Kotchen & Low LLP v. Precision Discovery, Inc. , 210 F. Supp. 3d 39 ( 2016 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
KOTCHEN AND LOW LLP,
Plaintiff,
v.
PRECISION DISCOVERY, INC., Civil Action No. 16-224 (GK)
and JERRY BARBANEL,
Defendants,
MEMORANDUM OPINION AND ORDER
Plaintiff Ketchen & Low LLP ("Plaintiff" or "K&L") and
Defendants Precision Discovery, Inc. ("Precision") and Jerry
Barbanel (together, "Defendants") are currently arbitrating
Precision's claims for over $3 million in unpaid bills for
electronic data processing, hosting, and related charges, costs
and fees. Plaintiff K&L filed this action seeking declaratory
judgment that Precision's arbitration claims are barred by the
doctrines of res judicata and is~ue preclusion and that they are
not subject to arbitration. Defendants have moved to stay
proceedings before this Court in favor of ongoing arbitration.
This matter is presently before the Court on Defendant's
Motion to Stay Proceedings and Compel Arbitration or in the
Alternative to Dismiss ("Motion to Compel Arbitration") [Dkt. No.
18], Defendant's Motion to Stay Proceedings and Compel Arbitration
or in the Alternative to Dismiss the Amended Complaint ("Am. Motion
to Compel Arbitration") [Dkt. No. 21], Defendant's Motion to Stay
Rule 26 Obligations Pending Determination on Arbitrability ("Mot.
to Stay") [Dkt. No. 26] , and Plaintiff's Motion for Rule 16
Scheduling Conference ("Pl.' s Mot.") [Dkt. No. 29] .
Upon consideration of the Motions, Oppositions, and Replies,
the entire record herein, and for the reasons stated below,
Defendants' Motion to Compel Arbitration is denied as moot.
Defendants' Amended Motion to Compel Arbitration and Motion to
Stay is granted in part and denied in part. Defendant's Motion to
Stay is denied as moot, and Plaintiff's Motion is denied.
I. BACKGROUND
A. Factual Background
This dispute stems from a contractual agreement reached
between the parties in relation to a separate suit, In re
Delta/AirTran Baggage Fee Antitrust Litig., MDL 09-2089 (N.D. Ga.)
("Delta Litigation"). On November 19, 2012, the judge in the Delta
Litigation issued a decision finding discovery misconduct by
Delta, the defendant in that case. See In re Delta/AirTran Baggage
Fee Antitrust Litig., 09-md-2089, 2015 WL 4635729, at *5 (N.D. Ga.
August 3, 2015). As a remedy, the judge ordered plaintiff's
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counsel, K&L, to retain a discovery expert to investigate Delta's
misconduct, and for Delta to pay the expert. Id.On November 25, 2012, K&L signed a retainer letter with
Precision. Pl.'s Ex. G ("Retainer Agreement") [Dkt. No. 22-7] The
Retainer Agreement stated that Precision had been hired, "to
perform computer forensic services in the matter of In Re
Delta/AirTran Baggage Fee Antitrust Litigation, MDL 2089," and
that "[Precision] will need to perform those procedures that [it]
consider[s] necessary to express a professional conclusion." Id.
at 1. The Retainer Agreement added that, "The scope of services
may change during the course of this engagement."
The arbitration clause of the Retainer Agreement states
that,
Any controversy or claim arising out of, or relating to
services provided by Precision Discovery and covered by
this letter for Counsel or at its request (including any
such matter involving any parent, subsidiary, affiliate,
successor in interest, of Counsel or of Precision
Discovery) shall be submitted first to voluntary
mediation, and if mediation is not successful, then to
binding arbitration, in. accordance with the dispute
resolution procedures set forth in the attachment to
this letter.
Retainer Agreement at 4.
In addition, the Retainer Agreement attached and incorporated
by reference Dispute Resolution Procedures, which contained an
additional arbitration clause. Id. at 6. The clause states that,
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If a dispute has not been resolved within 90 days after
the written notice beginning the mediation process (or
a longer period, if the parties agree to extend the
mediation) , the mediation shall terminate and the
dispute shall be settled by arbitration. The arbitration
will be conducted in accordance with the procedures in
this document and the Rules for Non-Administered
Arbitration of the CPR Institute for Dispute Resolution
("Rules") as in effect on the date of the engagement
letter, or such other rules and procedures as the parties
may designate by mutual agreement.
Any issue concerning the extent to which any dispute is
subject to arbitration, or concerning the applicability,
interpretation, or enforceability of these procedures,
including any contention that all or part of these
procedures are invalid or unenforceable, shall be
governed by the Federal Arbitration Act and resolved by
the arbitrators.
Retainer Agreement at 6.
In January 2013, Precision asked K&L for authorization to
perform E-discovery services. Pl.'s Opp. to Defs.' Mot. to Stay
Proceedings and Compel Arbitration, or to Dismiss at 5 ("Pl.' s
Opp.") [Dkt. No. 22). On January 4, 2013, Precision sent K&L a
proposed E-discovery Statement of Work ("SOW"). Pl.'s Ex. E [Dkt.
No. 22-5). K&L never signed the SOW. Pl.'s Opp. at 6. Instead, K&L
authorized Precision by email to proceed with a limited amount of
E-discovery. Pl.'sEx. B~~·S-7 ("LowDecl.") [Dkt. No. 22-2).
Between November 2012 and March 2013, Precision billed
$797, 481 for computer forensic services and $4, 102, 020 for E-
discovery services. Pl.'s Opp. at 7; Pl.'s Ex. C [Dkt. No. 22-3).
On May 20, 2013, Precision "request[ed] the Court's assistance in
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•.
ordering Delta to . . . pay for the services rendered by Precision
Discovery." Pl. 's Ex. K, ("Pixley Report") [DKt. No. 22-11] .
On May 28, 2013, Delta requested a hearing on Precision's
fees before the judge in the Delta Litigation. Pl.'s Opp. at 8. On
July 24, 2013, the Delta Litigation court held a full-day
evidentiary hearing. Id. In an Order dated September 25, 2013, the
Delta Litigation court ruled that Precision's fees were not
reasonable. Pl.'s Ex. P [Dkt. No. 22-16]. The court ordered Delta
to reimburse $655,635 in fees advanced by plaintiff's counsel, and
to pay Precision an additional $1, 794, 116 in fees. Id. at 38.
Together, these amounts represented a 50 percent reduction in
Precision's fees. Id.
In June 2013, Precision sent Delta a hard drive containing
approximately 371,000 documents that had been collected by
Precision for Delta's review. Low Deel. ~ 16. In late 2013, one of
Precision's Vice Presidents left Precision to start his own
company, Pixley Forensics Group ("Pixley"). Id. at ~ 13.
Thereafter, K&L discontinued its use of Precision and retained
Pixley as its expert witness. Id.
In December 2013, the Delta Litigation court ordered
Precision to make all data, including the hard drive with 371,000
documents, available to Pixley. Pl. 's Opp. at 11. Instead of
sending a hard drive to Pixley with the documents, Precision
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provided Pixley with a password to an online database of
approximately 8 million documents hosted by Precision, which
included but did not identify the 371,000 documents. Id.
On May 21, 2014, Precision sent K&L an invoice for
approximately $70,000 for hosting charges. Pl.'s Ex. T [Dkt. No.
22-20]. K&L refused to pay the invoice. Low Deel. ~ 17. Precision
now seeks to recover from K&L "under theories of unjust enrichment
and quantum meruit for the $485,558 in fees incurred for the
hosting and related services." Pl.'s Ex. D at 3 [Dkt. No. 22-4].
B. Procedural Background
On September 23, 2014, Precision commenced an arbitration
against K&L to recover unpaid fees from K&L for services provided
by Precision in connection with the November 9, 2012 Order in the
Delta Litigation. Defendants' Notice of Supplemental Authority at
1 ("Arbitration Decision") [Dkt. Nos. 25, 25-1] . On November 10,
2014, K&L filed its Answer and Counterclaims with the arbitrators.
Am. Mot. to Compel Arbitration at 6. On December 14, 2014,
Precision filed its Reply with the arbitrators. Id.
On February 10, 2016 K&L filed a Complaint in this Court.
[Dkt. No. l]. On February 16, 2016, K&L filed a Motion to Dismiss
the arbitration proceedings with the panel, claiming lack of
arbitrability. Arbitration Decision at 1.
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On April 5, 2016, Defendants filed a Motion to Stay and Compel
Arbitration, or in the Alternative to Dismiss with this Court
("Motion to Compel Arbitration") [Dkt. No. 18] . On April 6, 2016,
Plaintiff filed an Amended Complaint ("Am. Compl. ") [Dkt. No. 19] ,
which is the operative complaint.
On April 22, 2016, Plaintiff filed its Opposition to
Defendant's Motion to Compel Arbitration. [Dkt. No. 20]. On April
25, 2016, Defendants filed a Motion to Stay and Compel Arbitration,
or in the Alternative, to Dismiss the Amended Complaint ("Am.
Motion to Compel Arbitration") [Dkt. No. 21]. On April 26, 2016,
Plaintiff filed its Opposition to Defendant's Amended Motion to
Compel Arbitration ("Pl.'sOpp.") [Dkt. No. 22]. OnApril28, 2016,
Defendants filed their Reply to the Motion to Compel Arbitration
[Dkt. No. 23]. On May 6, 2016, Defendants filed their Reply to the
Amended Motion to Compel Arbitration ("Def. 's Reply") [Dkt. No.
24] .
On May 16, 2016, the Arbitration Panel ruled on K&L's Motion
to Dismiss, finding that all of Precision's claims except those
regarding the hosting charges were subject to arbitration.
Arbitration Decision at 11. On May 17, 2016, Defendants filed a
Notice of Supplemental Authority ("Arbitration Decision") [Dkt.
Nos. 25, 25-1], attaching the panel's decision.
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On May 24, 2016, Defendants filed a Motion to Stay Rule 26
Obligations Pending Determination on Arbitrability ("Mot. to
Stay") [Dkt. No. 26]. Plaintiff filed its Opposition on May 30,
2016 [Dkt. No. 27] and Defendants filed their Reply on June 9,
2016 [Dkt. No. 28].
On August 23, 2016 Plaintiff filed a Motion for Rule 16
Scheduling Conference [Dkt. No. 29]. On September 1, 2016,
Defendants filed their Opposition [Dkt. No. 30]. Plaintiff did not
file a Reply.
II. STANDARD OF REVIEW
"The Supreme Court has set out 'the proper framework for
deciding when disputes are arbitrable.'" Dist. No. 1, Pac. Coast
Dist., Marine Engineers' Beneficial Ass'n, AFL-CIO v. Liberty Mar.
Corp., 815 F.3d 834, 844 (D.C. Cir. 2016) (quoting Granite Rock
Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 296 (2010)). "Under
that framework, a court may order arbitration of a particular
dispute only where the court is satisfied that the parties agreed
to arbitrate that dispute." Id. (emphasis in original).
A dispute over the breadth of an arbitration provision is
"'generally for the courts to dete~mine' but 'parties may agree to
arbitrate questions of breadth' so long as they do so plainly."
Id. (quoting Nat'l R.R. Passenger Corp. v. Bos. & Me. Corp., 850
F.2d 756, 761 (D.C. Cir. 1988)).
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III. ANALYSIS
A. The Scope of the Retainer Agreement
1. Precision's Computer Forensic Services Fee and E-
Discovery Fee Claims
K&L does not dispute that the Retainer Agreement covers the
computer forensic services provided by Precision. However, K&L
argues that the E-discovery services provided by Precision were
not covered by the Retainer Agreement and thus not subject to its
arbitration provisions.
The language of the Retainer Agreement clearly shows that it
extended to the E-discovery services provided by Precision. There
are several provisions of the Retainer Agreement which make this
clear.
For example, as noted above, the second paragraph of page one
of the Agreement states that:
We have been asked to perform computer forensic services
in the matter of In Re Delta/AirTran Baggage Fee
Antitrust Litigation, MDL 2089. If you desire a report,
opinion or testimony on a matter, we will need to perform
those procedures that we consider necessary to express
a professional conclusion. The scope of services may
change during the course of this engagement. We will
discuss any variations with you prior to implementation.
Retainer Agreement at 1 (emphasis added) .
The Retainer Agreement thus contemplated Precision providing
a broad range of additional services beyond computer forensics
which might become necessary to reach an expert opinion.
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More explicitly, the section of the Retainer Agreement
related to compensation provides that, "[p]ricing for our
electronic discovery services will be provided at such time as
they are requested by counsel." Retainer Agreement at 2-3.
2. Precision's Unjust Enrichment Hosting Fee Claims
In contrast, the Retainer Agreement does not include any
mention of hosting fees. Furthermore, the hosting services
provided by Precision occurred after K&L terminated Precision as
its discovery expert in the Delta Litigation. Low Deel. ~16; Pl.'s
Opp. at 11.
In addition, the Court is also not convinced that Precision's
hosting fee claims are sufficiently related to the court-ordered
forensic services it provided in the Delta Litigation as to fall
within the four corners of the Retainer Agreement. Therefore, the
Retainer Agreement and its arbitration provisions do not apply to
Precision's claims arising out of its unpaid hosting fees.
Consequently, K&L may therefore pursue its $485,558 unjust
enrichment claim related to Precision's hosting fees before this
Court.
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B. The Arbitration Clause Mandates Arbitration of
Precision's Claims Arising from its Unpaid Computer
Forensic Services Fees and E-Discovery Fees
1. The Retainer Agreement Language
Precision's Computer Forensic Services Fee and E-Discovery
Fee Claims are subject to arbitration because the parties expressed
their clear and unmistakable intention to have the arbitration
panel determine the scope of its own jurisdiction. 1 See Skrynnikov
v. Fed. Nat. Mortg. Ass'n, 943 F. Supp. 2d 172, 176 (D.D.C. 2013)
("the question whether the parties have submitted a particular
dispute to arbitration, i.e. the 'question of arbitrability' is
'an issue for judicial determination [u]nless the parties clearly
and unmistakably provide otherwise [.] '") (quoting AT&T Techs., Inc.
v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986)).
The Retainer Agreement explicitly states that, "any issue
concerning the extent to which any dispute is subject to
arbitration. shall be governed by the Federal Arbitration Act
and resolved by the arbitrators." Retainer Agreement at 6. In this
case, the arbitration panel selected by both parties has already
1 The arbitration clause explicitly applies to claims against "any
parent, subsidiary [or] affiliate" of Precision. Def.'s Ex. 3 at
4 [Dkt. No. 21-3]. As President and CEO of Precision, Jerry
Barbanel is an "affiliate" of Precision. See Pearce v. E.F. Hutton
Group, Inc., 828 F.2d 826 (D.C. Cir. 1987). Therefore, all claims
arising out of factual allegations that are arbitrable for
Precision are arbitrable for Barbanel.
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determined that all of Precision's claims arising out of its unpaid
fees, with the exception of the hosting fees, are subject to
arbitration.
Even if there were any doubt that the arbitrability question
was for the arbitration panel to decide, this Court would find
that the computer forensic services fee and E-discovery fee claims
are subject to arbitration. The plain language of the arbitration
clauses of the Retainer Agreement dictate that all claims arising
thereunder are subject to arbitration. Retainer agreement at 2-3,
6.
2. Presumption of Arbitrability
Under Section 2 of the Federal Arbitration Act (FAA), 9 U.S.C.
§§ 1-16, which governs the arbitration provisions in the Retainer
Agreement, (Retainer Agreement at 6) , there is a "presumption of
arbitrability," and a rule that all "[d]oubts should be resolved
in favor of [arbitration]." The Supreme Court has held that, in
enacting the FAA, "Congress declared a national policy favoring
arbitration." Southland Corp. v. Keeting, 465 U.S. 1, 10 (1984).
Were there any doubt that the language of the Retainer
Agreement mandates arbitration, such doubt would be resolved in
favor of the arbitrability of Precision's claims arising out of
its unpaid computer forensic services and E-discovery fees. See
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
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24-25 (1983) ("as a matter of federal law, any doubts concerning
the scope of arbi trable issues should be resolved in favor of
arbitration") . 2
C. Plaintiff's Breach of Confidentiality Claim
Defendants do not substantively dispute that Plaintiff's
breach of confidentiality claim (Count II) is not arbitrable. As
Defendant points out, the Retainer Agreement specifically says
that claims based on Precision's confidentiality obligation are
not arbitrable. Retainer Agreement at 4.
Instead, Defendant argues that Count II should be dismissed
because it is barred by the express terms of the Retainer
Agreement. Defendant is correct.
2 K&L makes two additional arguments: 1) that Precision failed to
satisfy a condition precedent to arbitration by failing to seek
mediation; and 2) that Precision waived its right to arbitration
by seeking payment of its fees in federal court.
Without holding that mediation was a condition precedent of
arbitration, this Court finds that Precision's March 27, 2014
Mediation Notice Letter [Dkt. No. 22-21] would have satisfied such
a condition.
This Court is also not persuaded by K&L's waiver argument.
K&L argues that Precision waived its right to arbitration by
seeking payment of its fees in the Del ta Litigation. However,
because neither Precision nor K&L were party to the Delta
Litigation and because K&L's liability for Precision's fees was
not at issue in that litigation, Precision's participation in a
one day hearing for which it was summoned by that court did not
cause it to waive its rights to arbitration.
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The confidentiality restriction in the Retainer Agreement is
lifted, .
"as may be required '
by law, regulation or judicial or
administrative process." Retainer Agreement at 1. The testimony of
Precision's officer which K&L now claims constituted a breach of
confidentiality was given pursuant to a Court order that
Precision's employees "shall appear and offer evidence. in
support of the reasonableness of their fees and expenses." Pl.'s
Ex. M [Dkt. No. 22-13]. Thus, Plaintiff's testimony was not subject
to the confidentiality provisions of the Retainer Agreement and
Plaintiff's breach of confidentiality claim shall be dismissed.
IV. Conclusion
For the foregoing reasons, Defendants' Motions are granted in
part and denied in part, and Plaintiff's Motion is denied, and it
is hereby
ORDERED, that Defendants' Motion to Stay Proceedings and
Compel Arbitration or in the Alternative to Dismiss [Dkt. No. 18]
shall be denied as moot given the fact that the First Complaint
has been dismissed; and it is further
ORDERED, that Defendants' Motion to Stay Rule 26 Obligations
Pending Determination on Arbitrability [Dkt. No. 26] shall be
denied as moot since the issue of arbitrability has been decided;
and it is further
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ORDERED, that Defendants' Motion to Stay Proceedings and
Compel Arbitration or in the Alternative to Dismiss the Amended
Complaint [Dkt. No. 21] is granted in part and denied in part in
so far as the following; and it is further
ORDERED, that Precision's claims arising from its unpaid
computer forensic services and E-?iscovery fees are arbitrable and
are not properly before this Court; and it is further
ORDERED, that Precision's claims arising from its hosting
fees are not arbitrable and are properly before this Court; and it
is further
ORDERED, that Plaintiff's claim for Breach of Confidentiality
shall be dismissed; and it is further
ORDERED, Plaintiff's Motion for Rule 16 Scheduling Conference
is granted. The parties shall appear before this Court for a Status
Conference pertaining to Plaintiff's remaining claims on October
27, 2016, at 12:00 p.m.
I
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September 28, 2016
Copies to: attorneys on record via ECF
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