United States District Court, E.D. North Carolina, Western Division
W. FLANAGAN UNITED STATES DISTRICT JUDGE
matter is before the court upon defendant's motion to
dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6)
(DE 36) and plaintiff's motion to amend complaint (DE
46). The motions have been briefed fully and the issues
raised are ripe for ruling. For the following reasons, the
motions are granted in part and denied in part.
OF THE CASE
commenced this action on December 13, 2018, in the district
court of Harris County, Texas, asserting claims for breach of
contract and legal malpractice against defendant, a law firm
that represented plaintiff in the course of prior litigation
in this court, in the case Lorenzo v. Prime
Communications, L.P., No. 5:12-CV-69-H (E.D. N.C. )
(“Lorenzo” or the “underlying
action”). Plaintiff seeks compensatory damages, fees
paid in the underlying action, attorney's fees in this
action, and declaratory judgment.
removed this action to the United States District Court for
the Southern District of Texas, on January 28, 2019, and
moved to dismiss the action for lack of personal
jurisdiction, improper venue, and for failure to state a
claim. With leave of court, plaintiff filed the operative
amended complaint on March 7, 2019, including additional
factual allegations and an additional claim for breach of
fiduciary duty. Defendant again moved to dismiss the action
for lack of personal jurisdiction, improper venue, and for
failure to state a claim. On June 6, 2019, the United States
District Court for the Southern District of Texas granted in
part and denied in part defendant's motion, transferring
venue of the action to this court, and denying as moot the
remaining motions to dismiss.
answered the amended complaint and filed the instant renewed
motion to dismiss for failure to state a claim, pursuant to
Federal Rule of Civil Procedure 12(b)(6), on June 20, 2019.
In support of its motion, defendant relies upon a July 18,
2014, letter from defendant to plaintiff, and a June 21,
2017, order allowing defendant to withdraw in the underlying
filed the instant motion for leave to file second amended
complaint on July 9, 2019, relying upon a proposed second
amended complaint and redline, as well as email
correspondence between counsel. Plaintiff seeks leave to add
claims for constructive fraud and breach of duty of good
faith and fair dealing, as well as additional factual
allegations in support of all claims. Defendant responded in
opposition thereto, on July 30, 2019.
meantime, after an extension, plaintiff responded in
opposition to the instant motion to dismiss, relying upon the
following documents: 1) transcript of initial conference on
April 5, 2019, with the United States District Court for the
Southern District of Texas, 2) a brief filed in the case
Microsoft v. Baker, No 15-457 (S.Ct.), and 3) an
article entitled Rule 23(f) Class Certification Appeals:
Boon or Bust? Plaintiff replied in support of its motion
for leave to amend on August 13, 2019, and defendant replied
in support of its motion to dismiss on August 15, 2019.
court's case management order, entered June 21, 2019, the
deadline for mediation and discovery is January 30, 2020, and
dispositive motions are due February 20, 2020.
OF ALLEGED FACTS
facts alleged in the operative complaint may be summarized
as follows. Plaintiff “is an authorized AT&T
retailer” with “stores across the United States,
” and with headquarters in Sugar Land, Texas. (Compl.
¶ 6). In February 2012, a group of current and former
employees (the “Lorenzo plaintiffs”)
sued plaintiff in the underlying action in this court,
asserting that plaintiff failed to pay wages in accordance
with the Fair Standards Labor Act and the North Carolina Wage
and Hour Act (“NCWHA”). Plaintiff hired
defendant, a law firm based in Raleigh, North Carolina, to
represent it in Lorenzo.
2012 and 2017, in Lorenzo, defendant performed many
lawsuit-related tasks, including deposition preparation,
presenting plaintiff's witnesses for depositions,
conducting strategy sessions with plaintiff's principals,
meeting with plaintiff's principals regarding discovery,
exchanging thousands of emails and making hundreds of phone
calls with plaintiff's officers and employees. Plaintiff
also engaged defendant to perform other legal matters,
including advising plaintiff with respect to revisions that
plaintiff made to its nationwide employee handbook.
January 15, 2014, a magistrate judge granted, in part, the
Lorenzo plaintiffs' motions to certify the
collective wage action. The magistrate judge further
recommended that the Lorenzo plaintiffs' motion
to certify a class be granted in part. The presiding district
court judge confirmed and adopted the magistrate judge's
rulings and recommendations on March 24, 2014.
April 10, 2014, defendant, on behalf of plaintiff, filed a
petition with the United States Court of Appeals for the
Fourth Circuit for permission to file an interlocutory appeal
pursuant to Fed.R.Civ.P. 23(f), of the court's March 24,
2014, order. However, this petition was filed three days
late. Defendant informed plaintiff of its error.
“Until this point, a portion of [defendant's] fees
were being paid by [plaintiff's] insurer, and the
remainder was being paid by [plaintiff].” (Compl.
¶ 13 n. 2).
18, 2014, the parties entered into the following letter
agreement (hereinafter, the “letter agreement”):
As a matter of professional courtesy, Ragsdale Liggett, PLLC
(“Ragsdale”) agrees that any legal fees for this
matter that exceed the available legal defense costs
available under any policy of insurance applicable to this
matter maintained by Prime Communications, L.P.
(“Client”) will be waived so that the Client does
not incur any legal expense from Ragsdale in excess of all
available insurance coverage. Ragsdale further agrees to
continue to use its best efforts to defend the Client in this
matter. In exchange for this accommodation, Prime agrees to
waive and hold harmless Ragsdale from any acts or omissions
that have may have [sic] occurred by any member or employee
of Ragsdale during the defense of this matter.
(Compl. ¶ 14; DE 37-1). This letter agreement was
executed on behalf of defendant by William H. Pollock
(“Pollock”), and on behalf of defendant by Faisal
Charania, Esq., Vice President and Associate General Counsel
of plaintiff. (DE 37-1 at 2).
to the complaint, “[a]fter [defendant] entered into the
[letter agreement], [defendant] seemingly performed as little
work as possible to defend the [Lorenzo] lawsuit-
perhaps not surprising, given [defendant's] economic
disincentive to do so.” (Compl. ¶ 15). In April
2017, defendant “was preparing a very important motion
for summary judgment as to the [Lorenzo
plaintiffs'] collective-action claims.” (Compl.
¶ 16). “On April 5, 2017-the day the motion was
due for filing-[defendant] sent [plaintiff's] general
counsel a ‘final draft' of the motion that
contained numerous errors and was far from final.”
(Id.). One of plaintiff's officers emailed
This is the final draft [of the MSJ] you want me to review
when the intro paragraph is wrong? Amie sent this at 2:30
p.m. CST the day it is due for filing (24 page) motion[.]
As such, please be put on notice that proper efforts for
defense have not been used from your end and we hereby demand
adequate assurances per out [sic] contractual agreement that
Ragsdale will provide the counsel agreed to. We consider
these efforts a breach of contract.
(Id.). Plaintiff also emailed defendant on April 6,
2018 “about the status of important ‘action
items' that had [defendant] had let fall by the
wayside.” Id. “After [defendant]
provided a non-response to his email, plaintiff's officer
emailed again” on April 6, 2018:
[W]e do not need details about reasons for [Ragsdale's]
continued tardiness and delay going forward, we just need the
materials as we have no faith in Ragsdale's ability to
handle these matters without micromanagement. The dispositive
motions yesterday once again set us back due to the sub-par
efforts and we firmly believe your most meaningful
opportunity to turn the case around, and make good on your
promises, has been squandered. As such, we reiterate our
belief that you have breached our contract by not using best
(Id.). “On April 12, 2017-less than two weeks
from the due date for [plaintiff's] response to an
important motion for summary judgment- [defendant] notified
[plaintiff] that, notwithstanding the [letter agreement],
[defendant] was withdrawing from the case due to ‘a
conflict of interest' that had arisen solely as a result
of [plaintiff's] statement that [defendant's] efforts
were subpar.” (Compl. ¶ 17). Defendant
“further stated that it would conduct no more work on
the case, including filing a response to the summary ...