Case 2:10-cv-00191-TS-DN Document 5 Filed 03/25/2010 Page 1 of 16

Richard D. Burbidge (#0493)

rburbidge@bmgtrial.com
Jefferson W. Gross (#8339)
jwgross@bmgtrial.com
BURBIDGE MITCHELL & GROSS
215 South State Street, Suite 920
Salt Lake City, Utah 84111
Telephone: (801) 355-6677
Facsimile: (801) 355-2341

Attorneys for Defendant

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH, CENTRAL DIVISION

RADER, FISHMAN & GRAUER, PLLC, )
)
Plaintiff, ) ANSWER AND COUNTERCLAIM
)
v. ) Civil No. 2:10-cv-191
)
`1-800 CONTACTS, INC., ) Judge
)
Defendant. ) Magistrate Judge Paul M. Warner
)
1-800 CONTACTS, INC., )
)
Counterclaimant, )
)
v. )
)
RADER, FISHMAN & GRAUER, PLLC, )
)
Counterclaim Defendant. )
)

Defendant 1-800 Contacts, Inc. (“1-800” or “Defendant”), by and through its counsel of

record, and by and for itself only, responds to the Complaint of Plaintiff as follows:
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1. Defendant lacks sufficient information or belief to respond to paragraph 1 and, on

such basis, denies paragraph 1.

2. Defendant admits paragraphs 2 and 3.

3. In response to paragraph 5 (no paragraph number 4 is found in the Complaint),

Defendant responds as follows: Defendant admits that Plaintiff represented Defendant in various

litigation and non-litigation matters beginning in approximately January 2004 and concluding in

or around August 2009. Defendant further admits that the terms for Plaintiff’s representation of

Defendant in these matters were sometimes reduced to writing and sometimes were oral. Except

as expressly admitted herein, Defendant denies paragraph 5.

4. In response to paragraph 6, Defendant lacks sufficient information or belief to

respond to the allegations contained therein and denies the same on such basis.

5. In response to paragraph 7, Defendant admits that Plaintiff represented Defendant

as its counsel for a period of approximately 5½ years and that numerous lawyers and staff

associated with Plaintiff were involved in such legal representation. Except as expressly

admitted herein, Defendant denies paragraph 7.

6. In response to paragraph 8, Defendant admits that Bryan Pratt (“Pratt”) was an

attorney associated with Plaintiff and who worked in Plaintiff’s offices in Salt Lake City.

Defendant further admits that Pratt was involved with many of Defendant’s legal matters from

January 2004 through August 2009. Except as expressly admitted herein, Defendant lacks

sufficient information or belief to respond to the allegations of paragraph 8 and denies the same

on such basis.

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7. In response to paragraph 9, Defendant lacks sufficient information or belief to

respond to said paragraph and denies the same on such basis.

8. In response to paragraph 10, Defendant admits that Pratt has had a business

relationship with Mr. David Zeidner (“Zeidner”) an inside attorney for Defendant, and with Joe

Zeidner who is the brother of David Zeidner. Except as expressly admitted herein, Defendant

denies paragraph 10.

9. In response to paragraph 11, Defendant admits that the legal matters in which

Plaintiff represented Defendant often concerned patents, trademarks and trade secrets which

Defendant owned or was otherwise interested. Except as expressly admitted herein, Defendant

denies paragraph 11.

10. In response to paragraph 12, Defendant admits that Pratt was involved in many

“non-litigation” matters in which Plaintiff represented Defendant and that, from time to time,

other lawyers associated with Plaintiff in both Plaintiff’s Salt Lake City and Michigan offices

worked on such matters. Except as expressly admitted herein, Defendant denies paragraph 12.

11. In response to paragraph 13, Defendant admits that Pratt was not primarily

responsible for litigation matters in which Plaintiff represented Defendant and that usually

attorneys from Plaintiff’s Michigan office were primarily responsible for litigation matters in

which Plaintiff represented Defendant. Except as expressly admitted herein, Defendant denies

paragraph 13.

12. In response to paragraph 14, Defendant admits that on various occasions,

Defendant, by and through its employees including Zeidner, expressed appreciation for legal

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services rendered by Plaintiff, as well as outcomes in matters in which Plaintiff was providing

legal services to Defendant. Except as expressly admitted herein, Defendant denies paragraph

14.

13. In response to paragraph 15, Defendant admits that Plaintiff provided invoices to

Defendant. Except as expressly admitted herein, Defendant denies paragraph 15.

14. In response to paragraph 16, Defendant admits that, on or about August 13, 2007,

and at the direction of Defendant, Plaintiff filed a complaint on behalf of Defendant against

Lens.com, Inc. (“Lens.com”), a competitor of Defendant. Defendant further admits that this case

is entitled 1-800 Contacts v. Lens.com, Inc., 2:07-cv-00591 CW, and that the case is currently

pending in the United States District Court for the District of Utah. Except as expressly admitted

herein, Defendant denies paragraph 16.

15. In response to paragraph 17, Defendant admits that Pratt was very involved in the

attorney-client relationship between Plaintiff and Defendant, that Pratt was involved in many of

the transactional and patent prosecution matters in which Defendant retained Plaintiff and that

Pratt was not the attorney primarily responsible for the Lens.com litigation. Except as expressly

admitted herein, Defendant lacks sufficient information or belief to respond to the allegations of

paragraph 17 and denies the same on such basis.

16. Defendant admits paragraphs 18 and 19.

17. In response to paragraph 20, Defendant admits that Pratt discontinued his

association with Plaintiff in or around August 2009 and became associated with the law firm of

Holland & Hart in or around August 2009. Except as expressly admitted herein, Defendant lacks

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sufficient information or belief to respond to the allegations of paragraph 20 and denies the same

on such basis.

18. In response to paragraph 21, Defendant admits that, in or around August 2009,

Defendant retained Holland & Hart as its counsel, including as counsel in the Lens.com matter.

Except as expressly admitted herein, Defendant denies paragraph 21.

19. Defendant denies paragraphs 22, 23 and 24, inclusive.

20. In response to paragraph 25, Defendant objects to responding to said allegations

on the basis that so responding would compromise the attorney-client privilege between Plaintiff

and Defendant.

21. In response to paragraph 26, Defendant admits that Plaintiff represented

Defendant in the Lens.com litigation. Except as expressly admitted herein, Defendant objects to

and/or lacks sufficient information or belief to respond to paragraph 26 and denies the same on

such basis.

22. In response to paragraph 27, Defendant admits that the court in the Lens.com

litigation awarded Defendant significant sanctions against Lens.com. Except as expressly

admitted herein, Defendant lacks sufficient information or belief to respond to paragraph 27 and

denies the same on such basis.

23. Defendant admits paragraphs 28, 29, 30 and 31, inclusive.

24. In response to paragraph 32, Defendant admits that Mark Miller, a lawyer

specializing in litigation from Holland & Hart, attended the June 1, 2009 oral argument in the

Lens.com case. Defendant further admits that Holland & Hart was not counsel to Defendant or

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Lens.com in the Lens.com litigation as of June 1, 2009. Except as expressly admitted herein,

Defendant denies paragraph 32.

25. Defendant denies paragraph 33.

26. In response to paragraph 34, Defendant admits that in or around November 2009,

Zeidner, as in-house counsel for Defendant, complained about the amount of Plaintiff’s invoices

especially due to pre-litigation budgets which were provided to Defendant. In connection with

these complaints, representatives for Plaintiff and Defendant discussed discounts or adjustments

to Plaintiff’s invoices. Except as expressly admitted herein, Defendant denies paragraph 34.

27. In response to paragraph 35, Defendant objects to disclosing attorney-client

privileged communications in response thereto. Without waiving the attorney-client privilege,

Defendant admits that, in November 2008, Defendant complained that Plaintiff’s bills exceeded

pre-litigation budgets provided by Defendant to Plaintiff. Except as expressly admitted herein,

and subject to preservation of Defendant’s attorney-client privilege, Defendant denies paragraph

35.

28. In response to paragraph 36, Defendant admits that Plaintiff and Defendant

discussed a cap of Plaintiff’s legal fees of $750,000 for 2008 in connection with the Lens.com

matter. Except as expressly admitted herein, Defendant denies paragraph 36.

29. In response to paragraph 37, Defendant admits that, in accord with the agreed cap

of $750,000 for legal fees during calendar year 2008 for the Lens.com matter, Plaintiff agreed to

a discount of $150,000. Except as expressly admitted herein, Defendant denies paragraph 37.

30. Defendant denies paragraph 38.

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31. In response to paragraph 39, Defendant admits that it agreed to pay $428,902.17

prior to the end of November 2008 in connection with Plaintiff’s and Defendant’s agreements

concerning the budget ceiling of $750,000 for 2008 (which budget also implicated the above-

referenced discount of $150,000 on outstanding invoices from Plaintiff). Except as expressly

admitted herein, Defendant denies paragraph 39.

32. In response to paragraph 40, Defendant acknowledges that in November 2008,

Plaintiff stated to Defendant that “the present and prior discounts that [Plaintiff has] given

[Defendant] create a substantial negative impact on [Plaintiff’s] revenues for 2008.” Except as

expressly admitted herein, Defendant denies paragraph 40.

33. In response to paragraph 41, Defendant admits that, in or around January 2009,

Plaintiff and Defendant agreed that Plaintiff’s legal fees in the Lens.com matter would be capped

in an amount of $1.1 million from inception through the end of trial. Defendant further admits

that this agreement was reached in connection with Defendant’s complaints about Plaintiff’s

inability to meet pre-litigation budgets for the Lens.com litigation. Except as expressly admitted

herein, Defendant denies paragraph 41.

34. Defendant denies paragraph 42.

35. In response to paragraph 43, Defendant admits that at times Zeidner, its in-house

counsel, expressed appreciation to Plaintiff for Plaintiff’s services in the Lens.com litigation, as

well as for Plaintiff’s accommodations to Defendant’s complaints about Plaintiff exceeding pre-

litigation budget estimates. Except as expressly admitted herein, Defendant denies paragraph 43.

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36. In response to paragraph 44, Defendant admits that, through Zeidner, Defendant

gave gifts to attorneys associated with Plaintiff. Defendant further admits that those gifts would

have not been made absent Plaintiff’s representation of Defendant. Except as expressly admitted

herein, Defendant denies paragraph 44.

37. In response to paragraph 45, Defendant lacks sufficient information or belief to

respond to said allegations and denies the same on such basis.

38. In response to paragraph 46, Defendant admits that it had complaints about

Plaintiff’s invoices after November 2008 and after January 2009. Except as expressly admitted

herein, Defendant denies paragraph 46.

39. In response to paragraph 47, Defendant admits that attorneys associated with

Plaintiff performed work in 2009 on behalf of Defendant in the Lens.com matter and that

Defendant has not paid invoices sent by Plaintiff to Defendant in 2009. Except as expressly

admitted herein, Defendant denies paragraph 47.

40. In response to paragraph 48, Defendant admits that Plaintiff sent invoices in 2009

purportedly for attorney’s fees and other fees, costs and expenses. Except as expressly admitted

herein, Defendant denies paragraph 48.

41. In response to paragraph 49, Defendant lacks sufficient information and belief and

denies the same on that basis.

42. In response to paragraph 50, Defendant admits that Zeidner advised attorneys

associated with Plaintiff in a telephone conversation in August 2009 (in which Plaintiff was

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discharged) that Defendant would not pay Plaintiff’s invoices for numerous reasons. Except as

expressly admitted herein, Defendant denies paragraph 50.

43. In response to paragraph 51, Defendant admits that in August 2009, Defendant

advised Plaintiff that Defendant would not pay invoices which Plaintiff claimed to be due on

account of legal fees and expenses in the Lens.com litigation. Defendant further admits that,

since August 2009, Defendant has not paid such invoices. Except as expressly admitted herein,

Defendant denies paragraph 51.

44. Defendant denies paragraph 52.

45. Defendant admits paragraph 53.

46. Defendant denies paragraphs 54 and 55, inclusive.

47. In response to paragraph 56, Defendant admits that it has refused to pay amounts

set forth in invoices from Plaintiff to Defendant. Except as expressly admitted herein, Defendant

denies paragraph 56.

48. In response to paragraph 57, Defendant incorporates its responses to paragraphs 1

through 56 of Plaintiff’s Complaint as if set forth in full herein.

49. In response to paragraph 58, Defendant admits that it engaged Plaintiff on several

litigation matters and that some were pursuant to written engagements and some were oral

engagements. Defendant further admits that one term of such engagements was to pay costs and

fees, as agreed, in connection with Plaintiff’s provision of legal services to Defendant. Except as

expressly admitted herein, Defendant denies paragraph 58.

50. Defendant denies paragraphs 59, 60 and 61, inclusive.

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51. In response to paragraph 62, Defendant incorporates by this reference its

responses to paragraphs 1 through 56 of Plaintiff’s Complaint as if fully set forth herein.

52. In response to paragraph 63, Defendant admits that, under Utah law, the covenant

of good faith and fair dealing is implied in every contract. Except as expressly admitted herein,

Defendant denies paragraph 63.

53. Defendant denies paragraphs 64 through 68, inclusive.

54. In response to paragraph 69, Defendant incorporates by this reference its

responses to paragraphs 1 through 56, inclusive, of Plaintiff’s Complaint as if set forth in full

herein.

55. Defendant denies paragraphs 70 through 73, inclusive.

FIRST AFFIRMATIVE DEFENSE

Plaintiff has failed to state a claim for which relief may be granted.

SECOND AFFIRMATIVE DEFENSE

Plaintiff is barred from recovery due to its anticipatory breach of its engagement

agreement with Defendant.

THIRD AFFIRMATIVE DEFENSE

Plaintiff is barred from recovery due to its material breach of its engagement agreement

with Defendant.

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FOURTH AFFIRMATIVE DEFENSE

The claims are barred by false and erroneous billing. Specifically, in the invoices

referenced in Exhibit “A” to Plaintiff’s Complaint and in invoices presented in the Lens.com

litigation, Plaintiff falsely stated time billed to Defendant for one or more attorneys, including

time purportedly incurred and billed by Terrence Rader.

FIFTH AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by the doctrine of waiver.

SIXTH AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by the doctrine of estoppel.

SEVENTH AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by the doctrine of unclean hands.

EIGHTH AFFIRMATIVE DEFENSE

Plaintiff has failed to mitigate its damages, if any.

NINTH AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by the doctrine of duress.

TENTH AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by the doctrine of laches.

ELEVENTH AFFIRMATIVE DEFENSE

Plaintiff’s claims are barred by applicable statute of limitations.

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TWELFTH AFFIRMATIVE DEFENSE

Plaintiff is not entitled to recover due to a failure of consideration.

THIRTEENTH AFFIRMATIVE DEFENSE

Any amount sought to be recovered by Plaintiff in this action is offset in whole, or in part,

by the amount to be recovered by Defendant in its Counterclaim

COUNTERCLAIM

1. Counterclaimant 1-800 Contacts, Inc. (“Counterclaimant”), is a Delaware

corporation with its principal place of business located in Salt Lake County, State of Utah.

2. Counterclaim Defendant Rader Fishman & Grauer, PLLC (“RFG”), is a

professional limited liability company organized under the laws of the State of Michigan and has

its primary place of business in Bloomfield, Michigan.

3. This Court has jurisdiction of this Counterclaim pursuant to 28 U.S.C. § 1367.

4. Venue is proper in this Court for this Counterclaim.

5. In or around August 2007, Counterclaimant entered into an oral agreement with

RFG whereby RFG agreed to represent Counterclaimant’s interests as its attorney in the matter of

1-800 Contacts v. Lens.com, Inc., 2:07-cv-00591 CW (the “Lens.com Litigation”). In connection

with this engagement, RFG undertook a fiduciary duty to Counterclaimant. In exchange for the

faithful services of RFG, Counterclaimant agreed to pay the hourly legal fees of RFG that were

honestly and reasonably incurred by RFG.

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6. In November 2008, Counterclaimant and RFG modified the terms of their

engagement agreement. Specifically, RFG agreed that its fees for services rendered in 1998

would be capped at $750,000.

7. In or around January 2009, Counterclaimant and RFG further modified their

engagement agreement. Specifically, RFG agreed that its legal fees in the Lens.com Litigation

from inception to conclusion of trial would be capped at $1.1 million expressly anticipating that

fees for the trial of the matter would be $250,000 of that aggregate amount.

FIRST CLAIM FOR RELIEF

(Breach of Oral Agreement)

8. By this reference, Counterclaimant incorporates paragraphs 1 through 7 of this

Counterclaim as if set forth in full herein.

9. RFG breached its engagement agreement with Counterclaimant. Said breach was

anticipatory and material. Furthermore, RFG breached the covenant of good faith and fair

dealing implied in the engagement agreement.

10. Prior to RFG’s breaches of the engagement agreement, Counterclaimant

substantially performed its obligations under the engagement agreement with RFG.

11. Counterclaimant has been damaged as a result of RFG’s breach of the engagement

agreement, including consequential damages, in an amount to be proven at trial.

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SECOND CLAIM FOR RELIEF

(Breach of Fiduciary Duty)

12. By this reference, Counterclaimant incorporates paragraphs 1 through 11 of this

Counterclaim as if set forth in full herein.

13. As attorneys for Counterclaimant, RFG owed a fiduciary duty – and continues to

owe a fiduciary duty – to Counterclaimant,.

14. RFG has breached its fiduciary duty to Counterclaimant.

15. As a direct and proximate result of RFG’s breaches of its fiduciary duty to

Counterclaimant, Counterclaimant has been damaged in an amount to be proven at trial.

PRAYER

WHEREFORE, Defendant/Counterclaimant 1-800 Contacts, Inc., respectfully prays for

judgment as follows:

1. That Plaintiff’s Complaint be dismissed with prejudice;

2. That Defendant/Counterclaimant recovery damages in an amount to be proven at

trial on its First and Second Claims for Relief in its Counterclaim;

3. For costs incurred herein;

//

//

//

//

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4. For such other and further relief as the Court may deem just and proper.

DATED this the 25th day of March, 2010.

BURBIDGE MITCHELL & GROSS

/s/ Jefferson W. Gross

Jefferson W. Gross
Attorneys for Defendant

DEMAND FOR JURY TRIAL

Defendant/Counterclaimant 1-800 Contacts, Inc., hereby request a trial by jury of all

matters that may be resolved by jury trial.

DATED this the 25th day of March, 2010.

BURBIDGE MITCHELL & GROSS

/s/ Jefferson W. Gross

Jefferson W. Gross
Attorneys for Defendant

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CERTIFICATE OF SERVICE

On the date below written, the undersigned hereby certifies that a true and correct copy of
the foregoing ANSWER AND COUNTERCLAIM was delivered as indicated to:

VIA ECF:

Mary Anne Q. Wood

Darryl J. Lees
WOOD CRAPO, L.L.C.
500 Eagle Gate Tower
60 East South Temple
Salt Lake City, Utah 84111

DATED this the 25th day of March, 2010.

/s/ Dana Marie Schanuel

P:\Clients\1-800 Contacts\Pleadings\Answer.wpd

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