Opinion
Civil No. 3:00-MC-1-H
April 11, 2002
MEMORANDUM OPINION AND ORDER
Before the Court is Randall M. Lipshutz's Motion to Dismiss the Partnerships' Counterclaims, filed August 31, 2001, and the various responses and replies thereto. Also before the Court is Randall M. Lipshutz's Motion to Apply Georgia Law to the Plaintiff Partnerships' Counterclaims, filed January 14, 2002, and the responses thereto.
I. BACKGROUND
The present motions are part of the pending Lipshutz Fee Application. In turn, the Lipshutz Fee Application is part of the ongoing Virani receivership action. The history of the Virani Receivership is well-chronicled in the record and need not be repeated. In determining the present motions, the Court need only address factors relevant to the Lipshutz Fee Application.
Randall M. Lipshutz and Kim Thorne (collectively "Lipshutz") filed their claim for attorneys' fees with the Court on May 9, 2001. Lipshutz claimed that the fees were incurred by partnership entities that had been, or continued to be, managed by the Receiver. Lipshutz sought to collect the fees from the Receiver. On May 29, 2001, the Newnan Crossing, Twin Lakes, Kensington Business Park, Forest Chase, Crown Point, and Foxfire Estates partnerships (hereafter collectively "the plaintiff partnerships") filed a response in opposition to Lipshutz's claim and asserted several counterclaims against him. The counterclaims included fraud, breach of fiduciary duty, legal malpractice, and fee forfeiture. Lipshutz moves to dismiss these counterclaims pursuant to FED. R. Civ. P. 12(b) arguing lack of subject matter and personal jurisdiction, improper venue, insufficiency of process and service of process, and failure to state a claim upon which relief can be granted.
Of Lipshutz's almost $200,000 fee request, approximately $160,000 of the fees are attributable to the plaintiff partnerships. The remaining $40,000 is sought from partnerships managed by Richard Hull as the Virani Receiver.
II. SUBJECT MATTER JURISDICTION
Lipshutz argues that the plaintiff partnerships' counterclaims should be dismissed pursuant to FED. R. Civ. P. 12(b)(1). The Court notes that most of Lipshutz's subject matter jurisdiction arguments are more properly considered in the personal jurisdiction inquiry. As Lipshutz's claims and the plaintiff partnerships' counterclaims arise in the course of a federal receivership created pursuant to this Court's equity jurisdiction, this Court has subject matter jurisdiction over both Lipshutz's fee claim and any counterclaims or defenses that arise thereto. See Alexander v. Hillman, 296 U.S. 222, 238 (1935). Lipshutz's motion to dismiss under Rule 12(b)(1) is DENIED.
III. PERSONAL JURISDICTION and VENUE
A. Rule 8
The parties dispute whether Lipshutz is a party to the receivership action. The term "parties" can be defined as those ". . . persons . . . who are actively concerned in the prosecution and defense of any legal proceeding." BLACK'S LAW DICTIONARY 1275 (4th ed. 1968). The first step in prosecuting a legal proceeding in federal court is compliance with the pleading requirements of FED. R. CIV. P. 8. In order to assert a claim for relief, a pleading must include the following: (1) a plain statement of the jurisdictional basis of the claim unless the Court already has jurisdiction; (2) a plain statement demonstrating that the pleader is entitled to relief; and (3) a demand for judgment for the relief sought. FED. R. Civ. P. 8(a). Pleadings must be construed so as ". . . to do substantial justice." FED. R. Civ. P. 8(f). Lipshutz's May 9, 2001 Fee Claim must be examined to determine whether it asserted a claim under Rule 8.
Lipshutz's fee claim contains no jurisdictional allegation, but such an allegation is unnecessary. At the time Lipshutz filed his claim, the Court clearly had jurisdiction over the Virani receivership. See Orders appointing Richard Hull as Receiver and Granting Motions for Turnover Against Signa Development, Inc., Sanvir Development, Inc., and Atlanta Associates, Inc., filed May 24, 2000; Agreed Order for Restatement of the Receivership Order, filed July 31, 2000. As previously stated, this Court has subject matter jurisdiction to adjudicate Lipshutz's fee claim. Additionally, the Virani receivership is based in Dallas and the Receiver has made numerous appearances before the Court on receivership matters; the Court had personal jurisdiction over both the Receiver and the partnership entities. As the ongoing Virani receivership action provided the jurisdictional basis for Lipshutz's claim, he was not required to make any further jurisdictional allegations. Accordingly, Rule 8(a)(1) is satisfied.
Rule 8(a)(2) requires only "'a short and plain statement of the claim' that will give . . . fair notice of . . . the . . . claim . . . and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957) (quoting FED. R. Civ. P. 8(a)(2)); see 5 CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1215, at 145-46 (2d ed. 1990) [hereinafter "5 WRIGHT MILLER"]. Lipshutz's fee claim more than satisfies this requirement. The claim states that Lipshutz seeks to recover fees due for work performed on the partnerships' behalf. The evidence filed by Lipshutz in support of his claim also gives notice of the amount he claims from each partnership. Lipshutz's fee claim demonstrated that he was entitled to relief and gave fair notice of his claim. Rule 8(a)(2) is satisfied.
The demand for judgment required by Rule 8(a)(3) does not have to be in a prescribed form. A concise statement of the remedy sought is sufficient. See 5 WRIGHT MILLER § 1255, at 366. Even a cursory review of the fee claim reveals that it very clearly states the remedy sought by Lipshutz. He asserts that he is owed fees and seeks an order from this Court directing payment of said fees. Rule 8(a)(3) is satisfied.
The Receiver argues that Lipshutz's Fee Application should be considered as a claim against the individual plaintiff partnerships, not the receivership estate. See Receiver's Response to Lipshutz/Thorne Application, filed May 29, 2001. However, the record indicates that Lipshutz may seek satisfaction of his fee claim from assets held or managed by the Receiver. See Reply to Response of Receiver, filed June 14, 2001, ¶¶ 2-4. The Court need not resolve at this time whether Lipshutz's claim for payment ultimately lies against the receivership estate or the individual plaintiff partnerships. Regardless of whether Lipshutz's claim, if valid, is ultimately paid by the Receiver on behalf of the plaintiff partnerships or by the plaintiff partnerships themselves, the remedy sought is the same payment of the fee claim from the assets of the plaintiff partnerships.
In finding all three elements of Rule 8(a) satisfied, Lipshutz's claim for attorneys' fees constitutes a claim for relief in this Court. As such, Lipshutz has made himself a party to the Virani receivership proceeding. In making this finding, the Court is mindful of its obligations under Rule 8(f). Given that Lipshutz is prosecuting his fee claim in this Court, it would be unjust to allow that claim to proceed and treat Lipshutz as a non-party, thus preventing the assertion of counterclaims and defenses that arise from the same operative facts as Lipshutz's claim. Treating Lipshutz as a party to the receivership avoids this injustice and comports with the principles of Rule 8(f).
B. Receivership Jurisdiction
While Rule 8 provides a sufficient basis for the exercise of jurisdiction, the Court further finds that Lipshutz subjected himself to this Court's jurisdiction by filing his fee claim in the course of the Virani federal receivership action. In Alexander v. Hillman, the Supreme Court found that by submitting and contesting a claim before a special master in a federal receivership proceeding, the claimant submitted to the jurisdiction of the receivership court to resolve claims by the receivership against him. See Alexander, 296 U.S. at 241-243. Lipshutz argues that Alexander is inapplicable and that this Court should not exercise personal jurisdiction over him because "[h]e simply mailed his fee application . . . from his office in Georgia." Lipshutz Motion to Dismiss, at 7. Lipshutz points out that he has not appeared before a special master, has not proven his right to the fees as there has been no adversarial proceeding, and that resolution of the plaintiff counterclaims is not essential to the final disposition of the receivership proceeding as was the case in Alexander. The Court finds Lipshutz's arguments against this Court's jurisdiction unpersuasive.
The Court first concedes that no special master to adjudicate fee applications has been appointed in this case. But, conceding this point does not defeat the exercise of personal jurisdiction over Lipshutz. While Lipshutz may have mailed his fee application to the Receiver, he also chose to file his claim with the Court. If the Court would be entitled to exercise personal jurisdiction over Lipshutz had he filed his claim before a special master appointed by the Court, then surely his filing of a claim directly with the Court provides a sufficient basis for the exercise of personal jurisdiction. See Alexander, 296 U.S. at 241-43.
Lipshutz seeks adjudication of his claim's validity and his right of recovery. In support of these goals, Lipshutz filed evidence in support of his claim. See Appendices in Support of Lipshutz Fee Application, filed May 9, 2001. As Lipshutz has invoked this Court's jurisdiction on his own behalf, the Court cannot deny those against whom Lipshutz seeks to recover the opportunity to present counterclaims and defenses arising from the same factual predicate. Stated another way, Lipshutz subjected himself to all the consequences associated with a voluntary appearance by filing his claim, including potential defenses and counterclaims. See Alexander, 296 U.S. at 241. To hold otherwise would preclude the Court from adjudicating the complete relief required by equity. See id. at 241-42. Again, the plaintiff partnerships' counterclaims arise from the same underlying facts as Lipshutz's fee claim. The Court cannot decree complete relief as to Lipshutz's claim against the plaintiff partnerships without consideration of their counterclaims. The Court also notes that adjudicating plaintiffs counterclaims with Lipshutz's claim affords convenience, promptness, and efficiency to both the parties and the judiciary. See id. at 243.
C. Lipshutz's Rule 12(b)(2) and 12(b)(3) Motions
The general rule is that by voluntarily filing his claim for relief in this Court, Lipshutz has waived any objections based on personal jurisdiction or venue. See Alexander, 296 U.S. at 241-42; Murphy v. Travelers Ins. Co., 534 F.2d 1155, 1159 (5th Cir. 1976); 6 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE §§ 1416, 1424, at 123, 182-84 (2d ed. 1990) [hereinafter "6 WRIGHT MILLER"]. Lipshutz argues that his appearance before this Court was not voluntary, thus exempting him from the general rule. Lipshutz specifically points to page eight, paragraph nine of the Agreed Order for the Restatement of the Receivership Order which states that ". . . all persons who receive actual or constructive notice of this Order are enjoined in any way from . . . prosecuting any new proceedings (including collection or enforcement proceedings) that involve the Receiver or Receivership Assets . . . or the Receivership Entities in any other court except with the permission of this Court." Lipshutz argues that this language compelled him to file his fee claim in this Court. However, as the quoted language demonstrates, Lipshutz was not required to file his claim in this Court; to the contrary, he was only required to seek this Court's permission before filing a claim against the Receiver or the receivership entities in any other court. Lipshutz did not seek this Court's permission to pursue his fee claim in any other court; instead, he chose to pursue his claim for relief in this Court. By voluntarily filing his claim for relief in this Court, Lipshutz has waived any objections based on personal jurisdiction and venue. Accordingly, Lipshutz's motion to dismiss pursuant to Rules 12(b)(2) and 12(b)(3) is DENIED.
IV. FAILURE TO SERVE
Lipshutz moves to dismiss plaintiff partnerships' counterclaims pursuant to Rules 12(b)(4) and 12(b)(5) for insufficiency of process and insufficiency of service of process. As a party to this proceeding, Lipshutz's service arguments lack merit. "[U]nlike service of the original complaint, it is not necessary to have the pleading containing the counterclaim . . . served on the party against whom the claim is asserted since he already is a party to the action and within the court's jurisdiction. It is sufficient . . . if the pleading [containing the counterclaim] is delivered to the attorney of any party who has appeared in the action." 6 WRIGHT MILLER § 1407, at 41; see also FED. R. CIV. P. 5. The plaintiff partnerships asserted their counterclaims against Lipshutz via their Response in Opposition to Lipshutz's Application for Attorneys' Fees, filed May 29, 2001. The plaintiff partnerships' Certificate of Service indicates that Lipshutz was served with a copy of that pleading. Lipshutz does not claim otherwise. Accordingly, Lipshutz's motion to dismiss pursuant to Rules 12(b)(4) and 12(b)(5) is DENIED.
In addition to claiming he was not properly served, Lipshutz argues that the plaintiff partnerships lacked standing to assert their counterclaims as they were receivership entities at the time the counterclaims were filed. However, as the plaintiff partnerships correctly point out, the Agreed Order for Restatement of the Receivership Order stated that the Receiver would cease operating the plaintiff partnerships (1) if Agave Investments, et al. v. Sanvir Development, Inc. was resolved in plaintiffs' favor, or (2) by order of the Court. See Agreed Order for Restatement of the Receivership Order, filed July 31, 2000, at 5-6, ¶ 5. On April 9, 2001, the Agave case was resolved in the plaintiff partnerships' favor. See Appendix to the Partnerships' Response in Opposition to Lipshutz's Motion to Dismiss, filed September 24, 2001, at 19-26. Lipshutz filed his fee claim on May 9, 2001. By that time, the first condition of the Agreed Order had been satisfied. That the plaintiff partnerships were later formally removed from the Receiver's management by a court order is irrelevant. The plaintiff partnerships, acting in their own interest, had standing to assert counterclaims against Lipshutz at the time he asserted claims against them.
V. FAILURE TO STATE A CLAIM
Lipshutz moves to dismiss the plaintiff partnerships' counterclaims for failure to state a claim pursuant to Rule 12(b)(6). In considering a motion to dismiss a complaint for failure to state a claim, the Court must accept as true the non-movant's well-pleaded factual allegations and any reasonable inferences to be drawn from them. Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067 (5th Cir. 1994). A claim "should not be dismissed for failure to state a claim unless it appears beyond doubt that the [counterclaimant] can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see Heimann v. National Elevator Industry Pension Fund, 187 F.3d 493, 502 (5th Cir. 1999) (court may dismiss a claim under FED. R. Civ. P. 12(b)(6) only if "it appears that no relief could be granted under any set of facts that could be proved consistent with the allegations.") (quoting Barrientos v. Reliance Standard Life Ins. Co., 911 F.2d 1115 (5th Cir. 1990)).
After considering the pleadings, the briefs, and the relevant authorities, the Court finds that Lipshutz has not established that the plaintiff partnerships cannot prove facts in support of their claims. Therefore, Lipshutz's motion to dismiss pursuant to Rule 12(b)(6) is DENIED.
VI. APPLICATION OF GEORGIA LAW TO THE COUNTERCLAIMS
Lipshutz's moves for application of Georgia law to the plaintiff partnerships' counterclaims. This motion is largely unopposed. However, the plaintiff partnerships argue that Texas choice of law principles demand that Texas law determine procedural questions such as Lipshutz's claim that the plaintiff partnerships' counterclaims are barred by limitations. See Hill v. Perel, 923 S.W.2d 636, 639 (Tex.App. — Houston [1st Dist.] 1995, no writ); Hollander v. Capon, 853 S.W.2d 723, 727 (Tex.App.-Houston [1st Dist.] 1993, writ denied). Lipshutz did not file a reply on this point. After due consideration of Lipshutz's motion, the legal authority cited therein, and the plaintiff partnerships' response, the Court finds that the motion to apply Georgia law should be, and is, GRANTED as to the plaintiff partnerships' substantive counterclaims; pursuant to Texas choice of law principles, procedural questions arising from the counterclaims will be governed by Texas law. See id.
VII. CONCLUSION
Lipshutz's motion to dismiss is DENIED on all grounds. Lipshutz's motion to apply Georgia law is GRANTED as to the substantive law governing the plaintiff partnerships' counterclaims.
SO ORDERED.