Geo Specialty Chemicals, Incorporated v. Husisian , 951 F. Supp. 2d 32 ( 2013 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
GEO SPECIALTY CHEMICALS, INC., )
)
Plaintiff, )
)
"· )
)
Case No. 12-cv-1819 (RJL)
GREGORY HUSISIAN, et al., )
)
DefundantL )
MEMO~UM OPINION
(June PI , 2013) [Dkt. #10]
Plaintiff GEO Specialty Chemicals, Inc. ("plaintiff' or "GEO") brings this case
against its former outside counsel, Gregory Husisian ("Husisian"), and his current law
firm, Foley and Lardner LLP ("Foley") (collectively, "defendants"), alleging breach of
fiduciary duty and seeking injunctive relief and monetary damages. See generally Compl.
[Dkt. # 1]. Before the Court is Defendants' Motion to Dismiss for Lack of Subject Matter
Jurisdiction [Dkt. # 10]. The Court finds that it does have subject matter jurisdiction, but
it will nevertheless DISMISS the complaint sua sponte for failure to state a claim.
BACKGROUND
GEO is the largest producer of glycine in the United States. 1 See Compl. ~ 13. As
1"Glycine is an amino acid, one of 20 used to make proteins in the human body," and it is
used in several medical treatment regimens, including those for schizophrenia, type 2
diabetes, and brain damage caused by stroke. WebMD, http://www.webmd.com/
1
such, the company benefits greatly from customs tariffs-also called "antidumping
duties"-that are imposed by the United States Department of Commerce on Chinese
glycine producers to prevent them from selling (or "dumping") glycine in the United
States at below-market prices. Id. ~~ 7-8, 11, 13. In 1995, the Commerce Department
published the Antidumping Duty Order-or "China Order," as plaintiffs call it-
establishing the initial duties, and since then, the Commerce Department's International
Trade Administration ("ITA") has reviewed and adjusted the tariffs in various
proceedings under the heading "Glycine from the People's Republic of China (A-570-
836)," which plaintiffs refer to as "the Glycine Trade Case." Id. ~~ 7, 10-13.
In 2007 and 2008, Husisian, then an attorney at the law firm of Thompson Hine
LLP ("Thompson Hine"), represented GEO before the ITA. !d. ~ 15. At that time, the
Commerce Department was considering an adjustment to the antidumping duties paid by
two existing Chinese glycine shippers. ld. ~ 14. The Chinese companies favored a
reduction; GEO opposed it. !d. Husisian worked more than 300 hours on the matter,
during which time he had contact with GEO's legal team, consultants, and executives
vitamins-and-supplements/glycine-uses-and-risks (last visited May 9, 2010); see also
http://en.wikipedia.org/wiki/Glycine (last visited May 9, 2010) ("Glycine (abbreviated as
Gly or G) is an organic compound with the formula NH 2CH2COOH. Having a hydrogen
substituent as its side-chain, glycine is the smallest of the 20 amino acids commonly
found in proteins." (footnote omitted)). Glycine also has a wide range of non-medicinal
uses. For instance, glycine is an additive in both human and animal food products, a
buffering agent in cosmetics and toiletries, and a chemical component of rubber sponges
and fertilizers. See http://en.wikipedia.org/wiki/Glycine.
2
who collected and analyzed data, devised strategy, and monitored progress. !d. ,-r,-r 15-16.
Some of the individuals with whom Husisian interacted had access to GEO's confidential
information, strategies, and work product. !d. ,-r 17.
Husisian left Thompson Hine in 2009 and is now a partner at Foley. !d. ,-r 18. In
October 20 12, GEO learned that Husisian and Foley are representing two Chinese glycine
producers-Hebei Donghua Jiheng Fine Chemical Co., Ltd. and Hebei Donghua Jiheng
Chemical Co., Ltd. ("the Hebei Companies")-as they enter the U.S. market and request a
"new shipper review" from the ITA. !d. ,-r 19. Husisian never communicated with GEO
about these new representations, though his success in lowering antidumping duties for
the Hebei Companies would harm GEO by allowing cheaper Chinese glycine to enter the
United States. !d. ,-r,-r 20, 22. GEO twice demanded that Husisian and Foley withdraw
from their representation of the Hebei Companies; Husisian and Foley have refused,
maintaining that there is no conflict of interest. !d. ,-r,-r 23-25.
On November 8, 2012, after defendants refused for a second time to withdraw,
GEO brought this lawsuit, claiming that defendants are violating D.C. Rule of
Professional Conduct ("DCRPC") 1.9 and breaching fiduciary duties by representing the
Hebei Companies. !d. ,-r,-r 26-29. Five days later, GEO moved for a temporary restraining
order, see Mot. for TRO [Dkt. #4 ], which I denied and converted into a preliminary
injunction motion, see Minute Entry (Nov. 19, 2012). Ultimately, I denied the
preliminary injunction, finding that GEO had not established that any irreparable harm
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would result from defendants' conduct. See Mem. Op. at 13 [Dkt. #25].
Now before this Court is Defendants' Motion to Dismiss for Lack of Subject
Matter Jurisdiction. Defendants' primary contention is that GEO's claims fall under the
exclusive jurisdiction of the Court of International Trade ("CIT"). See Mem. in Supp. of
Defs.' Mot. to Dismiss ("Defs.' Mem.") at 2-5 [Dkt. #10-1] ("GEO has filed suit in the
wrong court."). They argue in the alternative that GEO has failed to exhaust
administrative ITA remedies and that the Court has neither federal question nor diversity
jurisdiction. See id. at 5-8. Predictably, GEO disagrees and counters with arguments
supporting this Court's jurisdiction to hear and decide the case. See Mem. in Opp'n to
Defs.' Mot. to Dismiss ("Pl.'s Opp'n") [Dkt. #15].
LEGAL STANDARD
Defendants argue that this case should be dismissed under Federal Rule of Civil
Procedure 12(b)( 1) for lack of subject matter jurisdiction. When facing such a motion, it
is the plaintiffs burden to prove by a preponderance of the evidence that the court does in
fact have jurisdiction over the case. See Budik v. Datmouth-Hitchcok Med. Ctr., --- F.
Supp. 2d ----, 2013 WL 1386211, at *4 (D.D.C. Apr. 5, 2013) (citing Biton v. Palestinian
Interim Self-Gov't Auth., 310 F. Supp. 2d 172, 176 (D.D.C. 2004)). The Court,
meanwhile, must construe the complaint liberally, accept all factual allegations as true,
and draw all inferences in the plaintiffs favor. !d. (citing Am. Nat'! Ins. Co. v. FDIC,
642 F.3d 1137, 1139 (D.C. Cir. 2011)). In addition, the Court may, if it so chooses, look
4
beyond the complaint and consider material outside of the pleadings. See Shade v. U.S.
Congress, ---F. Supp. 2d ----, 2013 WL 1694462, at *2 (D.D.C. Apr. 19, 2013) (citing
Scolaro v. D.C. Bd. ofElections & Ethics, 104 F. Supp. 2d 18,22 (D.D.C. 2000)).
Even where a defendant does not move to dismiss under Rule 12(b)( 6), courts in
our Circuit can still "dismiss a complaint sua sponte for failure to state a claim for which
relief can be granted if, 'taking all the material allegations of the complaint as admitted
and construing them in the plaintiffs favor,' the court determines that the plaintiffs
complaint could not possibly entitle him to relief."' Epps v. U.S. Capitol Police Bd., 719
F. Supp. 2d 7, 12 (D.D.C. 2010) (quoting Razzoli v. Fed. Bureau ofPrisons, 230 F.3d
371, 373-74 (D.C. Cir. 2000)); see also Jaeger v. United States, No. 06-625(JDB), 2006 WL
1518938, at *1 (D.D.C. May 26, 2006).
Under Rule 12(b)(6), the Court must dismiss plaintiffs' complaint if it does not
"contain sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and internal
quotation marks omitted). "A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." !d.; see also Twombly, 550 U.S. at 555 (factual
allegations must "be enough to raise a right to relief above the speculative level").
"[W]here the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged-but it has not 'show[ n] '-'that the
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pleader is entitled to relief."' Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
When analyzing a plaintiffs claims, the Court must "treat the complaint's factual
allegations as true" and "grant plaintiff the benefit of all inferences that can be derived
from the facts alleged." Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C.
Cir. 2000) (citation and internal quotation marks omitted). But "the court need not
accept inferences drawn by plaintiffl] if such inferences are unsupported by the facts set
out in the complaint. Nor must the court accept legal conclusions cast in the form of
factual allegations." Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir.
1994 ). Finally, the Court "may consider only the 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." E. E. 0. C. v. St. Francis Xavier Parochial Sch., 117 F .3d
621, 624 (D.C. Cir. 1997).
ANALYSIS
The Court finds that the CIT does not have exclusive jurisdiction over plaintiffs
claims. Regardless of whether the CIT has the authority to disqualify conflicted counsel,
defendants cite no authority-and the Court is not aware of any-standing for the
proposition that the CIT can hear a breach of fiduciary duty action against a private party
or award compensatory damages for a breach. This Court, on the other hand, has subject
matter jurisdiction over the entire case pursuant to the diversity statute, 28 U.S.C. § 1332.
Although this Court has jurisdiction over plaintiffs putative claims, the Court
6
cannot overlook that the complaint fails to plead facts supporting a plausible right to
relief. Indeed, drawing all inferences in plaintiffs favor, a factfinder could not possibly
conclude that the Hebei Companies' new shipper review is "the same or [] substantially
related" to the proceedings in which Husisian represented GEO. Nor are there allegations
to support an inference that defendants' representation of the Hebei Companies is the
proximate cause of any damages to GEO. Thus, plaintiff has failed to state a claim under
either Rule 1.9 or a breach of fiduciary duty theory, and the Court will dismiss the
complaint.
I. This Court Has Subject Matter Jurisdiction Over Plaintiff's Claims.
A. The CIT Does Not Have Exclusive Jurisdiction.
The parties agree that 28 U.S.C. § 1581(i) is the relevant jurisdictional statute in
this case. See Def.'s Mem. at 3; Pl.'s Opp'n at 2. It states, in part:
[T]he Court oflntemational Trade shall have exclusive jurisdiction of any civil
action commenced against the United States, its agencies, or its officers, that
arises out of any law of the United States providing for-
(1) revenue from imports or tonnage;
(2) tariffs, duties, fees, or other taxes on the importation of merchandise
for reasons other than the raising of revenue;
(3) embargoes or other quantitative restrictions on the importation of
merchandise for reasons other than the protection of the public health
or safety; or
(4) administration and enforcement with respect to the matters referred
to in paragraphs (1)-(3) of this subsection and subsections (a)-(h) of this
section.
In addition, defendants cite§ 1581(c) and (i) as conferring on the CIT exclusive
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jurisdiction over objections to ITA rulings. See Def.'s Mem. at 3.Z On its face, however,
§ 1581(i) refers to "civil action[s] commenced against the United States, its agencies, or
its officers"; it says nothing about tort claims between private parties.
Undaunted, defendants argue that the CIT has, not just jurisdiction, but exclusive
jurisdiction over this case because that court has addressed conflicts of interest and
disqualification issues in the past. See Def.'s Mem. at 3-5 (citing Makita Corp. v. United
States, 819 F. Supp. 1099 (Ct. Int'l Trade 1993); Shakeprooflndus. Prods. Div. oflll.
Tool Works Inc., 104 F.3d 1309 (Fed. Cir. 1997)). Please! Neither Makita nor
Shakeproof support defendants' position.
In Makita, the plaintiff brought a case against the United States and specifically the
U.S. Department of Commerce, claiming that a petitioner in an ITA antidumping
proceeding was represented by conflicted counsel, and seeking an injunction to remedy
the conflict. 819 F. Supp. at 240-42. The ITA determined that it did not have
jurisdiction to enjoin counsel from participating in the proceeding or accessing documents
under an administrative protective order based on an alleged conflict. !d. at 242. The
CIT disagreed and held that it did have jurisdiction, as well as "plenary authority and
responsibility to supervise professional conduct." !d. at 245. But it also found that its
authority was limited in one key respect: "Since only the ITA is properly before the
2See also Camargo Correa Metais, S.A. v. United States, 52 F.3d 1040, 1042-43 (Fed.
Cir. 1995); Miller & Co. v. United States, 824 F.2d 961, 963 (Fed. Cir. 1987).
8
court, relief can only be granted against it." Id. at 250. The CIT then granted plaintiff's
injunction "to the extent that the defendants and their officers, employees, agents,
servants, sureties and assigns be, and each hereby is, enjoined from allowing [conflicted
counsel] any access to the ITA's investigations of [plaintiff]." !d. at 251. The CIT did
not hold that its jurisdiction extends to claims for injunctive and compensatory relief
between private parties.
The same is true of Shakeproof In that case, the plaintiff brought a claim against
United States and the U.S. Department of Commerce claiming that the ITA behaved
arbitrarily and capriciously when, over plaintiff's objection, it allowed an allegedly
conflicted attorney to access confidential documents relating to an antidumping
investigation. 104 F .3d at 1311-12. The CIT denied plaintiff's request for an injunction
barring the attorney from participating in the antidumping proceeding, and the Federal
Circuit affirmed, both finding that the attorney was not conflicted. !d. at 1312-14. The
Federal Circuit explicitly bypassed, however, any consideration of§ 1581(i) and the
timing of the CIT's review. Id. at 1313. Instead, the court held that it was "unnecessary
to decide that issue when it has concluded that the plaintiff was not entitled to relief in
any event." Id. Because the court found that no conflict existed in the first place, it did
not discuss the scope of potential relief, much less suggest that the CIT had jurisdiction to
award monetary damages or issue an injunction directly against the law firm or lawyer.
Indeed, the Federal Circuit addressed the CIT's jurisdiction over claims between
9
private parties just last year in Sioux Honey Ass 'n v. Hartford Fire Ins. Co., 672 F .3d
1041 (Fed. Cir. 2012). There, the court held that the CIT had no jurisdiction over claims
brought by domestic food producers against private customs bond sureties because"§§
1581, 1582, and 1584 grant the [CIT] jurisdiction over specific types of claims mostly
involving trade law that are asserted by or against the United States." !d. at 1051
(emphasis added). The court also found that supplemental jurisdiction provisions, § 1583
and§ 1367, did not apply. !d. at 1051-54; see also Pat Huval Rest. & Oyster Bar, Inc. v.
US. Int'l Trade Comm 'n, 823 F. Supp. 2d 1365, 1380-81 (Ct. Int'l Trade 2012) (denying
motion to amend complaint to add claim against private party because claim would be
outside of court's subject matter jurisdiction and therefore futile).
Of course, in this case, GEO asks for more than just an injunction directing the
ITA to deny Husisian and Foley access to documents under an administrative protective
order. See Compl. at 7 (seeking compensatory damages); Pl.'s Opp'n at 6 ("[T]he CIT
could not do anything to enjoin Husisian and Foley from consulting or advising the Hebei
Companies (or other Chinese producers) behind the scenes, using privileged and
confidential information they already have adverse to GEO."). According to Makita, such
a narrow injunction is the only relief that the CIT could grant under these circumstances,
see 819 F. Supp. at 250-51, and that alone would require plaintiffto sue the United States
rather than defendants, see Sioux Honey Ass 'n, 672 F.3d at 1051-54. The CIT cannot
award compensatory damages or enjoin Husisian or Foley from engaging in any conduct
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outside of the immediate purview of the ITA's antidumping proceeding. 3 Our Circuit has
recognized that "the federal district courts can assert jurisdiction, under appropriate
jurisdictional grants, over customs-related matters in which no adequate remedy exists in
the" CIT. Timken Co. v. Simon, 539 F.2d 221, 226 n.7 (D.C. Cir. 1976). For the
following reasons, the diversity statute is an "appropriate jurisdictional grant[]" here.
B. This Court Has Diversity Jurisdiction.
Plaintiff and defendants agree that the parties to this lawsuit are all citizens of
different states as required by 28 U.S.C. § 1332(a)(1). See Def.'s Mem. at 7; Pl.'s Opp'n
at 9; see also Compl. ,-r,-r 1-3. Defendants contend, however, that GEO's damages are too
speculative and therefore do not meet the amount-in-controversy requirement.
Defendants are incorrect, and the Court will not dismiss the case on that ground.
It is well established in our Circuit that "a complaint should not be dismissed for
want of the requisite jurisdictional amount unless it appears 'to a legal certainty' that the
plaintiffs claim does not amount to [the statutory minimum]." Smith v. Washington, 593
F.2d 1097, 1099 (D.C. Cir. 1978) (quoting Hunt v. Wash. State Apple Adver. Comm 'n,
3For the same reason, defendants' argument that GEO failed to exhaust administrative
remedies is also meritless. See Stewart v. Evans, 275 F.3d 1126, 1130 (D.C. Cir. 2002)
("[W]e cannot ask [plaintiff] to exhaust an administrative remedy that does not exist."). It
bears noting that Thompson Hine attorney Matthew R. Nicely "contacted the Department
of Commerce to determine whether the Department had a procedure for disqualifYing
counsel for conflicts of interest, and was told by Michele Lunch of the Import
Administration's Chief Counsel's office that no such process exists." Affidavit of
Matthew R. Nicely ("Nicely Aff. ") ,-r 88 (Dkt. 18-1 ).
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432 U.S. 333, 346 (1977)); see also Rosenboro v. Kim, 994 F.2d 13, 17 (D.C. Cir. 1993)
("[T]he Supreme Court's yardstick demands that courts be very confident that a party
cannot recover the jurisdictional amount before dismissing the case for want of
jurisdiction."). This Court, too, has recognized that "[i]n general, '[a] plaintiffs
allegation that the matter in controversy exceeds the jurisdictional amount requirement,
even when it is in cursory form,' is sufficient to evade dismissal." RDP Techs., Inc. v.
Camhi AS, 800 F. Supp. 2d 127, 137 (D.D.C. 2011) (quoting 14AA Charles Alan Wright
et al., Federal Practice & Procedure§ 3702 (4th ed.)) (collecting cases).
When the plaintiff seeks injunctive relief, "the amount in controversy is measured
by the value of the object of the litigation." Hunt, 432 U.S. at 347. The Court "may look
either to the value of the right that plaintiff seeks to enforce or to protect[,] or to the cost
to the defendants to remedy the alleged denial." Smith, 593 F.2d at 1099 (footnote and
internal quotation marks omitted). Put another way, "[t]he value of injunctive relief for
determining the amount in controversy can be calculated as the cost to the defendant."
Wexler v. United Air Lines, Inc., 496 F. Supp. 2d 150, 153 (D.D.C. 2007) (citing Comm.
for GI Rights v. Callaway, 518 F.2d 466,472-73 (D.C. Cir. 1975)). 4 Although it is often
4 Defendants cite National Consumers League v. General Mills, Inc. ("NCL"), 680 F.
Supp. 2d 132, 140 (D.D.C. 2010), and National Organization for Women v. Mutual of
Omaha Ins. Co. ("NOW''), 612 F. Supp. 100, 107-08 (D.D.C. 1985), for the proposition
that the value of damages must be measured from the plaintiffs view. Def. 's Mem. at 7.
Yet, defendants ignore a material point of distinction between those cases and the one
now before the Court. Both NCL and NOW addressed whether the amount in controversy
can be calculated by adding up, or aggregating, the values of separate claims brought by
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difficult or impossible to assign precise monetary values to important legal rights, an
action seeking an injunction to protect or vindicate those rights can meet the amount-in-
controversy requirement. See Comm.for GI Rights, 518 F.2d at 472 ('"Absolute certainty
as to the amount is not essential; it suffices that there is a present probability that the
damages or the right sought to be protected meet the statutory requirement."' (quoting
Gomez v. Wilson, 477 F.2d 411, 420 n.51 (D.C. Cir. 1973))).
Whether viewed from plaintiffs or defendants' perspective, there is no way for the
Court to find "to a legal certainty" that the amount in controversy in this case is below
$75,000. In fact, there are strong indications that, if plaintiff is entitled to any relief at all,
or against different parties. See NCL, 680 F. Supp. 2d at 139-40; NOW, 612 F. Supp. at
107-09. Their holdings relied on the Supreme Court's decisions in Snyder v. Harris, 394
U.S. 332, 335-36 (1969) and Zahn v. Int'l Paper Co., 414 U.S. 291, 293-94 (1973),
which held that multiple parties' (or class members') damages cannot be aggregated to
reach a jurisdictional minimum.
Contrary to the parenthetical accompanying defendants' citation to NOW, that case
does not really "reject[] defendant's-v'iew calculation of damages for diversity jurisdiction
when injunctive and monetary relief has been requested." Def.'s Mem. at 7. What NOW
actually says is: "[T]o allow the defendant's view test to be used whenever injunctive
relief is sought along with damages in a class action would undermine the holdings of
Zahn and Snyder" because "viewing the jurisdictional amount issue from the defendant's
point of view is simply another way of aggregating [plaintiffs'] claims." 612 F. Supp. at
108 (emphasis added); cf Breakrnan v. AOL LLC, 545 F. Supp. 2d 96, 99, 103-06
(D.D.C. 2008) (rejecting defendant's-view calculation as a form of aggregation when
plaintiff was "acting in a representative capacity on behalf of the interests of the general
public").
Aggregation is not at issue in this case, so I will follow the line of authorities
recognizing defendant's-view damages calculations, even in cases where the plaintiff
seeks monetary damages and injunctive relief. See Busby v. Capital One, NA., ---F.
Supp. 2d ----,2013 WL 1191180, at *10 (D.D.C. Mar. 25, 2013).
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the value of that relief will greatly exceed $75,000. As I see it, there are two "object[s] of
the litigation" in this case: (1) defendants' ongoing representation of the Hebei
Companies, which plaintiff seeks to enjoin; and (2) plaintiff's confidential information,
the disclosure of which might constitute a breach of fiduciary duty and could be remedied
by compensatory damages.
As to the first-defendants' representation of the Hebei Companies-from
defendants' perspective, this business relationship appears to be worth far more than
$75,000. To say the least, "the cost to the defendant" of terminating that relationship
would be substantial. Indeed, according to his declaration, Husisian is the Hebei
Companies' only attorney working on trade matters. Declaration of Gregory Husisian
("Husisian Decl.") ~50 [Dkt. #16-1]. As ofNovember 2012, he had already spent many
hours meeting with his clients, learning about their operations and facilities, overseeing
their preparation of a Commerce Department questionnaire, and drafting lengthy narrative
portions of the questionnaire himself. Id. ~~53-54. Looking ahead, Husisian anticipates
(i) briefing a number of issues relating to the questionnaires, (ii) working on an
"exhaustive (likely two-week) verification of' questionnaire responses, and (iii) "[a]fter
the publication of the preliminary determination, ... submi[tting] arguments related to
the proper calculation of the antidumping duty rate." Id. ~ 56d-e. Husisian's description
of the extensive work involved in an antidumping review comports with GEO's allegation
that Husisian worked more than 1,400 hours on glycine-related issues for GEO, over 300
14
ofwhich were spent on the Commerce Department's review of its tariffs on Chinese
producers. See Compl. ~ 15; Nicely Aff. ~~ 15, 21. It is therefore reasonable to assume
that defendants will bill the Hebei Companies upwards of$75,000 legal services, and loss
of those fees is the "cost" of an injunction.
Turning to the second "object[] of the litigation"-plaintiff's confidential
information-the Court is not at all confident, much less "very confident," that its value is
less than $75,000. The Court must accept as true GEO's allegations that Husisian
obtained confidential information from GEO. See Budik, 2013 WL 1386211, at *4; see
also Compl. ~~ 16-17, 20, 26, 31. 5 If the supposed information could be used by foreign
glycine producers to lower their tariffs on U.S. imports, it would be extremely valuable
both to the foreign producers and to GEO. Relatedly, a breach of fiduciary duty that
results in the use of that information by a foreign producer could certainly result in
compensatory damages exceeding $75,000. Assuming the alleged information exists and
would be useful to the Hebei Companies, there is a very high probability that its value to
both plaintiff and defendants far exceeds the statutory minimum for diversity jurisdiction.
Accordingly, I find that I have jurisdiction over this matter under 28 U.S.C. § 1332.
II. Plaintiff's Complaint Fails to State a Claim for which Relief Can Be Granted.
While I disagree with will defendants jurisdictional argument, I will nevertheless
5 These are just the allegations in the complaint; whether GEO has supported them with
sufficient facts to state a plausible claim for relief is another matter, to be taken up in Part
II, infra.
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exercise my authority to dismiss plaintiffs complaint sua sponte because it fails to plead
facts sufficient to state a claim for a violation of Rule 1.9 or a breach of fiduciary duty.
A. The Complaint Does Not Plead a Violation of Rule 1.9 of the District of
Columbia Rules of Professional Conduct.
Rule 1.9 states that "[a] lawyer who has formerly represented a client in a matter
shall not thereafter represent another person in the same or a substantially related matter
in which that person's interests are materially adverse to the interests of the former client
unless the former client gives informed consent." An attorney violates the rule only if
three elements are established: ( 1) "the attorney accused of the violation is a 'former
attorney' with respect to a party presently before the court," (2) "the subject matter of the
former representation is the same as, or substantially related to, the present matter on
which the alleged violation of Rule 1.9 is based," and (3) "the interests of the former
client are adverse to the interests of the party represented by the attorney who is accused
of violating Rule 1.9." Paul v. Judicial Watch, Inc., 571 F. Supp. 17,21 (D.D.C. 2008).
The second element is of particular interest here. The DCRPC define "matter" as
including "any litigation, administrative proceeding, lobbying activity, application, claim,
investigation, ... or any other representation, except as expressly limited in a particular
rule." DCRPC 1.0(h). The comments to Rule 1.9 elaborate further on the scope of, and
relationship between, "matters" in this context:
[2] The scope of a "matter" for purposes of this rule
may depend on the facts of a particular situation or
transaction. The lawyer's involvement in a matter can also be
16
a question of degree. When a lawyer has been directly
involved in a specific transaction, subsequent representation
of other clients with materially adverse interests clearly is
prohibited. On the other hand, a lawyer who recurrently
handled a type ofproblem for a former client is not
precluded from later representing another client in a wholly
distinct problem of that type even though the subsequent
representation involves a position adverse to the prior client.
. . . Rule 1.9 is intended to incorporate District of Columbia
and federal case law defining the "substantial relationship"
test. See, e.g., Brown v. District of Columbia Board ofZoning
Adjustment, 486 A.2d 37 (D.C. 1984) (en bane); TC. Theatre
Corp. v. Warner Brothers Pictures, 113 F. Supp. 265(S.D.N.Y. 1953), and its progeny.
[3] Matters are "substantially related" for purposes of
this rule if they involve the same transaction or legal dispute
or if there otherwise is a substantial risk that confidential
factual information as would normally have been obtained
in the prior representation would materially advance the
client's position in the subsequent matter . ... A conclusion
about the possession of such information may be based on the
nature of the services the lawyer provided the former client
and information that would in ordinary practice be learned by
a lawyer providing such services.
DCRPC 1.9, cmts. 2, 3 (emphases added). In Brown, the District of Columbia Court of
Appeals stated that two matters are "substantially related" if "it is reasonable to infer
counsel may have received information during the first representation that might be useful
to the second." 486 A.2d at 50; see also Paul, 571 F. Supp. 2d at 25. The Restatement
(Third) of the Law Governing Lawyers ("Restatement") § 132 provides a similar
definition: matters are "substantially related" if"( 1) the current matter involves the work
the lawyer performed for the former client; or (2) there is a substantial risk that
17
representation of the present client will involve the use of information acquired in the
course of representing the former client, unless that information has become generally
known." Under the second part of this definition, a "[s]ubstantial risk exists where it is
reasonable to conclude that it would materially advance the client's position in the
subsequent matter to use confidential information obtained in the prior representation."
!d. cmt. d(iii).
GEO alleges that the Hebei Companies' new shipper review is "the same matter"
as the Commerce Department's 2007 and 2008 review of two existing glycine producers.
Compl. ~ 26. But GEO fails to provide any support for this "legal conclusion[] cast in
the form of[a] factual allegation[]." See Kowal, 16 F.3d at 1276. Upon closer scrutiny, it
is clear that these matters are not at all ''the same," but are in fact distinct proceedings,
linked only at a high level of generality. The Department of Commerce has imposed a
tariff on Chinese glycine producers for more than eighteen years, since March 1995, when
it published its Antidumping Duty Order: Glycine From the People's Republic of China,
60 Fed. Reg. 16,035, 16,116 (Mar. 29, 1995). Subsequent reviews are assigned the same
identification number (A-570-836), but they are initiated by separate petitions brought by
different parties seeking their own individualized relief. See Compl. ~ 12. 6 The Hebei
6See, e.g., Glycine From the People's Republic of China: Preliminary Partial Affirmative
Determination of Circumvention of the Antidumping Duty Order and Initiation of Scope
Inquiry, 77 Fed. Reg. 21,387, 21,532 (Apr. 10, 2012) (preliminary results from review of
Salvi Chemical Industries Limited and AICO Laboratories India Ltd., upon petition of
U.S. producers); Glycine From the People's Republic of China: Preliminary Results of
18
Companies' request for review, for instance, was published in October 2012. See Glycine
From the People's Republic of China: Notice oflnitiation of Antidumping Duty New
Shipper Review, 77 Fed. Reg. 65,611, 65,669-70 (Oct. 30, 2012).
Under the DCRPC's definition of the word, each Commerce Department review or
proceeding-including a new shipper review-is its own "administrative proceeding, ...
claim, [or] investigation" and therefore qualifies as its own "matter." Rule l.O(h). It
would be contrary to this definition, not to mention common sense, for this Court to lump
together every glycine review that has occurred in the past eighteen years and that occurs
indefinitely into the future simply because they deal with the same general subject matter
under the same administrative I.D. number. GEO's use of the phrase "Glycine Trade
Case" does not transform these separate investigative and administrative proceedings into
a single "matter" for purposes of applying Rule 1.9.
That said, it is possible that separate glycine matters may be "substantially related"
under the tests set forth above. In this case, however, GEO has failed to allege facts that
would allow a factfinder reasonably to infer that Husisian may have received information
Antidumping Duty Administrative Review, 70 Fed. Reg. 17,583, 17,649 (Apr. 7, 2005)
(preliminary results from review ofpetitioner-Baoding Mantong Fine Chemistry Co.,
Ltd.); Notice of Preliminary Results of Antidumping Duty New Shipper Review: Glycine
From the People's Republic of China, 68 Fed. Reg. 13,615, 13,669 (Mar. 20, 2003)
(preliminary results from new shipper review of petitioner-Tianjin Tiancheng
Pharmaceutical Co. Ltd.). The Commerce Department also conducts its own periodic
"sunset reviews." See, e.g., Glycine From the People's Republic of China: Continuation
of Antidumping Duty Order, 76 Fed. Reg. 57,897, 57,951 (Sept. 19, 2011).
19
during his representation ofGEO that might be useful in his representation of the Hebei
Companies, as required by Rule 1.9 and Brown, 486 A.2d at 50.
The complaint lists certain forms of confidential information that Husisian may
have learned while representing GEO ("information regarding GEO's positions, strategies
and work product") as well as some information Husisian may have learned that is not
alleged to be confidential ("research related to input values for glycine production"),
Compl. ~ 17, the disclosure of which could allegedly harm GEO, id. ~~ 26, 31. But GEO
never even hints at how the information learned in the GEO representation might be
useful to Hebei in its new shipper review, nor do the facts alleged in the complaint
suggest that information from a 2007 and 2008 proceeding would have any bearing on a
new shipper review conducted in 20 13.
Even under Brown's fairly lax "may have learned information" standard, plaintiff
still must plead facts showing that information from the first matter "might be useful in
the second." 486 A.2d at 50. Plaintiffs complaint offers no insight into the nature of
either proceeding. 7 Nor does the complaint specify what (if any) role GEO will have in
the new shipper review. If GEO is uninvolved in that proceeding, then it is implausible
that "information regarding GEO's positions, strategies and work product," Compl. ~ 17,
7 Plaintiff obviously need not reveal confidential information in order to plead its case,
but it must at least describe "the general features of the matters involved" with enough
specificity to establish that Husisian may have obtained information in the 2007 and 2008
representation that would be useful now. Restatement§ 132, cmt. d(iii).
20
would be of any use whatsoever to the Hebei Companies. Furthermore, the complaint
does not allege that the GEO's "research related to input values for glycine production" is
confidential, or that knowledge of that information could "materially advance" the Hebei
Companies' position. See DCRPC 1.9, cmt. 3; Restatement§ 132, cmt. d(iii). Absent
more fulsome allegations about the subject matter of the 2007 and 2008 GEO
representation and the ongoing Hebei Companies representation, it is impossible to infer
that the matters are "the same or[] substantially related," under Rule 1.9. Thus, the Court
cannot find anything "more than the mere possibility of misconduct," and the complaint
does not show that GEO is entitled to relief. Iqbal, 556 U.S. at 679.
B. The Complaint Does Not Plead a Breach of Fiduciary Duty
Finally, the complaint fails to allege a breach of fiduciary duty that would entitle
GEO to compensatory damages. In the District of Columbia and in our Circuit, "[t]o
recover on a claim for breach of fiduciary duty, the plaintiff must prove by a
preponderance of the evidence that a fiduciary duty existed between the parties, that the
defendant violated that fiduciary obligation, and that the plaintiffsuffered damages as a
proximate result ofthe violation." Gov't ofRwanda v. Rwanda Working Grp., 227 F.
Supp. 2d 45, 64 (D.D.C. 2002) (emphasis added) (citing Landise v. Mauro, 725 A.2d 445,
450 (D.C. 1998)).8
8See also Hendry v. Pelland, 73 F.3d 397, 402 (D.C. Cir. 1996) ("Compensatory
damages make plaintiffs whole for the harms that they have suffered as a result of
defendants' actions. Clients therefore need to prove that their attorney's breach caused
21
As already discussed, the Court finds that GEO has failed to plead facts from
which a factfinder could infer that defendants have violated a fiduciary obligation by
engaging in a Rule 1.9 conflict of interest. See supra Part II.A. But even if the complaint
adequately alleged a breach of duty, plaintiffs claim would still fail because GEO does
not allege that the breach has caused any injury. The complaint merely alleges that the
disclosure ofGEO's confidential information would cause GEO significant harm, see
Compl. ~~ 26, 31, but it does not say that any actual disclosure has occurred or that any
harm has been suffered as a result of defendants' work for the Hebei Companies.
Plaintiff, therefore, has not pleaded facts showing a plausible cause of action for breach
of fiduciary duty. 9
CONCLUSION
them injury so that the trier of fact can determine whether they are entitled to any
damages." (emphases added)); Bode & Grenier, L.L.P. v. Knight, 821 F. Supp. 2d 57, 64
(D.D.C. 2011) ("In order to state a claim under District of Columbia Law for breach of
fiduciary duty, [plaintiffs] must allege ... [,]to the extent plaintiff seeks compensatory
damages[,] the breach proximately caused an injury." (emphasis added; internal
quotation marks omitted)).
9Despite its flaws, the complaint does not allege facts that foreclose plaintiffs
entitlement to relief, and it is possible that GEO could amend its allegations to cure the
22
For all the foregoing reasons, defendant's Motion to Dismiss [Dkt. #10] is hereby
DENIED, but plaintiffs Complaint is DISMISSED for failure to state a claim. An
appropriate order shall accompany this Memorandum Opinion.
aforementioned defects. See Epps, 719 F. Supp. 2d at 13.
23