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James A. Wiatt and Elizabeth Rieger Wiatt v. Winston & Strawn

June 24, 2011


The opinion of the court was delivered by: Linares, District Judge.



This case arises out of allegations that Plaintiffs' former financial advisor, Kenneth Starr, and attorney, Jonathon Bristol, together, conspired to steal $2 million of their funds by unlawfully transferring such funds to Bristol's attorney's trust account. Defendants Winston & Strawn, LLP and Jonathan Bristol have filed motions to dismiss Plaintiffs' Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court has considered the submissions made in support of and in opposition to both motions. No oral argument was heard. Fed. R. Civ. P. 78. Based on the reasons that follow, Defendants' motions are granted in part and denied in part. Plaintiffs are granted leave to file an Amended Complaint, on or before August 22, 2011, which cures the pleading deficiencies discussed herein.


Plaintiff James Wiatt, a California resident, is a former talent agency executive who now does consulting work for a leading global web services company. (Compl., ¶ 21). Plaintiff Elizabeth Wiatt, also a California resident, is a businesswoman and entrepreneur. (Id.).

The Starr Defendants

From August 2003 through late May 2010, the Wiatts engaged the services of Kenneth Starr, Starr & Co., Starr & Co. principal Arlene Graff, and Starr Investment Advisors to manage all aspects of their personal finances. (Compl., ¶¶ 2, 9-13, 23).*fn2 Services performed by the Starr Defendants for the Wiatts included accounting, business management, investment management, investment advice, financial consulting, financial planning and tax advice. (Compl., ¶ 23). The Starr Defendants also assisted the Wiatts in selecting other professionals, such as bankers, realtors and lawyers. (Id.). For the performance of these services, the Wiatts paid the Starr Defendants substantial professional service fees on a monthly basis. (Compl., ¶ 24).

Throughout the course of their business relationship, Starr, a New York resident and former financial advisor, investment manager and accountant to the "stars," also cultivated a close personal friendship with James Wiatt. (Compl., ¶¶ 2, 29). In light of this relationship, and in order to perform the financial services on behalf of Plaintiffs, Starr and Graff had signatory authority over the Wiatts' bank and/or investment accounts, trusts and corporate entities. (Compl., ¶ 25).

The Winston & Strawn Defendants

Defendant Jonathan Bristol, a New Jersey resident, was, at all times relevant to this litigation, a capital partner at the law firm of Winston & Strawn, an Illinois limited liability partnership. (Compl., ¶¶ 16, 17). The Complaint refers to Bristol and Winston & Strawn collectively as the "Winston & Strawn Defendants."

Bristol had provided legal representation to Starr and his companies since at least 2007, at which time he served as a partner at the law firm of Thelen, LLP. (Compl., ¶¶ 31, 32). In 2008, Bristol left the firm of Thelen, LLP and was hired as a capital partner at Winston & Strawn, LLP. (Compl., ¶ 34). While at Winston, Bristol performed substantial work on behalf of the Starr Defendants, generating over $1 million in legal fees for Winston & Strawn in 2009 alone. (Compl., ¶ 38). For instance, on March 17, 2010, Winston received a $100,000 payment for services purportedly rendered by Bristol on behalf of Starr. (Compl., ¶ 39). This money did not come directly from Starr, however; it came from Bristol's attorney trust account. (Id.). The Complaint alleges that Bristol was aware that such funds belonged to defrauded clients of Starr. (Id).

In addition to representing the Starr Defendants, Winston & Strawn and Bristol also represented the Wiatts. (Compl., ¶¶ 41, 49). Starr had referred James Wiatt to Bristol in 2009 in connection with his departure from his employment at the William Morris Agency. (Compl., ¶ 42). Based on such recommendation, James Wiatt engaged the Winston & Strawn Defendants -- by way of e-mail exchange with Bristol on Bristol's Winston & Strawn e-mail account -- to provide him with legal services and advice regarding his separation agreement with the William Morris Agency. (Compl., ¶ 45). Bristol and Winston & Strawn continued to provide legal services to James Wiatt on a variety of matters through late May 2010, including but not limited to coordinating an interview with the SEC that was, unbeknownst to the Wiatts, related to wire transfers from the Wiatts' account into Bristol's attorney trust account. (Compl., ¶¶ 46, 58). During this time, Bristol communicated with the Wiatts through his Winston e-mail account, in writing on Winston & Strawn letterhead and/or by telephone. (Compl., ¶ 47). Bristol (on behalf of Winston & Strawn) was also copied on correspondence concerning certain contractual disputes in which James Wiatt was involved. (Compl., ¶ 51). Bristol also prepared at least two legal memoranda for James Wiatt (both of which were written on Winston letterhead, designated as "Attorney-Client Privileged" and saved on Winston's network) relating to complex legal employment and corporate issues in or around January 2010. (Compl., ¶ 52).

Throughout the course of Bristol's representation of the Wiatts, Bristol communicated directly with the Starr Defendants to obtain relevant documents which they maintained on behalf of the Wiatts, such as the separation agreement and investment records. (Compl., ¶¶ 56, 57). At no point prior to or during such representation, did Starr disclose to the Wiatts that the Winston & Strawn Defendants also represented most, if not all, of the Starr Defendants or Starr in his individual capacity. (Compl., ¶ 44).

The Alleged Theft of Funds

The Complaint alleges that, at some point in 2010, while Bristol was providing legal representation to the Wiatts, he conspired with the Starr Defendants to steal $2 million from the Wiatts for Starr's personal use. (Compl., ¶ 60). In furtherance of this conspiracy, the following two transfers were made: (1) Graff executed a wire transfer of $1,000,000 from the Wiatts' Management Account to Bristol's attorney trust account on or about January 4, 2010 (hereinafter the "January transfer"), and (2) Starr executed a wire transfer of $1,000,000 from the Wiatts' Management Account to Bristol's attorney trust account on or about April 26, 2010 (hereinafter the "April transfer"). (Compl., ¶¶ 63, 68, ). Once received by Bristol, the funds were immediately wired back out of the attorney trust account and into Starr & Co. and/or other third-parties believed to be Starr clients. (Compl., ¶ 66).

Although the bank records received by Bristol show that the funds came from the Wiatts' bank account, the Wiatts did not authorize such transfers and had no knowledge of such transfers until approximately March 2010 -- at which time they received the monthly financial report reflecting the January transaction. (Compl., ¶¶ 65, 67, 69). When questioned about this particular transaction, Graff, Starr and Bristol each informed the Wiatts that such funds had been "bundled" as an "investment" in "UBS." (Compl., ¶¶ 70-74). Such representations by Graff, Starr and Bristol were false inasmuch as none of the Wiatts' funds had been transferred to anyone at UBS in January 2010. (Compl., ¶ 75).

On April 26, 2010, Starr executed the second wire transfer of $1,000,000 from the Wiatts' Management Account. The April transfer was made on the same date on which James Wiatt signed a letter authorizing the transfer of $2,000,000 of his funds to UBS. (Compl., ¶¶ 80, 82). $1,000,000 of the Wiatts' funds was eventually transferred by Starr to UBS on April 26, 2010, but by this point in time, $2,000,000 had been taken out of their bank account. (Compl., ¶¶ 82-84). James Wiatt was subsequently informed, by UBS, that it had only received $1,000,000 of the $2,000,000 investment; when questioned, Starr explained that he was spreading out the investment into two separate transactions. (Compl., ¶ 84).

In May 2010, the Wiatts learned (by reading civil and criminal complaints filed against Starr and his related entities) that Defendants had actually used the proceeds of the April transfer to pay another Starr client, believed to be a celebrity. (Compl., ¶¶ 85-87). The Complaint alleges that Bristol, who, by this time had an ongoing attorney-client relationship with the Wiatts, knowingly used the money obtained from the Wiatts' April transfer to reimburse Starr's celebrity client. (Compl., ¶¶ 88). When questioned by James Wiatt in mid-May 2010, Bristol misrepresented that the wire transfers to his attorney trust account were made to facilitate the bundling of investments with UBS. (Compl., ¶ 89). To date, the $2,000,000 transferred from the Wiatts' Management Account to Bristol's attorney trust account has not been accounted for or returned. (Compl., ¶ 92).

SEC Investigation

In or around mid-May 2010, James Wiatt was contacted by an attorney for the SEC. (Compl., ¶ 93). Wiatt contacted Starr for his advice. (Compl., ¶ 96). Starr reassured Wiatt that there was "nothing to worry about," recommended that Wiatt contact Bristol for guidance, but failed to acknowledge that: (a) he was a target in the investigation, (b) he had been interviewed by the SEC in March 2010 and/or (c) that Bristol was representing him in connection with the SEC investigation. (Compl., ¶¶ 96-98).

James Wiatt subsequently contacted Bristol who explained that it was his understanding that the SEC investigation was a "routine investigation" "in the wake of the Madoff case." (Compl., ¶ 100). Wiatt asked Bristol whether he should be worried about entrusting his finances with Starr; Bristol told him "there was nothing . . . to worry about." (Id.). Bristol then advised Wiatt that his law firm, Winston & Strawn, was representing the Starr entities with regard to other matters and that he would need Wiatt to waive any potential conflicts that might exist if he wanted Bristol to represent him. (Compl., ¶ 101). Bristol did not, however, disclose that he and his attorney trust account were targets of the SEC investigation or that he was already representing Starr in connection with said investigation. (Compl., ¶ 102).

Bristol began representing Wiatt in connection with the SEC investigation after Wiatt agreed to waive any conflicts. (Compl., ¶ 103). In this regard, over the course of several weeks in mid-May 2010, Bristol communicated with the SEC, via e-mail and telephone calls, on behalf of James Wiatt; Bristol and Wiatt also communicated with each other, via e-mail and telephone calls, concerning said investigation. (Compl., ¶¶ 105-108). Throughout the course of Bristol's representation of James Wiatt in connection with the SEC investigation, Bristol learned that he and his law firm were also involved in the investigation (in connection with the transfer of funds from Bristol's attorney trust account). (Compl., ¶ 108). Bristol never conveyed this information to Wiatt; instead, he continued to represent Wiatt, not only with respect to the SEC investigation, but also in connection with his separation agreement from William Morris as it pertained to prospective employment opportunities. (Compl., ¶¶ 108, 109).

Starr's Arrest

On or about May 26, 2010, a criminal complaint by the United States Internal Revenue Services was filed against Starr in the United States District Court for the Southern District of New York based on allegations that Starr had engaged in a fraudulent scheme in connection with the business, accounting, and advisory services he provided to clients, including the Wiatts. (Compl., ¶ 111). Starr was arrested on the following day. (Compl., ¶¶ 90, 112). An indictment was returned against Starr on June 10, 2010. (Compl., ¶ 113). The SEC also filed a complaint against Starr and several of his entities, arising out of the same fraudulent scheme, on May 27, 2010. (Compl., ¶ 114). James Wiatt is described as an unnamed "Client," "Victim" or "Investor" in each of the pleadings. (Compl., ¶ 115). Bristol is described as an unnamed "attorney" in both pleadings. (Compl., ¶ 116). The January and April transfers at issue in this litigation are both referenced in the Starr complaints and Indictment. (Compl., ¶ 117). On September 10, 2010, Starr pled guilty to certain counts of the Indictment, including but not limited to, the wire fraud count relating specifically to the January transfer. (Compl., ¶ 119). The SEC's action is still pending. (Compl., ¶ 121).

Bristol's Termination and Indictment

Bristol was subsequently terminated by Winston & Strawn. (Compl., ¶ 122). On June 4, 2010, Winston & Strawn filed a Notice of Withdrawal in the SEC action stating that, "[p]ursuant to the Court's request at the June 1, 2010 hearing in this matter, Winston & Strawn, LLP hereby confirms that no attorney from Winston & Strawn LLP is representing any party in this case." (Compl., ¶ 125).

On December 14, 2010, a Grand Jury charged Bristol with one count of money laundering in connection with his representation of Starr and the Starr entities and use of his attorney trust account to launder over $20 million. (Compl., ¶ 126). The January and April transfers are referenced in the criminal Indictment. (Compl., ¶ 127).

On December 16, 2010, the SEC amended its complaint against Starr to allege claims against Bristol for aiding and abetting Starr's securities violations. (Compl., ¶ 128). On the same day, Bristol surrendered to law enforcement officials. (Compl., ¶ 130).

Plaintiffs' Claims

In light of the foregoing, Plaintiffs filed the Complaint in this matter on December 20, 2010 against the following defendants: Winston & Strawn LLP, Jonathan Bristol, Starr & Company LLC, Starr Investment Advisors, LLC, Aurora Cassirer, Esq. (as Receiver for Starr & Company LLC and Starr Investment Advisors, LLC), Kenneth I. Starr and Arlene Graff. Plaintiffs assert the following claims for relief: (1) negligent misrepresentation, (2) breach of fiduciary duty, (3) negligent supervision, (4) legal malpractice, (5) unjust enrichment, (6) conversion, (7) civil conspiracy, (8) fraud, (9) conspiracy to defraud, (10) RICO violations, (11) tortious interference with a contract, (12) tortious interference with a prospective business relations, and (13) accounting. This Court's jurisdiction over this matter is premised on 28 U.S.C. § 1331.

Currently before the Court are motions to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) filed by Defendants Winston & Strawn and Jonathan Bristol, respectively.


For a complaint to survive dismissal, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In determining the sufficiency of a complaint, the Court must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party. See Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). But, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions [;][t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S.Ct. at 1949. Additionally, in evaluating a plaintiff's claims, generally "a court looks only to the facts alleged in the complaint and its attachments without reference to other parts of the record." Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). With this framework in mind, the Court turns now to Defendants' motions.


As a preliminary matter, the Court must determine which law applies to Plaintiffs' state law claims.

1. Choice of Law

Generally speaking, since this Court exercises its diversity jurisdiction over this action, the law to be applied is that of the forum state -- New Jersey. Am. Cyanamid Co. v. Fermenta Animal Health, 54 F.3d 177, 180 (3d Cir.1995). Defendants, instead, urge the Court to apply New York law to some or all of Plaintiffs' non-federal claims. For instance, Defendant Bristol argues that New York law applies because "[t]he parties alleged conduct primarily occurred in New York." (Bristol br. at 9). Bristol provides no further analysis in support of the position that New York law should apply to all of Plaintiffs' state law claims. Winston argues that the distinction is immaterial for most of Plaintiffs' state law claims inasmuch as there is no conflict between New York and New Jersey law as to the claims asserted, with the exception of Plaintiffs' negligent misrepresentation and tortious interference claims. As to those two claims, Winston maintains that New York law should apply because: (1) Starr Defendants were New Yorkers, (2) the alleged thefts originated in, were meant to benefit the Starr Defendants in and were the subject of criminal and/or SEC charges in New York, and (3) Winston & Strawn has a New York office, of which Bristol was a partner. (Winston Br. at 13 n. 9). Plaintiffs, on the other hand, argue that New Jersey law should apply to all state law claims because: (1) there is no conflict, (2) the tortious and negligent acts at issue in this case center on a New Jersey bank account, (3) Defendants Bristol and Graff reside in New Jersey, (4) Defendant Winston & Strawn has an office in New Jersey, and (5) the damage occurred in New Jersey. (Pl. Opp'n Br. at 15 n. 3).

This Court must apply New Jersey's choice of law rules to determine what law should apply to state law claims. See Warriner v. Stanton, 475 F.3d 497, 499-500 (3d Cir. 2007). New Jersey's choice of law analysis is a two step process. First, a court must determine if an actual conflict in law exists among the states. See P.V. ex rel. T.V. v. Camp Jaycee, 197 N.J. 132 (2008); Lebegern v. Forman, 471 F.3d 424, 430 (3d Cir. 2006). Once it has been determined that a conflict exists, the court must determine which state has the "most significant relationship" to the claim at issue. Camp Jaycee, 197 N.J. at 136. This test is applied "on an issue-by-issue basis" and "is qualitative, not quantitative." Id. at 143.

Because the parties do not dispute that there is no conflict of law between New York and New Jersey for purposes of all state law claims asserted (with the exception of Plaintiffs' negligent misrepresentation and tortious interference claims) the Court will apply New Jersey law to all such claims. As to the negligent misrepresentation and tortious interference claims, the ...

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