Smith v. Rubicon Advisors LLC

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
TODD W. SMITH, :
:
Plaintiff & Counter-Defendant, : Civil Action No.: 17-0030 (RC)
:
v. : Re Document No.: 5
:
RUBICON ADVISORS, LLC, :
:
Defendant & Counter-Claimant. :
MEMORANDUM OPINION
DENYING DEFENDANT’S PARTIAL MOTION TO DISMISS
I. INTRODUCTION
Plaintiff Todd W. Smith formerly worked as a lobbyist for Defendant Rubicon Advisors,
LLC. Mr. Smith seeks damages from Rubicon on a variety of theories. Rubicon’s partial motion
to dismiss challenges Mr. Smith’s claims for unjust enrichment and interference with prospective
business opportunities.1 Because Mr. Smith has stated a claim on both theories, the Court denies
the motion.
1
Although Rubicon does not challenge this Court’s subject-matter jurisdiction, the Court
must independently verify that it has subject-matter jurisdiction. See, e.g., Delta Air Lines, Inc. v.
Exp.-Imp. Bank of United States, 85 F. Supp. 3d 250, 259 (D.D.C. 2015) (“[E]very federal court
has a special obligation to satisfy itself of its own jurisdiction before addressing the merits of any
dispute.” (quoting Dominguez v. UAL Corp., 666 F.3d 1359, 1362 (D.C. Cir. 2012))).
In this case, subject-matter jurisdiction appears to be based on diversity jurisdiction.
Diversity jurisdiction requires complete diversity, or in this case, that the plaintiff and defendant
cannot be citizens of the same state. See, e.g., Saadeh v. Farouki, 107 F.3d 52, 54–55 (D.C. Cir.
1997) (holding that Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806) and 28 U.S.C. § 1332require “complete diversity,” because “[f]ederal diversity jurisdiction is lacking if there are any
litigants from the same state on opposing sides” (citation omitted)).
Plaintiff is a natural person residing in Virginia and thus has Virginia citizenship. Compl.
¶ 2, ECF No. 1; Americold Realty Trust v. Conagra Foods, Inc., 136 S. Ct. 1012, 1016 (2016).
An LLC, such as Rubicon, takes the citizenship of each of its members. See, e.g., Lopes v.
JetsetDC, LLC, 994 F. Supp. 2d 135, 143 (D.D.C. 2014) (“28 U.S.C. § 1332 does not specify the
II. BACKGROUND2
Mr. Smith worked as a lobbyist for Rubicon from 2011 until he was fired in 2016.
Compl. ¶¶ 6–18, ECF No. 1. Rubicon is a lobbying firm with its principal place of business in
Washington, D.C. Compl. ¶ 3. According to Mr. Smith, his employment agreement bound
Rubicon to pay him “a base salary, plus health benefits and a retirement contribution of between
$15,000 and $25,000 each year.” Compl. ¶¶ 1, 7, 8, 41–45. In addition, Mr. Smith asserts that the
agreement entitled him to “additional compensation calculated at 50% of revenue for business
[Rubicon and Mr. Smith] pitch together and 70% of revenue for business [Mr. Smith] bring[s] in
without [Rubicon’s] assistance.” Compl. ¶ 7 (internal quotation mark omitted). Only the
retirement compensation and “additional compensation” are at issue in this lawsuit.3
citizenship status for noncorporate legal persons. The Supreme Court ‘has long maintained a
bright-line rule limiting corporate citizenship to corporations.’ Non-corporate entities ‘are
analogized to partnerships, which carry the citizenship of their members.’ . . . As an LLC,
‘diversity jurisdiction in a suit by or against the entity depends on the citizenship of all the
members.’” (quoting C.T. Carden v. Arkoma Assocs., 494 U.S. 185, 195 (1990))); id. (“The
District of Columbia and ‘every court that has addressed the citizenship status of LLCs has held
unequivocally that LLCs do not enjoy corporate citizenship.’” (quoting Johnson-Brown v. 2200
M St. LLC, 257 F. Supp. 2d 175, 180 (D.D.C. 2003))).
Because an LLC shares the citizenship of each of its members, Mr. Smith’s allegation
that Rubicon’s principal place of business is located in D.C., Compl. ¶ 3, does not address the
crucial issue. Neither party addresses the citizenship of Rubicon’s members. The Court will
therefore order supplemental briefing by the parties on subject-matter jurisdiction, as discussed
in the accompanying order.
2
When considering a motion to dismiss for failure to state a claim, a court “accepts the
allegations of the complaint as true.” Banneker Ventures, LLC v. Graham, 798 F.3d 1119, 1129
(D.C. Cir. 2015).
3
Although Mr. Smith’s complaint does not mention receiving his base salary or health
benefits during several of the years at issue, he does not affirmatively claim that he was
wrongfully deprived of this compensation or seek relief for his base salary or health benefits. See
generally Compl. ¶¶ 7–13. The Court thus concludes that Mr. Smith seeks compensation only for
the allegedly missing retirement compensation and additional compensation.
2
As to the retirement compensation, Mr. Smith claims that Rubicon failed to pay him
“retirement benefits for 2014, 2015, or 2016.” Compl. ¶¶ 1, 13, 39. As to the additional
compensation, Mr. Smith asserts that he helped recruit two clients to Rubicon in 2013. Compl.
¶ 9; Mem. Opp’n Def.’s Mot. Dismiss (Pl.’s Opp’n) at 2, ECF No. 8; Def’s Reply at 5–6, ECF
No. 10. According to Mr. Smith, both clients were pitched collaboratively with Rubicon and Mr.
Smith was therefore entitled to additional compensation in the amount of 50% of the revenue
from both. Compl. ¶ 9. Both remained clients for several years, and Mr. Smith was initially
satisfied with the compensation he received. Compl. ¶¶ 9–10. However, in 2015 Mr. Smith claims
that he was not paid the $90,000 in additional compensation that he should have received based
on the $60,000 and $120,000 in revenue brought in by the two clients. Compl. ¶ 11. Again, in
2016 Mr. Smith asserts that he was not paid the $45,000 in additional compensation which should
have flowed to him based on the $90,000 that one of the clients paid Rubicon. Compl. ¶¶ 12–13.
Mr. Smith claims that he asked to be paid these amounts, but was rebuffed.4 Compl. ¶¶ 14–18.
Mr. Smith’s worsening employment situation came to a head in 2016 when he received
an email giving him “13 minutes” of notice that he was being fired. Compl. ¶ 17. After receiving
the email, Mr. Smith claims that he was denied access to his email account and office, except for
a brief visit with an office manager, and that he continues to be denied access to “files and
commissions relevant to his representation of his clients.” Compl. ¶ 19. He also asserts that
Rubicon misleadingly left Mr. Smith’s biography on their website for at least eight weeks and
did not provide his updated contact information to clients. Compl. ¶ 20.
4
Mr. Smith also claims that, during 2016, he was offered $75,000 instead of the larger
amount that he was owed, but that the $75,000 was also never paid. Compl. ¶¶ 15–16, 28.
3
Based on these events, Mr. Smith seeks relief on five theories. After answering the
complaint and asserting counterclaims, see generally Partial Answer, Affirmative Defenses
Countercl.’s (Answer), ECF No. 4, Rubicon brought the instant motion to dismiss Mr. Smith’s
claims for unjust enrichment (Count IV) and interference with prospective business opportunities
(Count V)5 under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Mem.
Supp. Def.’s Mot. Partially Dismiss Pl.’s Compl. (Def.’s MTD), ECF No. 5-1. Because the Court
finds that Mr. Smith has properly stated a claim for both unjust enrichment and interference with
prospective business opportunities, the Court denies Rubicon’s motion.
III. LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) does not test a plaintiff’s ultimate likelihood of
success on the merits; rather, it tests only whether a plaintiff has properly stated a claim. See
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), abrogated on other grounds by Harlow v.
Fitzgerald, 457 U.S. 800 (1982). Nevertheless, “[t]o survive a motion to dismiss, 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)). This means that a plaintiff’s factual allegations “must be enough to
raise a right to relief above the speculative level, on the assumption that all the allegations in the
complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555–56 (citations omitted).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements,” are therefore insufficient to withstand a motion to dismiss. Iqbal, 556 U.S. at 678. A
5
Mr. Smith also alleged that (1) Rubicon violated the Wage Act by denying him
compensation; (2) Rubicon retaliated against him in violation of the Wage Act; and (3) Rubicon
breached the employment contract. See generally Compl. These counts are not at issue in the
instant partial motion to dismiss.
4
court need not accept a plaintiff’s legal conclusions as true, see id., nor must a court presume the
veracity of the legal conclusions that are couched as factual allegations, see Twombly, 550 U.S.
at 555.
IV. DISCUSSION
Pursuant to Federal Rule of Civil Procedure 12(b)(6), Rubicon moves to dismiss Mr.
Smith’s claims of unjust enrichment and interference with prospective business opportunities.6
The Court considers each in turn.
A. Unjust Enrichment
Rubicon argues that Mr. Smith cannot claim unjust enrichment while simultaneously
“rel[ying] on the existence of the specific contract payment terms” for his breach of contract
claims.7 Def.’s Reply at 2, see also Def.’s MTD at 4. The Court agrees with Mr. Smith that he
may advance unjust enrichment as an alternative theory of recovery at this stage of the litigation,
especially because Rubicon hints that it does not interpret the employment contract in the same
way as Mr. Smith.
6
Rubicon also initially moved to dismiss some Mr. Smith’s claims for additional
compensation under Federal Rule of Civil Procedure 8 because, by omitting to name the specific
clients, he had “not provided sufficient detail to put Defendant on notice of the claims being
brought.” Def.’s MTD at 6, ECF No. 5-1. Rubicon has subsequently stipulated that this argument
is moot because Mr. Smith named the clients. Def.’s Reply at 1, ECF No. 10. The Court
therefore denies Rubicon’s motion to the extent it seeks dismissal based on Rule 8.
7
The Court also rejects Rubicon’s argument that “Plaintiff’s claims are based exclusively
on the existence of a contract between Plaintiff and Rubicon.” Def.’s MTD at 4, ECF 5-1. To the
contrary, Count IV of Mr. Smith’s complaint does not discuss the employment contract and
claims that “it would be inequitable to allow [Rubicon] to keep the money” that it was “unjustly
enriched” by withholding it from him. Compl. ¶¶ 42–44, ECF No. 1. Without plumbing the
merits of these contentions, Mr. Smith has, at least, pleaded a claim for unjust enrichment
without reference to the contract.
5
Under D.C. law,8 “[u]njust enrichment occurs when: (1) the plaintiff conferred a benefit
on the defendant; (2) the defendant retains the benefit; and (3) under the circumstances, the
defendant’s retention of the benefit is unjust.” Fort Lincoln Civic Ass’n v. Fort Lincoln New
Town Corp., 944 A.2d 1055, 1076 (D.C. 2008) (quoting News World Commc’ns, Inc. v.
Thompsen, 878 A.2d 1218, 1222 (D.C. 2005)). In general, a plaintiff cannot maintain an unjust
enrichment claim concerning an aspect of the parties’ relationship that was governed by a
contract. See In re APA Assessment Fee Litig., 766 F.3d 39, 46 (D.C. Cir. 2014) (“Unjust
enrichment will not lie when the parties have a contract governing an aspect of [their] relation,
because a court will not displace the terms of that contract and impose some other duties not
chosen by the parties.” (internal quotation marks and citation omitted)).
However, a plaintiff may pursue an unjust enrichment claim as an “alternative theory of
liability” even though the plaintiff “ultimately cannot recover under both a breach of contract
claim and an unjust enrichment claim pertaining to the subject matter of that contract.” McWilliams
Ballard, Inc. v. Broadway Mgmt. Co., 636 F. Supp. 2d 1, 9 n.10 (D.D.C. 2009) (collecting
citations); see also Adm’rs of the Tulane Educ. Fund v. Ipsen Pharma, S.A.S., 771 F. Supp. 2d
32, 41 (D.D.C. 2011) (“It is difficult to see why, if [the plaintiff’s] claim is successful, it would
not be adequately compensated through that contract. However, at this stage of the litigation,
plaintiffs are entitled to plead an inconsistent theory and, making all inferences in their favor,
they have successfully stated an unjust enrichment claim.”); Fed. R. Civ. P. 8(d)(3) (“A party
8
Both parties assert that D.C. law governs Mr. Smith’s claims. See, e.g., Def.’s MTD at
4; Pl.’s Opp’n at 6. The Court does not question this conclusion. See In re Korean Air Lines
Disaster of Sept. 1, 1983, 932 F.2d 1475, 1495 (D.C. Cir. 1991) (“[C]ourts need not address
choice of law questions sua sponte.”); Davis v. Grant Park Nursing Home LP, 639 F. Supp. 2d
60, 65 (D.D.C. 2009) (explaining that, where all parties assume that D.C. law applies, “[t]he
Court need not and does not question the parties’ assumptions on that point”).
6
may state as many separate claims or defenses it has, regardless of consistency.”). Without this
rule, a plaintiff could be left “without any remedy should the fact-finder determine at a later stage
that there was no express agreement between the parties.” Scowcroft Grp., Inc. v. Toreador Res.
Corp., 666 F. Supp. 2d 39, 44 (D.D.C. 2009). Here, therefore, the Court need not dismiss Mr.
Smith’s alternative theory of unjust enrichment as inconsistent with his breach of contract claims.
This exception is especially necessary where, as here, the defendant casts doubt on the
validity of the contract.9 See, e.g., Armenian Assembly of Am., Inc. v. Cafesjian, 597 F. Supp. 2d
128, 135–36 (D.D.C. 2009) (holding that “dismissal of Defendants’ unjust enrichment . . .
counterclaims is not appropriate” because the plaintiffs continued to cast doubt on the validity of
the contract by “refus[ing] to admit that the conditions of the [contract] are applicable to this suit,
or even to admit what the conditions of [contract] are”); United States ex rel. Morsell v. Symantec
Corp., 130 F. Supp. 3d 106, 129–30 (D.D.C. 2015) (holding that “a plaintiff may advance quasi-
contract claims in the alternative” in part because the defendant “argu[ed] that the Contract was
not validly formed” (internal quotation marks and citations omitted)); cf. United States v.
Kellogg Brown & Root Servs., Inc., 800 F. Supp. 2d 143, 160–61 (D.D.C. 2011) (granting
motion to dismiss unjust enrichment claim where, “throughout the extensive briefing each party
9
Even if the opposing party does not seek to discredit the contract, dismissing unjust
enrichment claims in conjunction with contract claims may be premature where the parties have
not yet had the benefit of discovery and the Court has not yet interpreted the scope of the
contract. See, e.g., In re APA Assessment Fee Litig., 766 F.3d 39, 46 (D.C. Cir. 2014) (holding
that unjust enrichment claims should not have been dismissed after analyzing the scope of the
contract and determining that the contract did not “regulate the parties’ obligations in relevant
part” (internal quotation marks and citations omitted)); Dist. Title v. Warren, No. 14-1808, 2015
WL 12964657, at *10 (D.D.C. June 1, 2015) (“Moreover, without the benefit of discovery, it is
not yet clear whether the activities at issue in the unjust enrichment claim against [the] defendant
[] overlap entirely with the breach of contract claim. Accordingly, under the particular
circumstances presented here, the Court finds that it would be premature to dismiss the unjust
enrichment claim . . . even though plaintiff will not ultimately be able to recover damages on
legally inconsistent theories.” (internal quotation marks and citations omitted)).
7
has prepared in this case, there [was] no suggestion that the . . . contract is invalid or inapplicable
to the dispute at hand” and after the court found that “an express contract [was] present”).
Here, while seeking the dismissal of Mr. Smith’s unjust enrichment claims, Rubicon
simultaneously disputes the scope and validity of the contract. In its answer, Rubicon “admits
that there was an agreement between Defendant and Plaintiff at the time Plaintiff was employed
under which Plaintiff would be compensated” but maintains that “such agreement is not as described
by Plaintiff in the Complaint.”10 Answer ¶ 33, ECF No. 4; see also Answer ¶ 34 (“Defendant
denies that the agreement as alleged accurately sets forth the terms of the agreement between
Defendant and Plaintiff entered into in 2011.”). As Mr. Smith notes, these statements “raise[]
serious questions about whether [Rubicon] recognizes the same contract.” Pl.’s Opp’n at 5–6.
Nor is the case Rubicon cites, Sununu v. Philippine Airlines, Inc., to the contrary. 792 F.
Supp. 2d 39, 57 (D.D.C. 2011). In Sununu, the court granted the defendant summary judgment on
the plaintiff’s unjust enrichment claims after it determined that neither rescission, mistake, nor
misrepresentation invalidated the contract at issue. Id. at 54–57. This Court has not yet had a
similar opportunity to hold on the validity or scope of the employment contract at issue here, and
therefore will not dismiss Mr. Smith’s unjust enrichment claims at the motion to dismiss stage.
B. Interference with Prospective Business Opportunities
Rubicon contends that Mr. Smith fails to state a claim for interference with prospective
business opportunities11 for two reasons—first, because he “has not alleged the existence of a
10
In addition, as Mr. Smith notes, Rubicon refers to “notif[ying] Plaintiff,” apparently
unilaterally, “in March 2016, that his compensation was changed” without any reference to a
contract. Answer ¶ 33, ECF No. 4; cf. Pl.’s Opp’n at 5–6.
11
This tort is also referred to as “tortious interference with economic advantage.” Kimmel
v. Gallaudet Univ., 639 F. Supp. 2d 34, 45 (D.D.C. 2009).
8
business expectancy” and, second, because Mr. Smith did not allege “that he lost any future
contracts or clients due to Rubicon’s actions.” Def.’s MTD at 5. Neither argument has merit.
To state a claim for interference with prospective business opportunities, D.C. law
requires a plaintiff to plead: “(1) the existence of a valid business relationship or expectancy,
(2) knowledge of the relationship or expectancy on the part of the interferer, (3) intentional
interference inducing or causing a breach or termination of the relationship or expectancy, and
(4) resultant damage.” Jankovic v. Int’l Crisis Grp., 593 F.3d 22, 29 (D.C. Cir. 2010) (quoting
Bennett Enters. v. Domino’s Pizza, Inc., 45 F.3d 493, 499 (D.C. Cir. 1995)).
First, Mr. Smith has alleged that he had a “business expectancy” and that Rubicon had
“knowledge of” that business expectancy. The complaint states: “Rubicon . . . was aware that the
clients intended to transfer their work to Mr. Smith after Rubicon fired him.” Compl. ¶ 48. This
is contrary to Rubicon’s assertion that “[Mr. Smith] has failed to allege that he had a valid
business relationship in his own right with [the clients] independent of his employment” with
Rubicon. Def’s Reply at 4 (emphasis added). Mr. Smith has explicitly alleged that the clients
intended to transfer their work from Rubicon to Mr. Smith, and thus that he expected to begin a
separate relationship with the clients. Furthermore, Rubicon offers no legal authority for its
reading of such an “independence” requirement.
Second, Mr. Smith alleges both “interference” and “damage” caused by Rubicon in his
Complaint, stating “Rubicon’s continuing denial of access to the files has made it more difficult
and costly for Mr. Smith to continue to represent those clients.” Compl. ¶ 49. Rubicon contends
that a plaintiff must show complete loss of a contract or business expectancy, and faults Mr.
Smith’s claim because it does not allege “that he lost any future contracts or clients due to
Rubicon’s actions.” Def.’s MTD at 5. However, Rubicon does not identify any legal authority for
9
the proposition that harm to business expectancies is not cognizable. To the contrary, it appears
that harm to a business relationship may be cognizable as interference with prospective business
relationships. See generally Solers, Inc. v. Doe, 977 A.2d 941 (D.C. 2009) (holding that it was
error to dismiss a claim for interference with prospective business relationships when the plaintiff
pleaded general harm to its reputation and “damage” to its prospective business opportunities).
The tort of interference with an existing contract shares many of the elements of
interference with a business expectancy. See, e.g., Kaempfer v. Brown, 109 B.R. 527, 532
(D.D.C. 1990) (“The elements of the tort of intentional interference with business expectancies
run parallel to that of interference with existing contracts.” (citations omitted)), aff’d sub nom. B
& W Mgmt., Inc. v. Brown, 925 F.2d 487 (D.C. Cir. 1991) (unpublished table decision); Casco
Marina Dev., L.L.C. v. D.C. Redevelopment Land Agency, 834 A.2d 77, 84 (D.C. 2003) (“The
elements of tortious interference with prospective business advantage mirror those of
interference with contract.” (citing Brown v. Carr, 503 A.2d 1241, 1247 (D.C. 1986))). In cases
dealing with tortious interference with established contracts, damage to the contracting party has
been held to be sufficient even without the total destruction of the contract.12 See, e.g., Park v.
Hyatt Corp., 436 F. Supp. 2d 60, 64 (D.D.C. 2006) (finding that plaintiff who pleaded damages
from “lost profits and loss of reputation” had sufficiently stated a claim for tortious interference
with contract). Furthermore, “[t]he District of Columbia follows the Restatement with respect to
tortious interference claims.” Bowhead Info. Tech. Servs., LLC. v. Catapult Tech. Ltd., 377 F.
Supp. 2d 166, 175 (D.D.C. 2005) (collecting cases). And the Restatement states the elements of
tortious interference with an existing contract as including interference that “prevent[s] the other
12
Rubicon argues that Mr. Smith relies on cases discussing tortious interference with a
contract instead of tortious interference with a prospective business opportunity. Def.’s Reply at
5 n.3. However, as discussed above, the elements of these torts are parallel in D.C.
10
from performing the contract or caus[es] his performance to be more expensive or burdensome.”
Restatement (Second) of Torts § 766A (1979).
The Court therefore concludes that Mr. Smith need not plead complete destruction of a
business expectancy in order to plead a claim for interference with a business expectancy. At this
stage of the proceedings, Mr. Smith need not precisely establish the amount of damages he
allegedly suffered. Because Mr. Smith has adequately pleaded all necessary elements, the Court
therefore denies Rubicon’s motion to dismiss.13
V. CONCLUSION
For the foregoing reasons, Defendant’s Partial Motion to Dismiss (ECF No. 5) is
DENIED. An order consistent with this Memorandum Opinion is separately and
contemporaneously issued.
Dated: June 1, 2017 RUDOLPH CONTRERAS
United States District Judge
13
Rubicon adds in its reply an argument that Mr. Smith does not meet the requirement of
showing tortious interference. See Def.’s Reply at 3–5. However, although that argument may
have some merit, the Court must disregard this argument as it was not raised prior to Rubicon’s
reply. See Performance Contracting, Inc. v. Rapid Response Constr., Inc., 267 F.R.D. 422, 425
(D.D.C. 2010) (“As a general matter, it is improper for a party to raise new arguments in a reply
brief because it deprives the opposing party of an opportunity to respond to them, and courts may
disregard any such arguments.” (citing Aleutian Pribilof Islands Ass’n v. Kempthorne, 537 F.
Supp. 2d 1, 12 n.5 (D.D.C. 2008)).
11