Case Number:?BC566701????Hearing Date:?July 24, 2017????Dept:?34
SUBJECT:??Motion to disqualify
Moving Party:??Former Defendant and cross-complainant Christopher Biancotti
Resp. Party:?????Defendants and cross-complainants TWE Solutions, Marcato and Kiely
Biancotti?s Motion to Disqualify his former counsel is DENIED.
BACKGROUND:
Plaintiffs commenced this action on 12/15/14. Plaintiffs filed a third amended complaint on 6/17/15 against defendants for: (1) breach of shareholder agreement; (2) breach of employment agreement; (3) breach of fiduciary duties; (4) unfair competition; (5) unfair competition; (6) usurpation of corporate opportunities; (7) misappropriation of trade secrets; (8) intentional interference of contractual relations; (9) intentional interference of prospective economic relations; (10) conversion; (11) accounting; and (12) injunctive relief. Plaintiffs allege that the individual defendants, other than defendant Kiely, were former employees of Third Wave who abruptly departed their employment and started working for Kiely?s company, TWE. Plaintiffs allege that defendants used plaintiffs? confidential and trade secret information to directly compete with plaintiff. Plaintiffs allege that defendants solicited a number of Third Wave?s employees to leave the company and stole plaintiffs? clients. Plaintiffs allege that defendant Marcato stole plaintiffs? personal property.
On 9/30/15, complainants filed a cross-complaint against plaintiffs and others for: (1) breach of fiduciary duty; (2) breach of fiduciary duty; (3) involuntary dissolution; (4) fraudulent transfer; (5) unjust enrichment; (6) fraud; (7) negligent misrepresentation; (8) breach of contract; (9) wrongful constructive discharge; (10) interference with contract; (11) intentional interference with prospective economic advantage; (12) conversion; (13) failure to pay overtime; (14) failure to provide meal and rest periods; and (15) unfair business practices. The cross-complaint alleges, among other things, that Wroan secretly negotiated a transaction to sell Third Wave to Cal Net, a competitor of Third Wave, without sharing the sales proceeds with defendants. (See Cross-compl., ?? 54-58.) Defendants allege that this was part of a fraudulent scheme to obtain ownership and control of Third Wave without sharing any of the business with defendants. (Id., ?? 63, 69.) After the sale, Third Wave?s customers, engineers, servers, e-mail accounts, and telephones were moved to Cal Net. (Id., ?? 73-83.) Defendants allege that this left Third Wave insolvent, and that Third Wave received nothing in exchange for the sale. (Id., ? 84.)??Defendants allege that Wroan benefitted personally from the sale in the form of cash consideration and equity interests in Cal Net. (Id., ? 85.) Defendants allege that Wroan thereafter sold Third Wave?s physical assets and kept the proceeds for himself, leaving Third Wave with nothing. (Id., ? 86.) Defendants allege that Wroan then fraudulently drew down on Third Wave?s credit facility and kept the proceeds for himself. (Id., ? 87.) Defendants allege that Wroan closed Third Wave?s doors once Third Wave was left with no assets and large debts. (Id., ? 88.)
On 9/9/15, the Court sustained defendants? demurrer to the first and sixth causes of action in the TAC, without leave to amend.
On 1/12/17, the Court granted Marcato and Biancotti?s motion for summary adjudication of the second, third, seventh, eleventh, and twelfth causes of action. The Court granted the motion as to the ninth cause of action for Biancotti only. The motion was otherwise denied.
On 2/28/17, the Court granted Cal Net?s motion for summary judgment as to the cross-complaint.
ANALYSIS:
Defendant Biancotti seeks to disqualify David Michaels and his associated counsel Scott Humphrey from representing any party in this action.
A party may move to disqualify counsel for the opposing party on grounds recognized by law. (Weil & Brown,?Cal. Prac. Guide: Civ. Pro. Before Trial?(The Rutter Group 2016) ? 9:406.5.) A court has inherent power ?to control in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial proceeding before it, in every manner pertaining thereto.? (Code Civ. Proc. ? 128(a)(5).) This includes the power to disqualify counsel in appropriate cases. (Weil & Brown,?? 9:406.6 [citing?In re Complex Asbestos Litigation?(1991) 232 Cal.App.3d 572, 575].)
In ruling on a motion to disqualify, the Court must weigh: (1) the party?s right to counsel of choice; (2) the attorney?s interest in representing a client; (3) the financial burden on a client of changing counsel; (4) any tactical abuse underlying a disqualification motion; and (5) the principle that the fair resolution of disputes requires vigorous representation of parties by independent counsel. (Mills Land & Water Co. v. Golden West Refining Co.?(1986) 186 Cal.App.3d 116, 126.)
In situations where an attorney simultaneously represents conflicting parties, the issue is the attorney?s duty of loyalty. In contrast, situations where an attorney successively represents one client in an action after previously representing the other party, the issue is the duty of confidentiality to the previous client. (Gong v. RFG Oil, Inc.?(2008)?166 Cal.App.4th 209, 214.) ?In successive representation cases, if a ?substantial relationship? between the former representation and current litigation is shown, a presumption arises that the attorney has obtained confidential information from the former client.? (Weil & Brown,?Civ. Proc. Before Trial?(The Rutter Group 2016) ? 9:406.8a.) ?Absent such showing, the moving party must prove the lawyer in fact obtained such information; i.e., ?some showing of the nature of the communications or a statement of how they relate to the current representation.? ? (Ibid.)
Biancotti entered into an attorney-client relationship with Michaels on 12/13/14. (Biancotti Decl., ? 2, Exh. A.) On 2/23/17, Michaels filed a motion to be relieved as Biancotti?s counsel. (Id., ? 4.) Biancotti states that his testimony as to the facts and circumstances of leaving Third Wave?s employment are contrary to those testified by Marcato or Kielly in their depositions and Biancotti?s testimony presents a conflict with his prior counsel and the remaining defendants. (Id., ? 11.)
What makes this motion interesting is that Biancotti is no longer a party in this action. Biancotti states that he has been subpoenaed by Third Wave to appear and testify at trial in this action, and takes issue with defense counsel?s possible cross-examination of him in connection with his testimony. (Id., ? 12.)
Biancotti states that, pursuant to the terms of the retainer agreement, should a conflict arise between parties or counsel, each party had the right to consent to counsel?s continued representation of the other parties. (Biancotti Decl., ? 3.) Biancotti declares that he did not consent to the continued representation of the other defendants. (Id., ?? 5-6.) Defendants argue that the agreement provides that where a client withdraws from joint representation, he consents to counsel?s continued representation of the remaining clients and agrees not to seek disqualification of counsel from representing the remaining clients. None of the parties provide a copy of the agreement, and therefore the Court cannot determine whether the terms support plaintiff?s motion.
Defendants argue that Biancotti lacks standing to bring this motion because he is no longer represented by Michaels. This is not well taken. A former client has standing to seek disqualification. (SeeGreat Lakes Const., Inc. v. Burman?(2010) 186 Cal.App.4th 1347, 1356?[?A ?standing? requirement is implicit in disqualification motions. Generally, before the disqualification of an attorney is proper, the complaining party must have or must have had an attorney client relationship with that attorney.?].)
Defendants also argue that the motion should be denied because Biancotti is no longer a party to this action. Defendants appear to be correct that the only cognizable interest Biancotti has is the use of confidential information to cross-examine him should he be called as a witness at trial.
In?Kim v. True Church Members of Holy Hill Community Church?(2015) 236 Cal.App.4th 1435, a corporation (WCP) was a co-plaintiff and cross-defendant in the action and was represented by attorneys Sohn and Parker Mills; Sohn represented WCP until WCP was dismissed from the complaint and it is unclear when Parker Mills ceased representing WCP. (Id. at p. 1451.) The other plaintiffs and cross-defendants (appellants) took issue with Sohn or Parker Mills being permitted to cross-examine a WCP representative at trial. (Id. at pp. 1451-1452.) On appeal, appellants argued, among other things, that counsel?s continued representation of them cannot be considered adverse because WCP was no longer a party to the litigation. (Id. at p. 1454.) The court rejected appellants? argument that cross-examination would not create an ?actual conflict? required to establish an ethical violation. (Id. at p. 1456.) ?The ethical bar against acting in a manner adverse to a former client’s interests implicates not just the duty to maintain client confidences, but the duty of loyalty, which counsel would have violated by cross-examining a representative of their former client.? (Ibid.)
?Although the California Supreme Court has emphasized the duty of maintaining client confidences in successive representation cases [citation], the duty of loyalty also plays a role, as recognized in the longstanding rule that ? ?an attorney is forbidden to do either of two things after severing his relationship with a former client. He may not do anything which will injuriously affect his former client in any manner in which he formerly represented him nor may he at any time use against his former client knowledge or information acquired by virtue of the previous relationship.? ? [Citations.] Flatt held that the ?chief? question in successive representation cases is confidentiality, but did not hold that the duty of loyalty may play no part in the trial court’s decision on a disqualification motion.???(Ibid.)
? ?The spectacle of an attorney skewering her own client on the witness stand in the interest of defending another client demeans the integrity of the legal profession and undermines confidence in the attorney-client relationship.? ? [Citation.] In other words, cross-examining a former client results in an ?actual conflict? prohibited under rule 3?310 of the Rules of Professional Conduct.???(Id. at pp. 1456-1457.)
The appellate court next looked to whether the trial court had authority to prevent cross-examination, or if the only available remedy was to disqualify counsel. (Kim,?supra, 236 Cal.App.4th at p. 1458.) The court found that the trial court had the authority to do so.
?Appellants are essentially arguing that the court should have exercised its inherent authority by wielding a bludgeon rather than a scalpel. The court’s power to disqualify an attorney stems from its inherent authority under section 128, subdivision (a)(5), to control ?the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial proceeding before it …? Nothing in the statutory language or the case law supports appellants’ argument that the court’s exercise of that inherent authority cannot include preventing cross-examination if doing so will also prevent a breach of the ethical canons governing the officers appearing before the court.
?In [Hernandez v. Paicius?(2003) 109 Cal.App.4th 452, 467], the plaintiff initially sought to limit cross-examination of the plaintiff’s expert witness, on the grounds that the law firm representing defendant was simultaneously representing the plaintiff’s expert in an unrelated matter. The trial court limited the scope of cross-examination to exclude any cases in which defense counsel previously or currently represented the expert. However, the court allowed defense counsel to impeach the expert based on information obtained from the public record, even though the information related to the same cases giving rise to the conflict of interest. (Id. at pp. 464?465, 134 Cal.Rptr.2d 756.) The reviewing court reversed an order denying the plaintiff’s motion to declare a mistrial based on the cross-examination, but noted, ?Our disposition of this issue should not be construed as suggesting that disqualification of counsel is the appropriate remedy in all cases in which one party’s attorney represents an expert designated by the other side. A party’s right to select counsel of his or her own choosing may trump the opposing party’s freedom to choose an expert whose designation creates a conflict…. We can say without hesitation, however, that if the conflict has not been resolved by the time the client/witness is called to the stand, the court is faced with an insuperable obstacle to going forward ? an attorney with two clients in circumstances where he or she can be loyal only to one. The court cannot permit, much less preside over, an attorney’s attack on his or her own client.? (Id. at pp. 467?468, 134 Cal.Rptr.2d 756.) We construe the?Hernandez?opinion as recognizing the crucial role trial courts play in achieving the delicate balance necessary in the exercise of the court’s inherent authority, and decline to second-guess the appropriate balance struck by the trial court in this case between appellants’ right to retain counsel of their choice and the law firm’s duty of loyalty to its former client.???(Kim, 236 Cal.App.4th at p. 1458.)
Thus, the court in?Kim?recognized that a trial court may impose lesser sanctions, such as preventing cross-examination, where doing so would address the complained of conflict and would avoid the drastic consequences of disqualification. Such lesser sanctions may be appropriate here, as Biancotti fails to show that fully disqualifying defense counsel is necessary in order to address Biancotti?s concerns.
However, at this time, no party has moved for the lesser sanction of preventing cross-examination. To the extent that Biancotti or any party is concerned about defense counsel?s cross-examination, Biancotti or the party may move in limine to preclude cross-examination.
?The spectacle of an attorney skewering her own client on the witness stand in the interest of defending another client demeans the integrity of the legal profession and undermines confidence in the attorney-client relationship.? (Hernandez v. Paicius?(2003) 109 Cal.App.4th 452, 467.)??This Court would not preside over such a spectacle.??The Court suggests that counsel meet-and-confer to determine if an agreement ? short of disqualification ? can be reached that would maintain ?the integrity of the legal profession? (Id.) and would achieve the ?appropriate balance? between defendants? ?right to retain counsel of their choice and the law firm’s duty of loyalty to its former client.???(Jun Ki Kim v. True Church Members of Holy Hill Community Church?(2015) 236 Cal.App.4th 1435, 1458
Biancotti?s request to disqualify counsel is DENIED.