Jordan's Ladder Legal Placements, LLC v. Major, Lindsey & Africa, LLC

Background

Jordan’s Ladder Legal Placements, LLC (“Ladder”) and Major, Lindsey & Africa, LLC (“MLA”) are competing legal-recruiting companies. Ladder alleged that it entered into a fee agreement with Pillsbury Winthrop Shaw Pittman LLP under which Pillsbury would pay a placement fee when a candidate presented by Ladder joined the firm. The agreement stated that, when multiple recruiters claimed a fee, the recruiter whose resume was received first would be eligible for the fee, and that placement fees were payable within 30 days of an invoice.

Ladder alleged that it presented William M. Bosch and James M. Catterson to Pillsbury. Bosch and Catterson later joined Pillsbury as partners. Pillsbury paid Ladder $375,000 for Bosch’s placement but placed the $375,000 Catterson fee in a trust account while waiting for Ladder and MLA to resolve their competing claims. Ladder alleged that MLA, through its recruiter Lawrence N. Mullman, claimed the entire Catterson fee, knew about Ladder’s agreement with Pillsbury, and caused Pillsbury to withhold the fee.

Ladder brought two claims: a claim for tortious interference with contract under New York law and a request for a declaration that Ladder, rather than MLA, was entitled to the entire Catterson fee. MLA moved to dismiss both claims under Rule 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim.

Tortious-Interference Claim

The court denied MLA’s motion to dismiss Count II. Under New York law, Ladder had to allege a valid contract with a third party, MLA’s knowledge of that contract, intentional procurement of the third party’s breach without justification, an actual breach, and resulting damages.

The court held that Ladder plausibly alleged a valid agreement with Pillsbury covering Catterson’s placement. The complaint alleged that Catterson authorized Ladder, through Bosch, to present him to Pillsbury; that forms provided through Ladder were returned apparently signed by Catterson; and that Catterson attended a Pillsbury meeting arranged by Ladder. These allegations supported an inference that Catterson consented to Ladder’s representation. The court noted that later-discovered facts could undermine the claim, but those factual issues could not be resolved on a motion to dismiss.

The court also held that Ladder plausibly alleged MLA’s knowledge of the fee agreement. Ladder alleged that Jordan told Mullman about the agreement and that MLA knew, or should have known, that Ladder had an agreement with Pillsbury. The court stated that Ladder did not need to plead that MLA knew every detail of the agreement.

The court rejected MLA’s argument that the economic-interest defense required dismissal at this stage. That defense can protect a defendant that acted to protect a legal or financial stake in the business of the party that allegedly breached the contract. The court said that the defense depended on facts not apparent from the complaint, including the nature of MLA’s relationship with Catterson and whether that relationship gave MLA an interest in Pillsbury’s business. The court also explained that being a competitor alone is not enough to establish the defense.

Finally, the court held that Ladder plausibly alleged an actual breach. The agreement required payment within 30 days, and Pillsbury had not paid Ladder the Catterson fee. The court stated that placing the fee in a trust account did not eliminate the alleged breach and that the agreement did not condition Pillsbury’s payment obligation on the recruiting firms reaching an agreement about how to divide the fee.

Declaratory-Judgment Claim

The court granted MLA’s motion to dismiss Count I. Ladder sought a declaration that it, rather than MLA, was entitled to the entire Catterson fee. The court explained that the dispute over which recruiting company was entitled to the fee was different from the interference claim, which focused on MLA’s knowledge and alleged inducement of Pillsbury’s breach.

The court nevertheless concluded that the declaratory claim could not proceed against MLA. In the court’s view, the relevant dispute was between Ladder and Pillsbury because Pillsbury was the party that allegedly owed Ladder the fee. MLA did not owe Ladder the money under Ladder’s theory. Pillsbury was not a party to the lawsuit, and the court was not satisfied that all persons with an interest in the declaration were before it. The court therefore found no case or controversy between the parties to the action and declined to exercise its discretionary jurisdiction over the declaratory claim.

Disposition

The court denied MLA’s motion to dismiss the tortious-interference claim and granted MLA’s motion to dismiss the declaratory-judgment claim. The court directed the clerk to close the motion at Docket No. 10.