In Re: Pillsbury Winthrop Shaw Pittman LLP

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
In re: )
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CAPITOL HILL GROUP, ) 02-bk-359 (Chapter 11)
)
Debtor. )
)
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PILLSBURY WINTRHOP )
SHAW PITTMAN LLP, )
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Appellant, )
)
v. ) 11-cv-51 (RCL)
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CAPITOL HILL GROUP, )
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Appellee. )
)
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
We come now to the seventh year in a bitter feud between appellant Pillsbury Winthrop
Shaw Pittman LLP (“Shaw Pittman”) 1 and appellee Capitol Hill Group (“CHG”) over attorneys’
fees and services arising out of a Chapter 11 bankruptcy proceeding commenced nearly a decade
ago, during which Shaw Pittman served as legal counsel to CHG. Shortly before Shaw Pittman
withdrew as counsel, the parties reached an agreement that permitted CHG to delay full payment
of Shaw Pittman’s fees beyond the hearing date for confirmation of CHG’s reorganization plan.
In exchange for this extension, CHG promised that it would not challenge Shaw Pitman’s fee
applications in the bankruptcy proceeding. Despite this agreement, the matter before the Court
1
At the time of its representation, Shaw Pittman had not yet merged with Pillsbury Winthrop, and was
known only as Shaw Pittman.
today represents the latest skirmish in a prolonged dispute between the parties over attorneys’
fees. The fighting began when CHG, having agreed not to object to Shaw Pittman’s fees, raised
objections to those fees. It continued when Shaw Pittman sought an unnecessary and overbroad
declaratory judgment. It escalated when CHG, having been warned by the bankruptcy court that
any future claims against Shaw Pittman would be barred by res judicata, brought new claims
outside the bankruptcy proceedings. And now Shaw Pittman—unsatisfied with only obtaining
dismissal of CHG’s latest claims—seeks to extract additional fees from CHG. Having failed in
this endeavor below, Shaw Pittman appeals from entry of summary judgment in favor of CHG in
its adversary proceeding brought to collect fees the firm incurred while defending against a
malpractice suit brought against it by CHG in 2008. On appeal, Shaw Pittman argues that the
parties’ original agreement extends to the claims of malpractice and requires reimbursement. For
the reasons set forth below, the Court finds that the bankruptcy court properly interpreted and
applied the agreement and therefore affirms its dismissal of the adversary proceeding.
II. BACKGROUND
While the parties have been engaged in protracted litigation for a number of years, to
spare the reader and in the interest of brevity, the Court here recounts only those events which
are necessary to its determination of the issues on appeal.
A. The Bankruptcy Proceedings
Following entry into Chapter 11 proceedings, CHG retained Shaw Pittman as counsel
pursuant to an engagement approved by the bankruptcy court. Statement of Undisputed Material
Facts ¶ 1, R. at 22, Jan. 10, 2011 [2] (“Stmt. of Facts”). 2 Shaw Pittman represented CHG in
these proceedings from early 2002 until approximately January 7, 2004, when Shaw Pittman
2
CHG filed a response to Shaw Pittman’s statement of undisputed facts before the bankruptcy court in
which it concurred with certain statements by Shaw Pittman and disputed others. Unless otherwise stated, citations
to Shaw Pittman’s statement are only to those facts which CHG does not contest.
2
withdrew as counsel. Id. Following nearly two years of litigation, CHG’s restructuring plan was
scheduled for confirmation by Judge Teel of the bankruptcy court on December 15, 2003. Stmt.
of Facts ¶ 3. Pursuant to 11 U.S.C. § 1129(a)(9) of the bankruptcy code, Shaw Pittman was
entitled to be paid in full for its services rendered at that time. Id. So begins our tale.
1. The Fee Agreement and Subsequent Disputes
Prior to the deadline, CHG’s new counsel exchanged a series of emails with a Shaw
Pittman attorney, the substance of which would form an agreement concerning Shaw Pittman’s
fees (the “Fee Agreement”). In the first email, CHG offered to pay $850,000 of Shaw Pittman’s
outstanding fees and to provide a lien in favor of Shaw Pittman for the remaining fees, pending
approval of financing for CHG’s restructuring. In re Capitol Hill Group, 313 B.R. 344, 353 n.5
(D.D.C. 2004) (“In re CHG”). Shaw Pittman accepted this proposal but inserted a new
condition, stating “I will not be fighting with CHG about my fee applications (trust me, not that I
am concerned; and I am sure you probably know, any fights about fee applications would be an
expense to be paid by CHG).” Id. at 353 n.6. CHG responded “It’s a deal,” and then added
another condition concerning discounts to Shaw Pittman’s proposed fees. Id. at 353 n.7. The
final email from Shaw Pittman rejected the proposed discount, and requested confirmation that
all of the firm’s fees would be paid. Id. at 353 n.8. Following this exchange, CHG appeared
before the bankruptcy court and requested confirmation of a reorganization plan that
incorporated the two-step payment structure envisioned in the emails.
Shortly thereafter, Shaw Pittman filed two fee applications for services rendered during
the bankruptcy proceedings, Stmt. of Facts ¶ 6, and CHG—having apparently forgotten the Fee
Agreement—filed various objections to those fee applications. R. at 111. 3 In particular, CHG
3
Citations to “R. at __” throughout this opinion refer to the adjudicative record filed with this Court at the
inception of this appeal. See generally Bankruptcy Record, Jan. 10, 2011 [2].
3
objected to “the totality of fees billed by Shaw Pittman,” and raised several concerns at
subsequent hearings before Judge Teel. Id. Relying on the Fee Agreement, Judge Teel
overruled CHG’s objections, and on April 20, 2004 issued an order entitling Shaw Pittman to
collect the fees and expenses that accrued prior to December 15, 2003. App. at 278. 4 This order
was joined with several others and appealed to this Court. Stmt. of Facts ¶ 8.
On appeal, this Court held that when CHG declared “it’s a deal” in response to Shaw
Pitman’s request that it not fight with the firm about fee applications, CHG did in fact waive its
right to object to those fee applications. As this Court explained: “the emails unambiguously
show the that final email from Shaw Pittman served to clarify the terms of [its prior email] as not
including any . . . discount and requesting confirmation from CHG . . . . CHG’s failure to
respond show that at the conclusion of the emails, Shaw Pittman had extended an offer to CHG
but CHG had not accepted that offer.” In re CHG, 313 B.R. at 353. This Court then observed
that the law required CHG to represent to the bankruptcy court—when requesting approval of its
reorganization plan—that its administrative creditors (including Shaw Pittman) had been paid in
full or had otherwise agreed not to receive full payment at the time of confirmation. It therefore
held that by incorporating the payment schedule from the email exchange into the confirmation
plan and not otherwise informing the bankruptcy court that Shaw Pittman had not been fully
paid, CHG had accepted the Fee Agreement through its own actions and silence. Id. at 354–55.
That Agreement included a “term prohibiting objections to Shaw Pittman’s fee applications” and
a provision which “required CHG to pay Shaw Pittman’s expenses in the event that CHG
attempted to object to any of Shaw Pittman’s fee applications.” Id. at 354 & 357. Based on
these provisions, the case was remanded to the bankruptcy court to execute the prior fee award
4
Citations to “App. at __” throughout this opinion refer to the appendix filed by Shaw Pittman with this
Court as part of its initial briefing. See generally Exs. 1–16 to Appellant’s Brief, Feb. 7, 2011 [10]. The pages of
this appendix are stamped “SP - - - -,” and the Court uses these stamps for page references.
4
and to calculate Shaw Pittman’s costs in defending against CHG’s objections—including the
costs of the appeal—and enter an award for those expenses. Id. at 358.
Following the appeal, the bankruptcy court entered a series of orders concerning payment
of Shaw Pittman’s fees. First, on December 1, 2004, Judge Teel granted Shaw Pittman’s motion
for attorneys’ fees and ordered CHG to compensate Shaw Pittman for, inter alia, “fee application
litigation fees and expenses” which it incurred during its defense of its initial fee application.
App. at 368. That order referenced an earlier hearing, at which Judge Teel explained:
[CHG] and Shaw Pittman had entered into a contract that there
would be no objections to Shaw Pittman’s fee applications. And
Shaw Pittman was entitled to enforce that contract. It was entitled
to avoid any litigation by way of objection by [CHG] to its fee
applications. Shaw Pittman, as a matter of right, stood up for its
contractual right not to have any objections made to its fee
application and pursued that contractual right. And in doing so, it
incurred attorneys’ fees and expenses. . . . And as I’ve already said,
the reason the fees were so high was because [CHG] continued to
defend against the contract’s existence, raising often frivolous
legal arguments, injecting factual questions into the proceeding
that were stumbling blocks to a rapid disposition of the dispute.
Id. at 324–25. The bankruptcy court subsequently entered three additional orders granting Shaw
Pittman’s later fee applications. Id. at 422–27.
2. The Zoning Appeal
Prior to these fee disputes and throughout the bankruptcy proceedings, Shaw Pittman
acted as counsel for CHG in several capacities, one of which was the representation of an
affiliated entity—Capitol Hill Healthcare Corporation (the “Nursing Center”)—in a zoning
dispute. Id. at 760. Under the Certificates of Occupancy granted to the Nursing Center by the
D.C. Zoning Administrator, CHG was obligated to maintain a 1:5 ratio between the number of
parking spots it provided for the Center and the number of beds in the facility. Id. at 762. This
ratio permitted CHG to operate the Nursing Center while maintaining only 25 parking spots. On
5
March 26, 2003 the Zoning Administrator issued new Certificates to the Nursing Center that
maintained the 1:5 ratio rather than—as had been proposed—instituting a 1:1 ratio between
parking spots and beds. Id. Shortly thereafter, a neighborhood association appealed to the D.C.
Board of Zoning Adjustment (“BZA”) requesting that it reverse the Administrator’s decision and
amend the Nursing Center’s Certificates to mandate a 1:1 ratio (the “BZA Appeal”). Id. at 762.
Shaw Pittman represented the Nursing Center throughout the BZA Appeal, id. at 760,
until it moved before the bankruptcy court to withdraw as CHG’s counsel on the first day of
2004. Id. at 763. Six days later—before the bankruptcy court had acted on Shaw Pittman’s
motion—the BZA orally ruled in favor of the Nursing Center and affirmed the Administrator’s
issuance of Certificates that included only a 1:5 ratio. Id. One day later, the bankruptcy court
granted Shaw Pittman’s motion and the firm withdrew from its representation of CHG,
informing CHG that Shaw Pittman would cease to represent the Nursing Center in the BZA
Appeal. Id. 5 However, Shaw Pittman never informed the BZA that it had withdrawn as counsel
to the Nursing Center. Id. Nearly two months later—well after Shaw Pitman’s withdrawal—the
BZA sua sponte and without prior warning reversed course and in a written opinion voted to
reform the Nursing Center’s Certificates to reflect a 1:1 ratio of parking spots to beds. Id. The
only representative of CHG that was served with the BZA’s revised opinion was an attorney at
Shaw Pittman. Id. at 782. Shaw Pittman, however, did not pass on the BZA’s ruling at the time,
and CHG only learned of the written opinion from a third party in March of 2005—nearly six
months after the BZA’s decision and well beyond the time for any appeal by CHG. Id. at 764.
5
One point of contention before the bankruptcy court in this adversary proceeding was whether Shaw
Pittman’s actions—which CHG alleged were substandard—occurred after December 15, 2003 and thus would not
be subject to the terms of the Fee Agreement. Brief of Appellee Capitol Hill Group 10–11, Mar. 8, 2011 [11]
(“CHG Br.”). This question is critical, according to CHG, because if those acts are not subject to the Fee
Agreement, Shaw Pittman cannot use the Agreement to seek fees here. Id. However, because the Court holds that
Shaw Pittman cannot seek any reimbursement under the Fee Agreement—regardless of when the acts in question
occurred—the Court does not concern itself with the particular timing of the relevant events in the BZA Appeal.
6
B. The Malpractice Action
Subsequent to both the Fee Agreement and the BZA Appeal, quarrels between CHG and
Shaw Pittman continued for almost two more years. Clearly not having had enough in the
bankruptcy proceeding, CHG decided to expand the dispute and bring the fight to a new forum—
Superior Court. In a new complaint, CHG asserted that Shaw Pittman committed malpractice
and breached both its fiduciary duties to, and its engagement contract with, CHG through
substandard representation of the Nursing Center during the BZA Appeal (the “malpractice
claim”). See generally id. at 452–60. In particular, CHG alleged that Shaw Pittman failed to
raise certain arguments concerning historical designations which may have shielded CHG from
the BZA’s adverse opinion, and then waived CHG’s right to appeal by failing to promptly notify
CHG of the BZA’s second decision. Id. at 456–57. In light of these missteps, CHG sought $50
million in damages from economic losses caused by the BZA’s adverse decision. Id. at 457.
Shaw Pittman removed CHG’s suit to this Court and argued that the malpractice claim
arose out of the bankruptcy dispute and should be dismissed under the doctrine of res judicata.
In a September 2008 opinion, this Court agreed and dismissed CHG’s complaint. Capitol Hill
Grp. v. Pillsbury Winthrop Shaw Pittman, LLP, 574 F. Supp. 2d 143, 153 (D.D.C. 2008)
(“Capitol Hill I”). Specifically, this Court held that the malpractice claim was precluded because
it involved the same facts and circumstances as the prior bankruptcy disputes and thus could
have been raised in that proceeding. Id. at 149–51. On appeal, the D.C. Circuit observed that
Judge Teel had been in a position to evaluate the malpractice allegations and affirmed, holding
that “fee litigation in the bankruptcy proceeding preclude[s] later malpractice claims against the
bankruptcy professionals to which the fees had been awarded.” Capitol Hill Grp v. Pillsbury,
Winthrop, Shaw, Pittman LLC, 596 F.3d 485, 490–91 (D.C. Cir. 2009) (“Capitol Hill II”).
7
C. This Adversary Proceeding
Not wanting to be outdone by CHG’s latest offensive in the parties’ feud, Shaw Pittman
played Hatfield to CHG’s McCoy and struck back by returning to the bankruptcy court to
institute yet another adversary proceeding. R. at 1–3. The gravamen of Shaw Pittman’s
complaint is that CHG’s malpractice claim is a breach of the parties’ original Fee Agreement.
Id. at 3. A few months into this latest melee, Shaw Pittman moved for summary judgment,
arguing that “CHG [is] legally obligated to further compensate Shaw Pittman for the fees and
expenses incurred in defending against challenges by CHG to the services rendered by Shaw
Pittman.” Id. at 106. CHG returned fire, objecting that Shaw Pittman over-reads a Fee
Agreement that, by its own terms, extends to disputes over fee applications and not to separate
claims concerning the quality of the services provided by Shaw Pittman. Id. at 197–200.
In the opinion below, Judge Teel sided with CHG and held that the Fee Agreement could
not serve as a basis for recovering expenses incurred by Shaw Pittman in defending against
CHG’s malpractice claim. See generally Memorandum Decision re Plaintiff’s Motion for
Summary Judgment, R. at 526 (“Bk. Op.”). As Judge Teel explained, the Fee Agreement
prohibited CHG “from objecting to the pertinent fee applications on any ground, including based
on any alleged defect in Shaw Pittman’s services,” but did not “attempt to address whether
[CHG] was barred from seeking damages against Shaw Pittman for harm caused by any
malpractice.” Bk. Op. at 12. Thus, because the Fee Agreement “did not purport to release Shaw
Pittman from all claims that [CHG] might have against it,” id. at 14, it does not govern the
malpractice claim in which CHG “did not allege harm in the form of fees paid to Shaw Pittman
[but instead] alleged harm of an entirely different character, namely, substantial damages arising
from the BZA’s imposition of a requirement regarding parking spaces that adversely affected the
8
operations of [CHG].” Id. at 16–17. The bankruptcy court then instructed Shaw Pittman to
explain why summary judgment against it should not be entered. R. at 554–555. After Shaw
Pittman’s failed attempt to re-hash its earlier arguments, id. at 592–93, summary judgment was
entered on behalf of CHG. Id. at 595. Shaw Pittman, predictably, appeals.
III. STANDARD OF REVIEW
A decision on summary judgment by the bankruptcy court is reviewed de novo by the
district court. United States v. Spicer, 57 F.3d 1152, 1159 (D.C. Cir. 1995). This de novo review
includes both the bankruptcy court’s findings of fact and conclusions of law. Id. Summary
judgment in bankruptcy proceedings is governed by Bankruptcy Rule 7056, which incorporates
the standards found in Rule 56 of the Federal Rules of Civil Procedure. For a court to grant
dismissal under Rule 56, “the requirement is that there be no genuine issue of material fact.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). “A fact is ‘material’ if a dispute
over it might affect the outcome of a suit under the governing law.” Holcomb v. Powell, 433
F.3d 889, 895 (D.C. Cir. 2006). “An issue is ‘genuine’ if the evidence is such that a reasonable
jury could return a verdict for the non-moving party.” Doe v. IRS, 706 F. Supp. 2d 1, 5 (D.D.C.
2009) (citing Anderson, 477 U.S. at 248). Here, the relevant and material facts are largely
undisputed, and the resolution of this matter depends entirely upon the proper interpretation of
the Fee Agreement.
IV. ANALYSIS
Federal and state courts traditionally employ the so-called “American rule” in which
litigants pay their own attorneys’ fees, regardless of who wins and who loses, Alyeska Pipeline
Serv. Co. v. Wildersness Soc’y, 421 U.S. 240, 256 (1975), and the District of Columbia—whose
law governs this dispute—adheres to this practice. See Oliver T. Carr Co. v. United Techs.
9
Commc’ns Co., 604 A.2d 881, 883 (D.C. 1992) (“[T]his jurisdiction follows the American Rule
under which every party to a case shoulders its own attorneys’ fees . . . .”) (quotations omitted).
However, certain limited exceptions to the American rule exist; for example, a party may be
entitled to collect attorneys’ fees from the losing side by operation of statute or by contractual
agreement. Petrochem Insulation, Inc. v. NLRB, 240 F.3d 26, 35 (D.C. Cir. 2001). In other
circumstances, an award of attorneys’ fees may be warranted when one side acted in bad faith
by, for example, engaging in conduct sanctionable under Rule 11. Ass’n of Am. Physicians &
Surgeons, Inc. v. Clinton, 187 F.3d 655, 659 (D.C. Cir. 1999). Here, Shaw Pittman relies upon
two exceptions: first, it argues that the Fee Agreement struck between the parties extends to
CHG’s malpractice suit and thus requires CHG to reimburse Shaw Pittman for the cost of
defending against that action; second, Shaw Pittman contends that CHG acted in bad faith by
bringing a malpractice suit outside of the bankruptcy proceeding, and thus attorneys’ fees are
warranted. The Court addresses each of these arguments in turn.
A. The Fee Agreement is Inapplicable Here
The Court first turns to Shaw Pittman’s primary contention on appeal: that the Fee
Agreement, under which CHG agreed not to fight with Shaw Pittman about its fee applications,
extends to the malpractice claim brought by CHG outside of the bankruptcy proceedings and
thus obligates CHG to reimburse Shaw Pittman for the costs of defending itself against that
claim. SP Br. 13–17. Though overburdened with many levels of unnecessary complexity—an
unavoidable consequence of briefings by embittered and entrenched parties that have been
engaged in protracted and hostile litigation for nearly a decade—this issue is reducible to a
genuinely simple question: Was the malpractice claim a fight about fees as envisioned in the
Agreement? For the reasons set forth below, the Court finds that it was not.
10
1. The Scope of the Fee Agreement
“Interpretation of a contract, like statutory and treaty interpretation, must begin with the
plain meaning of the language.” AFGE, Local 2924 v. FLRA, 470 F.3d 375, 381 (D.C. Cir.
2006). The task of the Court in interpreting any contract—including the Fee Agreement here—is
to give effect to the parties’ intent, and where the language of the particular agreement or
provision is clear and unambiguous, the Court must assume that the meaning ordinarily ascribed
to the words used reflects the intentions of the parties. Pigford v. Schafer, 536 F. Supp. 2d 1, 10
(D.D.C. 2008) (citing Mesa Air Group, Inc v. Dep’t of Transp., 87 F.3d 498, 503 (D.C. Cir.
1996)). The Court will therefore not rely upon extrinsic evidence outside the language of the
contract unless the meaning of that particular agreement is facially uncertain. Nofziger
Commc’ns v. Birks, 989 F.2d 1227, 1230 (D.C. Cir. 1993).
The primary effect of the Fee Agreement is to bar CHG from disputing Shaw Pittman’s
fee applications in the bankruptcy proceeding. See supra Section II.A.1. The relevant provision
reads: “[Shaw Pittman] will not be fighting with CHG about [its] fee applications (trust me, not
that [Shaw Pittman is] concerned; and [Shaw Pittman is] sure [CHG] probably knows, any fights
about fee applications would be an expense to be paid by CHG).” In re CHG, 313 B.R. at 353
n.6 (quoting email exchange between counsel for Shaw Pittman and counsel for CHG). The
plain and clear meaning of this provision has been previously summarized by this Court: “CHG
cannot fight with Shaw Pittman over its fee applications.” Id. at 352; see also id. (finding clear
meaning of Fee Agreement to be “that CHG would not contest Shaw Pittman’s fee applications
for fees billed up to that point”). Nothing in the text of the Fee Agreement, however, purports to
waive any substantive rights of CHG beyond its right to dispute Shaw Pittman’s fee applications.
Thus, for example, if CHG were to learn tomorrow that Shaw Pittman, during the course of its
11
representation, had divulged CHG’s trade secrets to a competitor, nothing in the text of the
Agreement would bar CHG from seeking damages for any harm suffered as a result of that
improper disclosure. In other words, though it failed spectacularly, the Fee Agreement does in
fact have a specific, limited purpose: to ensure that Shaw Pittman could collect its fees in the
bankruptcy proceeding without significant objection or protracted litigation.
In arguing that the Fee Agreement should be understood more broadly, Shaw Pittman
places significant emphasis on the term “fight” in the relevant provision. According to Shaw
Pittman, the term “fight” encompasses any and all disputes related to, or that might otherwise
affect, Shaw Pittman’s ability to collect its fees. Following this line of thinking, Shaw Pittman
concludes that CHG’s malpractice suit “was a direct challenge to the services covered by the
[Fee Agreement] and for which Shaw Pittman sought compensation in its fee applications. It
was as much a fight over Shaw Pittman’s fee applications as were CHG’s prior objections and
other contests.” Brief of Appellant Pillsbury Winthrop Shaw Pittman LLP 14, Feb. 7, 2011 [10]
(“SP Br.”). On some level, Shaw Pittman is correct that “fight” reaches beyond formal
objections to Shaw Pittman’s fee applications within the bankruptcy proceeding and captures
other types of disputes over the firm’s fees. Thus, for example, if CHG had brought a separate
civil suit seeking return of some fees it had paid to Shaw Pittman on the ground that the firm had
double-billed CHG, the Court would have little trouble concluding that such a dispute would be
subject to the Fee Agreement. The Court therefore agrees with Shaw Pittman that “fight” covers
various forms of actions beyond a formal objection in the bankruptcy proceedings.
The Court cannot, however, accept the second step of Shaw Pittman’s reasoning, which
improperly stretches the Fee Agreement beyond its plain language to conclude that the
Agreement applies to other subjects beyond Shaw Pittman’s fees. As an initial matter, Shaw
12
Pittman improperly conflates a claim of harm derived from the services it provided with a
dispute over its fees. Nothing in the Fee Agreement addresses the quality of Shaw Pittman’s
services, or purports to waive CHG’s right to seek compensation for other harms—beyond the
payment of those fees—caused by such services. See Bk. Op. at 12 (“[T]he agreement did not
attempt to address whether [CHG] was barred from seeking damages against Shaw Pittman for
harm caused by any malpractice Shaw Pittman committed in the rendition of those services.”).
Had Shaw Pittman desired a waiver of all claims that CHG might have had against it, it could
have sought such a waiver from CHG. 6 It did not, however, and the Court will not now extend
the limited obligation found in the email exchange between the parties into a broader waiver of
substantive rights. Moreover, Shaw Pittman’s suggestion that the term “fight” expands the
subjects covered by the Fee Agreement ignores the plain language of the relevant provision, in
which “fight” is limited by the modifying clause which follows: about Shaw Pittman’s fee
applications. Even adopting Shaw Pittman’s proposed definition of “fight” as an “attempt to
prevent the success or effectiveness of,” SP Br. at 14 (quotations omitted), read in this context,
the Fee Agreement extends only to attempts to prevent the success of Shaw Pittman’s collection
of fees—not attempts to seek compensation for other harms caused by Shaw Pittman’s services.
Finally, as the term is commonly understood, a person only “attempts” that which he has the
specific intent to accomplish. United States v. Duran, 884 F. Supp. 577, 582 (D.D.C. 1995)
(citing Braxton v. United States, 500 U.S. 344, 349 (1991)). In other words, where a party
undertakes a particular act that has an incidental effect, it cannot be said that the party intended
6
Indeed, near the end of the bankruptcy proceedings, and prior to the malpractice suit, Shaw Pittman
sought assurances from the bankruptcy court that CHG would not bring any new claims against it. App. at 434–35.
In addressing these concerns, Judge Teel noted that any objection to Shaw Pittman’s services would be barred by res
judicata, id. at 435–36, and informed Shaw Pittman that “[i]f [CHG] were to pursue claims against you after this
adversary proceeding is dismissed, you’ve got the defense of res judicata, you can file your Rule 11 motion, file a
motion to extend the time to answer, and if they don’t dismiss in the face of a valid defense of res judicata, then
you’re back in the sanctions business.” Id. at 436. Notably, while Judge Teel indicated that Shaw Pittman might
seek sanctions in any separate dispute, he did not suggest that such a suit would be barred by the Fee Agreement.
13
to accomplish—or attempted—that effect. The Court therefore does not read the language of the
Fee Agreement as extending to actions taken by CHG which might have the incidental effect of
undermining Shaw Pittman’s pursuit of its fees but which were not so intended.
In sum, the language of the Fee Agreement plainly bars CHG from raising direct
challenges to Shaw Pittman’s collection of fees arising out of the bankruptcy proceedings, but
cannot fairly be read to shelter Shaw Pittman from any separate actions by CHG that might have
an effect on the fee applications but are not specifically intended to overturn them. 7 This reading
of the Agreement is consistent with its prior application, which has only been in the context of
direct challenges to Shaw Pittman’s fee applications. See supra Section II.A.1. Having
determined that the Fee Agreement applies only to disputes about Shaw Pittman’s fees—and not
to either claims regarding Shaw Pittman’s services or litigation which could incidentally affect
the collection of fees—the Court now turns to whether CHG’s malpractice claim does in fact
constitute a dispute about Shaw Pittman’s fees.
2. The Malpractice Claim is Not a Dispute over Fees
Applying the Fee Agreement as defined above, there is no doubt that CHG’s malpractice
claim against Shaw Pittman does not fall within the scope of the relevant provision. As an initial
matter, the suit itself does not challenge the award of fees to Shaw Pittman in the bankruptcy
proceeding, nor does it seek compensation for the fees paid. Nowhere in its complaint does
CHG indicate that Shaw Pittman had improperly received payment for its representation of
CHG’s interests during the BZA Appeal; indeed, CHG notes that Shaw Pittman received
compensation for its services during the BZA Appeal and yet does not object the payment of
7
Of course, as this Court previously determined, such separate actions may be precluded because of their
relation to the bankruptcy proceedings, see supra Section II.B, but that is because of the effect such later
proceedings might have on the bankruptcy court’s prior judgment, and not due to the existence of the Fee
Agreement. See infra Section IV.A.3.
14
those fees. App. at 455. Similarly, CHG does not contend that the payment of Shaw Pittman’s
fees in the bankruptcy proceeding caused CHG any harm, nor does the prayer for relief in the
complaint request either the return of the fees paid to Shaw Pittman or damages for the payment
of such fees. See generally id. at 459–60.
Rather than objecting to the fees paid to Shaw Pittman in the bankruptcy proceeding, the
malpractice complaint focuses on specific acts of Shaw Pittman which allegedly harmed CHG.
In particular, CHG alleges two deficiencies in Shaw Pittman’s representation of CHG during the
BZA appeal: Shaw Pittman’s failure to argue on appeal that certain D.C. zoning practices
concerning historic designations prohibited the BZA from imposing any additional parking
requirements on the Nursing Center, and Shaw Pittman’s substantial delay in informing CHG
that the original outcome of the BZA Appeal had been reversed and was now adverse to CHG’s
interests. Id. at 455–57. According to the malpractice complaint, these alleged failings on the
part of Shaw Pittman harmed CHG because they resulted in the adverse outcome of the BZA
Appeal which in turn required CHG to provide significantly more parking spots than it believed
were necessary prior to that adverse decision. Id. at 455–56. This substantial new requirement
had a negative economic impact on CHG, as it was unable to expand its operations in the area
due to the lack of available parking spaces and yet was left holding property below market value
due to the significant increase in the parking requirements. Id. at 456–58. In short, CHG’s suit
in Superior Court did not challenge Shaw Pittman’s previous collection of fees, nor did it request
the return of those fees; instead, the malpractice suit sought recovery for a harm—independent
from the fees paid to Shaw Pittman—that was allegedly caused by Shaw Pittman’s inadequate
representation of CHG. Such an action does not constitute a fight about Shaw Pittman’s fee
applications.
15
This conclusion is further substantiated by the fact that neither this Court nor the D.C.
Circuit relied upon the Fee Agreement in dismissing CHG’s malpractice suit. If the Fee
Agreement was in fact so broad as to preclude CHG’s malpractice claim, such an argument
would have presented a simple defense to the malpractice action and obviated the need for this
Court to engage in any preclusion analysis. Yet neither court reached this conclusion, despite
this Court’s explicit consideration of the Fee Agreement’s effect on the application of res
judicata. Capitol Hill I, 574 F. Supp. 2d at 354. This is because the core purposes of the Fee
Agreement was the preservation of Shaw Pittman’s right to collect its fees in the bankruptcy
proceeding—a bargain it received, Bk. Op. at 16—and not the prevention of suits alleging that
Shaw Pittman had provided inadequate representation and therefore harmed CHG.
3. Principles of Res Judicata Do Not Alter this Analysis
Perhaps recognizing that the plain language of the Fee Agreement does not support its
proposed interpretation, Shaw Pittman relies extensively on this Court’s application of res
judicata to dismiss the malpractice claim. In brief, Shaw Pittman argues that this Court’s
disposal of CHG’s suit demonstrates that the malpractice claim is merely a re-hash of the prior
fee disputes and should therefore be subject to the Fee Agreement. SP Br. at 10–14.
As an initial matter, there is no reason for the Court to look to the subsequent treatment of
CHG’s malpractice claim at all. As set forth above, the language of the Fee Agreement simply
cannot be read as a waiver of CHG’s right to bring suit alleging that Shaw Pittman was negligent
or deficient in its representation of the Nursing Center and therefore caused harm to CHG
through the imposition of substantially greater parking requirements. And because the plain
meaning of the Fee Agreement is clear and unambiguous, this Court need not look to extrinsic
evidence beyond the Fee Agreement—such as the resolution of the malpractice claim—to define
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the scope of the relevant provision. See Transmission Agency of N. Cal. v. FERC, 628 F.3d 538,
547 (D.C. Cir. 2010) (holding that ambiguity in contract interpretation only arises “where an
agreement is reasonably susceptible to different constructions or interpretations”) (quotations
omitted). However, not wanting to provide fertile ground upon which the parties might prolong
their feud, the Court below explains why its dismissal of the malpractice claim based on res
judicata does not alter the proper interpretation of the Fee Agreement.
Res judicata, also know as claim preclusion, is a legal doctrine that bars the re-litigation
of claims that were—or should have been—previously litigated. Under the doctrine, “a
subsequent lawsuit will be barred if there has been prior litigation (1) involving the same claims
or cause of action, (2) between the same parties or their privies, and (3) there has been a final,
valid judgment on the merits, (4) by a court of competent jurisdiction.” Smalls v. United States,
471 F.3d 186, 192 (D.C. Cir. 2006). The scope of such preclusion extends not only to claims
that were previously raised in a prior legal proceeding, but also to “matters that should have been
raised in an earlier suit.” NRDC v. EPA, 513 F.3d 257, 261 (D.C. Cir. 2008).
A key dispute during the malpractice proceeding—and one Shaw Pittman relied upon
here—was whether the first element of claim preclusion was satisfied; in other words, whether
the malpractice claim involved the “same claims or causes of action” as the earlier fee disputes.
Despite speaking in terms of “claim” or “cause of action,” this element is not concerned with the
legal theories set forth in each proceeding, see Rodriguez v. CIS, 605 F. Supp. 2d 142, 147
(D.D.C. 2009) (“[A]n action based on the same nucleus of facts . . . is said to share the same
cause of action, and therefore is barred by res judicata, even if the latter action is predicated on a
different legal theory.”); instead—as this Court explained—the central question is whether there
exists an identity of issues, which occurs when “the cases are based on the same ‘nucleus of
17
facts.’” Capitol Hill I, 574 F. Supp. 2d at 149 (quoting Page v. United States, 729 F.2d 818, 820
(D.C. Cir. 1984)). In the case of CHG’s malpractice claims, this Court found that “all three
counts . . . arose from the same nucleus of facts as the fee application disputes that were
previously decided in bankruptcy court.” Id. Thus, “because CHG’s claim for legal malpractice
arises from the same facts as Shaw Pittman’s claim for fees, CHG should have raised these
claims during the bankruptcy fee disputes” and its failure to do so precluded it from subsequently
raising those claims. Id. at 149–50; see also Rodriguez, 605, F. Supp. 2d at 147 (“Res judicata
bars a claim that could have been brought in a prior suit . . . but was not.”). Similarly, the D.C.
Circuit affirmed this Court’s application of claim preclusion after explaining that “there was an
adversarial process before the bankruptcy court and the bankruptcy court was in a position to
judge the quality of Shaw Pittman’s services.” Capitol Hill II, 569 F.3d at 491. The application
of res judicata to the malpractice claim was therefore a necessary result of the fact that CHG
could have raised its allegations in the context of the bankruptcy proceeding, see Kelly v.
NovaStar, 637 F. Supp. 2d 34, 38 (D.D.C. 2009) (“The doctrine of res judicata embodies the
principle ‘that a party who once has had a chance to litigate a claim before an appropriate
tribunal usually ought not to have another chance to do so.’”) (quoting SBC Commc’ns, Inc. v.
FCC, 407 F.3d 1223, 1229 (D.C. Cir. 2005)—a determination that is entirely distinct from the
question of whether the malpractice claim itself constitutes a “fight” about fees. 8
8
Shaw Pittman also makes much of this Court’s concern when addressing the malpractice claim that such a
claim could nullify the bankruptcy court’s prior holdings concerning attorneys’ fees. SP Br. at 16–17. However, the
“nullification” that both this Court and the D.C. Circuit were concerned with was not the nullification of fee awards
made pursuant to the Fee Agreement, but rather the nullification of Judge Teel’s prior determination that Shaw
Pittman had in fact provided adequate services. See Capitol Hill II, 569 F.3d at 492 (“[T]he bankruptcy judge also
made oral findings that Shaw Pittman’s services were professional . . . . To allow CHG to litigate malpractice claims
against Shaw Pittman now, based on the same representation, would nullify the initial judgment.”); see also Capitol
Hill I, 574 F. Supp. 2d at 149 (noting that “the bankruptcy court did make a finding that Shaw Pittman was entitled
to fees in part because the representation it provided was competent and professional”). Thus, this Court dismissed
CHG’s malpractice claim not because it was another “fight” about fees, but because Judge Teel had already
evaluated the quality of services performed by Shaw Pittman, see Capitol Hill I, 574 F. Supp. 2d at 149 (“[T]he
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The absence of any discussion of the Fee Agreement in the malpractice dispute
underscores this crucial distinction between (1) whether there was any factual overlap between
the fee disputes and the malpractice claim and (2) whether the fee disputes and the malpractice
claim are the same legal claim. Had this Court actually determined that CHG’s malpractice
claim was—as suggested by Shaw Pittman—part of a “scheme” to subvert the Fee Agreement
and merely constituted another fee dispute in disguise, this Court could have availed itself of a
much easier and more direct method for dismissing the suit—the Fee Agreement itself, which
bars any dispute over fees. It did not do so, however, but instead focused on the distinction
between whether a particular claim shared a common nucleus of facts with a prior claim and
whether that particular claim was simply a prior allegation in another legal form. Cf. Capitol
Hill I, 574 F. Supp. 2d at 149 (“[I]t is the facts surrounding the transaction or occurrence which
operate to constitute the cause of action, not the legal theory upon which a litigant relies.”).
Ignoring these distinctions, Shaw Pittman seizes on a passing statement by Judge Teel in
his opinion that “[w]hat Shaw Pittman appears to be arguing is . . . that if the malpractice claims
had been raised as an objection to the fee applications . . . the objection would have been barred
by the parties’ agreement . . . . That may be true.” Bk. Op. at 26–27. Based on this statement,
Shaw Pittman argues that Judge Teel ignored the potential effect that a judgment in favor of
CHG in the malpractice action could have had upon the prior fee applications. SP Br. at 15–17.
In essence, Shaw Pittman’s argument is that had CHG asserted its malpractice claim in the
bankruptcy proceeding it would have been treated as an objection to the fee application—thus
subject to the Fee Agreement—and the fact that the malpractice claim was brought in a separate
proceeding should not alter this result. Id. at 20–21. This argument, which relies upon Shaw
bankruptcy court did make a finding that Shaw Pittman was entitled to its fees in part because the representation it
provided was competent and professional.”), and this Court would not permit reconsideration of that evaluation.
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Pittman’s contention that allegations of malpractice in bankruptcy proceedings are merely
defenses to fee applications, is not without force, and the Court does not treat it lightly. The fact
that such allegations may sometimes be treated as defenses to fee applications, however, is
inextricably tied to the bankruptcy statutes, which require that the bankruptcy judge both find
that legal representation was adequate before granting a fee application, see 11 U.S.C. §
330(a)(3) (requiring bankruptcy court to evaluate “the nature, the extent and the value of such
services” before awarding attorneys’ fees), and deny fee applications where attorneys provide
substandard services. See id. at § 330(a)(4) (declaring that “the court shall not allow
compensation for . . . services that were not reasonably likely to benefit the debtor’s estate”).
Indeed, these provisions were explicitly relied upon in the cases cited by this Court and the D.C.
Circuit in dismissing CHG’s malpractice claim. See, e.g., Grausz v. Englander, 321 F.3d 467,
473 (4th Cir. 2003) (citing § 330(a)(3) and noting that “[t]he fee application proceeding
necessarily included an inquiry by the bankruptcy court into the quality of professional services
rendered”); In re Iannochino, 242 F.3d 36, 42 (1st Cir. 2001) (citing § 330(a)(4) and explaining
that “[u]nder the relevant section of the bankruptcy code governing fee awards, a finding of
malpractice would mean that the attorneys were not entitled to compensation for those services
found to be substandard”); Osherow v. Ernst & Young, LLP, 200 F.3d 382, 387 (5th Cir. 2000)
(same). 9 These provisions of the bankruptcy code, however, cannot alter the clear language of
the Fee Agreement, nor do they apply outside of the bankruptcy proceeding. In other words, the
fact that a malpractice claim might operate under the bankruptcy laws as a defense to a fee
9
The other cases cited by Shaw Pittman for the principle that a malpractice claim is a defense to a claim for
attorneys’ fees all involve cases in which a lawyer initially brought suit seeking payment, and the former client
subsequently asserted a claim for malpractice. See Hendry v. Pelland, 73 F.3d 397, 403 (D.C. Cir. 1996) (discussing
use of malpractice claims “as a defense to [a] counterclaim”); Law Offices of Jerris Leonard, P.C. v. Mideast Sys.,
Ltd., 111 F.R.D. 359, 361 (D.D.C. 1986) (“[I]t is hard to imagine a clearer compulsory counterclaim to a complaint
for failure to pay legal fees than a legal malpractice claim.”). None of these cases, however, support the proposition
that a former client who brings a suit for malpractice seeking damages for harms unrelated to the payment of the
attorney’s fees does not assert an independent cause of action but merely a “defense” to attorneys’ fees.
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application does not transform an independent claim for harms unrelated to the payment of
attorneys’ fees into a re-hash of the fee dispute. In applying the doctrine of res judicata to bar
CHG’s malpractice claim, this Court found that (1) the factual question of the quality of Shaw
Pittman’s services was before the bankruptcy court, (2) the bankruptcy court did in fact consider
the quality of Shaw Pittman’s services, and thus (3) CHG could have raised the malpractice
claim before the bankruptcy court’s final opinion. This Court did not, however, find that the
malpractice claim was merely an attempt to re-litigate the earlier fee disputes, and thus this
Court’s holding says nothing as to the proper interpretation of the Fee Agreement.
Indeed, it is not at all clear from the language of the Fee Agreement that—had CHG
pursued its malpractice claim in the bankruptcy proceedings and been able to demonstrate that it
was affirmatively harmed by Shaw Pittman’s failures in the proceedings—CHG either would
have either been (1) required to compensate Shaw Pittman for litigating this issue or (2) barred
from recovering damages based on its alleged harms. Had CHG prevailed, the Court sees
nothing in the Fee Agreement that would have prohibited CHG from successfully collecting
damages from Shaw Pittman based on the harms it suffered as a result of the adverse outcome of
the BZA Appeal. There is thus no basis upon which this Court can conclude that CHG’s
malpractice claim constitutes a “fight” about Shaw Pittman’s fees, and it therefore affirms Judge
Teel’s determination that the expenses incurred by Shaw Pittman in defending against the
malpractice claim are not subject to reimbursement by CHG pursuant to the Fee Agreement.
B. Shaw Pittman Has Not Established CHG’s Bad Faith
In addition to relying upon the plain language of the Fee Agreement, Shaw Pittman also
briefly contends that CHG acted in bad faith by bringing the malpractice claims outside of the
bankruptcy proceeding. As explained by Shaw Pittman: “CHG’s entire course of conduct with
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respect to Shaw Pittman’s fees since January 30, 2004 has been aimed at depriving Shaw Pittman
of the fruits of the [Fee Agreement].” SP Br. at 23. Shaw Pittman contends that these actions—
including the malpractice claim—constitute a breach of the duty of good faith implied by D.C.
law into every agreement—including the Fee Agreement here. Id. This argument fails for two
reasons. First, it is “a black letter principle of appellate review” that issues and theories not
asserted in the lower court are “waived and will not be heard for the first time on appeal.” In re
CHG, 313 B.R. at 350 (citing District of Columbia v. Air Florida, Inc., 750 F.2d 1077, 1084
(D.C. Cir. 1984)). Here, Shaw Pittman raises for the first time on appeal the doctrine of an
implied duty of good faith found in D.C. law, and so the Court will not rely upon it here.
Second, putting aside the legal issue of waiver, the simple fact remains that on a motion for
summary judgment, Shaw Pittman has not adduced a single piece of evidence—save its own
speculation and innuendo—to establish that CHG brought the malpractice claim for any purpose
other than to collect damages it had suffered as a result of the BZA Appeal. See supra Section
IV.A.2. Indeed, Shaw Pittman acknowledges as much in its reply briefing where it asks the
Court to remand this matter to the bankruptcy court to resolve the “classic issue of fact” as to
whether CHG violated the implied duty. Reply Brief of Appellant, Mar. 22, 2011 [12]. Given
Shaw Pittman’s utter failure to raise this issue when it had the opportunity, the Court is not
inclined to extend the parties’ melee in light of its clear waiver of the issue and the complete
absence of available evidence as to CHG’s intent.
V. CONCLUSION
Shaw Pittman and CHG have now been embroiled in disputes over fees and services
arising from the Chapter 11 proceedings for nearly a decade. Though it would like to believe
that today’s opinion might lead to final resolution of this long-running feud, the Court holds no
22
illusion that it possesses the power to pacify these parties. As precedent, this matter is less likely
to be recognized for the articulation of any particular principle than as an illustration of two legal
truisms: first, that no opponent is ever as dedicated or persistent a foe as one that feels aggrieved
by its former lawyers; and second, that the primary effect of an agreement to reimburse attorneys
for litigation concerning their fees will be to incentivize litigation concerning their fees. In this
case, these two circumstances have intermingled to form a volatile mix in which embittered
parties, now entrenched in their own views, continue to attack each other long after the costs of
doing so have exceeded the benefit to be gained. This Court now joins Judge Teel’s call for the
parties to put aside their past differences and bring an end to this matter.
For the reasons set forth above, it is hereby
ORDERED that Judge Teel’s Order Denying Plaintiff Pillsbury Winthrop Shaw
Pittman’s Motion to Reconsider and Entering Summary Judgment Against Shaw Pittman, as
supported by the September 14, 2010 Memorandum Decision re Plaintiff’s Motion for Summary
Judgment and the November 17, 2010 Memorandum Decision re Plaintiff’s Motion to
Reconsider, is AFFIRMED; it is furthermore
ORDERED that the parties shall bear responsibility for their own fees and expenses in
the adversary proceeding and this appeal; it is furthermore
ORDERED that this appeal is DISMISSED.
SO ORDERED.
Signed by Royce C. Lamberth, Chief Judge, on April 19, 2011.
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