United States District Court, N.D. Illinois, Eastern Division
R.F. TECHNOLOGIES, INC., an Illinois Corporation, and BABAK NOORIAN, Individually, Plaintiffs,
LECLAIR RYAN, P.C., a Virginia professional Corporation, and THOMAS O'LEARY, Individually, Defendants.
OPINION AND ORDER
L. ELLIS UNITED STATES DISTRICT JUDGE.
LeClair Ryan, P.C. (“LeClair”) and Thomas
O'Leary represented Plaintiffs R.F. Technologies, Inc.
(“RFT”) and Babak Noorian in a trademark
infringement case in the Southern District of California (the
“HME Litigation”). RFT and Noorian bring this
legal malpractice suit against LeClair and O'Leary,
alleging that they acted negligently in the course of their
representation of RFT and Noorian in the HME Litigation.
LeClair and O'Leary move to dismiss this case pursuant to
the doctrines of unclean hands and in pari delicto,
as well as for failure to state a claim. The Court finds that
the facts available to it at this stage of the case do not
support dismissal pursuant to the doctrines of unclean hands
or in pari delicto. Further, the Court finds that
RFT and Noorian have adequately pleaded their legal
malpractice claim. For these reasons, the Court denies
LeClair and O'Leary's motion to dismiss.
a business that markets, sells, and provides replacement
parts and repair for drive-thru headset products for the fast
food industry. Noorian founded RFT and is the company's
CEO. In 2012, HM Electronics, Inc. (“HME”)
brought a trademark infringement suit against RFT and Noorian
in the Southern District of California. RFT and Noorian
retained LeClair and O'Leary to defend them in this
the outset, the HME Litigation did not go well for RFT and
Noorian. Upon receiving notice of the litigation, Noorian
sent an email requesting that his sales personnel delete
certain documents relevant to the litigation. Over the course
of the litigation, no one implemented a legal hold at RFT or
with Noorian, and no one tried to recover the documents
deleted at Noorian's request.
addition to the document preservation issues, HME won a
motion for a preliminary injunction against RFT and Noorian.
Approximately six months after entering that preliminary
injunction, the Southern District of California held RFT and
Noorian in contempt and sanctioned them for violating the
terms of the injunction. The sanctions for the violation
included a daily fine for each day they failed to comply with
the injunction, attorneys' fees for HME, and disgorgement
of any profits made by RFT as a result of their violation of
court sanctioned RFT and Noorian for additional violations
during the pendency of the case. Unsurprisingly, in light of
the lack of a litigation hold and the deletion of documents,
the HME Litigation was rife with discovery issues. At a
hearing shortly before trial, HME moved for sanctions against
RFT and Noorian for noncompliance with the court's orders
and discovery procedures. The magistrate judge granted the
motion, entering an order for sanctions (the “Sanctions
Order”) that included issue sanctions, evidentiary
sanctions, and adverse inference instructions. See HM
Elecs. v. R.F. Techs., Inc., No. 12-cv-2884-BAS-MDD,
Doc. 420 (S.D. Cal. Aug. 7, 2015). According to RFT and
Noorian, the Sanctions Order forced them into settling the
case. The parties ended up settling for $9 million. In light
of the settlement, the HME Litigation district court vacated
the Sanctions Order as moot. See id., Doc. 454 (S.D.
Cal. Mar. 15, 2016).
Noorian argue that LeClair and O'Leary breached their
duty to them as attorneys a number of times during the HME
Litigation. LeClair and O'Leary neglected to institute a
litigation hold, and did nothing to address Noorian's
email regarding the deletion of certain documents. According
to RTF and Noorian, LeClair and O'Leary did not properly
respond to HME's motion for a preliminary injunction;
once HME obtained the preliminary injunction, LeClair and
O'Leary did not explain to RFT and Noorian what the
injunction required of them and what the implications would
be of violating it.
RFT and Noorian hold LeClair and O'Leary responsible for
a number of discovery missteps. Regarding a specific
discovery request seeking at least in part the very documents
that Noorian had requested his sales personnel delete,
O'Leary verified to the HME Litigation court both in
person and through signed discovery responses that all emails
responsive to that request had been produced. Despite these
representations, O'Leary did not ask his ESI vendor to
run searches to identify the documents responsive to that
request until months after his discovery response and
in-court representation. Moreover, 150, 000 pages of ESI were
improperly categorized as confidential and withheld on that
basis, and 375, 000 pages of ESI were not produced until
after the close of discovery. These discovery violations
culminated in the hearing that led to the magistrate
judge's Sanctions Order.
RFT and Noorian contend that LeClair and O'Leary breached
their duty when they did not advise RFT and Noorian to settle
after a mediation of the case in April 2014. According to RFT
and Noorian, LeClair and O'Leary did not explore whether
settlement within RFT's insurance policy limits was
motion to dismiss under Rule 12(b)(6) challenges the
sufficiency of the complaint, not its merits. Fed.R.Civ.P.
12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510,
1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion
to dismiss, the Court accepts as true all well-pleaded facts
in the plaintiff's complaint and draws all reasonable
inferences from those facts in the plaintiff's favor.
AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th
Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint
must not only provide the defendant with fair notice of a
claim's basis but must also be facially plausible.
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct.
1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d
929 (2007). “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.” Iqbal, 556 U.S.
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