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Donner v. Aristone Realty Capital, LLC

United States District Court, E.D. Pennsylvania

April 2, 2018

JACOBY DONNER, P.C., Plaintiff,
v.
ARISTONE REALTY CAPITAL, LLC, TODD M. LIPPIATT, and PATRICK M. MCGRATH, Defendants.

          MEMORANDUM

         I. INTRODUCTION

         This case arises out of alleged nonpayment of fees owed for legal services. Plaintiff Jacoby Donner, P.C. filed suit in this Court on May 12, 2017, seeking recovery of outstanding fees owed for legal services provided by plaintiff to defendants, Aristone Realty Capital, LLC, Todd M. Lippiatt, and Patrick M. McGrath. Defendants answered and asserted counterclaims against Jacoby Donner for malpractice in connection with the legal services performed.

         Presently before the Court is Jacoby Donner's Motion to Dismiss the Counterclaims (Document No. 14, filed July 27, 2017). For the reasons stated below, the Motion is granted in part and denied in part.

         II. FACTUAL BACKGROUND

         The facts of this case as set forth in Aristone Realty Capital, LLC., Todd M. Lippiatt, and Patrick M. McGrath's (collectively, “counterclaim plaintiffs”) Amended Answer, Defenses, and Counterclaims (Document No. 10, filed July 6, 2017). Aristone is a New York-based real estate development and investment company. Am. Counterclaim ¶ 4. Lippiatt and McGrath are principals of Aristone. Id. ¶¶ 5, 6. In February of 2010, Aristone retained Jacoby Donner to provide legal services in connection with several real estate development projects. Id. ¶ 7. This case involves those legal services provided to two non-party entities affiliated with Aristone: CS Paradiso LLC (“CS Paradiso”) and AH DB Kitchen Aspen Investors LLC (“AH DB”).

         Aristone acted through an affiliated company, CS Paradiso to acquire properties in a Tennessee real estate development called Tellico Village. Am. Counterclaim ¶15. In 2010, the Tellico Village Property Owners Association (“TVPOA”) sued CS Paradiso over unpaid assessments on certain parcels of land. Id. ¶ 16. The parties entered into a Settlement Agreement (the “TVPOA Settlement Agreement”) to resolve the claims and, as part of that Agreement, CS Paradiso was required to execute and record a number of quitclaim deeds and lien releases by August 19, 2013. Id. ¶ 17. Aristone asked Jacoby Donner to execute and record quitclaim deeds and lien releases as required by the TVPOA Settlement Agreement and Jacoby Donner accepted the assignment. Id. ¶ 18. Jacoby Donner executed the quitclaim deeds and lien releases in September 2014, over one year late, in violation of the terms of the TVPOA Settlement Agreement. Id. ¶ 19. In May 2015, TVPOA filed suit against CS Paradiso for breach of the TVPOA Settlement Agreement. CS Paradiso entered into a second Settlement Agreement and Release to resolve that claim (the “Second TVPOA Settlement Agreement”). Id. ¶ 22. As part of the Second TVPOA Settlement Agreement, CS Paradiso was required to pay TVPOA $250, 000.[1]

         Jacoby Donner also represented Aristone's affiliated company, AH DB. In 2013, McGrath and Lippiatt acted through two entities, AH DB and Rocky Aspen Management 204 LLC (“RAM”), to develop a restaurant and lounge in Aspen, Colorado. Am. Counterclaim ¶ 26. Together, the entities formed Rocky Aspen LLC (“Rocky Aspen”). Under their agreement, AH DB was to provide the financing for the restaurant and RAM was to provide restaurant expertise. Id. ¶ 26. Jacoby Donner represented AH DB. Id. ¶ 27. The cost of that project soared and AH DB was unable to provide the necessary capital for the project. Id. ¶ 31. In December 2014, the owner of the building in which the restaurant was located sued Rocky Aspen and McGrath for non-payment of rent and for construction costs. Id. ¶ 30. Rocky Aspen filed for bankruptcy in March 2016. Id. ¶¶ 31, 32. In the months leading up to the bankruptcy, Jacoby Donner failed to enforce existing contracts. Id. ¶ 33. Jacoby Donner also instructed associates to cease working on the AH DB matter and failed to adequately staff its representation of AH DB. Id. ¶¶ 34, 35. Aristone terminated its relationship with Jacoby Donner in the spring of 2016. Am. Counterclaim ¶ 13.

         Jacoby Donner filed the instant suit on May 12, 2017, for nonpayment of legal fees. On July 6, 2017, Aristone, McGrath, and Lippiatt filed amended answer with counterclaims asserting two counts of legal malpractice: Count I for breach of contract and Count II for negligence, both of which arise out of the same alleged conduct. Specifically, counterclaim plaintiffs assert that Jacoby Donner's failure to execute the quitclaim deeds and lien releases pursuant to the TVPOA Settlement Agreement caused Aristone to incur significant legal fees and pay additional funds in settlement. With respect to Jacoby Donner's representation of AH DB, counterclaim plaintiffs assert that Jacoby Donner caused Aristone and McGrath to incur significant legal fees because Jacoby Donner failed to enforce existing contracts and to exercise favorable options, failed to adequately staff the AH DB matter, and instructed attorneys to cease working on the AH DB matter. The breach of contract claims in Count I and the negligence claims in Count II are based on the same conduct.

         III. APPLICABLE LAW

         “The purpose of a 12(b)(6) motion to dismiss is to test the legal sufficiency of the complaint.” Nelson v. Temple Univ., 920 F.Supp. 633, 634 n.2 (E.D. Pa. 1996). To survive a motion to dismiss, plaintiff must allege “sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662 (2009). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 663. In assessing the plausibility of the plaintiff's claims, a district court first identifies those allegations that constitute nothing more than “legal conclusions” or “naked assertions.” Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555, 557 (2007). Such allegations are “not entitled to the assumption of truth.” Iqbal, 556 U.S. at 679. The court then assesses “the ‘nub' of the plaintiff['s] complaint-the well-pleaded, nonconclusory factual allegation[s]”-to determine whether it states a plausible claim for relief. Id.

         IV. DISCUSSION

         Jacoby Donner argues that the counterclaims must be dismissed in their entirety because counterclaim plaintiffs lack standing to bring suit. In the alternative, Jacoby Donner asserts that certain of plaintiffs' counterclaims are barred by the gist of the action doctrine. The Court addresses each argument in turn.

         A. Standing

         Jacoby Donner contends that the counterclaims must be dismissed in their entirety because, counterclaim plaintiffs lack standing to assert claims on behalf of affiliated entities CS ...


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