Cuneo Law Group, P.C. v. Joseph ( 2013 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
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THE CUNEO LAW GROUP, P.C., et al., )
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Plaintiffs, )
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v. ) Civil Action No. 12-0246 (RBW)
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JOEL D. JOSEPH, )
)
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Defendant. )
____________________________________ )
MEMORANDUM OPINION
The plaintiffs, The Cuneo Law Group, P.C. and Jonathan W. Cuneo, seek a declaratory
judgment pursuant to 28 U.S.C. § 2201 (2006) regarding the parties’ respective rights under a
settlement agreement resolving previous litigation between the parties and injunctive relief
prohibiting future breaches of the agreement. First Amended Complaint for Declaratory and
Injunctive Relief (“Am. Compl.”) ¶¶ 55–60. This matter is before the Court on the defendant’s
Motion to Dismiss the Amended Complaint or in the Alternative, Transfer the Case to the
Central District of California (“Def.’s Dismissal Mot.”), and the plaintiffs’ Motion for Summary
Judgment and Permanent Injunction (“Pls.’ Summ. J. Mot.”). Upon consideration of the parties’
submissions, 1 the Court concludes that it must grant in part and deny in part the defendant’s
motion to dismiss, deny the plaintiffs’ motion for summary judgment, and dismiss this case for
lack of jurisdiction.
1
In addition to the filings already referenced, the Court considered: (1) the defendant’s Statement of Points and
Authorities in Support of the Motion to Dismiss the Amended Complaint, or in the Alternative, Transfer the Case to
the United States District Court for the Central District of California (“Def.’s Dismissal Mem.”); (2) the Plaintiffs’
Opposition to Defendant’s Motion to Dismiss the Amended Complaint or in the Alternative, Transfer the Case to the
Central District of California (“Pls.’ Dismissal Opp’n”); (3) the plaintiffs’ Memorandum of Points and Authorities in
Support of Plaintiffs’ Motion for Summary Judgment and Permanent Injunction (“Pls.’ Summ. J. Mem.”); (4) the
defendant’s Statement of Points and Authorities in Opposition to the Motion to [sic] for Summary Judgment and for
a Permanent Injunction (“Def.’s Summ. J. Opp’n”); and (5) the Plaintiffs’ Reply to Defendant’s Opposition to Their
Motion for Summary Judgment and Permanent Injunction (“Pls.’ Summ. J. Reply”).
I. BACKGROUND
The long-running dispute between the parties originated with the defendant’s
employment by The Cuneo Law Group (“Cuneo”) as a staff attorney and then as an independent
contractor. See Cuneo Law Grp., P.C. v. Joseph, 669 F. Supp. 2d 99, 102–03 (D.D.C. 2009)
(Walton, J.), aff’d, 428 F. App’x 6 (D.C. Cir. 2011). A complete recounting of the history of the
parties’ discord is provided in the Court’s opinion in the earlier case just cited and which
involved the same settlement agreement that is the subject of the current litigation. See Cuneo
Law Grp., 669 F. Supp. 2d at 102–05. The following facts are taken from the plaintiffs’
statement of material facts as to which there is no genuine issue, none of which are disputed by
the defendant in his opposition. See generally Def.’s Summ. J. Opp’n.
In 2002, the parties entered into a settlement agreement (“Settlement Agreement”)
resolving prior litigation related to the defendant’s employment with Cuneo. See Pls.’ Summ. J.
Mem. at 9. In pertinent part, the Settlement Agreement provided that the defendant was to
receive twenty percent of the attorneys’ fees awarded in three then-pending cases, referred to as
the “Gold Train, Leatherman, and Kwikset cases,” Pls.’ Summ. J. Mem. Exhibit (“Ex.”) B at 4, 2
and in exchange, 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 claim, or correspond with the
litigants. If he does he has breached the agreement and waives his percentages,” id. at 2. The
Settlement Agreement further provided that “[t]he parties release each other of any and all claims
of any type whatsoever . . . .” Id.
In 2008, the plaintiffs sought a declaratory judgment from this Court that the defendant
had materially breached the Settlement Agreement and was therefore not entitled to twenty
2
The Court will use the pagination of the electronic filing system because the plaintiffs did not number the pages of
the exhibit.
2
percent of any attorneys’ fees awarded to Cuneo in the Leatherman and Kwikset cases. Pls.’
Summ. J. Mem. at 10. The plaintiffs alleged that the defendant had contacted and then sued
Cuneo’s co-counsel in the Gold Train case seeking additional payment from the attorneys’ fees
awarded in that case. Id. Due to these breaches of the Settlement Agreement, the plaintiffs
refused to pay the defendant any percentage of the attorneys’ fees he otherwise would have
received in the Leatherman case. See id. On March 27, 2009, this Court issued an order
granting the plaintiffs’ motion for summary judgment based upon the finding that the defendant
materially breached the Settlement Agreement. Id. The Court set forth its reasoning in the
memorandum opinion referenced above.
On June 9, 2009, the defendant sued Cuneo’s co-counsel in the Leatherman case in
California state court, seeking additional payment from the attorneys’ fees awarded in that case.
Id. at 11. The defendant subsequently contacted one of the plaintiffs in the Kwikset case and
attempted to persuade him “to obstruct any settlement of that case unless [the defendant]
received payment” and also filed an attorney’s lien. Id. Once the Kwikset case settled, the
defendant contacted and threatened to sue defense counsel in that case, and ultimately filed suit
against a variety of individuals and entities associated with the case seeking a portion of the
settlement funds. Id. at 12.
The plaintiffs instituted the current suit on May 11, 2012, seeking a declaratory judgment
finding (1) that the defendant has “committed continued material breaches” of the Settlement
Agreement and that “because of the material breaches,” the defendant is no longer entitled to any
of the monies paid to Cuneo in connection to the Kwikset settlement; (2) that the defendant
“gave up his rights, if any, to seek payment for the Kwikset [c]ase under quantum meruit and/or
unjust enrichment from Cuneo, Cuneo’s co-counsel or the Kwikset [d]efendants;” and (3) that
the defendant “pay [the plaintiffs’] fees and costs” arising from the current litigation. Am.
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Compl. at 10. The plaintiffs also requested a permanent injunction enjoining the defendant from
further breaching his obligations under the Settlement Agreement. Id. at 10–11.
The defendant subsequently filed a motion to dismiss, arguing that the plaintiffs’ claims
are barred by claim preclusion. Def.’s Dismissal Mem. at 1–3. In the alternative, the defendant
sought transfer of the case to the Central District of California. Id. at 3–6. While the motion to
dismiss was still pending, the plaintiffs filed their motion for summary judgment and for a
permanent injunction. Pls.’ Summ. J. Mot. at 1.
II. STANDARDS OF REVIEW
A. Rule 12(b)(6)
A Rule 12(b)(6) motion tests whether the complaint “state[s] a claim upon which relief
can be granted.” Fed. R. Civ. P. 12(b)(6). “To survive a motion to dismiss [under Rule
12(b)(6)], a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In making this assessment, a plaintiff
receives the “benefit of all inferences that can be derived from the facts alleged.” Am. Nat’l Ins.
Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (internal quotation marks and citation
omitted). But raising a “sheer possibility that a defendant has acted unlawfully” fails to satisfy
the facial plausibility requirement. Iqbal, 556 U.S. at 678. Rather, a claim is facially plausible
“when the plaintiff pleads factual content that allows the court to draw [a] reasonable inference
that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).
While the Court must “assume [the] veracity” of any “well-pleaded factual allegations” in the
complaint, conclusory allegations “are not entitled to the assumption of truth.” Id. at 679.
Although generally raised as an affirmative defense, the doctrine of res judicata may be raised in
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a pre-answer motion to dismiss under Rule 12(b)(6). See Stanton v. Dist. of Columbia Ct. of
Appeals, 127 F.3d 72, 76–77 (D.C. Cir. 1997).
B. Rule 56(a)
A motion for summary judgment will be granted “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). In evaluating a motion for summary judgment, the court must view
the evidence “in the light most favorable to the nonmoving party” and must “draw all reasonable
inferences in favor of the nonmoving party.” Talavera v. Shah, 638 F.3d 303, 308 (D.C. Cir.
2011) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). Summary judgment
is appropriate if the non-moving party “fails to make a showing sufficient to establish the
existence of an element essential to that party’s case,” on which the party bears the burden of
proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). “The mere existence of a scintilla
of evidence in support of the [non-moving party’s] position will be insufficient; there must be
evidence on which the jury could reasonably find for the [non-moving party].” Anderson, 477
U.S. at 252.
III. ANALYSIS
A. Transfer of case
Before turning to the question of dismissal, the Court finds that transfer of the case to the
Central District of California is not appropriate. Section 1404(a) provides that “[f]or the
convenience of parties and witnesses, in the interest of justice, a district court may transfer any
civil action to any other district or division where it might have been brought . . . .” 28 U.S.C. §
1404(a) (2006). District courts enjoy broad discretion in determining whether transfer of a case
pursuant to § 1404 is warranted. See SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1154 (D.C. Cir.
1978). The inquiry requires a “case-by-case determination of convenience and fairness.” Id.5
The circumstances here present little justification for transferring this case. The only
consideration that weighs in favor of transfer is the defendant’s convenience since he now
resides in California. See Def.’s Dismissal Mem. at 5. The other relevant considerations all
counsel against transfer. The Court’s resolution of this case based on the parties’ pleadings and
briefs (for the reasons explained infra) obviates the need to consider the convenience of any
potential witnesses or the location of any evidence. The plaintiffs chose to bring their case
before this Court, and object to the defendant’s request to transfer the case. See Pls.’ Dismissal
Opp’n at 2. And perhaps most importantly, two prior cases between the parties in this litigation
have been heard and adjudicated by this Court. Transferring this case would require another
court to expend its limited time and resources familiarizing itself with the lengthy history of this
case and the relevant law when this Court has already done so. To create such a duplication of
efforts is not in the interest of justice. Therefore, the Court declines to transfer this case in the
exercise of its discretion.
B. Impact of the Court’s prior opinion
The Court’s prior opinion interpreting the Settlement Agreement and adjudicating the
parties’ respective rights under the Agreement raises the possibility that the doctrine of res
judicata bars some or all of the plaintiffs’ claims. The doctrine of res judicata refers collectively
to the related concepts of claim preclusion and issue preclusion. Taylor v. Sturgell, 553 U.S.
880, 892 (2008); I.A.M. Nat’l Pension Fund, Benefit Plan A v. Indus. Gear Mfg. Co., 723 F.2d
944, 946 (D.C. Cir. 1983). 3 Under claim preclusion, “a final judgment on the merits in a prior
suit involving the same parties or their privies bars subsequent suits based on the same cause of
action.” I.A.M. Nat’l Pension Fund, 723 F.2d at 946–47 (citing Parklane Hosiery Co. v. Shore,
3
Because “[t]he preclusive effect of a federal-court judgment is determined by federal common law,” the Court
must apply controlling federal law in determining the applicability of res judicata in this case. Taylor, 553 U.S. at
891.
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439 U.S. 322, 326 n.5 (1979)). Issue preclusion addresses a different problem, so that a final
judgment on the merits in an earlier suit bars “subsequent relitigation of issues actually litigated
and determined in the prior suit, regardless of whether the subsequent suit is based on the same
cause of action.” Id. at 947 (citing same). Because “res judicata belongs to courts as well
litigants,” a court may raise the issue sua sponte. Stanton, 127 F.3d at 77.
In his motion to dismiss, the defendant argues that under claim preclusion, the plaintiffs’
claims and request for injunctive relief are barred by the prior litigation between the parties.
Def.’s Dismissal Mem. at 2–3. However, the Court need not reach that issue, because it has
identified a defect in the plaintiffs’ complaint involving issue preclusion, which operates to
deprive the Court of subject matter jurisdiction over this case. The plaintiffs’ declaratory
judgment claim seeks a declaration finding (1) that the defendant “committed continued material
breaches of the March 15, 2002, Settlement Agreement with Cuneo;” (2) that the defendant,
“because of the material breaches, lost his right to be paid any percentage of the fee in the
Kwikset [c]ase;” (3) that the defendant, “by entering in to the Settlement Agreement, gave up his
rights, if any, to seek payment for the Kwikset [c]ase under quantum meruit and/or unjust
enrichment from Cuneo, Cuneo’s co-counsel or the Kwikset [d]efendants;” and (4) that the
defendant pay the plaintiffs’ fees and costs in this action. Am. Comp. at 10. The plaintiffs also
ask the Court to enjoin the defendant from further breaching his obligations under the Settlement
Agreement. Id. at 10–11. The plaintiffs assert diversity jurisdiction under 28 U.S.C. § 1332(2006) as the basis for the Court’s jurisdiction, alleging that the amount in controversy exceeds
$75,000. Id. at 2.
The plaintiffs’ potential recovery of money damages, however, depends on the Court’s
adjudication of an issue that was already litigated before this Court and determined in its prior
opinion. With respect to the plaintiffs’ obligation to pay the defendant a twenty percent share of
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the attorneys’ fees obtained for the Kwikset case, this Court determined that the defendant had
materially breached the Settlement Agreement and thus held, “because the defendant materially
breached the 2002 Settlement Agreement . . . 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 2002 Settlement Agreement.” Cuneo Law Grp., 669 F. Supp. 2d at 125. The
plaintiffs recognize as much in their motion for summary judgment, which states that “[t]he
Court held that [the defendant] had, by contacting and suing Cuneo’s Gold Train co-counsel,
materially breached the 2002 Settlement Agreement, thereby losing his entitlement to any
percentage of the fees in the Leatherman and Kwikset cases.” Pls.’ Summ. J. Mem. at 10
(emphasis added). Since this issue was actively litigated by the parties and determined by the
Court in the 2008 litigation, issue preclusion bars the Court from considering it again here.
Because the amount in controversy is entirely predicated on the Court’s consideration of
an issue that is barred by issue preclusion, the asserted basis for jurisdiction fails. Diversity
jurisdiction under § 1332 requires that the amount in controversy in a civil action exceed
$75,000. 28 U.S.C. § 1332. Whether a complaint states a sufficient amount in controversy is
generally determined at the time the complaint is filed, and “[e]vents occurring subsequent to the
institution of suit which reduce the amount recoverable below the statutory limit do not oust
jurisdiction.” St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289–90 (1938).
However, “if, from the proofs, the court is satisfied to a [legal] certainty that the plaintiff was
never entitled to recover that amount . . . the suit will be dismissed.” Id. at 289. A court must
thus distinguish “between subsequent events that change the amount in controversy and
subsequent revelations that, in fact, the required amount was or was not in controversy at the
commencement of the action.” Jones v. Knox Exploration Corp., 2 F.3d 181, 183 (6th Cir.
1993). When faced with similar circumstances, the Third Circuit opined that it would consider
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the reduction in the amount of controversy through application of res judicata to be appropriately
placed in the latter category, depriving the court of jurisdiction. Carlisle v. Matson Lumber Co.,
186 F. App’x 219, 227 (3d Cir. 2006).
Following the reasoning of the Third Circuit, the Court agrees that the circumstances here
deprive the Court of jurisdiction. The plaintiffs were never entitled to recover any monetary
damages in this action because the Court’s consideration of the plaintiffs’ entitlement to damages
was barred by the doctrine of res judicata at the time the complaint was filed. The Court’s
determination that the plaintiffs’ claim for damages is precluded by the Court’s prior opinion is
thus a “subsequent revelation” that the amount in controversy was, in fact, not in controversy at
the time the plaintiffs filed their complaint. Without the claim for money damages resulting
from the defendant’s breach of the Settlement Agreement, there is no amount in controversy in
this case, let alone an amount sufficient to satisfy the requirements of § 1332. The Court finds
no other basis for jurisdiction here. See generally Am. Compl. Accordingly, the Court lacks
subject matter jurisdiction over this case, and must dismiss the plaintiffs’ claims for that reason. 4
IV. CONCLUSION
For the foregoing reasons, the Court concludes that it must grant the defendant’s motion
to dismiss only to the extent that the relief sought by the defendant is granted, and to deny it in
all other respects, and to deny the plaintiffs’ motion for summary judgment. 5
REGGIE B. WALTON
United States District Judge
4
Because the Court concludes that it does not have subject matter jurisdiction over the plaintiffs’ claims, it does not
reach the issue of whether injunctive relief is appropriate to enjoin the defendant from further breaching his
obligations under the Settlement Agreement. Nonetheless, the Court notes that it perceives a serious question as to
whether such relief could be granted as a result of established principles of contract law preventing a court from
awarding both enforcement of a contract and liquidated damages to redress a breach of contract. See 12 Arthur
Linton Corbin, Corbin on Contracts §§ 1216, 1222 (2d ed. 2002) (“[T]he injured party should not be allowed to
enforce and receive specific performance and at the same time get judgment for damages for a total breach.”).
5
The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.
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