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Grant & Eisenhofer P.A. v. Bernstein Liebhard LLP

United States District Court, Southern District of New York

April 20, 2015

GRANT & EISENHOFER, P.A., Plaintiff,
v.
BERNSTEIN LIEBHARD LLP, et al., Defendants.

MEMORANDUM OPINION AND ORDER

JESSE M. FURMAN, United States District Judge

The present case involves a dispute between two law firms over the terms of a fee-sharing agreement pursuant to which Plaintiff Grant & Eisenhofer PA. (“G&E”) agreed to serve as of counsel to Defendant Bernstein Liebhard, LLP (“Bernstein Liebhard”) in a specific litigation in exchange for twenty-six percent of the fee earned by the latter. Bernstein Liebhard now moves, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the Complaint in its entirety, alleging that G&E failed to perform its obligations under the parties’ fee agreement and that G&E abandoned the agreement. (Def Bernstein Liebhard LLP’s Mem. Law Supp. Mot. To Dismiss Pursuant Fed.R.Civ.P. 12(b)(6) (Docket No. 9) (“Def’s Mem.”) 1). [1] Bernstein Liebhard also contends that G&E’s claims for breach of the implied covenant of good faith and fair dealing and unjust enrichment fail as a matter of law. (Id. at 2). For the reasons stated below, Bernstein Liebhard’s motion is denied with respect to the contract claim, but granted with respect to the other claims.

BACKGROUND

This case arises out of a fee arrangement in In re Fannie Mae Securities Litigation, No. 04-CV-1639 (D.D.C.) (the “Fannie Mae litigation”), a class action brought in the United States District Court for the District of Columbia. (Am. Compl. (Docket No. 23) ¶ 1). In January 2008, Waite Schneider Bayless & Chesley Co. LPA (“Waite Schneider”) was appointed plaintiff’s Lead Class Counsel in that litigation, and Bernstein Liebhard - which represented two Ohio public pension funds (the “Ohio Funds”) - was appointed Co-Lead Class Counsel. (Id. ¶¶ 1, 11-12). At Bernstein Leibhard, William A. K. Titelman served as the primary contact person for the Ohio Funds, and Francis P. Karam was “one of the senior litigators working day-to-day on the case.” (Id. ¶ 13).

On or about March 2, 2009, Titelman and Karam both left Bernstein Liebhard to join G&E. (Id. ¶ 16). Three days later, G&E and Bernstein Liebhard entered a letter agreement stating in full as follows:

Consistent with 1) Ohio’s retainer agreement designating William Titelman as “Outside Counsel” in Fannie Mae, 2) the fact that Frank Karam has been managing the day to day litigation of the case, and 3) their move to Grant & Eisenhofer (“G&E”), the following agreement has been reached. Titelman and Karam, as well as G&E and Bernstein Liebhard (“BL”), wish to assure the client that there will be continuity of representation and efficient case management through the use of the same attorneys who have been working on the case regardless of their current firm affiliation. Further, this letter confirms the agreement between G&E and BL regarding G&E joining as additional counsel and serving as “Of Counsel” to BL on behalf of the Ohio funds in the Fannie Mae litigation. Pursuant to BL’s previously negotiated agreement with Waite Schneider Bayless & Chesley dated July 25, 2007, providing a fee to BL out of the overall fee, said portion of the overall fee due BL shall be divided as follows: 74% to BL and 26% to G&E. Both G&E and BL shall litigate this case consistent with their fiduciary duties to the Ohio funds and the class, maintaining the highest standards of excellence.

(Decl. Christian P. Siebott Supp. Def. Bernstein Liebhard LLP’s Mot. To Dismiss Pursuant Fed.R.Civ.P. 12(b)(6) (Docket No. 10) (“Siebott Decl”), Ex. A (the “Bernhard Liebhard Agreement”); see Am. Compl. ¶ 17).[2] Thereafter, G&E made contributions to the Fannie Mae litigation fund in amounts equal to twenty-six percent of Bernstein Liebhard’s obligation to the fund. (See, e.g., Am. Compl. ¶ 21).

On August 31, 2010, Karam left G&E. (Am. Compl. ¶ 22). Shortly before that date, Titelman - who remained at G&E - notified a lawyer named James Cummins at Waite Schneider of Karam’s impending departure and that G&E “stood ready to continue working on the case.” (Id. ¶ 22). Thereafter, and with Bernhard Liebhard’s knowledge, G&E continued to contribute twenty-six percent of Bernhard Liebhard’s obligations to the Fannie Mae litigation fund. (Id. ¶¶ 24-32).

By letter dated May 3, 2011, G&E entered into an agreement with Waite Schneider. (Am. Compl. ¶ 30). The letter reads, in its entirety:

Bill and I very much appreciated our telephone call last week and your commitment to deal with us directly and separately from Bernstein Liebhard going forward on the Fannie Mae litigation. We are pleased that you understand and agree with our desire to deal directly with Waite, Schneider, Bayless & Chesley and not have to deal with Bernstein Liebhard when it comes time for any potential fee distribution.
As promised with respect to your latest call to fund expenses on this litigation, enclosed please find a check in the amount of $104, 000.00 representing our 26% share of Bernstein[] Liebhard’s 25% share of the total fee.
As you know, we remain ready and willing to assist you in any way.

(Siebott Decl., Ex. B (the “Waite Schneider Agreement”)). G&E alleges that the agreement was “administrative only” and explains that “[s]ince [Waite Schneider] kept asking directly for payment, G&E thought it fair at the end of the case to get paid directly.” (Am. Compl. ¶ 30).

In 2012, Markovits, Stock & DeMarco, LLC (“MSD”) - now named as a defendant in this action - was substituted for Waite Schneider as Lead Counsel in the Fannie Mae litigation; MSD “also succeeded to the obligations” of Waite Schneider under Waite Schneider’s agreement with G&E. (Id. ¶ 34). The following year, the Fannie Mae litigation settled. (Id. ¶ 35). On December 6, 2013, the district court approved the settlement and awarded attorneys’ fees and expenses totaling $29, 152, 612.27 to MSD as Lead Counsel, for allocation to all Plaintiffs’ counsel. (Id. ¶¶ 39-40). MSD allocated $324, 995.61 to G&E. (Id. ΒΆΒΆ 43, 46). G&E insists that it is owed either $1, 900, 000 or $1, 348, 000 - representing twenty-six percent ...


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