The First Court of Appeals Thursday rejected a lawsuit filed by a Houston law firm aimed at settling a $15,000 dispute with the Podesta Group, a powerful and controversial Washington lobbying firm.
The Houston-based appeals court rejected a claim by Ajamie LLP that the dispute between the two firms could be settled in Texas because Ajamie could not show that the work performed — or not performed — by Podesta was substantially performed — or not performed — in Texas.
Harry Herzog, of Katy-based Herzog & Carp, handled the appeal for Podesta. He told The Texas Lawbook that he was not surprised by the ruling but was pleased, not only by the result, but by its clarity.
“It’s the first appellate opinion I’ve ever read that I agreed with every word written,” Herzog said.
The dispute arose in connection with lawsuits filed in Delaware against AT&T by the Ajamie firm on behalf of 60 minority partners in the communication giant’s mobile phone business – two of them in Texas. The lawsuits allege that AT&T revalued those partnerships unilaterally and unfairly. They are still pending in Delaware Chancery Court.
Because the lawsuit had a public policy dimension, Thomas Ajamie — the firm’s managing partner — hired the Podesta Group to explore those policy issues before the Federal Communications Commission and Congress. Ajamie was described in the opinion as friend of Tony Podesta, co-founder of the Podesta Group.
The two firms agreed under terms of a three-year contract that the Podesta Group would receive a $15,000 per month retainer and an undisclosed percentage of any money damages recovered from AT&T. The contract ran from May 2014 through June 2017.
According to the opinion, things went well between the two firms until the beginning of 2017, when Ajamie became dissatisfied with the Podesta Group’s performance. It was also about that time the Tony Podesta’s name began to emerge in connection with the federal investigation into the lobbyist and former Trump campaign chairman, Paul Manafort.
According to court documents, the Podesta Group had earned $1.2 million from 2012 to 2014, lobbying along with Manafort for the pro-Russian regime that ruled Ukraine. In April 2017 the lobbying firm registered retroactively for that lobbying effort and in October 2017 Podesta stepped down and declared the firm all but bankrupt. Last September the Justice Department announced that it had concluded its investigation of Podesta without filing criminal charges.
The conflict with the Ajamie firm began when it received its final invoice from the Podesta Group. They refused to pay, and in November 2018, Podesta sued in a District of Columbia Superior Court to collect the unpaid funds. Four days later Ajamie countersued in a Houston state court on behalf of his clients, seeking to reclaim funds paid to Podesta over the last six months of the contract — a period when, Ajamie maintained, the Podesta firm did no documentable work.
In Texas, the Podesta firm filed for a special appearance, arguing that the Texas court had no jurisdiction because neither the Podesta Group nor its services for Ajamie intersected substantially with the Lone Star State.
The trial court agreed — and so did the three-judge panel for the First Court of Appeals.
Ajamie had argued that the Podesta Group, while headquartered in Washington, had substantial connections to Texas through its influence with the Texas congressional delegation. That was a significant reason for hiring them. But more important to the court, Ajamie argued that the substance and execution of the long-term contract — invoices, payments and other connections to Texas-based Ajamie — established the minimum state-based activity that would make Podesta subject to specific jurisdiction in Texas.
Although Ajamie testified that there was significant business conducted in Texas, the appeals court ruled that the trial court had already settled any discrepancies as a matter of fact.
“Podesta’s contacts, though marginally relevant, do not concern facts that are in dispute,” wrote Justice Gordon Goodman for the panel. “Podesta’s alleged liability does not arise from them. Instead, Podesta’s liability arises from his alleged failure to perform his contractual duties during the final six months of the Consulting Agreement’s term. The operative facts of the litigation therefore concern whether Podesta performed under the contract during this time. The evidence shows that Podesta would have performed his duties in Washington, D.C., not Texas.”
The next step has not been determined but will not include an appeal, Thomas Ajamie told The Lawbook.
“The appeals court has spoken, and I respect that,” Ajamie said. Although the D.C. lawsuit against Ajamie has been dropped, according to D.C. court records, Ajamie said his firm will likely litigate with the Podesta Group for repayment of the final six months of the abortive contract. Any renewed litigation will take place either in Washington or Delaware, he said.
Ajamie said neither he nor his clients knew anything of the Podesta firm’s trouble until it was implicated in the Manafort indictment. It was then, he said, that the reason for the firm’s lack of communication became apparent.
Ajamie said he had been friends with Tony Podesta, “and I still am. But I’ll have to say I was taken aback when they sued us for the final payment after doing nothing for the final six months of the contract.”
For Herzog, whose small commercial firm has an active appellate practice, it was a very good day. The First Court of Appeals also handed him another win in YHR Mason Road Partners v. 7-7 Cleaners, Inc., a landlord-tenant dispute.
“I’m hoping now for peace in the valley,” Herzog said.