Opinion
Civil Action No. 04-3243 Section "A"(3).
February 2, 2006
ORDER AND REASONS
Before the Court is a choice of law issue. This matter was transferred to this Court in November 2004 from the United States District Court, Southern District of Mississippi, Jackson Division. The Court for the Southern District of Mississippi deferred a ruling on Defendants' pending Motion to Dismiss under FRCP Rule 12(b)(2) and 12(b)(6), but granted Defendants' Motion to Transfer under FRCP 12(b)(3). Defendants' Motion to Dismiss, which was pending in the Mississippi court prior to the case being transferred to the Eastern District of Louisiana, was denied without prejudice by this Court (Rec. Doc. 12), as this Court felt it was more appropriate to rule on the motion to dismiss after the choice of law issue was resolved.
In Van Dusen v. Barrack, 376 U.S. 612 (1964), the United States Supreme Court held that if a case was transferred on motion of a defendant, the transferee court must apply the law that would have been applied in the transferor court. As a result, the change in forum results only in a change of courtrooms, not a change of law. Accordingly, in this matter, where the law of several different states might apply, this Court must apply Mississippi's choice of law provisions. Neither the Defendant's Motion to Dismiss, nor Plaintiff's Opposition addressed the application of Mississippi's choice of law provisions. Thus, this Court ordered both parties to submit memoranda of law addressing Mississippi's choice of law provisions and the appropriate state's substantive law which should be applied to the merits of the dispute. (Rec. Doc. 12). The parties have complied.
The Court has reviewed the memoranda submitted by the parties, the record, and the applicable law. For the reasons that follow, the Court finds that Louisiana law is the appropriate law to apply.
I. Background
Plaintiff claims that during the time period from approximately October, 1993 until shortly before the filing of his lawsuit, he had been a practicing attorney and engineer associated with the law firm of Sacks and Smith, and/or its predecessors, successors and affiliated enterprises. Plaintiff claims that pursuant to various written and verbal agreements, he acted as both an employee and partner of the firm. He claims that upon termination of the August 1994 written contract between and among Andrew Sacks, P.C. and Stuart H. Smith, he entered a new contract with Sacks and Smith that had similar terms as the August 1994 contract, but also provided for the payment to Plaintiff of some additional fees.
Plaintiff asserts that in or around June 2000, he and representatives of Sacks Smith entered a new period of contract negotiations, which broke down and resulted in Andrew B. Sacks' ceasing salary payments to him under the existing agreement. He claims that after a period of several months, he continued to provide legal and expert services to Sacks Smith in several cases at the request of Stuart H. Smith.
Plaintiff claims that attorneys representing Defendants have settled, intend to settle, or have otherwise brought to conclusion, cases that were subject to the agreements providing for payment of fees to Plaintiff — and/or to which Plaintiff provided legal services for clients of those Defendants. He asserts that, nonetheless, he has been paid no fees, nor has any provision been made for payment of fees, in relation to these cases.
Plaintiff has brought suit, alleging breach of contract, bad faith, conversion, quantum meruit, action to enforce lien, and declaratory judgment. Defendant Andrew B. Sacks filed a counterclaim, asserting that Plaintiff is not entitled to any legal fees in any of the cases to which he refers. He seeks a declaratory judgment.
Plaintiff seeks application of Mississippi law to his claims, and alternatively, Pennsylvania law, which apparently allow courts to impose punitive damages in some instances. Defendants seek application of Louisiana law to the claims, which apparently does not authorize punitive damages in relation to the claims at issue.
II. Choice of Law
A. Law and Analysis
"In analyzing choice of law questions, [Mississippi] has adopted the `center of gravity' test." Sheppard Pratt Physicians, P.A. v. Sakwa, 725 So. 2d 755, 757 (Miss. 1998). A court that applies the center of gravity approach must determine "which state has the most substantial contacts with the parties and the subject matter of the action." Id. See also Johnson v. Pogue, 716 So. 2d 1123 (Miss.App. 1998); Ingalls Shipbuilding v. Federal Ins. Co., 410 F.3d 214, 230 (5th Cir. 2005). The test "may be applied in piecemeal fashion such that in a single case, the law of one state may be applied to one issue in the case while the law of another state may apply to another issue in the case depending upon which case has the most significant contacts with respect to each particular issue." Hanley v. Forester, 903 F.2d 1030, 1032 (5th Cir. 1990). "Forum law should presumptively apply unless it appears that non-forum contacts are of greater significance." Sentinel Industrial Contracting Corp. v. Kimmins, 743 So. 2d 954, 960 (Miss. 1999) (quoting Mitchell v. Craft, 211 So.2d 509, 512 (Miss. 1968)).
To determine the most significant relationships, Mississippi has looked to Restatement (Second) of Conflicts of Laws for guidance. Section 6 of the Restatement lists general choice of law factors, including: the needs of the interstate and international systems; the relevant policies of the forum; the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue; the protection of justified expectations; the basic policies underlying the particular field of law; certainty, predictability, and uniformity of result; and ease and determination in application of law to be applied. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6 (1971).
1. Breach of Contract
"Section 188 narrows the focus of § 6 by setting forth certain principles to be applied in making choice of law determinations in contract actions." Baites v. State Farm Mutual Automobile Ins. Co., 733 So. 2d 320, 322 (Miss Ct. App. 1998). Section 188 provides that the following factors should be considered in such actions: the place of negotiation of the contract; the place of contracting; the place of performance; the location of the subject matter of the contract; and the domicile, residence, nationality, place of incorporation and place of business of the parties. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188 (1971). Mississippi applies Section 188 in reviewing choice of law questions in cases involving both express and implied contracts. Sheppard-Pratt Physicians, P.A., 725 So. 2d at 757.
Plaintiff contends that because the contracts were negotiated (factor 1) and entered (factor 2) using telephones, facsimiles and the U.S. mail, the locations of the parties at the time of those events hardly makes a difference. Plaintiff also argues that the domiciles of the parties (factor 5) bears no relevance, and provides no insight into the proper choice of law. Plaintiff implies that "the place of performance" (factor 3) and "the location of the subject matter of the contract" (factor 4) are the most important factors to consider in this case. Plaintiff points to Sentinel Industrial Contracting Corp. v. Kimmins, 743 So. 2d 954, 959-60 (Miss. 1999), as support for this conclusion, in which the court addressed only those factors.
Plaintiff contends that "the place of performance" (factor 3) and "the location of the subject matter of the contract" (factor 4) favor the application of Mississippi law. He asserts that he was hired primarily to perform trial preparations on Mississippi cases using his Mississippi law license, and he was counsel-of record in more Mississippi actions than cases in any other state.
Defendants argue that the Section 188 factors favor application of Louisiana law. Defendants point to the transferor court's accepting as true the following: for the entire range of time spanned by his complaint, Plaintiff lived in New Orleans and worked in and from the New Orleans office; that all of the defendants live and work in either New Orleans or Philadelphia; and that no witnesses to the formation and breach of Plaintiff's employment contract are in Mississippi. Defendants also quote that court in stating, "the State of Louisiana has a greater interest in the outcome of this litigation than does the Commonwealth of Pennsylvania." Defendants assert that the court made that statement after deciding that Mississippi had insufficient contacts with the dispute.
Defendants contend that Mississippi's only contacts with Plaintiff's claims arise from the few cases filed in Mississippi on which Plaintiff worked (principally from Defendant's New Orleans office) and for which he claims fees. Defendants point out that none of the parties to the action resides or maintains a place of business in Mississippi. Defendants further assert that management and ownership of the defendant law firm was based out of the Philadelphia office. Further, they claim that Plaintiff worked from the New Orleans law office, was supervised there by defendant Smith, and lived in the City of New Orleans. Defendants contend that based on Plaintiff's own analysis, the cases he worked on in Mississippi were not significant cases, and he would not receive significant income from them.
Defendants assert that the greater number of witnesses, and virtually all the documentary evidence related to plaintiff's employment agreement(s) are located in Louisiana, Pennsylvania, or Washington, D.C. They assert that the employment contract at issue was negotiated in Philadelphia and New Orleans. Further, they assert that Plaintiff was paid from Philadelphia, and his work was supervised by New Orleans and/or Philadelphia lawyers. Defendants also contend that Plaintiff suffered his alleged economic harm in either Louisiana or in Washington, D.C. Defendants assert that, while Plaintiff's claims may have some connection to Louisiana or Pennsylvania, there is scant connection between the claims Plaintiff raises in this lawsuit and the State of Mississippi.
Plaintiff argues that Defendants improperly "rely on dicta taken out of context from the transferor court's order transferring this case to this Court on grounds of forum non conveniens to support their claims that this Court should apply Louisiana law to this case." (Pla. Reply, p. 2). Plaintiff generally argues that a decision regarding transfer on such grounds does not require the same analysis as a decision regarding conflicts of law. Plaintiff primarily contends that the law of forum non conveniens does not require an analysis of the relative interests of the states involved in the resolution of the dispute.
Factor 1 (Place of negotiation) — The place of negotiation of the employment contract(s) was Louisiana and Pennsylvania. Plaintiff apparently lived in New Orleans at the time of entering the alleged contracts. The other part(ies) to the alleged contracts lived and/or worked or did business in Philadelphia and/or New Orleans. The contracts were apparently negotiated and entered using telephones, facsimiles and the U.S. mail. (Pla. Brief, p. 9). Thus, the place of negotiation was Louisiana and Pennsylvania, where the contracting parties were located. Comment (e) to § 188 of the Restatement (Second) of Conflict of Laws indicates that "the place where the parties negotiate and agree on the terms of their contract is a significant contact." RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188, Comment (e). However, it further states that the place of negotiation "is of less importance when there is no one single place of negotiation and agreement, as, for example, when the parties do not meet but rather conduct their negotiations from separate states by mail or telephone." Id. Even though the place of negotiation of the contract bears less significance that it would otherwise, it should be noted that the negotiation did not take place in Mississippi.
Factor 2 (Place of contracting) — The place of contracting is either Louisiana or Pennsylvania or both because, according to Comment (e) to § 188, the place of contracting is "the place where occurred the last act necessary, under the forum's rules of offer and acceptance, to give the contract binding effect, assuming, hypothetically, that the local law of the state where the act occurred rendered the contract binding." Id. The state in which "the last act" occurred is unclear. Comment (e) further indicates that "[s]tanding alone, the place of contracting is a relatively insignificant contact." Id. "The place of contracting, . . . almost invariably, is but one of several contacts in the state." Id. Thus, the other relevant factors will provide further guidance as to what law should apply. It is worth noting, however, that while the first two factors may favor application of Louisiana or Pennsylvania law, neither supports applying Mississippi law.
Factor 3 (Place of performance) — The place of performance was primarily Louisiana, as Plaintiff's work and employment were based in New Orleans.
As previously mentioned, Plaintiff argues that this factor favors Mississippi. He contends that he was hired primarily to perform trial preparations for Mississippi cases using his Mississippi law license, and that he was counsel-of-record in more Mississippi actions than cases in any other state. However, Plaintiff also performed work for Defendants in cases brought or litigated in other states as well and seeks fees related to not only Mississippi cases, but also for Louisiana, Alabama, Arkansas, and perhaps Texas cases. (Cox Declaration ¶ IV, Pla. Brief, Exh. A). While Plaintiff may have performed some of his work on the cases which provide the basis of his claim for fees in states other than Louisiana, Plaintiff's work on all of these cases was centered and based in New Orleans, where he lived, and where his office was located. Thus, this factor supports application of Louisiana law.
Factor 4 (Location of the subject matter of the contract) — The subject matter of the contract(s) was the services to be performed by Plaintiff. As discussed above, those services were based and primarily performed in New Orleans, as Plaintiff worked in Defendant(s)' New Orleans office. Thus, this factor also supports application of Louisiana law.
As previously noted, Plaintiff implies that this factor and the place of performance factor are the most important. These two factors favor applying Louisiana law.
Factor 5 (The domicile, residence, nationality, place of incorporation and place of business of the parties) — Plaintiff is purportedly a current resident and citizen of the District of Columbia. The District of Columbia has little or no interest in this suit, as Plaintiff was a resident of Louisiana during the time relevant to this suit. Defendant Stuart H. Smith is purportedly a resident and citizen of Louisiana. His related business entity defendants are purportedly licensed to do business in Louisiana with a New Orleans "domicile address." Defendant Andrew B. Sacks is purportedly a resident and citizen of Pennsylvania. His related business entity defendants purportedly have a Philadelphia "domicile address."
Considering the above, it is clear that Louisiana law should be applied to the breach of contract issue, since Louisiana has the most substantial contacts, both qualitatively and quantitatively. Plaintiff's employment with Defendant(s) was based in New Orleans. He lived in New Orleans and worked in the New Orleans office during the relevant time period. Several of the Defendants live and/or do business in New Orleans. The contract negotiations and formation partially took place in New Orleans. The primary place of performance and location of the subject matter of the contract(s) was New Orleans. These contacts are more significant than in Pennsylvania or Mississippi.
2. Conversion
Mississippi also applies "the center of contacts" or "center of gravity" test to resolve conflicts of law disputes in tort cases. Hanley v. Forester, 903 F.2d at 1032 (citing Mitchell, 211 So. 2d 509).
Section 145 of the Restatement (Second) of Conflict of Laws lists the following contacts to be taken into account in applying the principles of § 6 to a tort issue: the place where the injury occurred; the place where the conduct causing the injury occurred; the domicile, residence, nationality, place of incorporation and place of business of the parties; and the place where the relationship, if any, between the parties is centered. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 145 (1971). See also Church v. Massey, 697 So. 2d 407, 410 (Miss. 1997) (citing McDaniel v. Ritter, 556 So. 2d 303, 310 (Miss. 1989)). "Under Mississippi law, the substantive law of the place of injury controls unless another state has a more significant relationship to the occurrence and the parties." Denman by Denman v. Snapper Division, 131 F. 3d 546, 549 (5th Cir. 1998).
Plaintiff, citing In re: Blanton, 824 So. 2d 558 (Miss. 2002), seems to contend that Mississippi calls for two separate analyses in tort cases — one under Section 6 and one under Section 145, and that the result of the former is at least as important as that of the latter. However various cases indicate that the two sections work together. As noted by the Fifth Circuit, "[u]nder the Restatement approach adopted by Mississippi, the court examines the contacts of the relevant states, as set forth in § 145, in light of the policy considerations in § 6." Denman by Denman v. Snapper Division, 131 F. 3d 546, 549 (5th Cir. 1998).
The Mississippi Supreme Court has stated that "`the principles of Sections 6 and 145 of the Restatement (Second) defy mechanical application — they are less `rules of law' than generally-stated guideposts.'" Church v. Massey, 697 So. 2d 407, 410 (Miss. 1997) (citing McDaniel v. Ritter, 556 So. 2d 303, 310 (Miss. 1989)). Further, "the factors enumerated in Restatement § 6 will from case to case be given such relative weight as they are entitled, consistent with the general scheme of the center of gravity test." Boardman v. United States Auto. Ass'n, 470 So. 2d 1024 (Miss. 1985). "Choice of law, rather than looking at minimum contacts, looks to `where the contacts are maximized.'" Church, 697 So. 2d at 410 (citing McDaniel, 566 So. 2d at 310).
Even though some cases seem to focus on Section 145 in conducting a tort choice of law analysis ( See, e.g., Davis v. National Gypsum Co., 743 F.2d 1132, 1333-34 (5th Cir. 1984) (applying Mississippi choice of law principles); Church v. Massey, 697 So. 2d 407, 410 (1997)), Section 6 considerations direct the same result — Louisiana law should apply.
The Court will consider Section 145 first. Defendant did not make specific arguments about Section 145. Plaintiff contends that the first two factors favor applying Mississippi law because a greater number of the cases that are subject to Plaintiff's fee claims in this action have been, or are being litigated in the courts of Mississippi than in any other state in the United States. He further contends that the conversions of fees that have been alleged in his complaint involve funds wrongfully removed from more Mississippi trust accounts than similar accounts in any other state. Further, he argues that if he is successful on the merits of this action, this Court's declaratory judgment will have to be filed in more Mississippi cases than cases in any other state. (Pla. Brief, p. 7).
Factor 1 (Place where the injury occurred) — This Court finds that the place where the injury occurred was Louisiana. Plaintiff lived in New Orleans and worked in the New Orleans office while employed by Defendant(s). He lived there when his contract negotiations with Sack Smith allegedly broke down, and "resulted in Andrew B. Sacks' ceasing payments of salary to Plaintiff under the existing agreement." (Pla. Complaint, ¶ XVI). Thus, New Orleans is where he sustained his alleged injury from the alleged conversion. He currently lives in Washington, D.C. To the extent he has sustained any injury there from the alleged conversion, it too could be considered a place of injury.
Factor 2 (Place where the conduct causing the injury occurred) — Plaintiff's pay apparently came from Pennsylvania, and thus the conversion of any fees would have occurred, at least in part, there.
Louisiana, where Plaintiff's office was located, is also a place where conduct causing the alleged injury occurred.
To the extent that funds have been allegedly "wrongfully removed" from trust accounts, the states where the accounts are/were located may also qualify as a place where conduct causing the injury occurred.
Factor 3 (The domicile, residence, nationality, place of incorporation and place of business of the parties) — As previously stated, Plaintiff is purportedly a current resident of the District of Columbia. The District of Columbia has little or no interest in this suit, as Plaintiff was a resident of Louisiana at all material time. Defendant Stuart H. Smith is purportedly a resident and citizen of Louisiana. His related business entity defendants are purportedly licensed to do business in Louisiana with a New Orleans "domicile address." Defendant Andrew B. Sacks is purportedly a resident and citizen of Pennsylvania. His related business entity defendants purportedly have a Philadelphia "domicile address."
Plaintiff contends that in a case such as this — in which each party resides in a different state — the domicile factor provides little insight into the proper choice of law. He argues that no one party can claim that the state of its domicile, by virtue of that fact alone, has a more compelling argument for the choice of its law than any other state.
The Court finds Plaintiff's argument unpersuasive. While this factor may support applying the law of more than one state, Mississippi, the state which Plaintiff advocates, is not one of them. Further, no party has claimed that the state of his domicile, by virtue of that fact alone, has a more compelling argument for the choice of its law. The factor is to be considered along with other factors, not by itself.
Factor 4 (The place where the relationship, if any, between the parties is centered) —
Plaintiff's argument that this factor supports applying Mississippi law is the same as his argument in regard to the first two factors. He further asserts that "[t]he fact that Mississippi is the locus of the most substantial relationships among the parties is further supported by the fact that Mr. Cox is licensed to practice law only in the State of Mississippi. At the time Mr. Cox was hired, Defendants had a significant caseload of Mississippi cases; [they] had no other lawyer in the firm licensed to practice law in Mississippi; and [they] had entered into the contracts at issue for essentially the sole purpose of benefitting from Mr. Cox's knowledge of Mississippi law and Mississippi oilfield operations, and his status as a Mississippi law practitioner." (Pla. Memo, p. 7).
This Court finds Plaintiff's assertions unpersuasive. The place where the relationship between the parties is centered is Louisiana, as Plaintiff worked in Defendant(s)' New Orleans office during the relevant time period. This is not a suit against a Mississippi client. It is a suit against Plaintiff's employer. And his relationship with his employer was based in New Orleans, Louisiana, where he lived and worked during his employment. Further, it is worth noting again that Plaintiff's work was not limited to Mississippi cases, and he seeks fees related to not only Mississippi cases, but also cases in Louisiana, Alabama, Arkansas, and perhaps Texas.
Louisiana has the most significant contacts under the Section 145 analysis. It is the place where Plaintiff's relationship with the Defendant(s) was centered. Plaintiff lived in New Orleans and worked in the New Orleans office during the relevant time period. It is where Plaintiff sustained all or some of his alleged injury. Additionally, some of the conduct causing the injury appears to have occurred there. Further, several of the Defendants live and/or do business in New Orleans. The only contact Mississippi has is that it may qualify as one of the places in which some of the conduct causing the injury occurred, to the extent funds were allegedly "wrongfully removed" from accounts located in Mississippi. However, in that regard, all the states in which such accounts are/were located would constitute a place in which some of the conduct causing the injury occurred. None of these states have contacts as significant as Louisiana. Likewise, Pennsylvania's contacts are not as significant as Louisiana's in quantity or quality.
Plaintiff addresses Section 6 considerations. Leading into this discussion, he contends that he was licensed only in Mississippi and had substantial prior experience as an oilfield engineer. He claims he was hired and paid by Andrew Sacks, P.C. for the principle purpose of handling the firm's Mississippi oilfield litigation docket. He claims he served as a liaison to the firm's Hattiesburg office and conducted significant pre-trial discovery and managed client contacts with the firm's Mississippi clients. He claims these contacts outweigh contacts in other states.
Plaintiff also places much emphasis on the issue of punitive damages. Plaintiff claims that Mississippi and Pennsylvania allow such damages in actions for conversion, and Louisiana does not. He also claims that among the three states, only Mississippi allows punitive damages for bad-faith breach of contract.
According to Plaintiff, Mississippi law provides specific statutory guidelines and limitations for awards of punitive damages. He claims that Louisiana has deferred consideration of appropriate instances in which punitive damages are warranted to the legislature, and that the legislature has been silent in cases of conversion. Plaintiff claims Mississippi's affirmative policy of awarding punitive damages in cases of conversion to deter wrongdoers from using the power of their position and circumstances to appropriate property for their own use trumps any interest derived from Louisiana's silence.
Plaintiff also contends that his "justified expectation," as a Mississippi lawyer practicing in the courts of Mississippi, is that Mississippi law will protect him from the misappropriation of fees by an out-of-state firm. He argues that his expectation is reasonably based on the fact that most jurisdictions allow awards of punitive damages to deter and punish misappropriation of fees. He claims that without such punitive measures, there is no incentive for defendants to hand over misappropriated funds without resorting to litigation. He claims that applying these rules in the predominance of cases involving interstate actions for recovery of fees ensures the "predictability and uniformity" of result and satisfies the needs of the interstate and international systems.
Plaintiff claims that the "ease in the determination and application of the law to be applied" factor does not favor application of Louisiana law to claims involving parties residing, and conduct occurring, in the common law jurisdictions of Mississippi, Pennsylvania, Alabama, Arkansas, and the District of Columbia.
Plaintiff seems to ignore that Louisiana does have an interest in its laws being applied, as Plaintiff worked and lived in Louisiana during all or most of the time in question. Furthermore, some of the defendants live in and/or do business in New Orleans. A state has an interest in having its laws apply to suits involving the rights of its residents. This case does not involve any Mississippi residents, current or former. The Court notes that some of the Defendants live and/or do business in Pennsylvania. Nonetheless, because the relationship between the Defendants and Plaintiff was centered in New Orleans, Louisiana has a greater interest in having its law applied.
Applying Louisiana law supports the needs of the interstate and international systems and provides for certainty, predictability, and uniformity of result, whereas applying Mississippi law does not. While Plaintiff was licensed to practice in Mississippi, and some of the cases which provide the basis for his claims against his employer were Mississippi cases, he also seeks fees and alleges conversion in relation to non-Mississippi cases. It makes little sense to apply Mississippi law to his claims related to those cases. It does, however, make sense to apply Louisiana law to Plaintiff's claims because this suit concerns Plaintiff's relationship with his employer and the fees he seeks to obtain for the services he allegedly provided for his employer. His employment and work was based in New Orleans, where his office was located, and where he lived.
Further, applying Louisiana law would support the protection of justified expectations. The parties did not select the law they wanted to govern their contract(s). Thus, they must have at least contemplated that the law of Louisiana, where Plaintiff lived and worked during his employment and where the parties' relationship was centered, could apply to disputes related to Plaintiff's employment.
The ease of determination and application of the law to be applied factor does not aid in deciding which laws to apply because one state's laws would not be easier or more difficult to apply than another state's laws in this case.
Based on the foregoing, Louisiana clearly "has the most substantial contacts with the parties and the subject matter," and thus its laws should be applied. Sheppard Pratt Physicians, P.A. v. Sakwa, 725 So. 2d 755, 757 (Miss. 1998).
Accordingly,
IT IS ORDERED.