ALERDING CASTOR HEWITT LLP v. FLETCHER et al

Filing 245

ORDER ON AFFIRMATIVE DEFENSES AND DISGORGEMENT. As the Court previously ordered, Defendants may present evidence in support of the affirmative defenses of fraudulent inducement and breach of fiduciary duty. Dkt. #211 . If they are successful, Plaintiff may be subject to fee forfeiture, which might extend to all unpaid fees. See id. at 6. But, for the reasons explained above and at the summary stage, that cannot allow disgorgement of fees. (SEE ORDER). Copy to Defendants' via U.S. Mail. Signed by Judge James Patrick Hanlon on 8/26/2021. (MAC)

Case 1:16-cv-02453-JPH-MJD Document 245 Filed 08/26/21 Page 1 of 4 PageID #: 3453

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
ALERDING CASTOR HEWITT LLP,

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Plaintiff,
v.
PAUL FLETCHER,
CAROLE WOCKNER,
Defendants.

No. 1:16-cv-02453-JPH-MJD

ORDER ON AFFIRMATIVE DEFENSES AND DISGORGEMENT
At the August 20, 2021 pretrial conference, Defendants argued that the
Court's order on affirmative defenses allows them to seek disgorgement of fees
previously paid to Plaintiff. See dkt. 211. Plaintiff responded that
disgorgement is barred by the Court's order granting it summary judgment on
Defendants' counterclaims, which included malpractice. See dkt. 172 (granting
summary judgment); dkt. 208 (denying motion to reinstate counterclaims).
When Plaintiff moved for summary judgment on Defendants's
counterclaims, Defendants did not respond. See Dkt. 172 at 7. The Court
therefore accepted Plaintiff's "supported factual assertions as uncontested." Id.
The Court then explained that Plaintiff was entitled to summary judgment on
the counterclaims:
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For legal malpractice, Defendants could not prevail without expert
testimony in their favor, which they did not designate, and also
failed to designate evidence supporting causation, which required a
likelihood of success in the underlying action. Id. at 9–11.
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Case 1:16-cv-02453-JPH-MJD Document 245 Filed 08/26/21 Page 2 of 4 PageID #: 3454

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For breach of contract and breach of fiduciary duty, Defendants
could not prevail "[s]ince [they] cannot prove a case of legal
malpractice." Id. at 14.

In short, Defendants' counterclaims were dismissed because Defendants
failed to designate any evidence in support, and Plaintiff's designated evidence
showed that it was entitled to judgment as a matter of law. See id. at 7;
Sommerfield v. City of Chicago, 863 F.3d 645, 649 (7th Cir. 2017) (explaining
that "[s]ummary judgment is not a time to be coy" as the "parties are required
to put their evidentiary cards on the table"). Defendants therefore may not
try—again—to reinstate a counterclaim by seeking disgorgement. See dkt. 208.
As the Court explained in its previous order denying reinstatement, a breach of
fiduciary duty requires evidence that Plaintiff did not exercise appropriate
"care, skill, or diligence." Id. at 7. At the summary-judgment stage, the
designated evidence did not allow a reasonable jury to make that finding. See
id. at 8; dkt. 172 at 9 (explaining that the designated evidence does not support
"any triable issue as to whether Alerding Castor exercised ordinary skill and
knowledge in representing Defendants").
By contrast, the Court's order allowing Defendants to present "evidence
in support of their affirmative defenses for fraudulent inducement and breach
of fiduciary duty at trial" does not turn on the summary judgment standard.
Dkt. 211 at 7. Defendants may present their defenses at trial, even if they
share some legal similarities with the dismissed counterclaims. See id.

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Case 1:16-cv-02453-JPH-MJD Document 245 Filed 08/26/21 Page 3 of 4 PageID #: 3455

These differences between the summary-judgment standard and the
standard for affirmative defenses explain why Defendants may introduce
evidence supporting the affirmative defense of a breach of fiduciary duty but
cannot obtain disgorgement. Disgorgement can come only through the
counterclaim. See Digitech Computer, Inc. v. Trans-Care, Inc, 646 F.3d 413,
419 (7th Cir. 2011); Philadelphia Indem. Ins. Co. v. Chi. Title Ins. Co., 771 F.3d
391, 402 (7th Cir. 2014) ("[A] counterclaim differs from an . . . affirmative
defense. A counterclaim is used when seeking affirmative relief, while an . . .
affirmative defense seeks to defeat a plaintiff's claim.").
Therefore, as the Court previously ordered, Defendants may present
evidence in support of the affirmative defenses of fraudulent inducement and
breach of fiduciary duty. Dkt. 211. If they are successful, Plaintiff may be
subject to fee forfeiture, which might extend to all unpaid fees. See id. at 6.
But, for the reasons explained above and at the summary stage, that cannot
allow disgorgement of fees.
SO ORDERED.
Date: 8/26/2021

Distribution:
PAUL FLETCHER
1203 E. Cota Street
Santa Barbara, CA 93103
CAROLE WOCKNER
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Case 1:16-cv-02453-JPH-MJD Document 245 Filed 08/26/21 Page 4 of 4 PageID #: 3456

1203 E. Cota Street
Santa Barbara, CA 93103
Michael J. Alerding
ALERDING CASTOR LLP
[e-mail]
Michael E. Brown
KIGHTLINGER & GRAY, LLP (Indianapolis)
[e-mail]
Abraham Murphy
[e-mail]

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