The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.
In this dispute amongst law firms regarding the allocation of legal fees ascertained as a result of a settlement of a class action brought in Illinois state court against the Aon Corporation, Plaintiffs Kirby McInerney LLP and Richard Stone ("Plaintiff" or "Kirby") brought an action in this case against one other member of class counsel, Edward T. Joyce ("Joyce"), an Illinois lawyer. As a result of the action, the fee dispute between Kirby and Joyce was arbitrated in Georgia. Once the arbitration award, which favored Kirby, was confirmed by a federal district court judge in Georgia, Kirby filed a complaint in this Court on June 5, 2008, which was amended on August 21, 2008 ("Compl."), to enforce the confirmed arbitration award against a second member of class counsel, Defendants John Randy Patchett and the Patchett Law Office ("Defendant" or "Patchett"). Patchett had not participated in the Georgia arbitration.
On October 2, 2008, Patchett filed a motion to dismiss, arguing primarily that under the Supreme Court's decision in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), this Court should abstain from exercising jurisdiction due to the existence of the class action that is currently pending in Illinois appellate courts. In the alternative, Patchett moves to dismiss on the grounds that this Court lacks personal jurisdiction over him under both the long-arm statute of New York and the Due Process clause of the federal constitution. Lastly, Patchett asserts that venue is improper here because none of the events and transactions underlying this lawsuit took place in New York.
On November 14, 2008, Plaintiff filed a motion to strike affidavits submitted with Patchett's reply papers from Edward T. Joyce, Esq., and Julia M. Nowicki, a now retired judge of the Circuit Court of Cook County, Illinois. On March 25, 2009, this Court held oral argument. For the reasons set forth below, Defendant's motion to dismiss is denied. Accordingly, Plaintiff's motion to strike is denied as moot. The parties are directed to appear before this Court for a status on conference on May 11, 2009 at 4:00 p.m.
A. The Commencement of the Aon action
On or about August 19, 1999, Kirby, a law firm based in New York, commenced a purported class action in the Cook County of Illinois Circuit Court ("Illinois Circuit Court") against the Aon Corporation concerning certain contingent commissions paid by class members to Aon in connection with the placement of commercial insurance for Aon's customers (the "Aon action"). (Compl. ¶¶6, 12; Declaration of Peter S. Linden, dated October 27, 2008 ("Linden Aff."), ¶2; Declaration of John Randall Patchett, submitted on October 2, 2008 ("Patchett Aff."), ¶7.) At the time of the commencement of the lawsuit, the only proposed class plaintiff was Alan Daniel; Kirby employed Futterman & Howard ("Futterman") and the Jacobs Law Firm ("Jacobs") to serve as local counsel in Illinois for Daniel. (Linden Aff. ¶2.)
Kirby was concerned as to whether Daniel was a member of the putative class, so in November of 2000, Kirby called Illinois lawyer Joyce to discuss the Aon action. (Declaration of Edward T. Joyce, dated November 6, 2008 ("Joyce Aff."), ¶3.) Kirby asked Joyce if any of his clients were plaintiffs in the putative class and, if so, whether one of them would agree to join Daniel as a putative class representative. (Id. ¶3.) Joyce called other Illinois law firms, and then called Kirby back to say that Williamson County Agricultural Association ("Williamson") was in the putative class and was willing to become a class representative with Daniel. (Id. ¶¶6-7.) Williamson was a client of Patchett, a "small Illinois law firm with its sole office located in Marion, Illinois." (Patchett Aff. ¶¶5, 7.)
On December 28, 2000, Kirby entered into a written agreement (the "Agreement" or "Contract") with three Illinois law firms -- Freed & Weiss ("F&W"), Patchett, and Joyce, collectively referred to as "Williamson's counsel." (Linden Aff. ¶5; Patchett Aff. ¶9.) In pertinent part, the agreement specified that "Joyce, F&W and Patchett have referred. Williamson. for inclusion as a plaintiff in the pending class action styled Daniel v. Aon Corporation, et al. or for the commencement of a similar class action on Williamson's behalf." (Linden Aff., Ex. A [Contract ¶1]; Compl. ¶¶15-17.) With regard to any ascertained fees that would be allocated amongst counsel, the Contract specified that:
In consideration for the services performed by Williamson's Counsel in connection with preparing the Williamson case, and in the event the court awards fees to plaintiffs' counsel in this action, Williamson's Counsel collectively will receive 15% off the top of the fees awarded to plaintiffs' counsel in this action, subject to the conditions specified below. In addition, Williamson's Counsel collectively will receive significant work in the referenced class action or a similar class action to be commenced on behalf of Williamson. (Linden Aff., Ex. A ¶3.) The contract further provided that Kirby would act as "lead counsel" and would be responsible for "managing the prosecution of th[e] action, making work assignments in th[e] action, for determining strategic decisions in the litigation of this action, conducting discovery, preparing for trial, and for initiating and directing settlement discussions with counsel for defendants." (Linden Aff., Ex. A ¶4.) Williamson's counsel would act as "members of, and constitute, an Executive Committee," which would be responsible for "assisting" Kirby in the action. (Id.) Lastly, the Agreement noted that should Williamson not ultimately be "certified as a class representative, but the action nevertheless achieves a successful outcome," Williamson's counsel could "apply at the conclusion of the action for reimbursement of attorneys' fees and expenses actually incurred." (Id.)
The contract was drafted on Kirby letterhead, which bore a New York address; Patchett, along with the other Illinois law firms, signed the agreement in Illinois and then faxed the signatures to Kirby in New York. (Linden Aff., Ex. A [Contract's signature pages].) Kirby further alleges that several drafts of the Agreement were negotiated by phone and fax between Kirby and Joyce. (Linden Aff. ¶5; Compl. ¶14.) Kirby contends that Joyce informed him that Williamson was originated by Patchett and that Joyce had asked F&W to work on "the case due to [Joyce's] pre-existing working relationship with Paul Weiss,"of F&W. (Linden Aff. ¶5.) Joyce "made clear" to Kirby "that he was negotiating, with express authority on his own behalf and on behalf of Patchett" and F&W. (Id.)
Joyce further made known that he, Patchett and F&W were "working as partners and joint venturers in their representation of Williamson pursuant to the [agreement], and that they had agreed as to how to divide up the 15% fee provided for in the [agreement] which they would share as partners." (Linden Aff. ¶5; Compl. ¶13.) To this, Joyce responds that he never told Kirby how Williamson's counsel would divide the 15% "off the top" fee; he asserts, however, that Williamson's counsel agreed amongst themselves that the division of fees would be made in proportion to the services performed and responsibility assumed by each lawyer, in accordance with Rule 1.5(g) of the Illinois Rules of Professional Conduct. (Joyce Aff. ¶6.)
During the prosecution of the Aon action from 2000 to 2005, Kirby asserts that he had "numerous communications with Patchett," which included: "1) faxes from Patchett, including his executed signature page to the Contract; 2) numerous emails to and from Patchett requesting or providing information to be used in prosecuting the Aon action; 3) telephone calls concerning Patchett's client and preparation of Patchett and Joyce to defend the deposition of Williamson; and 4) correspondence concerning the Aon action, including sending copies of filed documents and collecting Patchett's lodestar summary and related information in connection with the Aon settlement." (Linden Aff. ¶8; Compl. ¶¶3-4, 21-23.)
Specifically, and providing documentary support for some of his averments, Kirby asserts that: Patchett faxed the executed contract to him in New York on January 1, 2002; that Kirby, located in New York, spoke with Patchett by telephone on November 1, 2001 concerning Aon; that Patchett wrote to Kirby in New York on January 8, 2001 requesting additional information, which Plaintiff supplied (Linden. Aff., Ex. B [01/08/01 letter]); that Kirby wrote Patchett on January 4, 2002 to follow up on a substantive conversation Kirby had with Patchett in December, 2001 (Linden Aff., Ex. C [01/04/02 letter]); that on January 11, 22, and 24, and February 22, 2002, Patchett emailed Kirby at his office in New York in connection with Aon (Linden Aff., Exs. D, E [emails]); that from January through March, 2002, Patchett had several telephone conversations concerning Aon with Plaintiff, who was located in New York; that on March 13 and 14, 2002, Kirby, located in New York, spoke by telephone to Patchett and then sent a memo concerning an upcoming deposition to him; that on March 21, 2002, Patchett wrote to Kirby in New York requesting certain documents related to Aon (Linden Aff., Ex. F [03/21/02 letter]); that on April 2, 2002, Plaintiff mailed documents to Patchett from his office in New York; that on July 15, 2002, Plaintiff mailed a legal memorandum to Patchett from his office in New York (Linden Aff., Ex. H [07/15/02 letter]); that on December 2, 2005, Patchett sent three emails concerning Aon to Plaintiff at his office in New York; and, that throughout the course of the action, Kirby, from its New York office, sent Patchett copies of pleadings related to Aon. (Linden Aff. ¶9(a)-(p).)
In response, Patchett asserts that: all the work he performed in "connection with the prosecution of the Aon litigation was performed in Illinois"; that his "only contact with New York throughout the entire course of the Aon litigation was when [he] faxed a copy of the executed Letter Agreement" to Plaintiff in New York"; that he "never attended meetings in New York concerning the Aon litigation, nor did he perform any work in connection with the prosecution of the Aon Litigation" in New York; that he "never traveled to New York for any reason while the Aon Litigation was pending"; and, that he was not "and was not required to, submit any notices or payments related to the [Contract] to anyone in New York, and was not supervised by anyone in New York." (Patchett Aff. ¶¶12-13.)
Kirby also had regular interaction with Joyce during the prosecution of the Aon action. (Linden Aff. ¶10; Compl. ¶¶21-23.) This included: "1) hundreds of emails concerning the prosecution of the Aon action; 2) dozens of letters (and emails), many of which enclosed documents for Joyce's review and comment; 3) dozens of letters, faxes and emails from Joyce and his office, many including comments on documents prepared by Kirby; and 4) hundreds of phone calls concerning the prosecution and settlement of the Aon action." (Id.) Additionally, Joyce met with Kirby on at least two occasions in New York to discuss the Aon action." (Linden Aff. ¶10; Compl. ¶¶21-22.) Joyce does not deny these contacts with Plaintiff. (Joyce Aff. ¶9.)
B. The Settlement of the Aon Action and the Ensuing Dispute Over Counsel Fees
On July 28, 2004, the Illinois Circuit Court certified the class and appointed Kirby as sole lead class counsel; on March 9, 2005, a proposed Settlement Agreement was reached with Aon, which will result in an award to plaintiffs of between $85-$90 million. (Compl. ¶¶19-20; Compl. Ex. 2 [settlement agreement].) The Settlement Agreement, which was submitted to Illinois Circuit Court Judge Julia M. Nowicki, was signed only by Joyce and Kirby as "class counsel," and the agreement defined "Class Counsel" for "purposes of this Agreement" as Kirby for "Plaintiffs' lead counsel," and Joyce and Futterman as "executive committee counsel to the Class." (Compl. Ex 2 ¶21; Linden Aff. ¶11; Affidavit of Julia M. Nowicki, dated November 4, 2008 ("Nowicki Aff."), ¶¶3-5.) Patchett was not mentioned as class counsel in the settlement agreement.
The settlement agreement provided that "payment of attorneys' fees," "expenses," and "costs" ($19 million) would be "subject to the review and approval of the" Illinois Circuit Court. (Compl. Ex. 2 at 22.) And "in connection with this settlement," counsel was required to apply to the Illinois Circuit Court for an "aggregate award of attorneys' fees and expenses." (Id. at 17.) Further, the agreement noted that the "Final Order and Judgment in this action [would] include the [Illinois Circuit] Court's award of any attorneys' fees and expenses." (Id. at 22.)
Additionally, Aon was required to "pay or cause to be paid to Class Counsel such Fees and Expenses as may be awarded by the Court within ten days after the Effective Date" that the settlement agreement was approved, subject to the Illinois Circuit Court's approval.*fn1 (Compl. Ex. 2 at 22-23; Nowicki Aff. ¶5.) If the final settlement was delayed because a party filed a notice of appeal, Aon was required to "deposit an amount equal to the amount of attorneys fees and expenses awarded by the Court to a bank for deposit," where the money would be held pending resolution of the appeal. (Compl. Ex. 2 at 23.) That same day, Kirby wrote a letter to Joyce explaining that Kirby would "consult reasonably contemporaneously with and discuss every and any material aspect of this settlement and the administration of this settlement with Edward T. Joyce." (Joyce Aff., Ex. C [03/09/05 letter].)
On May 23, 2005, Joyce sent a letter to Kirby, asking what share of the Aon fee Kirby thought Joyce would receive. (Joyce Aff., Ex. D [05/23/05 letter]). The letter explained that it had been "two months" and Joyce had heard "nothing from" Kirby. (Id.) Kirby responded to this letter on May 31, 2005, writing that "hopefully this week" Kirby would be able to reach a "preliminary consensus about the issue of fees, if any are obtained." (Joyce Aff., Ex. E [05/31/05 letter].)
On August 15, 2005, class counsel in the Aon action filed a fee petition with Judge Nowicki, requesting $19 million in counsel fees. (Joyce Aff., Ex. A [fee petition]; Nowicki Aff. ¶6.) The fee petition was submitted by Kirby, but "also on the brief" was Joyce, Futterman, Jacobs, F&W, and Patchett, who were billed as "Attorneys for Plaintiffs." (Joyce Aff., Ex. A at 12-13.) The fee petition did not disclose the existence of a purported fee allocation agreement, or make any suggestions as to how the proposed $19 million fee award should or would be allocated. (Nowicki Aff. ¶6.)
On March 24, 2006, before any fees had been awarded, Joyce filed a motion with Judge Nowicki of the Circuit Court of Cook County, Illinois, reasserting class counsel's position that they were "entitled to an award of $19 million in fees." (Joyce Aff., Ex. F [fee-allocation motion]; Nowicki Aff. ¶8.) The motion acknowledged that there was an agreement among class counsel on how the first 15% of the proposed fee should be allocated, in that "Joyce and Patchett were to receive the first 15% of fees awarded," and that they would "share some of that 15% with" F&W. (Joyce Aff., Ex. F at 2.) The motion requested that the Court allocate the remaining 85% of the fees as follows: Futterman and Jacobs (10%), Patchett (7.5%), Kirby (37.5%), Joyce (45%). (Id.; Nowicki Aff. ¶8; Linden Aff. ¶14.)
Three days later, on March 28, 2006, Kirby filed a complaint in federal court in the Southern District of New York against Joyce under Docket Number 06-CV-2433, assigned to Judge Richard Berman, alleging that there was already a contract governing the division of fees amongst counsel, and that by filing a fee allocation motion in Illinois Circuit Court, Joyce has refused to abide by this Contract. (Joyce Aff., Ex. I [Kirby brief]; Joyce Aff. ¶10(i); Linden Aff. ¶16.) On March 30, 2006, in a written decision by Judge Nowicki, the Circuit Court of Illinois approved the proposed settlement agreement and awarded $19 million in fees to class counsel, (Joyce Aff., Ex. B [fee award]), but did not allocate the fees amongst counsel. (Id.) That same day, the F&W firm filed a response to Joyce's allocation motion, and alleged that there was also a dispute over allocation of the first 15% of the proposed fee, which Joyce had claimed was not in dispute. (Nowicki Aff. ¶9.)
On April 3, 2006, Judge Nowicki entered an order concerning Joyce's March 24, 2006 motion to allocate attorneys' fees among class counsel. (Joyce Aff., Ex. H [Nowicki order].) Judge Nowicki set a status conference on the motion for April 10, 2006 at 10:00 a.m., and further, the judge permitted any party desiring to submit written presentations regarding the motion until April 7, 2006 to do so. (Id.)
On April 6, 2006, Patchett filed a response to Joyce's March 24, 2006 motion to allocate the $19 million in fees among class counsel. (Joyce Aff., Ex. G [Patchett motion].) In pertinent part, Patchett averred that he "agrees that the percentage fees awarded pursuant to the request in Paragraph 11 of Joyce's Motion," which gave him 7.5% of the remaining 85% of the $19 million, was "equitable as to the Patchett Law Office and to Joyce & Associates," but Patchett took "no position as to the percentages awarded to" Futterman, Jacobs, or Kirby. (Id.)
On April 7, 2006, Kirby filed a response in the Illinois Circuit Court to Joyce's motion to allocate fees amongst class counsel. (Joyce Aff., Ex. I [Kirby brief]; Nowicki Aff. ¶11.) In its brief, Kirby first argued that Judge Nowicki should stay any such action concerning the division of fees because there was already a pending action filed in federal district court in New York. (Joyce Aff., Ex. I at 6.) On the merits of the fee allocation, Kirby contended that there was already an enforceable agreement, which should be governed by New York law, which divided up counsel fees amongst the parties and which awarded Williamson's counsel 15% of the $19 million. (Id. at 7-8.) Lastly, Kirby contended that the issue of the division of fees was not yet "ripe" because the fee allocation awarded by Judge Nowicki was subject to "to reversal, in whole or in part, on appeal." (Id. at 10.) Accordingly, the order awarding $19 million in fees was not yet final. (Id.)
On April 10, 2006, Judge Nowicki entered an order directing class counsel to select a mediator for the fee allocation dispute, and to report back to her on April 13, 2006 regarding who they selected. (Nowicki Aff. ¶13; Joyce Aff., Ex. J [order].) On April 13, 2006, Judge Nowicki ordered class counsel to mediate their fee allocation dispute, and to appear for a status report ...