Opinion
03-CV-3829 (ERK).
December 30, 2008
REPORT AND RECOMMENDATION
On September 26, 2008, Ronald Tonkin ("Tonkin"), the attorney for plaintiff Diane Kleiman ("Kleiman") in this Title VII employment discrimination case, submitted a motion to withdraw as counsel for Kleiman. See 9/26/08 Motion to Withdraw as Attorney for Diane Kleiman ("Motion to Withdraw"). In response to that motion, Kleiman personally addressed a letter to the Court in which she did not oppose Tonkin's withdrawal from the case, but did allege that Tonkin failed to return her case files and unlawfully retained approximately $25,000 of her funds. See 10/15/08 Letter from Kleiman ("Kleiman Letter"), at 2. On October 27, 2008, Judge Edward R. Korman granted the unopposed application to withdraw and referred Kleiman's request for relief to the undersigned magistrate judge. See 10/27/08 Order Granting Motion to Withdraw ("10/27/08 Order"); 10/27/08 Order Referring Application to Judge Mann. For the following reasons, this Court (1) directs Tonkin to immediately return any of Kleiman's files remaining in his possession, including those containing attorney work product, and (2) recommends that the District Court decline to exercise supplemental jurisdiction with regard to the Kleiman-Tonkin fee dispute and Kleiman's other allegations of misconduct against Tonkin.
The docket sheet incorrectly refers to the plaintiff as "Diane Kleinman."
BACKGROUND
Kleiman, who in 1999 was terminated from her position as a Criminal Investigator with what was then known as the United States Customs Service, retained Tonkin in August of 2002 to represent her in litigation alleging unlawful employment discrimination, retaliation and related claims. See Retainer Agreement (attached as Ex. 1 to 10/20/08 Tonkin Response to Motion), at 1, 3; see also Complaint, at 7. On September 26, 2008, after years of litigation, Tonkin moved to withdraw as Kleiman's attorney, citing health problems as well as "irreconcilable differences" with his client. See Motion to Withdraw. Judge Korman granted the motion as unopposed, see 10/27/08 Order, and referred to the undersigned magistrate judge a letter from Kleiman, alleging that Tonkin failed to return all of her case files to her and unlawfully retained funds she had advanced him for the costs of trial, thereby preventing her from obtaining new counsel in the lawsuit. See Kleiman Letter, at 2.
In response, Tonkin submitted a receipt from the United States Postal Service indicating that on October 9, 2008, he shipped Kleiman nine boxes weighing between twenty-one and thirty-three pounds each. See 11/11/08 Reply Letter from Tonkin ("Tonkin Reply"), Ex. 12. In addition, Tonkin included the "track and confirm" electronic notification from the United States Postal Service, evidencing that the boxes (which he described as her case files) had been accepted. See Tonkin Reply, Ex. 11.
Because of the sensitive nature of Kleiman's allegations, this submission to the Court, as well as Kleiman's 11/28/08 Response Letter, have been filed under seal.
Kleiman does not dispute her receipt of the nine boxes; rather, she claims that, a year and a half ago, she and her mother observed in Tonkin's office approximately thirty boxes containing her case files. See 11/28/08 Response Letter from Kleiman ("Kleiman Response"), at 4. Kleiman further alleges that the files delivered to her do not contain any of Tonkin's "work product" for the last six years, nor do they contain phone numbers and addresses of witnesses necessary for the continued prosecution of her claims. See Kleiman Response, at 7.
Kleiman also complains that Tonkin has mishandled funds entrusted to him. Specifically, she alleges that she most recently provided Tonkin with $25,000 in checks made payable to him between March and July of 2008, which funds were to be used to pay trial expenses. See Kleiman Letter, at 2. According to Kleiman, the money has neither been used for litigation expenses nor returned to her. See id. In response, Tonkin contends that he received a total of $50,000 from Kleiman and her mother throughout the course of the litigation, of which $38,513.90 was expended on costs. See Tonkin Reply, at 2. Tonkin submits bank records purportedly showing that, contrary to Kleiman's assertion, see Kleiman Response, at 1-2, the funds provided by Kleiman were properly maintained in his Interest on Lawyer's Trust account ("IOLTA"), and not in his personal bank account.See Tonkin Reply, Ex. 9. Although Tonkin claims that fees to date amount to $335,148.75, he does not explain whether he has returned or retained the balance of the $11,482.10 in the IOLTA account. See Tonkin Reply, at 2.
Kleiman denies that she owes any fees to Tonkin, alleging that they had a contingency fee agreement requiring her to pay only the out-of-pocket expenses. See Kleiman Response, at 6. She further accuses Tonkin of other criminal violations and ethical wrongdoing, such as making payments to himself and his associate from Kleiman's escrow fund, see id. at 3, charging Kleiman for expenses she had already paid, see id. at 2, and falsifying entries on the list of expenditures. See id. Kleiman notes that as a result of these allegations, the Harris County District Attorney's Office is currently conducting a criminal investigation into Tonkin's activities, which she believes will result in felony charges. See id. at 1, 7, 9-10. The Court has confirmed with the prosecutor that a criminal investigation is underway.
DISCUSSION
A. Fee Dispute and Misappropriation of Funds Claims
Kleiman's accusations against Tonkin relating to fees, expenses and the misappropriation of funds present state law issues of breach of contract and conversion; these allegations thus pose a preliminary issue, ignored by the parties, as to the existence of subject matter jurisdiction. In order to resolve these state law claims, the Court would have to exercise supplemental jurisdiction. See In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 510 F.Supp.2d 299, 323 (S.D.N.Y. 2007). Supplemental jurisdiction, governed by 28 U.S.C. § 1367, allows a court to hear disputes that are part of the "same case and controversy" as the underlying action. See Achtman v. Kirby, McInerney Squire, LLP, 464 F.3d 328, 335-36 (2d Cir. 2006). A fee dispute arising out of an attorney's representation of a party in federal court has been held to present a "common nucleus of operative fact" that supports the exercise of supplemental jurisdiction. See, e.g., Achtman, 464 F.3d at 336 (stating that fee disputes are the proper subject of supplemental jurisdiction due to the "clear hallmarks of a common nucleus of operative fact."). A federal court thus has the power to hear such a dispute, on the theory that the court has "obtained total familiarity with the subject matter of the [underlying] suit and the professional services of the moving parties thereon and of the virtual totality of all the compensation arrangements contended for and disputed." See id. (quoting Itar-Tass Russian News Agency, et al., v. Russian Kurier, Inc., 140 F.3d 442, 445 (2d Cir. 1998)).
Where, as here, section 1367 provides the basis for supplemental jurisdiction over a fee dispute, the Court may decline to exercise such jurisdiction only on the basis of an enumerated statutory exception. See Itar-Tass Russian News Agency, 140 F.3d at 448. Section 1367 lists the following permissible reasons for declining to exercise supplemental jurisdiction: "(1) the claim raises a novel or complex issue of State law; (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction; (3) the district court has dismissed all claims over which it has original jurisdiction; or (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction." 28 U.S.C. § 1367(c). Discretion to decline jurisdiction under the "exceptional circumstances" exception embodied in subsection (c)(4) is narrow and should take into account the values of "economy, convenience, fairness and comity." See Luongo v. Nationwide Mut. Ins. Co., No. 95-CV-3190 (MBM), 1996 WL 445365, at *6 (S.D.N.Y. Aug. 7, 1996); see also Jones v. Ford Motor Credit Co., 358 F.3d 205, 214 (2d Cir. 2004) (citing Itar-Tass Russian News Agency, 140 F.3d at 445-47).
The first three statutory exceptions do not apply in the instant case. There are, however, compelling reasons for declining jurisdiction under section 1367(c)(4), due to the exceptional circumstances of the ongoing, parallel state criminal investigation prompted by Kleiman against Tonkin in Texas. See Kleiman Response, at 1. The existence of a parallel proceeding addressing the same allegations may give rise to an exceptional circumstance supporting the Court's refusal to exercise supplemental jurisdiction under subsection (c)(4). See Phillip Morris Inc. v. Heinrich, No. 95-CV-0328 (LMM), 1998 WL 122714, at *1-2 (S.D.N.Y. Mar. 19, 1998) (declining to exercise supplemental jurisdiction where the same claims were being litigated in New Jersey state court and delay would prejudice plaintiff in the original action). Allowing the same claims to proceed in parallel state and federal actions may "frustrate judicial economy." SST Global Tech., LLC v. Chapman, 270 F.Supp.2d 444, 459 (S.D.N.Y. 2003) (citing Hays County Guardian v. Supple, 969 F.2d 111, 125 (5th Cir. 1992)).
This Court has confirmed the existence of an ongoing criminal investigation into Tonkin's activities by the Harris County District Attorney's Office, which inquiry, according to Kleiman, involves the same allegations raised in her letter to the Court.See Kleiman Response, at 1. Specifically, Kleiman claims that Tonkin is "inappropriately financially enriching himself" and has misappropriated monies advanced by her, which she alleges were commingled in his personal account. See id. at 1-2. Tonkin denies this allegation, stating that the funds he received from Kleiman were deposited into his IOLTA account. See 12/12/08 Tonkin Letter, at 1. Kleiman concedes that this dispute is the subject of the District Attorney's investigation. See Kleiman Response, at 1-2. Accordingly, this Court's inquiry into the factual dispute at issue here would significantly overlap with the investigation occurring in Texas, creating exceptional circumstances that weigh in favor of declining to exercise supplemental jurisdiction. Cf. Phillip Morris, 1998 WL 122714, at *1-2.
The factors of economy, convenience, fairness and comity also weigh against the exercise of supplemental jurisdiction. Judicial economy would be compromised by engaging in fact-finding on an issue that the District Attorney's Office is already investigating. Cf. Hays County Guardian, 969 F.2d at 125. Since Kleiman's ancillary claims relating to the fee dispute were only recently presented to this Court, there has not been a substantial expenditure of time and money in addressing these claims that would result in unfairness were the Court to decline to exercise supplemental jurisdiction. Cf. Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir. 1994) (holding that it would be unfair to dismiss state law claims where the parties had spent years preparing for trial in federal court on the claims and the jury had already heard several days of testimony). Finally, as a matter of comity, and in order to avoid inconsistent results, this Court should leave these determinations of state law to the state courts of Texas, where there is currently a pending criminal investigation. See Bronx Gate Grille v. DeLeon, No. 07-CV-4411 (RJD)(JO), 2008 WL 5069533, at *5 (E.D.N.Y. Nov. 24, 2008) (holding that the court should decline to exercise supplemental jurisdiction over state law claims where the federal claim was dismissed and there were parallel state criminal proceedings pending on the state law claims).
B. Return of Kleiman's Case Files
Although the Court recommends that the District Court decline to exercise supplemental jurisdiction over the fee dispute and related state law claims of misconduct raised by Kleiman, the issue of Kleiman's entitlement to Tonkin's case files does not rest on the Court's exercise of supplemental jurisdiction. "Federal courts have always had the inherent power to manage their own proceedings and to control the conduct of those who may appear before them. . . ." McDaniel v. County of Schenectady, No. 1:04-CV-757 (GLS) (RFT), 2005 WL 1745566, at *5 (N.D.N.Y. July 21, 2005) (citing Chambers v. NABSCO, Inc., 501 U.S. 32, 45-46 (1991)). The power to control the actions of attorneys as officers of the court also extends to the right to require attorneys to turn over their case files to their clients. See Tops Mkts., Inc. v. Quality Mkts., Inc., No. 93-CV-0302 (JE), 2001 WL 392082, at *3 (W.D.N.Y. Apr. 4, 2001) (holding that former attorney was required to turn over case files to new attorney even though he had a retaining lien on the files).
In an allegation disputed by Tonkin, Kleiman claims that in 2007, she observed thirty cartons of her case files in Tonkin's office and that therefore there are approximately twenty-one boxes of materials that Tonkin failed to return to her since withdrawing as her attorney. See Kleiman Response, at 4. Kleiman suggests that the unreturned case files contain Tonkin's work product, as she alleges that no work product has been included in the nine boxes of files that were returned to her. See id. at 7. Under the work-product doctrine, codified in Rule 26(b)(3) of the Federal Rules of Civil Procedure, documents or other tangible items "prepared in anticipation of litigation or for trial" are not discoverable by the opposing party. See Fed.R.Civ.P. 26(b)(3). However, this doctrine "does not apply to the situation in which a client seeks access to documents or other tangible things created or amassed by his attorney during the course of the representation." Spivey v. Zant, 683 F.2d 881, 885 (5th Cir. 1982); see also Martin v. Valley Nat'l Bank of Arizona, 140 F.R.D. 291, 320 (S.D.N.Y. 1991) ("Having been hired to serve the client, the attorney cannot fairly be authorized to subvert the client's interests by denying to the client those work papers to which the client deems it necessary to have access.").
Kleiman acknowledges that Tonkin mailed her nine boxes. See Kleiman Response, at 7. Tonkin characterizes Kleiman's estimate of the number of boxes observed in his office as an "exag[g]eration. . . ." Tonkin Letter, at 2.
The Court expresses no opinion on the plausibility of plaintiff's contention.
Accordingly, Tonkin is directed to promptly search his files for any remaining materials relating to his representation of Kleiman and, to the extent that any such materials have not yet been provided to Kleiman, Tonkin should immediately forward them to her, together with the names and addresses of potential witnesses in the case. By January 15, 2009, he shall file a declaration confirming that he has fully complied with this directive.
CONCLUSION
For the foregoing reasons, Tonkin is directed to promptly search for and forward to Kleiman any of her files that may remain in his possession, including those containing attorney work product, along with the names and addresses of potential witnesses; a declaration attesting that he has done so must be filed by January 15, 2009. In addition, the Court recommends that the District Court decline to exercise supplemental jurisdiction over the Kleiman-Tonkin fee dispute and other state law accusations of misconduct, due to the pending criminal investigation into Tonkin's activities by the Harris County District Attorney's Office.
Any objections to the recommendations contained in this Report and Recommendation must be filed with the Honorable Judge Edward R. Korman on or before January 15, 2009. Failure to file objections in a timely manner may waive a right to appeal the District Court order. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 72;Small v. Sec'y of Health Human Servs., 892 F.2d 15, 16 (2d Cir. 1989).
SO ORDERED.
Order