Shtauber v. Gerson
239 F. Supp. 3d 248
| D.D.C. | 2017Background
- In 2005 Allan Gerson (D.C. lawyer) and Zvi Shtauber (non‑lawyer consultant) executed an agreement: Shtauber would provide investigative/consulting services and receive 20% of contingent fees the “Gerson Group” obtained on claims referred by an Israeli attorney, David Mena.
- Shtauber alleges Gerson breached by failing to pay the agreed fees, failing to provide required status reports, and forcing Shtauber to incur expenses; Shtauber seeks contract damages (~$160,000), quantum meruit (~$720,000), and a declaratory judgment that he is entitled to 20% of future contingent fees.
- Gerson moved to dismiss under Rule 12(b)(6), arguing the fee‑sharing agreement is unenforceable as contrary to public policy because D.C. Rule of Professional Conduct 5.4(a) prohibits fee sharing with nonlawyers, and that quantum meruit is unavailable where an express contract exists and is pleaded inadequately.
- The contract specifies D.C. law governs; the Court applied D.C. contract law and considered the Agreement attached to the complaint.
- The Court concluded Rule 5.4(a) on its face bars contingent fee sharing with a nonlawyer and that D.C. ethics opinions support that conclusion, but declined to dismiss because under D.C. precedent a court may refuse to enforce an otherwise proscribed contract only after weighing public‑policy interests and equities.
- The Court therefore denied the motion to dismiss all counts: it held Count I (contract damages) and Count III (declaratory relief) survive because, at this stage, equitable factors counsel enforcement; Count II (quantum meruit) also survives because unjust enrichment can be pleaded alternatively where a contract has been materially breached and the pleading is sufficiently particular for 12(b)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of fee‑sharing agreement under D.C. Rules (Counts I & III) | Agreement is not covered by Rule 5.4(a) or, even if it is, equities require enforcement | Fee‑sharing with a nonlawyer violates Rule 5.4(a) and is contrary to public policy, making contract unenforceable | Court: Rule 5.4(a) prohibits the arrangement, but under D.C. precedent courts weigh public‑policy consequences; at pleading stage, equitable factors favor allowing enforcement — denial of dismissal |
| Availability of quantum meruit/unjust enrichment (Count II) | Alternatively recover reasonable value of services because Gerson breached | Quantum meruit unavailable where an express contract governs; pleading lacks particularity | Court: Quantum meruit allowed as alternative where plaintiff alleges material breach; plaintiff pleaded sufficient facts for 12(b)(6) — denial of dismissal |
| Sufficiency of pleadings for quantum meruit (Rule 12(b)(6)) | Complaint alleges services, breach, and value; adequate at pleading stage | Allegations are speculative and not particular enough | Court: Allegations are factual and plausible; no need for detailed valuation now — denial of dismissal |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (application of plausibility standard to legal conclusions)
- Landise v. Mauro, 725 A.2d 445 (D.C. 1998) (court may enforce agreements despite ethical violations where public‑policy analysis and equities counsel enforcement)
- Remsen Partners, Ltd. v. Stephen A. Goldberg Co., 755 A.2d 412 (D.C. 2000) (D.C. approach to contracts violating licensing/public‑policy rules and equitable remedies)
- Harrington v. Trotman, 983 A.2d 342 (D.C. 2009) (unjust enrichment typically unavailable where express contract governs, but available after material breach)
- W.R. Grace & Co. v. Local Union 759, 461 U.S. 757 (1983) (contracts violating explicit public policy are unenforceable)