motion in part and deny
it in part.
following facts are taken from the complaint, which is
presumed truthful at this stage. Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). Heyer and Schwartz, both lawyers,
left a national law firm in spring 2012 to start their own
two-person law firm called Schwartz & Associates. Compl.
¶¶ 8-11, Dkt. 1. They did not create an operating
agreement, but tax forms indicate that at the start, Heyer
held a 20 percent equity interest and Schwartz held an 80
percent interest. Id. ¶ 12. Heyer and Schwartz
had been working largely for one particular client at their
old firm, and they created the new firm primarily to serve
this client with their own billing arrangement. Id.
on behalf of Schwartz & Associates, signed a written
agreement with the principal client that required the client
to pay Schwartz & Associates a fixed fee each month.
Id. ¶¶ 15-16. Schwartz and the client also
agreed orally that the client would pay a 25 percent
contingency fee on any recovery resulting from Schwartz &
Associates' representation. Id. Heyer and
Schwartz agreed orally that Heyer would be entitled to a
fixed monthly distribution along with a portion of any
contingent fee recoveries received from the client.
Id. ¶ 13.
spring 2013, Schwartz & Associates successfully
negotiated a settlement that allowed the client to recover
$2.1 million. Id. ¶¶ 17-18. But the client
failed to promptly pay the 25 percent contingency fee-$525,
000-and Schwartz failed to press the client for payment.
Id. ¶ 19. In late summer 2013, Heyer and
Schwartz agreed to increase Heyer's equity share to 30
percent and that Heyer would receive 30 percent of future
contingency fees from the client. Id. ¶ 21.
Heyer and Schwartz also agreed that Heyer would receive $150,
000 of the $525, 000 already earned. Id. ¶ 22.
to Heyer, however, Schwartz had struck a deal with the client
that significantly reduced the $525, 000 amount. Id.
¶ 26. Another law firm had assisted Schwartz &
Associates on one of the client's cases, and under the
deal, the law firm was paid from the $525, 000. Id.
Heyer learned about the deal several months later from the
client. Id. ¶ 27. Schwartz initially denied
that he had made such deal, but in early January 2014 he
notified Heyer that he had accepted an amount of $305, 484.29
instead of $525, 000 from the client. Id.
¶¶ 29, 33. Heyer ultimately received 30 percent of
the $305, 484.29 amount, which at $91, 645.29 was $58, 354.71
less than the $150, 000 he was promised. Id. ¶
early January, the client indicated that it might end the
litigation for which it had retained Schwartz &
Associates, cutting off Schwartz & Associates'
primary source of revenue. Id. ¶ 31. The client
assured Heyer, however, that it would continue to pay the
funds necessary for Heyer to take his fixed monthly
distribution for the next three months. Id. ¶
35. Schwartz, in turn, promised Heyer that he would receive
that monthly distribution through May 2014. Id.
Schwartz & Associates helped the client settle three
additional cases in January and February, and Schwartz
promised Heyer that he would ensure that they would receive
the 25 percent contingency fees from the client. Id.
¶ 39. Heyer continued to work for Schwartz &
Associates, assuming that he would continue to receive his
fixed monthly distribution and his portion of the contingency
fees. Id. ¶ 41.
February 19, however, the client told Heyer that beginning in
March it would no longer pay the funds corresponding to his
fixed monthly distribution. Id. Schwartz then
decided to withhold Heyer's fixed monthly distribution
for February. Id. ¶ 42. Heyer left Schwartz
& Associates and resumed work at the national law firm in
mid-March. Id. ¶ 43. After Heyer left, the
client settled two additional cases that Schwartz &
Associates had worked on. Id. ¶ 44. Schwartz,
however, never pressed the client to pay the contingency
fees-for these two cases or the three that had settled
earlier. Id. ¶¶ 40, 44.
Heyer prepared to sue the client for the promised fixed
monthly distribution and contingency fees that summer,
Schwartz and the client entered into a release agreement
covering all potential claims of Schwartz & Associates
principals, agents, and authorized representatives.
Id. ¶ 46. In exchange, the client's
majority owner-who also owned an entity that acted as
Schwartz & Associates' landlord-gave Schwartz &
Associates free rent for ten months. Id. ¶ 48.
Heyer's claims were ultimately heard by an arbitration
board, which awarded Heyer an amount corresponding to his
fixed monthly distribution for the first half of March 2014
during which he was unemployed. Id. ¶ 47.
brought this suit in April 2016, the defendants moved to
dismiss in September 2016, and the case was reassigned to the
undersigned judge in December 2017.
12(b)(1) allows a defendant to move to dismiss an action for
lack of subject-matter jurisdiction. Fed.R.Civ.P. 12(b)(1).
Federal law empowers federal district courts to hear only
certain kinds of cases, and it is “presumed that a
cause lies outside this limited jurisdiction.”
Kokkonen v. Guardian Life Ins., 511 U.S. 375, 377
(1994). When deciding a Rule 12(b)(1) motion, the court must
“assume the truth of all material factual allegations
in the complaint and construe the complaint liberally,
granting plaintiff the benefit of all inferences that can be
derived from the facts alleged, and upon such facts determine
[the] jurisdictional questions.” Am. Nat. Ins. Co.
v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (internal
quotation marks omitted). But the court “may undertake
an independent investigation” that examines
“facts developed in the record beyond the
complaint” in order to “assure ...