John Xereas v. Marjorie Heiss ( 2021 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 24, 2020 Decided February 16, 2021
No. 19-7108
JOHN N. XEREAS,
APPELLANT
v.
MARJORIE A. HEISS, ET AL.,
APPELLEES
Consolidated with 19-7111
Appeals from the United States District Court
for the District of Columbia
(No. 1:12-cv-00456)
Brent M. Ahalt argued the cause and filed the briefs for
appellant.
William T. O’Neil argued the cause and filed the brief for
appellees.
Before: TATEL, PILLARD and WILKINS, Circuit Judges.
Opinion for the Court filed by Circuit Judge WILKINS.
2
WILKINS, Circuit Judge: Appellant John Xereas holds the
RIOT ACT trademark, a well-known local comedy brand. In
2010 he entered into a business agreement with Appellees
Geoffrey Dawson and Marjorie Heiss (“Defendants”) to open
the Riot Act Comedy Club in downtown D.C. After the
relationship soured, Xereas brought suit to recover damages
from Defendants’ alleged breaches of fiduciary duty and of the
operating agreement of the limited liability company the parties
formed to start the club, as relevant here. Defendants
counterclaimed, and after extensive discovery the parties
proceeded to jury trial in 2018.
Xereas challenges the District Court’s dismissal of his
claim for breach of the Defendants’ fiduciary duties of loyalty
and care on the pleadings, as well as a number of pretrial and
trial errors. Defendants cross-appealed and challenge the
District Court’s denial of their final motion for judgment as a
matter of law and request for attorney’s fees. We reverse the
District Court’s dismissal of Xereas’s breach of fiduciary duty
claim. We affirm the District Court’s rulings in all other
respects.
I.
A.
Xereas conceived the name “RIOT ACT” during his multi-
decade career in the D.C.-area comedy scene. He registered
RIOT ACT-related domain names in 2005 and did business as
RIOT ACT Entertainment LLC through 2012, booking comics
and producing and promoting events at local venues including
Lisner Auditorium, The Lincoln Theater, 9:30 Club, and DAR
Constitution Hall. Xereas obtained a trademark for RIOT ACT
in September 2012, with a first use date of September 2005.
3
After his successful first club closed, Xereas met and
agreed to go into business with Defendants Geoffrey Dawson
and Marjorie Heiss. The parties hoped to leverage Xereas’s
experience running a comedy club and Defendant Dawson’s
capital and connections as a successful bar and restaurant
owner. Defendant Heiss, the longstanding in-house counsel to
Dawson’s management company, joined the partnership as the
LLC’s attorney. The parties gave conflicting testimony at trial
about their discussions regarding the use of the RIOT ACT
trademark: Xereas says he told Defendants from the start that
he would retain ownership and rights to the trademark, but
would license it to the LLC and only charge a fee once the
business began to make money. Defendants testified that
Xereas agreed to contribute the RIOT ACT trademark to the
LLC and that he never informed them that he expected the
business to pay him a licensing fee.
In any event, no licensing agreement for the RIOT ACT
mark was executed. The parties eventually leased a large event
space in downtown D.C. zoned for a theater and arts venue and
began renovations. Defendant Heiss registered their company
as Riot Act DC, LLC and the parties executed an operating
agreement in May 2010 and the operative Amended Operating
Agreement (“the operating agreement”) on November 1, 2010.
Each party held a 33.33% stake in the LLC.
Xereas, Heiss, and Dawson were the sole Member-
Managers of the LLC. The operating agreement gave the
managing members “full and exclusive power and authority on
behalf of the Company to manage, control, administer[,] and
operate the business and affairs of the Company.” Amended
Operating Agreement, Art. VI § 6.1(a); see also id. Art. V §
5.10. In other words, all management decisions were
controlled by a two-thirds vote of the Member-Managers. The
operating agreement also provided that “[a]ny consideration to
4
be paid as salaries by the Company to the Managing Members
shall be determined by the Managing Members in their
reasonable discretion.” Id. Art. VI § 6.4. The operating
agreement also included a provision selecting the District of
Columbia as the source of governing law. Id. Art. X § 10.9.
Xereas claims that the parties agreed to pay him $72,000
per year for his work as General Manager, but later deferred
payments until the business became profitable. Trial Tr.
232:5–7. Defendant Dawson acknowledged that “[i]n a perfect
world, he would have gotten his salary, which we had hoped
would be $72,000 a year,” but Dawson also testified that
Xereas’s salary was never guaranteed. Trial Tr. 616:24–
617:16. Other management salaries were being paid, however.
Xereas testified that Defendants paid another employee
$65,000 per year to manage the club, and Defendant Dawson
testified that the LLC paid a $100,000 management fee to one
of his companies. Trial Tr. 235:13–17; 692:16–25. In the end,
Xereas received $26,000 in the year and a half between May
2010, when the LLC was officially formed, and his exit in
2012.
The Riot Act club opened its doors in August 2011. Not
long after, the relationship between the parties deteriorated.
The Defendants voted to fire Xereas’s brother and friend in
January 2012, and a verbal conflict ensued after which Xereas
left the premises. Xereas testified that he continued to work for
the LLC despite Defendants’ vote two days later to remove him
from his day-to-day managerial responsibilities. Defendants
cut off Xereas’s access to his Riot Act-domain email and
changed the locks at the club several days later. Defendants
ultimately voted to remove Xereas as a managing member in
March 2012, under the operating agreement’s provision for
removal of a manager for failure to devote time and effort to
the business necessary to maintain its interests. Amended
5
Operating Agreement, Art. VI § 6.3. Xereas maintained his
stake in the LLC, and currently owns a twenty-six percent
share. After cutting ties with Xereas and executing a quit-claim
deed to disavow any interest in the RIOT ACT trademark,
Defendants re-registered as Penn Social, LLC but were unable
to change the RIOT ACT mark on their liquor and occupancy
licenses throughout the pendency of this litigation.
B.
Xereas filed the initial Complaint in this action in March
2012, bringing Lanham Act and related claims under District
of Columbia law. The District Court exercised jurisdiction
over Xereas’s trademark infringement and other Lanham Act
claims pursuant to 15 U.S.C. § 1121 and supplemental
jurisdiction over the related District of Columbia law claims
pursuant to 28 U.S.C. § 1367(a).
Xereas’s Second Amended Complaint (“SAC”) alleged
twenty-six claims stemming from the parties’ less-than-
amicable breakup. Relevant for our purposes, the SAC
included: a claim for breach of fiduciary duty, Lanham Act and
common law trademark infringement claims; and interrelated
contract claims based on the implied covenant of good faith and
fair dealing, D.C. law, and the operating agreement. The
Defendants cross-claimed based on the same conduct alleged
in Xereas’s Complaint, including, as relevant here, a
conversion claim for a computer purchased by the LLC and
retained by Xereas.
The case was referred to Magistrate Judge Deborah A.
Robinson during discovery and referred to her for all purposes
by the parties’ consent in September 2017. The District Court
decided the parties’ cross motions for summary judgment and
allowed Xereas’s above-named claims, except for his claim for
6
breach of fiduciary duty, and all of Defendants’ cross-claims to
proceed. The District Court converted Defendants’ motion into
a Motion to Dismiss for the purpose of deciding Xereas’s
breach of fiduciary duty claim, and dismissed it under Federal
Rule of Civil Procedure 12(b)(6).
Magistrate Judge Robinson presided over a seven-day jury
trial from November 5 to 14, 2018. At trial, the District Court
conducted voir dire of Xereas’s sole expert witness, allowed
the expert to testify to unsupported business expenses and a
company valuation, and ruled his trademark damages
testimony inadmissible. After the close of Xereas’s evidence,
Defendants moved for judgment as a matter of law, claiming
that Xereas presented no evidence proving the damages
element of his breach of contract and trademark infringement
claims. The District Court granted the motion with respect to
one trademark claim and denied the motion as to the breach of
contract claims because it held the evidence could allow the
jury to find that Xereas was not paid the agreed-upon salary.
Defendants moved again for judgment as a matter of law at the
close of trial, and the District Court granted the motion as to
the remaining Lanham Act claims. Only Xereas’s claim for
breach of the operating agreement went to the jury.
The jury found for Xereas and awarded him $106,000 in
damages. The jury also found for Defendants on their
conversion claim and awarded the return of the computer.
Following trial, Defendants re-moved for judgment as a matter
of law, to alter or amend Xereas’s damages to the amount
claimed in his final pretrial statement, and for attorney’s fees
under the Lanham Act, 15 U.S.C. § 1051 et seq. After
amending Xereas’s damage award to $45,000 to conform with
the damages he identified in his pretrial statement as arising
from the breach of the operating agreement claim, the District
Court entered judgment for both parties pursuant to the jury
7
verdict. Defendants’ cross-appeal challenges the District
Court’s denial of their motion for judgment as a matter of law
on Xereas’s successful breach of contract claim and of their
request for attorney’s fees. The parties timely appealed, and
we have jurisdiction under 28 U.S.C. § 1291.
II.
The District Court dismissed Xereas’s claim that
Defendants owed and breached their fiduciary duties of loyalty
and care. Mem. Op. 30–31, ECF No. 188 (Oct. 5, 2018). To
state a claim for breach of fiduciary duty under District of
Columbia law, a plaintiff must allege facts sufficient to
establish: (1) the defendant owed plaintiff a fiduciary duty; (2)
a breach of that duty; and (3) proximate cause and injury to be
inferred from those facts. See Vicki Bagley Realty, Inc. v.
Laufer, 482 A.2d 359, 363 (D.C. 1984) (duty and breach);
Randolph v. ING Life Ins. & Annuity Co., 973 A.2d 702, 709
(D.C. 2009) (proximate cause and injury). The District Court
analyzed only the first prong and declined to reach the
remaining elements after finding it “clear” that a “special
confidential relationship transcending an ordinary business
transaction” that would give rise to a fiduciary duty “did not
take place” between the parties. Mem. Op. 31. Because this
holding was error, we reverse and remand to the District Court
for further proceedings.
Xereas also alleges that the District Court erred at trial
when it improperly excluded evidence relevant to his contract
claims that survived summary judgment; abused its discretion
by limiting, and ultimately striking, his expert’s testimony; and
made numerous additional evidentiary rulings at trial that
violated his substantial rights. Xereas has not shown that we
should vacate the verdicts based upon any of these evidentiary
rulings, particularly given the substantial deference we owe the
8
trial court on such issues. See Sprint/United Mgmt. Co. v.
Mendelsohn, 552 U.S. 379, 384 (2008). We consider both
arguments in turn.
A.
We review “de novo the dismissal of a complaint for
failure to state a claim, accepting [the] plaintiff’s factual
allegations as true and drawing all reasonable inferences in
[the] plaintiff’s favor.” Momenian v. Davidson, 878 F.3d 381,
387 (D.C. Cir. 2017). District of Columbia law governs claims
arising out of the parties’ operating agreement. D.C. CODE
§ 29-801.06 (2012); see also RESTATEMENT (SECOND) OF
CONFLICT OF LAWS § 187 (AM. L. INST. 1971); J.A. 1771.
Xereas grounds his claim for breach of the fiduciary duties of
loyalty and care in “[section] 29-804.09 of the DC Code and
DC Common Law.” Second Am. Compl. 93 (Count XXI),
ECF No. 102 (Aug. 22, 2017). Under either theory, District of
Columbia law provides that members of a member-managed
LLC owe each other fiduciary duties of loyalty and care, and
Xereas adequately alleged that Defendants entered into the Riot
Act DC, LLC with him. 1
We first note that section 29-804.09 applies only to
Defendants’ conduct beginning January 1, 2012: it was enacted
in its current form under District of Columbia Official Code
Title 29 Technical and Harmonizing Amendments Act of 2012,
D.C. Law 19-210, effective March 5, 2013, but with an
applicability date of January 1, 2012. See 59 D.C. Reg. 132801
The operating agreement is somewhat unclear as to whether Riot
Act DC, LLC is organized as a member-managed LLC or a manager-
managed LLC, but Xereas urges and Defendants do not contest that
the LLC is member-managed. See Appellant’s Br. 18 n.2;
Appellees’ Reply 4, 5, 8 (consistently referring to the LLC’s
“managing members”).
9
(Nov. 23, 2012); 60 D.C. Reg. 8436 (June 7, 2013); see also
Office of the General Counsel, Council of the District of
Columbia Legislative Drafting Manual 41–42 (2019)
(explaining that an applicability date is “different than [a
provision’s] effective date” and may accelerate or delay
implementation of new legislation). Because some of
Defendants’ alleged conduct occurred before January 2012,
and Xereas failed to point us to any statute applicable before
January 2012 specifying fiduciary duties between members of
an LLC, we analyze his claim first under the District’s common
law and second under the statute.2
Turning to the common law, “[a] fiduciary relationship is
founded upon trust or confidence reposed by one person in the
integrity and fidelity of another.” Bolton v. Crowley, Hoge &
Fein, P.C., 110 A.3d 575, 584 (D.C. 2015) (quoting Gov’t of
Rwanda v. Rwanda Working Grp., 227 F. Supp. 2d 45, 64
(D.D.C. 2002), aff’d in part, remanded in part sub nom. Gov’t
of Rwanda v. Johnson, 409 F.3d 368 (D.C. Cir. 2005)).
Whether a fiduciary relationship exists is “a fact-intensive
question, involving a searching inquiry into the nature of the
relationship, the promises made, the type of services or advice
given and the legitimate expectations of the parties.” Firestone
v. Firestone, 76 F.3d 1205, 1211 (D.C. Cir. 1996) (quoting
Church of Scientology Int’l v. Eli Lilly & Co., 848 F. Supp.
1018, 1028 (D.D.C. 1994)). District of Columbia courts have
“addressed the fiduciary duty of loyalty in the corporate and
partnership context[s],” but not in the specific context of a
limited liability company. Bolton, 110 A.3d at 581. However,
Calomiris v. Calomiris, 3 A.3d 1186 (D.C. 2010), suggests that
2
The common law duties that were allegedly breached overlap with
the statutory duties that apply to Defendants’ actions after January
2012, so the distinction does not affect the outcome of our analysis.
10
an action for breach of fiduciary duty may lie between
members of an LLC based on their status as members alone.
In Calomiris, one member of a family-held LLC brought
claims against the LLC and his siblings for breach of contract
and breach of fiduciary duty when the LLC refused to
reimburse him for attorney’s fees sought in connection with an
earlier action on behalf of the LLC. Id. at 1188–89. The
operating agreement contained an indemnification clause that
the claimant argued entitled him to prevail on his breach of
fiduciary duty claim should the LLC continue to violate the
indemnification provision by refusing to reimburse him for the
earlier action. Id. at 1194. Without evaluating the merits of his
claim, the court ruled that the claimant had pled sufficient facts
to entitle him to an award of fees under the clause. Id. at 1194–
95. In analyzing the sufficiency of his complaint, the court
noted, “[Claimant] sets forth his two causes of action and
paragraphs which demonstrate how he satisfies the elements of
those causes.” Id. at 1195. The court thus allowed the
claimant’s breach of fiduciary duty claim to continue where it
alleged an action arising out of the LLC’s operating agreement,
as Xereas does here.
While the Calomiris court allowed a well-pleaded claim
for breach of fiduciary duty by one member of an LLC against
another to survive a motion to dismiss, we acknowledge that it
did not directly consider the question whether members of an
LLC owe each other fiduciary duties by virtue of membership
alone. Id. Fortunately, Maryland courts have considered a
closely analogous question and held that “managing members
of an LLC owe common law fiduciary duties to the LLC and
to the other members based on principles of agency.” Plank v.
Cherneski, 231 A.3d 436, 450 (Md. 2020). We look to
Maryland’s common law because Maryland is “the source of
the District’s common law and an especially persuasive
11
authority when the District’s common law is silent.” Napoleon
v. Heard, 455 A.2d 901, 903 (D.C. 1983); see also Interstate
Fire & Cas. Co. v. Washington Hosp. Ctr. Corp., 758 F.3d 378,
383 (D.C. Cir. 2014). The Plank court relied on the Maryland
Court of Special Appeals’ decision in George Wasserman &
Janice Wasserman Goldsten Family LLC v. Kay, 14 A.3d 1193,
1210–11 (Md. Ct. Spec. App. 2011), abrogated on other
grounds by Plank, 231 A.3d, which held that “fiduciary duties
are not born of statutory language—the underlying fiduciary
duties pre-exist the statutes” and “[t]he same holds true in the
LLC context.” Thus, since at least 2011, “especially persuasive
authority” supports our reading of Calomiris to suggest that
Xereas, Dawson, and Heiss, at once members and managers of
the LLC, owed each other, as well as the LLC and any other
members, fiduciary duties of loyalty and care. Napoleon, 455
A.2d at 903.
In his Complaint, Xereas alleged that he entered into the
original operating agreement with Defendants on May 6, 2010
and further alleged that “Defendants Dawson and Heiss, by
virtue of being managers of the LLC at the time most of the
events that give rise to this Second Amended Complaint
occurred, were in a fiduciary relationship with Plaintiff who
was also a manager of the LLC.” Second Am. Compl. ¶¶ 46,
177. We find these allegations sufficient under Rule 12(b)(6)
to establish the existence of a fiduciary relationship under D.C.
common law.
For those events that took place in 2012 and therefore also
covered by the statute, Xereas correctly argues that section 29-
804.09 provides that members of a member-managed LLC owe
each other duties of loyalty and care, duties typical of a
fiduciary relationship. See D.C. Code §§ 29-804.09(a)–(c);
RESTATEMENT (THIRD) OF AGENCY § 8.01 (AM. L. INST. 2006);
see also Quincy Park Condo. Unit Owners’ Ass’n v. D.C. Bd.
12
of Zoning Adjustment, 4 A.3d 1283, 1290 (D.C. 2010)
(referring to “the duties of loyalty and care imposed by law on
a fiduciary”). Defendants urge that the “mere existence of a
contract generally does not give rise to a fiduciary duty,” and
they collect cases standing for the proposition that only a
relationship founded on trust and confidence that “transcends a
normal business transaction” gives rise to a fiduciary
relationship. Appellees’ Br. 9–10 (internal quotation marks
omitted). They argue that Xereas “presumed the special
relationship” and pleaded only actions “entirely within the
scope of the operating agreement.” Id. at 10 (internal quotation
marks omitted). Thus, resting on the twin premises that
fiduciary relationships only arise when parties extend their
relationship beyond the limits of their contractual obligations
and that the operating agreement is a typical commercial
relationship, Defendants argue no fiduciary relationship was
established. See id.
But Defendants’ authority aims to distinguish fiduciary
relationships from arms-length contracts, not from business
partnerships that give rise to duties owed by members or
managers of a limited liability company, and does not alter our
conclusion that the District of Columbia affords special status
to the relationship between members of an LLC. See, e.g.,
Firestone, 76 F.3d at 1207 (written agreement providing
payment guarantees for past-due, court-ordered child support
and spousal support); Attias v. CareFirst, Inc., 365 F. Supp. 3d
1, 6 (D.D.C. 2019) (health insurance policies); Ying Qing Lu v.
Lezell, 919 F. Supp. 2d 1, 6 (D.D.C. 2013) (investor’s escrow
deposit); Council on Am.-Islamic Relations Action Network,
Inc. v. Gaubatz, 793 F. Supp. 2d 311, 341–42 (D.D.C. 2011)
(confidentiality and non-disclosure agreement signed by an
intern as a condition of employment); Command Consulting
Grp., LLC v. Neuraliq, Inc., 623 F. Supp. 2d 49, 50 (D.D.C.
2009) (consulting services agreement); Paul v. Judicial Watch,
13
Inc., 543 F. Supp. 2d 1, 4 (D.D.C. 2008) (legal representation
agreement). And while it is true that District of Columbia
courts “have traditionally looked for . . . a special confidential
relationship that transcends an ordinary business transaction
and requires each party to act with the interests of the other in
mind,” Ying Qing Lu, 919 F. Supp. 2d at 6 (internal quotation
marks omitted), they have also suggested that membership in
an LLC constitutes one such special relationship, Calomiris, 3
A.3d at 1195.
In sum, section 29-804.09 imposes duties characteristic of
a special fiduciary relationship and requires members of an
LLC to act with the interests of the LLC and other members in
mind. See D.C. Code § 29-804.09(a) (“A member of a
member-managed limited liability company owes to the
company and, subject to § 29-808.01(b), the other members the
duties of loyalty and care stated in subsections (b) and (c) of
this section.” (emphases added)); §§ 29-804.09(b)–(c)
(requiring a member to “[a]ccount to the company,” to
“[r]efrain from dealing with the company . . . [with] an interest
adverse to the company,” and to “[r]efrain from . . . grossly
negligent or reckless conduct, [and] willful or intentional
misconduct”). And while we acknowledge that subsection (a)
was amended in 2012 to remove the word “fiduciary” before
“duties of loyalty and care,” compare 58 D.C. Reg. 2065 (Mar.
11, 2011), with 59 D.C. Reg. 13244, section 29-804.09(i)(5)
instructs that in a manager-managed LLC, “[a] member shall
not have any fiduciary duty to the company or to any other
member solely by reason of being a member.” We therefore
interpret the deletion of “fiduciary” as part of an effort to omit
extraneous text, since a reading in which section 29-804.09(a)
does not impose fiduciary duties upon members in a member-
managed LLC renders subsection (i)(5) surplusage. That is, we
doubt that the drafters would specify that members in a
manager-managed LLC do not owe each other fiduciary duties
14
unless members owe each other such duties in another context.
See Nielsen v. Preap, — U.S. —, 139 S. Ct. 954, 969 (2019)
(explaining that “every word and every provision is to be given
effect [and that n]one should needlessly be given an
interpretation that causes it to duplicate another provision or to
have no consequence.” (alteration in original and citations
omitted)).
In light of the above, the District Court improperly found
it “clear” that a “special confidential relationship transcending
an ordinary business transaction did not take place” between
the parties. See Mem. Op. 31. The District Court failed to
consider relevant District of Columbia and Maryland law, the
statute’s clear imposition of duties of loyalty and care typical
of a fiduciary, or the nature of the parties’ relationship—as
partners and co-managers in a business venture, not merely
arms-length parties to a standard commercial transaction.
Xereas’s claim for breach of fiduciary duty should have, at a
minimum, survived the pleading stage.
We hold that Xereas adequately alleged that he, Dawson,
and Heiss were members of a member-managed LLC, Second
Am. Compl. ¶ 362, and that under D.C. law that suffices to
plead the existence of a fiduciary duty. For the reasons above,
we reverse and remand this claim for further proceedings.
B.
Xereas has not, however, shown that we should reverse
any of the District Court’s evidentiary rulings, particularly
given the broad deference we owe the trial court on such issues.
See Sprint/United, 552 U.S. at 384. “[W]e review a trial court’s
evidentiary rulings for abuse of discretion and even if we find
error, we will not reverse an otherwise valid judgment unless
appellant demonstrates that such error affected [his] substantial
15
rights.” Bowie v. Maddox, 642 F.3d 1122, 1134 (D.C. Cir.
2011) (alterations in original) (internal quotation marks
omitted). For an error to affect a party’s substantial rights, it
“must have been prejudicial: It must have affected the outcome
of the district court proceedings.” Muldrow ex rel. Estate of
Muldrow v. Re–Direct, Inc., 493 F.3d 160, 168 (D.C. Cir.
2007) (quoting United States v. Olano, 507 U.S. 725, 734
(1993)). As the party claiming error, Xereas bears the burden
of demonstrating harmfulness. Shinseki v. Sanders, 556 U.S.
396, 409 (2009).
Xereas failed to carry his burden. To the extent his expert
testimony was relevant to claims properly dismissed for other
reasons, we find no prejudicial error. Nor do we find error
where the District Court excluded Xereas’s expert testimony
regarding trademark damages because it did not comply with
our decision in Foxtrap, Inc. v. Foxtrap, Inc., 671 F.2d 636(D.C. Cir. 1982), to the extent that Xereas’s challenge can even
be understood to extend to that ruling. And conclusory
statements that the trial court’s remaining alleged errors
“substantially prejudiced” Xereas do not demonstrate that each,
or any, error altered the outcome of trial. See, e.g., Appellant’s
Br. 24, 27; Appellant’s Reply and Response to Cross Appeal
10, 18, 22. We decline to decide each evidentiary issue in turn.
Instead, the trial court on remand should examine anew the
previous rulings through the lens of the single remaining
breach of fiduciary duty claim. Conscious that the District
Court—faced with a different claim on remand—could
determine that the new claim warrants different rulings, we
decline to elevate its prior rulings to law of the case because
evidentiary rulings are inherently situational. See
Sprint/United, 552 U.S. at 387–88 (citing the Advisory
Committee’s note on Federal Rule of Evidence 401, 28 U.S.C.
App. at 864, that “[r]elevancy is not an inherent characteristic
of any item of evidence but exists only as a relation between an
16
item of evidence and a matter properly provable in the case”);
2 WEINSTEIN’ S FEDERAL EVIDENCE § 401.04 (2020) (same).
We remand a claim that has never been tried to the jury; in other
words, the situation has changed, and so may the District
Court’s evidentiary rulings at any retrial.
We make one final note to guide the trial court on remand.
It is well settled that a party “cannot recover the same damages
twice, even though the recovery is based on two different
theories.” Hill v. Assocs. for Renewal in Educ., Inc., 897 F.3d
232, 241 (D.C. Cir. 2018) (Wilkins, J., concurring) (quoting
Medina v. District of Columbia, 643 F.3d 323, 326 (D.C. Cir.
2011)), cert. denied, 139 S. Ct. 1201 (2019). Xereas’s claim
for breach of the operating agreement went to the jury, which
found for him and awarded $106,000 in damages, later reduced
by the District Court. As described above, the parties’
agreement to enter into business and execution of the operating
agreement gave rise to their fiduciary relationship, and the
operating agreement helped define the contours of those
fiduciary duties. See, e.g., Amended Operating Agreement,
Art. VIII. Xereas alleged lost earnings and lost proceeds to the
LLC under both the breach of contract claim and his claim for
breach of fiduciary duty. Second Am. Compl. ¶¶ 285, 373. To
the extent the jury has already compensated him for
Defendants’ breach of the operating agreement, Xereas would
not be entitled to a windfall of double damages from any
second trial if a new jury, unaware of the prior award, assigns
damages to cure the lost earnings he has already received. See
Hill, 897 F.3d at 241. We leave it to the District Court on
remand to ensure Xereas is not compensated twice for the same
injury. See Medina, 643 F.3d at 326.
17
III.
Turning to Defendants’ cross-appeal, we affirm the
District Court’s decision to deny Defendants judgment as a
matter of law on Xereas’s breach of contract claim. We also
affirm the denial of Defendants’ fee petition for the reasons
below.
A.
“[W]e do not lightly disturb a jury verdict.” Radtke v.
Lifecare Mgmt. Partners, 795 F.3d 159, 163 (D.C. Cir. 2015)
(alteration omitted). We review the District Court’s denial of
a motion for judgment as a matter of law de novo. Id.“Judgment as a matter of law is appropriate only if the evidence
and all reasonable inferences that can be drawn therefrom are
so one-sided that reasonable men and women could not have
reached a verdict in plaintiff’s favor.” Muldrow, 493 F.3d at
165 (internal quotation marks and citation omitted). We cannot
substitute our view for that of the jury, nor do we assess the
credibility or weight of the evidence. See Radtke, 795 F.3d at
163.
Defendants argue that Xereas introduced insufficient
evidence at trial to support his breach of contract claim because
he failed to present evidence of damages caused by
Defendants’ breach of the operating agreement. Appellees’ Br.
25. Under District of Columbia law, breach of contract
requires a showing of: “(1) a valid contract between the parties;
(2) an obligation or duty arising out of the contract; (3) a breach
of that duty; and (4) damages caused by [the] breach.”
Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C.
2009). Defendants strenuously urge that any salary paid or
promised to Xereas was “discretionary” under the operating
agreement. Appellees’ Br. 27; see also Amended Operating
18
Agreement, Art. VI § 6.4. Under their theory, none of
Defendants’ breaching behavior, including removing Xereas as
a managing member, could have caused him to lose a salary he
was never entitled to. Appellees’ Br. 27.
Xereas counters that he introduced evidence that
Defendants agreed to pay him a salary of $72,000. Appellant’s
Reply and Response to Cross Appeal 25, 27. He argues that
testimony describing the LLC’s payment of similar salaries to
a second general manager, as well as management consulting
fees, allowed the jury to infer that he would have been
compensated at a similar rate to that of general managers had
he not been removed. Id. at 26–27. He further notes that he
presented evidence that Defendants improperly removed him
as a managing member in violation of the operating agreement,
and that in light of the conflicting testimony presented at trial,
“it was properly left to the jury to determine the weight of the
evidence presented and the credibility of the witnesses.” Id. at
25–26.
Xereas is correct: the evidence introduced at trial was not
“so one-sided that reasonable men and women could not have
reached a verdict in [his] favor.” Muldrow, 493 F.3d at 165.
Xereas testified that Defendants agreed to pay him a salary, and
Defendant Dawson acknowledged that “[i]n a perfect world, he
would have gotten his salary, which we had hoped would be
$72,000 a year.” See Trial Tr. 232:5–7; 616:24–617:9. But
Defendant Dawson also testified that this salary was never
guaranteed. Trial Tr. 617:10–16. Given the conflicting
testimony, it is not our role to substitute our view for the jury’s
careful weighing of the witnesses’ credibility and of the
evidence. See Radtke, 795 F.3d at 163.
We note finally that Xereas’s testimony that Defendants
improperly removed him as a managing member suffices to
19
draw a causal link between the claimed damages and his
removal. The operating agreement provides that “[n]o
Member, as such, other than the Managing Members shall . . .
[b]e paid any salary by the Company.” Art. V § 5.10(c). If the
jury evaluated the conflicting evidence and credited Xereas’s
testimony that he was to be compensated for performance of
his management duties, his improper removal as a managing
member eliminated his chance to recoup the salary owed. For
the reasons above, we affirm the District Court’s denial of
Defendants’ renewed motion for judgment as a matter of law.
B.
We also affirm the District Court’s denial of Defendants’
fee petition. Although Defendants are prevailing parties with
respect to their Lanham Act claims, the District Court also
based its denial on its view that this case is not “exceptional”
as required to justify fees. See 15 U.S.C. § 1117(a) (“The court
in exceptional cases may award reasonable attorney fees to the
prevailing party.”). We review the denial of Defendants’ Post-
Trial Motion for Attorney’s Fees for abuse of discretion.
United States ex rel. Burke v. Record Press, Inc., 816 F.3d 878,
882 (D.C. Cir. 2016). Defendants have not convinced us that
the trial court abused its “substantial discretion” in denying
Defendants’ fee petition. Swedish Hosp. Corp. v. Shalala, 1
F.3d 1261, 1271 (D.C. Cir. 1993).
A party need not win judgment on every claim to be a
“prevailing party.” Fox v. Vice, 563 U.S. 826, 834 (2011).
Because Defendants were granted judgment on the merits of all
three of Xereas’s Lanham Act claims, they were prevailing
parties. See Buckhannon Bd. & Care Home, Inc. v. W. Va.
Dep’t of Health & Human Res., 532 U.S. 598, 604 (2001)
(“[E]nforceable judgments on the merits . . . create the
‘material alteration of the legal relationship of the parties’
20
necessary to permit an award of attorney’s fees.” (quoting Tex.
State Tchrs. Ass’n v. Garland Indep. Sch. Dist., 489 U.S. 782,
792–93 (1989))). The District Court was incorrect when it
stated, without explanation, that “Defendants have failed to
demonstrate . . . that they are ‘prevailing’ parties.” See Mem.
Order 2, ECF No. 252 (Aug. 9, 2019).
However, no prejudice lies where the District Court did
not abuse its wide discretion in determining that this case is not
exceptional. Id. Analyzing an identical fee-shifting statute in
the Patent Act, 35 U.S.C. § 285, the Supreme Court has stressed
the discretion owed to district courts. See Highmark Inc. v.
Allcare Health Mgmt. Sys., Inc., 572 U.S. 559, 563 (2014). The
Lanham Act’s fee-shifting provision, like the Patent Act’s,
“emphasizes the fact that the determination is for the district
court.” Id. at 564 (citation omitted). Thus, we do not overturn
it lightly.
Defendants contend that this case stands out based on the
trial testimony, which they argue irrefutably showed that
Xereas’s claimed oral license to the LLC to use his RIOT ACT
trademark was “a fiction.” Appellees’ Br. 31. In their view,
the evidence showed that Xereas lied about granting an oral
license to Defendants, referred to the LLC’s ownership of the
intellectual property, and applied for the mark only after
granting the LLC the right to use it (and thus filed false
statements with the Patent and Trademark Office). Id. at 31–
32. Xereas responds that Defendants failed to establish that the
District Court abused its discretion where his trademark
infringement claims failed only because he did not introduce
evidence of damages traceable to their infringing behavior, not
because the evidence refuted his testimony that Defendants
infringed his mark. Appellant’s Reply and Response to Cross
Appeal 32.
21
The District Court found that Defendants failed to show
that the case was brought for the purpose of harassing them, or
that Xereas’s conduct was willful or in bad faith. Mem. Order
2. The Supreme Court has interpreted the Patent Act’s
identical fee-shifting statute broadly: “[A]n ‘exceptional’ case
is simply one that stands out from others with respect to the
substantive strength of a party’s litigating position (considering
both the governing law and the facts of the case) or the
unreasonable manner in which the case was litigated.” Octane
Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545,
554 (2014). Here the District Court exercised its substantial
discretion to find that this case was neither litigated
unreasonably nor brought to harass. Because district courts
“may determine whether a case is ‘exceptional’ in the case-by-
case exercise of their discretion, considering the totality of the
circumstances,” we decline to overturn the District Court’s
ruling here. See id.IV.
For the foregoing reasons, we reverse the District Court’s
dismissal of Xereas’s breach of fiduciary claim and remand for
proceedings consistent with this opinion. We affirm the
District Court’s rulings on both issues raised in Appellees’
cross-appeal.
So ordered.