Court Opinion

ID: 4038014
Source: CourtListenerOpinion
Date Created: 2016-09-28 20:01:41.165684+00
Date Added: 2024-06-11T07:45:16.037054
License: Public Domain

UNITED STATES DISTRICT COURT
                           FOR THE DISTRICT OF COLUMBIA

KOTCHEN AND LOW LLP,

                Plaintiff,

      v.

PRECISION DISCOVERY, INC.,                      Civil Action No. 16-224 (GK)
and JERRY BARBANEL,

                Defendants,

                          MEMORANDUM OPINION AND ORDER

      Plaintiff         Ketchen    & Low    LLP     ("Plaintiff"     or    "K&L")     and

Defendants       Precision     Discovery,        Inc.     ("Precision")     and     Jerry

Barbanel        (together,     "Defendants")        are     currently      arbitrating

Precision's       claims     for   over    $3    million     in   unpaid    bills     for

electronic data processing, hosting,                    and related charges,        costs

and fees.        Plaintiff    K&L filed this action seeking declaratory

judgment that Precision's arbitration claims are barred by the

doctrines of res judicata and is~ue preclusion and that they are

not   subject       to    arbitration.      Defendants       have   moved     to     stay

proceedings before this Court in favor of ongoing arbitration.

      This matter is presently before the                    Court on Defendant's

Motion     to    Stay    Proceedings      and    Compel    Arbitration or         in the

Alternative to Dismiss ("Motion to Compel Arbitration")                      [Dkt. No.
18], Defendant's Motion to Stay Proceedings and Compel Arbitration

or in the Alternative to Dismiss the Amended Complaint ("Am. Motion

to Compel Arbitration")                      [Dkt. No. 21], Defendant's Motion to Stay

Rule 26 Obligations Pending Determination on Arbitrability ("Mot.

to    Stay")        [Dkt.    No.        26] ,    and        Plaintiff's      Motion    for     Rule      16

Scheduling Conference ("Pl.' s Mot.")                              [Dkt. No. 29] .

       Upon consideration of the Motions, Oppositions, and Replies,

the    entire       record     herein,            and       for     the    reasons    stated       below,

Defendants'          Motion        to       Compel      Arbitration          is    denied     as    moot.

Defendants'         Amended Motion to Compel Arbitration and Motion to

Stay is granted in part and denied in part. Defendant's Motion to

Stay is denied as moot, and Plaintiff's Motion is denied.

I.     BACKGROUND

       A.        Factual Background

       This      dispute      stems             from    a    contractual          agreement        reached

between       the     parties           in      relation       to    a     separate    suit,        In   re

Delta/AirTran Baggage Fee Antitrust Litig., MDL 09-2089 (N.D. Ga.)

("Delta Litigation"). On November 19, 2012, the judge in the Delta

Litigation          issued    a     decision            finding          discovery    misconduct         by

Delta, the defendant in that case. See In re Delta/AirTran Baggage

Fee Antitrust Litig., 09-md-2089, 2015 WL 4635729, at *5 (N.D. Ga.

August      3,    2015).      As        a    remedy,         the    judge    ordered    plaintiff's

                                                       -2-
counsel, K&L, to retain a discovery expert to investigate Delta's

misconduct, and for Delta to pay the expert. Id.

        On November    25,   2012,    K&L     signed a    retainer       letter with

Precision. Pl.'s Ex. G ("Retainer Agreement")                  [Dkt. No. 22-7]      The

Retainer    Agreement    stated      that   Precision had         been hired,       "to

perform     computer    forensic     services     in     the    matter    of   In    Re

Delta/AirTran Baggage Fee Antitrust Litigation,                    MDL 2089,"       and

that "[Precision] will need to perform those procedures that [it]

consider[s] necessary to express a professional conclusion." Id.

at 1. The Retainer Agreement added that,                 "The scope of services

may change during the course of this engagement."

        The arbitration clause of the Retainer Agreement states

that,

        Any controversy or claim arising out of, or relating to
        services provided by Precision Discovery and covered by
        this letter for Counsel or at its request (including any
        such matter involving any parent, subsidiary, affiliate,
        successor in interest, of Counsel or of Precision
        Discovery)   shall be submitted first to voluntary
        mediation, and if mediation is not successful, then to
        binding arbitration, in. accordance with the dispute
        resolution procedures set forth in the attachment to
        this letter.

        Retainer Agreement at 4.

        In addition, the Retainer Agreement attached and incorporated

by reference Dispute Resolution Procedures,                    which contained an

additional arbitration clause. Id. at 6. The clause states that,

                                        -3-
     If a dispute has not been resolved within 90 days after
     the written notice beginning the mediation process (or
     a longer period, if the parties agree to extend the
     mediation) , the mediation shall terminate and the
     dispute shall be settled by arbitration. The arbitration
     will be conducted in accordance with the procedures in
     this document and the Rules for Non-Administered
     Arbitration of the CPR Institute for Dispute Resolution
     ("Rules") as in effect on the date of the engagement
     letter, or such other rules and procedures as the parties
     may designate by mutual agreement.

     Any issue concerning the extent to which any dispute is
     subject to arbitration, or concerning the applicability,
     interpretation, or enforceability of these procedures,
     including any contention that all or part of these
     procedures are invalid or unenforceable,       shall be
     governed by the Federal Arbitration Act and resolved by
     the arbitrators.

     Retainer Agreement at 6.

     In January 2013,          Precision asked K&L for authorization to

perform E-discovery services.          Pl.'s Opp.      to Defs.' Mot.        to Stay

Proceedings and Compel Arbitration,              or to Dismiss at 5          ("Pl.' s

Opp.")   [Dkt.    No.   22).   On January 4,      2013,    Precision sent K&L a

proposed E-discovery Statement of Work ("SOW"). Pl.'s Ex. E [Dkt.

No. 22-5). K&L never signed the SOW. Pl.'s Opp. at 6. Instead, K&L

authorized Precision by email to proceed with a limited amount of

E-discovery. Pl.'sEx.          B~~·S-7    ("LowDecl.")         [Dkt. No. 22-2).

     Between      November     2012   and      March   2013,    Precision     billed

$797, 481   for   computer     forensic     services      and $4, 102, 020   for   E-

discovery services. Pl.'s Opp. at 7; Pl.'s Ex. C [Dkt. No. 22-3).

On May 20, 2013, Precision "request[ed] the Court's assistance in

                                         -4-
•.

     ordering Delta to . . . pay for the services rendered by Precision

     Discovery." Pl. 's Ex. K,               ("Pixley Report")              [DKt. No. 22-11] .

             On May 28,        2013,    Delta requested a hearing on Precision's

     fees before the judge in the Delta Litigation. Pl.'s Opp. at 8. On

     July     24,    2013,     the     Delta        Litigation           court        held   a       full-day

     evidentiary hearing. Id. In an Order dated September 25, 2013, the

     Delta       Litigation     court        ruled    that      Precision's             fees     were      not

     reasonable. Pl.'s Ex. P [Dkt. No. 22-16]. The court ordered Delta

     to reimburse $655,635 in fees advanced by plaintiff's counsel, and

     to pay Precision an additional $1, 794, 116 in fees.                                      Id.    at 38.

     Together,       these     amounts       represented a               50 percent reduction in

     Precision's fees. Id.

             In June 2013,       Precision sent Delta a hard drive containing

     approximately        371,000           documents        that        had     been    collected          by

     Precision for Delta's review. Low Deel.                         ~   16. In late 2013, one of

     Precision's       Vice     Presidents           left     Precision           to    start        his   own

     company,        Pixley     Forensics           Group      ("Pixley").             Id.     at      ~   13.

     Thereafter,       K&L discontinued its use of Precision and retained

     Pixley as its expert witness. Id.

            In      December     2013,        the     Delta      Litigation             court         ordered

     Precision to make all data, including the hard drive with 371,000

     documents,       available        to    Pixley.        Pl. 's       Opp.    at    11.     Instead of

     sending a       hard drive         to    Pixley with the                   documents,       Precision
                                                     -5-
provided      Pixley     with      a     password        to     an    online     database     of

approximately      8     million        documents        hosted      by    Precision,      which

included but did not identify the 371,000 documents. Id.

      On     May   21,     2014,        Precision        sent        K&L   an    invoice     for

approximately $70,000 for hosting charges. Pl.'s Ex. T [Dkt. No.

22-20]. K&L refused to pay the invoice. Low Deel.                            ~   17. Precision

now seeks to recover from K&L "under theories of unjust enrichment

and quantum meruit          for        the   $485,558         in fees      incurred for      the

hosting and related services." Pl.'s Ex. D at 3 [Dkt. No. 22-4].

      B.     Procedural Background

      On September 23,            2014,      Precision commenced an arbitration

against K&L to recover unpaid fees from K&L for services provided

by Precision in connection with the November 9, 2012 Order in the

Delta Litigation. Defendants' Notice of Supplemental Authority at

1   ("Arbitration Decision")             [Dkt. Nos. 25, 25-1] . On November 10,

2014, K&L filed its Answer and Counterclaims with the arbitrators.

Am.   Mot.    to   Compel    Arbitration            at    6.    On    December      14,    2014,

Precision filed its Reply with the arbitrators. Id.

      On February 10,        2016 K&L filed a Complaint in this Court.

[Dkt. No. l]. On February 16, 2016, K&L filed a Motion to Dismiss

the   arbitration        proceedings         with    the       panel,      claiming   lack    of

arbitrability. Arbitration Decision at 1.

                                              -6-
        On April 5, 2016, Defendants filed a Motion to Stay and Compel

Arbitration,     or in the Alternative to Dismiss with this Court

("Motion to Compel Arbitration")         [Dkt. No. 18] . On April 6, 2016,

Plaintiff filed an Amended Complaint ("Am. Compl. ")                 [Dkt. No. 19] ,

which is the operative complaint.

        On   April   22,   2016,   Plaintiff      filed   its        Opposition   to

Defendant's Motion to Compel Arbitration.             [Dkt. No. 20]. On April

25, 2016, Defendants filed a Motion to Stay and Compel Arbitration,

or in the Alternative,         to Dismiss the Amended Complaint                ("Am.

Motion to Compel Arbitration")        [Dkt. No. 21]. On April 26, 2016,

Plaintiff filed its Opposition to Defendant's Amended Motion to

Compel Arbitration ("Pl.'sOpp.")         [Dkt. No. 22]. OnApril28, 2016,

Defendants filed their Reply to the Motion to Compel Arbitration

[Dkt. No. 23]. On May 6, 2016, Defendants filed their Reply to the

Amended Motion to Compel Arbitration              ("Def. 's Reply")       [Dkt. No.

24] .

        On May 16, 2016, the Arbitration Panel ruled on K&L's Motion

to Dismiss,     finding that all of Precision's claims except those

regarding      the   hosting   charges     were    subject      to     arbitration.

Arbitration Decision at 11.         On May 17, 2016, Defendants filed a

Notice of Supplemental Authority           ("Arbitration Decision")            [Dkt.

Nos. 25, 25-1], attaching the panel's decision.

                                     -7-
       On May 24,      2016, Defendants filed a Motion to Stay Rule 26

Obligations     Pending        Determination         on    Arbitrability      ("Mot.   to

Stay")     [Dkt. No.       26]. Plaintiff filed its Opposition on May 30,

2016     [Dkt. No.   27]     and Defendants filed their Reply on June 9,

2016 [Dkt. No. 28].

       On August       23,    2016   Plaintiff       filed a      Motion for Rule 16

Scheduling     Conference        [Dkt.       No.   29].     On    September    1,   2016,

Defendants filed their Opposition [Dkt. No. 30]. Plaintiff did not

file a Reply.

II.    STANDARD OF REVIEW

       "The Supreme Court has            set out          'the proper framework        for

deciding when disputes are arbitrable.'" Dist. No. 1, Pac. Coast

Dist., Marine Engineers' Beneficial Ass'n, AFL-CIO v. Liberty Mar.

Corp.,    815 F.3d 834,        844   (D.C.    Cir.   2016)       (quoting Granite Rock

Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 296 (2010)). "Under

that    framework,     a     court may order arbitration of a                 particular

dispute only where the court is satisfied that the parties agreed

to arbitrate that dispute." Id.                (emphasis in original).

       A dispute over the breadth of an arbitration provision is

"'generally for the courts to            dete~mine'        but 'parties may agree to

arbitrate questions of breadth'                so long as they do so plainly."

Id.    (quoting Nat'l R.R. Passenger Corp. v. Bos. & Me. Corp., 850

F.2d 756, 761 (D.C. Cir. 1988)).
                                             -8-
III. ANALYSIS

         A. The Scope of the Retainer Agreement

              1. Precision's Computer Forensic Services Fee and E-
                 Discovery Fee Claims

     K&L does not dispute that the Retainer Agreement covers the

computer forensic   services provided by Precision.   However,   K&L

argues that the E-discovery services provided by Precision were

not covered by the Retainer Agreement and thus not subject to its

arbitration provisions.

     The language of the Retainer Agreement clearly shows that it

extended to the E-discovery services provided by Precision. There

are several provisions of the Retainer Agreement which make this

clear.

     For example, as noted above, the second paragraph of page one

of the Agreement states that:

     We have been asked to perform computer forensic services
     in the matter of In Re Delta/AirTran Baggage Fee
     Antitrust Litigation, MDL 2089. If you desire a report,
     opinion or testimony on a matter, we will need to perform
     those procedures that we consider necessary to express
     a professional conclusion. The scope of services may
     change during the course of this engagement. We will
     discuss any variations with you prior to implementation.

     Retainer Agreement at 1 (emphasis added) .

     The Retainer Agreement thus contemplated Precision providing

a broad range of additional services beyond computer forensics

which might become necessary to reach an expert opinion.

                                -9-
     More        explicitly,       the    section       of     the    Retainer    Agreement

related     to     compensation          provides       that,        "[p]ricing    for     our

electronic discovery services will be provided at such time as

they are requested by counsel." Retainer Agreement at 2-3.

                  2. Precision's Unjust Enrichment Hosting Fee Claims

     In contrast,           the Retainer Agreement does not                  include any

mention     of     hosting     fees.      Furthermore,          the     hosting     services

provided by Precision occurred after K&L terminated Precision as

its discovery expert in the Delta Litigation. Low Deel.                           ~16;   Pl.'s

Opp. at 11.

     In addition, the Court is also not convinced that Precision's

hosting fee claims are sufficiently related to the court-ordered

forensic services it provided in the Delta Litigation as to fall

within the four corners of the Retainer Agreement. Therefore, the

Retainer Agreement and its arbitration provisions do not apply to

Precision's        claims    arising       out     of    its     unpaid    hosting        fees.

Consequently,        K&L     may    therefore       pursue       its     $485,558        unjust

enrichment claim related to Precision's hosting fees before this

Court.

                                            -10-
        B.   The  Arbitration   Clause   Mandates   Arbitration of
             Precision's Claims Arising from its Unpaid Computer
             Forensic Services Fees and E-Discovery Fees

               1.    The Retainer Agreement Language

        Precision's Computer Forensic Services Fee and E-Discovery

Fee Claims are subject to arbitration because the parties expressed

their clear and unmistakable intention to have the arbitration

panel determine the scope of its own jurisdiction. 1 See Skrynnikov

v. Fed. Nat. Mortg. Ass'n, 943 F. Supp. 2d 172, 176 (D.D.C. 2013)

    ("the question whether the parties have submitted a particular

dispute to arbitration,       i.e.    the    'question of arbitrability'     is

'an issue for judicial determination [u]nless the parties clearly

and unmistakably provide otherwise [.] '") (quoting AT&T Techs., Inc.

v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986)).

        The Retainer Agreement explicitly states that,             "any issue

concerning     the   extent   to     which    any   dispute   is   subject   to

arbitration.         shall be governed by the Federal Arbitration Act

and resolved by the arbitrators." Retainer Agreement at 6. In this

case, the arbitration panel selected by both parties has already

1 The arbitration clause explicitly applies to claims against "any
parent, subsidiary [or] affiliate" of Precision. Def.'s Ex. 3 at
4 [Dkt. No. 21-3]. As President and CEO of Precision, Jerry
Barbanel is an "affiliate" of Precision. See Pearce v. E.F. Hutton
Group, Inc., 828 F.2d 826 (D.C. Cir. 1987). Therefore, all claims
arising out of factual allegations that are arbitrable for
Precision are arbitrable for Barbanel.
                               -11-
determined that all of Precision's claims arising out of its unpaid

fees,    with the       exception of   the hosting fees,        are   subject   to

arbitration.

        Even if there were any doubt that the arbitrability question

was for the arbitration panel to decide,                this Court would find

that the computer forensic services fee and E-discovery fee claims

are subject to arbitration. The plain language of the arbitration

clauses of the Retainer Agreement dictate that all claims arising

thereunder are subject to arbitration. Retainer agreement at 2-3,

6.

                  2. Presumption of Arbitrability

        Under Section 2 of the Federal Arbitration Act (FAA), 9 U.S.C.

§§   1-16, which governs the arbitration provisions in the Retainer

Agreement,       (Retainer Agreement at 6) , there is a "presumption of

arbitrability," and a rule that all "[d]oubts should be resolved

in favor of       [arbitration]." The Supreme Court has held that,               in

enacting the FAA,         "Congress declared a national policy favoring

arbitration." Southland Corp. v. Keeting, 465 U.S. 1, 10 (1984).

        Were    there   any   doubt   that    the   language   of   the   Retainer

Agreement mandates arbitration,              such doubt would be resolved in

favor of the arbitrability of Precision's claims arising out of

its unpaid computer forensic services and E-discovery fees.                     See

Moses H.       Cone Mem'l Hosp. v. Mercury Constr. Corp.,             460 U.S. 1,

                                       -12-
24-25    (1983)    ("as a matter of federal law, any doubts concerning

the scope of arbi trable issues should be resolved in favor of

arbitration") . 2

        C.    Plaintiff's Breach of Confidentiality Claim

        Defendants     do   not    substantively       dispute   that    Plaintiff's

breach of confidentiality claim (Count II)                 is not arbitrable. As

Defendant points out,             the Retainer Agreement specifically says

that claims based on Precision's confidentiality obligation are

not arbitrable. Retainer Agreement at 4.

        Instead, Defendant argues that Count II should be dismissed

because      it   is   barred     by   the   express     terms   of     the   Retainer

Agreement. Defendant is correct.

2 K&L makes two additional arguments: 1) that Precision failed to
satisfy a condition precedent to arbitration by failing to seek
mediation; and 2) that Precision waived its right to arbitration
by seeking payment of its fees in federal court.

     Without holding that mediation was a condition precedent of
arbitration, this Court finds that Precision's March 27, 2014
Mediation Notice Letter [Dkt. No. 22-21] would have satisfied such
a condition.

     This Court is also not persuaded by K&L's waiver argument.
K&L argues that Precision waived its right to arbitration by
seeking payment of its fees in the Del ta Litigation. However,
because neither Precision nor K&L were party to the Delta
Litigation and because K&L's liability for Precision's fees was
not at issue in that litigation, Precision's participation in a
one day hearing for which it was summoned by that court did not
cause it to waive its rights to arbitration.
                               -13-
      The confidentiality restriction in the Retainer Agreement is

lifted,                  .
          "as may be required     '
                              by law,            regulation or judicial or

administrative process." Retainer Agreement at 1. The testimony of

Precision's officer which K&L now claims constituted a breach of

confidentiality     was     given   pursuant     to     a     Court     order   that

Precision's employees       "shall appear and offer evidence.                     in

support of the reasonableness of their fees and expenses." Pl.'s

Ex. M [Dkt. No. 22-13]. Thus, Plaintiff's testimony was not subject

to the confidentiality provisions of the Retainer Agreement and

Plaintiff's breach of confidentiality claim shall be dismissed.

IV.   Conclusion

      For the foregoing reasons, Defendants' Motions are granted in

part and denied in part, and Plaintiff's Motion is denied, and it

is hereby

      ORDERED,   that     Defendants'   Motion    to    Stay    Proceedings      and

Compel Arbitration or in the Alternative to Dismiss [Dkt. No. 18]

shall be denied as moot given the fact that the First Complaint

has been dismissed; and it is further

      ORDERED, that Defendants' Motion to Stay Rule 26 Obligations

Pending Determination on Arbitrability                [Dkt.   No.     26]   shall be

denied as moot since the issue of arbitrability has been decided;

and it is further

                                     -14-
     ORDERED,    that   Defendants'   Motion     to   Stay    Proceedings            and

Compel Arbitration or in the Alternative to Dismiss the Amended

Complaint    [Dkt. No. 21]   is granted in part and denied in part in

so far as the following; and it is further

     ORDERED,    that   Precision's   claims     arising      from   its    unpaid

computer forensic services and E-?iscovery fees are arbitrable and

are not properly before this Court; and it is further

     ORDERED,    that   Precision's   claims arising from its hosting

fees are not arbitrable and are properly before this Court; and it

is further

     ORDERED,   that Plaintiff's claim for Breach of Confidentiality

shall be dismissed; and it is further

     ORDERED,   Plaintiff's Motion for Rule 16 Scheduling Conference

is granted. The parties shall appear before this Court for a Status

Conference pertaining to Plaintiff's remaining claims on October

27, 2016, at 12:00 p.m.

                                                                                 I

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September 28, 2016

Copies to: attorneys on record via ECF

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