2018-00229212-CU-FR

Charles Somers vs. Dr. James Longoria

Nature of Proceeding: Motion to Disqualify Plaintiff’s Counsel

Filed By: Dudensing, Jan

Defendant Longoria’s motion to disqualify plaintiff’s counsel is DENIED, as follows.

The notice of motion does not comply with Code of Civil Procedure §1010 or CRC Rule 3.1110(a).

Defendant’s counsel failed to comply with CRC Rule 3.1110(b)(3)-(4).

Factual Background

This case presents a business dispute relating to LC Therapeutics, Inc. (“LCT”), an S corporation. According to plaintiff, he and defendant were friends and business associates years before they became business partners in LCT, a business founded by defendant in 2013. Plaintiff asserts he invested in LCT in reliance on a number of promises by defendant including that if plaintiff became a shareholder, defendant would convert LCT from an S corporation to an LLC; defendant would use equity as consideration for additional cash infusions, plaintiff could purchase as much equity as he wanted, plaintiff would have equal say in all decision-making and defendant would devote his time and energy to making LCT successful but it is alleged these representations were false. Thus, despite plaintiff’s substantial financial contributions, LCT is collapsing.

The complaint purports to assert causes of action for “Fraud,” Negligent Misrepresentation, Unjust Enrichment and Breach of Fiduciary Duty.

Moving Papers. Defendant now moves to disqualify plaintiff’s attorney William Warne and his firm, Downey Brand (“DB”) on the ground they previously represented LCT in various legal matters and therefore “had access to a wealth of confidential information that is germane to the instant lawsuit.” Specifically, defendant insists plaintiff’s counsel not only had access to defendant’s email account for several months in order to defend LCT in various litigation matters but also was provided by defendant “numerous confidential internal documents of [LCT].” Defendant contends this is not the first time that plaintiff’s attorney and DB have ‘ignored’ their duty of loyalty and that they must now be disqualified pursuant to Rules of Professional Conduct, Rule 3-310 by virtue of failing to obtain defendant’s informed and written consent to the current representation which is adverse to defendant.

Opposition. Plaintiff opposes, insisting this motion is “premised on several egregious misrepresentations” including that attorney Warne and DB previously represented defendant himself and had access to defendant’s email account which was used to access “confidential documents,” as well as that this lawsuit involves “the same legal and factual issues” as the prior representation so as to require disqualification in the absence of a written conflict-of-interest waiver. The opposition maintains the true facts are that attorney Warne and DB never represented defendant himself but only represented LCT, a separate legal entity which is not even a party to this action, in a few discrete and short-lived matters having no relation to the present action, which is a dispute only between plaintiff and defendant as individuals. Moreover, attorney Warne avers that he was never given access to defendant’s email account, never accessed

the account, never received any “confidential documents” from defendant and the few nonconfidential communications he did receive have no bearing on to the current suit, thereby obviating the need for a conflict waiver.

Reply. As best the court can determine, defendant appears to argue in the opening paragraph of the reply that (1) because there are only two shareholders in LCT (i.e., plaintiff and defendant), DB “necessarily obtained…information [germane] to the instant lawsuit” in which “each and every cause of action involves conduct squarely in the confines of the business;” (2) because of its prior representation of LCT, DB’s current “representation of one of the two shareholders…is substantially related to [the] prior representation of [LCT];” (3) DB cannot now deny it (a) represented the two individuals who are the sole shareholders on several occasions, (b) was by made “privy to the ends [sic] and outs of [LCT] because of those representations,” and (c) “necessarily obtained confidential information from [defendant] along the way;” and (4) DB must therefore be disqualified from its current representation of plaintiff.

The reply proceeds to assert that California has adopted a “substantial relationship” test which, when met, presumes “confidential information” pertinent the subsequent representation has been disclosed and results in disqualification. Defendant contends that Global Van Lines, Inc. v. Superior Court (V.l.P. Movers, Inc.) (1983) 144 Cal.App.3d 484 controls the outcome here because (1) the conflicted attorney was counsel for the former client, Global, at the time when the dispute between Global and his present client, V.I.P. Movers, arose, creating a reasonable inference that the attorney had obtained information during the representation of Global despite his declaration denying the recollection of any complaints by V.I.P. Movers against Global,

(2) the litigation between Global and V.I.P. Movers involved a business transaction in which the attorney was “directly involved,” and (3) as general counsel for Global, the attorney necessarily advised those key to the action and it must therefore be presumed that the attorney had “acquired substantial knowledge of the polices, attitudes and practices of Global’s management” relative to those issues which were being litigated in his subsequent representation of V.I.P. Movers.

Analysis

Rules of Professional Conduct, Rule 3-310(E) proscribes an attorney from accepting employment adverse to a client or former client where, by reason of the representation of the client or former client, the attorney member has obtained confidential information material to the employment (unless the attorney obtains informed written consent). Based on the Rule’s plain language, defendant must in order to prevail on the present motion demonstrate not only that DB previously represented defendant but also that by virtue of the earlier representation, DB obtained confidential information which is material to the present litigation against defendant. As will now be shown, defendant has failed in both respects.

First, defendant has presented no evidence that DB ever actually represented defendant himself in any matter and the moving papers effectively admit this. While the reply attempts to re-cast DB’s representation of the LCT corporate entity as being the legal equivalent of DB’s representation of the two individual shareholders, defendant has provided no legal authority for such a proposition but regardless, defendant’s suggestion runs contrary to the express language of Rules of Professional Conduct, Rule 3-600. Subdivision (A) of Rule 3-600 states in its entirety:

“In representing an organization, a member shall conform his or her representation to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement.” (Underline added for emphasis.)

It is also worth noting here that Rule 3-600(E) expressly permits an attorney representing an organization to also represent any of its directors, officers, employees, shareholders, etc. subject to the provisions of Rule 3-310 and if the organization’s consent to the representation is required by Rule 3-310, then such consent shall be given by an appropriate constituent of the organization other than the individual or constituent who is to be represented. Accordingly, defendant’s contention that DB’s prior representation of LCT should be construed as DB’s representation of the two individual shareholders so as to give rise to the need for DB to obtain defendant’s informed written consent for DB’s current representation of plaintiff must be rejected, which alone mandates denial of DB’s disqualification.

Second, defendant has failed to demonstrate the existence of any actual or apparent “substantial relationship” between any of the matters in which DB previously represented LCT and any of the allegations or issues presented in the current lawsuit by one of LCT’s shareholders. The only evidence now before the court is that DB briefly represented LCT itself in a handful of legal matters prior to the pending litigation: (1) In 2014 DB advised LCT about how to handle the departure of its now-former director and shareholder, Roy Chin, which was ultimately achieved without litigation; (2) in 2016, when LCT was sued for breach of contract by another company, DB was asked to assist with the defense but the lawsuit was apparently dismissed shortly thereafter; (3) in late 2016 DB was retained to handle LCT’s dispute with another corporation but again, the matter was quickly resolved with no real litigation; and (4) in 2017, LCT intended to pursue against another corporation claims relating to a patent and/or license but DB’s involvement in the dispute ended quickly with limited involvement beyond a phone call and follow-up engagement letter. Notably, defendant made no meaningful attempt to explain how any of these prior legal matters might be construed as having any connection or similarity to the present suit and this court can find none since, as explained above, the present suit arises from plaintiff’s claims that he was induced to invest in LCT by several representations/promises by defendant ( i.e., to convert LCT to an LLC; plaintiff would have equal say in decisions, defendant would devote his energy to making LCT successful, etc.) which were not true. Because defendant failed to establish some “substantial relationship” between at least one the earlier matters handled by DB and the current lawsuit, there arises no presumption that DB acquired from its earlier representation “confidential information” which could be used in a manner adverse to defendant and thus, Rule 3-310(E) does not compel DB’s disqualification from its representation of plaintiff in the case at bar.

Finally, based on the foregoing, defendant’s reliance on Global Van Lines, Inc. v. Superior Court is unavailing inasmuch as (1) the attorney in Global Van Lines, Inc. had not only been Global’s general counsel for 16 years but then turned around to sue his former client on behalf of V.I.P. Movers and (2) the subsequent representation of V.I.P. Movers involved claims against Global which originated while the attorney was Global’s general counsel and about which he would have had confidential information by virtue of his long tenure as Global’s general counsel. In contrast, in the case at bar DB never represented defendant, DB was never LCT’s general counsel and DB previously represented LCT in just a handful of discrete legal matters, all of which were short-lived but regardless, none of these prior limited representations has any

perceptible correlation with the claims asserted by plaintiff against defendant for falsely inducing the former’s sizeable investments in LCT.

Disposition

For the reasons set forth above, defendant’s motion to disqualify must be and hereby is denied.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. §1019.5; CRC Rule 3.1312.)