McCarter & English, LLP v. Jarrow Formulas, Inc.

McCARTER & ENGLISH, LLP, Plaintiff, v. JARROW FORMULAS, INC, Defendant.

No. 3:19-cv-01124 (MPS)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

March 22, 2021

RULING ON MOTIONS FOR SUMMARY JUDGMENT

I. INTRODUCTION

In this heated dispute, a law firm has sued its former client for outstanding legal fees, and the former client has counter-claimed, alleging that the law firm committed malpractice and overbilled it in connection with a recent trial in Kentucky that resulted in a multi-million dollar verdict against it. The parties have filed cross-motions for summary judgment. Specifically, the plaintiff law firm, McCarter & English, LLP ("McCarter"), seeks summary judgment on its claim for breach of contract, and on the counterclaims of its former client, Defendant Jarrow Formulas, Inc. ("Jarrow"), for legal malpractice, breach of fiduciary duty, negligent and intentional misrepresentation, and unfair trade practices. Jarrow seeks summary judgment as to its counterclaims for breach of fiduciary duty, negligent and intentional misrepresentation, and unfair trade practices. For the following reasons, I grant in part and deny in part McCarter's motion for summary judgment as to the breach of contract claim and the malpractice counterclaim, and deny both parties' motions for summary judgment as to the fiduciary duty, misrepresentation, and unfair trade practice counterclaims.

II. PROCEDURAL BACKGROUND

McCarter represented Jarrow in a jury trial in the United States District Court for the Western District of Kentucky ("the Kentucky Litigation") in which Caudill Seed & Warehouse Company sued Jarrow for violation of the Kentucky Uniform Trade Secrets Act, KY. REV. STAT. ANN. §§ 365.880-365.900 (West 2020), and other claims. ECF No. 174 ¶ 14. The jury returned a verdict against Jarrow in the amount of $2,427,605, finding willful and malicious misappropriation of trade secrets by Jarrow. Id. ¶ 17.¹ Shortly thereafter, Jarrow terminated its relationship with McCarter and McCarter brought this action for breach of contract, account stated, and unjust enrichment/quantum meruit to recover outstanding legal fees in the amount of $2,044,686.77. ECF No. 174 ¶ 28. McCarter filed a motion for prejudgment remedy and, after an evidentiary hearing (the "PJR hearing"), secured a prejudgment remedy in the amount $1,850,000. ECF Nos. 8, 56, 68; ECF No. 124 at 35.

In the meantime, Jarrow asserted eight counterclaims against McCarter, ECF No. 91, including, as pertinent to the summary judgment motions, claims for breach of fiduciary duty, negligent/intentional misrepresentation, unfair trade practices, and legal malpractice. Specifically, Jarrow alleges that McCarter, in spite of the fiduciary duties it owed to Jarrow as its counsel, "made numerous misrepresentations of material facts relating to its representation of Jarrow, including matters relating to billing rates, billings, and discounts." ECF No. 184 at 32 Count Three ¶ 135; id. at 34 Count Five ¶ 135. For example, Jarrow alleges that McCarter billed Jarrow's insurer at higher hourly rates, but when the insurer declined coverage, McCarter billed Jarrow at those higher hourly rates without notifying Jarrow of the increase. Id. at ¶¶ 55, 75, 76. Jarrow also alleges that McCarter applied pressure on Jarrow to bring its account current and told Jarrow that it was receiving discounts that it was not in fact receiving. Id. ¶¶ 78, 88, 94. Jarrow's counterclaim for legal malpractice alleges that McCarter made decisions during the KentuckyLitigation that failed to meet the standard of care for an attorney. It alleges that McCarter should have called as a live witness Jarrow Rogovin, Jarrow's Chairman and President, should have called a damages expert to rebut Caudill's damages evidence, should have presented an alternative damages calculation, and should have presented evidence to rebut the claim of willful and malicious misappropriation. It also alleges that McCarter failed to "adequately consult and communicate with the client." Id. at 33, Count Four ¶ 136.

III. FACTS

The following facts are taken from the parties' Local Rule 56(a) Statements and are undisputed unless otherwise indicated.

A. The Beginning of the Representation

In 1996, the law firm McCormick, Paulding & Huber, LLP ("MPH") entered into a written agreement with Jarrow (the "1996 Engagement Letter") that provided for legal representation. ECF No. 179 at 2 ¶ 1. The agreement is titled "Engagement Letter" and references "International Nutrition Co. v. Jarrow Formulas, Inc. et al (Our File No. 5575-01)". ECF No. 38-1 at 2. It was addressed to Mr. Jarrow Rogovin, signed by Attorney Mark Giarratana of MPH, and counter-signed by Rogovin. The letter "sets forth the terms of Jarrow's [] retention of [MPH]". Id. It states in relevant part, "We understand that you wish us to assume the legal representation of Jarrow [] in the above-identified intellectual property litigation ... currently pending in the United States District Court for the District of Connecticut." Id. Regarding payment for MPH's legal services, the letter states that "[d]uring the pendency of this matter, [MPH] will render statements to Jarrow [] on a monthly basis," that "[o]ur bills will reflect the hourly charge rate multiplied by the amount of time devoted to the matter by lawyers, legal assistants and other employees of the firm during the preceding calendar month as well as regular charges and disbursements recorded on our books during that month," that "[o]urstatements are due and payable 30 days after receipt and Jarrow [] agrees to pay each monthly statement within 30 days", and that base hourly rates for attorneys, legal assistants, and staff members "vary depending upon the experience and expertise of the person rendering services" and "may change from time to time." Id. at 2-3. The letter sets forth the then-applicable hourly rates of Giarratana and another MPH partner and notes that"[o]ther partners may likewise assist in this matter, if necessary, at their respective hourly rates". Id. at 3. The letter concludes by stating, "We look forward to representing you and your Company in connection with this intellectual property matter, and will do our best to work toward developing a long and mutually-satisfying relationship." Id. at 4.

In 1998, Giarratana left MPH and joined Cummings & Lockwood LLC; he then left that firm to join McCarter in 2003, where he has remained as a partner for sixteen years. ECF No. 179 at 3 ¶ 3; ECF No. 38 ¶¶ 4-5. On September 26, 2003, Giarratana sent a letter to Rogovin informing him that Cummings & Lockwood's Hartford office and lawyers from other offices would be merging with McCarter. ECF No. 175-42 at 2. "Accordingly, we plan to transfer your files to McCarter [] at the time of the merger, and to continue to provide you with intellectual property advice and services as we have in the past." Id. "At each of the foregoing law firms, Giarratana, and others working under his direction, continued to provide substantial legal services to Jarrow in intellectual property, litigation and insurance coverage matters." ECF No. 179 at 3 ¶ 4; ECF No. 38 ¶¶ 4-5. Giarratana testified that "throughout the 23-year relationship" with Jarrow, he "continue[d] to bill[] for [his] services and those of the people in [his] firm" and "continue[d] to bill in the same manner ... described in the [1996 Engagement Letter] regarding monthly bills and on a time-devoted basis[.]" ECF No. 69 at 19. "During its attorney-client relationship with Jarrow, McCarter opened over 400 matter files, all of which were handled byGiarratana and other lawyers, primarily out of McCarter's Hartford, Connecticut office." ECF No. 38 ¶ 5; see also ECF No. 180-42 at 20-21.

B. Hourly Rates for Legal Services in the Kentucky Litigation

The rate at which Giarratana billed Jarrow for the "hundreds of legal matters" he worked on started at $200 per hour in 1996, ECF No. 180-5 at 3, ECF 38-1 at 3, and increased over time. ECF No. 177 at 3 ¶ 9. The parties dispute how high the hourly rate reached, with Jarrow asserting that Giarratana billed Jarrow "from the middle of 2013 through early 2015 ... at widely disparate rates for services provided by the same attorneys in the closely related [] state court case brought against Jarrow consultant Kean Ashurst (the "Ashurst Litigation") and the Kentucky [] Litigation...." ECF No. 177 at 3-4 ¶ 9. Giarratana testified that he believed his rate remained at $405 per hour in the Ashurst Litigation in 2013, 2014, and 2015, ECF No. 180-6 at 7, and the parties agree that his rate increased to at least $535 per hour for the Kentucky litigation, although Jarrow contends that it was "over $535 per hour." See ECF No. 177 ¶ 8; ECF No. 175-4 at 19. Asked if he gave notice to Jarrow when the rate was being increased, Giarratana responded,

We - it depends on the situation. We didn't have a written notice that went out before the bill went out. When we sent the bill, the bill, of course, had a notice in it before they paid it. The bill indicated in several places what the rates were. There was an hourly rate indicated at the end of each matter on the bill for each of the timekeepers that appeared on that respective matter.

And also there was a - the time entries we billed on a time-devoted basis would indicate the amount of hours or portions of an hour and the dollar value; and it was simple arithmetic to determine the rate from that.

ECF No. 69 at 36. Rogovin testified that "[t]here was no notice[] of billing increases." ECF No. 180-19 at 3.

In 2013, "Rogovin specifically requested that McCarter represent Jarrow in the Kentucky Litigation." ECF No. 179 at 4 ¶ 8; ECF No. 38 at 3 ¶ 9. There was no "written retainer agreement entered into between Jarrow and [McCarter]" specifically "for [] Jarrow's representation in the Kentucky [] Litigation." ECF No. 177 at 1 ¶ 4. Giarratana testified that he informed Rogovin during a phone conversation that McCarter had been...