United States District Court, D. Maryland
MEMORANDUM AND ORDER
J. FREDERICK MOTZ, District Judge.
Pending before the Court in this case are several motions, two of which will be addressed in this opinion: Defendant's motion to dismiss the verified amended complaint (ECF No. 27) and Plaintiff's motion for leave to file a verified second amended complaint (ECF No. 34). The motion to dismiss has been briefed (ECF Nos. 33 & 48), and the motion to amend is unopposed. No hearing is necessary. The motion to dismiss will be denied, and the motion to amend will be granted.
This case began on June 12, 2013, with a complaint filed by Fundamental Administrative Services, LLC ("FAS"), against Kristi Anderson, who formerly served as general counsel to FAS and whose employment there was terminated April 12, 2013. (Compl., ECF No. 1.) FAS's amended complaint includes the same causes of action as the original complaint: Count I, a request for injunctive relief to prevent Anderson (1) from violating her ethical obligation as a member of the Maryland Bar to protect her client's confidences learned during her employment as counsel for FAS, (2) from violating nondisclosure requirements of joint defense agreements between Anderson and FAS, and (3) from turning over documents that belonged to FAS; Count II, a request for declaratory judgment that FAS was not obligated to provide Anderson with reimbursement for her legal fees and costs occasioned by her involvement in the bankruptcy court proceeding in the Middle District of Florida for Fundamental Long Term Care, Inc., and the adversary proceedings stemming from the bankruptcy case; and Count III, a claim for restitution of $400, 000, which FAS alleges Anderson received as unjust emichment when, while still employed by FAS, she approved payment of that amount to Steven Leitess, Esq., for fees and costs incurred as her counsel in the bankruptcy and related adversary proceedings. (Am. Compl., ECF No. 13.)
Initially, the Court granted a temporary restraining order ("TRO") but, after a hearing, dissolved the TRO and denied FAS's request for preliminary injunctive relief. (ECF Nos. 5, 13.) The Court denied preliminary injunctive relief because FAS's concern appeared to be focused on the bankruptcy and related proceedings in the federal court in Florida and because of the availability of that forum to address FAS's issues as to privilege and confidentiality. (Order, June 24, 2013, at 2.) Later, the Court denied Anderson's motion for sanctions and directed her to respond to FAS's amended complaint. (ECF No. 24.) Anderson responded with the pending motion to dismiss the amended complaint. Shortly afterward, FAS filed the pending motion for leave to file a second amended complaint.
Between the filing of Anderson's motion to dismiss and the filing of FAS's motion to amend, FAS filed an emergency motion for TRO and preliminary injunctive relief because of a new development, i.e., Anderson's filing of a complaint in Maryland state court against FAS and other defendants; FAS contended that the complaint revealed FAS's privileged and confidential information. (Pl.'s Emerg. Mot., ECF No. 28.) The Court agreed and issued another TRO and, after holding an in-court hearing, issued a preliminary injunction against Anderson. (ECF Nos. 32, 41.) The Court noted that its original, exclusive focus on the Florida bankruptcy proceedings had been too narrow and that the Court had never intended, by denying preliminary injunctive relief, to grant Anderson license to reveal FAS's privileged and confidential information outside of the bankruptcy proceedings. (Order, Sept. 27, 2013, at 2, ECF No. 32.) FAS's request for relief was broader than the events occurring in the bankruptcy court, and the preliminary injunction recognized that. Even so, the undersigned has assiduously sought to maintain comity with other courts by not asserting any exclusive prerogative by this Court to determine all matters relating to the issue of FAS's privileges and confidential information. Instead, the preliminary injunction recognizes the jurisdiction of other courts to determine such issues when required in the context of proceedings before them.
Anderson's motion to dismiss seeks dismissal of Count I on the ground of mootness and dismissal of Counts II and III for failure to state a claim for relief. Clearly, the Court's issuance of the preliminary injunction refutes the mootness argument. As earlier noted, although the Court at first perceived FAS's complaint as focused only on the bankruptcy proceeding, that focus, in hindsight, unnecessarily precluded FAS's request for injunctive relief outside the confines of the bankruptcy and related proceedings. Count I is not moot. The remaining arguments in the motion to dismiss are now considered.
II. Standard of Dismissal for Failure to State a Claim
A complaint must contain "sufficient factual matter, accepted as true, to state a claim to relif that is plausible on its lace.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. An inference of a mere possibility of misconduct is not sufficient to support a plausible claim. Id. at 679. As the Twombly opinion stated, "Factual allegations must be enough to raise a right to relief above the speculative level." 550 U.S. at 555. "A pleading that offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'... Nor does a complaint suffice if it tenders naked assertion[s]' devoid of further factual enhancement.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555, 557). Although when considering a motion to dismiss a court must accept as true all factual allegations in the complaint, this principle does not apply to legal conclusions couched as factual allegations. Twombly, 550 U.S. at 555.
Preliminarily, the Court notes FAS's unopposed motion for leave to file a second amended complaint is meritorious. The second amended complaint, once filed, will supersede the amended complaint and will technically moot Anderson's motion to dismiss. However, because the counts to which Anderson objects are included in the second amended complaint, and because the Court believes it is highly likely Anderson will file another motion to dismiss including the same arguments she now makes, it is expedient to address her arguments now as to Counts II and III in the amended complaint. By so doing, the Court does not foreclose Anderson from raising any other arguments as to the second amended complaint.
Counts II and III are intertwined. Count II seeks a declaratory judgment that FAS is not required to indemnify Anderson for her legal expenses in connection with the Florida proceedings, and Count III seeks repayment by Anderson of an advance of legal expenses to Anderson's counsel.
Anderson argues that she is clearly entitled to be indemnified for the costs and fees associated with her representation in the bankruptcy and related litigation. (Def's Mot. Dismiss Supp. Mem. 10.) Her argument implies that her Executive Employment Agreement ("EEA") with FAS superseded the FAS LLC Agreement and, therefore, FAS's allegation that she was required to comply with the LLC Agreement in order to be indemnified for her legal expenses fails as a matter of Law. The EEA was attached to Anderson's response to FAS's first motion for TRO and preliminary injunction (Def.'s Opp'n Ex. II, ECF No. 9-12), and the LLC Agreement was attached to Anderson's motion to dismiss (Def.'s Mot. Dismiss Ex. I). Both agreements are relied upon by FAS in its complaint for relief and their authenticity has not been challenged. Accordingly, the Court will consider them on this motion to dismiss. See Am. Chiropractic Ass'n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004).
The EEA's relevant section on indemnification is Section 7. In 7.1, the EEA states in pertinent part, "The Company shall indemnify the Executive to the fullest extent permitted by the Operating Agreement, as in effect on the date hereof. The Company expressly represents, acknowledges and warrants that the Executive is a Covered Person, ' as that term is defined in the Operating Agreement." Section 7.2 goes on to spell out the kinds of costs and expenses covered by the indemnification agreement and to specify that Anderson has sole discretion to select, retain, and direct independent counsel for covered ...