Winston & Strawn LLP v. Law Firm Eaves

WINSTON & STRAWN LLP, Plaintiff, v. THE LAW FIRM OF JOHN ARTHUR EAVES, Defendant.

Case No. 1:13-cv-01940 (JDB)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

Dated: June 11, 2014

MEMORANDUM OPINION

Plaintiff Winston & Strawn LLP ("W&S") brings this action against defendant Law Firm of John Arthur Eaves ("Eaves Law Firm").¹ W&S claims that Eaves Law Firm breached a contract between the two parties by failing to pay for legal services provided by W&S. John Arthur Eaves, Jr. ("Eaves") has filed a motion to dismiss for (1) failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6) and (2) ineffective service of process under Federal Rule of Civil Procedure 12(b)(5).² For the reasons discussed below, the Court will deny Eaves's motion.

BACKGROUND

W&S alleges that in January 2010, Eaves, on behalf of Eaves Law Firm, retained W&S to provide legal services. See Compl. ¶ 6. Under the terms of the agreement, Eaves Law Firm agreed to pay W&S a monthly rate of $12,000. See Pl.'s Opp'n to Def.'s Mot. to Dismiss ("Pl.'s Opp'n") Ex. 1 [ECF No. 9-1] at 12-15. Nine months later, alleges W&S, Eaves again enteredinto an agreement with W&S on behalf of Eaves Law Firm by adjusting the monthly rate to $18,000. See id. ¶ 9. W&S continued to provide legal services until November 2011, when it stopped because of Eaves Law Firm's purported failure to pay its fees in full.

W&S then filed a complaint against Eaves Law Firm for breach of contract, demanding unpaid legal fees amounting to $279,400.63. Eaves has now moved to dismiss the complaint, arguing that Eaves Law Firm does not exist and that W&S's complaint fails to adequately plead a claim for breach of contract.

STANDARDS OF REVIEW

a) Motion to Dismiss for Ineffective Service of Process

Whether service was proper is a jurisdictional issue: "federal courts lack the power to assert personal jurisdiction over a defendant unless the procedural requirements of effective service of process are satisfied." Mann v. Castiel, 681 F.3d 368, 372 (D.C. Cir. 2012). Proper service of process "is not some mindless technicality." Friedman v. Estate of Presser, 929 F.2d 1151, 1156 (6th Cir. 1991) (quoting Del Raine v. Carlson, 826 F.2d 698, 704 (7th Cir. 1987)). Instead, the requirement stems from the Due Process Clause of the Fifth Amendment, which requires that defendants receive adequate notice of the proceedings against them. See Dusenbery v. United States, 534 U.S. 161, 167 (2002). "When a defendant moves to dismiss under Rule 12(b)(5), the plaintiff has the burden of establishing the validity of service of process." Freedom Watch, Inc. v. Org. of Petroleum Exporting Countries, 288 F.R.D. 230, 231 (D.D.C. 2013). To meet this burden, the plaintiff "must demonstrate that the procedure employed satisfied the requirements of the relevant portions of Rule 4 and any other applicable provision of law." Light v. Wolf, 816 F.2d 746, 751 (D.C. Cir. 1987).

Generally, if "matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." Fed. R. Civ. P. 12(d). But "a court may consider material outside of the pleadings in ruling on a motion to dismiss for lack of venue, personal jurisdiction, or subject-matter jurisdiction" without converting the motion into a Rule 56 motion. Artis v. Greenspan, 223 F. Supp. 2d 149, 152 (D.D.C. 2002). In other words, on questions of jurisdiction, "plaintiffs are not limited to evidence that meets the standards of admissibility required by the district court. Rather, they may rest their argument on their pleadings, bolstered by such affidavits and other written materials as they can otherwise obtain." Mwani v. bin Laden, 417 F.3d 1, 7 (D.C. Cir. 2005).

b) Motion to Dismiss for Failure to State a Claim

To survive a motion to dismiss under Rule 12(b)(6), a complaint need only contain "'a short and plain statement of the claim showing that the pleader is entitled to relief,'" such that the defendant had "'fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion to dismiss, a plaintiff must supply "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action" to provide the "grounds" of "entitle[ment] to relief." Twombly, 550 U.S. at 55-56; see also Papasan v. Allain, 478 U.S. 265, 286 (1986). Instead, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

"[I]n passing on a motion to dismiss . . . the allegations of the complaint should be construed favorably to the pleader." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); see alsoLeatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993). Therefore, the factual allegations must be presumed true, and plaintiffs must be given every favorable inference that may be drawn from allegations of fact. See Scheuer, 416 U.S. at 236; Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000). The Court need not, however, accept as true "a legal conclusion couched as a factual allegation," or inferences that are unsupported by the facts set out in the complaint. Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan, 478 U.S. at 286).

DISCUSSION

Eaves moves to dismiss the complaint for insufficient service of process under Rule 12(b)(5) and for failure to state a claim upon which relief can be granted under Rule 12(b)(6). The Court will first examine the service issue, and then turn to Eaves's argument that W&S has failed to adequately plead a breach of contract.

I. INSUFFICIENT SERVICE OF PROCESS

The Court must first address a preliminary matter. W&S attached exhibits to its opposition to Eaves' motion to dismiss in support of its argument that Eaves Law Firm is an entity that can be sued. Generally, a court must convert a motion under Rule 12 into a Rule 56 motion for summary judgment when it considers matters outside the pleadings. See Fed. R. Civ. P. 12(d). A court need not do so, however, if the outside material is considered to determine jurisdictional questions. See Artis, 223 F. Supp. 2d, at 152. Whether Eaves Law Firm was properly served is a jurisdictional question, as "without proper notice, defendants cannot be subjected to the personal jurisdiction of the court." Lacey v. Wing, 360 F. Supp. 2d 31, 35 (D.D.C. 2003). Therefore, the Court will rely on W&S's exhibits in ruling on Eaves's 12(b)(5) motion without converting it to a Rule 56 motion.

Eaves argues that Eaves Law Firm is not an entity that can be sued, that he cannot accept service of process for an entity that does not exist, and that W&S did not name the correct party in the complaint. Eaves is incorrect on each of these points, for the reasons explained below.

a) Eaves Law Firm is a Partnership with the Capacity to be Sued

Eaves first contends that Eaves Law Firm does not exist. W&S counters that Eaves Law Firm is an entity that may be served under Rule 4(h)(1)(B), but W&S does not specify what kind of entity. Instead, it simply refers to Eaves Law Firm as a "corporate entity" or a "law firm." Pl.'s Opp'n [ECF No. 9] at 6. Rule 4(h)(1)(B) governs service on a corporation, partnership, or association. Eaves Law Firm is not a corporation, as W&S admits, because it has not filed articles of incorporation in any state. Id. at 7. The inquiry does not end there, however, because Eaves Law Firm could be considered a partnership.

"Under Rule 17(b)(3), District of Columbia law governs whether [an] alleged partnership has a capacity to sue and be sued." Embassy of Federal Republic of Nigeria v. Ugwuonye, 901 F. Supp. 2d 92, 97 (D.D.C. 2012); see Fed. R. Civ. P. 17(b)(3). District of Columbia law, in turn, provides that "the internal affairs of a partnership [are governed by] . . . the law of the state of the jurisdiction in which the partnership has its principal office." D.C. Code § 29-601.06. The internal affairs of a partnership include whether the partnership exists. See Ugwuonye, 901 F. Supp. 2d at 97-98. W&S's complaint alleges that Eaves Law Firm's principal place of business is located in Jackson, Mississippi. See Compl. ¶ 2. Hence, whether the partnership exists depends on Mississippi law.

Under Mississippi law, "the association of two or more persons to carry on as co-owners of a business for profit forms a partnership, whether or not the persons intend to form a partnership." Miss. Code. Ann. § 79-13-202(a). An express agreement is not required to form apartnership, and "'intent may be implied or established from the surrounding circumstances.'" Smith v. Redd, 593 So.2d 989, 994 (Miss. 1991) (quoting Norman Prop. v. Bozeman, 557 So.2d 1265, 1270 (Ala. 1990)); see also Allied Steel Corp. v. Cooper, 607 So.2d 113, 117 (Miss. 1992) (noting that absent an express contract, a partnership can be implied through the parties' conduct). The main factors considered when determining whether a partnership exists are the intent of the parties, the control the parties exercised on the enterprise, whether profit was shared, and how the alleged partnership holds itself out to third parties, but none of these factors is dispositive. See Redd, 593 So.2d at 996; see also Beckman v. Farmer, 579 A.2d 618, 628 (D.C. 1990) (finding that the way a firm holds itself out to clients is relevant in determining the firm's legal characteristics).³

According to W&S's complaint, Eaves Law Firm has consistently held itself out as a law firm. Its website repeatedly refers to the firm as "The Law Firm of John Arthur Eaves" and lists attorneys associated with the firm. See Pl.'s Opp'n Ex. 3 [ECF No....