Winston & Strawn LLP v. Crumens Ltd C/O Johnson & McLean LLC

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
WINSTON & STRAWN LLP, )
)
Plaintiff, )
)
v. ) Civil Action No. 13-524 (EGS)
)
JAMES P. MCLEAN, JR, et al., )
)
Defendants. )
)
MEMORANDUM OPINION
I. Introduction
Plaintiff Winston & Strawn LLP (“W&S”) sues defendants
Crumens Ltd. (“Crumens”) and James P. McLean, Jr. (“Mr.
McLean”), proceeding pro se, for breach of contract. W&S, a law
firm with an office in the District of Columbia, argues that it
provided legal services pursuant to a contract and Mr. McLean
refuses to pay. Pending before the Court is W&S’s motion for
summary judgment. After careful consideration of the motion, the
response, the reply thereto, the entire record, and the
applicable law, W&S’s motion for summary judgment is GRANTED.
II. Background
A. Factual Background
In April 2012, Mr. McLean—on behalf of Crumens—agreed in
writing to pay W&S to provide legal services to Edward S.
1
Warneck. 1 See Engagement Agreement (“E.A.”), ECF No. 51-2 at 2-
6. 2 Mr. McLean lived with “the mother of [Mr. Warneck’s]
daughter-in law” and in March 2012 “contacted [Mr. Warneck] by
phone and offered to pay [his] legal fees involving [] various
investigations.” Warneck Aff., ECF No. 51-8 ¶ 3. Mr. Warneck
accepted Mr. McLean’s offer and met with Thomas Buchanan, a W&S
attorney who Mr. McLean had recommended. Id. ¶ 5.
On April 11, 2012, W&S prepared an Engagement Agreement,
which clarified that W&S represented Mr. Warneck “individually
in connection with potential litigation involving the Department
of Justice, the Department of Transportation, Creditors of
Direct Air, and other matters relating to your employment at
Direct Air (‘the Litigation’).” E.A., ECF No. 51-2 at 2. As set
forth in the Engagement Agreement, Crumens “agreed to pay [Mr.
Warneck’s] costs and legal expenses in connection with the
litigation.” Id. The Engagement Agreement also explained the
nature of W&S’s services, the fees for those services, and that
payment was due “within thirty days of . . . receipt of [W&S’s]
statement.” Id. at 3. Mr. Warneck signed the Engagement
Agreement on April 13, 2012. Id. at 5. Mr. McLean signed the
1 Mr. Warneck is not a party to this litigation, as he was not
obligated to pay for W&S’s services under the contract.
2 When citing electronic filings throughout this Opinion, the
Court cites to the ECF page number, not the page number of the
filed document.
2
Engagement Agreement, on behalf of Crumens “c/o Johnson &
McLean, LLC” on April 16, 2012. Id. at 6.
Pursuant to the Engagement Agreement, W&S began
representing Mr. Warneck in April 2012. See, e.g., Def.’s Exs.,
ECF No. 55-1 at 11-86; ECF No. 55-2 at 26-41 (billing statements
detailing work performed on Mr. Warneck’s behalf). Beginning in
June 2012, W&S sent Mr. Warneck and Mr. McLean monthly invoices.
See, e.g., Statement of Account, ECF No. 51-6 at 2; Def.’s Ex.,
ECF No. 55-1 at 11-86 (billing statements); id. at 87-88 (emails
related to invoices). W&S represented Mr. Warneck through March
2013. At that time, W&S stopped providing legal services because
it had not been paid. Statement of Account, ECF No. 51-6 at 2.
From April 2012 through March 2013, W&S provided
$495,053.60 worth of legal services to Mr. Warneck. Id. For
almost a year, Mr. McLean promised he would pay W&S’s invoices.
See Def.’s Ex., ECF No. 55-1 at 87-160 (emails from Mr. McLean
to Mr. Buchanan promising payment and explaining lack of
payment). Indeed, Mr. McLean never challenged or objected to an
invoice. McLean Dep., ECF No. 51-3 at 45:10-13. To date, Mr.
McLean has not paid W&S for the legal services it provided Mr.
Warneck. Id. 47:6-9.
B. Procedural Background
On August 19, 2014, the Court granted W&S’s motion for
summary judgment as conceded pursuant to Local Rule 7(b), as Mr.
3
McLean had not timely filed his memorandum in opposition. See
Order, ECF No. 54. Mr. McLean appealed the Court’s Order to the
U.S. Court of Appeals for the District of Columbia Circuit
(“D.C. Circuit”). In December 2016, the D.C. Circuit reversed
the Court’s Order and remanded for further proceedings,
concluding that Local Rule 7(b) was inconsistent with Federal
Rule of Civil Procedure 56. See Mandate, ECF No. 70; USCA Case
Number 14-7197. In January 2017, the Court ordered supplemental
briefing. W&S’s motion for summary judgment is now ripe for
review.
III. Standard of Review
Pursuant to Federal Rule of Civil Procedure 56, summary
judgment should be granted only “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); Waterhouse v. District of Columbia, 298 F.3d 989, 991
(D.C. Cir. 2002). The moving party must identify “those portions
of the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, which
it believes demonstrate the absence of a genuine issue of
material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986) (internal quotations omitted). On the other hand, to
defeat summary judgment, the nonmoving party must demonstrate
that there is a genuine issue of material fact. Id. at 324. A
4
material fact is one that is capable of affecting the outcome of
the litigation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). A genuine dispute is one in which “the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party.” Id. Further, “[t]he evidence of the non-movant
is to be believed, and all justifiable inferences are to be
drawn in his favor.” Id. at 255.
IV. Analysis
A. Mr. McLean is Personally Liable
As an initial matter, Mr. McLean argues that he never
agreed to “personally pay for legal services” because he signed
the Engagement Agreement on behalf of Crumens, a corporation.
Def.’s Opp’n, ECF No. 55 at 5. Therefore, Mr. McLean contends
that he is “not liable for any legal fees.” Id. at 3-4.
Generally, a corporation is liable for its own debts. “The
general rule is that a corporation is regarded as an entity
separate and distinct from its shareholders.’” Ruffin v. New
Destination, LLC, 773 F. Supp. 2d 34, 40 (D.D.C. 2011)
(quoting Lawlor v. District of Columbia, 758 A.2d 964, 975 (D.C.
2000)). To that end, a corporation is treated as separate and
distinct from its owner, even if it is wholly owned by one
individual or entity. Alkanani v. Aegis Def. Servs., 976 F.
Supp. 2d 1, 8 (D.D.C. 2013) (citing Quinn v. Butz, 510 F.2d 743,
757 (D.C. Cir. 1975)). Consequently, a plaintiff attempting to
5
hold an individual liable for the actions or obligations of a
corporation must establish that there is some reason to
disregard the corporate form. See id.Here, however, Mr. McLean may not escape personal liability
because he signed the Engagement Agreement on behalf of a legal
entity that never existed. “In [the District of Columbia,] 3 an
agent who enters into a contract is held personally liable on
it, and he does not escape liability by purporting to act for a
fictitious or nonexistent principal.” Resnick v. Abner B. Cohen
Advert., Inc., 104 A.2d 254, 255 (D.C. 1954). Indeed, if an
individual acts on behalf of a corporation before incorporation,
the individual is jointly and severally liable for the
corporation’s debts. Robertson v. Levy, 197 A.2d 443, 447 (D.C.
1964)(holding an individual personally liable because the
corporation did not exist at the time of the contract and
therefore, the individual “assumed to act as a corporation
without any authority so to do”); see Geier v. Conway, Homer &
Chin-Caplan, P.C., 983 F. Supp. 2d 22, 38 (D.D.C. 2013)(citing
Robertson v. Levy for the proposition that “when an individual
purports to act on behalf of a corporation and the corporation
3 Federal courts apply the common law of the jurisdictions in
which they sit. See Tidler v. Eli Lilly & Co., 851 F.2d 418, 424
(D.C. Cir. 1988) (citing Erie R.R. v. Tompkins, 304 U.S. 64(1938)). The parties do not argue that any other jurisdiction's
law should apply.
6
has not yet been formed, the individual is liable for the debts
he incurred”).
Despite Mr. McLean’s arguments to the contrary, see Def.’s
Opp’n, ECF No. 55 at 3-4, it is clear that he was acting as a
principal on behalf of Crumens when he signed the Engagement
Agreement, see Def.’s Dep., ECF No. 51-3 at 40:7-10 (“Q: were
you acting as a principal on behalf of Crumens Limited when you
signed this letter? A: Yes.”); see E.A., ECF No. 51-2 at 6 (Mr.
McLean’s signature on behalf of Crumens). And it is undisputed
that Crumens did not exist at the time Mr. McLean signed the
Engagement Agreement. Indeed, Crumens never existed as a
corporate entity. See, e.g., Def.’s Dep., ECF No. 51-3 at 29:10-
18 (“Q: Did Crumens Limited ever have any office space? A: No.
Q: Did it ever have any bank accounts? A: No. Q: Did it ever
have any employees? A: No. Q: Did it ever have any funding? A:
No.”); Def.’s Interrog., ECF No. 51-5 at 18 (“Defendant does not
know the current status, if any, of Crumens, Ltd . . . .
Defendant believes that Crumens, Ltd. is not an operating
entity. At the time the engagement letter was signed, Crumens,
Ltd., was in the process of formation . . . .”).
Therefore, because the record establishes that: (1) Mr.
McLean signed the Engagement Agreement on behalf of Crumens; and
(2) Crumens did not exist at that time, Mr. McLean may not
“escape liability” for Crumen’s debts. Resnick, 104 A.2d at 255.
7
B. Mr. McLean is Liable for Breach of Contract
W&S argues that it is entitled to summary judgment because
Mr. McLean agreed to pay the law firm for its legal services and
failed to do so. Pl.’s Mot., ECF No. 51 at 11-12. 4 Mr. McLean
puts forward several non-meritorious arguments, all of which are
addressed below. See Def.’s Opp’n, ECF No. 55.
Under District of Columbia law, a plaintiff may prevail on
a breach of contract claim if it establishes: “‘(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 breach.’” CapitalKeys, LLC v. Democratic Republic of
Congo, 278 F. Supp. 3d 265, 285 (D.D.C. 2017) (quoting Francis
v. Rehman, 110 A.3d 615, 620 (D.C. 2015)).
First, to prove there was a valid contract between the
parties, W&S must establish “‘mutual assent of the parties to
all the essential terms of the contract.’” Id. (quoting Duffy v.
Duffy, 881 A.2d 630, 633 (D.C. 2005)). The Engagement Agreement
set forth the essential terms of the contract: the scope of
4 W&S also argues that it is entitled to summary judgment on an
“account stated” theory. Pl.’s Mot., ECF No. 51 at 8-11.
Essentially, it argues that Mr. McLean agreed to pay a stated
sum of money. See id. Because the Court agrees that Mr. McLean
breached his contract with W&S, the Court need not reach this
argument. Furthermore, it appears this “account stated” argument
is a separate cause of action that was not plead in the
complaint. See Compl., ECF No. 1; Corp. Sys. Res. v. Washington
Metro. Area Transit Auth., 31 F. Supp. 3d 124, 140 (D.D.C.
2014)(analyzing an account stated claim).
8
W&S’s legal services, the associated fees, Mr. McLean’s
obligations in paying for W&S’s services, and W&S’s obligations
in representing Mr. Warneck. See E.A., ECF No. 51-2. By signing
the Engagement Agreement, Mr. McLean “accepted and agreed to”
the essential terms therein. CapitalKeys, 278 F. Supp. 3d at
285; see E.A., ECF No. 51-2 at 6; Def.’s Dep., ECF No. 51-3 at
39:16-21, 40:7-10 (agreeing he signed the Agreement).
Mr. McLean does not dispute that he signed the Engagement
Agreement. See generally Def.’s Opp’n, ECF No. 55. Instead, he
argues there was no contract because the Engagement Agreement
was merely “an agreement that, if certain commercial
transactions, which Defendant had discussed with Thomas Buchanan
. . . were to come to fruition, Crumens Ltd. would be formed and
would pay for very carefully delineated and prescribed legal
services . . . .” Id. at 4. Thus, Mr. McLean essentially argues
that any contract with W&S was subject to a condition precedent
that “certain commercial transactions” come to fruition. See id.
Because the “deal” never materialized, Mr. McLean contends that
the contract was never formed. See Def.’s Interrog., ECF No. 51-
5 at 20 (“The transaction which was to provide funds . . .,
and/or provide for payment of billings of Plaintiff, did not
close out and no funds were available. Defendant did not
contract with Plaintiff.”).
9
No reasonable jury could agree. There is no language in the
unambiguous Engagement Agreement supporting Mr. McLean’s
argument that the contract was contingent on a condition
precedent. See E.A., ECF No. 51-2. As discussed, the Engagement
Agreement clearly states that “Crumens Ltd. has agreed to pay
[Mr. Warneck’s] costs and legal expenses in connection with the
litigation.” Id.
Regardless, Mr. McLean relies on emails between himself and
Mr. Buchanan to support his argument that the parties had a
“mutual understanding” that there was “never any agreement”
because payment was “contingent” on “consummation of a ‘deal.’”
Def.’s Opp’n, ECF No. 55 at 5. 5 However, the record clearly
contradicts his argument and Mr. McLean’s own conduct after
signing the contract belies his contentions. See CapitalKeys,
278 F. Supp. 3d at 286 (considering the parties’ conduct post-
5 W&S argues that the Court may not consider parol evidence. See
Reply, ECF No. 71 at 5-6. Not so. “[O]rdinarily conditions
precedent to a contract must be strictly and literally fulfilled
and that one of the exceptions to the Parol Evidence Rule
permits the introduction of outside evidence to show the
existence of an unfulfilled condition precedent to liability.”
Rowe v. Shehyn, 192 F. Supp. 428, 431 (D.D.C 1961)(discussing an
exception to that general rule not applicable here); Blackman v.
Hustler Magazine, Inc., 620 F. Supp. 1501, 1513 (D.D.C.
1984), aff'd in part, rev'd in part on other grounds, 800 F.2d
1160 (D.C. Cir. 1986) (“Under the law of . . . the District of
Columbia, an oral condition precedent to a written contract may
be established by parol evidence.”)(citing Mark Keshishian &
Sons, Inc. v. Washington Square, Inc., 414 A.2d 834 (D.C. App.
1980)).
10
contract). For example, Mr. McLean repeatedly emailed W&S,
assuring the firm that it “will be paid as promised.” Def.’s
Ex., ECF No. 55-1 at 104. At one point, he also stated that he
would be “happy” to “guarantee payment.” Id. at 95. The Court
has read the hundreds of pages of emails that Mr. McLean
attached to his memorandum, see ECF Nos. 55-1, 55-2, and 55-3,
and it is apparent that Mr. McLean’s references to another
“deal” were offered as excuses for his months-long delay in
paying W&S. See, e.g., ECF No. 55-1 at 114 (Email from Mr.
McLean: “I am sorry it is taking so long.”); id. at 154 (Email
from Mr. McLean: “If the wire is not on the way to you tomorrow
I will liquidate securities and send [money]”); see also
Buchanan Decl., ECF No. 51-7 ¶ 4 (“Each and every week . . . Mr.
McLean advised that payment was forthcoming. His usual
explanation was that ‘the deal’ was about to close”). Judging by
the sheer volume of emails W&S sent Mr. McLean to collect
payment and the lack of factual support for Mr. McLean’s
contentions, no reasonable jury could believe that W&S “knew and
acknowledged that any and all payments for legal services were
to be made from funds resulting from transactions for which the
Defendant acted solely as a facilitator.” Def.’s Opp’n, ECF No.
55 at 5. Finally, Mr. McLean never objected to an invoice as
premature or inappropriate in light of the deal not
materializing. McLean Dep., ECF No. 51-3 at 45:10-13.
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Second, the parties’ valid Engagement Agreement obligates
Mr. McLean to compensate W&S for the legal services performed
pursuant to the Agreement. See CapitalKeys, 278 F. Supp. 3d at
286. For example, the agreement requires that Mr. McLean pay the
firm’s fees, as set forth in paragraph two, within thirty days
of receiving an invoice. E.A., ECF No. 51-2 at 2-3.
Nonetheless, Mr. McLean argues that he had no obligation to
pay W&S. First, he contends that W&S “never sought payment from
or made any demand on Defendant until months had elapsed without
payment” and that he never “received any information relating to
or regarding legal services that Plaintiff was performing.”
Def.’s Opp’n, ECF No. 55 at 5. Although Mr. McLean did not cite
specific pages in the record, the Court read the hundreds of
pages that Mr. McLean attached to his memorandum. 6 A reasonable
jury could not agree with Mr. McLean’s arguments because there
is no factual support for them. The record establishes that W&S
incessantly contacted him to collect payment. See generally
Def.’s Exs., ECF Nos. 55-1, 55-2, 55-3 (over one hundred pages
of emails requesting payment). Furthermore, it is abundantly
clear that Mr. McLean received and acknowledged receiving W&S’s
6 Despite having done so, it is not the Court's duty to search
through Mr. McLean’s lengthy exhibits. See Potter v. District of
Columbia, 558 F.3d 542, 553 (D.C. Cir. 2009) (Williams, J.,
concurring) (“[J]udges ‘are not like pigs, hunting for truffles
buried in briefs’ or the record.” (quoting United States v.
Dunkel, 927 F.2d 955, 956 (7th Cir. 1991))).
12
invoices. See, e.g., Def.’s Ex., ECF No. 55-1 at 87-89 (email
discussion between Mr. McLean and W&S regarding April and May
2012 invoices).
Mr. McLean also argues that the legal services W&S provided
were outside of the scope of the Engagement Agreement and thus,
he has no obligation to pay. See Def.’s Opp’n, ECF No. 55 at 4-
5; see also Def.’s Interrog., ECF No. 51-5. To the contrary, the
Engagement Agreement states that “the scope of our engagement
will be limited to the representation of [Mr. Warneck] in the
litigation. We have agreed that our present engagement is
limited to performance of services related to the litigation.”
E.A., ECF No. 51-2 at 2. The Agreement goes on to define
“litigation” as “potential litigation involving the Department
of Justice, the Department of Transportation, Creditors of
Direct Air, and other matters relating to [Mr. Warneck’s]
employment at Direct Air.” Id. The hundreds of pages of billing
records Mr. McLean included as exhibits fully support that W&S
limited its representation to services “related to the
litigation.” See, e.g., Def.’s Exs., ECF No. 55-1 at 7-86, 160-
195; ECF No. 55-2 at 25-41. Moreover, despite receiving invoices
for almost a year, Mr. McLean never objected to W&S’s
representation or invoices. See generally Def.’s Exs., ECF Nos.
55-1, 55-2, and 55-3; Def.’s Dep., ECF No. 51-3 at 45:10-13 (“Q:
13
When you received any of [the invoices] did you ever challenge
any of the services rendered in those bills? A: No.”).
Therefore, despite Mr. McLean’s arguments to the contrary,
the record establishes that Mr. McLean received and accepted
W&S’s invoices. As such, no reasonable jury could find that Mr.
McLean was not obligated to pay W&S for its legal services. See
Ristau v. Madhvani, 1991 WL 283666, at *1-2, 4 (D.D.C. Dec. 20,
1991) (ruling in favor of attorney on breach of contract claim
because, among other reasons, the “defendants have never claimed
that [the attorney's] performance of the work was in any way
unsatisfactory”).
Third, it is undisputed that Mr. McLean did not make any
payment toward the amount he was obligated to pay. Def.’s Dep.,
ECF No. 51-3 at 47:6-9 (“Q: Would you agree to date, Mr. McLean,
that you have paid none of the Winston & Strawn legal bills? A:
Yes, sir.”).
Finally, W&S “‘has been deprived of the use of the money
withheld’ and has incurred damages as a result of Defendants'
breach.” CapitalKeys, 278 F. Supp. 3d at 286 (quoting Bragdon v.
Twenty–Five Twelve Assocs. Ltd. P'ship, 856 A.2d 1165, 1171
(D.C. 2004)). Having established a valid contract and