Stephan Zouras LLP v. Marrone

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF PENNSYLVANIA

STEPHAN ZOURAS LLP, :

Plaintiff, : CIVIL ACTION NO. 20-2357

v. : (JUDGE MANNION)

THOMAS MORE MARRONE,

Defendants. :

MEMORANDUM

Presently before the court is the report of Judge Carlson, (Doc. 88),

which recommends the court grant in part and deny in part the parties’ cross

motions for summary judgment, (Docs. 78 & 79). Defendants object to Judge

Carlson’s recommendation that the court deny their motion for summary

judgment with respect to Plaintiffs claim for unjust enrichment and quantum

meruit and grant summary judgment in favor of Plaintiff as to Defendants’

liability on that count. (Doc. 90). A review of the record reveals Judge Carlson

unerringly found no genuine dispute as to the nonexistence of an oral

contract that would preclude Plaintiff's unjust enrichment claim. And there is

ample evidence supporting the claim that Plaintiff conferred a benefit on

Defendants via its work on the Smiley litigation. Thus, the court will

OVERRULE Defendants’ objections and ADOPT the report in its entirety.

I. STANDARD OF REVIEW

When objections are timely filed to the report and recommendation of

a magistrate judge, the district court must review de novo those portions of

the report to which objections are made. 28 U.S.C. §636(b)(1); Brown v.

Astrue, 649 F.3d 193, 195 (3d Cir. 2011). Although the standard is de novo,

the extent of review is committed to the sound discretion of the district judge,

and the court may rely on the recommendations of the magistrate judge to

the extent it deems proper. Rieder v. Apfel, 115 F.Supp.2d 496, 499 (M.D.

Pa. 2000) (citing United States v. Raddatz, 447 U.S. 667, 676 (1980)).

For those sections of the report and recommendation to which no

objection is made, the court should, as a matter of good practice, satisfy itself

that there is no clear error on the face of the record in order to accept the

recommendation. Fed. R. Civ. P. 72(b), advisory committee notes; see □□□□

Univac Dental Co. v. Dentsply Intern., Inc., 702 F.Supp.2d 465, 469 (M.D.

Pa. 2010) (citing Henderson v. Carlson, 812 F.2d 874, 878 (3d Cir. 1987)

(explaining judges should give some review to every report and

recommendation)). Nevertheless, whether timely objections are made or not,

the district court may accept, not accept, or modify, in whole or in part, the

findings or recommendations made by the magistrate judge. 28 U.S.C.

§636(b)(1); M.D. Pa. Local R. 72.31.

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ll. Discussion’

Plaintiff Stephan Zouras LLP brings several claims against

Defendants: (1) breach of contract; (2) breach of fiduciary duty; (3) fraud; (4)

conversion; (5) unjust enrichment; and (6) quantum meruit. (Doc. 1). Plaintiff

moved for summary judgment on its unjust enrichment claim.* (Doc. 78).

Defendants moved for summary judgment on all counts in Plaintiff's

complaint. (Doc. 79). Judge Carlson recommends the court grant Plaintiff's

motion, in part, as to liability only against Defendants on the unjust

enrichment and quantum meruit claim. (Doc. 88). Judge Carlson also

recommends the court grant Defendants’ motion, in part, as to Plaintiff's

claims in counts | through IV of the complaint. (Doc. 88). Defendants object

to Judge Carlson’s recommendations with respect to Plaintiff's unjust

enrichment and quantum meruit claim. The court will address the objections

in turn.

1 Judge Carlson carefully delineated the relevant factual and

procedural background of this case in his report, (Doc. 88 at 1-10), which

the court will not fully repeat.

2 In Pennsylvania, unjust enrichment and quantum meruit claims are

synonymous and properly assessed together. Rosengrant v. Transcon. Gas

Pipe Line Co., LLC, No. 4:20-CV-01555, 2020 WL 7260997, at *4 (M.D. Pa.

Dec. 10, 2020). The terms unjust enrichment and quantum meruit are used

herein interchangeably and refer to a single claim for relief.

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Judge Carlson stated the relevant legal standards pertaining to the

parties’ cross motions for summary judgment, (Doc. 88 at 10-14), which the

court will not fully repeat. With those standards as a background, we turn to

the parties’ arguments.

A. There is no genuine dispute regarding the nonexistence of

an enforceable contract.

Judge Carlson found Defendants’ motion for summary judgment of

Plaintiffs unjust enrichment claim should be denied. (Doc. 88 at 22).

Defendants argued summary judgment was appropriate because Plaintiff

alleged there was an enforceable contract between the two law firms, which,

under Pennsylvania law, would preclude a claim for unjust enrichment. See

SodexoMAGIC, LLC v. Drexel Univ., 24 F.4th 183, 228 (3d Cir. 2022)

(citations and quotation marks omitted). Judge Carlson rejected this

argument, explaining it is well-settled in Pennsylvania that a plaintiff may

plead contract and quantum meruit claims in the alternative. Indeed, “cases

are legion permitting just this form of alternative pleading.” (Doc. 88 at 20)

(collecting cases).

Defendants object to this finding. In doing so, they repeat the same

argument they made in their summary judgment briefing. Defendants argue

the unjust enrichment claim must be dismissed because “the parties’

relationship is governed by an express contract.” (Doc. 90 at 2). But

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Defendants’ objections do not demonstrate error in Judge Carlson's rejection

of the same argument.

Defendants have consistently and vociferously defended against this

lawsuit by maintaining the parties did not have an enforceable contract

governing their relationship with regard to the Smiley case. For example,

after Plaintiff's Rule 30(b)(6) designee, David Cohen, testified to the

existence of an oral fee sharing agreement between the parties, Defendant

Thomas Marrone submitted an affidavit swearing that his telephone and

email communications with Mr. Cohen “led to an oral agreement . . . where

Cohen and | would review damages-related discovery and calculate potential

damages for settlement[,] and | would pay Cohen what | determined in my

sole discretion to be a fair and reasonable fee for his services following the

award of any attorneys’ fees.” (Doc. 83-1 at 14). A promise to compensate

someone in a reasonable way, without more, is undoubtedly unenforceable

under Pennsylvania law. See Ecore Int'l, Inc. v. Downey, 343 F.Supp.3d 459,

489-90 (E.D. Pa. 2018).

Judge Carlson reviewed this evidence, along with several vague and

ambiguous emails between the parties, and found there was no valid,

enforceable fee sharing contract. (Doc. 88 at 15-18). Defendants do not

object to this finding; indeed, it is the finding they sought in their motion for

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summary judgment. Nor does Plaintiff object to the nonexistence of an

enforceable contract, having conceded to entry of judgment on the breach of

contract claim in Defendants’ favor. In Rule 56 terms, then, there is no

genuine dispute as to the nonexistence of an enforceable fee sharing

agreement. The fact that Plaintiff previously alleged there was an oral

agreement does not mean it is now foreclosed from maintaining an unjust

enrichment claim under Pennsylvania law. As Judge Carlson explained, this

argument “rests upon a curious conflation of concepts.” (Doc. 88 at 19).

In sum, Defendants have not pointed to any error in Judge Carlson's

finding that there exists no enforceable contract that would preclude

Plaintiff's unjust enrichment claim. Accordingly, Defendants’ objection will be

overruled.

B. Plaintiff's unjust enrichment theory is supported by record

evidence.

Defendants also object to Judge Carlson's report because it declined

to dismiss Plaintiffs unjust enrichment and quantum meruit claim even

though, in Defendants’ view, that claim rested on an unpled theory.

Specifically, Defendants argue Plaintiff's claim rested solely on the theory

that it increased the settlement value in the underling Smiley case. But then

Plaintiff, “as a backstop,” added a new theory of entitlement to a pro rata

distribution of fees based on lawyer-hours worked when it moved for

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summary judgment. Defendants contend Judge Carlson should not have

permitted this claim to go forward on the newly raised, unpled theory of unjust

enrichment.

This objection fails in the first instance because Plaintiff's alleged

entitlement to a pro rata share of the Smiley fee award was not a new theory

raised in its motion for summary judgment. Rather, Plaintiff raised its

entitlement to at least a pro rata share of the Smiley fee award in multiple

paragraphs throughout the complaint. (See, e.g., Doc. 1 at If] 14, 32, 37, 72,

80). This objection also fails because Defendants have not demonstrated

error in Judge Carlson’s finding that the record contains ample evidence

supporting the claim that Plaintiff conferred some benefit on Defendants via

its work on the Smiley litigation. The value of the benefit is disputed and must

be decided by a factfinder.

Thus, the court will overrule Defendants’ objection to Judge Carlson’s

recommendation that the court deny its motion for summary judgment on

Plaintiff's unjust enrichment and quantum meruit claim.

lll. . CONCLUSION

In light of the foregoing, and after a review of the record, the court will

ADOPT Judge Carlson's report in its entirety. (Doc. 88). The court will

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GRANT, in part, Plaintiffs motion for summary judgment of its unjust |

enrichment and quantum meruit claim as to liability only. The court will

GRANT, in part, Defendants’ motion for summary judgment of all of Plaintiff's

claims except its unjust enrichment claim. An appropriate order follows.

wi E. MANNION

United States District Judge

DATE: August 9, 2023

20-2357-01

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