Johnson v. Nextel Communications, Inc.

293 F.R.D. 660, 2013 WL 5526579, 2013 U.S. Dist. LEXIS 141445
CourtDistrict Court, S.D. New York
DecidedSeptember 30, 2013
DocketNo. 07 Civ. 8473 (GBD)(KNF)
StatusPublished
Cited by10 cases

This text of 293 F.R.D. 660 (Johnson v. Nextel Communications, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Johnson v. Nextel Communications, Inc., 293 F.R.D. 660, 2013 WL 5526579, 2013 U.S. Dist. LEXIS 141445 (S.D.N.Y. 2013).

Opinion

MEMORANDUM DECISION AND ORDER

GEORGE B. DANIELS, District Judge:

Before the Court is the motion for class certification of common issues of Representative Plaintiffs Michael S. Johnson, Donna Dymkowski, Patricia Long-Correa, Antonio Samuel, and Angelette Waters. Plaintiffs allege that Defendant Leeds, Morelli & Brown, P.C. (“LMB”) committed, and Defendant Nextel Communications, Inc. (“Nextel”) procured and facilitated, various illegal acts against the proposed class in connection with Defendants’ negotiation and execution of the Dispute Resolution Settlement Agreement (“DRSA”). The DRSA memorialized an agreement between LMB, then-counsel for Plaintiffs and the proposed class, and Nextel to negotiate and perform a dispute resolution mechanism that would resolve numerous employment discrimination claims against Nextel. Specifically, Plaintiffs allege that the DRSA was rife with conflicts of interest that gave rise to the following claims: (i) breach of fiduciary duty; (ii) commercial bribery; (iii) fraud; (iv) tortious interference with a business contract; (v) unjust enrichment; (vi) negligence/legal malpractice; (vii) breach of contract; (viii) consumer fraud/unauthorized practice of law/attorney misconduct; and (ix) conversion.

Accordingly, pursuant to Federal Rule of Civil Procedure 23(c)(4), Plaintiffs seek an order certifying an issue class against Nextel only, and an issue subclass against LMB, with respect to “issues ... related to the negotiation, drafting, and performance of the Dispute Resolution Settlement Agreement that resolved the discrimination claims of LMB’s clients.” (Plaintiffs’ Memorandum of Law in Support of Their Motion for Certification of Common Issues [ECF No. 97], p. 1 (“Pis. Mem.”).) Additionally, Plaintiffs seek class certification of their entitlement to punitive damages based on those same issues.

Plaintiffs’ motion to certify a class as to common issues of liability and punitive damages against Nextel is GRANTED. Plaintiffs’ motion to certify a subclass against LMB is DENIED.

BACKGROUND

This case concerns LMB’s prior representation of 587 individuals, including the named Plaintiffs, in their asserted individual employment discrimination claims against Nextel. In 2000, prior to the commencement of any lawsuit, representatives from LMB and Nextel convened in New York to negotiate and draft the DRSA, which created the framework for an alternative dispute resolution process (“DRP”) through which Nextel would process and resolve claims brought against it by LMB’s clients. On September 28, 2000, Nextel and LMB signed the DRSA. (See Ex. 26 to Deel. of Jennifer Fountain Connolly [ECF No. 98-28].)

Plaintiffs allege that, in negotiating, agreeing to, and performing the DRSA, Nextel essentially purchased LMB’s loyalty away from its clients by means of the promise and then payment of $5.5 million in attorneys’ fees to process each employment discrimination claim through the DRP, and an additional flat fee of $2 million to act as consultants to Nextel on its employment practices over a two-year period. To earn the full $5.5 mil[665]*665lion, the terms of the DRSA required LMB to ensure that all 587 claims were resolved within 45 weeks. If it did not succeed, LMB stood to have its fees reduced per unresolved claim. Plaintiffs allege that these terms caused LMB to severely compromise its representation of its clients, and instead work to resolve each discrimination claim to Nextel’s satisfaction, resulting in much lower individual settlements than would otherwise have been obtained absent LMB’s conflicts of interest under the DRSA, and in much lower settlements than LMB had represented to its clients at the outset of their representation. In total, the $7.5 million that Nextel agreed to pay LMB in connection with resolving LMB’s clients’ claims through the DRP, and as an employment practices consultant thereafter, is nearly twice the amount of the collective, aggregate recovery on all claims processed under the DRP.1

Acknowledging that the terms of the DRSA contained conflicts of interest for the firm in its representation, LMB disclosed these conflicts to its clients and had each member sign a waiver as to the conflicts. The Second Circuit has since held that despite those waivers, LMB’s conflicts of interest in this matter were so great as to be “not consentable.” Johnson v. Nextel Commc’ns, Inc., 660 F.3d 131, 139, 141 (2d Cir.2011).

Two state court actions involving substantially the same issues here have been litigated prior to the instant action. In April 2002, putative class action Foster v. Leeds, Morelli & Brown, P.C. (No. 02-cv-1484) was filed in Colorado state court against LMB by the 587 former LMB clients, who also make up the proposed Class in the present action against Nextel. The Foster Court certified that class for settlement purposes only, and the Foster plaintiffs settled with LMB for $1.2 million on June 30, 2003. That settlement was approved by the court on November 5, 2003. 41 class members opted out of the Foster settlement. (See Foster Final Order and Judgment, Sandak Ex. 22 [ECF No. 108-6].) In 2003, two Foster opt-outs filed one Colorado state lawsuit, McNeil v. Leeds Morelli & Brown, P.C, (No. 03-cv-893) for claims arising from the same set of facts against Nextel and LMB. The McNeil court dismissed Nextel from the case, a jury found in favor of LMB, and on May 7, 2009, a Colorado appeals court affirmed the judgments in that case. (McNeil Op. (Colo.App.Ct. 2009), Sandak Ex. 6 [ECF No. 108-1].)

Before this Court, Plaintiffs seek to certify a proposed liability class comprised of the individuals who asserted employment discrimination claims against Nextel, were represented by LMB in the prosecution of those claims, and ultimately resolved their claims through the DRSA. Plaintiffs also seek to certify a subclass against LMB of 39 of the firm’s former clients who opted out of the Colorado Foster class settlement2 who, Plaintiffs argue, retained their claims against LMB by virtue of opting out. Plaintiffs request that both the class against Nextel and the subclass against LMB be certified as to the following issues: Whether, by entering into the DRSA, Defendant LMB (i) knowingly breached its fiduciary duty to its clients, (ii) breached a duty of care to its clients (legal malpractice), (iii) breached its retainer agreements with its clients (breach of contract), (iv) appropriated or interfered with funds that otherwise belonged to its clients under the terms of their retainer agreements (conversion), and (v) incurred punitive liability by engaging in this conduct; and whether, by entering into the DRSA, Defendant Nextel (i) intentionally and without justification procured LMB’s breach of its retainer agreements with its clients (tortious interference with a contract), (ii) knew about LMB’s wrongful conduct, including the alleged breach of fiduciary duty, malpractice and conversion (aiding and abetting), (iii) knowingly and substantially participated in the [666]

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Cite This Page — Counsel Stack

Bluebook (online)
293 F.R.D. 660, 2013 WL 5526579, 2013 U.S. Dist. LEXIS 141445, Counsel Stack Legal Research, https://law.counselstack.com/opinion/johnson-v-nextel-communications-inc-nysd-2013.