Children's Legal Servs. v. Shor Levin & Derita, PC

850 F.Supp.2d 673

CHILDREN'S LEGAL SERVICES, PLLC, Plaintiff,

v.SHOR LEVIN AND DERITA, PC, Defendant.

Case No. 10–13000.

United States District Court,

E.D. Michigan,

Southern Division.

March 28, 2012.

David M. Hollar, David M. Hollar, PLLC, Conshohocken, PA, Steven M. Ribiat, Brooks Wilkins Sharkey & Turco, PLLC, Birmingham, MI, for Plaintiff.

Michelle M. Wezner, Howard & Howard Attorneys PLLC, Royal Oak, MI, Patrick M. McCarthy, Howard & Howard, Ann Arbor, MI, for Defendant.

OPINION AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS FOR WANT OF PERSONAL JURISDICTION OR IMPROPER VENUE OR TO TRANSFER VENUE

DAVID M. LAWSON, District Judge.

On July 30, 2010, plaintiff Children's Legal Services, PLLC, a Michigan law firm, filed the present lawsuit in this Court against defendant Shor, Levin, & DeRita, P.C., a Pennsylvania law firm, alleging breach of a settlement agreement, fraud, promissory estoppel, and unjust enrichment. At the core of the dispute is a marketing plan designed to attract families with children suffering from cerebral palsy and other birth trauma related ailments, and the division of attorney's fees generated by the prosecution of medical malpractice cases involving those victims. The defendant has moved to dismiss on the ground of lack of personal jurisdiction. Alternatively, the defendant would like the case transferred to the Eastern District of Pennsylvania. The plaintiff opposes the motion. The Court heard oral argument on October 12, 2011 and now concludes that the motion should be denied.

I. Facts

The parties' relationships are tangled, which lends an air of complexity to the facts. Here is the quick version. Some Michigan lawyers devised a marketing plan to locate potential medical malpractice clients who may have birth trauma cases. They advertised under the name of 4MyChild, and published contact information. When potential clients called, the cases were screened and referrals were made to law firms around the country. The law firms paid advertising fees and referral fees in some cases. The lawyers and their law firms that devised the program filed for bankruptcy, and the plaintiff, Children's Legal Services, PLLC, (“CLS”) purchased the assets, including the rights to the 4MyChild program, from the bankruptcy estate.

Defendant Shor, Levin, & DeRita, P.C., (“Shor Levin”) was one of the law firms that paid advertising fees and received referrals. At some point, however, Shor Levin decided to start its own advertising program, which it called 4MyBaby. CLS believed that the 4MyBaby program infringed the 4MyChild trademark and protested to Shor Levin. A settlement agreement supposedly was reached, which involved yet another Pennsylvania law firm—Villari, Kusturiss, Brandes & Kline (“Villari Kusturiss”)—to whom Shor Levin referred medical malpractice cases and received referral fees. As part of the alleged settlement agreement, Villari Kusturiss paid over to CLS referral fees it held in escrow to which both Shor Levin and CLS had made a claim. CLS apparently wanted to find peace between Shor Levin and Villari Kusturiss, because CLS had agreed to indemnify Villari Kusturiss for the legal fees Villari Kusturiss incurred as part of the dispute with Shor Levin.

CLS alleges in the complaint that Shor Levin breached the settlement agreement by filing a subsequent lawsuit against Villari Kusturiss to recover the escrowed funds that were paid over to CLS as part of the settlement agreement. Shor Levin filed its motion to dismiss under Federal Rule of Civil Procedure 12(b)(2), or in the alternative to dismiss for lack of venue under Rule 12(b)(3) and 28 U.S.C. § 1406(a) or to transfer venue under 28 U.S.C. § 1404(a), alleging that all of the activity in this case, including the alleged settlement agreement, occurred in Pennsylvania, and it has no contact with Michigan. CLS disagrees. To demonstrate Shor Levin's contacts with Michigan, a more extensive discussion of the facts is necessary. The details follow.

Stern & Associates, another Michigan law firm, was the creator and original holder of the intellectual property rights in the 4MyChild program. The partners in that law firm were Kenneth Stern and Lawrence Korn, both residents of Michigan. Those lawyers also were members of another law firm called Korn & Stern, P.C., (“Korn & Stern”), which was a Pennsylvania professional corporation. Stern also happens to be the founder of CLS, which Stern characterizes as the “successor in interest” to Stern & Associates. Korn & Stern had no employees except the two members. All work performed by Korn & Stern was done by Stern & Associates employees in Michigan.

Stern advertised 4MyChild as a program that provided counseling to parents of children with cerebral palsy, Erb's Palsy, and other neurological injuries. Calls from interested parties who responded to the advertising were fielded in Michigan by employees of Stern & Associates. If the law firm determined that medical malpractice may have been involved in the injury, then it either handled the case itself, jointly represented the client with an affiliated law firm in nearly every state, or referred the case entirely to an affiliated law firm.

In 2004, Lawrence Korn filed an involuntary chapter 7 bankruptcy petition against Stern & Associates after a disagreement over the value of Korn's share of the law firm after he was unable to practice law due to a disability. The petition was filed in the Eastern District of Michigan. Although the parties are not clear on this point, it appears that Sterns & Associates already had filed for bankruptcy, because the bankruptcy court consolidated the two cases. In 2005, CLS purchased the proceeds, rights, and claims of both Stern & Associates and Korn & Stern from the consolidated bankruptcy estate. As part of the purchase, CLS acquired all of the rights, including intellectual property rights, associated with the 4MyChild program. When the bankruptcy proceedings terminated, CLS was the owner and operator of the 4MyChild program.

Defendant Shor Levin is a Pennsylvania professional corporation located in Jenkintown, Pennsylvania. In 1998, Shor Levin and Korn & Stern formed a Pennyslvania partnership called Larry Korn and Associates. The purpose of the partnership was to offer essentially the same services that 4MyChild offers. The partnership agreement never mentions 4MyChild by name, but it does describe a similar concept.

The plaintiff alleges that Shor Levin funded the advertising for the 4MyChild program by advancing funds to Korn & Stern in Michigan. Korn & Stern, however, made all the purchases. When a prospect called 4MyChild, the call would be answered in Michigan by the Stern & Associates office employees. Korn & Stern and Stern himself would screen the cases to determine if a viable malpractice case could be filed. If there was a potentially meritorious suit, the case would be either handled by Korn & Stern or Stern & Associates, or sent to affiliated counsel, including the Michigan law firm of Sommers Schwartz and the Pennsylvania firm of Villari Kusturiss. If the case yielded fees, Shor Levin would receive a share.

Shor Levin was making substantial advances for the advertising of 4MyChild to the tune of approximately $50,000 per month, and it was interested in the procedurestaking place in Michigan. Jay Shor and Lawrence Levin of Shor Levin took a trip to Detroit in 1998 to find out exactly how the program was being operated in Michigan. When the trip failed to impress, Shor Levin terminated the relationship with respect to the 4MyChild advertising.

Although the relationship between Shor Levin and the 4MyChild program had ended, there were still pending cases in which Shor Levin claimed a right to fees once completed. Villari Kusturiss was responsible for litigating the remaining cases that had come to Pennsylvania through Shor Levin and the 4MyChild advertising. Shor Levin negotiated referral fees with Villari Kusturiss that were to be paid upon completion of the 4MyChild cases. When a 4MyChild case concluded, the attorney's fee would be paid directly to Villari Kusturiss. From there, if the case had started during the time Shor Levin was paying for the advertising for 4MyChild, Villari Kusturiss would distribute a 20% referral fee each to Korn & Stern and Shor Levin. If the case had started after Shor Levin had stopped paying for advertisements, and Korn & Stern had started paying, Villari Kusturiss would distribute 5% of the attorney's fee to Shor Levin and a 38% fee to Korn & Stern.

At some point in time before all fees had been distributed to Shor Levin from Villari Kusturiss, Shor Levin created and began marketing its own program, which was almost identical to 4MyChild, called 4MyBaby. Korn & Stern and Stern & Associates learned that Shor Levin created 4MyBaby and accused Shor Levin of trademark infringement. Believing that potential infringement damages were accruing to Korn & Stern and Stern & Associates, Korn & Stern informed Villari Kusturiss to stop distributing fees to Shor Levin that were generated from the 4MyChild cases. Korn & Stern informed Villari Kusturiss that the money was to be held in escrow until the issues between the two parties were resolved. Shortly thereafter, and before a resolution was negotiated, the involuntary bankruptcy commenced, and CLS purchased the assets of Stern & Associates and Korn & Stern.

On January 13, 2005, CLS and Shor Levin met in Pennsylvania to settle the dispute that had arisen regarding 4MyChild and 4MyBaby. On that day, the two firms reached an oral agreement, which was memorialized in an e-mail from Jay Shor. The specifics of that agreement, however, are unclear. Shor's e-mail fails to shed much light: it only states: “We just finished meeting with Ken Stern regarding the above mentioned matters. As you know, Ken Stern proposed a settlement of all issues and I am hereby advising you that those terms and conditions are acceptable.”

CLS...