Hammervold v. Blank

MARK HAMMERVOLD Plaintiff, v. DAVID BLANK, DIAMOND CONSORTIUM, INC.d/b/a THE DIAMOND DOCTOR,and JEWELERS MUTUAL INSURANCE CO. Defendants.

Civil Action No. 4:20-cv-165

United States District Court EASTERN DISTRICT OF TEXAS SHERMAN DIVISION

August 6, 2020

Judge Mazzant

MEMORANDUM OPINION AND ORDER

Pending before the Court are: (1) Defendants David Blank and Diamond Consortium, Inc. d/b/a the Diamond Doctor's 12(b)(6) Motion to Dismiss Plaintiff's Complaint and Supporting Memorandum of Law (Dkt. #9), and (2) Jewelers Mutual Insurance Company's Motion to Dismiss for Failure to State a Claim Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Dkt. #17). Having considered the motions and the relevant pleadings, the Court finds that both motions should be GRANTED.

BACKGROUND

The present case arises out of a prior action ("underlying lawsuit").¹ In the underlying lawsuit, Diamond Consortium, Inc. ("Diamond Consortium") and David Blank sued Brian Manookian, Brian Cummings, and Cummings Manookian, PLC (collectively, "Initial Defendants") alleging that the Initial Defendants engaged in a scheme to defame and defraud them. The allegations against the Initial Defendants were that they created a website and advertisementsfalsely accusing Mr. Blank and Diamond Consortium of committing diamond fraud and cheating customers by over-grading diamonds. According to the allegations, the Initial Defendants had threatened lawsuits against Mr. Blank and Diamond Consortium unless they retained Cummings Manookian as counsel and paid a $25,000 retainer fee for a period of 120 months, totaling three million dollars. This retainer would conflict the Initial Defendants off of cases asserted against Mr. Blank and Diamond Consortium. The Initial Defendants were alleged to have made these retainer agreements with other jewelers as well.

On September 14, 2016, Mark Hammervold and Hammervold, PLC ("Hammervold Defendants") were added to the suit. According to Mr. Blank and Diamond Consortium, the Hammervold Defendants were necessary because the Initial Defendants would solicit clients and then refer them to the Hammervold Defendants to prosecute the case, thereby avoiding the appearance of a conflict when the Initial Defendants sought to enter retainer agreements with targeted jewelers. Based on this allegation, Mr. Blank and Diamond Consortium added the Hammervold Defendants to the lawsuit and brought claims against them for violations of the Racketeer Influenced Corrupt Organizations Act, 18 U.S.C. § 1926(c) ("the RICO Act") and for civil conspiracy.

The Hammervold Defendants filed a motion to dismiss for failure to state a claim, which the Court denied. The Hammervold Defendants' then-counsel additionally filed a motion to withdraw as counsel based on "limited resources" of the Hammervold Defendants and to permit the Hammervold Defendants to continue in litigation represented by Mark Hammervold, which the Court denied. The Hammervold Defendants filed a notice of appeal as to both orders on May 25, 2017 and June 6, 2017. After filing the appeal, the Hammervold Defendants filed a motion to stay the case and the Initial Defendants filed a motion to sever. The Court granted the motions onJune 27, 2017 and opened the separate case against just the Hammervold Defendants.² The Fifth Circuit issued opinions affirming the Court's decisions regarding the Texas Citizens Participation Act and the motion to withdraw on June 12, 2018 and August 8, 2018. The case resumed on July 16, 2018.

The Hammervold Defendants then filed a motion to withdraw and motion to proceed pro se. The Court granted the motion on January 15, 2019. On February 28, 2019, Mr. Blank and Diamond Consortium filed a voluntary notice of dismissal without prejudice pursuant to Federal Rule of Civil Procedure 41. After conferring with the parties by e-mail on the agreement thereto, the Court granted the motion for voluntary dismissal, using the proposed order on February 28, 2019. Subsequently, on March 14, 2019, the Hammervold Defendants filed a motion to amend the judgment that the Court entered, arguing that because the judgment was silent as to fees and costs, the Court should amend it to allow reassessment of costs and attorney's fees (Dkt. #90). Additionally, on March 21, 2019, the Hammervold Defendants filed a motion for sanctions and attorneys' fees (Dkt. #94). On February 20, 2020, the Court issued a Memorandum Opinion and Order denying both motions ("Sanctions Order") (Dkt. #107).

In the Sanctions Order, after reviewing the merits of the case and the parties' conduct, the Court found that Mr. Blank and Diamond Consortium did not act in bad faith in prosecuting the underlying lawsuit; that their conduct throughout the course of the underlying lawsuit was appropriate; and that their motion practice was not duplicative or harassing (Dkt. #107).

In response to the underlying lawsuit and the Court's Sanctions Order, on February 27, 2020, Mr. Hammervold filed the above-styled action alleging malicious prosecution and abuse of process against Mr. Blank, Diamond Consortium, and Jewelers Mutual Insurance Co. ("JewelersMutual") (Dkt. #1). On May 1, 2020, Mr. Blank and Diamond Consortium filed a motion to dismiss (Dkt. #9). On June 1, 2020, Mr. Hammervold filed a response (Dkt. #21). On June 8, 2020, Mr. Blank and Diamond Consortium filed a reply (Dkt. #25). On June 15, 2020, Mr. Hammervold filed a sur reply (Dkt. #30).

On May 22, 2020, Jewelers Mutual filed a motion to dismiss (Dkt. #17). On June 5, 2020, Mr. Hammervold filed a response (Dkt. #24). On June 12, 2020, Jewelers Mutual filed a reply (Dkt. #29). On June 19, 2020, Mr. Hammervold filed a sur reply (Dkt. #32). ³

LEGAL STANDARD

The Federal Rules of Civil Procedure require that each claim in a complaint include a "short and plain statement . . . showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). Each claim must include enough factual allegations "to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the complaint fails to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded facts in plaintiff's complaint and view those facts in the light most favorable to the plaintiff. Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider "the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint." Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine whether the complaint states a claim for relief that is plausible on its face. "A claim has facial plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonableinference that the defendant is liable for the misconduct alleged." Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "But where the well-pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not 'show[n]'—'that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679 (quoting FED. R. CIV. P. 8(a)(2)).

In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and disregard conclusory allegations, for they are "not entitled to the assumption of truth." Iqbal, 556 U.S. at 664. Second, the Court "consider[s] the factual allegations in [the complaint] to determine if they plausibly suggest an entitlement to relief." Id. "This standard 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims or elements.'" Morgan v. Hubert, 335 F. App'x 466, 470 (5th Cir. 2009) (citation omitted). This evaluation will "be a context-specific task that requires the reviewing [C]ourt to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679. Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face."' Id. at 678 (quoting Twombly, 550 U.S. at 570).

ANALYSIS

Mr. Blank, Diamond Consortium, and Jewelers Mutual ask the Court to dismiss this case on the ground that Mr. Hammervold's malicious prosecution and abuse of process claims are barred by res judicata and/or collateral estoppel. Specifically, they argue that the Court's findings and conclusions in the Sanctions Order (Dkt. #107) in the underlying lawsuit preclude Mr. Hammervold's subsequent lawsuit alleging malicious prosecution and abuse of process. For the following reasons, the Court agrees.

I. Choice of Law

At the outset, the parties disagree as to the applicable substantive law. A federal court sitting in diversity applies the choice of law rules of the state in which it sits. Resolution Tr. Corp. v. Northpark Joint Venture, 958 F.2d 1313, 1318 (5th Cir. 1992) (citing Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Thus, this Court applies Texas choice of law rules. Texas courts use the "most significant relationship" test when resolving choice of law questions in tort cases. Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 696 (Tex. 2002). The Court must weigh four factors, outlined in § 145 of the Restatement (Second) of Conflict of Laws, when determining which state's law applies: "(a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicil[e], residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if...