Court Opinion

ID: 2663442
Source: CourtListenerOpinion
Date Created: 2014-04-04 01:58:34.50131+00
Date Added: 2024-06-11T13:23:22.410162
License: Public Domain

§§§_i,§@
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA §§Q;@§2@H

manner or QOLUM§.>JA
BODE & GRENIER, L.L.P.,

Plaintiff,

Civil Acti0n No. O8~l323 (RWR)
(Under Seal)

'V.

CARROLL L. KNIGHT,
et a1.,

Defendants.

\/\.¢`.z\/\/\/`/\/`z\¢\/\/\/

MEMORANDUM OPINION AND ORDER
Plaintiff law firm Bode & Grenier, L.L.P., brings this

diversity action for breach of contract and unjust enrichment
against Carroll Knight, Delta Fuels, Inc., Delta Fuels of
Michigan, lnc., and Knight Enterprises, and breach of guaranty
against defendant Carroll Knight only, to recover at least
$75,lO5 97, for defendants' purported failure to pay for legal
services provided to them by plaintiff. The parties cross-moved
for summary judgment, and the magistrate judge has recommended
that both motions for summary judgment be denied. Because the
magistrate judge's recommendation to deny the defendants' motion
for summary judgment is supported in law and the defendants'
objections are without merit, that recommendation will be
adopted. However, because there are no issues of material fact
in dispute regarding defendants' counterclaim and Bode & Grenier

is entitled to judgment in its favor on the counterclaim,

CLERK, U.S. D?S'F§ZICI` CC.¢UR §`

_ 2 _
Bode & Grenier's objections will be sustained and judgment will
be entered for Bode & Grenier on the defendant's counterclaim.
BACKGROUND
From 1994 through 2008, Bode & Grenier represented the

defendants in various matters, including litigation relating to
gasoline contracts and petroleum futures, regulatory and tax
matters, and litigation arising out of a petroleum spill on the
defendants' property in Toledo, Ohio. (Compl. H l; Defs.' Stmt.
of Mat. Facts (“Defs.' Stmt.”) H 2.) Bode & Grenier alleges that
during the entire 13-year period that it represented the
defendants, the defendants had agreed verbally to be billed
monthly for Bode & Grenier’s services. (Compl. H l2.) During

the representation over the petroleum spill, Bode & Grenier

performed multiple tasks for the defendants,  

Redacted from Origina1

  <:_<1_.111@.)

Bode & Grenier alleges that between December 2005 and
January 2007, the defendants sporadically paid Bode & Grenier's
monthly bills. However, after January 2007, the defendants
ceased paying, causing Bode & Grenier's managing partner William

Bode to telephone Knight and ask him to explain the delinquency

m we  _

Redacted from Original

|
|
 

Further, Knight

3SSUr€d BOd€ Redacted from Original

zthat he personally guaranteed payment of all delinquent and
future legal fees and expenses incurred by the defendants. In
reliance on that guarantee, Bode & Grenier continued to provide

legal services to the defendants. (ld. II 22-27.)

Redacted from Original
_  B@d@ r@sp@nd@d

that Bode & Grenier would stop providing legal services to the
defendants unless Knight provided partial security for the
outstanding legal bills, by executing a promissory note and
confession of judgment. Knight then signed a retention letter
iterating the terms of the lawyer-client relationship between
Bode & Grenier and the defendants and acknowledging that

Bode & Grenier was owed $446,566 for legal services, and executed
a promissory note for $300,000 payable on May 1, 2008 to

Bode & Grenier. On May l, 2008, the defendants failed to pay the
amount owed under the promissory note. Bode & Grenier withdrew
as counsel for the defendants in the various cases that were

active in which it represented the defendants, and on May 2,

_4_
2008, filed in state court in Michigan the confession of judgment
accompanying the promissory note. (ld; jj 29-32; Defs.' Stmt.
1[ 4.)

Bode & Grenier then filed the instant action, alleging
breach of contract against all defendants for $75,lO5.97 in
unpaid legal bills (Count I), alleging unjust enrichment against
all defendants (Count lI), seeking to enforce Knight's personal
guarantee (Count IlI), and seeking to pierce the corporate veil
and hold Knight personally responsible for any liability of the
other defendants (Count IV). The defendants answered and filed a
counterclaim for disgorgement or forfeiture of legal fees, based
on the allegation that the complaint filed by Bode & Grenier
divulged privileged communications in violation of its fiduciary
duty to keep client confidences secret under Rule l.6 of the
District of Columbia Rules of Professional Conduct.

Both parties moved for summary judgment. The magistrate
judge issued two opinions recommending denying both motions for
summary judgment. See Bode & Grenierj L.L.P. v. Kniqht, Civil
ACtiOn NO. O8~l323 (RWR/DAR), 2010 WL 882650 (D.D.C, MarCh l0,
20lO), and Bode & Grenier, L.L.P. v. Knight, Civil Action No. O8-
l323 (RWR/DAR), 2010 WL 908934 (D.D.C. MaJ.”Ch l2, 2010). B©th

parties filed objections to the opinions.

_5_
DISCUSSlON

“The magistrate judge's report and recommendation is
reviewed de novo.” Inversora Murten, S.A. v. Energoprojekt
H@lding co., 671 F. supp. 2d 152, 154-155 (D.D.c. 2009> (citing
LCVR 72.3(€), and F€d. R. Civ. P. 72).

“Summary judgment may be appropriately granted when the
moving party demonstrates that there is no genuine issue as to
any material fact and that moving party is entitled to judgment
as a matter of law.” Bonaccorsv v. Dist. of Columbia, 685 F.
Supp. 2d l8, 22 (D.D.C, 20lO) (citing Fed. R. Civ. P. 56(c)).

“In considering a motion for summary judgment, [a court is to
draw] all ‘justifiable inferences' from the evidence . . . in
favor of the nonmovant ” Cruz-Packer v. Dist. of Columbia, 539
F. Supp. 2d l8l, 189 (D.D.C. 2008) (quoting Anderson v. Libertv
Lobby, lnc., 477 U.S. 242, 255 (l986)); Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (l986). “However, a
non~moving party cannot defeat summary judgment by ‘simply
show[ing] that there is some metaphysical doubt as to the
material facts.’” Bonaccorsy, 685 F. Supp. 2d at 22 (quoting
Moore v. Hartman, 571 F.3d 62, 66 (D C. Cir. 2009) (quoting
Matsushita, 475 U.S. at 586)). “‘Briefs con:aining mere
allegations or merely denying the movant's pleading are not
enough to prevent summary judgment; instead, a non~movant must go

beyond the pleadings to proffer specific fac:s rebutting the

_5_
movant's assertions.’” Bonaccorsy, 685 F. Supp. 2d at 22
(quoting Graham v. Holder, 657 F. Supp. 2d 210, 215 (D D.C. 2009)
(citing Greer v. Paulson, 505 F.3d 1306, 1315 (D.C. Cir. 2007),
and Burke v. Gould, 286 F.3d 513, 517-18 (D.C. Cir. 2002)). “The
relevant inquiry ‘is the threshold inquiry of determining whether
there is a need for a trial - - whether, in other words, there
are any genuine factual issues that properly can be resolved only
by a finder of fact because they may reasonably be resolved in
favor of either party '” Single Stick, Inc. v. Johanns, 601 F.
Supp. 2d 307, 312 (D.D C. 2009) (quoting Anderson, 477 U.S. at
250) (overruled on other grounds by Prime Time 1nt'l Co. v.
Vilsack, 599 F.3d 678 (D.C. Cir. 2010)). A genuine issue is
present where the “evidence is such that a reasonable jury could
return a verdict for the non-moving party,” although “‘[t]he
possibility that a jury might speculate in the plaintiff's favor
is insufficient to defeat summary judgment.’” Pardo-Kronemann v.
Donovan, 601 F.3d 599, 611 (D.C. Cir. 2010) (affirming summary
judgment for defendant despite supervisor’s statements that the
adverse employment action came from the administrative office
where the plaintiff “had some pretty powerful enemies,” because
the statements reflected a personal opinion insufficient for a
reasonable jury to conclude that the employer's explanation was
pretext for retaliation) (quoting Haynes v. Williams, 392 F.3d
478, 485 (D.C. Cir. 2004). Summary judgment is appropriate where

171
the evidence is “so one~sided that one party must prevail as a
matter of law.” Anderson, 477 U.S. at 248, 252.

l. DEFENDANTS’ MOTlON FOR SUMMARY JUDGMENT

The defendants moved for summary judgment, arguing that this
action was precluded by the doctrine of res judicata, based on
the earlier confession of judgment filed in Michigan by
Bode & Grenier against the defendants for $300,000 in attorney
fees. (Defs.' Mem. in Supp. of Mot. for Summ. J. (“Defs.' Mem.”)
at 2.) According to the defendants, the judgment against the
defendants in the Michigan action was a final judgment on the
merits, and Michigan law broadly applies the doctrine of res
judicata, precluding both claims that were actually litigated and
every claim arising from the same transaction that the parties
could have raised but did not. Bode & Grenier opposed, arguing
that res judicata was inapplicable because the action filed in
Michigan was not a final judgment on the merits, and that instead
of being characterized as an action to recover attorney fees, it
was a specialized proceeding to enforce a promissory note.

(Pl.'s Opp’n at 1~2.)

The magistrate judge recommended denying the defendants'
motion for summary judgment because the defendants had not
established that the Michigan action constituted a final judgment
on the merits,

The undersigned finds that Defendants have failed to
point to evidence in the record from which the court

_8._

could determine that “a prior judgment exists[.]”

Defendants rely upon the docket sheet and the consent

judgment filed in the Michigan court. However, the

docket sheet is bereft of any entry which indicates

that the parties ever appeared before a judge of the

Michigan court, or that a judge of the Michigan court

rendered any decision with respect to the merits, The

judgment neither includes nor refers to any findings

with respect to the merits of the Michigan case;

rather, the judgment merely reflects the acknowledgment

of Defendants that they had failed to comply with the

terms of the promissory note executed by the parties.

Bode & Grenier, 2010 WL 908934, at *5.

The defendants have filed objections to that report and
recommendation, arguing that it erred and misapplied Michigan law
by determining that the confessed judgment action filed by
Bode & Grenier in Michigan was not decided on the merits,

(Defs.’ Objns. at 2.)

Under 28 U.S.C. § l738, “federal courts must give state
court judgments the same preclusive effect as would be given by
the courts of the state where the judgments emerged.” Smith v.
District of Columbia, 629 F. Supp. 2d 53, 57 (D D.C. 2009)
(citing Miqra v. Warren CitV Sch. Dist., 465 U.S. 75, 81 (1984)).
ln Michigan, “[t]he doctrine of res judicata is employed to
prevent multiple suits litigating the same cause of action.”
Adair v. Michigan, 680 N.W.Zd 386, 396 (Mich. 2004). Res
judicata precludes “a subsequent action between the same parties
when the evidence or essential facts are identical.” Dart v.

Dart, 597 N.W.2d 82, 89 (Mich. 1999). “The doctrine bars a

second, subsequent action when (1) the prior action was decided

_gi
on the merits, (2) both actions involve the same parties or their
privies, and (3) the matter in the second case was, or could have
been, resolved in the first.” Adair, 680 N.W 2d at 396.1 Under
Michigan law, the “burden of proving res judicata is on the party
asserting it.” Buck v. Thomas M. Cooley Law Sch., 597 F.3d 812,
817 (€th Cir. 2010).

Michigan broadly applies the doctrine of res judicata
to advance its purposes. Pierson Sand & Gravel, Inc[.]
v. Keeler Brass Co[.], 596 N.W.2d 153, 161 (Mich.
1999). “As a general rule, res judicata will apply to
bar a subsequent relitigation based upon the same
transaction or events . . . .” 1dg Thus, under
Michigan's broad approach to res judicata, the doctrine
“bars not only claims already litigated, but also every
claim arising from the same transaction that the
parties, exercising reasonable diligence, could have
raised but did not.” Adair, at 121. There are two
alternative tests for determining when res judicata
will bar a claim in a second lawsuit because the claim
could have, with the exercise of reasonable diligence,
been brought in the first actions the “same
transaction” test and the “same evidence” test. 1d4 at
124. The “same evidence” test looks to “whether the
same facts or evidence are essential to the maintenance
of the two actions.” Jones, at 401. As stated in
[Dart]: “Res judicata bars a subsequent action between
the same parties when the evidence or essential facts
are identical.”

1 The standard for establishing res judicata in the District
of Columbia is similar. A lawsuit will be barred by res judicata
in the District of Columbia if there has been earlier
“‘litigation (1) involving the same claims or cause of action,

(2) between the same parties or their privies, and (3) there has
been a final, valid judgment on the merits, (4) by a court of
competent jurisdiction.'” Capito1 Hill Group v. Pillsburv,
Winthrop, Shaw, Pittman, LLC, 569 F.3d 485, 490 (D.C. Cir. 2009)
(quoting Smalls v. United States, 471 F.3d 186, 192 (D.C. Cir.
2006>>.

_1@i
Begin v. Mich. Bell Tel. Co., 773 N.W.2d 271, 283 (Mich. App.
2009).

The defendants provided with their motion for summary
judgment the signed 2008 confession of judgment in favor of
Bode & Grenier in the amount of $3O2,500.2 (Defs.' Mem. Ex. 3.)
1n Michigan, confessions of judgment are governed by MCL
600 2906, which provides:

Judgments may be entered in any circuit court at any

time, upon a plea of confession, signed by an attorney

of such court, although there is no suit then pending

between the parties, if the following provisions are
complied with, and not otherwise:

(1) The authority for confessing such judgment shall be

in some proper instrument, distinct from that

containing the bond, contract or other evidence of the

demand for which such judgment was confessed;

(2) Such authority shall be produced to the officer

signing each judgment, and shall be filed with the

clerk of the court in which the judgment shall be

entered, at the time of the filing and docketing of

such judgment. [Emphasis added.]

MCL 600.2906.

Here, the report and recommendation correctly found that the
doctrine of res judicata does not bar the instant action based
upon the confession of judgment. The transaction in a confession
of judgment is the process of obtaining the signatory's signature

on the note and confession of judgment itself, not the events

that formed the basis of the debt. The evidence that would be

2 The promissory note contained a promise to pay $300,000.
The confession of judgment included $2,500 in attorney fees.

_11_
used to establish or dispute the confession of judgment - - the
confession and note - - is distinct from the evidence that would
be necessary to establish the underlying debt. §§§ Corrigan v.
DOWning, 562 N.E.2d 923, 924-25 (OhiO App. l988). ln additiOn,
the process used to establish a confession of judgment does not
lend itself well to adding additional claims based upon the
underlying debt. See Gordon v. Heller, 260 N.W. 156, 157 (Mich.
1935) (stating that “the confession of judgment is purely ex
parte”). While the defendants argue that §egin supports treating
confessions of judgment as final judgments on the merits, §egin
applied res judicata to a “consent judgment” that was entered in
the course of contested litigation, not a confession of judgment
entered through the procedures listed in MCL 600.2906. The court
noted that the parties did not dispute that the consent judgment
in that case was a final judgment decided on the merits. §§gin,
773 N W.2d at 282-283. The magistrate judge correctly found that
the defendants had not met their burden of establishing that res
judicata precluded the instant action, and the defendants'

objections will be overruled.3

3 Bode & Grenier also argues that res judicata should not
apply here because the debt that is the subject of this action
did not become ripe until after the firm filed the confession of
judgment. Bode & Grenier attached to its opposition to the
defendants' motion for summary judgment Bode's affidavit which
stated that at the time the confession of judgment was entered,
the firm had not yet determined the exact amount owed by the
defendants. (Defs.' Opp'n Ex. 7 jj 5-8.) Because the defendants
did not meet their burden of showing that the confession of

_12-
Il. PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

1n their answer to the complaint, the defendants asserted a
counterclainF against Bode & Grenier for disgorgement or
forfeiture of all of the legal fees paid by the defendants to
Bode & Grenier, claiming that Bode & Grenier breached its
fiduciary duty to the defendants by divulging the defendants'
“confidences, secrets and privileged communications” in the
complaint in this action. (Defs.' Counterclaim jj 4-9.) The
defendants' counterclaim did not specify the portions of the
complaint that purportedly divulged the defendants' confidences,
secrets, and privileged communications. However, in its motion
for summary judgment, Bode & Grenier states that the defendants
informed them that the information at issue is found in
paragraphs 8 through 11, 16 through 18, 24 through 30, 34, 46,
and 49 through 51. (Pl.'s Mot. for Summ. J. at 6.) Briefly,
paragraphs 8 through 11 and 16 through 18 allege that Knight was

the president, director, sole stockholder and sole corporate

judgment was a final judgment on the merits that justified
applying the doctrine of res judicata to preclude this action,
this argument will not be addressed.

4 The parties both assert that the counterclaim is governed
by the law of the District of Columbia. (See Pl.'s Mot. to
Dismiss at 4; Defs.' Mem. in Opp'n to Mot. to Dismiss at 3-7.)
“The Court is under no obligation to question [the parties]
assumptions [that District of Columbia law applies], and so it
will assume that District of Columbia law applies to the issues
addressed in this Opinion." Jacobsen v. Oliver, 555 F. Supp. 2d
72, 77 (D.D.C. 2007), citing CSX Transp., 1nc. v. Commercial
Union lns. Co., 82 F.3d 478, 482-83 (D.C. Cir. l996).

_13_
officer of the other defendants, and that Bode & Grenier
represented the defendants for 13 years in a number of matters
including litigation about an oil spill on the defendants'
property in 2005. Paragraphs 24 through 30 allege and describe

conversations between Bode & Grenier and Knight regarding the

“l€l@l“l@“”' ll“pal‘l legal l’lll‘l' _
Redacted from Original

 @md that might

“stood behind” the other defendants and personally guaranteed

 
 
 

payment of all of their delinquent legal bills. Paragraphs 34
and 49 through 51 allege that the corporate defendants were mere
instrumentalities and alter egos of Knight, and that Knight used
the corporate defendants to avoid paying Bode & Grenier's legal
bills. Paragraph 46 alleges that Knight “clearly and
unambiguous[ly] expressed his intent” to personally guarantee the
legal bills owed to Bode & Grenier by the other defendants.

Bode & Grenier moved for summary judgment on the defendants'
counterclaim, arguing that the complaint did not reveal any
confidential communications made for the purpose of securing
legal advice or services, that several of the paragraphs of the
complaint cited in the counterclaim contained public information,
that the defendants did not establish that Bode & Grenier
knowingly revealed any client secrets or confidences in the

complaint, and that disgorgement of legal fees would not be

_l4_
appropriate here even if the complaint did reveal the defendants'
confidences or secrets. (Pl.’s Mem. in 8upp. of Mot. for Summ.
J. at 3, 5-6 ) The defendants opposed.

The magistrate judge recommended denying Bode & Grenier's
motion for summary judgment on the counterclaim. The report and
recommendation concluded that there was a genuine issue of
material fact as to the extent that Bode & Grenier revealed
confidences and secrets based on the “transcript of the
deposition of Counterclaimant Knight, who testified that he
shared information about his personal and business finances with
Counter-Defendant during the course of their attorney-client
relationship.” Bode & Grenier, 2010 WL 882650 at *3-5.

Bode & Grenier filed objections to that report and
recommendation. Bode & Grenier argues that even if
Bode & Grenier knowingly disclosed client confidences, secrets,
and privileged communications in the complaint, disgorgement
would not be available as a remedy because the alleged breach of
fiduciary duty could not have compromised or corrupted the
representation because the breach occurred after the
representation ended; because disgorgement is not available for
breaches of the duty that Bode & Grenier is alleged to have
breached; and because disgorgement is an inappropriate equitable

remedy. (Pl.'s Obj'ns at 4.)

_l5_

1n order to state a claim under District of Columbia Law for
breach of fiduciary duty, the defendants must allege that:
“(1) defendant owed plaintiff a fiduciary duty; (2) defendant
breached that duty; and (3) to the extent plaintiff seeks
compensatory damages -- the breach proximately caused an injury.”
Paul v. Judicial Watch, lnc., 543 F. Supp. 2d 1, 5-6 (D D.C.
2008). “A violation of the Code of Professional Responsibility
or of the Rules of Professional Conduct can constitute a breach
of the attorney's common law fiduciary duty to the client.”

Griva v. Davison, 637 A.2d 830, 846-47 (D.C. 1994); see also

Hendrv v. Plelland, 73 F.3d 397, 401 (D.C. Cir. 1996). District
of Columbia Rule of ?rofessional Conduct 1.6 prohibits a lawyer
from knowingly revealing, using to a client’s disadvantage, or
using to the attorney's advantage, information protected by the
attorney-client privilege under D.C. law or information gained in
the professional relationship that the attorney's client has
requested to be held inviolate or which would be deleterious or
embarrassing to the client to reveal. D.C. Rule of Prof. Cond.
l.6. A disclosure of client confidences can constitute a breach
of an attorney's fiduciary duty of loyalty to its client. Herbin
v. Hoeffel, 806 A.2d 186, 197 (D.C. 2002) (reversing dismissal of
the plaintiff’s claim that his attorney in a criminal matter

breached her fiduciary duty of loyalty by disclosing confidential

_l5_
information to a prosecutor in order to assist with the
prosecution of the plaintiff).

Disgorgement of legal fees for a breach fiduciary duty is an
equitable remedy, United states v. Project on Gov't Oversight,
572 F. Supp. 2d 73, 76-77 (D.D.C. 2008), and equitable remedies
are generally left for a court to decide within its sound
discretion, Smith-Havnie v. Dist. of Columbia, 155 F.3d 575, 578
(D C. Cir. l998). One decision in this district explained that
“disgorgement is an extraordinary remedy, and if it is ever
appropriate, it should be used only in situations where the
deterrence rationale is so important that only disgorgement will
serve a socially useful purpose.” Avianca v. Corriea, Civil
ACtion No. 85-3277 (RCL), 1992 WL 93l28, *l2 (D.D.C. April l3,
1992). “[U]nder District of Columbia law, clients suing their
attorney for breach of the fiduciary duty . . . and seeking
disgorgement of legal fees as their sole remedy need prove only
that their attorney breached that duty, not that the breach

caused them injury.” Hendry v. Pelland, 73 F.3d 397, 401-02

(D C. Cir. 1996), 1n the District of Columbia, the “general rule
is that an attorney need only return fees for the representation

which was compromised by a breach of fiduciary duty[.]” Avianca,
1992 WL 93l28, at *12. Disgorgement may not be warranted where a
purported breach of fiduciary duty occurs after an attorney's

discharge. Orendick v, Chiodo, 272 A.D.2d 901, 902 (N.Y. App.

_l7_
2000) (reversing trial court's judgment for clients in a
disgorgement action, in part because the purported breach of
fiduciary duty occurred after the attorney was discharged).

Both parties analyze the defendants' claim for disgorgement
under the standard set forth in the Restatement (Third) of the
Law Governing Lawyers § 37. lt states that “[a] lawyer engaging
in a clear and serious violation of duty to a client may be
required to forfeit some or all of the lawyer's compensation for
the matter. Considerations relevant to the question of
forfeiture include the gravity and timing of the violation, its
willfulness, its effect on the value of the lawyer's work for the
client, any other threatened or actual harm to the client, and
the adequacy of other remedies.” Restatement (Third) of the Law
Governing Lawyers § 37.

Bode & Grenier argues that the timing of the violation would
not justify disgorgement and did not affect the value of
Bode & Grenier's work because the disclosures occurred after the
representation ended, that the disclosures were not willful
because Bode & Grenier did not reveal and does not believe that
its complaint revealed confidential information, and that there
was no threat of harm from the disclosure. (Pl.'s Mem. at 21-
23.) The defendants disagree. The defendants argue that
disgorgement is appropriate when an attorney has engaged in

“abusive fee-collection methods,” although they provide no

_18..
authority to support their characterization of Bode & Grenier's
actions as “abusive.” (Defs.' Opp'n at 14.) The defendants also
argue that the threat of harm was great

Redacted from Original

while Redacted from Original

_the risk here is wholly

speculative, and, Redacted from Original does not help tip the

scales the defendants' favor. 1n any event, the parties do not
provide authority that the District of Columbia follows the rule
set forth in Restatement (Third) of the Law Governing Lawyers

§ 37.

Otherwise, even assuming that there is a genuine issue as to
whether Bode & Grenier revealed secrets or confidences by filing
the complaint, the facts here would not warrant the exercise of
discretion to award disgorgement. Applying Avianca's rule that a
breach of fiduciary duty justifies disgorgement of fees for the
representation which was compromised by the breach, the
defendants do not show that the alleged breach compromised any
portion of Bode & Grenier's representation. The defendants do

not allege that Bode & Grenier revealed client confidences or

secrets during their thirteen year attorney-client relationship.

_19_
The alleged violation occurred only after Bode & Grenier
attempted repeatedly to obtain payment for legal services it
rendered to the defendants and ended their representation of
them. 1n addition, the rationale of deterring behavior like
Bode & Grenier’s in this case is not so strong that only
disgorgement will serve a socially useful purpose since
Bode & Grenier took prompt action to mitigate any perceived harm
to the defendants. lt moved to seal the complaint and thus
prevent the continued disclosure of the sensitive material in the
complaint approximately two days after the defendants filed their
counterclaim and 27 days after Bode & Grenier filed the complaint
in this matter. This case does not involve a law firm breaching
its duty of loyalty from nearly the beginning of the lawyer-
client relationship and continuously for more than one year, see
Financial General Bankshares, 1nc. v. Metzger, 523 F. Supp. 744
(D.D.C. 1981), vacated on other grounds in Financial General

Bankshares, 1nc. v. Metzger, 680 F.2d 768 (D.C. Cir. 1982). Nor

does this case involve an attorney representing multiple parties
to a transaction with conflicting interests, see Hendry, 73 F.3d
at 401. Nor do the defendants argue that Bode & Grenier's
unauthorized disclosures made the fees charged by Bode & Grenier
somehow unreasonable. See Bertelsen v. Harris, 537 F.3d 1047,
l056~58 (9th Cir. 2008) (affirming judgment for defendant law

firm on a clients' claim for disgorgement where the trial court

__20..

held that even if the firm breached its fiduciary duty to the
clients by failing to disclose potential conflicts of interest
and obtain written conflict waivers, the firm's conduct was not
“so egregious as to justify disgorgement of fees paid” and the
firm's fee was reasonable for the work done).

Likewise, in Sealed Partv v. Sealed Partv, Civil Action No.
04-2229, 2006 WL 1207732 (S.D. 'l`eX. May 4, 2006), a client sued
an attorney and his law firm for divulging in a promotional press
release confidential information about a settlement agreement
into which the client had entered. ld;, 2006 WL 1207732, at *4.
The court held that the attorney breached his “fiduciary duty
under Texas law to not disclose his former client’s
confidential information without the Client's permission,” and
that the attorney did so for his “self promotion and potential
financial gain.” ldg, 2006 WL 1207732, at *17, 19. However, the
court entered judgment for the attorney on the client’s claim for
equitable forfeiture, because “the remedy of forfeiture must fit
the circumstances presented” and in that case, “the public
interest in maintaining the integrity of attorney-client
relationships is served by the conclusions herein that the
Attorney breached a fiduciary duty to the Client, but not
ordering a forfeiture.” 1dg, 2006 WL 1207732, at *20-21.

The violations alleged by the defendants, even assuming they

are true, do not warrant an equitable award of fee disgorgement,

_ 2 l _
and Bode & Grenier are entitled to judgment. The objection to
the recommendation to deny the plaintiff’s motion for summary
judgment on the defendants' counterclaims will be sustained, and
judgment will be entered for the plaintiff on the counterclaim.
CONCLUS l ON AND ORDER

The defendants have not shown that res judicata bars this
case, The record presents no material issue regarding whether
any post-representation fiduciary breach by plaintiff was willful
enough to support disgorgement of legal fees or caused any actual
or impending harm to the defendants, and the plaintiff is
entitled to judgment on the defendants' counterclaim. Thus, it
is hereby

ORDERED that the defendants' objections [43] to the
recommendation to deny the defendants' motion for summary
judgment be, and hereby are, OVERRULED. The defendants' motion
[28] for summary judgment is DENlED. lt is further

ORDERED that the plaintiff’s objections [42] to the
recommendation to deny the plaintiff’s motion for summary
judgment be, and hereby are, SUSTA1NED. Plaintiff's motion for
summary judgment [27] is GRANTED. Judgment is entered for the
plaintiff on the defendants' counterclaims. lt is further

ORDERED that plaintiff’s motion [51] to lift the stay

entered on plaintiff’s motion for leave to amend the complaint

_22_
pending determination of the objections to the reports and
recommendations be, and hereby is, GRANTED. lt is further

ORDERED that the parties confer and file under seal by
October 11, 2011, a notice attaching a mutally agreed upon
proposed redacted version of this memorandum opinion and order
that could be filed on the public docket.

SlGNED this 20th day of September, 2011,

w

RICHARD W. ROBERTS
United States District Judge