Cluett, Peabody & Co. v. CPC Acquisition Co., Inc.

Paul Bilzerian, Bilzerian & Brodovsky, and CPC Acquisition Company, Inc. (collectively, Bilzerian) (plaintiffs) retained the law firm Latham & Watkins (Latham) (defendant) in connection with Bilzerian’s attempted takeover of Cluett, Peabody & Co., Inc. (Cluett). Latham represented Bilzerian and provided legal services commonly performed during an attempted corporate takeover. Bilzerian and Cluett brought separate actions related to the takeover attempt in federal district court, and the two actions were consolidated in district court in New York. Prior to disposition of the case, Cluett agreed to be acquired by a third party. Subsequently, Bilzerian and Cluett entered into a stipulation to dismiss the case. Meanwhile, a dispute arose regarding the amount Latham billed Bilzerian for legal services. Bilzerian brought an action in California state court seeking a determination of the amount of legal fees owed to Latham. Latham requested that the district court for the Bilzerian-Cluett case exercise the court’s ancillary jurisdiction over the fee dispute and determine the fees owed. After the request was referred to a magistrate, the magistrate recommended that the district court could exercise ancillary jurisdiction. The factors considered by the magistrate weighed in favor of exercising jurisdiction over the fee dispute. In particular, the magistrate found that the district court’s familiarity with the amount and quality of Latham’s work would facilitate rapid disposition of the fee dispute. In contrast, in a state court unfamiliar with the proceedings, a substantial part of the record would have been considered and litigated over again. Additionally, the magistrate noted that a court had the responsibility to protect its officers in matters such as fee disputes, found that litigation of the case in California or New York would be equally convenient for the parties, and found that considerations of judicial economy were inconclusive. The district court adopted the magistrate’s recommendation and agreed to exercise ancillary jurisdiction. Bilzerian appealed.