Pillsbury Winthrop Shaw Pittman LLP v. Capitol Hill Group (In Re Capitol Hill Group)
447 B.R. 387
| D.D.C. | 2011Background
- CHG and Shaw Pittman engaged in a long-running fee dispute arising from CHG's Chapter 11 case; Shaw Pittman advised CHG from 2002 to early 2004 and sought fees later awarded by the bankruptcy court.
- Before plan confirmation, CHG and Shaw Pittman exchanged emails forming a Fee Agreement under which CHG would not object to Shaw Pittman's fee applications; CHG later agreed to pay or finance fees per the agreement.
- CHG filed objections to Shaw Pittman's fee applications; the bankruptcy court and appellate courts held that CHG had waived objections to fees through the Fee Agreement.
- After the fee disputes, CHG filed a separate malpractice action in Superior Court alleging Shaw Pittman’s deficient BZA appeal representation harmed CHG financially; Shaw Pittman removed and the district court dismissed the suit as res judicata precluded by bankruptcy proceedings.
- The district court initially ruled the Fee Agreement did not bar CHG’s malpractice claim because the claim sought damages unrelated to fee objections; on appeal, the court reaffirmed that res judicata barred the malpractice claim but held the Fee Agreement does not broadly preclude non-fee damages claims.
- The court ultimately affirmed dismissal of the adversary proceeding without reinstating the malpractice claim
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Fee Agreement extend to CHG’s malpractice claim outside bankruptcy proceedings? | CHG contends the Agreement broadly bars disputes affecting Shaw Pittman’s fee collection. | Shaw Pittman argues the Agreement only bars objections to fee applications, not independent malpractice claims. | No; the Agreement does not bar the malpractice claim. |
| Is CHG’s malpractice claim a dispute over fees? | CHG alleges harms from substandard services, not objections to fees. | Shaw Pittman argues the claim is incidental to fee collection. | Malpractice claim does not constitute a fight over fees. |
| Does res judicata bar CHG’s malpractice claim? | CHG could have raised malpractice in bankruptcy; preclusion should apply. | Capitol Hill II supports preclusion when same nucleus of facts existed. | Res judicata bars the malpractice claim; CHG should have raised it earlier. |
| Was CHG’s malpractice suit brought in bad faith? | Shaw Pittman claims bad faith; CHG’s motives should be implied. | No evidence supports bad-faith assertion; the issue was waived. | Bad-faith theory waived; insufficient evidence to prove bad faith. |
| If the Fee Agreement is not broad enough, does it affect this result? | The Agreement should preclude any suit arising from the same facts as fee disputes. | The Agreement’s scope is limited to fee-applications, not harms from malpractice. | Scope is limited to fee disputes; does not extend to malpractice harms. |
Key Cases Cited
- Capitol Hill Grp. v. Pillsbury Winthrop Shaw Pittman, LLP, 569 F.3d 485 (D.C. Cir. 2009) (malpractice claims precluded by fee-litigation preclusion; res judicata and fee issues intertwined)
- Capitol Hill Grp. v. Pillsbury, Winthrop, Shaw, Pittman LLC, 574 F. Supp. 2d 143 (D.D.C. 2008) (malpractice claim precluded; consideration of fee disputes in bankruptcy court)
- In re CHG, 313 B.R. 344 (D. Det. Cir. 2004) (fee agreement interpretation; waiver of objections to fee applications; remand for fee calculation)
- Smalls v. United States, 471 F.3d 186 (D.C. Cir. 2006) (elements of claim preclusion and final judgment requirements)
- NRDC v. EPA, 513 F.3d 257 (D.C. Cir. 2008) (scope of claim preclusion includes matters that should have been raised)