GARRY A. BAILEY, et al., individually and on behalf of others similarly situated,

Plaintiffs,

vs.

HAFFAR & ASSOCIATES, a Professional Corporation, a California corporation, et al.,

Case No. 2010-1-CV-179515

TENTATIVE RULING RE: MOTION TO DISQUALIFY CLASS COUNSEL

The above-entitled action is set for hearing before the Honorable Thomas E. Kuhnle on July 28, 2017, at 9:00 a.m. in Department 5. Having reviewed the submissions of the parties, the Court issues its tentative ruling as follows:

I. INTRODUCTION

This is a class action brought by plaintiffs Garry A. Bailey and Brooke T. Bailey (collectively, “the Baileys”) individually and on behalf of approximately eleven hundred individuals (collectively, “Plaintiffs”) who paid about $3.8 million in advance fees for “loan modification” services to defendants Daylight Technologies, Inc. (“Daylight Technologies”), Charles Everette Rose (“Rose”), Amwest Capital Mortgage (“Amwest”), Glenn Hinton (“Hinton”) and Michael Nazarinia (“Nazarinia”) (collectively, “Defendants”). Defendants allegedly created a mortgage loan modification scheme and recruited then-inactive attorney Mohamed Fouzi Haffar (“Haffar”) to lend his name to the operation. Plaintiffs allege that under the name Haffar & Associates, Defendants used “robo-dialers” to solicit hundreds of thousands of homeowners throughout California, collected advance “legal” fees from them purportedly for loan modification services, provided services of little or no value, and refused to refund the unearned fees.

The Second Amended Complaint (“SAC”) asserts eight class claims: (1) violations of the Consumer Legal Remedies Act (“CLRA”) (against all Defendants); (2) breach of fiduciary duty (against Haffar); (3) conspiracy to breach fiduciary duty (against Daylight Technologies, Rose, Amwest, Hinton and Nazarinia); (4) violations of Business and Professions Code section 6150, et seq. (against all Defendants); (5) violations of the Civil RICO Statute, 18 U.S.C. section 1962(c) (against Haffar, Nazarinia, Daylight Technologies, Rose, Amwest and Hinton); (6) conspiracy to violate the Civil RICO Statute, 18 U.S.C. section 1962(d)) (against Haffar, Nazarinia, Daylight Technologies, Rose, Amwest and Hinton); (7) violations of the Unfair Competition Law (against all Defendants); and (8) negligence (against Daylight Technologies, Amwest and Hinton). The SAC asserts three individual claims by Plaintiffs: (9) professional negligence (against Haffar); (10) interference with contractual relations (against all Defendants); and (11) fraud (against all Defendants).

On May 21, 2012, default was entered against Rose for his failure to answer the Second Amended Complaint. In December 2013, a motion for default judgment was granted in favor of Plaintiffs against Rose. Rose appealed unsuccessfully and remittitur issued on April 21, 2016.
In April 2017, an offer was made by Rose’s half-sister, Heather Baker, of $100,000 to be paid in a lump sum, and $150,000 to be paid over the course of three years, to fully satisfy the judgment against Rose. (Declaration of Lenden F. Webb in Support of Motion to Disqualify Class Counsel (“Webb Decl.”), ¶¶ 19-20; Declaration of Tavy A. Dumont in Opposition to Charles Rose’s Motion to Disqualify Plaintiffs’ Counsel (“Dumont Decl.”), ¶ 5.) Plaintiffs’ counsel responded that the offer could not be accepted without performing due diligence to evaluate the settlement offer against collection prospects. (Webb Decl., ¶ 21; Dumont Decl., ¶ 7.) Rose now moves to disqualify attorney Tavy Dumont and The Law Office of Tavy Alice Dumont from representing Plaintiffs in this action pursuant to Code of Civil Procedure section 128, subdivision (a)(5).

II. REQUEST FOR JUDICIAL NOTICE

Plaintiffs request judicial notice of the following:

(4) Minute order dated October 28, 2016, from the judgment debtor examination proceedings of Charles Rose, in San Diego Superior Court; and

(5) Minute order dated February 23, 2017, from the hearing on Plaintiffs’ ex parte application for a turnover order, in San Diego Superior Court.

The Court can take judicial notice of these documents as court records. (Evid. Code, § 452, subd. (d).) Accordingly, the request for judicial notice is GRANTED.

III. DISCUSSION

A trial court’s authority to disqualify an attorney derives from the power inherent in every court 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 matter pertaining thereto. (Walker v. Apple, Inc. (2016) 4 Cal.App.5th 1098, 1106, quoting People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145, quoting Code Civ. Proc., § 128, subd. (a)(5).)

Rose argues Dumont should be disqualified because she has neglected her duty to protect the best interest of the class by rejecting the settlement offer of $250,000. Rose asserts defendant Nazarinia settled for a much smaller sum of $60,000 and another defendant settled for approximately $30,000. Rose contends the $250,000 offer is likely to be the most generous offer to come. Rose argues the rejection of the settlement offer extends the life of this action, increases attorney fees, and limits the potential recovery for Plaintiffs.
In opposition, Plaintiffs argue Rose lacks standing to bring this motion. Plaintiffs are correct. As explained in one case:
Standing generally requires that the plaintiff be able to allege injury, that is, an invasion of a legally protected interest. 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. The burden is on the party seeking disqualification to establish the attorney-client relationship.

(Coldren v. Hart, King & Coldren, Inc. (2015) 239 Cal.App.4th 237, 245, citations and quotation marks omitted.)

Rose has presented no evidence demonstrating any attorney-client relationship with Dumont and does not even argue in the moving papers that he has standing to bring this motion. Consequently, Rose’s motion for disqualification must be denied.

Even if Rose had standing, there would be no basis to grant the motion. Rose states the default judgment against him is for the sum of $13,165,351.83. A settlement of $250,000 is a tiny fraction of the default judgment amount. The evidence is far from clear that Rose does not have more money to pay toward the judgment. Rose has avoided providing straightforward, honest answers regarding his finances and has also not been forthcoming regarding his possessions. Moreover, even if Rose truly does not have much money left, Dumont simply asserted that due diligence was needed prior to accepting the offer; Dumont did not reject the offer outright.

Rose’s motion is without merit and appears to have been brought to harass and intimidate Plaintiffs’ counsel. Plaintiffs’ counsel does not move for sanctions, but requests the Court issue an Order to Show Cause as to why it should not impose sanctions on Rose’s attorney, Lenden Webb. Absent a motion, the Court will not impose sanctions in this instance. Nevertheless, Webb is cautioned to avoid bringing frivolous motions and to refrain from making misleading or false statements to the Court. Any further conduct of this sort may result in future sanctions.

The motion to disqualify class counsel is DENIED.

The Court will prepare the final order if this tentative ruling is not contested.