Olshan Frome Wolosky LLP v. Pantheon Environmental, LLC

Background

Olshan Frome Wolosky LLP sued Pantheon Environmental, LLC, also known as Pantheon Environmental, Inc.; Albert McLelland; Gentry Beach; Elizabeth Schick; Eric Schick; and Hover Energy, LLC. Olshan sought to recover unpaid legal fees, late charges, attorneys’ fees and costs, collection costs, and prejudgment interest. The operative complaint alleged that $204,239 remained due for legal services, including work performed for Hover.

According to the complaint, McLelland, Beach, and the Schicks retained Olshan in March 2015 to provide corporate legal services, including forming Pantheon. They signed an engagement letter stating that, until Pantheon was reasonably capitalized, each of them would be responsible for Olshan’s fees and expenses and, unless otherwise agreed in writing, would be separately, jointly, and severally responsible for the full payment of Olshan’s invoices. The complaint also alleged that Olshan performed work for Hover at McLelland’s direction, that Pantheon owned a controlling interest in Hover, and that the companies shared directors and executives.

Olshan asserted four causes of action: breach of contract and account stated against all defendants except Hover, and unjust enrichment and quantum meruit against all defendants. An account stated claim generally concerns an agreement, express or implied, that a stated amount is owed. Quantum meruit is a claim for the reasonable value of services provided when payment is allegedly owed even without an enforceable contract.

Defendants’ Motions to Dismiss

All defendants moved under Federal Rule of Civil Procedure 12(b)(6), arguing that the complaint failed to state a legally sufficient claim. Hover additionally moved under Rule 12(b)(2), arguing that the court lacked personal jurisdiction over it. Beach later joined the motion filed by Pantheon and the Schicks. McLelland also requested $10,000 in attorneys’ fees if his motion were granted.

The court rejected the argument that Olshan improperly grouped the defendants together. The complaint alleged joint and several liability for Pantheon and the Individual Defendants under the engagement letter and alleged that those defendants benefited from Olshan’s services. The court also noted that the complaint treated Hover separately and did not assert breach-of-contract or account-stated claims against Hover. Although the complaint did not allocate the $204,239 among work performed for Hover and work performed for Pantheon, the court said that issue could be addressed through discovery and did not prevent the claims from being adequately pleaded.

The court also rejected the argument that Olshan could not plead both contract and non-contract claims. Although a party generally cannot recover under a contract and quasi-contract theories for the same subject matter when a valid written agreement clearly covers the dispute, the defendants did not concede that the engagement letter was valid or that its scope resolved the dispute. The court therefore allowed the unjust-enrichment and quantum-meruit claims to proceed while discovery explored the services performed, the circumstances in which they were requested, and the benefits received by the defendants. The court noted that one set of claims might later need to be eliminated as to some defendants.

The court found plausible Olshan’s allegation that Pantheon was not reasonably capitalized. Whether Pantheon was reasonably capitalized, and when, were factual questions that could not be resolved on a motion to dismiss, particularly because the engagement letter did not define “reasonable capitalization.” The court also rejected arguments that the engagement letter was limited to 2015 or that it necessarily prevented liability by the Individual Defendants. Because the parties had not submitted the engagement letter itself, the court relied at this stage on the complaint’s allegations about its terms.

The court further held that the complaint plausibly alleged liability for Hover-related work. The complaint alleged that Pantheon controlled Hover and that McLelland was the chief executive officer of both entities. It also alleged that McLelland directed Olshan to perform services for Hover. Those allegations were sufficient at the motion-to-dismiss stage to support possible liability by Pantheon and the Individual Defendants, or alternatively to support unjust-enrichment and quantum-meruit claims if McLelland had directed the work personally.

As to the account-stated claim, the court found that the complaint alleged that the defendants had promised to pay the invoiced amounts under the engagement letter. It also alleged that Eric Schick confirmed that Pantheon and its members had received the statement of account and that no defendant objected to it. The court said it was reasonable at this stage to infer acceptance from receipt of the account and the absence of objections.

Personal Jurisdiction Over Hover

Olshan relied on New York’s long-arm statute, specifically New York Civil Practice Law and Rules § 302(a)(1), which permits jurisdiction when a defendant transacts business in New York and the claim arises from that business. The court concluded that Olshan made the required initial showing of jurisdiction.

The complaint and supporting materials indicated that Hover retained Olshan to draft Hover’s limited liability company agreement in 2015, that the agreement described Olshan’s continued representation of Hover, and that Olshan performed legal services for Hover. The materials also referred to Olshan as Hover’s outside corporate counsel in 2018. Because Olshan’s claims concerned Hover’s alleged failure to pay for those services, the court found a sufficient connection between Hover’s New York-related business and the claims.

The court also concluded that exercising jurisdiction complied with constitutional due-process requirements. Hover had purposefully used a New York law firm for legal services performed in New York, making it foreseeable that Hover could be sued there over a payment dispute. The court found no compelling reason that exercising jurisdiction would be unfair or unreasonable. It considered the burden on Hover, New York’s interest in resolving disputes involving its law firms, Olshan’s interest in obtaining relief there, the efficiency of avoiding related litigation in multiple states, and the states’ shared policy interests.

Disposition

Judge Robert W. Lehrburger denied the defendants’ motions to dismiss. The court denied Hover’s request for dismissal for lack of personal jurisdiction, rejected the Rule 12(b)(6) arguments, and denied McLelland’s request for $10,000 in attorneys’ fees as a sanction. The Clerk of Court was directed to close the motions at Docket Nos. 55, 57, 59, and 75.