Downing et al v. Goldman Phipps PLLC et al

Filing 185

MEMORANDUM AND ORDER. (See Full Order.) IT IS HEREBY ORDERED that defendants' motion to dismiss for failure to state a claim [# 136 ] is denied. IT IS FURTHER ORDERED that the separate motion of the individual defendants to dismiss for failure to state a claim [# 138 ] is denied. IT IS FINALLY ORDERED that defendants' motion to strike [# 146 ] is denied without prejudice. Signed by District Judge Catherine D. Perry on 07/06/2015. (CBL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
DON M. DOWNING, et al.,

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Plaintiffs,
vs.
GOLDMAN PHIPPS PLLC, et al.,
Defendants.

Case No. 4:13CV206 CDP

MEMORANDUM AND ORDER
This order deals with defendants’ two motions to dismiss for failure to state
a claim and their motion to strike. [ECF Nos. 136, 138, 146.] For the reasons that
follow, I will deny all three motions.
Background
As set out in more detail in earlier orders, this case is one of several arising
from disputes over fees among lawyers representing groups of plaintiffs in the
genetically modified rice multi-district litigation (Rice MDL). I issued an order in
the Rice MDL creating a common benefit trust fund to compensate co-lead counsel
and those attorneys working with them for services they provided that benefited all
the plaintiffs in this litigation (the Common Benefit Order). See In re Genetically
Modified Rice Litig., No. 4:06MD1811CDP, ECF No. 2574, 2010 WL 716190
(E.D. Mo. Feb. 24, 2010). The Common Benefit Order required percentages of

any settlements or judgments from the Rice MDL cases to be contributed to the
Fund. I held that this court lacked jurisdiction to order parties in related state-court
cases to make contributions. The two groups of lawyers and law firms who are
plaintiffs in this suit seek to recover from two groups of lawyers and law firms,
namely the Phipps Group1 and Murray Group,2 who represented plaintiffs in those
state-court cases. Plaintiffs bring claims against these defendant lawyers under
theories of unjust enrichment and quantum meruit.
Legal Standards
Motion to Dismiss – Rule 12(b)(6)
The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal
sufficiency of the complaint. When considering a Rule 12(b)(6) motion, the court
assumes the factual allegations of a complaint are true and construes them in favor
of the plaintiff. Neitzke v. Williams, 490 U.S. 319, 326-27 (1989). Matters of
public record referenced in a complaint may be considered by the court in
determining a Rule 12(b)(6) motion to dismiss for failure to state a claim.
Deerbrook Pavilion, LLC v. Shalala, 235 F.3d 1100, 1102 (8th Cir. 2000).
Rule 8(a)(2) of the Federal Rules of Civil Procedure provides that a
1

The Phipps Group is made up of the following law firm defendants: Goldman Phipps PLLC,
Goldman Pennebaker & Phipps P.C., Phipps Cavazos PLLC, Mikal C. Watts P.C., Keller
Stolarczyk PLLC, and Banks Law Firm PLLC; as well as individual lawyer defendants Martin J.
Phipps, Mikal C. Watts, and Charles A. Banks.
2
The defendants in the Murray Group are the Murray Law Firm and individual lawyer Stephen
B. Murray Sr.
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complaint must contain “a short and plain statement of the claim showing that the
pleader is entitled to relief.” In Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007),
the Supreme Court clarified that Rule 8(a)(2) requires complaints to contain “more
than labels and conclusions, and a formulaic recitation of the elements of a cause
of action.” Id. at 555; accord Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).
Specifically, to survive a motion to dismiss, a complaint must contain enough
factual allegations, accepted as true, to state a claim for relief “that is plausible on
its face.” Twombly, 550 U.S. at 570. The factual allegations must be sufficient to
“‘raise a right to relief above the speculative level.’” Parkhurst v. Tabor, 569 F.3d
861, 865 (8th Cir. 2009) (quoting Twombly, 550 U.S. at 555). The issue in
determining a Rule 12(b)(6) motion is not whether the plaintiff will ultimately
prevail, but whether the plaintiff is entitled to present evidence in support of the
claim. See Skinner v. Switzer, 562 U.S. 521, 529-530 (2011) (quoting Scheuer v.
Rhodes, 416 U.S. 232, 236 (1974)).
Motion to Strike – Rule 12(f)
Federal Rule of Civil Procedure 12(f) provides that “the court may strike
from a pleading an insufficient defense or any redundant, immaterial, impertinent,
or scandalous material.” Although the court enjoys “broad discretion” in
determining whether to strike a party’s pleadings, such an action is “an extreme
measure.” Stanbury Law Firm v. IRS, 221 F.3d 1059, 1063 (8th Cir. 2000) (per
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curiam). Accordingly, motions to strike are “viewed with disfavor and are
infrequently granted.” Id. (internal quotation marks and citations omitted). A
motion to strike will not be granted unless the challenged matter “is immaterial in
that it has no essential or important relationship to the claim for relief.” FDIC v.
Coble, 720 F. Supp. 748, 750 (E.D. Mo. 1989) (internal quotation marks and
citations omitted). Courts have defined allegations or defenses as “impertinent”
when they “do not pertain, and are not necessary to the issues in question.” 5C
Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1382
(3d ed. 2004).
Unjust Enrichment
A claim for unjust enrichment under Missouri law has three elements: 1) a
benefit conferred by a plaintiff on a defendant; 2) the defendant’s appreciation of
the fact of the benefit; and 3) the acceptance and retention of the benefit by the
defendant in circumstances that would render that retention inequitable. Hertz
Corp. v. RAKS Hospitality, Inc., 196 S.W.3d 536, 543 (Mo. Ct. App. 2006). “A
person who has been unjustly enriched at the expense of another is required to
make restitution to the other.” Petrie v. LeVan, 799 S.W.2d 632, 634 (Mo. Ct.
App. 1990). The law of restitution is based on the conception “that no one should
unjustly enrich himself at the expense of his neighbour.” Id. at 635 n.1 (internal
quotation marks and citation omitted).
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Quantum Meruit
“The law implies contracts under circumstances where the minds of the
parties do not meet on a given subject, and no intention touching the question
appears[.]” Weinsberg v. St. Louis Cordage Co., 116 S.W. 461, 466 (Mo. Ct. App.
1909).
[A]s, for instance, where a party, without an intention to pay therefor,
requests another to perform labor for him, and permits it to be
executed to his benefit. In such circumstances, unless it appears the
party rendering the labor intended it should be gratuitously performed,
the law will imply a promise to pay. In such a case, though it is
certain there was no meeting of the minds, the law nevertheless
implies a contract to pay.
Id. Quantum meruit is a remedy for the enforcement of such a quasi-contractual
obligation and is generally based on the principle of unjust enrichment. Lucent
Techs., Inc. v. Mid-West Elecs., Inc., 49 S.W.3d 236, 241 (Mo. Ct. App. 2001).
“When one party has been unjustly enriched at the expense of another, the
beneficiary can be compelled to make restitution to the one conferring the benefit.”
Id.
The essential elements of a quasi-contract or quantum meruit claim are 1)
that the plaintiff provided to the defendant materials or services at the defendant’s
request or with the acquiescence of the defendant; 2) that the materials or services
had reasonable value; and 3) that – despite the demands of the plaintiff – the
defendant has failed and refused to pay the reasonable value of such materials or
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services. County Asphalt Paving Co. v. Mosley Constr., Inc., 239 S.W.3d 704, 710
(Mo. Ct. App. 2007). A claim for quantum meruit does not require the existence of
an express agreement between the parties. Id.
In cases of quantum meruit recovery, the party viewed as breaching the
implied contract is required to return to the injured party the reasonable value of
work and labor furnished. Bellon Wrecker & Salvage Co. v. Rohlfing, 81 S.W. 3d
703, 711 (Mo. Ct. App. 2002). However, the furnished services must have
enriched the recipient in the sense of benefits conferred. Turpin v. Anderson, 957
S.W.2d 421, 427 (Mo. Ct. App. 1997) (citing International Materials Corp. v. Sun
Corp., 824 S.W.2d 890, 895 (Mo. banc 1992)). As such, an unjust enrichment
quantum in a case may be nothing if the actual value enjoyed by the recipient is
none. International Materials, 824 S.W.2d at 895.
Motion to Dismiss for Failure to State a Claim
The lawyer defendant groups move to dismiss plaintiffs’ Second Amended
Complaint under Fed. R. Civ. P. 12(b)(6), arguing that it fails to state a claim upon
which relief can be granted.3
Plaintiffs allege that they conferred a benefit by providing and/or paying for

3

This motion [ECF No. 136] is brought by all the defendants challenging the claims brought by
all the plaintiffs. It does not distinguish between the claims brought by the plaintiff law firms
(Counts I - IV) and the same claims brought by the lawyers as co-trustees (Counts V - VIII). I
therefore do not address whether there are any distinguishing factors between these two groups
of plaintiffs for the purposes of this motion.
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common benefit services and expense-related materials, which were developed in
relation to the Rice MDL litigation and were provided to the defendant lawyers by
virtue of their representation of Rice MDL litigants. These common benefit
services and materials are alleged to include documents and discovery obtained
from Bayer in the Rice MDL, the development of trial and legal strategy, and
testimony obtained from deponents and trial witnesses. Plaintiffs allege that the
defendants used these common services and materials in their representation of
state-court clients, including in their settlement negotiations. Plaintiffs contend
that it is inequitable for the defendant lawyers to reap the benefits of what they did
not sow, that is, to have been paid their own legal fees without reimbursing
plaintiffs for the services they provided and paid for.
As an initial matter, I reject defendants’ argument that because there was
never a contractual relationship between them and the plaintiff lawyer groups,
plaintiffs cannot recover under either an unjust enrichment or quantum meruit
theory. The existence of an express agreement between the parties is not required
to state a claim of unjust enrichment or quantum meruit. An implied agreement
can be inferred from the parties’ conduct, namely, the non-gratuitous performance
of services at the request or acquiescence of another from which the other obtained
benefit. The allegations set out in the amended complaint here adequately allege
such a relationship between the plaintiffs and the defendant lawyers.
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I also reject defendants’ related argument that the amended complaint fails
to allege a required element of quantum meruit – that they requested or
“authorized” plaintiffs to perform work on their behalf. I note, for instance, that
the amended complaint refers to an early case management order (CMO) in the
Rice MDL that provided that all MDL depositions “may be cross noticed in any
related action pending in state court, and may be used . . . in any related state court
proceedings” if allowed by applicable state law. (See 4:06MD1811, ECF No. 292
at p. 7; see also id., ECF No. 474.) Given the CMO’s use of permissive language
(“may be cross-noticed”), the defendant lawyers were permitted, but not required,
to avail themselves of these particular MDL services and materials to use in their
state-court cases. It can be argued that, by availing themselves of these nonmandated services, defendants requested such services or at least acquiesced in
plaintiffs’ provision of them. I find the amended complaint to adequately allege
that the defendants requested or acquiesced in plaintiffs’ provision of common
benefit services.
The focus of defendants’ motion to dismiss, however, is their argument that
plaintiffs cannot recover against them on an unjust enrichment or quantum meruit
theory inasmuch as it was the defendants’ state-court clients who benefited from
the common benefit services, and not the defendants merely acting as their
lawyers. Defendants contend that, in the absence of a representative relationship
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with these state-court clients, plaintiffs cannot recover attorneys’ fees for work
performed that benefited non-clients. I reject these arguments as well.
In their amended complaint, plaintiffs claim that the defendant lawyers
benefited by retaining fees and expenses paid to them by their state-court clients
after obtaining successful results through their use of common services paid for
and provided by plaintiffs. Plaintiffs contend that the defendants’ retention of
these fees and expenses is unjust given that they did not pay for the common
benefit services they used to earn them. Accordingly, the benefits alleged in this
case are the attorneys’ fees and expenses themselves retained by the defendant
lawyers from their state-court clients, not the clients’ recoveries from the
underlying Bayer litigations. By retaining possession of the fees and expenses and
not paying for the services that led to their receipt, the defendant lawyers are the
recipients of the benefits alleged in this litigation.
Defendants’ reliance on Johnson v. United States Dep’t of Hous. & Urban
Dev., 939 F.2d 586 (8th Cir. 1991), and Brzonkala v. Virginia Polytechnic Inst. &
State Univ., 115 F. Supp. 2d 677 (W.D. Va. 2000), to argue otherwise is misplaced.
In Johnson and Brzonkala,4 the prevailing parties in each respective litigation

4

Both Johnson and Brzonkala examined exceptions to the American Rule in relation to an award
of attorney’s fees. The American Rule provides for each party to pay its own attorney’s fees.
Absent statutory authority or other exceptions to the Rule, a prevailing party does not collect its
attorney’s fee from the loser. Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 247
(1975); Johnson, 939 F.2d at 590.
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sought attorneys’ fees from the losing parties on the theory that the litigation
conferred a “substantial benefit” upon an identifiable class whose interest was so
aligned with the losing party that assessing fees against the losing party would
result in the benefited class sharing in the expense of the litigation. In both
Johnson and Brzonkala, the courts denied the requested fees, finding that the
losing parties were not representative of the benefited class and that the required
nexus between the fees sought and the class of beneficiaries was lacking. Contrary
to defendants’ assertion, the circumstances here are not analogous. First, the
plaintiffs here do not seek attorneys’ fees and costs against the loser in the original
MDL or state-court litigations, that is, Bayer. Nor is this an action for attorneys’
fees and expenses from the litigants who obtained recoveries from Bayer in the
original litigations. Instead, as set out above, the recovery sought by plaintiffs are
the fees and expenses themselves that the defendant lawyers “earned” through their
use of Rice MDL common services that they did not pay for.
Nor does the absence of a representative relationship between plaintiffs and
the defendants’ state-court clients defeat plaintiffs’ claims. Relying heavily on Fox
v. AAA U-Rent It, 17 S.W.3d 481 (Ark. 2000), defendants argue that the lack of
such an attorney-client relationship precludes any claimed recovery by plaintiffs
for work performed that benefited non-clients. The circumstances in Fox,
however, are inapposite to those alleged in the amended complaint here.
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The trial court in Fox certified a class in an action seeking tax refunds from
an Arkansas state agency. The court of appeals reversed the class certification,
finding that the law did not permit a class to bring the relevant claims. The
attorneys thereafter sought to recover fees from non-representative class members
for work performed through the time the court of appeals reversed the class status.
Arguing quantum meruit, the attorneys based their fee request on well-settled law
that discharged attorneys are entitled to reasonable compensation for services
rendered to the date of discharge. The court found, however, that because reversal
of the class certification in fact nullified the class, there never existed an attorneyclient relationship between the attorneys and the non-representative members of
the class. With no attorney-client relationship, the attorneys could not have been
“discharged” and therefore were not entitled to fees based on their quantum meruit
theory. Fox, 17 S.W.3d at 487-88. Notably, the quantum meruit argument in Fox
was based only on the attorneys’ assertion of a previous attorney-client relationship
from which they claimed an entitlement to fees through the time of discharge. The
plaintiffs here do not base their quantum meruit theory on this rationale.
Defendants rely on Fox to also argue that plaintiffs cannot recover merely
because their work product provided a stare decisis basis for the state-court
litigants’ later success.5 Plaintiffs claim no such entitlement, however. While their

5

The Fox court determined not to award attorneys’ fees on the “sole basis” of stare decisis, that
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claims are based, in part, on stare decisis elements, they also allege that the
defendant lawyers benefited from using tangible materials obtained by plaintiffs
and at their expense, as well as from plaintiffs’ significant expenditure of time and
resources in gathering and arranging for discovery; researching, drafting, and
articulating arguments to the court; and preparing for and conducting trials at
which defendants obtained strategic benefit for their own trials. Plaintiffs also
claim that their significant expenditure of time and resources led to the global
settlement with Bayer from which all plaintiffs – both MDL and state-court –
benefited, and from which defendants accepted and retained unearned fees and
expenses for work performed and paid for by plaintiffs. In sum, unlike Fox, these
alleged benefits to the defendants are not based solely on the stare decisis value of
the common benefit services.
Finally, defendants contend that the lack of requested relief specific to them
as lawyers demonstrates the “absurdity” of the claims. In their prayer for relief,
plaintiffs seek 11% of the total recovery the Phipps Group’s state-court clients
obtained from Bayer, for fees and expenses. From the Murray Group, plaintiffs
seek 8% of its state-court clients’ total recovery from Bayer, for fees. The proper
recovery for unjust enrichment and quantum mertuit claims is the reasonable value

is, on the basis that counsel for one successful litigant could collect an attorney’s fee from any
other successive litigant who was successful under similar circumstances. Fox, 17 S.W.3d at
487.
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of the work and labor furnished in view of the actual value enjoyed by the
defendants. Failure to allege the reasonable value of services rendered is not fatal
to the statement of any cause of action. Failure to prove the reasonable value,
however, is fatal to recovery in quantum meruit. McCardie & Akers Constr. Co. v.
Bonney, 647 S.W.2d 193, 194 (Mo. Ct. App. 1983). But we are not yet at the stage
of litigation where proof of the value is required.
If an attorney is able to retain the benefit of having services provided and
available for him to use on behalf of his client, without paying for such service, the
provider of these services may bring a claim against that attorney in quantum
meruit for unjust enrichment. See Town & Country Appraisals, LLC. v. Hart, 244
S.W.3d 187, 191 (Mo. Ct. App. 2007). “We fail to see how [the attorney] can
contend that the availability of [services] creates a benefit for a client, alone,
without benefiting the attorney representing such client.” Id.
The lawyer defendant groups’ motion to dismiss plaintiffs’ Second
Amended Complaint for failure to state a claim will be denied.
Motion of Individual Defendants to Dismiss
The individual lawyer defendants also move to dismiss under Rule 12(b)(6),
arguing that they cannot be individually liable because the allegations and
averments in the Second Amended Complaint, as well as the Rice MDL pleadings
cited in the amended complaint, show that their actions were done only on behalf
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of their law firms and not as individuals. They argue that, because the amended
complaint makes no allegations of wrongdoing on the part of the individual
defendants apart from the alleged actions taken on behalf of their law firms, it fails
to state a claim against them as individual defendants and must be dismissed as to
them.
In order to state a claim for unjust enrichment/quantum meruit against a
lawyer who also acts as an agent for his law firm, a complaint must allege that the
individual lawyer undertook personal obligations and personally retained benefits
from his actions. See Town & Country Appraisals, 244 S.W.3d at 189. A
complaint alleging that the lawyer served and acted only as the agent of his law
firm fails to state a claim for individual liability against the lawyer. Id.
Here, plaintiffs allege that all defendants – both individual lawyers and law
firms alike – used common benefit services from the Rice MDL to their own
benefit without paying for the provision of such services. The services and
materials alleged to be used include documents and discovery obtained from Bayer
in the Rice MDL, the development of trial and legal strategy, and testimony
obtained from deponents and trial witnesses. The amended complaint alleges
specific conduct by each named individual lawyer taken on behalf of himself
individually and/or on behalf of his respective law firm(s).6 The remainder of the
6

ECF No. 128 at paras. 18, 19, 21, 23.
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amended complaint collectively refers to all defendants as benefiting from the
provision of common benefit services and unjustly retaining said benefits.
The amended complaint adequately alleges that the individual lawyers
engaged in personal conduct availing themselves of the Rice MDL common
benefit services and materials from which they obtained and retained benefits. The
amended complaint alleges specific conduct on the part of each individual lawyer
and that such conduct was performed by each lawyer individually and/or on behalf
of their law firms. It further alleges that all defendants – which, by definition,
include all of the law firms and the individual lawyers – retained benefits from the
conduct alleged, including the direct or indirect receipt of fees and expenses.
Given the explicit allegations of specific conduct against each individual lawyer
performed as an individual, the lawyers’ claim that the amended complaint fails to
allege any wrongdoing on their part as individuals is without merit. The amended
complaint’s subsequent collective reference to all defendants as unjustly benefiting
from the provision of services does not destroy the nature of the claims brought
against the individual lawyers. Cf. Move Merch, LLC v. Amaru/AWA Merch., Inc.,
No. 4:14-CV-878 CAS, 2015 WL 1040366, at *4 (E.D. Mo. Mar. 10, 2015).
Accordingly, a review of the face of the amended complaint shows it to
contain enough factual allegations to state plausible claims for unjust enrichment
and quantum meruit against the individual lawyers as individuals. To the extent
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the complaint alleges that the lawyers also acted on behalf of their law firms, its
claims of unjust enrichment and quantum meruit do not fail merely because they
are alleged against corporate officers individually as well as in their capacity as
agents of their professional corporations. E.g., Zipper v. Health Midwest, 978
S.W.2d 398 (Mo. Ct. App. 1998). Whether plaintiffs are able to prove such
individual liability and that the individual lawyers benefited personally from their
alleged misconduct is not a matter to be determined on a motion to dismiss. If,
after discovery, the individual lawyers can show that they acted only within the
scope of their relationship with their law firms, they may seek summary judgment
on their contention that they cannot be held personally liable on plaintiffs’ claims.
See Move Merch, 2015 WL 1040366, at *3.
The individual lawyers’ motion to dismiss plaintiffs’ Second Amended
Complaint for failure to state a claim against them will be denied.7
Motion to Strike
Defendants move to strike numerous allegations from the amended
complaint that refer to the Common Benefit Order. In particular, they object to
plaintiffs’ inclusion of language that plaintiffs characterize as binding findings and

7

Plaintiffs raise numerous other arguments as bases to deny this motion. To rule the motion on
these other bases, however, would require me to review evidence beyond that which may be
considered on a Rule 12(b)(6) motion to dismiss. If necessary, plaintiffs may raise these
evidence-based arguments at subsequent stages in this litigation.
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conclusions. In their response, plaintiffs argue that the statements from the MDL
orders are in fact entitled to res judicata effect – plaintiffs essentially argue that
their case has already been proven and they need do no more than refer to the
MDL orders to prove their case.
As set out above, motions to strike are rarely appropriate, and this case is no
different. Defendants are not prejudiced by the allegations remaining in the
amended complaint. I have ruled that the complaint states a claim for unjust
enrichment and for quantum meruit, but in doing so, I am not endorsing plaintiffs’
statements that they somehow have already proven the claims by referring to the
MDL orders. Claims require proof, and none has been presented to me thus far. I
do not know how plaintiffs intend to prove their case; but to the extent their briefs
so far indicate that they believe they can simply rely on prior rulings of this court
for their proof of either liability or damages, I have very strong reservations.
Nevertheless, whether plaintiffs are able to adduce proof on the elements of
their claims is an issue better left for summary judgment and not one to be litigated
on a motion to strike. See Kuhlmeier v. Hazelwood Sch. Dist., 578 F. Supp. 1286,
1295-97 (E.D. Mo. 1984); FDIC v. Dosland, 298 F.R.D. 388, 399 (N.D. Iowa
2013). This includes whether and to what extent language used in previous orders
is relevant or has any effect on the elements to be proved. Cf. International
Materials, 824 S.W.2d at 896 (trial court’s simple finding that attorneys’ efforts
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contributed to final victory was not a measure of the actual value to the client).
Indeed, while an apparently inevitable personal sense of injury is not an isolated
phenomenon in our system of adversary litigation, it is not to be automatically
equated with a legal right to redress. Schleit v. British Overseas Airways Corp.,
410 F.2d 261, 262 (D.C. Cir. 1969).
The motion to strike will be denied, but without prejudice to re-examination
of the issues if raised in a subsequent motion for summary judgment.
Accordingly,
IT IS HEREBY ORDERED that defendants’ motion to dismiss for failure
to state a claim [# 136] is denied.
IT IS FURTHER ORDERED that the separate motion of the individual
defendants to dismiss for failure to state a claim [# 138] is denied.
IT IS FINALLY ORDERED that defendants’ motion to strike [# 146] is
denied without prejudice.

_______________________________
CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE

Dated this 6th day of July, 2015.

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