No D.C. Jurisdiction

The United States District Court for the District of Columbia (Judge Cooper) dismissed a lawyer v. lawyer fee fight without prejudice

Florida-based lawyer George Lambert defended Nevada businessman Mykalai Kontilai in a lawsuit brought by the Securities and Exchange Commission in the Southern District of New York. Naturally, Lambert would like to be paid for his services. The trouble is that the main apparent source of funds for Lambert’s fees is an insurance policy from which Lambert’s erstwhile co-counsel in the case has already been paid for his fees. To escape this predicament, Lambert has sued his former comrade-in-arms, Maryland attorney Cary Hansel, and his law firm. Lambert accuses Hansel of interfering with his business relationship with their mutual client and committing fraud by strong-arming Kontilai into authorizing the insurance payment and reducing the coverage before Lambert could tap into the policy himself. Defendants move to dismiss on jurisdictional grounds and for failure to state a claim. They also move to strike certain material in Lambert’s filings as impertinent and scandalous.

While the Court harbors doubts about Lambert’s standing to bring these rather inventive claims, the suit faces a more immediate jurisdictional impediment: the Court lacks personal jurisdiction over Hansel and his firm. The Court will therefore grant Defendants’ motion to dismiss for that reason. It will withhold judgment on the motion to strike pending resolution of Hansel’s separate motion for Rule 11 sanctions against Lambert, which is still being briefed.

Personal jurisdiction

Lambert’s complaint is much like that in Exponential Biotherapies. It alleges that insurance payouts were not received in D.C. It does not allege that Lambert lost business in D.C., like the plaintiffs in Crane and Kaiser Stuhl Wine did. Nor does it even allege that Lambert performed any work on behalf of Kontilai from D.C. Instead, Lambert, like the plaintiff in Exponential Biotherapies, is alleging that money that otherwise would have flowed into D.C. was halted by Hansel’s actions. That connection to D.C., when none of the original events underlying this case occurred here and the plaintiffs are a Florida resident and a Florida corporation, is too tenuous to support personal jurisdiction in this forum. See Exponential Biotherapies, 638 F. Supp. 2d at 11.

Dismissal

While Hansel asks that the Court dismiss with prejudice, a jurisdictional dismissal is not a judgment on the merits and ordinarily is without prejudice. See Givens v. Bowser, 111 F.4th 117, 122–23 (D.C. Cir. 2024). Hansel has not offered any reason to depart from that general rule, so the Court will dismiss without prejudice.

A recent Department of Justice press release on the client

A Nevada man was sentenced yesterday to 51 months in prison and ordered to pay $6.1 million in restitution stemming from his role in a years-long fraud scheme.

According to court documents, Mykalai Kontilai, formerly Michael Contile, 55, of Las Vegas, facilitated an investment fraud scheme involving his company, Collector’s Coffee Inc., doing business as Collector’s Café (Collector’s Coffee), a company incorporated in California and headquartered in Las Vegas. From 2012 to 2018, Kontilai made or caused to be made numerous materially false and misleading representations to induce victims to invest in Collector’s Coffee — a company he claimed was on the verge of launching an online auction house for third-party owned collectibles, such as Hollywood and sport memorabilia. As a result of Kontilai’s numerous false and misleading statements, including that investor funds would be used for legitimate business purposes, that Kontilai had personally invested millions of his own money in the company, and that he did not take a salary, Kontilai successfully raised approximately $23 million from Collector’s Coffee investors. However, rather than using the proceeds as represented, Kontilai stole approximately $6.1 million for his own personal use, including for the purchase of luxury goods, apartments, and vehicles.

The U.S. Securities and Exchange Commission (SEC) began investigating Kontilai for misappropriating investor funds in or around 2017. Kontilai obstructed the investigation by forging documents that he caused to be transmitted to the SEC and lied under oath to the SEC. Kontilai was charged in connection with this conduct both in the present case on June 3, 2020, and in a separate case in the District of Colorado on March 10, 2020. While under investigation but prior to charging, Kontilai fled to Russia and was ultimately arrested on an Interpol Red Notice in Germany in 2023. He was extradited back to the United States to face the pending charges in May.

On Nov. 21, Kontilai pleaded guilty to one count of wire fraud. As part of the plea agreement in this case, the government has moved to dismiss the Colorado case.

(Mike Frisch)