SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

PANKAJ PATHAK, an individual; HARISH KASHYAP, an individual; RARE MILE TECHNOLOGIES PVT. LTD., an Indian Corporation; and RARE MILE, INC., a California Corporation,

Plaintiffs,

vs.

AMIT JNAGAL, an individual; INFERLYTICS, INC., a California Corporation; MEENAKSHI DHATA, an individual; INFRRD, a Delaware Corporation; INNOFLEXION TECHNOLOGIES, INC., a California Corporation; and DOES 1 THROUGH 100,

Defendants.

AND RELATED CROSS-ACTION.
Case No. 2017-1-CV-305120

TENTATIVE RULING RE: DEMURRER TO THE SECOND AMENDED COMPLAINT; MOTION FOR ORDER DISQUALIFYING COUNSEL

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on March 29, 2018, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:
I. INTRODUCTION
A. Allegations of the Second Amended Complaint
According to the allegations of the Second Amended Complaint, (“SAC”), filed on October 20, 2017, plaintiff Pankaj Pathak and defendant Amit Jnagal founded Rare Mile Technologies PVT. LTD. (“Rare Mile India”), an Indian corporation, in March 2011. (SAC, ¶ 20.) Plaintiff Harish Kashyap joined as a director of Rare Mile India in May 2011. (Ibid.) In October 2012, Rare Mile Technologies, Inc. (“Rare Mile U.S.”), a California corporation, was established as a 100% wholly-owned subsidiary of Rare Mile India with Pathak, Kashyap, and Jnagal as directors. (Id. at ¶ 22.)
In October 2013, Jnagal was sent to the United States with the goal of expanding Rare Mile U.S. (SAC, ¶ 25.) In February 2016, plaintiffs Pathak, Kashyap, Rare Mile India, and Rare Mile U.S. (collectively, “Plaintiffs”) gained knowledge Jnagal was using Rare Mile U.S.’s corporate fund for unauthorized personal expenses. (Id. at ¶ 28.) Plaintiffs asked Jnagal for an accounting of the expenses in February 2016, but he refused. (Id. at ¶ 35.) In March 2016, Jnagal falsely claimed he had reimbursed the money used for personal expenses back to Rare Mile U.S. (Id. at ¶ 36.)
Among other wrongful acts, in February 2016, Jnagal wrongfully obtained a loan for Rare Mile U.S. by falsely listing himself as a U.S. citizen. (SAC, ¶ 38.) Rare Mile U.S. had a written agreement to transfer at least $15,000 per month to Rare Mile India for three years, but Jnagal has refused to transfer the money since August 2015. (Id. at ¶¶ 40-41.) Jnagal also wrongfully removed Pathak and Kashyap from the board of directors of Rare Mile U.S. (Id. at ¶ 43.) Jnagal has used Rare Mile U.S.’s funds for the running of defendant Inferlytics, Inc., a creation of Rare Mile U.S. with work being done by Rare Mile U.S. employees. (Id. at ¶ 46.)
The SAC sets forth the following causes of action: (1) Breach of Duty of Loyalty (against Jnagal); (2) Breach of Fiduciary Duty of Confidentiality (against Jnagal); (3) Conversion (against all defendants); (4) Conspiracy to Commit Conversion (against all defendants); (5) Fraud (Concealment) (against all defendants); (6) Money Had and Received (against all defendants); (7) Accounting (against all defendants); (8) Unfair Business Practices (against all defendants); (9) Intentional Interference with Prospective Economic Advantage (against all defendants); (10) Intentional Interference with Contractual Relations (against Jnagal); (11) Computer Crimes – Penal Code Section 502 (against Jnagal); (12) Receipt of Stolen Property – Penal Code Section 496 (against all defendants); and (13) Defamation Per Se (against Jnagal).
B. The Section 709 Cross-Complaint and Related Proceedings
On May 23, 2017, Jnagal filed a cross-complaint against Plaintiffs. The cross-complaint sets forth a single cause of action to set aside the appointment of Kashyap to the board of directors of Rare Mile U.S. and requests a hearing pursuant to Corporations Code section 709 to determine the validity of Kashyap’s appointment.
On August 8, 2017, and on November 7, 2017, the Court presided over a trial regarding the issue raised in the cross-complaint. The Court concluded Kashyap had resigned from the boards of Rare Mile India and Rare Mile U.S. in November 2015 and Kashyap’s attempted reappointment to the Rare Mile U.S. board through an Extraordinary General Meeting scheduled for September 12, 2016, was invalid. (Order Re: Claims Made in the Cross-Complaint, pp. 3:19-20, 4:8-5:13.)
II. DISCUSSION
There are now two matters before the Court: Defendants motion for order disqualifying Chugh, LLP from representing Plaintiffs, and Defendants’ demurrers to the SAC.
A. Motion to Disqualify Counsel
Defendants argue Plaintiffs’ counsel, Chugh, should be disqualified from representing Plaintiffs because of conflicts of interest and ethical violations that undermine the integrity of the judicial process and will have a continuing effect on these proceedings.
1. Chugh’s Representation of Rare Mile India
As an initial matter, Plaintiffs acknowledge Chugh no longer represents Rare Mile India. (Plaintiffs’ Opposition to Defendants’ Motion for Order Disqualifying Counsel, p. 3:7.) Consequently, to the extent Defendants make arguments supporting the contention that Chugh cannot represent Rare Mile India, the motion is moot.
2. Standing
In assessing Defendants’ motion to disqualify the Court must start with assessing standing. As a general matter, “before the disqualification of an attorney is proper, the complaining party must have or must have had an attorney-client relationship with that attorney.” (Great Lakes Const., Inc. v. Burman (2010) 186 Cal.App.4th 1347, 1356.) Defendants have never had an attorney-client relationship with Chugh, so this ground for establishing standing does not apply.
Standing can also arise from the breach of a duty of confidentiality owed to the complaining party. (Great Lakes Const., Inc. v. Burman, supra, 186 Cal.App.4th at p. 1356.) Defendants argue Pathak may have shared privileged information with Chugh and Kashyap arising from the time Pathak and Jnagal were allied as directors of Rare Mile India in a prior dispute with Kashyap. However, Defendants do not identify any particular information that may have been shared, or how it would affect this lawsuit. The circumstances here are distinguishable from those in the cases relied on by Defendants where specific privileged documents were identified (Gotham City Online, LLC v. Art.com, Inc. (N.D. Cal. 2014) 2014 WL 1025120) or where an attorney representing the plaintiff had previously represented a defendant in the same action. (Meza v. H. Muehlstein & Co. (2009) 176 Cal.App.4th 969). For these reasons, the Court finds Defendants have not established this ground for standing.
One of Defendants’ main arguments is that there is a conflict between Pathak/Rare Mile India and Kashyap. To have standing to move to disqualify opposing counsel, however, a non client must show harm arising from a legally cognizable interest that is concrete and particularized, not hypothetical. (Great Lakes Const., Inc. v. Burman, supra, 186 Cal.App.4th at p. 1358.) Defendants have not made any showing of harm from the purported conflict and therefore have not established standing to move to disqualify Chugh from representation of Pathak and Kashyap on this ground.
3. Dual Representation Conflicts
Even if the Court were to consider Defendants’ arguments regarding the supposed conflict between Pathak and Kashyap, they would not support disqualification. Defendants provide evidence that at the section 709 trial Pathak testified that Rare Mile India breached Kashyap’s resignation agreement because Rare Mile India owed Kashyap $100,000 and did not pay it. (See Declaration of Daniel Sakaguchi in Support of Defendants’ Motion for Order Disqualifying Counsel, Ex. 2, pp. 142:15-143:15, 154:15-155:26.) At that time Pathak had check signing authority for Rare Mile India and the responsibility (together with Jnagal) for reimbursing Kashyap. (Id. at p. 152:8-13.)
Defendants argue Kashyap’s claim for $100,000 demonstrates his interests directly conflict with Pathak and Rare Mile India and that the conflict is unwaivable. Defendants contend Chugh therefore must be disqualified pursuant to Flatt v. Superior Court (1994) 9 Cal.4th 275. In Flatt, the Court held the rule of disqualification in dual representation cases is automatic. (Flatt v. Superior Court, supra, 9 Cal.4th at p. 284.) This is only the rule, however, where there is an actual conflict between the parties. Pathak and Kashyap are not adverse to each other in any cases. The fact that Kashyap may have a claim for $100,000 is a potential conflict, not an actual conflict, because Kashyap has not elected to file suit on the claim. Further, Pathak and Kashyap have waived the conflict. (Declaration of Pankaj Pathak, ¶ 7; Declaration of Harish Kashyap, ¶ 7.) The Court finds disqualification based on dual representation conflicts is not warranted.
4. Improper Communications
Another ethical violation about which Defendants complain concerns direct and indirect communications between Chugh and Jnagel at a time when Jnagel was represented by counsel. Rule 2-100 of the California Rules of Professional Conduct prohibits such communications. In particular, Rule 2-100, subdivision (A), states: “a member shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer.” Chugh does not dispute such communications took place. Instead, it argues among other things that its attorneys believed Jnagel was no longer represented. The Court finds the explanation is not credible, and that Chugh violated Rule 2-100.
Defendants urge the Court to disqualify Chugh based on its violations of Rule 2-100. Disqualification is proper “[i]f the status or misconduct which is urged as a ground for disqualification will have a continuing effect on the judicial proceedings which are before the court….” (Chronometrics, Inc. v. Sysgen, Inc. (1980) 110 Cal.App.3d 597, 607.) Disqualification is improper if “the court’s purpose is to punish a transgression which has no substantial continuing effect on the judicial proceedings to occur in the future….” (Ibid.) Here, the Court does not believe Chugh’s violation of Rule 2-100 will have a continuing effect on the proceedings, nor does it believe there is a likelihood of prejudice. Therefore, the Court declines to disqualify Chugh based on this violation.
5. Chugh’s Unauthorized Representation of Rare Mile U.S.
Defendants argue Chugh’s past and present representation of Rare Mile U.S. was and is unauthorized and violates Business and Professions Code section 6104. Section 6104 states: “Corruptly or wilfully and without authority appearing as attorney for a party to an action or proceeding constitutes a cause for disbarment or suspension.”
As stated previously, in the Court’s December 5, 2017 Order following the Corporations Code section 709 trial, the Court found Kashyap had resigned from the boards of Rare Mile India and Rare Mile U.S. in November 2015. (Order Re: Claims Made in the Cross-Complaint, p. 3:19-20.) Additionally, the Court held Kashyap’s attempted reappointment to the Rare Mile U.S. board through an Extraordinary General Meeting scheduled for September 12, 2016, was invalid. (Id. at pp. 4:8-5:13.) Therefore, at the time Rare Mile U.S. signed a retainer agreement with Chugh on August 30, 2016, Kashyap was not a board member and therefore there could not have been a majority of board members to retain Chugh to represent Rare Mile U.S. against Jnagal.
Plaintiffs contend Kashyap has now been properly reappointed to the Rare Mile U.S. board, and he and Pathak have retained Chugh as counsel for Rare Mile U.S. Defendants respond that Plaintiffs have not followed the correct procedure to reappoint Kashyap and Chugh’s current representation of Rare Mile U.S. is still unauthorized and violates section 6104.
Plaintiffs have filed a sur-reply in addition to another declaration from Pathak. Pathak’s declaration has the minutes from a meeting of Rare Mile India attached as Exhibit 1. The minutes appear to show that Rare Mile India, as the sole shareholder of Rare Mile U.S., attempted to elect Kashyap to be a director of Rare Mile U.S. However, the minutes are faded and largely illegible and it is not entirely apparent what happened at the meeting.
Even if the Court assumes the minutes show Kashyap was elected director of Rare Mile U.S. at a Rare Mile India board meeting, Plaintiffs have not established that the Rare Mile India meeting was properly noticed or that a director for Rare Mile U.S. could be elected at a meeting for Rare Mile India. Appointment to the board of Rare Mile U.S. is governed by the bylaws of Rare Mile U.S., not Rare Mile India. A vacancy on the board of Rare Mile U.S., unless caused by the removal of a director, may be filled by appointment of the board. (Cross-Complaint, Ex. A (“Bylaws of Rare Mile Technologies, Inc.”), § 2.2.) Plaintiffs have not provided evidence that a majority of the Rare Mile U.S. board (impossible in this case with Kashyap not on the board) met to appoint Kashyap to the vacancy on the board. Rare Mile U.S. shareholders may also elect a director to fill a vacancy not filled by the board. (Ibid.) However, a shareholders’ meeting for Rare Mile U.S. at which an “action” takes place requires 10 to 60 days notice. (Id. at § 1.3.) No such notice was provided here.
Plaintiffs have again failed to follow the proper procedure to appoint Kashyap to the board of Rare Mile U.S. The Court notes that its Order following the section 709 trial explained the defects in Plaintiffs’ prior attempt to appoint Kashyap to the Board. Plaintiffs’ repeated and improper attempts to appoint Kashyap to the Rare Mile U.S. board of directors cause the Court to find that Chugh is wilfully and without authority appearing as attorney for Rare Mile U.S. Consequently, the Court finds not only that Chugh has not been authorized to represent Rare Mile U.S., but that Chugh is now disqualified from such representation for the remainder of this lawsuit.
In sum, the motion to disqualify is GRANTED as to Chugh’s representation of Rare Mile U.S. and DENIED as to Chugh’s representation of Pathak and Kashyap.
B. Demurrers
Defendants Jnagal, Meenakshi Dhata, Inferlytics, Inc., Infrrd, Inc., and Innoflexion Technologies, Inc. (collectively, “Defendants”) demur to the third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, and twelfth causes of action on the grounds that they fail to state facts sufficient to constitute a cause of action against Dhata, Inferlytics, Infrrd, and Innoflexion and are uncertain. Jnagal demurs to all causes of action on the ground that they fail to state facts sufficient to constitute a cause of action against him and are uncertain.
Plaintiffs have not filed an opposition to the demurrers. Instead, Plaintiffs filed a Third Amended Complaint on March 12, 2018. Defendants argue Plaintiffs never sought leave of Court to file the Third Amended Complaint and it should be struck and the demurrers sustained.
Because no opposition was filed to Defendants’ demurrers, the demurrers are SUSTAINED WITH 30 DAYS LEAVE TO AMEND. Because the Third Amended Complaint was filed without leave of court, it is STRICKEN.

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