Franco v. Dugan, II et al

Filing 24

ORDER AND REASONS: IT IS HEREBY ORDERED that 12 Motion to Dismiss Pursuant to Rule 12(b)(3) filed by the defendants, is DENIED. IT IS FURTHER ORDERED that pursuant to the Colorado River abstention doctrine, this matter is STAYED and ADMINISTRATIVELY CLOSED pending resolution of the related matter proceeding in the Civil District Court, Parish of Orleans, State of Louisiana. Signed by Judge Mary Ann Vial Lemmon on 12/5/2017.(ajn)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DAVID B. FRANCO

CIVIL ACTION

VERSUS

NO: 17-6559

JAMES R. DUGAN, II AND THE
DUGAN LAW FIRM, APLC

SECTION: "S" (2)

ORDER AND REASONS
IT IS HEREBY ORDERED that the Motion to Dismiss Pursuant to Rule 12(b)(3) filed by
the defendants, James R. Dugan, II and the Dugan Law Firm, APLC (Doc. #12) is DENIED.
IT IS FURTHER ORDERED that pursuant to the Colorado River abstention doctrine, this
matter is STAYED and ADMINISTRATIVELY CLOSED pending resolution of the related matter
proceeding in the Civil District Court, Parish of Orleans, State of Louisiana, The Dugan Law Firm,
APLC v. Damon J. Baldone, APLC d/b/a Damon J. Baldone and Associates, C/A No. 16-7376.
BACKGROUND
This matter is before the court on a motion to dismiss filed by defendants, James R. Dugan,
II and The Dugan Law Firm, APLC (collectively, "Dugan"). Dugan argues that this matter should
be dismissed under Rule 12(b)(3) of the Federal Rules of Civil Procedure because plaintiff's
employment contract specifies that the proper venue for this action is the Civil District Court, Parish
of Orleans, State of Louisiana ("CDC"). Dugan also argues that there is already an action regarding
plaintiff's compensation pending in the CDC and this court should defer to that litigation.
Plaintiff, David B. Franco, filed this action against his former employer, Dugan, seeking to
recover compensation to which he alleges he is entitled. Franco was hired by Dugan as an associate
attorney in July 2010. Franco alleges that at the time he was hired his oral employment agreement
included: a $75,000 annual salary, plus benefits; a $5,000 signing bonus; a 20% handler's fee on

cases Franco handled for the firm, which would be split with other attorneys who also worked on
the case; and, an additional 10% generator's fee for cases Franco brought to the law firm and worked
on.
Franco alleges that from July 2010 to June 2014, he worked for Dugan under the terms of
the July 2010 oral employment contract. According to Franco, during this time he generated and
worked on cases concerning the Deepwater Horizon/BP oil spill litigation, prescription drug co-pay
subsidy litigation, and NFL concussion litigation. Franco alleges that all of the oil spill cases were
signed up between July 2010 and June 2013; all of the drug co-pay subsidy cases were resolved prior
to June 2014; and all of the NFL concussion cases were signed up in 2012 and 2013. Thus, Franco
argues that he is owed handler's and generator's fees on those cases in accordance with the terms of
the July 2010 employment agreement. Franco further alleges that in early 2014, he generated and
worked on cases regarding the General Motors ignition switch recall. Franco claims that he is
entitled to generator's and handler's fees in accordance with the July 2010 employment agreement
for work done on cases that he brought to the Dugan firm and worked on prior to June 20, 2014.
On June 20, 2014, Franco entered into a written employment agreement with Dugan. The
terms of the June 2014 written employment agreement included: a $75,000 annual salary; bonuses
to be paid at Dugan's discretion in an amount not to exceed 20% of the fees paid to Dugan in
connection with a particular case, which would be split with other attorneys who worked on the case
in a manner deemed appropriate by Dugan; and, various benefits such as parking, bar dues,
continuing legal education expenses, professional liability insurance, and health insurance. The June

2

2014 employment agreement provides for the application of Louisiana law to the construction and
enforcement of the agreement, and includes a jurisdiction and venue provision that states:
Any suit involving a claim for compensation allegedly owed as a
result of a matter pending in federal district court in the Eastern
District of Louisiana may only be brought in that venue, if the federal
court can exercise jurisdiction over the suit. Except for the
foregoing, any suit involving any dispute or matter arising under this
Agreement may only be brought in the Civil District Court for the
Parish of Orleans, State of Louisiana, which shall have exclusive
jurisdiction over the subject matter of the dispute.
Further, the June 2014 employment agreement purports to contain "all of the terms of the agreement
between the parties hereto relating to the subject matter hereof" and supersede "any and all [other]
Agreements."
Franco quit working for Dugan on July 31, 2016. On August 16, 2016, Dugan filed an
amended petition in The Dugan Law Firm, APLC v. Damon J. Baldone, APLC d/b/a Damon J.
Baldone and Associates, C/A No. 16-7376, litigation pending in the CDC to add Franco as a
defendant. Dugan alleges that Franco breached the non-solicitation clause in the June 2014
employment agreement, interfered with and conspired to interfere with a professional services
contract and committed conversion by contacting Dugan's clients in the BP oil spill and NFL
concussion litigation and convincing them to discontinue Dugan's representation in favor of
obtaining legal service from Franco.1

1

Section VI of Franco's June 2014 employment agreement with Dugan states:

Subject to applicable law, if Franco's employment with [Dugan] is terminated for any reason
whatsoever, whether voluntarily or involuntarily, Franco agrees, for a period of one year
from the date of termination, not to solicit, directly or indirectly, any clients of [Dugan] for
whom Franco provided services while employed by [Dugan] or other clients or referral

3

The fee dispute between Dugan, Franco and Baldone was also part of the BP oil spill
litigation pending before United States District Judge Barbier in the United States District Court for
the Eastern District of Louisiana. Judge Barbier referred all of the BP oil spill fee disputes to United
States Bankruptcy Judge Jerry A. Brown, who is serving as a Third-Party Claims Adjudicator.
Franco filed a fee dispute regarding the BP oil spill litigation with Judge Brown. On January 27,
2017, Judge Brown issued an order in a fee dispute case titled Ernest Bellanger, Jr. v. The Dugan
Law Firm, which also implicated the fee dispute between Dugan, Franco and Baldone. Judge Brown
held:
2. The withheld attorneys fees at issue in this Dispute are subject to
pending litigation in Civil District Court for the Parish of Orleans
("the Civil District Court"), The Dugan Law Firm, APLC v. Damon
J. Baldone, et al., No. 16-7376, which also involves other parties and
attorney fees for clients not associated with Deepwater Horizon oil
spill.
3. The Civil District Court is the appropriate venue for the
comprehensive determination of the numerous state law claims and
their fair and equitable distribution of attorney fees. It would be a
waste of judicial resource for the Third Party Claims Dispute
Resolution Process to apportion attorneys fees for a single claimant
when the Civil District Court is hearing the entire controversy, and
it could lead to potential inconsistent adjudications and jurisdictional
issues or disputes. If there are related issues or claims necessary for
a complete adjudication of all issues not yet placed before the Civil
District Court, the parties are free to assert them there, as allowed by
that Court.
Dugan filed a motion for summary judgment in the CDC litigation on the issue of whether
the June 2014 employment agreement between Dugan and Franco is the applicable contract that

services of client of [Dugan] whose names became known to Franco while in the employ of
[Dugan]. This paragraph solely precludes solicitation within the following parishes: Orleans,
Jefferson, St. Tammany, East Baton Rouge, Terrebonne and Lafourche.

4

governs Franco's compensation while he was employed by Dugan. On November 3, 2017, the state
court judge held that:
the sole issue before the Court on the Partial Motion for Summary
Judgment filed by [Dugan] was the scope of the contractual
agreement between The Dugan Law Firm and David Franco. the
Court reviewed the contract between David Franco and The Dugan
Law Firm, dated [June 20], 2014, and based upon that review the
Court finds this is a legal issue. The Court finds that the contract is
clear and unambiguous Mr. Franco's compensation is set forth in the
contract related to salary, benefits, and discretionary bonuses. As a
matter of law, any funds paid prior to his departure in July 2016 have
in fact been fixed. . . .
Franco filed this action against Dugan in the United States District Court for the Eastern
District of Louisiana on July 7, 2017, alleging that he was not fully compensated by Dugan pursuant
to the terms of his July 2010 employment agreement. Franco alleges that the June 2014 employment
agreement is invalid because he was forced to sign it within one hour or it being presented to him
with a penalty of immediate termination if he refused to sign. Thus, Franco claims that all amounts
due to him are governed by the July 2010 employment agreement. Franco brings claims under the
legal theories of breach of contract, detrimental reliance, fraud and fraudulent misrepresentation,
violation of the Louisiana Unfair Trade Practices Act, conversion, unpaid commissions, penalties
and attorneys' fees, unjust enrichment, and quantum meruit. Franco contends that some of the
counts pertain to Dugan's removing money from his bank account after it had been deposited.
Dugan filed the instant motion to dismiss arguing that this case should have been filed in the
CDC pursuant to the forum selection clause found in the June 2014 employment agreement. Dugan
argues that all of Franco's claims are related to his compensation and the June 2014 employment
agreement specifies that such claims are subject to the forum selection clause. Dugan also argues

5

that there is already an action regarding plaintiff's compensation pending in the CDC and this court
should defer to that litigation.
Franco argues that his claims are not related to the June 2014 employment agreement, but
rather the July 2010 employment agreement. Franco argues that all of the cases for which he seeks
to recover fees were brought to the Dugan firm and worked on prior to his executing the June 2014
employment agreement, thus the fee disputes are governed by the July 2010 employment agreement
and are not subject to the forum selection clause found in the June 2014 employment agreement.
Franco also argues that the "supersedes" language in the June 2014 employment agreement does not
invalidate the July 2010 employment agreement, but rather replaces it going forward. Further,
Franco argues that his other claims related to Dugan's misappropriating funds from Franco's bank
account after June 20, 2014, are not related to the employment agreement and thus, are not subject
to the forum selection clause.
Additionally, Franco argues that if the forum selection clause applies, it supports the case
being brought in the United States District Court for the Eastern District of Louisiana. The forum
selection clause states that any suit involving a fee dispute resulting from a matter pending in the
United States District Court for the Eastern District of Louisiana can be brought only in this court
if the court would have jurisdiction over the case. Franco states that the majority of his fee claims
pertain to his work on cases related to the BP oil spill litigation, which is pending in this court.
Therefore, Franco contends that the forum selection clause dictates that this is the proper venue.
ANALYSIS
Dugan, seeking to enforce a forum selection clause, filed the instant motion as a motion to
dismiss pursuant to Rule 12(b)(3). In Atlantic Marine Construction Co. v. United States District

6

Court, 134 S.Ct. 568, 580 (2013), the Supreme Court of the United States held that "the appropriate
way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine
of forum non conveniens", not a motion to dismiss under Rule 12(b)(3). At oral argument, Dugan's
counsel argued that this court should defer to the CDC litigation under the doctrine of forum non
conveniens or the Louisiana procedural law exception of lis pendens. Dugan does not specifically
argue for the application of the Colorado River abstention doctrine. However, the court may raise
the application of the Colorado River abstention doctrine sua sponte. Murphy v. Uncle Ben's, Inc.,
168 F.3d 734, 737 n. 1 (5th Cir. 1999).
Pursuant to the Colorado River abstention doctrine, a district court may stay or dismiss a
federal suit when there is a parallel suit pending in state court. Colorado River Water Conservation
Dist. v. United States, 96 S.Ct. 1236 (1976). A federal court may use the Colorado River doctrine
to abstain only under “exception circumstances,” because it “is a narrow exception to a federal
court's ‘virtually unflagging’ duty to adjudicate a controversy that is properly before it.” African
Methodist Episcopal Church v. Lucien, 756 F.3d 788, 797 (5th Cir. 2014) (citations omitted). A
decision to abstain “must be based on considerations of wise judicial administration, giving regard
to conservation of judicial resources and comprehensive disposition of litigation.” Id. (quotations
and citations omitted).
A. Parallelism
Determining whether the federal action and state action are sufficiently parallel is the first
step to determining whether abstention is proper under the Colorado River doctrine. Id. “Parallel
actions are those involving the same parties and the same issues.” Id. (quotations and citations
omitted). However, the “precise identity” of parties and issues is not necessarily required. Id.

7

Instead, the court “look[s] both to the named parties and to the substance of the claims asserted in
each proceeding.” Id.
In this case, the parties are not identical. Franco and Dugan are parties to both cases, but the
CDC litigation includes additional parties, namely Baldone and the Hodgins Law Group, LLC.
However, the substance of the claims demonstrates that the underlying state-court suit and this
federal suit are parallel. Both suits involve fee disputes between Franco and Dugan regarding the
BP oil spill and NFL concussion litigation. Further, both suits involve the applicability of Franco's
June 2014 employment agreement to the fee disputes, and the state court judge has already held that
the "the contract is clear and unambiguous Mr. Franco's compensation is set forth in the contract
related to salary, benefits, and discretionary bonuses." Therefore, the actions are sufficiently parallel.
B. Colorado River Factors
To determine whether “exceptional circumstances” exist so as to justify application of the
Colorado River abstention doctrine, the court examines six factors:
(1) assumption by either court of jurisdiction over a res; (2) relative
inconvenience of the forums; (3) avoidance of piecemeal litigation;
(4) the order in which jurisdiction was obtained by the concurrent
forums; (5) to what extent federal law provides the rules of decision
on the merits; and (6) the adequacy of the state proceedings in
protecting the rights of the party invoking federal jurisdiction.
Id. at 798 (quoting Stewart v. W. Heritage Ins. Co., 438 F .3d 488, 491 (5th Cir. 2006)). The
Supreme Court of the United States has noted that “[t]he decision whether to dismiss a federal action
because of parallel state-court litigation does not rest on a mechanical checklist, but on a careful
balancing of the important factors as they apply to a given case, with the balance heavily weighted
in favor of the exercise of jurisdiction.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 103
S.Ct. 927, 937 (1983).
8

The first factor, jurisdiction over a res, favors abstention. In his January 27, 2017, Order,
Judge Brown directed the parties to deposit a portion of the disputed funds into the registry of the
court at CDC or to an escrow holder. If the parties followed Judge Brown's Order, the CDC has
jurisdiction over a part of the res at issue in this case, namely some of the disputed funds that make
up a portion of the attorneys' fees to which Franco claims he is entitled.
The second factor, relative inconvenience of the fora, is neutral. This factor “primarily
involves the physical proximity of [each] forum to the evidence and witnesses.” African Methodist
Episcopal Church, 756 F.3d at 800 (quoting Evanston Ins. Co. v. Jimco, Inc., 844 F.2d 1185, 1191
(5th Cir. 1988)). Both this court and the CDC are in Orleans Parish, Louisiana and are physically
less than one mile apart.
The third factor, the avoidance of piecemeal litigation, weighs in favor abstention. “The real
concern at the heart of the third Colorado River factor is the avoidance of piecemeal litigation, and
the concomitant danger of inconsistent rulings. . ." Id. (quoting Black Sea Inv., Ltd. v. United
Heritage Corp., 204 F.3d 647, 650–51 (5th Cir. 2000)). The federal and state court litigation involve
the same issues pertaining to the applicablity of Franco's June 2014 employment agreement and the
fees to which he is entitled from Dugan. Franco has asserted claims in this litigation regarding fee
disputes that are not at issue in the CDC case, but he could raise those issues in the CDC litigation
by filing a reconventional demand. Further, the state court has already held that the June 2014
employment agreement governs Franco's compensation salary, benefits, and discretionary bonuses.
There is a real danger of piecemeal litigation and inconsistent rulings.
The fourth factor, the sequence in which jurisdiction was obtained, favors abstention. This
factor “should not be measured exclusively by which complaint was filed first, but rather in terms

9

of how much progress has been made in the two actions.” Id. (quoting Moses H. Cone, 103 S.Ct.
at 940). The amended complaint adding Franco as a defendant to the state court litigaiton was filed
on August 16, 2016. A motion for partial summary judgment has already been decided pertaining
to the applicability of the June 2014 employment agreement. This federal action was filed almost
a year later on July 7, 2017. Dugan has not filed an answer and there is no scheduling order in this
case. Thus, the CDC litigation is substantially further along.
The fifth factor, whether and to what extent federal law controls the merits of the decision,
weighs in favor of abstention. This court has diversity subject matter jurisdiction over this action
pursuant to 28 U.S.C. § 1332 because Franco is a citizen of Texas; Dugan, personally, and the
Dugan law firm are both citizens of Louisiana; and, there is more than $75,000 in controversy. All
of the claims Franco raises in this case arise under Louisiana state law. The CDC, a Louisiana state
court, is certainly capable of deciding Louisiana state law claims.
The sixth factor, the adequacy of the state proceedings to protect Franco's rights, is neutral.
This factor can only be neutral or weigh against abstention, it cannot weigh in favor of abstention.
Id. at 801. Here, there is no indication that Franco's rights would not be adequately protected in the
state court. Franco has an opportunity to present his claims in the CDC litigation by filing a
reconventional demand and he can appeal any adverse decisions in the state courts. Judge Brown
is presiding over fee disputes related to the BP oil spill. Judge Brown has deferred to the CDC
litigation with respect to a BP oil spill fee dispute between Franco, Dugan and Baldone. If this court
were to apply the first sentence of the forum selection clause in the June 2014 employment
agreement or find that the forum selection clause does not apply and find that this is the appropriate
forum for this dispute, because of Franco's claims related to the BP oil spill, the case would be

10

referred to Judge Brown who presumably would again defer to the CDC litigation. None of the other
cases for which Franco claims fees are pending in the Eastern District of Louisiana. Therefore,
those claims would be subject to the second clause of the forum selection clause, which dictates that
CDC is the proper forum. Franco can bring all of his claims within the context of the CDC litigation,
making the sixth factor neutral.
In sum, four of the Colorado River factors favor abstention and two are neutral. The
weighing of the factors shows that abstention is warranted in this case. Therefore, this case will be
STAYED pending the outcome of the CDC litigation.2
CONCLUSION
IT IS HEREBY ORDERED that the Motion to Dismiss Pursuant to Rule 12(b)(3) filed by
the defendants, James R. Dugan, II and the Dugan Law Firm, APLC (Doc. #12) is DENIED.
IT IS FURTHER ORDERED that pursuant to the Colorado River abstention doctrine, this
matter is STAYED and ADMINISTRATIVELY CLOSED pending resolution of the related matter
proceeding in the Civil District Court, Parish of Orleans, State of Louisiana, The Dugan Law Firm,
APLC v. Damon J. Baldone, APLC d/b/a Damon J. Baldone and Associates, C/A No. 16-7376.

2

“Most circuits to have considered the issue have held that a stay is always preferable [to dismissal]
because it may likely produce the same practical result as a dismissal while still leaving the docket open in
case loose ends remain at the conclusion of the state proceedings.” Saucier v. Aviva Life & Annuity Co., 701
F.3d 458, 465 (5th Cir. 2012) (quoting Jimenez v. Rodriguez–Pagan, 597 F.3d 18, 31 (1st Cir. 2010)).

11

New Orleans, Louisiana, this _____ day of December, 2017.
5th

____________________________________
MARY ANN VIAL LEMMON
UNITED STATES DISTRICT JUDGE

12