Filed: Jun. 26, 2018
Latest Update: Jun. 26, 2018
Summary: MEMORANDUM DECISION DENYING MOTION TO DISMISS COUNTERCLAIMS AND CROSS-CLAIMS FILED BY JOSEPH MARTIN BARRETT NEIL W. BASON , Bankruptcy Judge . At the dates set forth above this court held hearings on the motion (adv. dkt. 24, the "MTD") by which plaintiff Wellgen Standard LLC (with its predecessor in interest, "Wellgen") seeks to dismiss the counterclaims and crossclaims (adv. dkt. 18, the "Barrett Complaint") included in the answer filed by Joseph Martin Barrett to the complaint filed by W
Summary: MEMORANDUM DECISION DENYING MOTION TO DISMISS COUNTERCLAIMS AND CROSS-CLAIMS FILED BY JOSEPH MARTIN BARRETT NEIL W. BASON , Bankruptcy Judge . At the dates set forth above this court held hearings on the motion (adv. dkt. 24, the "MTD") by which plaintiff Wellgen Standard LLC (with its predecessor in interest, "Wellgen") seeks to dismiss the counterclaims and crossclaims (adv. dkt. 18, the "Barrett Complaint") included in the answer filed by Joseph Martin Barrett to the complaint filed by We..
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MEMORANDUM DECISION DENYING MOTION TO DISMISS COUNTERCLAIMS AND CROSS-CLAIMS FILED BY JOSEPH MARTIN BARRETT
NEIL W. BASON, Bankruptcy Judge.
At the dates set forth above this court held hearings on the motion (adv. dkt. 24, the "MTD") by which plaintiff Wellgen Standard LLC (with its predecessor in interest, "Wellgen") seeks to dismiss the counterclaims and crossclaims (adv. dkt. 18, the "Barrett Complaint") included in the answer filed by Joseph Martin Barrett to the complaint filed by Wellgen.1 Appearances were as noted on the record.
1. Background
This Court has reviewed all relevant papers including (1) the Barrett Complaint — which asserts claims for quantum meruit, to enforce his alleged attorney's charging lien, and for declaratory relief (adv. dkt. 18); (2) the MTD and supporting request for judicial notice (adv. dkt. 25) ("RJN"); (3) Mr. Barrett's opposition to the MTD (adv. dkt. 30) (the "Opposition"); and (4) Wellgen's reply (adv. dkt. 34).
For the reasons stated on the record, this Court orally denied the MTD as to all counterclaims and crossclaims with one exception. This Court took under submission Mr. Barrett's quantum meruit claims regarding a contingency fee recovered in the case styled Teitelbaum v. Lyft, Inc., et al ("Teitelbaum").
The basis for this Court's oral ruling was essentially as follows. Given current uncertainty in the law regarding the "unfinished business doctrine" and related legal concepts, and the uncertain facts including precisely when the services were performed, this Court could not conclude as a matter of law that Mr. Barrett would be unable to assert a quantum meruit claim. He might be entitled to assert such a claim, even without Wellgen's consent to his ongoing representation of clients, for services that he performed in his individual capacity, as opposed to services performed either for Debtor or for Maximum Legal (California) LLP ("Max Legal").2 But Wellgen asserts that on the present record Barrett is bound by his declaration that he was still working for Max Legal at the time the Teitelbaum matter was settled.
2. Analysis
Except as emphasized below, this Court need not repeat the standard applicable to the MTD, which are well known and well summarized by the parties. Wellgen argues: (1) that the Barrett Complaint does not adequately allege precisely when Mr. Barrett worked on the Teitelbaum case; and (2) that this Court can take judicial notice of (a) Mr. Barrett's own declaration filed in this case dated August 1, 2017 (case dkt. 3-1, the "Barrett Declaration") in which he states that he was working at that time for Max Legal and (b) the notice of settlement filed in the Teitelbaum case on June 30, 2017, stating that the settlement occurred on June 26, 2017. See Reply, adv. Dkt. 34, page 12, lines 12-18. Although Wellgen states that a copy of the notice of settlement is attached to its Reply, that document is missing. Nevertheless, the parties do not appear to dispute that the notice of settlement recites a date prior to the August 1, 2017 date of the Barrett Declaration, so for purposes of the following discussion this Court assumes without deciding that this is so.
Wellgen acknowledges that, in general, in reviewing the sufficiency of the Barrett Complaint, this Court must accept as true all facts alleged therein and draw all reasonable inferences in favor of Mr. Barrett. See Rule 12(b)(6) (incorporated by Rule 7026); Maya v. Centex Corp., 658 F.3d 1060, 1068 (9th Cir. 2011). Wellgen also acknowledges (adv. dkt. 24, p.8:1-6) that the Barrett Complaint includes some allegations about when Mr. Barrett worked on the Teitelbaum case.
The Barrett Complaint alleges, in relevant part:
208. Around the time of the closure of L&B, efforts were made to form Maximum Legal as a new law firm. In its Complaint, [Wellgen] alleges that Maximum Legal was never validly formed, and never came into existence as a legal entity, such that it never had any right to any attorney's fees or reimbursement of costs.
. . .
210. Regardless of whether Maximum Legal was ever validly formed, its ostensible existence was short lived. Maximum Legal only purported to operate as a law firm for approximately two weeks. Maximum Legal then ceased operations, shut down, and sought bankruptcy protection.
211. Barrett disassociated from Maximum Legal shortly after the failure of L&B.
212. Barrett performed valuable services and incurred costs in the Teitelbaum matter . . . after the ostensible existence of Maximum Legal ended, and after Barrett disassociated from that entity.
213. The settlements in the above cases have been primarily, if not entirely, the result of Barrett's work on those cases after he departed from L&B, after Maximum Legal ceased to exist, and after Barrett ceased to be associated with Maximum Legal. [Barrett Complaint, adv. dkt. 18, ¶¶ 208-213 (emphasis added)]
Even if Mr. Barrett is unsure about the exact dates, the Barrett Complaint includes sufficient factual allegations to come within this Court's oral ruling as to quantum meruit claims. But Wellgen cites authority that this Court can disregard a complaint's allegations in certain circumstances:
Courts need not accept as true allegations that are contradicted by . . . judicially noticed materials. See, e.g., Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000); see also Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001) ("The court need not, however, accept as true allegations that contradict matters properly subject to judicial notice or by exhibit."). Courts may also use judicially noticed facts and documents to establish that the complaint fails to state a viable claim for relief. See, e.g., United States v. Ritchie, 342 F.3d [903] at 907-08 [9th Cir. 2003]; Sprewell, 266 F.3d at 988 (9th Cir. 2001). [MTD (adv. dkt. 24), p. 3:16-23]
Wellgen asks this Court to take judicial notice of the Barrett Declaration, which it characterizes (adv. dkt. 24, pp.7:13-8:6) as stating that after leaving Layfield & Barrett Mr. Barrett was an employee of Max Legal through August 1, 2017. This Court agrees that the declaration cannot reasonably be read otherwise.
As noted above the Barrett Declaration is dated August 1, 2017 — after the Teitelbaum settlement was reached — and it states in part:
I, Joseph Barrett, hereby declare as follows:
1. [C]urrently I am employed as a lawyer at Maximum Legal (California), LLP ("Maximum Legal"), which was formed on or about May 10, 2017. Except where specified otherwise, I have personal knowledge of the facts set forth below and, if called to testify as a witness, could and would competently testify thereto.
* * *
4. Until it ceased employing any lawyers on or about June 1, 2017, [shortly before the notice of settlement in the Teitelbaum action] [Layfield & Barrett] was a law firm headquartered in California, representing plaintiffs in personal injury cases. . . .
* * *
14. . . . [Layfield & Barrett's] case management system is being accessed by Maximum Legal to obtain information for approximately 40 active litigation cases and another 40 cases in pre-litigation stages in which Maximum Legal represents the plaintiff or plaintiffs.
* * *
16. Maximum Legal is now associated with a number of cases previously handled by [Layfield & Barrett]. . . .
17. From Saturday, July 22, to Thursday, July 27, 2017, Maximum Legal's access to [Layfield & Barrett's] case management system was cut off. . . .
I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.
Executed this 1st day of August, 2017, in Irvine, California.
/s/ Joseph M. Barrett [Case dkt. 3-1 (emphasis added)]
Nevertheless, although the Barrett Declaration assumes that Max Legal was in existence on August 1, 2017, this Court cannot treat that assumption as a binding admission by Barrett. As alleged in the Barrett Complaint, Wellgen itself asserts that Max Legal might never have been validly formed, and alternatively Max Legal may have been too "short lived" (in Barrett's words) to have continued its existence through the date of the Teitelbaum settlement. In such situation, regardless whether Barrett assumed he was working for Max Legal on August 1, 2017, in fact he may have been representing any clients in a different capacity (presumably for Debtor, or as part of a de facto partnership with other attorneys, or on his own). In other words, depending on the facts (and also on the uncertain law regarding unfinished legal business), Barrett still might have a claim for quantum meruit recovery regarding the Teitelbaum matter.
For the foregoing reasons this Court is not persuaded that the MTD can be granted as to the Teitelbaum matter. The MTD will be denied by separate order.
