Court Opinion

ID: 4282051
Source: CourtListenerOpinion
Date Created: 2018-06-07 13:03:56.51664+00
Date Added: 2024-06-11T07:49:07.298656
License: Public Domain

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             DISTRICT OF COLUMBIA COURT OF APPEALS

                                 No. 15-CV-1214

                    LUDWIG & ROBINSON, PLLC, APPELLANT,
                                                                           06/7/2018

                                        V.

                    BIOTECHPHARMA, LLC, et al., APPELLEES.

                         Appeal from the Superior Court
                          of the District of Columbia
                                 (CAB-884-13)

                        (Hon. Brian Holeman, Trial Judge)
(Argued March 16, 2017                                      Decided June 7, 2018)

      Robert W. Ludwig, with whom Salvatore Scanio and James E. Tompert were
on the brief, for appellant.
      Albert Wilson, Jr., with whom Lily A. Graves was on the brief, for appellees
BiotechPharma, LLC, Converting Biophile Laboratories, Inc., and Raouf Guirguis.
      Jeffrey S. Jacobovitz for appellee Martin Kalin.
      Before GLICKMAN, FISHER, and THOMPSON, Associate Judges.

      THOMPSON, Associate Judge: Appellant Ludwig & Robinson PLLC (―L&R‖

or ―the law firm‖) appeals from the Superior Court‘s dismissal of its claims

alleging fraud and conspiracy by defendants/appellees BiotechPharma, LLC

(―BTP‖), BTP‘s wholly-owned subsidiary Converting Biophile Laboratories, Inc.
                                         2

(―CBL‖), BTP‘s principal Raouf Guirguis (together, the ―BTP defendants‖), and

Martin Kalin (alleged to be a BTP lender ―who has held himself out‖ as BTP‘s

―Executive Vice President‖).     For the reasons set out below, we reverse and

remand.

                                  I. Background

      L&R‘s complaint alleges that in 2011, BTP engaged the law firm‘s services

to provide the company with ―advice and representation regarding cross-border

intellectual property claims.‖ The engagement, which entailed extensive motions

practice in the Eastern District of Virginia (the ―Rocket Docket‖) and elsewhere as

well as depositions and interviews ―across the country and overseas,‖ began after

Kalin contacted L&R seeking representation for the company. On March 4, 2011,

BTP, through Guirguis, executed an engagement letter that set out L&R‘s hourly

rates and specified a monthly billing schedule. The engagement letter provided

that bills would be ―due and payable upon receipt‖ and stated that ―[i]n the event of

nonpayment, the [f]irm reserves the right to withdraw from representation in this

matter.‖
                                        3

      On April 25, 2011, after L&R had begun its work (including drafting a

complaint for misappropriation), Kalin ―sought [an] alternate billing‖ arrangement,

and L&R and BTP signed a modified engagement letter under which L&R agreed

to defer half its hourly rates and BTP agreed to pay the law firm‘s deferred fees

plus 30% upon settlement of the misappropriation action or upon ―[a]ny

cumulative investment in BTP exceeding $500,000.‖          Over the next several

months, L&R continued to provide legal services to BTP but received little by way

of payment for those services. On January 19, 2012, L&R held a meeting with

Guirguis and Kalin during which it ―raised BTP‘s ongoing failure to pay‖ its legal

fees. L&R told Guirguis and Kalin ―to expect larger bills for round-the-clock work

and expenses . . . until the case was settled or tried.‖ L&R ―conveyed [that] its

lawyers would not work without pay‖ and said that they would ―be forced to move

to withdraw absent payment.‖ Guirguis and Kalin ―represented BTP would pay

past bills, and $40,000 a month for December [2011] forward, through . . . CBL[]

or [through] investment in BTP.‖

      Payments were not made, however, and, in early February, after L&R

reminded Guirguis and Kalin that it would ―need . . . a revised fee arrangement if

[it was] to continue representation in light of mounting legal fees and costs,‖

Guirguis ―agreed to pay at least $75,000 a month for December forward.‖ On
                                        4

February 28, 2012, ―to account for further deferred payment and risk,‖ L&R and

BTP entered into a second modification to the engagement letter, ―signed by

Guirguis and copied to Kalin.‖ Pursuant to the second modification letter, ―BTP

agreed to increase L&R‘s success fee to 50% of deferred fees, with

guarantees . . . by CBL and Guirguis.‖ Thereafter, although ―L&R sent monthly

invoices . . . showing [its] fees and expenses[] [with] detailed descriptions[] and

time‖ reports, BTP ―did not pay any $75,000 payment for December [2011]

through May [2012].‖

      On January 31, 2013, after attempts to collect payment proved unsuccessful,

L&R brought suit in the Superior Court, suing BTP for breach of contract (Count

I); CBL and Guirguis for breach of guarantee (Count II); each of the BTP

defendants for ―Failure to Pay Accounts Stated‖ (Count III); and all defendants for

fraud (Count IV), and conspiracy (Count V). The complaint alleges that as of June

5, 2012, BTP had incurred but failed to pay hourly fees of $1,233,683.08, a

―success fee‖ of $358,659.96, and expenses of $196,605.67, for a total of

$1,788,948.71.

      Of particular note given the issues before us, the fraud count (Count IV)

against all of the defendants/appellees alleges that Guirguis (on behalf of BTP and
                                        5

CBL) and Kalin represented, over the period from October 2011 to May 2012,

including ―[b]efore, during, and after the January 19[, 2012,] meeting,‖ that ―L&R

would be paid from CBL‘s revenue and credit line,‖ thus ―representing

[that] . . . the credit line existed,‖ even though at all relevant times CBL had no

credit line. Count IV further alleges that these representations, as well as the

representations regarding the large monthly payments from December 2011

forward, ―were made with the intent to deceive L&R.‖         Count IV alleges in

addition that the defendants ―concealed BTP‘s true financial condition, failing to

disclose Kalin‘s actual investment in or loans to BTP, its indebtedness to lenders,

and the fact and magnitude of liens.‖        The foregoing representations and

omissions, Count IV alleges, ―induced [L&R] to continue work,‖ as the law firm

relied upon them ―in deciding not to seek to withdraw as counsel on January 19,

2012[,] and thereafter, and in deciding not to require security against nonpayment

of fees and expenses . . . upon entering [into] the [s]econd [m]odified

[e]ngagement [l]etter on February 28, 2012.‖ Count IV includes a prayer for

―damages in the amount of services rendered and billed, but not paid, with interest

from when payment was due, attorney‘s fees, and any other appropriate relief.‖

Count V contains similar allegations and a similar prayer for relief, including a

prayer for ―attorney‘s fees and expenses under Counts IV and V.‖
                                         6

       The Superior Court action was stayed while the contract claims against the

BTP defendants proceeded to arbitration before the Attorney-Client Arbitration

Board (―ACAB‖), as requested by BTP.          On February 11, 2015, the ACAB

awarded L&R $908,000 on its claim for ―approximately $1.79 million in fees and

expenses, plus interest.‖

      The Superior Court granted L&R‘s motion to confirm the arbitration award

and entered judgment for $908,000 against BTP, CBL and Guirguis jointly and

severally. On June 22, 2015, the court held a hearing on pending matters. L&R

initially told the court that ―[i]f the arbitration award by ACAB had been complied

with . . . the complaint would be moot.‖ Shortly thereafter, however, saying that it

had ―misspoke[n]‖ earlier, L&R argued that its claims for fraud and conspiracy

against the BTP defendants and Kalin should proceed. The court readily disagreed

as to the BTP defendants, reasoning from the bench and in a June 23, 2015, written

order that all of the counts of the complaint ―were pled by L&R in order to recover

its unpaid legal fees‖; that the fraud and conspiracy claims ―were disposed [of]

when [the law firm was] compensated under the [ACAB] award‖ (which the court

said had res judicata effect as to Counts I–III of the complaint ); and that L&R did

not ―have a separate right to compensation [from the BTP defendants] based on

claims of fraud and conspiracy.‖      Without allowing L&R an opportunity for
                                         7

briefing, the court dismissed the fraud and conspiracy claims against the BTP

defendants. The court postponed its ruling as to dismissal of the claims against

Kalin (who was not a party to the ACAB proceedings), although it preliminarily

suggested that the fraud and conspiracy claims against Kalin were ―subsumed

within the award of the arbitrator.‖ L&R had argued that the law firm was entitled

to recover from Kalin if it could ―show more than [the ACAB] award as damages

as to [Kalin] up to the claimed 1.8 million dollars.‖ L&R told the court that it was

―entitled to judgment against a co-defendant [Kalin] who may be more collectible

than the BTP defendants,‖ and it asserts in its brief that it has never been able to

collect the ACAB award amount.

      At an October 1, 2015, hearing, the Superior Court denied the law firm‘s

motion to alter or amend the judgment dismissing the claims against the BTP

defendants. The court also dismissed the claims against Kalin, reasoning that L&R

had, through the arbitration award, ―received the relief it sought against the

defendants, which was a money judgment essentially for payment for legal

services previously rendered.‖ The court found ―without merit‖ the arguments

―that [the] ACAB had no jurisdiction over the fraud claim‖ and that ―the arbitration

award did not create res judicata effect‖ as to the fraud claim. L&R explained that

its request ―for additional fees under a fraud and conspiracy theory . . . was
                                          8

necessitated by [the defendants‘] obstructive conduct‖ and pertained to

―compensat[ion] for the need to pursue‖ and ―chase‖ the BTP defendants ―to honor

[their] obligation.‖   The court, however, characterized Counts IV and V as

―alternative theories of relief for the exact same relief‖ that was ―granted under the

arbitration award.‖1

      Finally, in an October 13, 2015, written order, the Superior Court explained

its reasoning that ―the fraud and conspiracy claims are wholly dependent upon the

extant contract‖; that L&R has not alleged ―an independent injury over and above

the mere disappointment of [its] hope to receive [its] contracted-for benefit‖; that

L&R‘s claimed damages were addressed in the breach of contract claim; and that

―[t]here [was] no duty owed to [L&R] ‗from considerations other than the

contractual relationship.‘‖ Oct. 13, 2015, Order at 7 (quoting Choharis v. State

Farm Fire & Cas. Co., 961 A.2d 1080, 1089 (D.C. 2008)).

      L&R now appeals the dismissal of its claims for fraud and conspiracy

against the BTP defendants and Kalin. As to the BTP defendants, L&R argues that

dismissal of the Counts IV and V fraud and conspiracy claims was error because

      1
         The court had earlier stated that the ―five counts [of the complaint] were
used in order to recover under separate causes of action the same dollar amount.‖
                                          9

the law firm was ―entitled to recover[] its reasonable attorney[s‘] fees incurred in

having to bring this suit as an additional item of damage‖ for appellees‘ ―willful

and wanton‖ ―fraudulent and collusive conduct.‖ Regarding Kalin, L&R argues

that dismissal of the fraud and conspiracy claims against him was error because he

is a ―jointly and severally liable tortfeasor‖ against whom the law firm is entitled to

obtain a separate judgment.2 L&R contends that the holding in Choharis, which

the Superior Court cited in denying the law firm‘s motion to alter or amend

judgment,    is   inapplicable     because    of    ―fraud-in-the-inducement‖      and

―difference-in-damages‖ exceptions Choharis recognized.

                              II. Standard of Review

      ―We review an order granting a motion to dismiss de novo.‖ Hillbroom v.

PricewaterhouseCoopers LLP, 17 A.3d 566, 572 (D.C. 2011) (quoting

Chamberlain v. American Honda Fin. Corp., 931 A.2d 1018, 1022 (D.C. 2007)).

As such, ―we apply the same standard the trial court was required to apply,

accepting the allegations in the complaint as true and viewing all facts and drawing

      2
         See Young v. District of Columbia, 752 A.2d 138, 145 n.15 (D.C. 2000)
(citing R. & G. Orthopedic Appliances & Prosthetics, Inc. v. Curtin, 596 A.2d 530,
544 (D.C. 1991)) (―Joint tortfeasors contributing to single injury may be jointly
and severally liable to injured party.‖).
                                         10

all reasonable inferences in favor of the plaintiffs.‖ Id. (quoting Murray v. Wells

Fargo Home Mortg., 953 A.2d 308, 316 (D.C. 2008)).

                                   III. Analysis

      This court stated in Choharis that ―a cause of action that could be considered

a tort independent of contract performance is a viable claim‖ if the tort ―exist[s] in

its own right independent of the contract[] and any duty upon which the tort is

based . . . flow[s] from considerations other than the contractual relationship.‖ 961
A.2d at 1089. We further explained that ―conduct occurring during the course of a

contract dispute may be the subject of a fraudulent . . . misrepresentation claim

when there are facts separable from the terms of the contract upon which the tort

may independently rest and when there is a duty independent of that arising out of

the contract itself, so that an action for breach of contract would reach none of the

damages suffered by the tort.‖ Id. The latter clause means that a category of

damages may be the subject of a fraudulent misrepresentation claim if it does not

―fall within the realm of recoverable contract damages‖ and is not ―potentially

compensable under contract principles.‖ Id. at 1089–90.3

      3
         See also Thermal Dynamics Int’l, Inc. v. Safe Haven Enters., LLC, 952
F. Supp. 2d 143, 153 (D.D.C. 2013) (―The standard set forth in Choharis
                                                                        (continued…)
                                          11

      As described above, the Superior Court reasoned that ―[t]here [was] no duty

owed to [L&R] ‗from considerations other than the contractual relationship‘‖ and

that L&R had not alleged ―an independent injury over and above the mere

disappointment of [its] hope to receive [its] contracted-for benefit.‖ Oct. 13, 2015,

Order at 6–7 (quoting Choharis, 961 A.2d at 1089). We disagree as to both prongs

of that reasoning.

      We cannot agree that the defendants/appellees owed no duty to L&R ―from

considerations other than the contractual relationship.‖ 961 A.2d at 1089. Our

case law establishes that ―[w]hen a person undertakes to make a statement in a

business transaction, either voluntarily or in response to inquiries, he is bound not

only to state truly what he tells, but also not to suppress or conceal any facts within

his knowledge which would materially qualify those stated.‖ Ehrlich v. Real

Estate Comm’n, 118 A.2d 801, 802 (D.C. 1955); see also, e.g., Giles v. General

Motors Acceptance Corp., 494 F.3d 865, 880 (9th Cir. 2007) (defendant ―had an

(…continued)
is . . . dependent on . . . whether the damages the plaintiff allegedly suffered are
compensable by a breach of contract claim.‖); cf. Merrill Lynch & Co. v. Allegheny
Energy, Inc., 500 F.3d 171, 183 (2d Cir. 2007) (noting that under New York law,
―parallel fraud and contract claims may be brought if the plaintiff . . . seeks special
damages that are unrecoverable as contract damages‖).
                                        12

independent ‗duty imposed by law‘ not to commit fraud, a duty not ‗arising by

virtue of the alleged express agreement between the parties‘‖); Jacobson v.

Hofgard, 168 F. Supp. 3d 187, 200 (D.D.C. 2016) (―Defendants . . . possessed a

duty, independent of the [s]ales [c]ontract, to make truthful representations about

the [p]roperty‖ advertised for sale);4 Morris v. Achen Constr. Co., 747 P.2d 1211,

1212–13 (Ariz. 1987) (en banc) (stating, in answer to the question ―whether the

fraud action between A and B is an action ‗arising out of contract‘ because the

alleged fraud caused A to enter into a contract with C,‖ that ―[t]he duty not to

commit fraud is obviously not created by a contractual relationship and

exists . . . even when there is no contractual relationship between the parties at

all.‖).

          4
          In Jacobson, the court rejected the contention that all of the plaintiff
homeowners‘ fraudulent misrepresentation claims were ―inappropriately
duplicative of [their] breach of contract claim.‖ 168 F. Supp. 3d at 199. The court
explained that the claims arising from misrepresentations made during
―negotiations involving the content and conditions of the [contract for the sale of
the house],‖ including ―a promise by [d]efendants to make 27 specific repairs
before settlement,‖ were ―duplicative of [p]laintiffs‘ breach of contract claim and
[could not] provide the basis for an actionable, independent tort.‖ Id. By contrast,
―misrepresentations that precede[d] the formation of the contract and [were]
alleged to have induced plaintiffs to contract to purchase the property,‖ including
―false representations and omissions when advertising the [p]roperty,‖ gave rise to
an independent tort because ―[p]laintiffs did not face mere contractual
disappointment — [rather,] they entered into a contract to purchase a property that
they would not have otherwise.‖ Id. at 199–200 (emphasis in original omitted).
                                         13

      Here, the L&R-BTP relationship was an open-ended engagement; i.e., it had

no fixed termination date. L&R‘s complaint alleges that the law firm reserved the

right to ―move to withdraw absent payment‖ and threatened to invoke that right

when confronting Guirguis and Kalin about BTP‘s failure to pay billed amounts.

The complaint further alleges that during those conversations, BTP (through

Guirguis) and Kalin induced L&R to continue providing legal services to BTP

under modified engagement letters, and thus not to withdraw, through false

statements about payment sources available to pay the law firm‘s bills (e.g., CBL‘s

purported credit line) and through omissions about ―the fact and magnitude of

liens‖ against BTP, loans by Kalin to BTP, and BTP‘s level of ―indebtedness.‖5 In

      5
           These alleged financial misrepresentations and omissions are similar to
ones that courts have held will support a claim of fraudulent misrepresentation.
See, e.g., American Media, Inc. v. Bainbridge & Knight Labs., LLC, 22 N.Y.S.3d
437, 439 (N.Y. App. Div. 2016) (―Ruderman‘s assurance that Bainbridge had an
$850,000 account receivable from Walgreen‘s that was ‗in the process of being
paid‘ and ‗would be used to pay [p]laintiffs‘ is alleged to have induced plaintiffs to
continue to furnish advertising services under the contract. Ruderman‘s alleged
misrepresentations as to Bainbridge‘s wherewithal and the condition of
Bainbridge‘s finances constitute actionable fraud.‖); Penn Anthracite Mining Co.
v. Clarkson Sec. Co., 287 N.W. 15, 17 (Minn. 1939) (―[A] finding of fraudulent
misrepresentation [was] imperative‖ where officials of the defendant company
vouched for financial statements purporting to show the assets, liabilities, and
financial condition of the company while knowing that a relatively large number of
the reported accounts receivable were moribund or had been assigned as security
for loans made to the company).

      That said, some of L&R‘s allegations about statements by Guirguis and
Kalin — such as the allegations that they stated BTP ―would pay past bills, and
                                                                        (continued…)
                                            14

the context of these alleged transactions, the defendants/appellees had a duty

independent of the subsequent modified engagement letters to ―state truly what‖

they told the law firm and ―also not to suppress or conceal any facts within [their]

knowledge which would materially qualify those [representations] stated.‖

Ehrlich, 118 A.2d at 802. L&R‘s complaint in Counts IV and V is about alleged

fraud in the inducement, a claim that we recognized in Choharis is not duplicative

of a contract claim. See 961 A.2d at 1088 n.11 (―[A]n insurance company may be

liable for fraud and misrepresentation in matters leading to the procurement of the

contract . . . .‖); see also Marvin Lumber & Cedar Co. v. PPG Indus., 223 F.3d
873, 885 (8th Cir. 2000) (―Courts generally agree that fraud in the inducement,

necessarily prior to the contract, is independent of the contract . . . .‖).

      We also cannot agree that, like the complaint in Choharis, L&R‘s complaint

failed to allege ―an independent injury over and above the mere disappointment of

[its] hope to receive [its] contracted-for benefit.‖        Oct. 13, 2015, Order at 6

(…continued)
$40,000 a month for December [2011] forward,‖ and then that BTP would ―pay at
least $75,000 a month for December forward‖ — at least arguably do not support a
claim of fraudulent inducement. ―[P]romissory statements as to what will be done
in the future . . . give rise only to a breach of contract claim,‖ while ―false
representations of present fact . . . give rise to a separable claim of fraudulent
inducement.‖ Stewart v. Jackson & Nash, 976 F.2d 86, 89 (2d Cir. 1992) (internal
quotation marks and citation omitted).
                                         15

(quoting Choharis, 961 A.2d at 1089). After broken pipes caused Mr. Choharis‘s

home to sustain extensive water damage, he sued his homeowner‘s insurance

company for its course of conduct in dealing with claims he made under the policy.

He alleged that the insurance company misrepresented that there was no short-term

rental housing available in his area (a misrepresentation that caused him to live in a

hotel for an extended period) and knowingly or negligently made false

―representations about the absence of mold when it knew mold might be a

problem‖ in his house. 961 A.2d at 1089. After he settled with the insurance

company on his breach of contract claim based on denial of coverage, the trial

court dismissed his fraud and negligent misrepresentation claims against the

insurer.   We upheld that dismissal, reasoning that the insurance company‘s

―statements and any duty with respect thereto related directly to the question of

interim living expenses provided for in the contract‖; that any ―[a]dded expense to

Choharis resulting from the misstatements would fall within the realm of

recoverable contract damages‖; that any ―duty of [the insurance company] to be

accurate in its assessment of the mold condition would flow basically from the

contractual relationship‖ and was ―directly related to an obligation arising under

the contract[,] viz., compensation for mold if it existed‖; and that ―[a]ny

misstatements with respect thereto which resulted in added expense to Choharis
                                        16

that he would not otherwise have had to bear would be potentially compensable

under contract principles.‖ Id. at 1089–90.

      Mr. Choharis made no claim that, prior to Mr. Choharis‘s taking out the

policy, the insurance company had made misrepresentations about (for example)

the scope of the offered coverage or the financial strength of the company and its

ability to meet its obligations under issued policies. We specifically recognized

that in that very different circumstance, ―an insurance company may be liable for

fraud and misrepresentation in matters leading to the procurement of the contract.‖
961 A.2d at 1088 n.11.

      We applied the principles set out in Choharis in EDCare Mgmt., Inc. v.

DeLisi, 50 A.3d 448 (D.C. 2012). EDCare, too, is quite different from the instant

case. The case arose from a dispute between a hospital called Capitol Medical

Center, LLC (―CMC‖) and EDCare (an emergency-care management and

administrative services company) and its subsidiary, The Greater Southeast

Community Emergency Physicians, LLC (―GSCEP‖). Id. at 449–50. GSCEP and

CMC entered into a contract wherein CMC agreed to pay GSCEP a monthly

stipend for recruiting and training emergency room physicians to provide services

at the hospital. Id. In March 2009, after CMC had fallen behind on payments, the
                                         17

parties agreed that the contract would terminate on May 31, 2009. Id. at 450.

After CMC still did not pay, the case proceeded to arbitration. Id. The arbitral

tribunal awarded GSCEP damages for breach of contract, ―rul[ing] that the

Hospital is liable to GSCEP for failing to pay for all of the services that GSCEP

rendered to the Hospital.‖ With CMC facing receivership, however, EDCare, the

assignee of GSCEP‘s rights and obligations under the CMC contract, filed a

fraudulent misrepresentation claim against DeLisi, CMC‘s CEO, ―seeking to

recover its out-of-pocket expenses suffered in reliance on DeLisi‘s allegedly

fraudulent misrepresentations concerning CMC‘s ability to pay the debts owed

under the CMC Contract.‖ 50 A.3d at 450. EDCare alleged that DeLisi had

―fraudulently induced EDCare to forego its right to terminate its obligations under

the CMC Contract earlier than May 31, 2009,‖ with assurances to GSCEP that

―there [was] absolutely no reason to have concern regarding receiving payment in

full for [GSCEP‘s] services‖ and that CMC was ―expecting the hospital to be

successful in collecting the significant funds due [it].‖ Id. The trial court granted

summary judgment in favor of DeLisi, and we affirmed, agreeing that EDCare‘s

claim was barred under the Choharis rule that ―a breach of contract claim may not

be recast as a tort claim.‖ 50 A.3d at 449.
                                        18

      The record in EDCare shows that, in the GSCEP–CMC arbitration, GSCEP

advanced both contract and tort claims, see 50 A.3d at 450, and alleged, inter alia,

that CMC repeatedly made payment assurances but acted in bad faith. The record

in EDCare also shows that the arbitration panel awarded GSCEP‘s claimed

damages on its breach of contract claim but found that ―GSCEP failed to carry its

burden of proof‖ on its tort claim (for tortious interference).      As this court

explained in EDCare, EDCare and GSCEP were in privity, as were CMC and

DeLisi, 50 A.3d 451–52, with the result that the arbitrator‘s decision posed a res

judicata bar with respect to ―not only claims that actually were litigated in the

[arbitration] but all issues arising out of the same cause of action that could have

been litigated‖ in that proceeding. Id. at 451 (internal quotation marks omitted).

Further, EDCare recounts that DeLisi made the assurances alleged to have

constituted fraudulent misrepresentations in an email on May 29, 2009, ―a few

days before the contract‘s [May 31, 2009,] termination date,‖ id. at 450, at which

time GSCEP was already obligated to perform under the contract. Thus, the

alleged misrepresentations did not precede (and thus did not fraudulently induce)

the contract, but were made during the fixed contract period, when, as this court

said, ―DeLisi had no duty independent of the CMC Contract to make any

representations about CMC‘s financial circumstances or ability to make payment.‖
                                        19

Id. at 452.6    Finally, our opinion in EDCare emphasized the EDCare CEO‘s

admission ―that had CMC made all the payments it owed to GSCEP, CMC would

have ‗fulfilled its obligations‘ to EDCare and ‗we would not be sitting here

today.‘‖ 50 A.3d at 450. Therefore, we said (in setting out an alternative basis for

upholding      the   dismissal   of   EDCare‘s    claim),   EDCare‘s     fraudulent

misrepresentation claim was ―wholly dependent on the CMC Contract, under

which EDCare had the right to collect fees from CMC for services provided by

GSCEP.‖ Id. at 452.

      The posture of this case is quite different from that of EDCare. First, while

it appears that EDCare‘s fraudulent misrepresentation claim could have been

brought before the arbitrators who resolved GSCEP‘s breach of contract and

tortious interference claims, in this case, the ACAB, which arbitrated the

BTP-L&R fee dispute, had no jurisdiction to consider tort claims (including claims

      6
         And, although this was not a part of this court‘s rationale in EDCare,
DeLisi‘s alleged statement that ―there [was] absolutely no reason to have concern
regarding [GSCEP‘s] receiving payment in full for [its] services‖ and his expressed
―expect[ation] that the hospital would be successful in collecting the significant
funds‖ owed to it, at least arguably were not actionable factual representations or
omissions. Cf. Freeland v. Iridium World Commc’ns, Ltd., 545 F. Supp. 2d 59, 76
(D.D.C. 2008) (internal quotation marks, citation, and brackets in original omitted)
(―It is well-established . . . that generalized statements of optimism that are not
capable of objective verification are not actionable . . . .‖).
                                         20

relating to fraudulent misrepresentation or conspiracy). Under the rules of the

ACAB, that body‘s jurisdiction is limited to disputes ―about the fee paid, charged,

or claimed for legal services.‖ D.C. Bar Att‘y-Client Arb. Bd. R. 3 (b).7 In

addition, the Superior Court did not find, and none of the parties has argued that,

Kalin is a privy of any of the BTP defendants such that he could be bound by the

ACAB decision to which the BTP defendants were subject. For those reasons, the

ACAB arbitration decision did not have res judicata effect as to L&R‘s claims

sounding in fraudulent inducement and civil conspiracy8 against the BTP

defendants, and likewise is not a res judicata bar with respect to any claim against

Kalin.9

      7
          See also D.C. Bar R. XIII (a)–(b) (providing that ―[a]n attorney subject to
the disciplinary jurisdiction of this [c]ourt shall be deemed to have agreed to
arbitrate disputes over fees for legal services and disbursements related thereto‖
―pursuant to such reasonable rules and regulations . . . as may be promulgated from
time to time by the [ACAB].‖).
      8
           ―Civil conspiracy is not an independent tort but only a means for
establishing vicarious liability for an underlying tort.‖ Grimes v. District of
Columbia, 89 A.3d 107, 115 (D.C. 2014) (internal quotation marks omitted).
      9
         As we repeated in EDCare, ―[u]nder the doctrine of res judicata, ‗a final
judgment on the merits of a claim [including an arbitration award] bars relitigation
in a subsequent proceeding of the same claim [including any claim arising out of a
common nucleus of facts that could have been litigated in that proceeding]
between the same parties or their privies.‘‖ 50 A.3d at 451 (quoting Patton v.
Klein, 746 A.2d 866, 869 (D.C. 1999)).

                                                                       (continued…)
                                          21

      Second, as already discussed, while this court‘s opinion in EDCare focuses

on EDCare‘s complaint about misleading statements made by DeLisi during the

contract period in an email sent two days before the agreed contract-termination

date, L&R complains of alleged misrepresentations and omissions that preceded

and induced decisions by the law firm not to withdraw from the representation of

BTP in an open-ended engagement,10 and to continue work under a modified

engagement letter.

(…continued)
      The parties disagree about whether, and to what extent, the Superior Court
dismissed counts Count IV and V of the complaint on the ground of res judicata.
In any event, no one appears to argue that the court‘s dismissal of those claims can
be sustained on the basis of res judicata.
      10
           This case is similar to Mendelsohn, Drucker & Assocs. v. Titan Atlas
Mfg., 885 F. Supp. 2d 767 (E.D. Pa. 2012). In that case, a client that had failed to
make timely payment for a law firm‘s legal services sent an email to the law firm
giving a purported U.S. Postal Service Priority Mail tracking number for a
payment the client claimed to have sent, causing the law firm not to withdraw from
representation but to prepare and file an Answer on the client‘s behalf. Id. at 772.
After the Postal Service reported that ―the provided tracking number did not match
any envelope sent,‖ id., and a promised ―replacement check‖ did not arrive, the law
firm withdrew and sued the client for fraudulent inducement and breach of
contract. Id. The court denied the client‘s motion to dismiss the fraudulent-
inducement claim, rejecting the client‘s argument that the ―gist of the action‖ was a
contract claim and reasoning that the client ―knowingly induced [the law firm] to
continue its legal representation through fraudulent misrepresentations about [the
client‘s] forthcoming payment of legal fees‖ and that the fraudulent inducement
was ―collateral to [the client‘s] contract with [the law firm] because it constitutes a
                                                                         (continued…)
                                        22

      Third, EDCare sought to recover its ―out-of-pocket‖ outlays incurred in

performing its obligations as the assignee of GSCEP‘s contract rights and

obligations under the contract with CMC, i.e., the ―additional resources and funds

[EDCare devoted] towards the provision of emergency medicine management

services for the Hospital‖ through the agreed contract termination date. Id. at 452.

In other words, EDCare sought to recover reliance damages, which we said ―could

have been addressed in an action for breach of contract.‖ Id.; see 3 Dan B. Dobbs,

Law of Remedies § 12.1 (1) (2d ed. 1993) (describing reliance damages as a

contract remedy).

      By contrast, L&R, through Counts IV and V of its complaint, seeks recovery

of items of damages that do not ―fall within the realm of recoverable contract

damages‖ and are not ―potentially compensable under contract principles.‖

Choharis, 961 A.2d at 1089–90. Most obviously, L&R seeks recovery of what the

complaint terms its ―attorneys‘ fees‖ incurred in pursuing recovery against the BTP

defendants and Kalin for damages from their alleged fraud and conspiracy.

Elsewhere, L&R has described this item of prayed-for damages as ―compensat[ion]

(…continued)
breach of duties of honesty imposed by society, not contractual duties contained in
the Engagement Letter.‖ Id. at 790.
                                          23

for the need to pursue‖ and ―chase‖ the BTP defendants ―to honor [their]

obligation‖ given their ―obstructive conduct,‖ including, as L&R contended at oral

argument, its costs of ―prosecut[ing] [its claims] before the ACAB.‖11

      ―In line with the ‗American rule‘ for litigation generally, the parties in

contract litigation pay their own attorneys‘ fees . . . unless the contract itself

provides otherwise . . . .‖ 3 Dobbs, supra, § 12.1 (1). ―[I]n tort actions for fraud or

fraudulent inducement,‖ however, our jurisdiction recognizes the principle that

―the perpetrator of a fraud is liable to respond in such damages as naturally and

proximately resulted from the fraud, and the proximate result rule should be

employed in a flexible manner.‖ Espaillat v. Berlitz Schs. of Languages of Am.,

Inc., 383 F.2d 220, 222 (D.C. Cir. 1967) (internal quotation marks omitted). Under

that flexible approach, if L&R is able to prove fraudulent inducement by the BTP

defendants and/or Kalin and the expenses it has incurred in pursuing its claims for

      11
          The Superior Court seemed to believe that the arbitration award of (a
portion of) the fees L&R billed to BTP for legal services was ―the exact same
relief‖ L&R sought through its Count IV and Count V prayer for ―attorney‘s fees.‖
However, the fees at issue here are not the fees L&R billed for legal services
provided to BTP, but instead are L&R‘s costs of representing itself in pursuing its
claims against the appellees. BTP, which argues that ―L&R fails to identify what
exactly it retained or gave up as a consequence of BTP‘s alleged fraudulent
misrepresentations over and above the disappointment of not getting paid by BTP,‖
appears also to have overlooked L&R‘s claim for its ―attorney‘s fees‖ in
representing itself as an item of compensatory damages.
                                         24

payment under the contract against the BTP defendants, it may be entitled to

recover those expenses as an item of compensatory damages (for which the

perpetrators of the fraud would be jointly and severally liable). Cf. Hundley v.

Johnston, 18 A.3d 802, 809 (D.C. 2011) (holding that where attorneys‘ fees are in

essence compensatory damages for a tort, they may be allowed).

      In seeking ―its reasonable attorney‘s fees incurred in having to bring this suit

as an additional item of damage,‖ L&R also relies on cases applying the ―almost

universally recognized rule that [counsel fees] may be recovered in . . . cases where

the wrongful action complained of is characterized by . . . gross fraud on the part of

the defendant.‖    Schlein v. Smith, 160 F.2d 22, 25 (D.C. Cir. 1947) (quoting

Ballard v. Spruill, 74 F.2d 464, 466 (D.C. Cir. 1934)). We express no opinion as

to whether the factual allegations in this case, if proven, satisfy that standard. We

do hold that L&R was entitled to attempt to prove its entitlement to such damages

for the alleged fraud.

      L&R also told the Superior Court that, through Counts IV and V of the

complaint, it seeks ―damages . . . up to the claimed 1.8 million dollars‖ or, as

described in the complaint, ―damages in the amount of services rendered and

billed, but not paid, with interest from when payment was due.‖ It is not clear to
                                       25

us that L&R is still pursuing this item of claimed damages, because its briefs on

appeal do not specifically argue for it. We nevertheless address this item because

it might be thought that its inclusion in L&R‘s prayer for relief under Counts IV

and V shows that these counts seek damages that are compensable under contract

principles. That is, it might be thought that to the extent this item of damages

forms the basis of L&R‘s prayer for relief under Counts IV and V, both counts are

barred under the Choharis rule, which bars a parallel tort claim unless ―an action

for breach of contract would reach none of the damages suffered by the tort.‖ 961
A.2d at 1089 (emphasis added). Indeed, counsel for the BTP defendants and

counsel for Kalin both contended at oral argument that L&R‘s prayer for the $1.78

million in damages under Counts I–III and under the fraud and conspiracy counts

shows that the fraud and conspiracy counts are not separate and independent of the

contract claim.12

      We have said that ―[b]y suing in tort, the defrauded party . . . claims

sufficient compensation to make his position as good as it would have been had he

not entered into the transaction at all.‖ United Sec. Corp. v. Franklin, 180 A.2d
12
            BTP also makes the point somewhat differently, arguing that ―the
arbitration award . . . bars L&R from coming back and arguing that absent BTP‘s
alleged fraud, they should have or would have gotten more in attorney‘s fees from
BTP under the engagement letters.‖
                                        26

505, 510 (D.C. 1962) (internal quotation marks and citation omitted). Under a

different formulation, the measure of damages is ―what the [defrauded party] lost

as a result of the fraud.‖ Espaillat, 383 F.2d at 223. The Espaillat decision is

particularly instructive as to the measure of damages when the ―fraudulently

induced contract [was] for personal services.‖ Id. at 222. The case involved a

fraudulent-inducement claim by a foreign national who alleged that she took a job

with the Berlitz language school at a promised salary of $600 a month for one year

on the basis of the school‘s knowingly false representation that her status as an

alien would not interfere with the proposed employment. Id. at 221. ―[T]wo

months later Army authorities . . . required Berlitz to discharge her because it had

been learned that she was an alien.‖ Id. In remanding the matter for a new trial on

the issue of damages, the D.C. Circuit stated that the new jury should be instructed

that it could take into account the plaintiff‘s ―earning power in various capacities

reasonably related to the nature of the services the appellee intended she should

render over the contemplated life of the contract.‖ Id. at 224. Further, the D.C

Circuit said, jurors should be instructed that while their determination would ―not

necessarily be based upon the amount of the promised salary,‖ the jurors ―w[ould]

be free to consider as some evidence‖ the monthly amount the parties themselves

had agreed the appellant was to receive under the employment contract. Id. at 224.

In other words, as we read Espaillat, the jury could consider the amount the
                                        27

plaintiff was to have been paid under the contract as a measure of her damages for

fraudulent inducement, with a view toward putting her in the position she would

have been in had she not entered into the fraudulently induced contract but pursued

other earnings opportunities instead.

      In this case, the amount L&R billed BTP for legal services under the second

modified engagement letter is some measure of what the law firm could have

earned if the lawyers involved had withdrawn from representing BTP and taken on

work for another or other clients. As L&R has suggested, its damages (if any) in

this regard were likely ―up to‖ rather than equivalent to the billed $1.8 million,

because that amount was billed for what L&R has asserted was ―round-the-clock

work‖ and also because it included a success fee ($358,659.96) that the law firm

would not necessarily have earned through other engagements, as well as expenses

($196,605.67, for, inter alia, ―depositions and interviews across the country and

overseas‖) the law firm would not necessarily have incurred in representing other

clients. Whatever L&R might be able to prove in the way of ―damages . . . up to

the claimed 1.8 million dollars,‖ the point we make here is that L&R‘s inclusion of

a prayer to recover such an amount as damages for alleged fraudulent inducement

does not necessarily require a conclusion that the law firm is attempting to

recharacterize a contract claim as a fraud claim, or is merely trying to obtain the
                                         28

benefit of its bargain under its contract with BTP.13 Though monetarily equivalent

to L&R‘s claimed damages for breach of contract, the law firm‘s prayer in Counts

IV and V for approximately $1.8 million in damages may have a different basis

and may pertain to damages that are not compensable under contract principles.14

      13
           More generally, the fact that a party relies on what was required under a
contract to prove its alleged damages for a defendant‘s failure to disclose material
information does not necessarily mean that the party is improperly trying to
enforce the contract. For instance, in Campbell v. Fort Lincoln New Town Corp.,
55 A.3d 379 (D.C. 2012), we determined that the plaintiffs, who were neither
parties to nor third-party beneficiaries of a land disposition agreement (―LDA‖)
between the District of Columbia and a developer, were not entitled to sue for the
developer‘s breach of the LDA. Id. at 382–83. We held, however, that the
plaintiffs were entitled to present evidence of the developer‘s breach of the LDA in
order to prove the existence and extent of their damages under their cause of action
for the developer‘s alleged violation of the disclosure-to-prospective-purchasers
provisions of the District of Columbia Condominium Act. Id. at 386. While
acknowledging our statement in Choharis that ―a tort claim may be considered
independent of a claim for breach of contract if, inter alia, the duty upon which the
tort is based flows from considerations other than the contractual relationship,‖ id.
at 386 n.26, we reasoned that the plaintiffs‘ ―need to present evidence of [the
developer‘s failure to perform its obligations under] the LDA . . . to prove their
damages did not render their Condominium Act claim a mere reformulation of
their legally flawed breach of contract claim.‖ Id. at 386. We said that it was not
correct ―to equate [the plaintiffs‘] theory of damages with enforcement of the
LDA.‖ Id. at 387. We concluded that ―if the[] [plaintiffs] succeed in proving that,
had the LDA been disclosed to them, they would have convinced the District to
enforce it against [the developer], they at most will be entitled to monetary
damages reflecting the lost value of [the developer‘s] performance to them.‖ Id.
      14
         Compare 3 Dobbs, supra, §§ 12.1 (1), 12.3 (1) (explaining that courts
usually do not consider lost-opportunity costs to be contract-reliance expenses and
that such costs are ―special damages and subject to the limit[ing rules] that apply to
such claims,‖ including certainty and foreseeability), with 2 Dobbs, supra, § 9.2 (3)
                                                                        (continued…)
                                        29

At the very least, the Superior Court should not have dismissed Counts IV and V in

their entirety without affording the parties an opportunity for briefing on the

rationale for the damages that L&R is seeking, which could be independent of the

law firm‘s contract claims and thus recoverable notwithstanding Choharis and

EDCare. Of course, in no event will L&R be permitted a duplicative recovery.

See Saunders v. Hudgens, No. 12-CV-1318, 2018 D.C. App. LEXIS 194, at *9

(D.C. May 10, 2018) (―A plaintiff is entitled to be made whole, but not more than

whole.‖); Espaillat, 383 F.2d at 224 (―[T]he jury must be told to deduct [from the

appellant‘s damages] the compensation [already] received from the appellee by the

appellant . . . .‖).

                                 IV. Conclusion

       We conclude for the foregoing reasons that L&R‘s claims for fraud and

conspiracy were erroneously dismissed.       Accordingly, the judgment of the trial

court is reversed and the case remanded for further proceedings consistent with this

opinion.

                                      So ordered.

(…continued)
(―In most jurisdictions, the victim of fraud may recover special or consequential
damages caused by the misrepresentation . . . .‖).