Cuneo Law Group, P.C ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
THE CUNEO LAW GROUP, P.C., )
)
and )
)
JONATHAN W. CUNEO, )
)
Plaintiffs, )
v. ) Civil Action No. 08-00253 (RBW)
)
JOEL D. JOSEPH, )
)
Defendant. )
______________________________)
Memorandum Opinion
The Cuneo Law Group and Jonathan Cuneo (“the plaintiffs”) initiated this action
for a declaratory judgment against Joel Joseph (“the defendant”) for the alleged material
breach of parties’ settlement agreement. First Amended Complaint for Declaratory
Relief (“Am. Compl.”) ¶¶ 43 -45. The defendant denies breaching the settlement
agreement and has filed a counterclaim seeking, inter alia, a declaration from the Court
that it was in fact the plaintiffs who breached the settlement agreement. First Amended
Counterclaim; Jury Trial Demanded (“Am. Countercl.”) ¶¶ 37-42. Currently before the
Court is the plaintiffs’ motion for summary judgment and the defendant’s cross-motion
for partial summary judgment pursuant to Federal Rule of Civil Procedure 56(c), and the
plaintiffs’ motion to dismiss Counts I, III, IV, V, VI, and VII of the defendant’s
counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6). Upon careful review
of the pleadings filed by the parties, their motions, and all memoranda and exhibits
submitted in support of those motions, for the reasons that follow, the Court will grant
summary judgment to the plaintiffs and deny the defendant’s cross-motion for partial
summary judgment. The Court will also grant the plaintiffs’ motion to dismiss Counts I,
III, IV, V, VI, and VII of the defendant’s counterclaim.
I. Factual Background1
A. The Relationship Between the Parties
The parties’ underlying relationship began in 2001 when the plaintiffs, a law firm
and Mr. Cuneo, who “holds an interest in [the firm,]” initially employed the defendant as
one of the firm’s staff attorneys, Am. Compl. ¶ 12; Verified Answer to the First
Amended Complaint and Counterclaim2 (“Verified Answer”) ¶ 12; Memorandum of
Points and Authorities in Support of Plaintiffs’ Motion for Summary Judgment as to their
Action for Declaratory Judgment and Plaintiffs’ Motion to Dismiss and/or for Summary
Judgment as to Defendant Joseph’s Counterclaims (“Pls.’ Mem. I”) ¶ 2,3 and later as an
independent contractor, Pl.’s Mem. I, Affidavit of Jonathan W. Cuneo (“Cuneo Aff.”) ¶
2. While employed by the plaintiffs, the defendant worked on “the preliminary stages”
of three contingency fee cases, the Gold Train, Leatherman, and Kwikset cases. Pls.’
1
The facts set forth below are either admitted or are not in dispute.
2
The defendant combined his answer and counterclaim into his Verified Answer to the First
Amended Complaint and Counterclaim (“Verified Answer”). The defendant later amended his
counterclaim in his First Amended Counterclaim without amending the Verified Answer. Therefore, when
referring to the defendant’s answer to the plaintiff’s First Amended Complaint for Declaratory Relief, the
Court will reference the defendant’s initial Verified Answer.
3
The plaintiffs filed their initial motion for summary judgment on March 27, 2008; however,
because the defendant filed an amended counterclaim, the plaintiffs filed a new motion for summary
judgment on June 11, 2008. Their new motion and supporting memorandum incorporate the original
arguments advanced in their initial motion and supporting memorandum without further reiteration.
Because the original arguments are incorporated in this manner, the court will have to reference both
memoranda in this opinion and distinguish them by referring to the first submission as “I” and the second
submission as “II.”
2
Mem. I, Cuneo Aff.” ¶ 2; Am. Compl. ¶ 20; Pls.’ Mem. I at 1. The relationship between
the plaintiffs and the defendant began to deteriorate for a variety of reasons and was
ultimately terminated when the defendant filed a lawsuit against the plaintiffs on August
20, 2001 (the “2001 Lawsuit”). Pls.’ Mem. I, Cuneo Aff. ¶ 3 & Exhibit (“Ex.”) A
(Complaint, Joseph v. Cuneo Law Group, P.C., No. 1:01CV01755, Oct. 3, 2001) (“2001
Compl.”). In the 2001 Lawsuit, the defendant alleged, inter alia, that the plaintiffs: (1)
were liable for breach of the employment contract between him and the law firm, and (2)
that the plaintiffs were guilty of unjust enrichment and conversion. Pls.’ Mem. I, Cuneo
Aff. ¶ 3 & Ex. A, (“2001 Compl.”). Furthermore, the defendant demanded payment of
any money that the plaintiffs owed him. Am. Compl. ¶ 15; Verified Answer ¶ 15. The
plaintiffs refused to pay the funds being requested by the defendant because they had
received a garnishment notice from the District of Columbia, which required that any
payment owed to the defendant be delayed.4 Am. Compl. ¶¶ 13-14; Verified Answer ¶¶
13-14. While the 2001 Lawsuit was in litigation, the defendant filed liens in the
plaintiffs’ pending cases and contacted the plaintiffs’ various co-counsel in those cases.
Am. Compl. ¶ 16; Verified Answer ¶ 16. Ultimately, the parties entered into a settlement
agreement on March 15, 2002, resolving the defendant’s 2001 Lawsuit. Pls.’ Mem. I,
Cuneo Aff. ¶ 4 & Ex. B (Agreement of Release) (the “2002 Settlement Agreement”).
4
The defendant objects to Cuneo’s reasoning for withholding payment, asserting that the plaintiffs
were holding “[t]he funds . . . in trust for payment of a health insurance policy for [the defendant] and his
three sons,” and therefore, according to the defendant, “had no right not to pay the insurance premium.”
Verified Answer ¶ 14.
3
B. The 2002 Settlement Agreement
The 2002 Settlement Agreement “provided that [the defendant] was to receive 20
percent (20%) of Cuneo’s net fees, if any, in three (3) then-pending plaintiffs’
contingency fee cases, referred to as the Gold Train Case, the Leatherman Case, and the
Kwikset Case.” Am. Compl. ¶ 20; Verified Answer ¶ 20. The parties included a non-
interference clause in the 2002 Settlement Agreement, which states that “[the defendant]
shall make no attempt to interfere with the pending cases or cases that follow, nor shall
he attempt to file liens or notices of claims, or correspond with the litigants. If [the
defendant] does he has breached the agreement and waives his percentages.” Pls.’ Mem.
I, Cuneo Aff. ¶ 5 & Ex. B (2002 Settlement Agreement). The defendant “also agreed in
writing to ‘release all liens’ and ‘not file any independent fee applications’ and to
‘cooperate’ with [the plaintiffs] ‘reasonably in the prosecution of [the three pending
contingency fee] cases.’” Am. Compl. ¶ 22; Verified Answer ¶ 22.
C. The Defendant’s Alleged Breach of the 2002 Settlement Agreement
The plaintiffs allege that in January 2006, payment was received for the Gold
Train case,5 Am. Compl. ¶ 23, and from those funds the plaintiffs paid and the defendant
accepted $240,895 in accordance with the 2002 Settlement Agreement.6 Pls.’ Mem. I,
5
The defendant states that he believes the plaintiffs received payment in the Gold Train case in
December 2005. Verified Answer ¶ 23.
6
The defendant never disputes the amount that the plaintiffs assert was forwarded to him pursuant
to the 20% he was entitled to receive under the terms of the 2002 Settlement Agreement. Furthermore, the
plaintiffs “withheld $50,000 as a reserve to cover [expenses associated with the disbursement of the
settlement agreement], and paid [the defendant] 20% of [the plaintiffs’] fees after such amount was
withheld.” See Statement of Material Facts as to which there is No Genuine Issue in Support of Plaintiffs’
Opposition to Defendant’s Motion for Summary Judgment as to his Breach of Contract Claim ¶ 12.
According to the defendant, he was told by an individual associated with the plaintiff law firm that he
would receive the withheld funds “within 90 days.” Verified Answer ¶ 24.
4
Cuneo Aff. ¶ 7; Am. Compl. ¶ 24; Verified Answer ¶ 24. However, despite accepting
this payment and in disregard of the 2002 Settlement Agreement, the defendant contacted
the plaintiffs’ co-counsel in the Gold Train case, demanding an additional 20% “finders
fee” for his work on that case. Am. Compl. ¶ 26; Verified Answer ¶ 26, 31; Pls.’ Mem. I,
Cuneo Aff. ¶ 8.7 Upon receipt of the defendant’s demand letter, the plaintiffs’ co-counsel
in the Gold Train case notified the plaintiffs of the defendant’s demand, Pls.’ Mem. I at
2; Cuneo Aff. ¶ 8 & Ex. E (Letter to the defendant from the plaintiffs’ counsel, Jan, 19,
2006.), and the plaintiffs informed the defendant that his conduct constituted a material
breach of the 2002 Settlement Agreement, id. Then, on February 24, 2006, the defendant
filed a complaint against the plaintiffs’ co-counsel seeking one-third of their fees from
the Gold Train case. Pl.’s Mem. I, Cuneo Aff. ¶ 9 & Ex. F (Complaint, Joseph v.
Dubbin, No. 06-20464, Feb. 24, 2006). On December 22, 2006, the case against the
plaintiffs’ co-counsel was dismissed with prejudice, which Joseph appealed. Id., Cuneo
Aff. ¶ 9 & Ex. H (Docket, Joseph v. Dubbin, No. 06-20464). The parties to that lawsuit
then engaged in negotiations, which resulted in a settlement, and the case was dismissed
with prejudice on March 15, 2007. Id.
On February 12, 2008, the plaintiffs “received payment in the Leatherman Case.”
Am. Compl. ¶ 41. The plaintiffs promptly filed the present lawsuit claiming that the
defendant had “lost . . . entitlement to any share [of] the fee in the Leatherman Case” due
to his prior interference in the Gold Train case. Id. ¶ 42. Consequently, pursuant to the
7
The plaintiffs contend that the amount the defendant initially demanded was for an additional
finders fee of 20 %, although the defendant does not explicitly admit that he demanded an amount equal to
20%, he never disputes the plaintiffs’ contention as to the amount. Furthermore, the record reflects that he
did in fact demand an additional finders fee.
5
terms of the 2002 Settlement Agreement, the plaintiffs refused to release any of the
proceeds from the Leatherman case to the defendant on the ground that he “waived his
entitlement to a percentage of the Leatherman fee . . . .” Pls.’ Mem. I, Cuneo Aff. ¶13.
D. The Current Dispute
On February 15, 2008, the plaintiffs filed their initial complaint in this case, and
on February 26, 2008, they filed their amended complaint. After filing an initial answer
and counterclaim on March 5, 2008, on May 22, 2008, the defendant filed an amended
counterclaim and answer asserting claims of legal malpractice; breach of the settlement
agreement; quantum meruit; unjust enrichment; unfair trade practices under the District
of Columbia Consumer Protection Procedures Act; intentional infliction of emotional
distress; and conversion. Am. Countercl. On June 11, 2008, the plaintiffs filed their
motion for summary judgment as to their request for declaratory judgement and their
motion to dismiss or, in the alternative, for motion for summary judgment on the
defendant’s counterclaim. The defendant then filed a memorandum on June 23, 2008, in
opposition to the plaintiffs’ motions and also a separate cross-motion for partial summary
judgment.
II. Legal Analysis
A. The Plaintiffs’ Summary Judgment Motion
To grant a motion for summary judgment under Rule 56(c), this Court must find
that “the pleadings, the discovery, and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and that the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(c). The Court must also view the
evidence in the light most favorable to the non-moving party. Bayer v. U.S. Dept. of the
6
Treasury, 956 F.2d 330, 333 (D.C. Cir. 1992). However, the nonmoving party cannot
rely on “mere allegations or denials . . . but . . . must set forth specific facts showing that
there [are] genuine issue[s] for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986) (citation omitted) (some alterations in original). Therefore, under Rule 56(c), if a
party fails to “establish the existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial,” summary judgment is warranted.
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). However, the party moving for
summary judgment bears the burden of establishing that there is insufficient evidence to
support the non-moving party’s case. Id. at 325.
1. The Plaintiffs’ Breach of the Settlement Agreement Claim
The plaintiffs contend that they are entitled to summary judgment on their
settlement breach claim, arguing that the defendant materially breached the 2002
Settlement Agreement by interfering with the then-pending contingency fee cases, filing
a lawsuit against the plaintiffs’ co-counsel in one of those cases, and corresponding with
the litigants in that case, which violated the terms of the settlement agreement’s non-
interference clause. Am. Compl. ¶¶ 44-45. The defendant responds that he did not
materially breach the 2002 Settlement Agreement because he contacted only “co-
counsel” and not the actual parties. Verified Answer ¶¶ 2, 25-26, 31. He further asserts
that “even if he did [breach the agreement], the paragraph in question [in the 2002
Settlement Agreement] . . . constitute[s] an illegal liquidated damages clause and [is
therefore] invalid.” Verified Answer ¶¶ 2, 31, 42, 44. The Court’s first task is to
determine what the parties intended when they executed the non-interference clause of
the 2002 Settlement Agreement.
7
a. The Terms of the Non-Interference Clause of the 2002
Settlement Agreement
The parties dispute the meaning of the terms litigants and pending contained in
the 2002 Settlement Agreement. The defendant contends the term “litigants” does not
include lawyers and the term “pending” means a case that has not been “settled.”8
Defendant’s Opposition to the Motion for Summary Judgment and the Motion to Dismiss
the Counterclaim and Statement of Points and Authorities in Support of the Motion for
Partial Summary Judgment (“Def.’s Opp’n I”) at 3.9 On the contrary, the plaintiffs argue
that “the term ‘litigants’ was intended to include [both the] parties and their attorneys”
because “[n]one of the defendants in the pending cases were natural persons[,]” as
“[t]hey were the United States and two corporations,” and therefore, the only way the
defendant “could have corresponded with a party defendant would be through its
attorney.” Pls.’ Mem. I at 10. Furthermore, the plaintiffs contend that the term
“pending” includes all cases covered by the settlement agreement, even if a case was
“administratively closed,”10 so long as the settlement remained outstanding and the case
8
Although the defendant never adopts the term administratively closed, it is the Court’s
understanding that the defendant is asserting that once a case has been “settled” and is closed, it is no
longer in a pending status.
9
Like the plaintiffs, see supra at n.2, the defendant filed his initial memorandum opposing
plaintiffs’ motion for dismissal or summary judgment on April 14, 2008. After the plaintiffs filed a new
motion for summary judgment or dismissal, the defendant filed a new memorandum in opposition to that
motion on June 23, 2008, incorporating the arguments made in his original memorandum without actually
further reiterating them. The Court will therefore have to reference both memoranda and will distinguish
them by referring to the first submission as “I” and the second submission as “II.”
10
The case that was the subject of the settlement agreement was also assigned to the judge in this
case at the time of the settlement. Cases are administratively closed by this judge solely for statistical and
case management purposes. Cases in this status usually have been settled but remain under the Court’s
supervision and can be administratively opened in the event problems arise with the settlement and the
Court’s intervention becomes necessary.
8
was still under the Court’s jurisdiction, which was the status of the case the parties had
agreed to settle. Id. at 10-11.
Settlement agreements “are in the nature of contracts.” America v. Preston, 468
F. Supp. 2d 118, 122 (D.D.C. 2006) (quoting Makins v. District of Columbia, 277 F.3d
544, 546-47 (D.C. Cir. 2002) (applying contract law to a settlement agreement dispute)).
Thus, “[t]he enforceability of a settlement agreement is governed by [ ] principles of
contract law.” Village of Kaktovik v. Watt, 689 F.2d 222, 230 & n.62 (D.C. Cir. 1982)
(referring to United States v. ITT Cont’l Banking Co., 420 U.S. 223, 238 (1975)); see
also Lloyd v. Mukasey, 568 F. Supp. 2d 2, 16 (D.D.C. 2008); Simon v. Circle Assocs.,
Inc., 753 A.2d 1006, 1012 (D.C. 2000).
When construing a contract to determine whether an interpretation of its terms is
reasonable, courts “consider[] the intent of the parties entering the agreement and
whether a reasonable person in the position of the parties, knowing the circumstances
surrounding the agreement and the usages that either party knew or should have known,
would find it reasonable.” C&E Servs., Inc. v. Ashland Inc., 498 F. Supp. 2d 242, 265
(D.D.C. 2007). “A court must honor the intentions of the parties as reflected in the
settled usage of the terms they accepted in the contract . . . and will not torture words to
import ambiguity where the ordinary meaning leaves no room for ambiguity.”
Unfoldment, Inc. v. D.C. Contract Appeals Bd., 909 A.2d 204, 209 (D.C. 2006) (internal
citation and quotation marks omitted).
Whether a contract is ambiguous is a question of law. Id. A contract is “not
ambiguous where the court can determine its meaning without any other guid[ance] than
a knowledge of the simple facts on which, from the nature of language in general, its
9
meaning depends.” Wash. Props., Inc. v. Chin, Inc., 760 A.2d 546, 548 (D.C. 2000)
(internal citation and quotation marks omitted). On the other hand, “if there is more than
one interpretation that a reasonable person could ascribe to the contract, while viewing
the contract in context of the circumstances surrounding its making, the contract is
ambiguous.” Gryce v. Lavine, 675 A.2d 67, 69 (D.C. 1996).
Here, the issue of whether the parties intended the terms litigants to include
lawyers and pending to include the implementation stage of the settlement distribution
must be derived from the language of the 2002 Settlement Agreement and what a
reasonable person in the position of the parties would have intended each term to mean.
The pertinent part of the 2002 Settlement Agreement states: “Joel Joseph shall make no
attempt to interfere with the pending case or cases that follow, nor shall he attempt to file
liens or notices of claim, or correspond with the litigants. If he does he has breached the
agreement and waives his percentages.” Pl.’s Mem. I, Cuneo Aff. ¶ 4 & Ex. B (2002
Settlement Agreement).
The plaintiffs’ argument that the parties intended the term “litigants” to also
include the attorneys representing the parties is persuasive. The three lawsuits covered
by the 2002 Settlement Agreement involved class action suits against the United States
and two corporations. Plaintiffs’ Reply in Support of their Motion for Summary
Judgment as to their Action for Declaratory Judgment and Motion to Dismiss and/or for
Summary Judgment as to Defendant Joseph’s Counterclaims (“Pls.’ Reply I”) at 4.11
11
The Court notes that the plaintiffs assert that the three continency fee cases involved the United
States and two corporations, and the defendant never disputes this contention. Furthermore, the plaintiffs
include a copy of the Final Order and Judgment in the Gold Train case, which illustrates that Gold Train
was in fact against the United States. See Pls.’ Mem. I, Cuneo Aff., Ex. C (Final Order and Judgment).
10
Therefore, the only plausible means of corresponding with the defendants would
necessarily have been through their attorneys. Consequently, a reasonable person in the
position of either the plaintiffs or the defendant, all of whom were attorneys, would have
understood that the term litigants included the attorneys representing the parties. The
defendant’s assertion that the term litigants excluded the attorneys, absent any such
exclusionary language, totally lacks credibility.
Additionally, the plaintiffs’ argument that the parties intended the term “pending
cases” to include “administratively closed” cases covered by the 2002 Settlement
Agreement while the settlement remained outstanding is equally persuasive. Pls.’ Mem.
I at 10-11. The context in which the 2002 Settlement Agreement was executed is an
important consideration. See C&E Servs., 498 F. Supp. 2d at 265 (stating that a court
must consider “the intent of the parties entering the agreement and whether a reasonable
person in the position of the parties, knowing the circumstances surrounding the
agreement and the usages that either party knew or should have known, would find [the
term pending cases] reasonable.”) (emphasis added) (citations omitted). Both parties
were aware of the cases that were covered by the agreement, Pl.’s Mem. I, Ex. B (Cuneo
Aff.) ¶ 7 (“The terms set forth in the attached exhibits are part of this release”) & Ex. A
(listing “the Gold Train, Leatherman, and Kwikset cases as well as any directly related
litigation” as the cases covered by the settlement agreement), and there is no indication in
the agreement that some unspecified event would exempt any of these cases from the
agreement’s coverage. Therefore, any reasonable person would interpret the term
pending cases to include all three cases until such time as the conditions of the settlement
agreement were satisfied. The defendant’s efforts to inject non-existent limiting
11
language, specifically that a case that has been settled and closed is no longer “pending,”
Def’s Opp’n I at 3, into the agreement echo the efforts of the plaintiff in Howell ex rel.
D.H. v. District of Columbia and must be rejected for the same reason here. See 522 F.
Supp. 2d 57, 63 (D.D.C. 2007) (noting that “[t]he plaintiff bases her entire breach of
contract argument on language that simply does not appear in the settlement agreement . .
. .”).
In Howell, the court rejected the plaintiff’s claim that the defendant breached a
settlement agreement. Id. While the settlement agreement itself did not include a
specific time frame during which the defendant would provide the agreed-to services, the
notes of the resolution meeting indicated that the defendant would require “at least 90
days” to provide the services. Id. The court stated that, “although the [language in the]
settlement agreement [] ma[de] no mention” or express limitation of the time frame
during which the defendant would provide the services, the court would accept the
“settled usage” of the express terms that the parties memorialized in their meeting, not
the limiting language that the plaintiff alleged. Id. Therefore, the plaintiff could not
inject her proposed limiting language into the agreement.
In this case, the defendant attempts to limit the meaning of the term pending cases
just as the plaintiff in Howell attempted to impose an unexpressed limitation on the
phrase “at least 90-days” in her settlement agreement to mean that after ninety days the
defendant was in breach. Id. The Howell Court rejected the plaintiff’s attempts to
“torture” the agreement’s terms to benefit her reasoning and, instead, “honor[ed]” the
accepted language of the terms of the contract. Id. This Court agrees with the court’s
reasoning in Howell, concluding that the term pending cases, in the face of specific cases
12
being expressly identified in the agreement, leaves no room for any interpretation other
than the parties were referring to the cases identified in the agreement, and that these
cases would remain subject to the terms of the agreement until such time as the
conditions of the agreement were satisfied. Therefore, the Court must “honor the
intentions of the parties as reflected in the settled usage of the terms they accepted in the
contract . . . and will not torture words to import ambiguity where the ordinary meaning
leaves not room for ambiguity.” Id. at 63 (internal citation and quotation marks omitted,
emphases added).
b. Did the defendant’s actions constitute a material breach of
the 2002 Settlement Agreement?
The plaintiffs argue that the defendant materially breached the 2002 Settlement
Agreement by “deliberately” interfering with the Gold Train case despite repeated
warnings by the plaintiffs. Pls.’ Mem. I at 10. The defendant contends that he did not
breach the 2002 Settlement Agreement, but that even if he did, “such breach was minor
and did not substantially harm [the] plaintiff[s].” Am. Countercl. ¶ 40.
If the defendant engaged in conduct that constituted a material breach of the 2002
Settlement Agreement, conduct that “go[es] to the essence and frustrate[s] substantially
the purpose for which the contract was agreed to by the injured party,” then under the
terms of the settlement agreement, he is not entitled to any payments provided by the
agreement. Draim v. Virtual Geosatellite Holdings, Inc., 522 F.3d 452, 454-55 (D.C. Cir.
2008) (quoting Keefe Co. v. Americable Int’l, Inc., 755 A.2d 469, 475 (D.C. 2000).
“[W]hether a material breach has occurred is generally a question of fact[]” unless “there
is only one reasonable conclusion,” with the result being that the “court must address
13
what is ordinarily a factual question as a question of law.” 23 Williston on Contracts §
63:3 (4th ed. 2009); see also America, 468 F. Supp. 2d at 122.
In determining whether a material breach has occurred, the Court must consider:
the extent to which [the] plaintiff[s] will be deprived of the benefit which
[they] reasonably expected under the contract; the extent to which the
plaintiff[s] can be adequately compensated for the part of that benefit of
which [they] will be deprived; the extent to which the defendant will
suffer forfeiture; the likelihood that the defendant will cure his failure,
taking account of all the circumstances including any reasonable
assurances; and the extent to which the behavior of the defendant
comports with standards of good faith and fair dealing.
America, 468 F. Supp. 2d at 125 (citing Greyhound Lines, Inc. v. Bender, 595 F. Supp.
1209, 1224 (D.D.C. 1984)). The Court may also consider the extent to which “the
contract has been performed at the time of the breach[,]” whether the breach was willful
rather than “by negligence or by extraneous circumstances[,]” and whether “the breach
was quantitatively serious.” Greyhound, 595 F. Supp. at 1224 (internal citation and
quotation marks omitted).
Here, the question that must be answered is whether the defendant’s
communication with the plaintiffs’ co-counsel went to the essence of the agreement, and
thus, interfered with or substantially frustrated the purpose for which the 2002 Settlement
Agreement was reached. The plaintiffs contend that the non-interference clause was
added to the 2002 Settlement Agreement due to the defendant’s “prior conduct,” which
included filing liens in other cases in which the plaintiff law firm was involved as
counsel. Pls.’ Mem. I at 8. The defendant disputes the plaintiffs’ contention, but does
not offer an alternative argument as to why the parties agreed to include the non-
interference clause. Def.’s Opp’n I at 1. The Court finds that the plaintiffs’ position is
14
the only reasonable explanation for the inclusion of the clause in the absence of any other
explanation provided by the defendant. Moreover, the prior history between the parties
also supports the plaintiffs’ position, illustrated by the fact that in 2001 the plaintiffs took
exception to the defendant’s behavior at that time, which consisted of the defendant filing
liens and contacting the plaintiffs’ co-counsel in their pending cases. Am. Compl. ¶ 16.
To prevent the defendant from engaging in similar behavior, the parties entered into the
2002 Settlement Agreement. See Pls.’ Mem. I, Cuneo Aff. ¶ 5. These circumstances
logically support the plaintiffs’ position that the non-interference clause was included in
the settlement agreement because of the defendant’s behavior during the course of the
prior lawsuit between the parties. As further support for the plaintiffs’ position, the last
sentence in paragraph six of the 2002 Settlement Agreement makes it strikingly clear that
the non-interference requirement was essential to the continued validity of the 2002
Settlement Agreement. Pls.’ Mem. I at 6. Specifically, the language states that if the
defendant attempted to interfere with the pending cases, attempted to file liens or notices
of claims, or corresponded with the litigants in the cases that were covered by the
agreement, “he [will have] breached the [2002 Settlement] Agreement and waiv[ed] his
percentages” of the fees agreed to in the agreement Id.
The plaintiffs assert that the defendant improperly interfered in the Gold Train
case, Pls.’ Mem. I, Cuneo Aff. ¶ 9, when he deliberately contacted their co-counsel on
several occasions despite the language of the 2002 Settlement Agreement prohibiting
such behavior. As noted earlier, the defendant demanded a 20% fee from the plaintiffs’
co-counsel in one of the three cases covered by the settlement agreement for work he
performed in that case even though he had already received $240,895 in accordance with
15
the settlement agreement. Pls.’ Mem. I at 2. The defendant was made aware by the
plaintiffs that his actions were not in compliance with the 2002 Settlement Agreement,
but he nonetheless continued to communicate with the plaintiffs’ co-counsel,
disregarding multiple letters from the plaintiffs informing him that he was in material
breach of the 2002 Settlement Agreement by doing so. Pls.’ Mem. I, Cuneo Aff., Ex. E.
(Letter from the plaintiffs’ counsel to the defendant, Feb. 10, 2006.)
In America, the court found that the defendant breached a settlement agreement
which contained a provision stating that “all inquiries [about the plaintiff] from
prospective employers received by [the defendant’s agency] shall be referred to and
handled by the Agency’s Office of Human Resources.” 468 F. Supp. 2d at 123. The
court found that the defendant breached the settlement agreement when two of the
defendant’s employees failed to refer calls inquiring about the plaintiff to the human
resources department “as required by . . . the settlement agreement.” Id. at 124. The
court noted that “the provision [at issue] requir[ed] an employee of the defendant to have
no substantive communications with prospective employers, and to immediately forward
calls from such persons to its Human Resources Department.” Id. The Court further
pointed out that “[t]here [was] no question that [the employees] reasonably believed that
the caller [who was making an inquiry about the plaintiff] was in fact a prospective
employer and they still did not comply with that requirement.” Id. The court, therefore
held that the defendant had breached the settlement agreement.
Here, the settlement agreement contains express language forbidding the
defendant from “fil[ing] any independent fee applications, and [failing to] . . . cooperate
with the Cuneo Law Group reasonably in the prosecution of these cases,” or “mak[ing]
16
[any] attempt to file liens or notices of claim, or correspond with the litigants,” Pls.’
Mem. I, Cuneo Aff., Ex. B, just as the settlement agreement in America prohibited the
defendant’s agency from failing to refer inquiries about the plaintiff to the agency’s
human resources department. Moreover, whereas the defendant in America only had
“reasonabl[e] belie[f]” that the defendant was in breach of the settlement agreement, 468
F. Supp. 2d at 124, the plaintiffs in this case actually warned the defendant that he was
breaching the settlement agreement. Pls.’ Mem. I, Cuneo Aff. ¶ 8. Thus, the Court is
compelled to find that the defendant materially breached the 2002 Settlement Agreement.
The magnitude of the breach cannot be considered minor because the defendant’s
conduct went further than simply communicating with litigants, as he subsequently filed
a claim against the plaintiffs’ co-counsel in the Gold Train case in the federal District
Court in Miami, suing not for just 20% as he previously demanded on January 10, 2006,
from the plaintiffs’ co-counsel in that case, Pls.’ Mem. I, Cuneo Aff. ¶ 8, but rather “1/3
of their fees.” Pls.’ Mem. I at 2. And when the defendant filed suit against the plaintiffs’
co-counsel, “[t]o avoid further interference and disruption to the Gold Train case,” the
plaintiffs “agreed to indemnify [their] co-counsel against [the defendant’s] suit.
Statement of Material Facts as to which there is No Genuine Issue in Support of
Plaintiffs’ Opposition to Defendant’s Motion for Summary Judgment as to His Breach of
Contract Counterclaim (“Pls.’ Stmt.”) ¶ 9. [However, the plaintiffs also] retained counsel
to defend the suit in Miami[, and] Miami counsel succeeded twice in having [the
defendant’s] suit dismissed for failure to state a claim, the second time with prejudice.
Id. [The plaintiffs] ultimately paid a sum of money to settle the case on behalf of [their]
co-counsel.” Id. As a result of the defendant pursuing the Miami litigation, the plaintiffs
17
incurred “out-of-pocket costs, including the settlement, but excluding the time spent and
the plaintiffs’ overhead costs, were in excess of $35,000.” Id. And in addition to the
plaintiffs’ monetary expenses, they expended nearly one year defending against the
Miami case. Pl.’s Mem. I, Cuneo’s Aff. ¶ 9 & Ex. H (Docket, Joseph v. Dubbin, No.
1:06-cv-20464). These expenditures of time and money were exactly what the plaintiffs
sought to avoid through the execution of the 2002 Settlement Agreement. Nonetheless,
the defendant insists that the Court should disregard his actions, even if they amounted to
a breach of the settlement agreement, and focus on the extent of the harm he will suffer if
the Court enforces the 2002 Settlement Agreement’s forfeiture clause.
Although the defendant disagrees, Def.’s Opp’n I at 5, the extent of his loss
resulting from the forfeiture provided in the settlement agreement is but one of eight
factors that the Court may consider when assessing the materiality of a breach. See
America, 468 F. Supp. 2d at 125 (delineating factors that a court is to consider when
determining whether there has been a material breach of an agreement). Accordingly,
while the defendant’s loss from the forfeiture would exceed $400,000, this factor alone
is insufficient to defeat the plaintiffs’ forfeiture claims. See S. Brooke Purll, Inc. V.
Vailes, 850 A.2d 1135, 1139 (D.C. 2004) (rejecting the trial court’s determination that a
forfeiture clause was an invalid penalty because it was completely disproportionate to the
contractor’s actual loss and instead finding that the “burden was on the owner”of the
house being renovated to show that the clause was “disproportionate to the contractor’s
anticipated damages in the event of a breach”)(emphasis added). This is particularly true
in this case because any loss sustained by the defendant would have been occasioned by
his own conduct. As previously demonstrated, the defendant knowingly and deliberately
18
acted in a manner that was directly at odds with the non-interference clause of the 2002
Settlement Agreement. While courts will not enforce forfeiture provisions that constitute
a penalty, such provisions will be upheld where it is otherwise appropriate to do so, as the
Neuffer v. Bakery & Confectionary Workers International Union of American case
demonstrates. 307 F.2d 671, 671-73 (D.C. Cir. 1962). In Neuffer, a plaintiff
unsuccessfully sought the resumption of pension payments from his union after violating
a provision under which individuals forfeited all benefits upon being found in violation
of the Union’s constitution. Id. The court in Neuffer held that the plaintiff was not
entitled to his pension because he had voluntarily brought himself within the terms of an
express forfeiture clause, noting that while a trivial offense might not justify complete
forfeiture, the plaintiff’s efforts to induce the Union’s members to join a rival union did
not qualify as trivial. Id. at 672-73. Similarly, in this case, the defendant’s anti-forfeiture
argument fails because he voluntarily brought himself within the terms of the forfeiture
clause and his non-compliant conduct was not trivial; in fact, it frustrated a critical
component and objective of the 2002 Settlement Agreement.
In addition, the defendant’s behavior was not a breach based on a mere
technicality; rather, his behavior caused the plaintiffs to spend more than $35,000
defending against the Miami litigation, which took nearly a year to resolve. On this
record, the Court can only conclude that the plaintiffs were deprived of a critical benefit
for which they had bargained when they entered into the settlement agreement with the
defendant and that the defendant’s actions therefore amounted to a material breach of the
2002 Settlement Agreement.
19
c. Was the non-interference clause a liquidated damages
provision?
The defendant relies on District Cablevision Ltd. Partnership v. Bassin, 828 A.2d
714 (D.C. 2003), for the proposition that “voiding [his] $460,000 fee [would]
consititute[] an illegal penalty” because the amount “bears no reasonable relationship to
the actual costs incurred by [the plaintiffs],” which he contends at most totaled
“$12,500.” Def.’s Opp’n I at 5. The plaintiffs argue, on the other hand, that the 2002
Settlement Agreement is not an unlawful liquidated damages penalty because “[i]t states
no amount, percentage, or other formula. It does not state that [the defendant] owes [the
plaintiffs] anything in the event of a breach.” Pls.’ Mem. I at 12.
The defendant’s reliance on Bassin is misplaced. Bassin states, as the defendant
accurately quotes in his opposition memorandum, that a penalty occurs:
when a contract specifies a single sum in damages for any and all breaches
even though it is apparent that all are not of the same gravity, the
specification is not a reasonable effort to estimate damages; and when in
addition the fixed sum greatly exceeds the actual damages likely to be
inflicted by a minor breach . . . 828 A.2d at 724 (citation and internal
quotation marks omitted) (emphasis added).
However, the 2002 Settlement Agreement does not specify a single sum in damages that
the plaintiff would receive if the agreement was breached; instead, the settlement
agreement simply states that the defendant will forfeit his percentages if he does not
comply with paragraph six (the non-interference clause) of the 2002 Settlement
Agreement. In addition, as indicated above, the breach occasioned by the defendant’s
conduct was not minor, but to the contrary was significant. Therefore, the Bassin
proscription is not applicable to the facts presented in this case.
20
As previously noted, part of the 2002 Settlement Agreement states that “Joseph
shall make no attempt to interfere with the pending cases or cases that follow, nor shall
he attempt to file liens or notices of claim, or correspond with the litigants. If he does he
has breached the agreement and waives his percentages.” Pls.’ Mem. I, Cuneo Aff., Ex.
B. In assessing whether a provision in a contract amounts to a liquidated damages
clause, the Court’s first inquiry is whether the clause serves as a remedy for the breach of
the contract. See Red Sage Ltd. P’ship v. Despa Deutsche Sparkassen Immobilien-
Anlage-Gasells-Chaft MBH, 254 F.3d 1120, 1125 (D.C. Cir. 2001). To determine if a
contractual clause is a remedy, District of Columbia law requires that courts look to the
written language of the contract which governs the dispute, “unless it is not susceptible of
a clear meaning.” Id. (internal citation and quotation marks omitted).
In Red Sage, a District of Columbia restaurant sought a declaration from the
court that its landlord breached an exclusive-use contract that was part of its lease. Id. at
1122. The restaurant alleged that its landlord breached the agreement by leasing space to
a specialty cake shop in the same building. Id. Furthermore, the restaurant claimed that
another clause in the lease agreement reduced its monthly rent by 50% during the period
while the competing-use business operated on the premises. Id. at 1123. Specifically,
the clause in question stated that “rent . . . shall be abated” by 50% if the landlord
violated his obligations under the contract. Id. Additionally, the contract stated that the
rent abatement “shall not limit any other remedies which [the t]enant may have against
[the l]andlord for violating its obligations under this Section.” Id. (emphasis added).
While the restaurant claimed that this was not a liquidated damages clause, and was
instead a readjustment of its rent based on changed conditions, the court concluded that
21
the language created a liquidated damage clause because it indicated the parties’ intent to
provide a remedy in the event the lease was breached as a result of space in the building
being leased to a competing business. Id. at 1125
As in Red Sage, the language used in this case in the 2002 Settlement Agreement
indicates that the non-interference clause was intended to be a liquidated damages clause.
To reiterate, the clause reads, in part, that “Joseph shall make no attempt to interfere with
the pending cases or cases that follow, nor shall he attempt to file liens or notices of
claim, or correspond with the litigants. If he does he has breached the agreement and
waives his percentages.” See Pls.’ Mem. I at 6 (emphasis added) (citing 2002 Settlement
Agreement ¶ 6). The clause in Red Sage used nearly identical language, such as use of
the terms “shall be” and “shall not.” 254 F.3d at 1125. The language in the settlement
agreement indicates that a remedy has been provided in the event of a breach, i.e. the
defendant “waives his percentages.” Pls.’ Mem. I at 6. While the plaintiffs argue that
the non-interference clause does not state an “amount, percentage[,] or other formula”
and does not state that the defendant owes the plaintiffs “anything in the event of a
breach,” Pls.’ Mem. I at 12, there is no requirement in the law that such clauses do so in
order to qualify as a liquidated damages clause. Moreover, the non-interference clause
does refer to percentages that the defendant would have received in the three cases if
there had been no breach of the settlement agreement. As a result, the non-interference
clause was designed to act as a remedy to redress the types of breaches designated in the
clause. Therefore, the non-interference clause is a liquidated damages clause, and the
Court must now determine whether the clause is enforceable.
22
d. Is the non-interference clause enforceable?
District of Columbia “jurisprudence has been tolerant of liquidated damages
clauses unless they are demonstrated unreasonable.” S. Brooke Purll, Inc., 850 A.2d at
1138. Thus, under District of Columbia law, contractual clauses providing for liquidated
damages in the event of a contractual breach are unenforceable only when the remedy
provided is deemed a penalty. See Dist. Cablevision Ltd. P’ship v. Bassin, 828 A.2d 714,
724 (D.C. 2003) (holding that a liquidated damages clause specifying a single sum for all
contractual breaches that bore no “reasonable” relationship to actual damages was
unenforceable as a penalty); Red Sage, 254 F.3d at 1126 (citing Davy v. Crawford, 147
F.2d 574, 575 (D.C. Cir. 1945) (holding that while “parties to a contract may agree in
advance to a sum certain which shall be forfeited as liquidated damages for breach of the
contract,” if that “agreement is for a penalty it is void”)).
Courts examine a number of variables when assessing whether a particular
liquidated damages clause amounts to a penalty. For instance, a liquidated damages
clause will not be deemed a penalty if the contracting parties reasonably believed that
any damages arising from the breach of the contract would be difficult to ascertain, and
thus determined that such a provision was a “reasonable protection against uncertain
future litigation.” Order of Am. Hellenic Educ. Progressive Ass’n v. Travel Consultants,
Inc., 367 A.2d 119, 126 (D.C. 1976); see also Red Sage, 254 F.3d at 1127 (citing Davy,
147 F.2d at 575); Barnette v. Sayers, 289 F. 567, 570 (D.C. Cir. 1923) (“Uncertainty in
amount and difficulty of ascertainment of damages are regarded as supporting the view
that a contract provides for liquidated damages rather than a penalty . . . .”). Also, “[so]
long “as a liquidated sum bears a reasonable relation to the damages foreseeable at the
23
time of contracting the clause is enforceable.” S. Brooke Purll, Inc., 850 A.2d at 1138
(internal brackets omitted) (quoting Christacos v. Blackie’s House of Beef, 583 A.2d
191, 197 (D.C. 1990) (citing Burns v. Hanover Ins. Co., 454 A.2d 325, 327 (D.C.
1982))); see also Ashcraft & Gerel v. Coady, 244 F.3d 948, 955 (D.C. Cir. 2001) (citing
Restatement (Second) of Contracts § 356(1) (1981)) (explaining that damages may be
liquidated in a contract “but only at an amount that is reasonable in [] light of the
anticipated or actual loss caused by the breach . . . .”)); Davy, 147 F.2d at 575 (“damages
stipulated in advance should not be more than those which at the time of execution of the
contract can be reasonably expected from its future breach . . . . ”). Further, if the
liquidated damages clause was “the product of fair arm’s length bargaining, particularly
between sophisticated parties, . . . [greater] latitude [is] afforded the contracting parties to
argue as they wish on the remedies for a breach.” Dist. Cablevision, 828 A.2d at 723-24
(citations omitted); Red Sage, 254 F.3d at 1129 (noting that under District of Columbia
law, courts “are generally reluctant to disturb terms agreed upon by [sophisticated]
parties”). Thus, if a liquidated damages clause bears no reasonable relation to
foreseeable damages, does not serve as a reasonable protection against uncertain future
litigation, or “appears” to make the “default of the party against whom it runs more
profitable to the other party than performance would be,” then the clause “will be void as
a penalty.” Order of Am. Hellenic Educ. Progressive Ass’n, 367 A.2d at 126.
In Red Sage, the Circuit Court held the liquidated damages clause enforceable
under District of Columbia law, reasoning that at the time the parties signed the
agreement they could have reasonably believed that damages arising from the breach
would be difficult to ascertain due to the fact that isolating lost sales caused entirely by a
24
competitor is difficult to determine. 254 F.3d at 1127. Moreover, the court found that
the 50% rent abatement was not “plainly without reasonable relation to any probable
damage which may follow a breach.” Id. (quoting Davy, 147 F.2d at 575). The court
reasoned that because “the rent abatement provision” encompassed “a wide variety of
competing uses” that could constitute a breach, both parties could have reasonably
anticipated that damages might be higher or lower than 50% of the monthly rent, and
therefore ultimately agreed upon a single formula intended to capture “a wide range of
possible damages.” Red Sage, 254 F.3d at 1128. The Circuit Court determined that such
a design was not “unreasonable as a matter of law.” Id. The court also found that
because of the uncertainty of potential future damages, “the provision [did] not guarantee
Red Sage a certain windfall in case of a breach.” Id. Furthermore, because the contract
was negotiated by sophisticated parties, which the Circuit found “perhaps most
important,” id. at 1129, it concluded that “the rent abatement provision in Red Sage’s
lease [was] enforceable as a matter of law,” id. at 1130.
In Ashcraft & Gerel, 244 F.3d at 949, the plaintiff law firm sued a former
employee, an attorney, for a breach of his employment contract and sought damages
under the liquidated damages clause of the plaintiff’s employment contract, id. at 949,
which totaled $400,000 at the time of the alleged breach, id. at 950. The court rejected
the defendant’s challenge to the reasonableness of the provision, in part because it was
“triggered” only upon a “material” breach, and also because the amount recoverable
under the provision was not deemed unreasonable under District of Columbia law, given
the fact that it increased every year in conjunction with the defendant’s increasing value
to the firm. Id. at 955. The court took note of the fact that the plaintiff was not “only the
25
head of the [firm’s] Boston office, but . . . he was [also] the only lawyer in that office
with substantial experience in the firm’s Boston practice areas[, and c]onsequently [] the
firm [could] reasonably argue that his termination for cause would likely be disruptive
and create both considerable losses and expenses while the firm sought to replace him[,
which] a firm partner [estimated would result in lost] business opportunities ... [of]
between $1 million and $1.5 million.” See id. (internal citation and quotation marks
omitted).
In S. Brooke Purll, Inc., a contractor filed a counterclaim seeking liquidated
damages pursuant to a contract clause, which stated that in the event of a breach,
liquidated damages would be 35% of the full contract price. 850 A.2d at 1136. In
holding this liquidated damages provision enforceable, the District of Columbia Court of
Appeals found that the percentage in the provision was not disproportionate to the actual
damages, which, according to the evidence, was within 1.67% to 10% of the contractor’s
expected profit. Id. at 1139.
Similarly, the District of Columbia Court of Appeals held in Order of American
Hellenic that a liquidated damages provision was enforceable because of the difficulty in
determining the amount of damages that would be sustained in the event of a breach, and
that the “reasonable estimate of the [plaintiff’s] net profit” approximated the minimum
sum of $100,000 selected by the parties as the liquidated damages amount was close in
value to what the actual damages may have been. 367 A.2d at 127.
All of the cases discussed above support the conclusion that the non-interference
clause in the parties’ 2002 Settlement Agreement is an enforceable liquidated damages
clause. Just as damages were too difficult to assess in Red Sage, S. Brooke Purll, Inc.,
26
and Order of American Hellenic when the agreements in those cases were executed, the
extent of the damages that would be occasioned by a breach resulting from the
defendant’s interference with the three then-pending class action lawsuits would have
been difficult, if not impossible to assess when the settlement agreement was executed
for several reasons. First, before a settlement of those three lawsuits was attained, it
would have been entirely speculative to assume that any funds would be acquired, and if
so, in what amount, as the fees the plaintiffs would have been awarded and the share the
defendant would receive hinged entirely on the outcome of the three unresolved
contingency fee cases. Second, as the non-interference clause itself recognized, the
nature of any breach could occur in a number of different ways, e.g., any “attempt to
interfere with the pending cases or cases that follow,” any “attempt to file liens or notice
of claims,” or “correspond with the litigants.” Pl.’s Mem. I, Cuneo Aff. ¶5 & Ex. B
(2002 Settlement Agreement). And, the nature of a breach could quite possibly have
varying degrees of impact on the settlement process and therefore the prospects of
whether settlements in the pending cases would occur, and if so, at what amounts.
Assessing these variables before they occurred with any degree of accuracy would have
amounted to nothing more than a game of chance at best.
Additionally, the defendant’s loss of his percentage of the legal fees bore a
reasonable relation to the potential damages the plaintiff could suffer as a result of a
breach caused by the defendant. If the defendant’s interference led to an unfavorable
outcome in any of the pending cases, then obviously the plaintiffs would incur a
monetary loss, and considering the fees ultimately acquired by the plaintiffs in two of the
cases–$3.85 million in the Gold Train case, id., Cuneo Aff. ¶ 7, and $2,190,982 in the
27
Leatherman case, id. ¶¶ 11-12–it is evident that the damages the plaintiffs would
potentially sustain could have far exceeded the amounts provided by the liquidated
damages provision. The District of Columbia Court of Appeals in Ashcraft & Gerel and
Order of American Hellenic concluded that the liquidated damages provisions in those
cases provided reasonable estimations of the actual damages that would be incurred, and
the facts of this case provide no basis to depart from those rulings. Not only has the
defendant failed to make any showing that the liquidated damages provision did not
follow the guidance provided in Red Sage and the legal authority upon which it relied,
but his argument that the actual damages sustained by the plaintiffs was minimal, as
compared to the actual liquidated damages amount, is irrelevant. The fact remains that
the extent of the damages could not be reasonably calculated when the settlement
agreement was executed and the plaintiffs were deprived of a material benefit they
bargained for, causing them to expend more than $35,000 and considerable time
defending against and resolving the defendant’s interfering behavior.
Finally, while the defendant cites District Cablevision as support for his position
that the non-interference clause is unenforceable, the ruling in that case actually
undermines his position. In District Cablevision, two consumers on behalf of a class of
cable television subscribers brought an action against the District Cablevision Limited
Partnership claiming they were charged excessive late payment fees of $5.00 each for
failure to make timely monthly payments for their television service. 828 A.2d at 717-
18. The late fee was originally $2.00, but in 1990, District Cablevision “unilaterally”
increased the fee to $5.00 without any analysis or estimate to determine the actual
damages incurred as a result of customers failing to pay their bills on time. Id. at 718.
28
Rather, the increase was implemented “simply to ‘motivate’ subscribers to pay in a
timely fashion.” Id. On appeal, the court found that based on the evidence presented
during the trial, a jury could reasonably find that the “charge[s were] arbitrary, excessive,
[and] designed . . . [to take] advantage of many thousands of individual customers,”
effectively “ma[king] their cumulative defaults millions of dollars more profitable to
[District Cablevision] than their timely performance would have been.” Id. at 725.
Moreover, the increase having been unilaterally imposed by District Cablevision, the
court found that it was not the product of fair arm’s length bargaining between
sophisticated parties. Id. at 723-24. In contrast to what occurred in District Cablevision,
here, as lawyers and a law firm, the parties were sufficiently sophisticated to appreciate
what they were agreeing to when the 2002 Settlement Agreement was executed, and the
non-interference clause of the settlement agreement was not unilaterally imposed by the
plaintiffs, but rather was the product of negotiation between the parties. Thus, there can
be no claim by the defendant that the clause was the product of unfair bargaining.
Accordingly, District Cablevision actually supports the conclusion that the non-
interference clause in the 2002 Settlement Agreement is an enforceable liquidated
damages provision.
B. The Plaintiffs’ Motion to Dismiss the Defendant’s Counterclaims
The defendant’s counterclaim asserts the following claims: legal malpractice
(Count I)12, breach of the settlement agreement (Count II), quantum meruit (Count III),
12
In the defendant’s amended counterclaim he titles his “first cause of action” as a claim for
“Breach of Obligations of Attorney to Client.” Am. Countercl. ¶ 30. However, in the parties subsequent
filings, they both refer to the claim as one for legal malpractice; therefore, the Court will take the liberty of
(continued...)
29
unjust enrichment (Count IV), unfair trade practices under the District of Columbia
Consumer Protection Procedures Act (the “D.C. Consumer Act”)(Count V), intentional
infliction of emotional distress (Count VI), and conversion (Count VII). The plaintiffs’
Federal Rules of Civil Procedure Rule 12(b)(6) motion seeks dismissal of all of these
claims.
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests whether
a party asserting a claim has properly stated a claim upon which relief may be granted.
Woodruff v. DiMario, 197 F.R.D. 191, 193 (D.D.C. 2000). For a counterclaim to survive
a Rule 12(b)(6) motion, it need only provide “a short and plain statement of the claim
showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), and accords the
opponent “fair notice of what the claim is and the grounds on which it rests,” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). “Although detailed
factual allegations are not necessary to withstand a Rule 12(b)(6) motion to dismiss, to
provide the grounds of entitlement to relief, a [party asserting a claim] must furnish more
than labels and conclusions or a formulaic recitation of the elements of a cause of
action.” Hinson ex rel N.H. v. Merritt Educational Ctr., 521 F. Supp. 2d 22, 27 (D.D.C.
2007) (internal quotation marks omitted) (quoting Twombly, 550 U.S. at 555). Or, as the
Supreme Court more recently stated, “[t]o survive a motion to dismiss, a [counterclaim]
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949 (2009)
(quoting Twombly, 550 U.S. at 570). Furthermore, a claim is facially plausible “when [a
12
(...continued)
continuing to address the claim as both parties have.
30
party asserting a claim] pleads factual content that allows the court to draw a reasonable
inference that the [opposing parties are] liable for the misconduct alleged.” Id. (quoting
Twombly, 550 U.S. at 556). Moreover, under Rule 12(b)(6), the Court “must treat the
[counterclaim’s] factual allegations as true and must grant [the party asserting a claim]
the benefit of all reasonable inferences [that can be derived] from the facts alleged.”
Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006) (internal quotation and citation
omitted). Finally, factual challenges are not permitted under Rule 12(b)(6); instead, the
Court may only consider the factual allegations set forth in the [counterclaim], any
documents attached as exhibits thereto (or incorporated therein), and matters subject to
judicial notice in weighing the merits of the motion. EEOC v. St. Francis Xavier
Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997). The Court’s focus is therefore
restricted to the facts as alleged by the [party asserting a claim], which must be sufficient
“to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555.
The plaintiffs argue that the 2002 Settlement Agreement precludes the defendant
from pursuing his counterclaims for legal malpractice (Count I), quantum meruit (Count
III), and unjust enrichment (Count IV). Pls.’ Mem. I at 14-16. The defendant responds,
arguing that the “[p]laintiffs’ breach of the settlement agreement reopens the underlying
claims.” Def.’s Opp’n I at 5. In addition, the plaintiffs assert that the defendant has
failed to state viable claims with regards to his unfair trade practices (Count V),
intentional infliction of emotional distress (Count VI), Pls.’ Mem. I at 17-20, and
conversion (Count VII) claims, Memorandum of Points and Authorities in Support of
Plaintiffs’ Motion for Summary Judgment and/or to Dismiss Defendant Joseph’s First
Amended Counterclaim (“Pls.’ Mem. II”) at 5. The defendant counters this point by also
31
arguing stating that the plaintiffs “breach of the settlement agreement reopens the
underlying claims.” Def.’s Opp’n I at 5.13
The defendant submitted a copy of the 2002 Settlement Agreement with his
Verified Answer, see Verified Answer, Exs. 1 (Exhibit A, 2002 Settlement Agreement)
& 2 (Agreement of Release, 2002 Settlement Agreement),14 and he asserts a breach of
contract claim, which arises out of that agreement. Am. Countercl. ¶¶ 25, 37-42.
Therefore, consideration of the 2002 Settlement Agreement for the purpose of addressing
the plaintiffs’ dismissal motion will not convert the motion into one for summary
judgment under Federal Rule of Civil Procedure 56(c). E.E.O.C., 117 F.3d at 624.
Accordingly, the Court will consider the parties’ 2002 Settlement Agreement in
addressing the plaintiffs’ Rule 12(b)(6) challenge.
1. Is the 2002 Settlement Agreement a bar to the defendant’s legal
malpractice, quantum meruit, and unjust enrichment claims?
The 2002 Settlement Agreement stems from a lawsuit the defendant in this action
brought in this Court against the plaintiffs in 2001 seeking compensation for work he
performed in the same three contingency fee cases while employed as a staff attorney,
and later as a contract attorney, by the plaintiffs. In that lawsuit, the defendant asserted
claims for, inter alia, “breach of contract, quantum meruit, unjust enrichment, and
promissory estoppel. Pls.’ Mem. I, Cuneo Aff., Ex. A (2001 Compl.) at 1. As noted
13
The defendant also asserts that his “claim regarding malpractice is not time barred as [he]
continues to suffer harm.” Id. For the reasons expressed later, infra at 33 n.15, the Court need not address
the defendant’s statute of limitations argument because he is foreclosed from pursuing his malpractice
claim under the terms of the 2002 Settlement Agreement.
14
The Court has taken the liberty of assigning numbers to the defendant’s exhibits in his
opposition memorandum and to the exhibits in his Verified Answer as he has failed to do so.
32
above, in 2002, the parties reached an agreement settling those claims (the 2002
Settlement Agreement), and providing for the defendant to receive twenty percent of the
net fees the plaintiffs acquired in the three pending contingency fee cases. Further, the
defendant agreed to release all liens, not file any independent fee applications, not to
make contact with the litigants in the three pending cases, and to cooperate with the
plaintiffs in the prosecution of the those cases. As the Court has already explained, the
defendant breached the parties’ settlement agreement, and moreover, as will be
explained later, infra at 38-39, the defendant, having first breached the settlement
agreement, cannot maintain his breach of contract claim against the plaintiffs in this
action.
Earlier, the Court noted that “[a]n agreement to settle a legal dispute is a contract.
Each party agrees to extinguish those legal rights it sought to enforce through litigation
in exchange for those rights secured by the contract.” Green v. Small, No. Civ.A.
05-1055(ESH), 2006 WL 148740 *8 (D.D.C. Jan. 19, 2006) (quoting Village of
Kaktovik, 689 F.2d at 230). If a party breaches the settlement agreement, “the non-
breaching party may choose either to enforce the agreement or to rescind it and sue on
the original claims.” Hazel v. WMATA, Civ.A. No. 02-1375 (RWR), 2006 WL
3623693 *9 (D.D.C. Dec. 4, 2006).
Here, when the defendant agreed to resolve his case by entering into the 2002
Settlement Agreement with the plaintiffs, he forfeited his legal right to a determination
on the merits of his legal malpractice, quantum meruit, and unjust enrichment claims.15
15
Specifically, the defendant and the plaintiffs agreed to “make a full and final settlement and
(continued...)
33
Green, 2006 WL 148740 *8. In exchange, the defendant received the plaintiffs’ binding
promise to pay him 20% of the net fees they received from the three pending
contingency fee cases referenced in the agreement, provided the defendant did not
breach the 2002 Settlement Agreement. Moreover, the 2002 Settlement Agreement
clearly bars the defendant from bringing these claims. The plain language of the
agreement states that: “[t]he parties intend to make a full and final settlement and release
of any and all claims of any type whatsoever that they do or may have against each other
. . . .” Pls.’ Mem. I, Cuneo Aff. ¶ 4 & Ex. B (2002 Settlement Agreement). The
agreement further states that “[t]he parties release each other of any and all claims of any
type whatsoever including but not limited to the civil action in the civil division of the
United States District Court for the District of Columbia.” Id. Thus, the 2002
Settlement Agreement, by its own terms, precludes the Court from entertaining the
defendant’s legal malpractice, quantum meruit, and unjust enrichment counterclaims.
Moreover, contrary to the defendant’s position, nothing the plaintiffs have done merits a
different result.
15
(...continued)
release of any and all claims of any type whatsoever that they do or may have against each other and they
acknowledge that there is good and valuable consideration for this Agreement.” Pls.’ Mem. I, Cuneo Aff.,
Ex. B. (emphasis in original). Clearly, the claims being asserted in Counts I, III, and IV of the defendant’s
counterclaim arose out of events that occurred before the defendant initiated the lawsuit in 2001 and could
have been pursued in that action, as in fact two of the three Counts were. However, the defendant
knowingly abandoned those claims and any other future claims he could have pursued in consideration for a
20% interest in the net fees the plaintiffs acquired in the three pending contingency fee cases.
34
2. Has the defendant failed to allege a counterclaim of unfair trade
practice pursuant to the District of Columbia Consumer Protection
Procedures Act?
The defendant’s unfair trade practice claim is based on his theory that the 2002
Settlement Agreement’s non-interference clause is an unfair and improper trade practice
under the D.C. Consumer Act, D.C. Code § 28-3901 (2001). Am. Countercl. ¶¶ 60-62.
The plaintiffs and the defendant both advance arguments concerning their perspectives
of what is a “trade practice” under the D.C. Consumer Act. The defendant argues that
the term must be interpreted broadly and when construed from this perspective “the
[2002 Settlement Agreement] between [the plaintiffs] and [the defendant] was incidental
to the supply of legal services to consumers and comes within the broad reach of the
D.C. Consumer . . . Act.” Def.’s Opp’n I at 6. The plaintiffs respond that the defendant
reads the term too broadly and that “[w]hile it may be true the [the plainitffs are] in the
business of providing consumer legal services, the dispute between [the parties,] which
the Settlement Agreement resolved[,] concerned the employment relation between [the
parties] and only indirectly the provision of those legal services.” Pls.’ Reply I at 10.
The Court agrees with the plaintiff that the defendant has failed to state a claim under the
D.C. Consumer Act.
The defendant’s theory is that the plaintiff’s action in attempting to enforce an
invalid liquidated damages clause is an unfair and improper trade practice under the
D.C. Consumer Act. Am. Countercl. ¶ 62. Therefore, the defendant’s claim hinges on
the Court finding that the non-interference clause is invalid, a proposition that the Court
has already rejected. See supra Part III.A.3. Thus, the defendant’s claim must be
dismissed.
35
Even in absence of the Court’s finding that the non-interference clause is an
enforceable liquidated damages provision, the defendant’s counterclaim would
nevertheless have to be dismissed because under the D.C. Consumer Act the term “trade
practice” does not apply to the 2002 Settlement Agreement in any respect. The Act
defines “trade practice” as “any act which does or would create, alter, repair, furnish,
make available, provide information about, or, directly or indirectly, solicit or offer for
or effectuate, a sale, lease or transfer, of consumer goods or services.” D.C. Code § 28-
3901(6). The Act defines a “consumer” as “a person who does or would purchase . . . or
receive consumer goods or services . . . or a person who does or would provide the
economic demand for a trade practice[,]” and “as an adjective, ‘consumer’ describes
anything, without exception, which is primarily for personal, household or family use[.]”
Id. § 28-3901(2). Finally, the Act defines “merchant” as “a person who in the ordinary
course of business does or would supply the goods or services which are or would be the
subject matter of a trade practice.” Id. § 28-3901(3). Here, the defendant’s actions, in
regards to the settlement agreement, cannot by any stretch of the imagination be
construed as purchasing activity, but instead involved negotiations between attorneys
and their subsequent execution of an agreement settling their dispute. As such, the
plaintiffs’ participation in the process that brought about the settlement agreement did
not involve them in providing the defendant with any consumer services, and thus the
defendant’s claim falls outside the scope of a consumer-merchant relationship, which the
D.C. Consumer Act regulates. See Ford v. Chartone, Inc., 908 A.2d 72, 81 (D.C. 2006)
(stating that “the [D.C. Consumer Act] was designed to police trade practices arising
36
only out of consumer-merchant relationships”) (internal citation and quotation marks
omitted).
Finally, the defendant cites Banks v. District of Columbia Department of
Consumer and Regulatory Affairs, 634 A.2d 433 (D.C. 1993), as support for the viability
of his unfair trade practice claim; however, this case is distinguishable from Banks. In
Banks, the court found that providing legal services was a trade practice within the
definition of the Act. Id. at 437. However, in that case, the defendant provided legal
advice to an individual in no capacity other than that of someone purporting to be an
attorney to a layman who sought and paid for legal advice. Id. at 435. As previously
stated, the present case, by contrast, concerns a former employee of the plaintiffs who,
following the termination of his employment as an attorney, negotiated and executed a
settlement agreement with his former employer. Accordingly, the plaintiffs cannot be
said to have “ma[d]e available,” or “provide[d] information about, a service[]” that is
“part[] of the economic output by society[,]” as the Court in Banks found had occurred
in that case. Id. at 437.
3. Should the defendant’s intentional infliction of emotional distress
counterclaim be dismissed because he has failed to assert extreme
and outrageous conduct by the plaintiffs?
The plaintiffs argue that the defendant’s intentional infliction of emotional
distress counterclaim should be dismissed because the defendant fails to provide a
“description of the emotional distress supposedly suffered,” a description of the effect of
the distress upon him, and an explanation for how a “contract dispute involving payment
of a sum of money in a business context” amounts to “outrageous” conduct that goes
“beyond all possible bounds of decency[.]” Pls.’ Mem. I at 20. The defendant argues
37
that he has adequately asserted a claim for intentional infliction of emotional distress in
his counterclaim. Def.’s Opp’n I at 7. Specifically, he states that the plaintiffs “acted
unreasonably and in bad faith in failing to pay the sum due as agreed in the settlement
agreement,” id., and that this “conduct was truly outrageous and should not be justified
in a civilized society” because they had “no valid argument for failing to pay [him],
other than to punish him for recovering compensation from other lawyers for a case that
he created,” id. at 8.
An intentional infliction of emotional distress claim “requires a showing of (1)
extreme and outrageous conduct on the part of the defendant which (2) intentionally or
recklessly (3) causes the plaintiff[, here the defendant,] severe emotional distress.”
Khan v. Parsons Global Servs., Ltd., 521 F.3d 421, 428 (D.C. Cir. 2008) (quoting
Darrow v. Dillingham & Murphy, LLP., 902 A.2d 135, 139 (D.C. 2006)); see also
Kaseem v. Wash. Hosp. Ctr., 513 F.3d 251, 255 (D.C. Cir. 2008). The alleged conduct
must be “so outrageous in character, and so extreme in degree, as to go beyond all
possible bounds of decency.” Williams v. Fed. Nat’l Mortg. Ass’n, Civ.A. No. 05-
1483(JDB), 2006 WL 1774252* 9 (D.D.C. June 26, 2006) (citing Duncan v. Children’s
Nat’l Med. Ctr., 702 A.2d 207, 211 (D.C. 1997)). The plaintiff may not merely state
“labels and conclusions” in an attempt to meet the necessary standard. Grandison v.
Waskenhut Servs., Inc., 514 F. Supp. 2d 12, 18 (D.D.C. 2007) (dismissing claim because
the plaintiff merely “allege[d], in conclusory fashion, that [the defendant’s] actions in
terminating [the plaintiff] were ‘extreme and outrageous and willfully performed [and]
caused severe emotional distress to [the plaintiff]’”).
38
In Williams, the Court held that the complaint failed to state a claim for
intentional infliction of emotional distress, where the plaintiff alleged that the defendants
had “active[ly], conspiratorial[ly], malicious[ly], and secretive[ly] attempt[ed] to curtail
or terminate [the plaintiff’s] prospective and ongoing business relationships.” 2006 WL
1774252 *10. The complaint also stated that the defendants intended through their
actions to damage “[the plaintiff’s] personal and business reputation,” by having
“refused to contract with her because of her race and engaged in a campaign to prevent
others from doing business with her.” Id. Despite these allegations, the court found that
the defendants’ conduct failed to rise to the level required to satisfy a claim for
intentional infliction of emotional distress. Id.
Furthermore, in Tiefenbacher v. AARP, No. 05-1802(CKK), 2006 WL 1126841
at *1 (D.D.C. April 27, 2006), the court found that plaintiff’s allegations that her
employer humiliated her through demeaning and vulgar expletives, made obscene and
sexually offensive statements, terminated plaintiff’s employment without providing her
severance or vacation pay, and escorted her from the premises like a common criminal
were, even if true, were not sufficient to support a finding of extreme and outrageous
conduct, id. at *4. Likewise, in Duncan v. Children’s National Medical Center, 702
A.2d 207 (D.C. 1997), the District of Columbia Court of Appeals affirmed the trial
court’s dismissal of the plaintiff’s intentional infliction of emotional distress claim,
where the plaintiff alleged that after becoming pregnant her employer “forc[ed] her to
continue to either work in [a job position], where her fetus would be exposed to
radiation, or to lose her job,” id. at 211, finding that the employer’s conduct was “not
39
sufficiently ‘outrageous’ as a matter of law to sustain the cause of action . . . .,” id. at
212.
In this case, the defendant’s counterclaim is based on his assertion that he was
denied the payment of money owed to him. None of the allegations presented in support
of the defendant’s counterclaims even rise to the level of the defendants’ actions in
Tiefenbacher or Duncan, which the courts in both cases deemed insufficient to show
extreme and outrageous conduct. Id. Further, as the court in Tiefenbacher noted, claims
for intentional infliction of emotional distress have been denied under even more severe
facts than were present in that case. See 2006 WL 1126841 at *4 (citing Kerrigan v.
Britches of Georgetowne, Inc., 705 A.2d 624, 628 (D.C. 1997)).
Similar to the plaintiffs in the cases discussed above, the defendant has failed to
demonstrate that if his allegations are proven true, he is entitled to relief. Even assuming
the accuracy of his allegation that the plaintiffs intentionally, recklessly, and deliberately
“depriv[ed the] defendant of his share of proceeds from the Leatherman case,” Am.
Countercl. ¶ 65, not only was the withholding a justifiable response to the defendant’s
breach of the settlement agreement, but the plaintiffs’ conduct cannot be described, as a
matter of law, to have been extreme and outrageous to such a degree as to cause the
defendant severe emotional distress. See Williams, 2006 WL 1774252 at *10. In other
words, “[the plaintiff’s] alleged conduct is not atrocious and outside the bounds of
civilized society under District of Columbia law. In the commercial arena and
elsewhere, it is commonplace that . . . contracts fail to materialize for [numerous]
reasons,” and such conduct “does not rise to the level of outrageous behavior required to
support a claim for intentional infliction of emotional distress.” Id. And this is
40
especially true here, where it was the defendant’s own conduct that precipitated the
plaintiffs’ legitimate response about which the defendant is complaining. Accordingly,
the defendant has failed to allege facts sufficient to maintain his counterclaim for
intentional infliction of emotional distress.
4. Should the defendant’s conversion counterclaim be dismissed for
failure to state a claim?
The plaintiffs argue that the defendant’s conversion counterclaim fails because
“the failure to pay a sum of money pursuant to a contract, even if wrongful, does not
constitute a . . . conversion.” Pls.’ Mem. II at 5. The defendant contends that the
plaintiffs unlawfully “exercised control, and continued to exercise control” of money
that is due to him pursuant to the 2002 Settlement Agreement. Defendant’s
Memorandum in Opposition to the Motion for Summary Judgment and/or to Dismiss the
First Amended Counterclaims and in Support of his Motion for Partial Summary
Judgment (“Def.’s Mem. II”) at 3. Both parties rely on Curaflex Health Services, Inc. v.
Bruni, 877 F. Supp. 30 (D.D.C. 1995) and Government of Rwanda v. Rwanda Working
Group, 227 F. Supp. 2d 45 (D.D.C. 2002) to support their respective positions.
Conversion is “any unlawful exercise of ownership, dominion or control over the
personal property of another in denial or repudiation of his rights thereto.” Curaflex,
877 F. Supp. at 32 (quoting Duggan v. Keto, 554 A.2d 1126, 1137 (D.C. 1989)). “One
may be liable for conversion to a person who is in possession of property or who has the
right to immediate possession of the property.” Id. (citation omitted). To establish a
claim of conversion when money is the object of the claim, a plaintiff must have “the
right to a specific identifiable fund of money.” Id. However, a claim for conversion of
41
money may not be maintained to enforce a contractual obligation for payment of money.
Calvetti v. Antcliff, 346 F. Supp. 2d 92, 106 (D.D.C 2004); see also Curaflex, 877 F.
Supp. at 32 (citing Scherer v. Laborers’ Int’l Union of N. Am., 746 F. Supp. 73, 84
(N.D. Fla. 1988) (rejecting the plaintiff’s conversion claim because her action was “for
recovery of an ordinary debt based on a [employment] contract”)).
In Curaflex, a contractual relationship existed between the plaintiff and the
defendants that required the plaintiff to provide products and services to the defendants’
patients regardless of whether the patients paid the defendants. 877 F. Supp. at 31. The
defendants, in returned for the products and services, were obligated to pay the plaintiff
70% of the revenues it billed for those goods and services. Id. at 33. The plaintiff
argued that the defendant corporation was obligated under the parties’ contract “to
segregate from its general revenue all amounts it received for services [the plaintiff]
rendered, to deposit the segregated funds into a separate designated lock box account
and to transfer the lock box to [the plaintiff].” Id. at 32. The plaintiff was then to retain
70% of the funds for itself and transfer the remaining funds to the defendant corporation.
Id. at 33. Based on this arrangement concerning the handling of the funds, the plaintiff
alleged “that the [contract] clearly and unambiguously created in [the plaintiff] a
property right to a specific and identifiable fund of money[,]” and that when the
defendant corporation failed to act in compliance with how the money for the plaintiff’s
services was to be handled and ultimately delivered to the plaintiff, “it converted [the
plaintiff’s] property.” Id. The court rejected the plaintiff’s position, concluding that the
defendant’s failure to transfer the funds to the plaintiff was a breach of the contract
between the parties, but not a conversion of those funds. Id. The court reached this
42
conclusion because it found that “[w]hile the monies in the lock box were a specific,
identifiable fund,” the plaintiff had no “immediate right to possession or control of the
[money,]” as its “ability to gain possession or control of the funds in the lock box was
wholly contingent on [the defendant corporation] meeting its obligation [under the
contract] to instruct the bank [where the lock box was maintained] to transfer the funds
from the lock box to [the plaintiff’s] . . . bank account.” Id. Therefore, the court found
that the plaintiff could not maintain its conversion claims “[a]s a matter of law.” Id.
In Rwanda, a contractual relationship also existed between the plaintiff and the
defendant, which required the plaintiff to pay the defendant a specific sum of money for
work that would then be performed on behalf of the plaintiff. 227 F. Supp. 2d at 50, 63.
The plaintiff paid the defendant $28,000 and $55,000 as specified in two separate
contracts, however, the defendant failed to use the funds in a manner that would benefit
the plaintiff as anticipated by the terms of the contracts. Id. The plaintiff therefore
demanded that the defendant return the money that was paid to him pursuant to the
contracts. Id. Because the defendant had received a specific identifiable sum of money
from the plaintiffs, did not perform the services required by the contract, and did not
return the money when requested to do so by the plaintiffs, the court held that the
defendant unlawfully converted the plaintiff’s money. Id.
The facts in this case more resemble those in Curaflex. First, when the 2002
Settlement Agreement was executed, there was no specified amount of money the
defendant was entitled to receive under the agreement, rather he was entitled to receive a
specific percentage of an unspecified sum based on the fees the plaintiffs might be
awarded if the three cases covered by the settlement agreement settled. See Curaflex,
43
877 F. Supp. at 32-33 (the amount of funds Curaflex would be entitled to receive would
be based on an unspecified sum of services paid by the defendants’ patients). Second,
the defendant had no ownership interest in, or even control or possession over the funds
that are the object of the dispute in this case. See id. (The funds were delivered to the
defendants and never made their way to the plaintiff). In Rwanda, by contrast, the
money originated with the plaintiff, the plaintiff paid the funds to defendant, and then
the plaintiff demanded the return of the money because the defendant failed to do what
he was hired to do according to the terms of the parties’ two contracts. 227 F. Supp. 2d
at 62. Here, the money the defendant claims was diverted did not originate with him but
came, or would have come, from a third party. This Court is in total agreement with the
conclusions reached by its colleagues in both Curaflex and Rwanda, as it is clear why on
the facts of those cases its colleagues ruled as they did. Finding remarkable similarities
between the facts in this case and Curaflex, as compared to the distinct dissimilarities
between the circumstances in Rwanda, the Court finds that the defendant cannot
maintain his conversion counterclaim. As the Court in Curaflex observed, 877 F. Supp.
at 33, 35, what the defendant is asserting here is a claim for breach of contract, not
conversion.
C. The Defendant’s Motion for Partial Summary Judgment on his Breach of
Contract claim.16
The defendant seeks partial summary judgment on his second counterclaim for
the plaintiffs’ alleged breach of the 2002 Settlement Agreement. Defendant’s Motion
16
The defendant also requested summary judgment on his conversion claim. The request is being
denied for the same reason the plaintiffs are entitled to dismissal on their Rule 12(b)(6) motion.
44
for Partial Summary Judgment at 1. Specifically, he argues that the “[p]laintiffs
willfully and maliciously breached the settlement agreement by failing to promptly pay
[him] twenty percent of the amount received regarding the Leatherman case.” Am.
Countercl. ¶ 38. The plaintiffs argue, on the other hand, that the defendant has “fail[ed]
to demonstrate that he is entitled to summary judgment” because they “ha[ve] already
demonstrated that summary judgment should be granted in [their] favor” and the
defendant’s summary judgment request “concerns the identical issue.” Memorandum of
Points and Authorities in Opposition to Defendant’s Motion for a Partial Summary
Judgment at 3. The Court agrees with the plaintiffs.
A party’s material breach of a settlement agreement generally excuses the other
party’s obligation to perform its end of the bargain under the agreement. Hazel, 2006
WL 3623693 *9. Thus, under contract law, the party that first breaches the contract may
not recover for the subsequent failure of the other party to perform. Ashcraft & Gerel,
244 F.3d at 952) (“[A] party to a contract may defend [a breach of contract claim] on the
ground that there existed . . . a legal excuse for non-performance . . .”); 14 Williston on
Contracts §43:5 (4th ed.) (“[T]he party first in default under a bilateral contract cannot
recover for the subsequent failure of the other party to perform.”); Restatement (Second)
of Contracts § 237 (1981); Restatement (Second) of Contracts §241 cmt. e (1981) (“A
material failure of one party gives the other party the right to withhold further
performance”); see also Steel v. Isikoff, 130 F. Supp. 2d 23, 32 (D.D.C. 2000). Here,
because the defendant materially breached the 2002 Settlement Agreement, see supra
Part III.A.2., the plaintiffs were relieved of their duty to pay him 20% of the net fees
they acquired in the Leatherman and Kwikset cases, as would have been required by the
45
2002 Settlement Agreement. This case is therefore distinguishable from those cases
where the record raises questions as to whether an injured party was relieved of its
contractual duties when the other party had breached only some of its obligations. See
Manganaro Corp. v. HITT Contracting, Inc., 193 F. Supp. 2d 88, 98 (D.D.C. 2002)
(stating that a party who has performed certain obligations under a contract may demand
that the other party honor the contract provided that the demanding party’s lack of
performance was not material to the contract. “The corollary is that if a party has
materially breached the contract in a manner that goes to the very root of the contract, he
cannot then terminate his performance and demand that the other party perform.”); see
also 14 Williston on Contracts § 43:6 (4th ed.) (“Material failure of performance under a
contract calling for an exchange of performances will suspend or discharge the other
party’s duty to perform”). Here, because defendant breached the non-interference clause
of the 2002 Settlement Agreement, which was a material component of the settlement
agreement, see supra Part III.A.2., the plaintiffs were no longer obligated to pay the
defendant based on the agreement. See Ferguson v. Caspar, 359 A.2d 17, 25 (D.C.
1976) (affirming trial court and finding that “by [the appellants] own conduct, [they]
precluded their right to obtain specific performance of the contract” when they failed to
comply with a material obligation of the agreement).
IV. Conclusion
For the foregoing reasons, the Court concludes that the defendant materially
breached the 2002 Settlement Agreement, while on the other hand no breach of the
agreement was committed by the plaintiffs. Therefore, the plaintiffs’ motion for
summary judgment on their claim for breach of the 2002 Settlement Agreement is
46
GRANTED. In addition, the plaintiffs’ motion to dismiss Counts I, III, IV, V, VI, and
VII of the defendant’s seven counterclaims is GRANTED. Finally, the defendant’s
motion for partial summary judgment on his breach of contract and conversion
counterclaims is DENIED.
SO ORDERED.17
REGGIE B. WALTON
United States District Judge
17
This Memorandum Opinion is being issued to explain the reasoning underlying the Order issued
on March 27, 2009, which is now a final appealable order.
47