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Ungaretti & Harris, LLP v. Servicemaster Co.

May 27, 2010

UNGARETTI & HARRIS, LLP, PLAINTIFF,
v.
THE SERVICEMASTER COMPANY, DEFENDANT.



The opinion of the court was delivered by: John F. Grady, United States District Judge

MEMORANDUM OPINION

Before the court are two motions: (1) defendant's motion to dismiss Counts II, III, and IV of the complaint; and (2) plaintiff's motion to dismiss defendant's counterclaim. For the following reasons, defendant's motion is granted, and plaintiff's motion is granted in part and denied in part.

BACKGROUND

Ungaretti & Harris, LLP ("Ungaretti"), a law firm, brings this action for outstanding legal fees and "fraudulently obtained rebated legal fees" against a former client, The ServiceMaster Company ("Servicemaster"). From 2005 to 2009, Ungaretti represented Servicemaster and its related companies in more than one hundred lawsuits that primarily involved employment-law issues. According to Ungaretti, "not a single" case it handled "resulted in a verdict adverse to Servicemaster or its subsidiaries and virtually every case was resolved on terms favorable to Servicemaster." (Compl. ¶ 2.)

The parties had a good business relationship for about a year and a half. In the fall of 2007, however, Servicemaster experienced a management change and budget-cutting directives, and its payments to Ungaretti "began to falter." (Id. ¶¶ 16-17.) Servicemaster stopped paying Ungaretti's bills in full and began to negotiate reduced bills and credits, claiming that certain charges were excessive "without any review of the actual task or the complexities of the work." (Id. ¶ 20.) Ungaretti alleges that it nonetheless continued to "faithfully and fully" provide legal services to Servicemaster. (Id. ¶ 19.)

In 2007 Servicemaster also instituted a "preferred counsel" program, also known as a "primary firm network," pursuant to which a limited number of law firms would be eligible to be engaged to provide legal services. Plaintiff explains that these programs "are used by many large companies like Servicemaster to be more efficient with outside counsel dollars by limiting the number of firms eligible for their work and demanding steep discounts or credits from those firms in consideration for being chosen to be in the network." (Id. ¶ 3.) Servicemaster chose Ungaretti as one of its preferred law firms.

In response to "explicit guarantees" from individuals in Servicemaster's legal department that Servicemaster would continue to refer legal matters to Ungaretti (which Ungaretti alleges were false promises) and in response to Servicemaster's repeated requests for rebates, Ungaretti provided rebates and credits to Servicemaster totaling $128,015.38. (Id. ¶ 4.) Despite its acceptance of the rebates, Servicemaster thereafter terminated its relationship with Ungaretti and failed to engage Ungaretti in any additional matters. Servicemaster also refused to pay $284,259.47 in outstanding legal fees that were incurred, for the most part, in the defense of two matters described in the complaint.

Ungaretti has filed a four-count complaint for breach of contract and of the covenant of good faith and fair dealing (Count I); quantum meruit (Count II); common-law fraud (Count III); and unjust enrichment (Count IV). It seeks to recover $284,259.47 in outstanding fees and $128,015.38 in rebates that were allegedly fraudulently obtained, plus interest, punitive damages, costs, and reasonable attorney's fees.

Servicemaster has filed a two-count counterclaim. In Count I, Servicemaster alleges that Ungaretti breached its contract with Servicemaster, specifically Ungaretti's guarantee of client satisfaction, by refusing to reduce its bills. Count II is a claim that Ungaretti breached its fiduciary duty to Servicemaster by disclosing, in the complaint in this lawsuit, confidential information relating to its representation of Servicemaster that is not necessary to recovering its fees.

Servicemaster moves to dismiss Counts II, III, and IV of the complaint. Ungaretti moves to dismiss the counterclaim.

DISCUSSION

The purpose of a 12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to resolve the case on the merits. 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356, at 354 (3d ed. 2004). Under federal notice-pleading standards, a complaint need not contain "detailed factual allegations," but it must have more than mere "labels and conclusions." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff is obligated to provide the factual grounds of his entitlement to relief, and a "formulaic recitation" of the elements of a claim will not do. Id. The complaint must contain sufficient facts to raise a plaintiff's right to relief above a "speculative" level, id. at 555, and the claim must be "plausible on its face," id. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S.Ct. 1937, 1949, 173 L.Ed. 2d 868 (2009). When evaluating a motion to dismiss a complaint, we must accept as true all factual allegations in the complaint, but not its legal conclusions. Id. at 1949-50.

A. Servicemaster's Motion to Dismiss Counts II, III, and IV

1. Quantum Meruit and Unjust Enrichment (Counts II and IV)

Servicemaster contends that Ungaretti's quasi-contractual claims should be dismissed because the relationship between the parties was governed by an express contract, citing, inter alia, our opinion in Song v. PIL, L.L.C., 640 F. Supp. 2d 1011 (N.D. Ill. 2009). Ungaretti responds that the claims are proper alternative theories of recovery.

"An express contract is a contract in which the terms of the contract or agreement are openly and fully uttered and avowed at the time of the making." Impo Glazetile, Inc. v. Florida Tile Indus., Inc., No. 92 C 6930, 1994 WL 630550, at *4 (N.D. Ill. Nov. 8, 1994) (internal quotation marks omitted). Our decision in Song was based on the principle that a plaintiff may not bring quasi-contract claims where there is an express contract governing the parties' relationship. Song had alleged, and the defendants did not dispute, the existence of an express contract. The instant case is distinguishable from Song because Ungaretti has not alleged that the agreement between the parties was an express contract, and indeed, it appears that the parties do not agree on the terms of their agreement. Therefore, plaintiff will be permitted to proceed on its quasi-contractual claims. However, it has not properly alleged those claims in the alternative because Counts II and IV incorporate by reference its ...


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