United States District Court, D. Maryland
CHRISTOPHER A. TERAS, et al.,
JINHEE KIM WILDE, et al.
DEBORAH K. CHASANOW, District Judge.
Presently pending and ready for resolution in this breach of contract action are a motion to dismiss (ECF No. 6) and motion to seal (ECF No. 8), filed by Defendants Jinhee Wilde ("Wilde") and Wilde & Associates, LLC ("W&A"). The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, Defendants' motion to dismiss and motion to seal will be denied.
A. Factual Background
Plaintiff Worldwide Personnel, Inc. ("Worldwide") is a corporation organized under the laws of the District of Columbia and wholly owned by Plaintiff Christopher A. Teras ("Teras"). (ECF No. 1 ¶¶ 3, 10). Worldwide is a specialized personnel staffing company that works with foreign recruiters, primarily in Asia, to recruit foreign workers to be placed with employers located in the United States in jobs for which there is an insufficient supply of American workers. (Id. ¶ 10). In 1989, Teras commenced a foreign worker recruitment program with Company X,  a multi-state food processing company. Since Worldwide was incorporated in 1995, Company X's foreign worker recruitment program has been serviced through Worldwide. (Id. ). Worldwide provides various services to Company X and the foreign recruiters and engages various United States-based service-providers on the recruiters' and recruits' behalf including attorneys, interpreters, and resettlement coordinators. (Id. ¶ 17). In addition, Worldwide coordinates the preparation and filing of the foreign workers' visa applications and immigration-related forms. (Id. ¶ 21). Worldwide sometimes engages lawyers to perform this work, and other times the work is performed by non-lawyers. (Id. ). When such work is performed by service-providers selected by Worldwide, Worldwide compensates such service-providers out of the fixed-fee it receives from the foreign recruiters. (Id. ). The foreign recruiters and recruits are also free to engage their own service-providers, but independent service-providers must be engaged at the foreign recruiter's or recruit's own expense. (Id. ).
On October 1, 2004, Plaintiff Teras and Defendant Jinhee Kim Wilde ("Wilde") formed an immigration law practice named Teras & Wilde, PLLC ("T&W"). (Id. ¶ 11). At the time of T&W's formation, Wilde had virtually no immigration clients and did not know or have any relationship with the foreign recruiters who worked with Worldwide or Company X. (Id. ¶ 12). After T&W was formed, Worldwide engaged T&W to perform services, including preparation and filing of the foreign workers' visa applications and immigration-related forms that were necessary for foreign workers to obtain their immigration visas and to be permitted to immigrate to the United States and work for companies such as Company X. (Id. ¶ 11). Prior to Worldwide engaging T&W's services, Worldwide had engaged Plaintiff Christopher A. Teras, P.C. ("CATPC"), a professional corporation wholly owned by Teras, to perform the services that were later performed by T&W. (Id. ¶ 13).
In 2009, disputes arose among Teras, Wilde, Worldwide, CATPC, and T&W, which led to litigation being filed in the Superior Court of the District of Columbia. The litigation involved the dissolution of T&W and professional malpractice claims against Wilde. (Id. ¶¶ 9, 14). On July 20, 2010, Teras, Wilde, Worldwide, CATPC, and T&W entered a Settlement Agreement (the "Agreement" or "Settlement Agreement") to settle all issues and claims among the parties. (Id. ¶ 15). The Settlement Agreement was intended to address all issues in the litigation and govern the parties' past and future relationships. (Id. ¶ 9). The Agreement governs the handling and division of payments that were due to Worldwide for foreign workers that were recruited by Worldwide and had immigrant cases filed in 2007 and 2008. (Id. ¶ 22). The Settlement Agreement requires that all payments that were due to Worldwide for these specific recruits must be paid directly to Worldwide, and then disbursed in predetermined and agreed amounts among Worldwide, Teras, and Wilde. (Id. ¶¶ 23-25). The Agreement called for Worldwide to send a letter signed by Teras and Wilde to the relevant recruiters, informing them that all payments should be directed to Worldwide. (Id. ¶ 26). The parties also agreed that if further legal work was necessary for any of the recruits covered by the Agreement, Worldwide would use specific procedures to engage independent "Selected Counsel" to perform such work, and that neither Teras or Wilde could perform the work. (Id. ¶¶ 31-32). Worldwide agreed to negotiate and pay a reasonable fee to Selected Counsel, and in consideration for Worldwide's commitment to pay such fees, the parties allocated $1, 000 per recruit to Worldwide to offset such an expense. (Id. ¶ 31).
According to Plaintiffs, since the inception of the Settlement Agreement, Wilde has committed numerous breaches of the Agreement, including: secretly diverting payments that were due to Worldwide under the Settlement Agreement to herself or W&A and concealing these payments from Worldwide (Id. ¶ 27); inducing the recruiters and recruits to ignore the letter sent by Worldwide and send their fees directly to Defendants (Id. ¶ 30); failing to cooperate with Worldwide to appoint Selected Counsel and instead undertaking Selected Counsel's work in secrecy (Id. ¶¶ 32-33); failing to disclose to Worldwide correspondence that Wilde received from the United States Department of State and other government agencies and instead secretly taking action in these matters (Id. ¶¶ 35-36); disclosing the terms of the Settlement Agreement to Company X and foreign recruiters (Id. ¶¶ 37-38); and inducing the foreign recruiters not to honor their fixed-fee agreements with Worldwide and instead work directly with Wilde (Id. ¶¶ 39-40).
B. Procedural Background
On January 27, 2014, Teras, CATPC, and Worldwide (collectively "Plaintiffs") filed a four count complaint against Wilde and W&A (collectively "Defendants" or "Wilde"). Plaintiffs allege that since the Agreement's inception Defendants have failed to comply with it. Plaintiffs have filed several claims which spring from Defendants' alleged violation of the parties' Settlement Agreement, including: breach of contract (count II); interference with contractual relationships (count III); and interference with economic relationships (count IV). Plaintiffs also request a declaratory judgment (count I), and various forms of relief flowing from their other claims, including: damages; an accounting; attorneys' fees; costs; and an injunction against Wilde preventing her from continuing to breach the Settlement Agreement. On March 5, 2014, Defendants filed a motion to dismiss (ECF No. 6), and a motion to seal (ECF No. 8). The motion to dismiss is fully briefed. (ECF Nos. 11 and 12).
II. Motion to Dismiss
A. Standard of Review
The purpose of a motion to dismiss under Rule 12(b)(6) is to test the sufficiency of the complaint. 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." 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) (internal 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)). In evaluating the complaint, unsupported legal allegations need not be accepted. Revene v. Charles Cnty. Comm'rs, 882 F.2d 870, 873 (4th Cir. 1989). 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).
B. Affirmative Defense
Defendants first argue that Plaintiffs' claims are barred because they violate several ethical rules. Defendants argue that Plaintiffs have not stated a claim for breach of contract based on their failure to deliver fees to Worldwide because the legal fees received by Wilde were for legal services she performed, and it would violate Rule 5.4 of the Rules of Professional Conduct to split these fees with Worldwide, a non-lawyer. Defendants also contend that Plaintiffs' claims infringe on the recruiters' and recruits' rights to choose Wilde as their counsel and Wilde's right to perform work for these clients and receive compensation for that work. Defendants assert that the Maryland and District of Columbia Rule of Professional Conduct 5.6 prohibits such agreements that restrict attorneys' rights to practice law. Defendants contend that under "the ethical rules and the parties' agreement, Wilde is free to compete for the business of the recruits, recruiters, and employer[, ]" and accordingly, Plaintiffs' claims should be dismissed because they are barred by the Attorney Rules of Professional Conduct. (ECF No. 6-1, at 5-6).
Plaintiffs respond that neither their claims nor the Settlement Agreement violate any ethical rules. First, Plaintiffs contend that Wilde is not necessarily forbidden by Rule 5.4 from sharing the fees she received from the recruiters or recruits because the nature of the monies paid to Wilde is uncertain at this stage in the proceedings and the fees were not necessarily paid for legal services considering that Worldwide's agreements with recruiters covered a range of services, many of which were non-legal. (ECF No. 11-1, at 15). Second, Plaintiffs note that § 4(c) of the Settlement Agreement specifically recognizes recruits' right to retain counsel of their choice: "each [recruit] shall have the unimpeded right to retain an independent attorney of his/her choosing and at his/her own cost." (ECF No. 11-1, at 7). According to Plaintiffs, the Agreement merely requires that the recruit pay for an independent attorney's services if the recruit chooses not to use the Selected Counsel retained by Worldwide; it does not ban the recruit from using independent counsel. Third, Plaintiffs argue that Wilde does not have an unfettered right to represent any client that comes to her seeking advice. In fact, Plaintiffs assert that Rules of Professional Conduct 1.6, 1.8, and 1.9 may disqualify Wilde from representing the foreign recruits and recruiters due to her duty of confidentiality and to avoid conflicts of interests with her former client, Worldwide.
At the motion to dismiss stage, it is not appropriate to consider Defendants' affirmative defense based on the Attorney Rules of Professional Conduct. An affirmative defense is not ordinarily considered on a motion to dismiss because a plaintiff is not required to negate it in the complaint. The purpose of a motion to dismiss under Fed.R.Civ.P. 12(b)(6) is to "test the legal adequacy of the complaint, and not to address the merits of any affirmative defenses." Richmond, Fredericksburg & Potomac R.R. Co. v. Forst, 4 F.3d. 244, 250 (4th Cir. 1993). "A court may consider defenses on a 12(b)(6) motion only when the face of the complaint clearly reveals the existence of a meritorious affirmative defense.'" E. Shore Markets, Inc. v. J.D. Assoc. Ltd. P'ship, 213 F.3d 175, 185 (4th Cir. 2000); see also 5A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1357, at 348 (2d ed. 1990). It certainly is not "clear" from the face of the complaint that the Settlement Agreement or Plaintiffs' requested relief under the Settlement Agreement would violate Rule 5.4 by requiring Defendants to share legal fees with non-lawyers, nor that it would violate Rule 5.6 by improperly restricting Wilde's right to practice law. Moreover, Defendants' arguments regarding fee sharing rely on facts - that the legal fees Wilde received were for bona fide legal services - contrary to those asserted by Plaintiffs. Plaintiffs' summation of Defendants' defense is entirely on point:
Defendants appear to be contending that any monies they have received are not Worldwide's fixed fees, but bona fide payments for legal services Defendants rendered to the recruits. That defense  runs counter to the Complaint's allegations that Wilde has diverted the fixed fees due and owing to Worldwide [under the Settlement Agreement]. Thus, there is a dispute about how much money Defendants have received and what it was in payment for. (ECF No. 11-1, at 13-14). At the motion to dismiss stage, Plaintiffs' allegations must be taken as true, and therefore, Defendants' argument that Plaintiffs' claims are barred by the Rules of Professional Conduct will be rejected.
C. Breach of Contract (Count II)
Defendants contend that despite Plaintiffs' allegations that Defendants violated several provisions of the Settlement Agreement, none of these violations states a plausible claim for breach of contract because Plaintiffs fail to allege that they were harmed by these breaches. Defendants point specifically to several of their alleged breaches - failure to cooperate in selecting and engaging Selected Counsel; failure to cooperate with Worldwide in processing recruits' visa applications; and ...