Court Opinion

ID: 616138
Source: CourtListenerOpinion
Date Created: 2011-10-26 23:21:50+00
Date Added: 2024-06-11T17:50:36.067818
License: Public Domain

Case: 11-30057     Document: 00511646050         Page: 1     Date Filed: 10/26/2011

            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                            FILED
                                                                         October 26, 2011

                                       No. 11-30057                        Lyle W. Cayce
                                                                                Clerk

RICHARD BLAUSTEIN, ET AL

                                                  Plaintiffs
v.

BURT DAVID HUETE,

                                                  Defendant - Appellant
v.

TIMOTHY MAIER; CHRISTOPHER MAIER; MAIER & MAIER, P.L.L.C.,

                                                  Defendants - Appellees

                   Appeal from the United States District Court
                       for the Eastern District of Louisiana
                             USDC No. 2:08-CV-1357

Before JOLLY, DeMOSS, and PRADO, Circuit Judges.
PER CURIAM:*
        This appeal from an order to arbitrate arises out of a patent dispute, which
involves the inventors, an LLC in which the inventors were members, and a law
firm hired to draft a patent application. The issues before us concern the nature

        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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                                 No. 11-30057

of the relationship among these parties and which parties are bound to an
arbitration agreement between the LLC and the law firm. The district court
dismissed Inventor Burt David Huete’s claims against the law firm, holding that
Huete, as a direct beneficiary of the fee agreement between the LLC and the law
firm, was estopped from litigating this dispute in violation of the agreement’s
terms. For the reasons that follow, we AFFIRM.
                                       I.
      Burt David Huete claims that he, along with Richard and Gail Blaustein,
invented a wireless device called “the Stalker.” Huete filed a provisional patent
for the Stalker in October 2006. The inventors formed an LLC, Special Projects
Limited (“SPL”), to market the Stalker, and retained Timothy and Christopher
Maier of Maier & Maier, P.L.L.C. (“the Maiers”) to prepare a non-provisional
patent application. The Maiers’s fee agreement, which listed SPL as the client,
contained a clause requiring arbitration of disputes related to the agreement and
another clause requiring any litigation to be brought in a court in Northern
Virginia. Richard Blaustein and Burt David Huete signed the fee agreement on
SPL’s behalf.
      Huete contends that after the execution of this agreement, the Blausteins
conspired with the Maiers to extinguish his patent rights, creating a conflict of
interest in the Maiers’s representation of his interests. According to Huete, the
patent application the Maiers prepared was deficient in a number of ways,
causing the inventors to lose the continuity intended to come from a provisional
patent.
                                       II.
      Huete sued the Blausteins and other members of SPL in state court. The
Blausteins, in turn, sued Huete in federal court, where the two suits were
consolidated.   Both the Blausteins and Huete amended their respective
pleadings to add claims against their attorneys, the Maiers. Against the Maiers,

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Huete pled claims of legal malpractice, negligence, breach of fiduciary duty, and
breach of an implied contract.
      The Maiers moved to dismiss on several grounds. On September 11, 2009,
the district court found that Huete was a party to the fee agreement and was
thus bound to arbitration; it dismissed all of Huete’s claims. Blaustein v. Huete,
2009 WL 2982928, at *3-*4 (E.D. La. Sept. 11, 2009).
      Huete appealed the district court’s ruling, which was reversed and
remanded by a panel of the Fifth Circuit on June 18, 2010. Blaustein v. Huete,
2010 WL 7097472, at *1-*2 (5th Cir. June 18, 2010). The panel found that
because Huete signed the fee agreement in a representative capacity, he was not
personally bound.    Id. at *1.   The panel did not, however, “foreclose the
possibility that Huete can be held to the arbitration agreement as a non-party
beneficiary.” Id. at *2. The panel remanded the case to the district court to
decide whether Huete, as a non-signatory, could be bound to the agreement
under principles of contract and agency law. Id.
      On remand, the Maiers filed another motion to dismiss, asserting that the
doctrine of direct benefits estoppel required Huete to arbitrate his individual
claims. The district court granted the Maiers’s motion to dismiss on that basis
on December 22, 2010, finding that Huete knowingly sought and obtained direct
benefits from the fee agreement and asserted claims stemming from that
agreement. Huete appeals.
                                       III.
      Huete contends that the district court erred in applying the doctrine of
direct benefits estoppel to bind him to the arbitration agreement between SPL
and the Maiers. He argues that any benefit he would have received under the
agreement was indirect and that he actually “received” detriment because the
Maiers performed their services poorly. Huete also argues that he and the
Blausteins had separate attorney-client relationships with the Maiers and that

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these relationships, not the relationship embodied in the fee agreement, form the
basis of his claims. Lastly, Huete argues that enforcing the fee agreement
against him would violate Louisiana’s public policy against allowing attorneys
to compel arbitration with clients.
      The Maiers counter that Huete was aware of the terms of the fee
agreement and received client-like benefits from it.       They argue that the
allegations in Huete’s complaint require referencing the fee agreement, and that
there is no public policy in Louisiana against arbitration between attorneys and
clients. The Maiers also argue that the district court’s order bound Huete to the
forum selection clause in the fee agreement and that Huete, by neglecting
discussion of the forum selection clause in his primary brief, has waived any
argument that he is not bound to litigate in Northern Virginia. In the Maiers’s
view, this waiver necessitates dismissal of this appeal, and they filed a motion
to dismiss advancing this position after oral argument.
                                       IV.
                                       A.
      We review a district court’s application of the doctrine of direct benefits
estoppel for abuse of discretion. Noble Drilling Servs., Inc. v. Certex USA, Inc.,
620 F.3d 469, 472 (5th Cir. 2010) (citing Grigson v. Creative Artists Agency,
L.L.C., 210 F.3d 524, 528 (5th Cir. 2000)). A district court abuses its discretion
where it erroneously applies the law or makes a clearly erroneous assessment
of the facts. Id. at 473.
      “[S]o long as there is some written agreement to arbitrate, a third party
may be bound to submit to arbitration. Ordinary principles of contract and
agency law may be called upon to bind a non-signatory to an agreement whose
terms have not clearly done so.” Bridas S.A.P.I.C. v. Gov’t of Turkm., 345 F.3d
347, 355-56 (5th Cir. 2003) (internal citation omitted). Direct benefits estoppel
is one theory by which non-signatories may be bound to arbitrate. Hellenic Inv.

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Fund, Inc. v. Det Norske Veritas, 464 F.3d 514, 517 (5th Cir. 2006). The theory
applies to “‘non-signatories who, during the life of the contract, have embraced
the contract despite their non-signatory status but then, during litigation,
attempt to repudiate the arbitration clause in the contract.’” Id. at 517-18
(quoting E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin
Intermediates, S.A.S., 269 F.3d 187, 200 (3d Cir. 2001)). “A non-signatory can
‘embrace’ a contract containing an arbitration clause in two ways: (1) by
knowingly seeking and obtaining ‘direct benefits’ from that contract; or (2) by
seeking to enforce the terms of that contract or asserting claims that must be
determined by reference to that contract.” Noble, 620 F.3d at 473.
      Huete “embraced” the fee agreement between SPL and the Maiers in both
respects. He obtained the same sort of benefits from the fee agreement that a
client would have received: research, reasoning, drafting, and filing, all informed
by the Maiers’s legal training. Huete received these benefits as a member of
SPL because he formed SPL for that purpose. Had SPL not existed, Huete
would have had to hire his own patent attorney to perform these tasks.        The
only way this benefit could have been any more direct were if Huete had been an
actual party to the fee agreement, in which case we would not need to consider
an estoppel theory. Huete’s subjective assessment that these services were so
poorly rendered that they were not benefits cannot control our analysis. That
question is grounded in the merits of the claim, not in its arbitrability.
      Huete’s claims, whether they all enforce the fee agreement or not, must be
determined, at least in part, by reference to that agreement. He specifically
alleges that the Maiers “failed to exercise reasonable care, skill and diligence in
performing legal services for SPL, Huete and other inventors.” It is impossible
to square this allegation with Huete’s argument that his claims are all based on
attorney-client relationships separate from the written fee agreement.
Assuming every other pled allegation relates to some unwritten attorney-client

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relationship, this allegation, which includes SPL by name, must relate to an
attorney-client relationship in which SPL was a party. SPL was a party to the
attorney-client relationship formed by the fee agreement; therefore this claim,
at least, invites us to reference the fee agreement.        In the light of these
considerations, we cannot agree that the district court abused its discretion in
applying direct benefits estoppel to compel Huete to arbitrate.
      Nor are we willing to negate the arbitration provision based on conjecture
about Louisiana’s public policy. Huete cites no authoritative pronouncement of
that policy, and it is not our place to pronounce the public policy of a state.
                                        B.
      The foregoing discussion moots the Maiers’s motion to dismiss this appeal
based on the forum selection clause. The district court analyzed the single issue
of direct benefits estoppel, with two implications in this case: first, Huete’s
relationship with the arbitration clause, and second, his relationship with the
forum selection clause. The district court held that Huete is “estopped from
relying on his non-signatory status to avoid the arbitration and forum selection
clauses . . . .” This conclusion followed the court’s general discussion of direct
benefits estoppel’s applicability. Although Huete’s primary brief did not discuss
the forum selection clause separately, neither did the district court’s order.
      The issue below, and the focus of our review, is whether Huete is bound
by the arbitration clause and forum selection clause because of direct benefits
estoppel. We hold that the district court did not abuse its discretion in applying
direct benefits estoppel, and we have acknowledged the implications that flow
from that doctrine’s application to this case.
      Accordingly, the district court’s order dismissing Huete’s claims pending
arbitration is
                                                                     AFFIRMED.

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