Opinion
Civil Action No. 01-1944, Section "C"(4)
November 9, 2001
ORDER AND REASONS
On July 20, 2001, the plaintiffs, The Law Offices of Daniel E. Becnel, Jr., et al, filed a Motion to File an Amended Complaint (doc. #5) seeking to amend their original complaint to set forth ancillary jurisdiction as an alternative jurisdictional basis for their claim. The defendants oppose the motion contending that this claim is not one over which this Court has ancillary jurisdiction.
I. Factual and Procedural Background
This suit arises out of a claim for attorney fees filed by the plaintiffs for breach of a Referral Agreement entered between the plaintiffs and the John Arthur Eaves Law Firm ("Eaves Firm"). The plaintiff alleges that in early February 2001, they entered an agreement with attorneys from the Eaves Firm. Pursuant to the agreement, the Eaves firm had authority to settle up to four hundred of the plaintiffs' diet medication cases against American Home Products in exchange for a percentage of the contracted fee. The plaintiffs allege that the Eaves Firm breached the agreement by failing to settle the cases in the time and at the amount agreed, and by allowing an unauthorized third party to negotiate the settlements on behalf of their clients.
Upon the plaintiffs filing their case on June 26, 2001, in the Eastern District of Louisiana, the case was randomly allotted to Section "C"(4) to be heard before District Court Judge Ginger Berrigan. Two days later, the plaintiffs filed an ex parte Motion to Transfer to Section "T." The plaintiffs claimed that the instant action was substantially the same and closely related to Civil Action 97-3178 which had been assigned to Section "T" to be heard before District Court Judge Thomas Porteous. As such, Judge Berrigan signed the plaintiffs' motion, transferring the case to Section "T". On August 21, 2001, however, Judge Porteous transferred the matter back to Judge Berrigan in Section "C" on the grounds that the "two suits will not involve subject matter that comprises all or a material part of the subject matter or operative facts of the prior action."
The defendants had previously, on July 17, 2001, filed a Motion to Dismiss based on lack of subject matter jurisdiction. Despite obtaining consent for a continuance of the hearing until August 15, 2001, the plaintiffs did not file any opposition before the August 7, 2001 deadline and did not file an opposition anytime thereafter.
Local Rule 7.5E requires that: "[e]ach party opposing a motion shall file, in duplicate, a memorandum of the reasons advanced in opposition to the motion and a list of . . . authorities . . . . [relied upon]. ..no later than the eight calendar day prior to the noticed hearing and shall at the same time serve a copy thereof on the opposing parties." No memorandum in opposition has been filed.
However, on July 20, 2001, the plaintiffs filed the present motion seeking leave to amend its original complaint to plead ancillary jurisdiction as an alternative jurisdictional basis. The plaintiffs contend that the instant case involves a dispute over attorney's fees which has arisen from the original action, Civil Action No. 97-3178. As such, the plaintiffs claim that the dispute is within the domain of this Court's ancillary jurisdiction and requests that this Court allow them to amend their original complaint.
The defendants, on the other hand, contend that the Referral Agreement at the center of the instant dispute bears no nexus to the original action which involved product liability and personal injury tort claims against American Home Products for the diet medications Fen-Phen and Redux. They further contend that the instant dispute does not involve persons who were parties to the original action. The defendants thus claim that the instant action does, not fall within this Court's ancillary jurisdiction and requests that the plaintiffs Motion for Leave to File Amended Complaint be denied.
II. Analysis
"Ancillary jurisdiction allows the court to hear claims that bear a "logical relationship to the aggregate core of operative facts which constitutes the main claim over which the court has an independent basis of federal jurisdiction." Warren G. Kleban Eng'g Corp. v. Caldwell, 490 F.2d 800, 802 (5th Cir. 1974). However, the exercise of ancillary jurisdiction is discretionary. Olympia Hotels Corp. v. Johnson Wax Development Corp., 908 F.2d 1363, 1365 (7th Cir. 1990).
Courts have exercised ancillary jurisdiction over disputes between attorneys and clients over the proper amount of attorney's fees due the attorneys for work performed in the underlying litigation. Cluett, Peabody Co. v CPC Acquisition Co., 863 F.2d 251, 256 (2d Cir. 1988); Novinger v E.I. DuPont de Nemours Co., 809 F.2d 212, 217 (3d Cir.), cert. denied, 481 U.S. 1069, 107 S.Ct. 2462, 95 L.Ed.2d 871 (1987); 520 East 72nd Commercial Corp. v 520 East 72nd Owners Corp., 691 F. Supp. 728, 737 (S.D.N.Y. 1988); Rhoades v. Procunier, 624 F. Supp. 564, 567 (E.D.Va. 1986); see Jackson v. United States, 881 F.2d 707 (9th Cir. 1989) (government challenge to validity of contingency fee contract between plaintiffs and their attorney); Pay Television of Greater New York, Inc. v. Sheridan, 766 F.2d 92, 94 (2d Cir. 1985) (fees owed to withdrawing attorney); In re Air Passenger Computer Reservations Systems Antitrust Litigation, 724 F. Supp. 744 (C.D.Cal. 1989) (dispute among plaintiffs over responsibility for payment of their attorneys' fees).
However, other than in the settlement of class actions, courts have declined to exercise ancillary jurisdiction over disputes between attorneys as to the proper division of fees earned in the underlying litigation. Adams v. Allied Chemical Corp., 503 F. Supp. 253 (E.D.Va. 1980), aff'd, Taylor v. Kelsey, 666 F.2d 53, 54 (4th Cir. 1981) (per curiam) (fee splitting agreement); In re Hijacking of Pan American World Airways, Inc. Aircraft at Karachi International Airport, Pakistan on September 5, 1986, 698 F. Supp. 479, 482 (S.D.N.Y. 1988) (court would not ordinarily exercise ancillary jurisdiction to settle fee dispute between law firm and former member, assuming the court had such jurisdiction); see Sederquist v. Court, 861 F.2d 554, 557 (9th Cir. 1988) (no ancillary jurisdiction over separate action to recover attorneys' fees from non-parties to the first action). If the fee dispute does not arise as a matter of necessity from anything which occurred in the underlying proceedings, if the district court is not required to establish and distribute a fee, and if the dispute arises purely from a private contract between attorneys, there is no basis for ancillary jurisdiction. Taylor, 666 F.2d at 54.
The Tenth Circuit has established the following test for determining whether to exercise ancillary jurisdiction: (1) an ancillary matter should arise from the transaction that was the basis of the principal proceeding, during the course of the principal proceedings, or as an integral part of the main proceedings; (2) the federal court should be able to determine the matter with but a substantial new fact-finding proceeding; (3) failing to determine the matter should not deprive a party of any important procedural or substantive right; or (4) the matter should be decided in order to protect the integrity of the principal proceeding or insure that its disposition is not frustrated. Jenkins v. Weinshienk, 670 F.2d 915, 918 (10th Cir. 1982) (citing Morrow v. District of Columbia, 417 F.2d 728, 740 (D.C. Cir. 1969)).
"Determining the legal fees a party to a lawsuit properly before the court owes its attorney, with respect to the work done in the suit being litigated, easily fits the concept of ancillary jurisdiction." Id.; see also Garrick v. Weaver, 888 F.2d 687, 690 (10th Cir. 1989). However, the instant dispute involves a determination of the legal fees attorneys owe attorneys, not a determination of the legal fees a party owes his attorneys.
Applying the factors noted above, the Court concludes that it should not exercise ancillary jurisdiction over this fee dispute. First, the dispute did not arise from the personal injuries that resulted from the use of Fen-Phen and Redux and gave rise to the original lawsuit, nor is it an integral part of the main proceeding which has since concluded. Also, the fee dispute did not arise from anything which occurred in the proceeding of the underlying litigation. Rather, the dispute arose from the Referral Agreement entered by the plaintiffs and the Eaves Firm.
Second, the Court would be unable to resolve the instant dispute without substantial fact-finding. The contract claims of the plaintiffs will have an impact on the proper division of fees as they are entitled to assert their claims of breach of contract against the Eaves Finn. These claims may require extensive discovery. Moreover, the parties may even be entitled to a jury trial on all issues properly triable by a jury.
Third, this Court's failure to decide the fee dispute will not deprive any of the parties to the original action of any rights. In fact, the parties to this action are not involved in the fee dispute. Finally, the fee dispute need not be decided to protect the integrity of the underlying litigation or to insure that its disposition is not frustrated.
Accordingly,
IT IS THEREFORE ORDERED that the Motion to File an Amended Complaint (doc. #5) is DENIED.