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Prime Communications, L.P. v. Ragsdale Liggett, PLLC

United States District Court, E.D. North Carolina, Western Division

October 31, 2019

PRIME COMMUNICATIONS, L.P., Plaintiff,
v.
RAGSDALE LIGGETT, PLLC, Defendant.

          ORDER

          LOUISE W. FLANAGAN UNITED STATES DISTRICT JUDGE

         This 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.

         STATEMENT OF THE CASE

         Plaintiff 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.

         Defendant 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.

         Defendant 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 action.

         Plaintiff 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.

         In the 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.

         Per the 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.

         STATEMENT OF ALLEGED FACTS

         The facts alleged in the operative complaint[1] 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.

         Between 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.

         On 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.

         On 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.[2] 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][3].” (Compl. ¶ 13 n. 2).

         On July 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).[4] 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).

         According 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 defendant:

Bill,
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 efforts.

(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 ...


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