Filed 6/18/20 Cortina v. North American Title Co. CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

CAROLYN CORTINA et al.,

Plaintiffs and Respondents,

v.

NORTH AMERICAN TITLE COMPANY,

Defendant and Appellant.

F077659

(Super. Ct. No. 07CECG01169)

OPINION

APPEAL from a judgment of the Superior Court of Fresno County. Jeffrey Y. Hamilton, Jr., Judge.

Morgan, Lewis & Bockius, Thomas M. Peterson and Deborah E. Quick for Defendant and Appellant.

Wagner Jones Kopfman & Artenian, Lawrence M. Artenian, Laura E. Brown; Wanger Jones Helsley and Patrick D. Toole for Plaintiffs and Respondents.

-ooOoo-

North American Title Company, Inc. (NATC), appeals from an order disqualifying its legal counsel for having ex parte communications with class members in a class action lawsuit. Carolyn Cortina et al. (plaintiffs) are employees who sued NATC for unpaid overtime. The trial court certified two classes of plaintiffs: those NATC deemed exempt from overtime regulations and those it classified as nonexempt.

After years of litigation, the trial court issued a statement of decision in which it found (1) a “[f]ailure of class-wide proof” required decertification of the “non-exempt class” and dismissal of its claims, and (2) NATC was liable to the “exempt class” for restitution of unpaid overtime. Pursuant to the latter ruling, a referee was appointed to conduct evidentiary proceedings and make recommendations as to the amount of restitution owed.

The special reference proceedings included testimony by members of the exempt class. To prepare for cross-examination of the witnesses, lawyers from one of NATC’s defense firms, Morgan, Lewis & Bockius LLP (Morgan Lewis), attempted to interview members of the decertified class, i.e., parties who had no stake in the outcome of the reference proceedings. When plaintiffs’ counsel learned of those efforts, they moved on behalf of their clients to disqualify Morgan Lewis for violating former rule 2-100 of the State Bar Rules of Professional Conduct (rule 2-100). Rule 2-100 is the predecessor to current rule 4.2, and both versions prohibit unauthorized communications with a represented party about the subject matter of the representation.

Morgan Lewis admitted to speaking with four members of the nonexempt class. It claimed to have acted in good faith, believing those individuals were not represented by counsel since the trial court had ruled to decertify the nonexempt class. The involved attorneys further submitted that the conversations did not yield any material information. Plaintiffs argued the decertification order had not yet taken effect, meaning the nonexempt class was still represented by class counsel, but plaintiffs offered no evidence of any information disclosed to Morgan Lewis during the allegedly improper communications.

It was plaintiffs’ burden to establish three factual predicates: (1) the nonexempt class members were represented by counsel during the relevant time period, (2) Morgan Lewis had actual knowledge of the representation, and (3) there was a genuine likelihood the unauthorized contact would have a substantial continuing effect on the proceedings in the case. NATC argues, and we agree, plaintiffs did not meet their burden of demonstrating the likelihood of a substantial continuing effect on the proceedings. We also agree any implied findings by the trial court of the requisite circumstances are not supported by substantial evidence. Therefore, the disqualification order must be reversed.

FACTUAL AND PROCEDURAL BACKGROUND

This case began 13 years ago with the filing of a putative class action complaint against NATC. The complaint was amended in 2009 and again in 2010, at which point North American Services, LLC (NAS) was named as a codefendant. The trial court certified the “exempt” and “non-exempt” classes of plaintiffs.

The matter proceeded to trial on a single cause of action under Business and Professions Code section 17200 et seq., also known as the unfair competition law (UCL). In October 2016, the trial court issued a statement of decision. Codefendant NAS was found not liable to the exempt class. NATC, on the other hand, was ordered to pay restitution of unpaid overtime to the exempt class. In reliance on Code of Civil Procedure section 639, subdivision (a)(3), and “due to the consumption of time that would be required to assess the amounts of individual restitution,” the trial court appointed a referee to conduct further proceedings and submit recommendations as to the amount of restitution owed. NATC was ordered to bear the cost of the reference proceedings, including up to $500 per hour for the referee’s services.

With regard to the nonexempt class, the trial court found insufficient evidence to support plaintiffs’ allegation of a “company-wide policy of pressuring class members to work unreported overtime [and/or] through meal periods and rest breaks.” However, the trial court declined to enter judgment in favor of NAS or NATC except as to the claims of the representatives of the nonexempt class. The court ruled decertification of the nonexempt class was required, and it said the class claims would be dismissed without prejudice following a notice of dismissal in accordance with Code of Civil Procedure section 581, subdivision (k).

In December 2016, NATC attempted to appeal certain rulings in the statement of decision. Among other contentions, the trial court was alleged to have erred by decertifying the nonexempt class rather than entering a judgment in favor of NATC. On that particular issue, plaintiffs successfully moved to dismiss the appeal as premature for lack of a final judgment.

According to the parties’ briefing, the special reference proceedings began in January 2018. At the time, NATC’s defense team consisted of lawyers from Baker & McKenzie LLP, Jackson Lewis P.C., and Morgan Lewis. Morgan Lewis had been involved in the case since approximately 2010 as counsel for codefendant NAS. After the trial court issued its statement of decision, NATC retained Morgan Lewis to help defend its interests on appeal and in the reference proceedings.

On March 29, 2018, the parties exchanged a series of e-mails authored by plaintiffs’ attorney Patrick Toole and a Morgan Lewis attorney named Barbara Miller. We reproduce the conversation verbatim:

Toole: “Counsel— [¶] We were just advised this morning that attorneys from Ms. Miller’s office are contacting Class Members. Is that true? Please investigate and confirm. [¶] If so, we object to any unethical communication and demand these efforts cease immediately. [¶] Please advise.”

Miller: “Whom do you believe we contacted that is a member of the exempt class?”

Toole: “So, your offices have contacted Class Members? [¶] As to exempt or non-exempt, what is the difference at this time? My understanding [is] that until Judge Hamilton sends the Notice which was stalled because of the writs/appeals, we are still class counsel. [¶] Please advise. Thanks.”

Miller: “We have not contacted exempt class members. [¶] If your position is that we cannot contact members of the non-exempt class, what is the basis? By order of the Superior Court, the class has been decertified.”

Toole: “Barbara, [¶] Not sure why you are playing games here—are you confirming that your office is contacting Class Members, either in the Exempt or Non-Exempt classes? Please clarify so I can properly respond. Thanks.”

Attorney Miller did not write back to the last e-mail, so Attorney Toole sent a followup message: “Given the importance of the issues raised below, can someone confirm whether [NATC]’s counsel are contacting members of the Exempt OR Non-Exempt Classes?” This e-mail also went unanswered. Two weeks later, plaintiffs filed a motion to disqualify Morgan Lewis from the case.

Plaintiffs’ motion relied on the following language in rule 2-100: “While representing a client, [an attorney] shall not communicate directly or indirectly about the subject of the representation with a party the [attorney] knows to be represented by another lawyer in the matter, unless the [attorney] has the consent of the other lawyer.” (Rules Prof. Conduct, former rule 2-100(A).) Plaintiffs argued the nonexempt class was still represented by class counsel because the trial court had not yet issued an order of dismissal nor approved the parties’ proposed forms of notice of the pending dismissal. Plaintiffs’ evidence focused on the question of whether Morgan Lewis had actual knowledge of the representation.

The combined total of exempt and nonexempt class members was estimated to be 700 people. Plaintiffs’ moving papers indicate there are “200+” members of the nonexempt class. In August 2015, plaintiffs’ counsel sent a letter to defense attorney Michael Brewer listing approximately 213 “Class Members” who had signed “conditional fee agreements” with class counsel. The letter did not distinguish between exempt and nonexempt class members. However, in a declaration supporting the motion to disqualify, plaintiffs’ attorney Daniel Kopfman claimed 154 of the 213 people identified in the letter were nonexempt class members, including a woman named Tara Denham.

In a separate declaration, Tara Denham attested to her receipt of a voicemail on March 28, 2018, one day prior to the previously quoted e-mail exchange between attorneys Toole and Miller. A transcription of the voicemail reads, in pertinent part:

“Hi Tara, … I’m an attorney with a law firm called Morgan Lewis & Bockius and we represent North American Title Company in connection with a class action lawsuit that covers a period of your employment. [¶] I just wanted to take about 5, 10 minutes to speak with you about your experience working at the Santa Cruz location. And I wanted to see what your work experience was like and what you knew about kind of the working habits and the amount of work that your co-workers put in. [¶] If you wouldn’t mind calling me back I’d appreciate it….” (Some capitalization omitted.)

Plaintiffs assumed the notice given to defense attorney Brewer via the August 2015 letter was imputed to Morgan Lewis, even though Morgan Lewis did not begin representing NATC until late 2016. The March 2018 voicemail left for Tara Denham was cited as proof Morgan Lewis had attempted to speak to a represented party about the subject matter of the litigation. Plaintiffs cursorily argued “the information obtained through the unethical contacts” would have a continuing effect on the reference proceedings, but no evidence was offered regarding the content of the alleged “information.”

NATC’s opposition argued the nonexempt class members ceased to be represented by class counsel when the trial court decertified the class. The date of decertification was alleged to be October 20, 2016, when the trial court issued a minute order containing its statement of decision. NATC also denied Morgan Lewis had actual knowledge of any separate attorney/client relationships between plaintiffs’ counsel and individual members of the nonexempt class. The opposition was supported by the sworn declarations of Barbara Miller and two associate attorneys who had been tasked with contacting members of the nonexempt class.

According to NATC, plaintiffs’ counsel designated certain exempt class members to testify in the reference proceedings during the months of February and March 2018. The trial court had declined to reopen discovery, which left NATC with few options to prepare for cross-examination of the witnesses whose testimony would be used to determine the amounts of restitution it was required to pay. In earlier stages of the case, the trial court had limited the number of depositions to approximately 25 to 30 percent of the 700 people comprising both classes. NATC alleged “many of the Exempt Class Members testifying in the referee proceedings [had] never been subject to discovery, never produced documents, and never had their depositions taken.”

Attorney Miller’s declaration explained, in general terms, how Morgan Lewis determined there were “fewer than fifteen individuals” in the nonexempt class who might have knowledge “regarding work habits” of specific members of the exempt class who were scheduled to testify in the reference proceedings. According to the declarations of the associates who reached out to those individuals, Morgan Lewis established contact with only four of them. The associate who left the voicemail for Tara Denham said she never called him back, which was confirmed by Denham’s own declaration. The four people who spoke with the associates reportedly told the associates they were not represented by counsel.

Miller attested to having no prior knowledge of Tara Denham being individually represented by plaintiffs’ counsel. She further indicated that Morgan Lewis had not previously received a copy of the August 2015 letter to attorney Brewer, i.e., the one identifying nonexempt class members who had signed conditional fee agreements with class counsel. While preparing NATC’s opposition papers, Miller obtained a copy of the letter from Brewer, reviewed it, and “confirmed that no Morgan Lewis attorney associated with the [case] actually talked with anyone listed on the letter.”

On May 9, 2018, the trial court issued a written tentative ruling on the motion. It indicated various objections plaintiffs had made to NATC’s evidence would be overruled but the motion itself would be granted. Approximately three pages of the tentative ruling were devoted to the issues of representation and actual knowledge, i.e., the question of whether rule 2-100 had been violated. In a comparatively brief analysis, the grounds for disqualification were stated as follows: “Disqualification may be proper if counsel’s misconduct is likely to have a continuing effect on the proceedings; e.g., enabling counsel to cross-examine opposing witnesses more effectively. [Citation]. Here, that was [the] stated purpose of the contact with non-exempt class members. See Declaration of Miller at ¶¶2–3. Therefore, disqualification is justified.” (Boldface in original.)

On the day of the motion hearing, attorney Miller filed a supplemental declaration. The following excerpt is most relevant to our analysis:

“Morgan Lewis attorneys spoke with only four members of the previously certified Non-Exempt Class, none of whom were identified in counsel’s August 10, 2015 letter to Mr. Brewer. One of the four declined to participate in any conversation, and the conversation ended without anything of substance communicated. Three others worked in offices of four Exempt Class members who have already testified in the referee proceedings. None of the information obtained during the conversations was shared with Mr. Brewer or anyone at his firm, as there was nothing from the conversations of note to share. Mr. Brewer, not anyone from Morgan Lewis, cross-examined the four testifying Exempt Class members. Thus, no Exempt Class member could possibly have been prejudiced by the interviews. Moreover, since the four Exempt Class members have already testified, no threat of prejudice to ongoing proceedings could possibly exist.”

While arguing NATC’s opposition, Miller reiterated the assertions made in her declaration:

“[T]here were only four people who anybody at our firm actually talked to. One of them wouldn’t talk to us, so we actually had a conversation with three of them. Those three people were related to three individuals, three class members who were scheduled to testify. Those three people all testified. They’re done. They’ve given their testimony.

“So there cannot be any impact of those communications on the continued referee proceedings. It’s not possible. Whatever happened in those communications related to three people who have already testified. And not only that, but those three people who testified already, Mr. Brewer did the cross-examination. Our firm didn’t communicate anything to Mr. Brewer or his firm about those conversations because there was nothing to communicate. There was nothing about those conversations that was notable. Nothing was communicated to Mr. Brewer. The people were cross-examined. It’s over. There is no continuing [effect on] anything.”

The hearing concluded with the trial court requesting a supplemental brief from plaintiffs’ counsel regarding the issues of representation and actual knowledge. On May 29, 2018, the trial court issued an order adopting its tentative ruling. NATC filed a timely notice of appeal.

DISCUSSION

Attorneys are subject to discipline for having unauthorized contact with represented parties, but disqualification “is a drastic remedy that should be ordered only where the violation … has a ‘substantial continuing effect on future judicial proceedings.’” (City of San Diego v. Superior Court (2018) 30 Cal.App.5th 457, 462.) It must also be shown the attorney had “actual knowledge” that the person contacted was represented by counsel. (Snider v. Superior Court (2003) 113 Cal.App.4th 1187, 1215.) “Although we review a decision to disqualify counsel under the abuse of discretion standard, the court’s discretion is limited by legal principles underpinning [rule 2-100].” (Doe v. Superior Court (2019) 36 Cal.App.5th 199, 206.) “A discretionary ruling predicated on a required finding of fact is necessarily an abuse of discretion if no substantial evidence supports the fact’s existence.” (Borissoff v. Taylor & Faust (2004) 33 Cal.4th 523, 531.)

The parties agree that “once a class is certified, class counsel represent absent class members for purposes of the ethical rule that prohibits communication with represented parties.” (Walker v. Apple, Inc. (2016) 4 Cal.App.5th 1098, 1107.) Plaintiffs generally concede the representation ends upon decertification of the class. (Daniels v. City of New York (S.D.N.Y. 2001) 138 F.Supp.2d 562, 564–565.) The point of contention is whether, as plaintiffs argue, “decertification and dismissal go hand-in-hand” and constitute a singular event.

It appears there is little or no authority regarding whether the attorney-client relationship between class counsel and absent class members continues in the interim between an order of decertification and the formal entry of dismissal. NATC’s briefing thus raises an interesting issue: How did the Morgan Lewis attorneys have actual knowledge the people they contacted were represented by counsel if the fact of such representation is dependent upon an unsettled question of law? We need not answer the question, because plaintiffs failed to demonstrate the alleged violation of rule 2-100 was prejudicial.

As explained in City of San Diego v. Superior Court, supra, 30 Cal.App.5th 457, “disqualification of counsel is a prophylactic remedy designed to mitigate the unfair advantage a party might otherwise obtain if the lawyer were allowed to continue representing the client.” (Id. at pp. 470–471.) Proof of unauthorized contact with a represented party is not alone sufficient to justify disqualifying the culpable lawyer. (Id. at pp. 470–472.) “[T]he prophylactic nature of the disqualification remedy means the focus of the analysis must be on ‘whether there exists a genuine likelihood that the status or misconduct of the attorney in question will affect the outcome of the proceedings before the court.’” (Id. at p. 471, quoting Gregori v. Bank of America (1989) 207 Cal.App.3d 291, 309; accord, McMillan v. Shadow Ridge at Oak Park Homeowner’s Assn. (2008) 165 Cal.App.4th 960, 968 [“‘what the court must do is focus on identifying an appropriate remedy for whatever improper effect the attorney’s misconduct may have had in the case before it’”].)

For a trial court to find the likelihood of a substantial continuing effect on the proceedings, “[t]here must be a ‘reasonable probability’ and ‘genuine likelihood’ that opposing counsel has ‘obtained information the court believes would likely be used advantageously against an adverse party during the course of the litigation.’” (City of San Diego v. Superior Court, supra, 30 Cal.App.5th at p. 462, quoting Gregori v. Bank of America, supra, 207 Cal.App.3d at p. 309.) Plaintiffs do not deny their failure to present evidence of what, if anything, Morgan Lewis learned through the ex parte communications. In an argument made for the first time on appeal, plaintiffs claim the trial court was entitled to presume Morgan Lewis received confidential information from the people it contacted.

Plaintiffs analogize to a line of authority that includes In re Complex Asbestos Litigation (1991) 232 Cal.App.3d 572 and Shadow Traffic Network v. Superior Court (1994) 24 Cal.App.4th 1067. Those cases involved situations where nonlawyer employees or expert consultants who were hired by one party’s legal counsel had some type of prior relationship with the opposing party. The holdings are well summarized in another opinion cited by plaintiffs, Toyota Motor Sales, U.S.A. v. Superior Court (1996) 46 Cal.App.4th 778: “If … a former consultant or employee is shown to have possessed confidential information material to the pending litigation, a rebuttable presumption arises that the consultant has disclosed such information to present counsel. [Citation.] If the presumption is rebutted, disqualification is not required. If not rebutted, disqualification may be required.” (Id. at p. 782.)

Although we find plaintiffs’ analogy unconvincing, the evidence was still insufficient under the framework of the cases upon which they rely. In other words, they failed to meet the initial burden of showing the nonexempt class members possessed confidential information material to the pending litigation. The lack of evidence is not surprising, since absent class members generally have little contact, if any, with class counsel. (See Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260, 266 [“The class action structure relieves the unnamed class members of the burden of participating in the action”]; Earley v. Superior Court (2000) 79 Cal.App.4th 1420, 1434 [“The representative parties … are the ones responsible for trying the case, appearing in court, and working with class counsel on behalf of absent members. The structure of the class action does not allow absent class members to become active parties”].)

Moreover, even assuming a presumption applied in this case, the presumption was rebutted by NATC’s uncontroverted evidence. Attorney Miller submitted a sworn declaration stating the four individuals contacted by Morgan Lewis were not on the list of nonexempt class members who had established separate attorney-client relationships with class counsel. She further attested that Morgan Lewis did not obtain any material information relevant to the case.

Taking another new position on appeal, plaintiffs claim they were prevented from meeting their evidentiary burden because NATC never identified the four nonexempt class members who talked to Morgan Lewis. Plaintiffs allege that “[d]espite numerous requests,” NATC “refused to specify what [was] said or who was contacted,” which “meant that plaintiffs could not call and speak with those affected.” The record does not support these assertions.

With regard to the “numerous requests” allegation, plaintiffs cite the e-mail exchange between attorneys Patrick Toole and Barbara Miller. Toole merely asked if Morgan Lewis had contacted any members of the exempt or nonexempt classes. The declaration of Tara Denham shows he already knew the answer to that question, as she had advised his office earlier that morning of the voicemail she received. Plaintiffs offer no additional support for their argument. NATC notes the only other reference to the identities of the contacted parties was a passing remark in the reply brief below.

The record does not show plaintiffs’ counsel or the trial court made any inquiries regarding the identities of the contacted parties or the substance of their conversations with Morgan Lewis. In fact, plaintiffs’ counsel argued it did not matter what was said during those phone calls. At the motion hearing, attorney Toole presented the following argument: “We really don’t know what Ms. Miller talked to these—or her attorneys talked to these class members about. The question—and I think the declaration and the evidence and the argument by counsel misconstrue the ruling, Your Honor. The question isn’t what was learned from the unethical conduct, the question is did unethical conduct occur.” As we have explained, the last statement is at odds with the applicable law.

If plaintiffs believed NATC was obstructing their ability to meet their evidentiary burden, they should have voiced the concern while the motion was pending. New arguments and issues—especially those based on facts not reflected in the record—are generally outside the scope of appellate review. “This rule is rooted in the fundamental nature of our adversarial system: The parties must call the [trial] court’s attention to issues they deem relevant.” (North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 28; see Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 879 [“‘if the new theory contemplates a factual situation the consequences of which are open to controversy and were not put in issue or presented at trial[,] the opposing party should not be required to defend against it on appeal’”].)

Next, plaintiffs argue the disqualification order should be affirmed under the doctrine of implied findings. This fundamental principle of appellate review requires us to “‘infer all findings necessary to support the [order] and then examine the record to see if the findings are based on substantial evidence.’” (Frei v. Davey (2004) 124 Cal.App.4th 1506, 1512.) “However, the appellate court does not merely rubber-stamp the trial court’s decision.” (Ibid.) The substantial evidence requirement means “‘that such evidence must be of ponderable legal significance. Obviously the [term] cannot be deemed synonymous with “any” evidence.’ … While substantial evidence may consist of inferences, such inferences must be ‘a product of logic and reason’ and ‘must rest on the evidence’ [citation]; inferences that are the result of mere speculation or conjecture cannot support a finding [citations].” (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633.)

In support of the implied findings argument, plaintiffs cite Evidence Code section 412 (section 412). The statute provides: “If weaker and less satisfactory evidence is offered when it was within the power of the party to produce stronger and more satisfactory evidence, the evidence offered should be viewed with distrust.” Section 412 is relevant to a trier of fact’s assessment of the evidence, but plaintiffs had the burden of proof as the moving party. (See Evid. Code, § 500.) Any shortcomings in the evidence NATC elected to proffer in support of its opposition cannot excuse plaintiffs’ failure to meet their own evidentiary burden. So arguing NATC’s evidence could have or should have been viewed with distrust “misses the mark.” (Bank of Costa Mesa v. Losack (1977) 74 Cal.App.3d 287, 291.) “Section 412 pertains to trial courts. As stated earlier, the test on appeal is whether there is substantial evidence in support of the judgment.” (Ibid.)

Furthermore, as NATC argues in its briefing, “the record must show the court actually performed the factfinding function. Where the record demonstrates the trial judge did not weigh the evidence, the presumption of correctness is overcome.” (Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1477.) Here, the trial court ruled disqualification was necessary because Morgan Lewis’s “stated purpose” for contacting nonexempt class members was to obtain advantageous information. Attorney Miller declared the efforts were not successful, which was the only evidence relating to the potential continuing effect on the proceedings.

In essence, plaintiffs argue the trial judge concluded Miller perjured herself by submitting a false declaration (see Pen. Code, § 118, subd. (a)) and lied again during oral argument. Had such a determination been made, it would undoubtedly be reflected in the record and there would have to be some type of evidence to support the finding. (See Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 890 [a trier of fact may reject a witness’s uncontradicted testimony but cannot do so arbitrarily].) Viewing the record in the light most favorable to the challenged order, we are unable to draw the necessary inferences. We thus conclude the trial court erred by granting plaintiffs’ motion.

DISPOSITION

The order of disqualification is reversed and the trial court is directed to enter a new order denying plaintiffs’ motion. Defendant shall recover its costs on appeal.

PEÑA, J.

WE CONCUR:

LEVY, Acting P.J.

FRANSON, J.