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Clark v. Podesta

United States District Court, D. Idaho

August 5, 2016

ERIC R. CLARK, attorney at law; and CLARK & ASSOCIATES, PLLC, Plaintiffs
v.
JEFFERY J. PODESTA, individually and as the agent of Street Search, LLC; and STREET SERACH, LLC, a New Jersey limited liability company, Defendants.

          MEMORANDUM DECISION AND ORDER

          Edward J. Lodge United States District Judge

         INTRODUCTION

         Pending before the Court in the above-entitled matter are Plaintiffs’ Motion for Partial Summary Judgment and Defendants’ Motion for Summary Judgment. The parties have filed their responsive briefing and the matter is now ripe for the Court’s review. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, these motions shall be decided on the record before this Court without oral argument.

         FACTUAL AND PROCEDURAL BACKGROUND

         The complete procedural background and facts of this case are established in the Report and Recommendation (“Report”) issued by Magistrate Judge Candy W. Dale relating to Defendants’ Motion to Dismiss. (Dkt. 27.) The Report adopts the record in the light most favorable to Plaintiffs, and this Court incorporates the same in this order, with the exception of those additional facts relevant to the parties’ motions for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (weighing the evidence and drawing inferences from the facts “are jury functions, not those of a judge, whether he is ruling on a motion for summary judgment or for a directed verdict. The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.”). See also Hughes v. U.S., 953 F.2d 531, 541 (9th Cir. 1992).

         Plaintiffs Eric Clark and his law firm, Clark & Associates, PLLC (collectively “Clark”) initiated this lawsuit against Jeffery Podesta-both individually and as the agent of Street Search, LLC, which is also a named defendant (collectively “Podesta”)-on claims of fraud and breach of contract. The claims arise out of Podesta’s alleged failure to pay Clark attorney fees pursuant to an Idaho state court action in which Clark represented Podesta.[1] In September of 2010, Podesta contacted Clark regarding representation. In the initial interview between Clark and Podesta, prior to signing any agreement, Podesta described the case to Clark. Podesta contended he had an arrangement with Robert Coleman, a plaintiff in the state court action, regarding fifty percent ownership of a hedge fund, describing the value of his share of the hedge fund as approximately five million dollars. The state court had entered a default judgment in favor of Coleman. Podesta sought Clark’s representation to set aside the default judgment, and if default was set aside, to pursue a defense and file counterclaims against Coleman in the state court action.

         In September 2010, the initial attorney client agreement was for Podesta to pay a retainer of $2, 500 and $200 an hour for Clark’s attorney time. Later in November 2010, the parties agreed to a partial contingency fee, and Clark alleges Podesta (1) stated he did not have funds to pay an hourly fee, (2) estimated the value of his share of the hedge fund to exceed five million dollars, and (3) claimed to have never been involved in any prior criminal or civil proceeding. (Dkt. 1-4, ¶ 9.) Based on this information, Clark agreed to represent Podesta on a partial contingency fee basis. The Attorney Representation Agreement-Partial Contingency Fee Agreement (“Agreement 1”) Dated: January 10, 2011, [2] included the following language:

Prior to settlement or completion of trial, Attorney may either withdraw with Clients’ consent or upon reasonable notice to Clients, for good cause, including, but not limited to, breach of Clients’ obligation to timely pay attorney fees or Clients’ failure to cooperate with Attorney regarding a material issue in this case.

(Dkt. 22-1.)

         The parties were scheduled to mediate in January of 2012. Just prior to mediation, plaintiffs in the state lawsuit requested financial records of Podesta’s past earnings. Upon inspection of Podesta’s financial records, Clark discovered that Podesta was earning a substantial monthly income. He also learned that the value of the hedge fund in question was likely closer to the one or two million dollar range, rather than the five million dollar range Podesta previously represented at the time Clark was first retained.

         During the mediation, Coleman offered to settle the case notwithstanding there was no written agreement that existed between Podesta and Coleman regarding the hedge fund. Clark, Podesta’s co-counsel, [3] and the mediator all advised Podesta it would be wise to accept the settlement offer, but Podesta rejected the offer. During this time, Clark indicated to Podesta that he was considering withdrawing as counsel because he found Podesta’s rejection of the settlement offer unwise. Clark also expressed his concerns to Podesta that the value of the hedge fund was substantially less than Podesta initially represented.

         In response, Clark alleges Podesta made a promise to Clark to pay his accumulated hourly fees regardless of the outcome of trial, orally modifying the initial written partial contingency fee agreement. Clark maintains he and Podesta agreed to the modification of Agreement 1 such that Clark would continue to represent Podesta and he would bill his time at the hourly rate of $200. Podesta maintains that there was no modification to Agreement 1 and that Clark’s trial representation was pursuant to the partial contingency fee due upon recovery expressly state in Agreement . Podesta also submitted emails from Clark that arguably acknowledge the trial representation was based on Agreement 1.[4]

         On February 6, 2012, the case went to trial. Over Clark’s objections, the court admitted evidence offered by plaintiffs of complaints and a consent judgment from two fraud cases in which Podesta was a named defendant.[5] This was the first time Clark learned of these other proceedings. The jury’s verdict was adverse to Podesta. The total hourly attorney’s fees due to Clark after trial and post-trial motions equaled $129, 576.76, which included deductions for payments previously made to Clark by Podesta.

         Clark agreed to represent Podesta through his appeal of the state lawsuit, and billed Podesta an hourly fee for this representation pursuant to a new written fee agreement, Modification of Attorney Representation (“Agreement 2”). (Dkt. 69-1, Ex. C.)[6] In a June 2012 email, Clark offered a flat fee of $40, 000 for the appeal. (Dkt. 69-1, Ex. D.) Clark claims Podesta agreed to the flat fee and made regular payments. The balance due on the appeal flat fee is the $3, 000 Clarks seeks to recover in Count III.[7]

         Upon completion of the appeal, Clark demanded payment for his accumulated attorney’s fees from trial based on the oral modification of Agreement 1 in addition to the remaining $3, 000 fees owed pursuant to Agreement 2. Podesta refused to respond to Clark’s demands.

         Clark filed this lawsuit on October 31, 2014, in the District Court of the Fourth Judicial District of the State of Idaho to recover his accumulated attorney’s fees, prejudgment interest, and attorney’s fees and costs in this matter. Clark asserts three state-law causes of action: (1) fraud in the inducement (“Count I”); (2) breach of the oral modification to Agreement 1 (“Count II”); and (3) breach of Agreement 2 (“Count III”). On January 8, 2015, [8] Podesta filed a motion to dismiss under both Rule 12(b)(2) and Rule 12(b)(6) of the Federal Rules of Civil Procedure. On September 29, 2015, this Court adopted the Magistrate Judge’s Report, denying Podesta’s Motion to Dismiss. Clark thereafter filed a Motion to Amend the Complaint to add a claim for punitive damages. On February 2, 2016, Clark filed a Motion for Partial Summary Judgment as to Count III of the Complaint. On February 9, 2016, Podesta filed a Motion for Summary Judgment as to all counts of the Complaint.

         STANDARD OF REVIEW

         Motions for summary judgment are governed by Rule 56 of the Federal Rules of Civil Procedure. Rule 56 provides that the court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.

         The Supreme Court has made it clear that under Rule 56 summary judgment is mandated if the non-moving party fails to make a showing sufficient to establish the existence of an element which is essential to the non-moving party’s case and upon which the non-moving party will bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the non-moving party fails to make such a showing on any essential element, “there can be no ‘genuine issue of material fact, ’ since a complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial.” Id. at 323.

         Moreover, under Rule 56, it is clear that an issue, in order to preclude entry of summary judgment, must be both “material” and “genuine.” An issue is “material” if it affects the outcome of the litigation. S.E.C. v. Seaboard Corp., 677 F.2d 1289, 1293 (9th Cir. 1982). An issue, before it may be considered “genuine, ” must be established by “sufficient evidence supporting the claimed factual dispute ... to require a jury or judge to resolve the parties’ differing versions of the truth at trial.” Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir. 1975) (quoting First Nat’l Bank of Arizona v. Cities Serv. Co., Inc., 391 U.S. 253, 289 (1968)). The Ninth Circuit cases are in accord. See, e.g., British Motor Car Distrib. v. San Francisco Automotive Indus. Welfare Fund, 882 F.2d 371, 374 (9th Cir.1989).

         According to the Ninth Circuit, in order to withstand a motion for summary judgment, a party:

(1) must make a showing sufficient to establish a genuine issue of fact with respect to any element for which it bears the burden of proof; (2) must show that there is an issue that may reasonably be resolved in favor of either party; and (3) must come forward with more persuasive evidence than would otherwise be ...

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