The opinion of the court was delivered by: I. LEO GLASSER, Senior District Judge
This action concerns legal services provided by defendant
attorney Michael Griffith ("defendant" or "Griffith") to
plaintiff Gabriel D'Jamoos ("plaintiff") in connection with a
commercial dispute. Plaintiff commenced a legal malpractice
action against defendant and this Court granted summary judgment
in favor of defendant dismissing the complaint in its entirety.
Pending before the Court are various motions relating to
defendant's counterclaims for attorney's fees.
In an order dated August 31, 2004, familiarity with which is
assumed, this Court granted summary judgment in favor of
defendant and dismissed plaintiff's complaint in its entirety.
See Affidavit of Ann Marie Forte ("Forte Aff.") Ex. A
(attaching D'Jamoos v. Griffith, No. 00-1361 (E.D.N.Y. 2004)
("D'Jamoos I")). The factual background of this dispute is set
forth in detail in that Memorandum and Order. Briefly, for purposes of
this motion, the Court details the following facts. Plaintiff
retained defendant for legal representation in 1986. The parties
had a retainer agreement that provided for a 20% contingency fee
based on "settlement, trial or otherwise," in addition to an
initial retainer and per diem fee in the event of trial. Id. at
7. Defendant represented plaintiff in a dispute between plaintiff
and his brother-in-law, John Lucchese ("Lucchese"), concerning
plaintiff's investment in Belmont Realty Corporation ("Belmont").
Defendant commenced an action on behalf of plaintiff against
Lucchese and his wife, plaintiff's sister, which went to trial in
February 1997. At the close of all the evidence, the parties
placed an oral settlement on the record, which was never
consummated. Plaintiff and Lucchese reached a second settlement
agreement in March 1998 (the "1998 Settlement"), pursuant to
which plaintiff was to receive 49% of the issued and outstanding
shares of Belmont without regard to the amount of his investment.
Second Amended Complaint ("Compl.") ¶ 7; Forte Aff. Ex. A.,
D'Jamoos I at 5. That settlement was memorialized in a written
stipulation of settlement on September 27, 1998 (the "Restated
Shareholders' Agreement" or "RSA").*fn1 See id. at 6. By
1999, plaintiff had not received the shares from the 1998 Settlement.*fn2
Plaintiff terminated defendant's legal services in December 1999.
Id. On July 19, 2000, plaintiff commenced this action, in which he
asserted various claims including: (1) legal malpractice; (2)
that defendant represented plaintiff despite a conflict of
interest in violation of N.Y. Judiciary Law § 487; (3) breach of
fiduciary duty based on defendant's failure to disclose a
conflict of interest created by counsel Griffith hired to
represent him when he was sued in an unrelated action; and (4)
common law fraud based on defendant's failure to disclose the
conflict of interest. Plaintiff premised subject matter
jurisdiction on diversity of citizenship pursuant to
28 U.S.C. § 1332.*fn3 Defendant answered the complaint*fn4 and
asserted, inter alia, two counterclaims for (1) plaintiff's
breach of his agreement to compensate defendant for legal
services rendered and (2) a judgment in quantum meruit for the
reasonable value of those services.
After granting summary judgment in favor of defendant in
D'Jamoos I, the Court administratively closed the case.
Plaintiff thereafter filed a notice of appeal, which he withdrew
by stipulation after the Court reopened the case in light of the
defendant's pending counterclaims. See Affidavit of Todd J. Krouner ("Krouner Aff.") Ex. D.
Pending before the Court are the following motions: (1)
plaintiff's motion to dismiss the counterclaims for lack of
subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1);
(2) plaintiff's motion, in the alternative, for an order entering
final judgment on the Court's order of summary judgment pursuant
to Fed.R.Civ.P. 54(b); (3) an order setting a trial date for
resolution of defendant's counterclaims; (4) defendant's
cross-motion for permission to amend his counterclaims to assert
the requisite amount in controversy under 28 U.S.C. § 1332; and
(5) defendant's request that this action be referred to the
assigned Magistrate Judge for establishment of a discovery
schedule regarding damages. The Court will consider each motion
When deciding a motion to dismiss for failure to state a claim
for relief under Fed.R.Civ.P. 12(b)(6), a court takes the
facts as alleged in the counterclaims to be true, and must draw
all reasonable inferences from those facts in favor of the
defendant. See Ortiz v. Cornetta, 867 F.2d 146, 149 (2d Cir.
1989) (stating principles with respect to facts alleged in a
complaint). "[M]otions to dismiss for [lack of] subject matter
jurisdiction under Rule 12(b)(1) are reviewed under the same standards as motions to dismiss for failure to state a claim
under Rule 12(b)(6)." Walker v. New York, 345 F. Supp. 2d 283,
286 (E.D.N.Y. 2004) (Hurley, J.) (citations omitted). A court
must not dismiss the counterclaims "unless it appears beyond
doubt that the [defendant] can prove no set of facts in support
of his claim which would entitle him to relief." Conley v.
Gibson, 355 U.S. 41, 45-46 (1957).
I. Plaintiff's Motion to Dismiss the Counterclaims
A. Subject Matter Jurisdiction
Plaintiff argues that defendant's counterclaims fail to satisfy
the requisite amount in controversy for diversity jurisdiction
under 28 U.S.C. § 1332. See Pl. Mem. at 2. Defendant in turn
requests leave to amend his counterclaims to allege the amount in
controversy under § 1332(a) and an order from the Court directing
that expert discovery on damages commence.
Courts have supplemental jurisdiction over compulsory
counterclaims regardless of whether there is an independent basis
for jurisdiction over those claims, i.e., diversity
jurisdiction or federal question jurisdiction. Baker v. Gold
Seal Liquors, Inc., 417 U.S. 467, 469 n. 1 (1974) ("If a
counterclaim is compulsory, the federal court will have ancillary
jurisdiction over it even though ordinarily it would be a matter
for a state court); Moore v. New York Cotton Exchange,
270 U.S. 593, 608-10 (1926) (court had jurisdiction over compulsory counterclaim,
notwithstanding that claim creating federal question jurisdiction
over complaint was dismissed); Harris v. Steinem, 571 F.2d 119,
121-22 (2d Cir. 1978) (citing rule regarding supplemental
jurisdiction over compulsory counterclaims); Corsearch, Inc. v.
Thomson & Thomson, 792 F. Supp. 305, 333 (S.D.N.Y. 1992)
(holding court had supplemental jurisdiction over compulsory
state law counterclaims and that jurisdiction remained despite
the fact that plaintiff's claims containing allegations which
formed part of the same factual context as defendant's
counterclaims were dismissed before trial). See also 10 James
Wm. Moore, et al., Moore's Federal Practice § 13.110, 13-102
(3d ed. 2004) (hereinafter "Moore's Federal Practice") ("unless
it falls within the supplemental jurisdiction of the court, a
counterclaim . . . in an action based on diversity must satisfy
the jurisdictional amount").
Thus, whether an independent jurisdictional basis must exist in
order for the Court to adjudicate defendant's counterclaims turns
on the nature compulsory or permissive of those claims.
According to Federal Rule of Civil Procedure 13(a), a compulsory
counterclaim "arises out of the transaction or occurrence that is
the subject matter of the opposing party's claim. . . ." Courts
interpret this standard broadly. See Moore, 270 U.S. at 610
("`Transaction' is a word of flexible meaning. It may comprehend a series of many occurrences, depending not so much upon the
immediateness of their connection as upon their logical
relationship."). Courts consider the following factors when
deciding whether a counterclaim is compulsory or permissive: "(1)
identity of facts between the original claim and counterclaim;
(2) mutuality of proof; (3) logical relationship between original
claim and counterclaim." Mirkin, Barre, Saltzstein, Gordon,
Hermann & Kreisberg v. Noto, 94 F.R.D. 184, 187 (E.D.N.Y. 1982)
(Glasser, J.) (quoting Federman v. Empire Fire & Marine Ins.
Co., 597 F.2d 798, 811-12 (2d Cir. 1979)). "Although these
factors or tests may be indicative in one sense or another of the
compulsory character of a counterclaim, no one of them is
conclusive, and should not be relied upon exclusively." Id. The
crucial inquiry with respect to pleadings is "whether the
essential facts of the various claims are so logically connected
that considerations of judicial economy and fairness dictate that
all the issues be resolved in one lawsuit." Harris,
571 F.2d at 123; see also Koufakis v. Carvel, 425 F.2d 892, 898-99 (2d
Cir. 1970) (counterclaim found to be compulsory because
allegations of wrongful termination of franchise in violation of
franchise agreement arose out of the same facts as plaintiff's
claim for breach of contract).
In his first counterclaim, defendant alleges that he agreed to
represent plaintiff in a commercial dispute and that plaintiff paid defendant an initial retainer fee of $10,000 and agreed to
pay defendant the remainder on a contingency fee basis of 20% of
any award after trial or settlement. Def. Answer ¶ 15.
Additionally, plaintiff agreed to pay for all out-of-pocket
expenses incurred by defendant on behalf of plaintiff. Id.
Defendant alleges that plaintiff reimbursed him for the
out-of-pocket expenses he incurred. By contrast, because
plaintiff refused to execute and conclude the Restated
Shareholders' Agreement and never recovered any amount in the
litigation, defendant has not been compensated for the legal
services he rendered and has suffered damages in an amount to be
determined at trial. Id. ¶ 16-17. In his second counterclaim,