Opinion
Civ. 3:20-CV-2357
07-15-2022
STEPHAN ZOURAS LLP, Plaintiff, v. THOMAS MORE MARRONE, et al., Defendants.
Mannion Judge
Acting out of an abundance of caution, we are addressing this motion to dismiss an affirmative defense in the defendants' amended answer through a Report and Recommendation because such matters have been deemed to be dispositive motions which require a Report and Recommendation by a magistrate judge instead of an order. See Sonos, Inc. v. D&M Holdings Inc., No. CV 14-1330-RGA-MPT, 2016 WL 4249493, at *3 (D. Del. Aug. 10, 2016), report and recommendation adopted, No. CV 14-1330-RGA, 2016 WL 4581078 (D. Del. Sept. 1, 2016).
Martin C. Carlson United States Magistrate Judge
I. Background
This case, which comes before us for consideration of a contested motion to amend the defendant's answer to dismiss an affirmative defense with prejudice, illustrates how mutual suspicion and enmity between parties can lead those litigants to strange and seemingly counter-intuitive positions.
As we have previously noted, the adversaries in this litigation, the Zouras and Moremarrone law firms, were once allies in a great litigative victory, in that they were co-counsel for the plaintiff class in Smiley v. E.I. Du Pont De Nemours and Co., Civil No. 3:12-CV-2380. That Fair Labor Standards Act lawsuit concluded with a significant victory for the plaintiffs, a victory which resulted, in part, in an aggregate attorneys' fee award of $1,793,423.00 for all plaintiffs' counsel, a sum which was entrusted to the Moremarrone law firm for disbursement.
However, this victory has now turned these attorney allies into adversaries, and this success has spawned bitter strife between counsel. The nature of the dispute that divides formerly allied counsel involves allocation of these legal fees and competing claims for shared paternity of the victory in the Smiley case. In essence, the Moremarrone and Zouras law firms dispute what is the appropriate share of these fees that should be paid to the Zouras firm. In this regard, the plaintiff, Stephan Zouras LLP, contends that it is entitled to fees totaling at least $573,000, representing what it alleges was its pro rata share of the entire fees award, as a result of its work in the Smiley case. The defendant, Moremarrone LLC, disagrees with this assessment and has placed a more modest sum, $325,502.70, in escrow for payment to the Zouras firm. According to the Moremarrone firm, this escrowed sum was intended to fairly compensate the plaintiff by setting aside for the Zouras firm a sum of money equal to the amount of the lodestar legal fees claimed by that firm in the fees petitions filed in the Smiley litigation. Thus, the instant case is somewhat akin to an attorneys' fee dispute involving competing claims of paternity for the victory in the Smiley litigation.
It is against this factual backdrop that the plaintiff, the Zouras law firm, filed this action against Attorney Marrone and his law firm, advancing claims of breach of contract (Count I), breach of fiduciary duty (Count II), fraud (Count III), conversion (Count IV), unjust enrichment (Count V), and quantum meruit (Count VI) against Mr. Marrone and his law firm. (Doc. 1). This multi-faceted complaint by one set of lawyers has inspired a multi-faceted response by opposing counsel, an amended answer which sets forth some thirty-eight affirmative defenses, including an affirmative defense that: “Stephan Zouras's damages, if any, are barred, in whole or in part, by the doctrine of set-off.” (Doc. 14 at 23, Affirmative Defense Number 38). The parties are currently engaged in discovery, and as part of that discovery process, the plaintiff law firm has demanded factual support for this set-off affirmative defense. The Marrone law firm defendants, in turn, have filed a motion to amend their amended answer to dismiss this set-off claim “with prejudice.” (Doc. 54).
Normally, a party in litigation would be pleased to have its adversary agree to dismiss a claim or affirmative defense “with prejudice,” but this is not a normal lawsuit. The Zouras firm plaintiff opposes the defendants' motion to dismiss this affirmative defense, and the grounds for their opposition cast a harsh light upon the deep well of mutual mistrust that exists between these counsel. (Doc. 57). Noting that the Marrone defendants have indicated: “Defendants seek to withdraw the affirmative defense of set off only and do not withdraw any claims against any person or entity, affirmative or otherwise,” (Doc. 56, at 2), and citing what it believes to be Mr. Marrone's penchant for serial filings and multiplicitous lawsuits, the plaintiff contends that this motion should be denied unless Mr. Marrone makes further litigation concessions regarding the abandonment of other defenses or claims. (Doc. 57). Mr. Marrone, in turn, observes that what the Zouras law firm describes as past vexatious litigation on his part consists, in large measure, of lawsuits which the Zouras firm previously filed on behalf of Mr. Marrone. Therefore, the Marrone defendants insists that they should be permitted to withdraw this defense. (Doc. 58).
This motion is fully briefed and is, therefore, ripe for resolution. For the reasons set forth below, it is recommended as follows: The motion to amend the defendants' answer to dismiss the affirmative defense of set-off with prejudice should be granted. However, in the event that this course leads to the filing of multiplicitous set-off claims by the Marrone defendants in other forums, the court should reserve the right to reconsider this ruling at the request of the Zouras firm.
II. Discussion
For the contentious counsel in this case, this motion to amend presents a stark choice between two fundamental, and in their view irreconcilable, principles.
According to the Marrone defendants, this motion is governed by the liberal pleadings standards prescribed by Rule 15 which provides that “[t]he court should freely give leave [to amend] when justice so requires.” Fed.R.Civ.P. 15(a)(2). Given the rule's stated policy favoring freely granting leave to amend in the interests of justice, the defendants insist that this motion should be granted without any exception or qualification. In contrast, citing its speculative concern that this motion is simply a prelude to the serial litigation of this set-off claim in multiple forums, the Zouras firm argues that Rule 1's injunction that the Federal Rules of Civil Procedure “should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding,” Fed.R.Civ.P. 1, calls for the denial of this motion which the plaintiff views as a cynical effort by the Marrone defendants to launch expensive litigation in multiple forums in order to secure some tactical advantage.
We reject this simple binary choice. Instead, we recommend a third path to the court. At the outset we note that it is well-settled that: “Rule 15(a) declares that leave to amend ‘shall be freely given when justice so requires'; this mandate is to be heeded.” Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). Here, the Marrone defendants seek to amend their answer to delete an affirmative defense with prejudice. On its face, such a course of action aides in streamlining litigation; removes extraneous issues from this lawsuit; and works no immediate prejudice to the plaintiff, who no longer has to defend against a set-off affirmative defense. Since the motion, on its face, complies with the requirements of Rule 15, we should not allow a speculative concern that the motion is part of a broader, and perhaps more sinister, litigation strategy serve as grounds for denying this request. Therefore, under the governing rules regime in federal court where leave to amend should freely given, this motion to amend the answer by dismissing this set-off defense with prejudice should be granted.
This recommendation does not mean, however, that we are not mindful of the concerns voiced by the plaintiffs. Instead, we simply regard those concerns as speculative and premature at this time. However, we note that should the Zouras firm's concerns prove to be well-founded, the court has a simple expedient available to it to ensure that Rule 1's mandate that the Federal Rules of Civil Procedure “should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding,” Fed.R.Civ.P. 1, is vindicated. If the Marrone defendants secured the dismissal of this set-off defense with prejudice, but then endeavored to resurrect the set-off claim in some other forum in order to gain some perceived tactical advantage, this court would remain free to entertain a motion to reconsider this ruling filed by the Zouras firm. Under prevailing legal standards a motion to reconsider is appropriate whenever there has been “(1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court granted the motion for summary judgment; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.” Howard Hess Dental Laboratories Inc. v. Dentsply Intern., Inc., 602 F.3d 237, 251 (3d Cir. 2010). Should the Zouras firm prediction prove prescient, and the dismissal of this affirmative defense merely served as the predicate for serial litigation of set-off issues elsewhere, the court would be free to decide whether this course of conduct constituted the type of intervening factual development which called for reconsideration of this decision and inclusion of this set-off issue in the instant lawsuit in order to avoid a manifest injustice.
We note as well that the Zouras firm would have a second simple path available to it in the event that the Marrone defendants attempted to resurrect this set-off claim in the guise of a new lawsuit. Any such lawsuit filed by the Marrone firm, a Pennsylvania law firm, against the Zouras firm, which is located in Illinois, would implicate the federal court's diversity jurisdiction. Therefore, regardless of where this case was filed it would likely be subject to removal to federal court and consolidation with the instant lawsuit. Through this course the prejudicial specter of litigation on multiple fronts perceived by the Zouras firm can also be easily remedied.
III. Recommendation
Accordingly, for the foregoing reasons, IT IS RECOMMENDED THAT the motion to amend the defendants' answer to dismiss the affirmative defense of setoff with prejudice should be granted. (Doc. 54). However, in the event that this course leads to the filing of multiplicitous set-off claims by the Marrone defendants in other forums, the court should reserve the right to reconsider this ruling at the request of the Zouras firm.
The parties are further placed on notice that pursuant to Local Rule 72.3:
Any party may object to a magistrate judge's proposed findings, recommendations or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses or recommit the matter to the magistrate judge with instructions. The failure to timely object may constitute a waiver of any future right to object or appeal this issue.