Mcilwain, LLC v. Berman

MCILWAIN, LLC, a/k/a Timothy J. McIlwain, Attorney at Law, Plaintiff, v. Steve BERMAN, et al., Defendants.

Civil No. 17-1257 (RBK/KMW)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN VICINAGE

May 24, 2018

NOT FOR PUBLICATION

OPINION

KUGLER, United States District Judge:

Plaintiff Timothy McIlwain did not get the fees he asked for in a class action settlement. He has now sued other class counsel—the law firm of Hagens Berman Sobol Shapiro, LLP ("Hagens Berman") and several of its partners—in an effort to pool together and then redistribute that same settlement. Now before the Court are Hagens Berman's Motion to Set Aside Default Judgment (mislabeled, as no judgment has been entered) (ECF No. 21), Steve Berman's Motion to Dismiss for Lack of Personal Jurisdiction (ECF No. 27), and Hagens Berman's Motion to Dismiss for Lack of Personal Jurisdiction. (ECF No. 30.)

Because McIlwain's claims involve actions that took place almost entirely outside of New Jersey—indeed, thousands of miles away in California—we find that the Court lacks personal jurisdiction over Defendants. We also conclude that it is appropriate to set aside the Clerk's entry of default. Defendants' motions are therefore GRANTED.

Finally, the Court finds that McIlwain could have brought this case in the Northern District of California and that it is in the interests of justice to transfer it there pursuant to 28 U.S.C. § 1631.

I. BACKGROUND

This attorneys' fees dispute is set forth in great detail in an August 19, 2015 order by Judge Wilken of the Northern District of California. See Keller v. Nat'l Collegiate Athletic Ass'n, 2015 WL 8916392 (N.D. Cal. Dec. 15, 2015). We recount the facts necessary to render a judgment on whether this Court may exercise personal jurisdiction over Defendants.

A. Lawsuits Filed Against Electronic Arts

1. The Keller Litigation

On May 5, 2009, Samuel Michael Keller, the former starting quarterback for the Arizona State University and University of Nebraska football teams, filed a class action in the U.S. District Court for the Northern District of California, alleging that the National Collegiate Athletic Association ("NCAA") had violated his right to publicity by using his likeness in videogames produced by Electronic Arts ("EA"). See Compl., Keller v. Electronic Arts, Inc., Civ. No. 09-1967 (ECF No. 1). Keller's counsel in the matter was the law firm of Hagens Berman Sobol Shapiro, LLP. Defendants Steve W. Berman, Robert B. Carey, and Leonard W. Aragon are all members of the firm.

On February 8, 2010, Judge Wilken of the Northern District of California denied EA Sport's "Anti-SLAPP" motion, so-named because of California's Strategic Lawsuits Against Public Participation statute, a law designed to mitigate the speech-chilling effects of litigation. See Keller v. Elecs. Arts, Inc., No. C 09-1967 CW, 2010 WL 530108, at *1 (N.D. Cal. Feb. 8, 2010). In so doing, the Keller court rejected EA's argument that its games were transformative works protected by the First Amendment. Id. at *9. EA filed an interlocutory appeal of the order.

2. The Hart Litigation

On June 12, 2009, two months after Keller was filed, Ryan Hart, a former quarterback on the Rutgers University football team, and Troy Taylor, a former professional football player, filed a similar class action against EA, this time in the Superior Court of New Jersey. After the complaint was amended (and Taylor left the case), Hart's new complaint brought claims under New Jersey common law. It was then removed to the U.S. District Court for the District of New Jersey pursuant to the Class Action Fairness Act, 28 U.S.C. §§ 1332(d), 1453, and 1711-1715. See Hart v. Electronic Arts, Inc., Civ. No. 3:09-5990. Hart's counsel was the law firm of McKenna McIlwain, LLP, now defunct. The firms' members were Keith A. McKenna and Timothy J. McIlwain, the latter of whom is the Plaintiff in this matter. At summary judgment, the Hart court found that EA was entitled to assert a First Amendment defense to the right to publicity claims. See Hart v. Elec. Arts, Inc., 808 F. Supp. 2d 757, 760 (D.N.J. 2011). Hart appealed.

Finally, on July 21, 2009, another group of plaintiffs sued EA as a putative class action, alleging a set of antitrust violations in a suit before the Northern District of California. See O'Bannon v. NCAA, Civ. No. 09-3329. The O'Bannon plaintiffs appear to have been the primary drivers of discovery in the cases before the Northern District of California, and for purposes of this decision it is sufficient to note that they were to receive a significant share of the eventual settlement.

B. Keller and Hart Appealed

Hart was heard first on appeal, represented by McKenna McIlwain and the law firm of Altshuler Berzon LLP. On January 25, 2012, Keith McKenna filed a notice of substitution of attorney, substituting the McKenna Law Firm, LLC for McKenna McIlwain. One day before Hart's opening brief was due, McIlwain filed yet another notice of substitution of attorney,substituting himself, Timothy McIlwain, for McKenna McIlwain. The McKenna Law Firm withdrew.

On May 21, 2013, the Third Circuit reversed the district court's grant of summary judgment, finding that the transformative use test used by the Keller court was the "proper analytical framework to apply." Hart v. Electronic Arts, Inc.,717 F.3d 141, 165 (3d Cir. 2013). Hart's briefing before the Third Circuit explicitly relied on the disposition in Keller, noting that he argued the "precise conclusion" reached by that court. The Third Circuit also noted in its opinion that "Keller is simply our own case incarnated in California." Id. at 163 n.28.

A few weeks later, on July 31, 2013, the Ninth Circuit affirmed the Keller district court's order denying EA's Anti-SLAPP motion. See In re: NCAA Student-Athlete Name & Likeness Licensing Litigation, 724 F.3d 1268 (9th Cir. 2013). The Ninth Circuit relied on the reasoning in Hart, along with other precedent. Id. at 1278.

C. Negotiations and Settlement

In June of 2013, Mr. McIlwain, on behalf of his firm, met with Hagens Berman at one of its offices in San Francisco, California, where they discussed a plan for the Hart and Keller cases, including whether to consolidate the actions and how to divide fees between the firms. (Compl. at 4.) McIlwain has presented several emails between him and Robert Carey, a partner of Hagens Berman, that discussed the possibility of them cooperating and setting up a fee-sharing arrangement for the Keller and Hart. For example, Carey told Plaintiff via an email that Hagens Berman would prefer for McIlwain to work with them, but "[i]f you are simply set on having a fight to control the class, we are comfortable intervening in your case and seeking lead counsel appointment on your case." (Id.) In subsequent emails, Carey and McIlwain discussed thepossibility of working together, with Carey saying he was "not trying to freeze you out or deny you your rightful credit and role." (Id.)

On August 25, 2013, Hagens Berman filed a putative class action lawsuit in the District of New Jersey that presented the same theory of liability as the Hart case already pending in that district. See Alston v. Electronic Arts, Inc., Civ. No. 13-5157. Defendant Steve Berman submitted a pro hac vice application to the New Jersey district court, and he has previously appeared pro hac vice in other matters in the state. It appears Alston was filed as part of a contingency plan to usurp leadership of the putative class in Hart.

The parties in Keller, Hart, and O'Bannon had all attempted to settle their respective cases as early as 2011, without success. On September 10, 2013, the cases proceeded to a joint mediation before Randy Wulffe in California. Plaintiffs' counsel in all three cases agreed to a settlement in principle, agreeing to an amount of approximately $40,000,000. At the time of the mediation, Hart was represented by Timothy McIlwain. During the mediation process, Eugene Egdorf of the Lanier Law Firm, McIlwain's co-counsel, sent an email to Steve Berman and Robert Carey of Hagens Berman and to Timothy McIlwain on September 24, 2013. That email ("the Email Agreement") provided as follows:

I am writing to confirm what I understand our agreement to be regarding the current proposal from Randy Wulffe to settle the EA litigation (Hart, Keller, and O'Bannon). Please confirm your agreement, or of course advise of any changes.

1. We agree to work together in the submission of applications for fees and expenses;

2. We agree to support each other concerning the substance and merits of our fee submissions;

3. We agree to support each other and collectively, as appropriate, contest any applications for fees and expenses from other firms;4. For any fee award or agreement to our firms (Hagens Berman, The Lanier Law Firm, and Tim McIlwain), we agree to consider those as a joint award which will be pooled together for our collective group;

5. From that joint award to our collective group, irrespective of the methodology, substance and distribution ordered by the Court, we agree that 60% of such fees will be paid to Hagens Berman, and the remaining 40% to Lanier and McIlwain;

6. Each of the firms can submit a request for recovery of their reasonable expenses, and we will support each other in that regard;

7. Lanier and McIlwain will be added as counsel to the Keller case against the NCAA; the above agreement concerning the distribution of fees on a 60/40 basis will NOT apply to that relationship, which will instead be governed by either a future separate agreement or by Court Order.

(Compl. Ex. A.) Steve Berman replied, to all, "this is agreed." (Id.)

Toward the close of the mediation, McIlwain and Egdorf signed a Term Sheet dated September 26, 2013, setting forth the bases for the settlement. (Pl. Resp. Ex. D.) No one else signed this document.

This appears to have caused a new crisis. McIlwain's client at the time, Ryan Hart, has stated that he first heard about this...