Teras et al v. Wilde et al
Filing
55
MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 11/12/2015. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
CHRISTOPHER A. TERAS, et al.
:
v.
:
Civil Action No. DKC 14-0244
:
JINHEE KIM WILDE, et al.
:
MEMORANDUM OPINION
Presently pending and ready for resolution in this breach
of contract action is a motion to dismiss the counterclaim of
Jinhee
Kim
Wilde
and
Wilde
&
Associates,
LLC
(“W&A”)
(collectively, the “Counterplaintiffs” or “Defendants”), filed
by
Christopher
(“Worldwide”)
and
necessary.
Teras
and
(collectively,
“Plaintiffs”).
briefed,
A.
(ECF
the
Local
No.
court
Rule
the
24).
now
Worldwide
105.6.
Inc.
“Counterdefendants”
The
rules,
Personnel,
issues
no
For
have
hearing
the
been
being
following
or
fully
deemed
reasons,
Counterdefendants’ motion to dismiss the counterclaim will be
denied.
I.
Background
A.
Factual Background1
Plaintiff
Christopher
A.
Teras
and
Defendant
Jinhee
Kim
Wilde are both lawyers who specialize in immigration law.
In
September 2004, Mr. Teras and Ms. Wilde formed a partnership to
practice
(“T&W”).
law,
which
they
organized
(ECF No. 19, at 8).
as
Teras
&
Wilde,
PLLC
T&W worked with U.S. employers
and foreign workers, particularly those from Asia, in an effort
to secure visas for them to enter the United States and take
employment opportunities that U.S. employers could not fill with
U.S. workers.
In December 2008, Mr. Teras and Ms. Wilde decided
to discontinue their partnership, but they did not reach any
agreement concerning the termination of T&W.
from T&W effective January 31, 2009.
Ms. Wilde withdrew
At that time, Ms. Wilde
demanded that Mr. Teras provide an accounting of firm assets and
liabilities, and Mr. Teras allegedly refused.
suit
in
the
Superior
Court
for
the
demanding an accounting and other relief.
Ms. Wilde filed
District
of
Columbia
On July 20, 2010, Mr.
Teras and Ms. Wilde entered into a settlement agreement (the
“Settlement Agreement” or “Agreement”) to resolve all issues and
1
The facts recounted here are either set forth in
Counterplaintiffs’ answer and counterclaim (ECF No. 19) or
evidenced by documents referenced or relied upon in the
counterclaim.
Additional background of this litigation is set
forth in a prior decision of the court.
(See ECF No. 14).
Accordingly, this background discussion offers only a brief
summary and assumes some familiarity with the facts.
2
claims between the parties relating to the dissolution of T&W.
Other
parties
to
the
Settlement
Agreement
included:
T&W;
Christopher A. Teras, P.C. (“CATPC”), a professional corporation
wholly
owned
by
Mr.
Teras;
and
Worldwide,
a
corporation
organized under the laws of the District of Columbia and wholly
owned
by
Mr.
Teras.
Mr.
Teras
and
Ms.
Wilde
executed
the
Settlement Agreement on behalf of these entities.
After Ms. Wilde brought suit for an accounting, Mr. Teras
arranged the filing of Bar complaints against Ms. Wilde in an
alleged
attempt
“to
gain
an
advantage
in
his
settlement
negotiations with [Ms.] Wilde, and in his efforts to compete
with [her] for future business.”
Counterplaintiffs allege that,
since the parties entered into the Settlement Agreement, Mr.
Teras has affirmatively and voluntarily assisted in at least two
proceedings against Ms. Wilde and communicated with Bar counsel
in both Maryland and the District of Columbia.
(Id. at 11).
According to Counterplaintiffs, Mr. Teras communicated with a
key
witness
against
Ms.
Wilde,
affirmatively
and
voluntarily
assisted that witness in providing testimony, and supported Bar
counsel
in
testimony.
locating,
securing,
and
preparing
that
witness
Mr. Teras also allegedly voluntarily disclosed the
Settlement Agreement to the D.C. Bar.
Furthermore, the Settlement Agreement governed the payment
of liabilities then pending and the disposition of future fees
3
received from foreign workers whose cases had been initiated by
T&W and remained pending.
Under the terms of their contracts
with T&W, foreign workers made incremental payments to T&W at
various stages and “a larger, balloon payment upon issuance of a
visa to the foreign worker.”
(Id. at 9).
Counterplaintiffs
allege that, during the course of the parties’ partnership and
continuing through the negotiation of the Settlement Agreement,
Mr. Teras represented that the foreign recruiters with whom Mr.
Teras and Ms. Wilde worked on behalf of foreign recruits were
aware of and had entered into agreements with Worldwide.
Mr.
Teras also allegedly represented that the U.S. employers to whom
the
foreign
Worldwide.
recruits
had
applied
had
relationships
with
But, according to Counterplaintiffs, Worldwide had
no such agreements.
(Id. at 9-10).
“Instead, Worldwide existed
only as a device for [Mr.] Teras to funnel to himself a greater
share of the fees paid by foreign recruiters.”
(Id. at 10).
Ms. Wilde relied on Mr. Teras’ representations to her detriment,
as
she
consented
additional
Worldwide.”
payments
to
hundreds
to
Mr.
of
Teras
thousands
“under
of
the
dollars
in
auspices
of
Ms. Wilde also agreed to give Worldwide a role in
future proceedings and a portion of future fees received from
foreign
recruiters.
The
Settlement
Agreement
portion of these future fee payments to Worldwide.
4
allocated
(Id. at 9).
a
B.
On
Procedural Background
January
27,
2014,
Plaintiffs
Mr.
Teras,
CATPC,
and
Worldwide filed a complaint against Defendants Ms. Wilde and W&A
alleging that Defendants failed to comply with the Settlement
Agreement since its inception.
On March 5, 2014, Defendants
filed a motion to dismiss (ECF No. 6) and a motion to seal (ECF
No. 8).
opinion
On February 26, 2015, the court issued a memorandum
and
order
motion to seal.
denying
Defendants’
motion
to
dismiss
and
filed
an
answer
and
(ECF Nos. 14; 15).
Defendants
as
Counterplaintiffs
counterclaim on March 12, 2015.
(ECF No. 19).
Plaintiffs as
Counterdefendants filed a motion to dismiss Counts I and II of
the counterclaim.
(ECF No. 24).
Counterplaintiffs responded in
opposition and requested a hearing on the motion (ECF No. 29),
and Counterdefendants replied (ECF No. 30).
II.
Standard of Review
The purpose of a motion to dismiss under Rule 12(b)(6) is
to
test
the
sufficiency
of
the
complaint,
or
counterclaim.
Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir.
2006).
A complaint need only satisfy the standard of Rule 8(a),
which requires a “short and plain statement of the claim showing
that the pleader is entitled to relief.”
Fed.R.Civ.P. 8(a)(2).
“Rule 8(a)(2) still requires a ‘showing,’ rather than a blanket
assertion,
of
entitlement
to
relief.”
5
Bell
Atl.
Corp.
v.
Twombly,
550
U.S.
544,
555
n.3
(2007).
That
showing
must
consist of more than “a formulaic recitation of the elements of
a cause of action” or “naked assertion[s] devoid of further
factual enhancement.”
Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citations omitted).
At this stage, all well-pleaded allegations in a complaint
must be considered as true, Albright v. Oliver, 510 U.S. 266,
268 (1994), and all factual allegations must be construed in the
light
most
favorable
to
the
plaintiff.
See
Harrison
v.
Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.
1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134
(4th Cir. 1993)); Brockington v. Boykins, 637 F.3d 503, 505-06
(4th Cir. 2011).
In evaluating the complaint, unsupported legal
allegations
not
need
be
accepted.
Revene
Comm’rs, 882 F.2d 870, 873 (4th Cir. 1989).
v.
Charles
Cnty.
Legal conclusions
couched as factual allegations are insufficient, Iqbal, 556 U.S.
at 678, as are conclusory factual allegations devoid of any
reference to actual events.
United Black Firefighters v. Hirst,
604 F.2d 844, 847 (4th Cir. 1979).
facts
do
not
permit
the
court
to
“[W]here the well-pleaded
infer
more
than
the
mere
possibility of misconduct, the complaint has alleged, but it has
not ‘show[n] that the pleader is entitled to relief.’”
556
U.S.
at
679
(quoting
Fed.R.Civ.P.
8(a)(2)).
Iqbal,
Thus,
“[d]etermining whether a complaint states a plausible claim for
6
relief will . . . be a context-specific task that requires the
reviewing court to draw on its judicial experience and common
sense.”
Id.
“Even
though
the
requirements
for
pleading
a
proper complaint are substantially aimed at assuring that the
defendant be given adequate notice of the nature of a claim
being made against him, they also provide criteria for defining
issues
for
complaints.”
trial
and
for
early
disposition
of
inappropriate
Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir.
2009).
Allegations
of
fraud,
which
Counterplaintiffs
assert
in
Count I of their counterclaim, are subject to the heightened
pleading standard of Fed.R.Civ.P. 9(b).
783.
Rule 9(b) states that, “in alleging a fraud or mistake, a
party
must
state
with
particularity
constituting the fraud or mistake.
and
Harrison, 176 F.3d at
other
generally.”
conditions
of
a
the
circumstances
Malice, intent, knowledge,
person’s
mind
may
be
alleged
Such circumstances typically “include the ‘time,
place, and contents of the false representation, as well as the
identity of the person making the misrepresentation and what
[was] obtained thereby.’”
Id. at 784 (quoting 5 Charles Alan
Wright & Arthur R. Miller, Fed. Prac. & Proc. § 1297 (2d ed.
1990)).
Rule 9(b) provides the defendant with sufficient notice
of the basis for the plaintiff’s claim, protects the defendant
against frivolous suits, eliminates fraud actions where all of
7
the facts are learned only after discovery, and safeguards the
defendant’s reputation.
Id.
at 784 (citation omitted).
In
keeping with these objectives, “[a] court should hesitate to
dismiss a complaint under Rule 9(b) if the court is satisfied
(1) that the defendant[s were] made aware of the particular
circumstances for which [they] will have to prepare a defense at
trial and (2) that [the] plaintiff has substantial prediscovery
evidence of those facts.”
Id.
Fraud allegations that fail to
comply with Rule 9(b) warrant dismissal under Rule 12(b)(6).
See Harrison, 176 F.3d at 783 n.5.
III. Analysis
Fraud (Count I)2
A.
In Count I of the counterclaim, Counterplaintiffs allege
that
Mr.
Teras
relationships
According
with
to
relationships.
that
Ms.
made
Wilde
false
foreign
representations
recruiters
Counterplaintiffs,
on
Mr.
and
Worldwide
(ECF No. 19, at 9-10).
relied
about
Teras’
U.S.
had
Worldwide’s
employers.
no
such
Counterplaintiffs allege
representations
to
her
detriment, as she consented to hundreds of thousands of dollars
in additional payments to Mr. Teras and agreed to give Worldwide
a
role
received
in
future
from
proceedings
foreign
and
recruiters.
2
a
portion
of
future
Counterplaintiffs
fees
seek
The parties agree that District of Columbia law, which the
parties chose in the Settlement Agreement, applies to Count I.
(ECF No. 28-1 § 14(g)).
8
declaratory judgment establishing that the Settlement Agreement
is
unenforceable
future
and
that
payments.
Counterplaintiffs
Worldwide
is
not
Counterdefendants
state
an
actionable
entitled
challenge
fraud
claim
to
any
whether
on
which
relief may be granted, arguing that the Settlement Agreement
resolved all of the claims between Mr. Teras, Ms. Wilde, and
affiliate entities arising from the dissolution of T&W.
No. 24-1, at 1).3
Counterplaintiffs’
(ECF
In addition, Counterdefendants argue that
fraud
claim
is
barred
by
the
statute
of
limitations, and that Ms. Wilde did not reasonably rely on Mr.
Teras’ representations.
(Id. at 5-8).
Counterdefendants first assert that Counterplaintiffs fail
to state an actionable fraud claim because such claims were
released in the Settlement Agreement.
The release provision in
§ 3 of the Settlement Agreement provides:
Except with respect to the Parties’
respective
covenants,
obligations
and
agreements under this Agreement, Wilde, on
Wilde’s own behalf and on behalf of each of
Wilde’s
Affiliates,
hereby
absolutely,
unconditionally and forever releases and
discharges
the
other
Parties
to
this
Agreement and the Affiliates of the other
Parties to this Agreement, from any and all
claims of any nature whatsoever, in law or
3
Counterdefendants’ motion does not distinguish between
arguments made on behalf of Mr. Teras or Worldwide.
Neither
does Counterdefendants’ motion distinguish between Ms. Wilde and
W&A.
Accordingly, this memorandum opinion will refer to
Counterdefendants and Counterplaintiffs collectively, unless
otherwise noted.
9
in equity, whether known or unknown, whether
or not damages have accrued or are now known
or ascertainable, in any way resulting from,
arising out of, taking place, or relating to
[any act or omission occurring prior to July
20, 2010].
(ECF
No.
28-1
§
3(d))
(emphases
added).4
Counterdefendants
contend that because Counterplaintiffs’ fraud claim is based on
Mr. Teras’ purported misrepresentations prior to the effective
date of the Settlement Agreement, the claim included in Count I
was released and cannot now be asserted.
Counterplaintiffs
concede
that
(ECF No. 24-1, at 4).
Mr.
Teras’
alleged
misrepresentations occurred within the timeframe covered by the
Settlement Agreement (ECF No. 19, at 9), but assert that Mr.
Teras’ alleged misrepresentations fraudulently induced Ms. Wilde
to enter into the Settlement Agreement (ECF No. 29, at 3).
4
Defendants’ counterclaim incorporates by reference the
Settlement Agreement.
(See ECF No. 19).
Accordingly, the
Settlement Agreement, which is attached as an exhibit to
Plaintiffs’ motion to dismiss, may be considered in adjudicating
Plaintiffs’ motion. See Philips v. Pitt Cnty. Mem’l Hosp., 572
F.3d 176, 180 (4th Cir. 2009) (permitting courts to consider
documents attached to the motion to dismiss that are integral to
the counterclaim and authentic); Clark v. BASF Corp., 142
F.App’x 659, 661 (4th Cir. 2005) (citing 5A Charles Alan Wright &
Arthur R. Miller, Fed. Prac. & Proc. § 1327 (3d ed. 2004)
(“[W]hen the plaintiff fails to introduce a pertinent document
as part of her pleading, a significant number of cases from
throughout the federal court system make it clear that the
defendant may introduce the document as an exhibit to a motion
attacking the sufficiency of the pleading; that certainly will
be true if the plaintiff has referred to the item in the
complaint and it is central to the affirmative case.”)).
10
Under
fraud
Rule
“must,
9(b),
at
a
a
plaintiff’s
minimum,
allegations
describe
the
time,
sounding
place,
in
and
contents of the false representations, as well as the identity
of the person making the misrepresentation and what he obtained
thereby.”
United States ex rel. Owens v. First Kuwaiti Gen.
Trading & Contracting Co., 612 F.3d 724, 731 (4th Cir. 2010)
(citation omitted).
Fraud claims that do not comply with Rule
9(b) warrant dismissal under Rule 12(b)(6).
See Harrison, 176
F.3d at 783 n.5.
Here, Counterplaintiffs’ allegations are not
too
the
vague,
and
counterclaim
contains
specific
facts
regarding Mr. Teras’ purported fraud that led Ms. Wilde to enter
into the Settlement Agreement.
According to Counterplaintiffs,
Mr. Teras made false representations during the course of the
parties’
partnership
Agreement.
and
negotiation
(ECF No. 19, at 9).
of
the
Settlement
Counterplaintiffs allege that
“Worldwide existed only as a device for [Mr.] Teras to funnel to
himself a greater share of the fees paid by foreign recruiters”
and
that
Ms.
representations
counterclaim
Wilde
to
her
in
and
relied
detriment.
describes
misrepresentations
participants
reasonably
Mr.
Teras’
fraudulent
relevant
on
at
(Id.
10).
alleged
inducement,
conversations
Mr.
and
Teras’
The
fraudulent
identifies
the
negotiations,
and
alleges that Ms. Wilde agreed to the terms of the Settlement
Agreement as a result of her reasonable reliance on Mr. Teras’
11
misrepresentations.
(Id.
at
9-10).
These
allegations
are
sufficient, and the release provision is no bar to Count I.
Counterdefendants next argue that Count I is barred by a
three-year statute of limitations.
D.C. Code § 12-301(8))).
affirmative
defense
that
(ECF No. 24-1, at 5 (citing
“The statute of limitations is an
should
only
be
employed
to
dismiss
claims pursuant to Rule 12(b)(6) when it is clear from the face
of the complaint that the claims are time barred.”
Welch
&
Rushe,
Inc.,
28
F.Supp.3d
446,
456
Long v.
(D.Md.
2014)
(citations omitted); 5B Charles Alan Wright & Arthur R. Miller,
Fed. Prac. & Proc. § 1357 (3d ed.) (“A complaint showing that
the governing statute of limitations has run on the plaintiff’s
claim
for
relief
is
the
most
common
situation
in
which
the
affirmative defense appears on the face of the pleading and
provides a basis for a motion to dismiss under Rule 12(b)(6).”).
Counterdefendants contend that dismissal is proper “[b]ecause
the facts necessary for the [c]ourt’s determination of whether
the statute of limitations on [Ms.] Wilde’s fraud claim has run
are apparent from the face of [the counterclaim].”
1, at 5).
(ECF No. 24-
In response, Counterplaintiffs argue that the face of
the counterclaim does not reveal when the fraud claim accrued.
(ECF No. 29, at 4).
What constitutes the accrual of a cause of
action is a question of law.
See, e.g., Bussineau v. President
of Georgetown College, 518 A.2d 423, 425 (D.C. 1986).
12
When
accrual actually occurred in a particular case is a question of
fact.
See, e.g., Ehrenhaft v. Malcolm Price, Inc., 483 A.2d
1192, 1204 (D.C. 1984).
“When one person defrauds another,
there will be a delay between the time the fraud is perpetrated
and the time the victim awakens to the fact.”
Kropinski v.
World Plan Executive Council-US, 853 F.2d 948, 955 (D.C. Cir.
1988).
Due to this inherent delay, “a cause of action [for
fraud] accrues for purposes of the statute of limitations when
the plaintiff has either actual notice of her cause of action or
is
deemed
to
be
on
inquiry
notice
because
.
.
.
an
investigation, if conducted, would have led to actual notice.”
Diamond v. Davis, 680 A.2d 364, 372 (D.C. 1996).
“[T]he inquiry
is highly fact-bound and requires an evaluation of all of the
plaintiff’s circumstances.”
the
face
of
the
Id.
counterclaim
Here, it is not apparent from
when
the
alleged
fraud
was
discovered by Counterplaintiffs, or reasonably should have been.
See Kropinski, 853 F.2d at 955; Johnson v. Long Beach Mortgage
Loan Trust 2001-4, 451 F.Supp.2d 16, 42 (D.D.C. 2006).
The
allegations in the counterclaim reveal when Mr. Teras allegedly
made false representations to Ms. Wilde, but Counterplaintiffs
do not assert when Ms. Wilde discovered or reasonably should
have discovered the fraud.
Counterdefendants also argue that Count I fails because Ms.
Wilde’s alleged reliance on Mr. Teras’ misrepresentations was
13
unreasonable.
Settlement
found
in
Asserting
Agreement
the
that
renders
Settlement
the
integration
immaterial
Agreement,
clause
of
the
representations
not
Counterdefendants
contend
that the statements on which Ms. Wilde relied were immaterial
and her reliance thus was unreasonable.
(ECF No. 24-1, at 7).
The underlying fraud claim at issue requires that Ms. Wilde
acted in reasonable reliance on the alleged misrepresentation.
See, e.g., Atraqchi v. GUMC Unified Billing Servs., 788 A.2d
559, 563 (D.C. 2002).
Counterplaintiffs challenge whether the
Settlement Agreement’s integration clause renders Ms. Wilde’s
reliance unreasonable and bars her fraud claim.
According to
Counterplaintiffs, Mr. Teras’ “fraudulent statements were as to
existing facts that formed the basis for the parties’ agreement,
and which were perpetuated in that agreement.
. . .
That is
precisely the type of fraud that is not barred by an integration
clause, and on which a fraud claim can proceed.”
at 10).
(ECF No. 29,
Counterdefendants misread case law to stand for the
proposition
that
representations
one
where
may
the
not
reasonably
Settlement
rely
Agreement
on
prior
contains
an
integration clause.
See Washington Inv. Partners of Delaware,
LLC
K.S.C.C.,
v.
Sec.
House,
28
A.3d
566,
576
(D.C.
2011);
Hercules & Co. v. Shama Rest. Corp., 613 A.2d 916, 931-32 (D.C.
1992); One-O-One Enterprises, Inc. v. Caruso, 848 F.2d 1283,
1287 (D.C. Cir. 1988).
The factual scenarios in the case law
14
cited by Counterdefendants are inapposite.
seek
relief
not
for
prior
oral
agreements
Counterplaintiffs
that
contradict
statements contained in the Settlement Agreement, but because
Mr.
Teras
allegedly
presented
induce
her
to
Ms.
Wilde
enter
into
with
misleading
the
Settlement
information
to
Agreement.
The present case is distinguishable from those on
which Counterdefendants rely where prior oral representations
that provided the basis of the plaintiff’s claim were terms or
promises not included in the contract.
Here, Counterplaintiffs
assert that the information furnished to Ms. Wilde in attempt to
form the Settlement Agreement was fraudulent and misleading, and
it is a question of fact whether Ms. Wilde reasonably relied on
such
statements
in
determining
whether
to
enter
into
the
contract.
Contrary to Counterdefendants’ assertions (ECF No. 30, at
8), District of Columbia case law recognizes this distinction:
Although the court did not engage in
any
significant
discussion
of
the
differences between the fraud claims in One–
O–One and those at hand in Whelan[ v. Abell,
48 F.3d 1247 (D.C. Cir. 1995)], and although
the discussion of fraud in the inducement in
One–O–One is technically dictum, we agree
with the court’s general statement in Whelan
that an integration clause does not provide
a blanket exemption to claims of fraud in
the inducement.
We are satisfied, however,
that the
Whelan
court was correct in
distinguishing
allegedly
fraudulent
representations with regard to promises of
future behavior.
See Hercules, 613 A.2d
15
918-19 (involving allegations that [the
defendant’s] misrepresentation that it would
deposit money into an account to satisfy
obligations under the contract induced [the
plaintiff]
to
agree
to
include
an
arbitration clause in the contract); One–O–
One, 848 F.2d at 1285 (involving allegations
that [the defendants’] promise that they did
not intend to sell or dispose of their
interest in [the business], although not
included in the final, fully integrated
agreement,
fraudulently
induced
[the
plaintiff] to enter into the contract).
When a written contract contains an
incorporation clause, any alleged prior
representations that a party will or will
not do something in the future that are not
included in that written contract generally
do not support a fraud-in-the-inducement
claim.
On
the
other
hand,
prior
representations
that
conceal
fraudulent
conduct, thereby precluding a party from
filing
suit
within
the
statute
of
limitations period, may provide support for
such a claim.
Here, we respect that
distinction and note that [the plaintiff’s]
allegations involved representations that
may have shielded fraudulent conduct and
information
which
allegedly
would
have
enabled her to file her suit before the
statute expired.
Drake
v.
McNair,
993
A.2d
607,
624
(D.C.
2010).
Counterplaintiffs adequately allege that “[Ms.] Wilde reasonably
relied
on
detriment.
additional
[Mr.
.
Teras’]
.
.
payments
representations,
[She]
[to
would
not
Worldwide]
and
so
have
agreed
had
she
representations about Worldwide were false.”
10).
did
to
to
known
.
her
.
.
[his]
(ECF No. 19, at
Because “an integration clause does not provide a blanket
exemption”
to
fraud
claims,
16
Drake,
993
A.2d
at
624,
Counterdefendants’ motion to dismiss Count I of the counterclaim
will be denied.
See Intelsat USA Sales Corp. v. Juch-Tech,
Inc., 935 F.Supp.2d 101, 114 (D.D.C. 2013).
B.
Breach of Contract (Count II)
Counterplaintiffs argue that Mr. Teras twice breached the
Settlement Agreement.
Teras
breached
Columbia
Bar
by
cooperating
counsel
Wilde.5
Second,
disclosed
the
violation
of
First, Counterplaintiffs assert that Mr.
in
Maryland
disciplinary
Counterplaintiffs
Settlement
the
with
Agreement
contract’s
and
District
proceedings
allege
to
D.C.
confidentiality
against
that
Bar
Mr.
of
Ms.
Teras
counsel,
provision.
in
In
response, Counterdefendants contend that Counterplaintiffs have
failed to state a plausible claim for breach of contract because
the Settlement Agreement permitted Mr. Teras to act as he did.
1.
Cooperating with Maryland and D.C. Bar Counsel
Counterdefendants
breach-of-contract
argue
“claim
that
must
be
Counterplaintiffs’
dismissed
because
first
the
Settlement Agreement expressly permits Mr. Teras to take ‘any
5
Counterdefendants note that Ms. Wilde’s disciplinary
proceedings in the District of Columbia arose from her criminal
conviction by the Incheon District Court in Incheon, South
Korea, “based on that court’s finding that respondent had stolen
$1,100 in U.S. currency from another passenger while on a flight
from Washington to Incheon, South Korea.” In re Wilde, 68 A.3d
749,
751
(D.C.
2013);
(ECF
No.
24-1,
at
8
n.4).
Counterplaintiffs assert that a Maryland complaint against Ms.
Wilde was resolved with a finding that she did not violate any
ethics rules. (ECF No. 19, at 11).
17
actions
required
by
law’
and
comply
‘with
the
rules
of
professional conduct applicable to lawyers in any jurisdiction
in which’ [Mr.] Teras is licensed to practice.”
at 8 (quoting ECF No. 28-1 § 12(h))).6
(ECF No. 24-1,
Counterdefendants refer
to the relevant subsection in full:
Each Party agrees that it will not
affirmatively
voluntarily
encourage,
cooperate with, or assist in any way in the
prosecution of any case (civil or criminal)
or proceeding against any other Party,
including without limitation any pending Bar
complaints,
the
pending
case
in
Korea
against Wilde, and any potential cases by
Erica Chang or TD Bank.
Nothing herein
shall restrict a Party from i) pursuing any
claim, cause of action or the enforcement of
any right, remedy or agreement arising under
this Agreement, or ii) taking any actions
required by law, such as responding to any
court or administrative subpoenas or other
process,
or
iii)
responding
to
lawful
requests from any governmental official
including, without limitation, Bar counsel
or its agents or representatives, . . . or
v) complying with the rules of professional
conduct
applicable
to
lawyers
in
any
jurisdiction where such Party is licensed to
practice.
(ECF
No.
28-1
§
12(h)
(emphases
added)).
According
to
Counterdefendants, the Settlement Agreement’s express carve-outs
render Counterplaintiffs’ breach-of-contract claim implausible.
(ECF No. 24-1, at 9-10).
Counterdefendants cite pertinent rules
6
Counterdefendants erroneously refer to § 13(h) in their
memorandum in support of their motion to dismiss. (See ECF No.
24-1, at 9-10).
The provision is styled as § 12(h) in the
Settlement Agreement. (See ECF No. 28-1 § 12(h)).
18
of
professional
conduct
from
Maryland
and
the
District
of
Columbia to show that Mr. Teras “had a duty, not an option, to
report [Ms.] Wilde’s misconduct to Bar Counsel.”
(Id. at 10).
Counterdefendants thus assert that Mr. Teras’ conduct “is not
prohibited by the Settlement Agreement because it constitutes
‘actions required by law,’ ‘responding to lawful requests from .
.
.
Bar
Counsel,’
professional
and/or
‘complying
The
Settlement
conduct.’
with
the
that
“there
is
a
of
creates
Agreement
explicit safe harbor for these types of actions.”
ECF No. 28-1 § 12(h))).
rules
an
(Id. (quoting
In response, Counterplaintiffs argue
difference
between
responding
to
a
lawful
request from Bar Counsel for information . . . and voluntarily
searching for and providing information to Bar Counsel.”
(ECF
No. 29, at 11).
According to Counterplaintiffs, Mr. Teras’ duty
is
at
irrelevant
counterclaim
the
“alleges
that
motion-to-dismiss
he
stage,
‘affirmatively
and
as
the
voluntarily
assisted in at least two proceedings’” against Ms. Wilde and
“assisted Bar Counsel in ‘locating, securing, and preparing’”
witness testimony.
(Id. (quoting ECF No. 19, at 11)).
Counterplaintiffs
plausibly
allege
that
the
Settlement
Agreement created a number of obligations for Mr. Teras, and
that he breached them.
the
parties
from
Here, the Settlement Agreement prohibits
“affirmatively
voluntarily
encourag[ing],
cooperat[ing] with, or assist[ing] in any way in the prosecution
19
of any case (civil or criminal) or proceeding against any other
Party,” subject to some enumerated exceptions.
12(h); see ECF No. 19, at 11).
not
allege
undertaken
other
explicitly
pursuant
lawful
assistance
that
to
demands,
as
the
affirmative
Although Counterplaintiffs do
Mr.
the
(ECF No. 28-1 §
Teras’
rules
of
professional
allegations
and
assistance
are
not
conduct
describing
voluntary
was
Mr.
or
Teras’
sufficient
to
satisfy the pleading standard and assert a claim for breach of
contract.
2.
Disclosing the Existence of the Settlement Agreement
Counterplaintiffs also allege that Mr. Teras “voluntarily
disclosed the Settlement Agreement to the D.C. Bar.”
19, at 11).
does
“not
(ECF No.
According to Counterdefendants, the counterclaim
allege
that
[Mr.]
Teras
provided
a
copy
of
the
Settlement Agreement to Bar Counsel or that he disclosed any or
all
of
the
content
conditions.”
of
the
Settlement
Agreement’s
terms
or
(ECF No. 24-1, at 11 (emphasis in original)).
Counterdefendants argue that the counterclaim “fails to state a
claim for breach of the Settlement Agreement’s confidentiality
provision
Teras
because
disclosed
Counsel
confidentiality
the
Settlement
avers
only
original)).
[Counterplaintiffs’]
conduct
provision.”
allegation
Agreement’s
expressly
(Id.
at
that
existence
permitted
11-12
[Mr.]
to
by
(emphasis
Bar
the
in
Counterdefendants thus contend that “[Mr.] Teras
20
did not breach the Settlement Agreement by communicating that
the
parties
had
litigation.”
entered
(Id.
at
into
12).
an
In
agreement
response,
to
end
their
Counterplaintiffs
assert that Counterdefendants rewrite the counterclaim and argue
that the counterclaim does “allege[] that [Mr. Teras] disclosed
the Settlement Agreement itself.”
(ECF No. 29, at 12).
Construing the factual allegations of the counterclaim in
the light most favorable to Counterplaintiffs, Counterdefendants
cannot succeed on their motion to dismiss.
The confidentiality
provision of the Settlement Agreement provides:
Except as expressly set forth in this
Agreement,
such
Party
shall
keep
this
Agreement
confidential
and
shall
not
disclose the terms of this Agreement to any
individual,
association,
corporation,
government agency or other entity without
specific grant of permission in writing by
the other Parties, provided that any Party
may disclose the terms of this Agreement
pursuant
to
applicable
law,
statute,
regulation, administrative process or court
process;
and
further
provide
that
the
Parties may state that they have resolved
their dispute.
(ECF
No.
28-1
§
14(a)
(emphases
added)).
Counterplaintiffs
allege that Mr. Teras breached the confidentiality provision of
the
Settlement
Agreement
by
“voluntarily
Settlement Agreement to the D.C. Bar.”
disclos[ing]
the
(ECF No 19, at 11).
The
Settlement Agreement prohibits the parties from disclosing the
terms
of
the
agreement,
which
21
would
certainly
encompass
disclosing
the
actual
Counterplaintiffs’
contract
allegation
in
that
its
Mr.
entirety.
Teras
Here,
disclosed
the
Settlement Agreement itself goes beyond what Counterdefendants
suggest, which is that Mr. Teras disclosed only the existence of
the
Settlement
Agreement.
(ECF
No
24-1,
at
12).
Counterdefendants also argue that the confidentiality provision
contains a carve-out permitting the parties to disclose terms
“pursuant to applicable law . . . [or] administrative process or
court
process.”
(ECF
No.
28-1
§
14(a)).
However,
Counterplaintiffs do not allege that Mr. Teras disclosed the
Settlement
Accordingly,
Agreement
because
pursuant
to
Counterplaintiffs
such
a
sufficiently
proceeding.
allege
a
contractual obligation and breach, Counterdefendants’ motion to
dismiss the breach-of-contract counterclaim will be denied.
IV.
Conclusion
For
the
foregoing
dismiss will be denied.
reasons,
Counterdefendants’
motion
A separate order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
22
to
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