The opinion of the court was delivered by: JOYNER
Defendants have filed a joint motion to dismiss plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(1)
and (6) or in the alternative to stay proceedings pending the outcome of an underlying state court matter.
For the reasons set forth below, the motion is denied.
On January 19, 1996, plaintiff retained defendant Gus Milides to represent her in divorce, custody and equitable distribution proceedings to be filed in the Court of Common Pleas of Northampton County against her husband, Michael J. Popovice. (Pl's Complaint, P8).
Plaintiff's complaint avers that at that meeting, she told Mr. Milides that she owned a one-fifth interest in several companies and that a sale of those companies at a very substantial premium to the owners was imminent. (Pl's Complaint, Ps 10-11). Plaintiff further avers that Milides, who had never represented her before, did not discuss with her the basis or rate of the legal fees to be charged despite her repeated inquiries and offers to pay him a retainer. Instead, defendant told plaintiff that they would address attorneys' fees "later." (Complaint, Ps 24-25, 34). On May 30, 1996, the companies were sold to USA Waste for "tens of millions of dollars, payable in the common stock of USA Waste." (Complaint, Ps 17-18). Meanwhile, following the filing of the complaint in the Northampton County Court, the relationship between Mr. and Ms. Popovice deteriorated even further to the point that plaintiff felt so harassed that she hired security personnel for her home, filed a petition for protection from abuse and considered filing criminal charges against her estranged husband. (Complaint, Ps 38-42). Plaintiff alleges that despite defendant's knowledge of her vulnerable mental state and her susceptibility to becoming highly dependent upon others, on August 27, 1996, he called her late in the evening, advised her that it was "going to cost $ 1,000,000 to clean up this mess," and instructed her to come to his office the following morning to sign a contract. (Complaint, Ps 42-44). The following day, defendant presented plaintiff with a fee agreement pursuant to which she was obligated to deliver $ 1,000,000 of her securities to defendants, $ 500,000 upon execution of the agreement and $ 500,000 on January 31, 1997. (Complaint, Ps 46, 49). Plaintiff contends that she signed the agreement because she felt bound to defendants, who had been representing her for more than 8 months and the child custody phase of the proceedings were about to begin and were expected to continue through the fall of 1996. (Complaint, P47). She transferred 17,777 shares of her USA Waste stock, worth more than $ 550,000 on that date, to the account of the Laub, Seidel firm at the Allentown branch of Merrill Lynch. (Complaint, P53).
By January, 1997, however, plaintiff had become dissatisfied with defendants' representation and refused defendant Milides' demands to turn over another 17,776 shares of stock. Plaintiff terminated the attorney-client relationship with defendants on March 6, 1997 and thereafter demanded the return of those shares which she had previously turned over. Defendants have refused to do so and in fact, filed a declaratory judgment action in the Northampton County Court of Common Pleas on September 12, 1997 asking that Court to declare the legal rights and obligations of the parties under the written fee agreement. (Complaint, Ps54, 58-61).
One month later, plaintiff filed this lawsuit alleging that defendants fraudulently misrepresented and inflated the value of the legal services they rendered and proposed to render to her in the divorce, custody and equitable distribution matter and with regard to enforcing an antenuptial agreement. In doing so, plaintiff contends, defendants violated Section 10(b) and Rule 10(b)-5 of the Securities Exchange Act, 15 U.S.C. § 78j(b), and should further be held liable to her under the common law theories of fraudulent misrepresentation, breach of fiduciary duty, civil conspiracy, unjust enrichment, violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 P.S. § 201-9.2 and for an accounting. Defendants moved to dismiss this complaint on the grounds that plaintiff has failed to state a cause of action upon which relief may be granted under the federal securities laws and thus this Court should decline to exercise supplemental jurisdiction over the remaining state law claims. Defendants alternatively argue that since all of plaintiff's claims arise out of the attorney-client relationship in the state court divorce action and the Commonwealth of Pennsylvania and its courts have an overriding interest in and its laws will determine the outcome of that dispute, this Court should stay and abstain from hearing this action.
Standards Governing Motions to Dismiss
Under Fed.R.Civ.P. 12(b), the defenses of lack of jurisdiction over the subject matter and the failure to state a claim upon which relief may be granted may be raised by motion. In resolving a Rule 12(b)(6) motion, the court primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case and exhibits attached to the complaint may also be taken into account. Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3rd Cir. 1990). In so doing, the court must accept as true the facts alleged in the complaint, together with all reasonable inferences that can be drawn therefrom and construe them in the light most favorable to the plaintiff. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3rd Cir. 1990). The court's inquiry is directed to whether the allegations constitute a statement of a claim under Rule 8(a) and whether the plaintiff has a right to any relief based upon the facts pled. Dismissal under Rule 12(b)(6) for failure to state a claim is therefore limited to those instances where it is certain that no relief could be granted under any set of facts that could be proved. Ransom v. Marrazzo, 848 F.2d 398, 401 (3rd Cir. 1988).
Similarly, a district court can grant a 12(b)(1) motion to dismiss for lack of subject matter jurisdiction based on the legal insufficiency of the claim. However, dismissal is proper only when the claim "appears to be immaterial and made solely for the purpose of obtaining jurisdiction or is wholly insubstantial or frivolous... When subject matter jurisdiction is challenged under Rule 12(b)(1), the plaintiff must bear the burden of persuasion." Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1408-09 (3rd Cir. 1991). See Also : Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 666, 94 S. Ct. 772, 776, 39 L. Ed. 2d 73 (1974).
Unlike a motion to dismiss for failure to state a claim under Rule 12(b)(6), when a party attacks the factual allegations of jurisdiction, the courts are not limited in their review to the allegations of the complaint. Any evidence may be reviewed and any factual disputes resolved regarding the allegations giving rise to jurisdiction as it is for the Court to resolve all factual disputes involving the existence of jurisdiction. Sitkoff v. BMW of North America, Inc., 846 F. Supp. 380, 383 (E.D.Pa. 1994) citing Moore's Federal Practice (Second Ed.) at P12.07[2.-1]. In contrast, if the attack to jurisdiction is facial, that is, the allegations of jurisdiction stated in the complaint, the factual allegations of the complaint are presumed to be true and the complaint is reviewed to ensure that each element necessary for jurisdiction is present. Id. If jurisdiction is based on a federal question, the pleader claiming federal jurisdiction simply must show that the federal claim is not frivolous. Radeschi v. Commonwealth of Pennsylvania, 846 F. Supp. 416, 419 (W.D.Pa. 1993), citing Bartholomew v. Librandi, 737 F. Supp. 22 (E.D.Pa.), aff'd 919 F.2d 133 (3rd Cir. 1990). Only if it appears to a certainty that the pleader will not be able to assert a colorable claim of subject matter jurisdiction may the complaint be dismissed. Kronmuller v. West End Fire Co. No.3, 123 F.R.D. 170, 172 (E.D.Pa. 1988). See Also : Mortensen v. First Federal Savings and Loan Association, 549 F.2d 884, 891 (3rd Cir. 1977).
The courts have long recognized that the fundamental purpose of § 10b and Rule 10b-5 is to promote the full and fair disclosure of material information in securities transactions and protect persons who are deceived in securities transactions, i.e., to make sure that buyers of securities get what they think they are getting and that sellers of securities are not tricked into parting with something for a price known to the buyer to be inadequate or for a consideration known to the buyer not to be what it purports to be. Angelastro v. Prudential-Bache Securities, Inc., 764 F.2d 939, 949 (3rd Cir. 1985), cert. denied, 474 U.S. 935, 106 S. Ct. 267, 88 L. Ed. 2d 274 (1985); Pages, Inc. v. Gruner & Jahr Printing & Publishing ...