Judge: Alison Mackenzie, Case: 24STCV15148, Date: 2024-09-23 Tentative Ruling

Case Number: 24STCV15148    Hearing Date: September 23, 2024    Dept: 55

NATURE OF PROCEEDINGS:  Hearing on Defendant's Motion to Disqualify Counsel

Defendant’s Motion to Disqualify Counsel is denied.    

BACKGROUND

Plaintiff Armine Avetissian (“Plaintiff”) brings this action against Lucid Group USA, Inc. and Lucid USA, Inc., and doe defendants 1 to 30 (“Defendants”), alleging that Defendants failed to pay Plaintiff the money owed under the parties’ settlement agreement. Defendants, instead, paid the funds to hackers, who had hacked Plaintiff’s Counsel’s email and sent Defendant false wire instructions. 

The causes of action are: (1) Breach of Written Contract; (2) Breach of Implied Covenant of Good Faith And Fair Dealing; and  (3) Negligence.

The motion now before the Court is Defendants’ Motion to Disqualify Counsel. 

LEGAL STANDARD

“A trial court's authority to disqualify an attorney derives from its inherent power, codified at Code of Civil Procedure section 128, subdivision (a)(5), to control the conduct of its ministerial officers and of all other persons connected with its proceedings in furtherance of justice.” Jarvis v. Jarvis (2019) 33 Cal.App.5th 113, 129. Disqualification may be ordered as a prophylactic measure against a prospective ethical violation likely to have a substantial continuing effect on future proceedings. City of San Diego v. Superior Court (2018) 30 Cal.App.5th 457, 462, 471–472; but see In re Jasmine S. (2007) 153 Cal.App.4th 835, 843 (“‘an appearance of impropriety by itself does not support a lawyer's disqualification’”). Doe v. Yim (2020) 55 Cal.App.5th 573, 581 (Yim). 

ANALYSIS

Conflict of Interest

Defendants argue that Plaintiff’s Counsel, Hovanes Margarian, has a conflict of interest because he and his law firm face potential liability due to their inadequate IT security and failure to detect the breach of the firm’s email system, which resulted in the hack and thus Plaintiff’s loss. Motion at p. 2:2-14.  Defendants further argue that Margarian’s inquiry into potentially representing Defendants on other cases after this case is resolved raises questions regarding his ability to represent Plaintiff. 

Plaintiff argues that because she has given her informed written consent, there is no reason to disqualify Margarian. Opposition at p. 5:9-11.   

California Rules of Professional Conduct Rule 1.7 (b) states the following: “A lawyer shall not, without informed written consent from each affected client and compliance with paragraph (d), represent a client if there is a significant risk the lawyer’s representation of the client will be materially limited by the lawyer’s responsibilities to or relationships with another client, a former client or a third person, or by the lawyer’s own interests.” Cal. R. Prof. Conduct 1.7 (b), (footnote omitted).

“A ‘standing’ requirement is implicit in disqualification motions.” Great Lakes Construction, Inc. v. Burman (2010) 186 Cal.App.4th 1347, 1356 (Great Lakes). “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.” Ibid. In the absence of an attorney-client relationship, generally, “some sort of confidential or fiduciary relationship must exist or have existed.” Ibid. “Thus, a moving party must have standing, that is, an invasion of a legally cognizable interest, to disqualify an attorney.” Id. at p. 1357. “[T]he standing requirement for attorney disqualification motions protects against the strategic exploitation of the rules of ethics and guards against improper use of disqualification as a litigation tactic.” Id. at p. 1358. 

Defendants are not now and have not previously been Margarian’s clients, nor do they allege that they have any confidential or fiduciary relationship with Margarian.  Instead, Defendants argue that they are prejudiced by the risk that Plaintiff could decide that Margarian’s representation was ineffective, forcing Defendants to relitigate this case. Motion at p. 8:14-20. Defendants provide no authority for the proposition that a civil plaintiff whose attorney’s ineffective assistance results in a negative verdict may overturn that verdict and relitigate the case. Accordingly, the Court finds that Defendants lack standing to bring a motion to disqualify based on any potential conflict of interest between Plaintiff and Margarian. See Great Lakes, supra, (2010) 186 Cal.App.4th at p. 1357. 

The Advocate-Witness Rule

Defendants further argue that Margarian should be disqualified because he is likely to testify as a fact witness at trial. 

The “advocate-witness rule” prohibits an attorney from acting as an advocate and a witness in the same proceeding. Kennedy v. Eldridge (2011) 201 Cal.App.4th 1197, 1208. As codified, the rule states, “A lawyer shall not act as an advocate in a trial in which the lawyer is likely to be a witness unless: [¶] (1) the lawyer’s testimony relates to an uncontested issue or matter; [¶] (2) the lawyer’s testimony relates to the nature and value of legal services rendered in the case; or [¶] (3) the lawyer has obtained informed written consent from the client.” Rules Prof. Conduct, rule 3.7(a), fn. omitted. A comment to the rule clarifies that the informed consent exception is not absolute: “Notwithstanding a client’s informed written consent, courts retain discretion to take action, up to and including disqualification of a lawyer who seeks to both testify and serve as an advocate, to protect the trier of fact from being misled or the opposing party from being prejudiced.” Rules Prof. Conduct, rule 3.7(a), com. 3. fn. omitted (citing Lyle v. Superior Court (1981) 122 Cal.App.3d 470 (Lyle).

“Where a lawyer representing a party in trial is also a witness during the trial, his or her effectiveness, both as a lawyer and as a witness, may be impaired in the eyes of the fact finder. Such disadvantage inures to the detriment of the party being represented by the lawyer serving such a dual function.” Smith, Smith & Kring v. Superior Court (1997) 60 Cal.App.4th 573, 578. In Lopez v. Lopez (2022) 81 Cal.App.5th 412, 425 (Lopez), the court reversed the order of disqualification where the trial court found the attorney’s “dual role would impair his credibility as a witness … and diminish his effectiveness as an advocate.” California Rules of Professional Conduct, rule 37(a)(3), likewise reflects the insight that as a general matter, it is the attorney’s client who is harmed by the attorney acting as a witness, and therefore requires informed consent from the client, and no other parties to the trial. See Cal. Rules of Prof. Conduct 37.(a)(3).

“[T]he trial court, when balancing the several competing interests, should resolve the close case in favor of the client’s right to representation by an attorney of his or her choice.” Lyle, supra, 122 Cal.App.3d at. 482 “[I]f a party is willing to accept less effective counsel because of the attorney’s testifying, neither his opponent nor the trial court should be able to deny this choice to the party without a convincing demonstration of detriment to the opponent or injury to the integrity of the judicial process.” Ibid.

“In exercising its discretion to disqualify counsel under the advocate-witness rule, a court must consider: (1) whether counsel’s testimony is, in fact, genuinely needed; (2) the possibility opposing counsel is using the motion to disqualify for purely tactical reasons; and (3) the combined effects of the strong interest parties have in representation by counsel of their choice, and in avoiding the duplicate expense and time-consuming effort involved in replacing counsel already familiar with the case. Trial judges must indicate on the record they have considered the appropriate factors.” Lopez, supra, 81 Cal.App.5th at 424 (cleaned up).

Here, Defendants have named Margarian and his firm as cross-defendants and intend to argue at trial that Margarian is responsible for Plaintiff’s injury. See Cross Complaint at ¶¶  4,9, 10, 11. Defendants intend to call Margarian as a witness to testify as to his alleged negligence in failing to prevent the wire fraud. See Motion at p. 7:5-6.  While Plaintiff has given written consent, Defendants argue the Court should nevertheless exercise its discretion to disqualify Margarian. Defendants argue that Margarian appearing as a witness and serving as an advocate will likely prejudice Defendants and cause juror confusion. Defendants offer no reason specific to this case that Margarian’s testimony will result in prejudice and confusion besides the fact of his dual role. Id. at p. 7:2-3. This argument is unavailing because it would amount to a bright-line rule against attorneys as witnesses. However, Rules Prof. Conduct, rule 3.7(a), explicitly allows attorney witnesses where informed consent is given. While a court may disqualify an attorney even when informed consent has been given, it may only do so when there is a “convincing demonstration of detriment to the opponent.’ Lyle, supra, 122 Cal.App.3d at. 482.

Defendants argue that they might be prejudiced in challenging Margarian’s credibility but fail to consider how Margarian’s testimony may disadvantage Plaintiff. Motion at p. 9: 18-19. Margarian serving as both a witness and advocate could impair his credibility and effectiveness as an advocate because the jury may find he has an unusually strong interest in vindicating his own actions regarding the hacking of his email. If Defendants successfully impeach Margarian’s testimony, the jury may not believe his arguments as an advocate.

Because the Court finds that Defendants have not made a convincing demonstration of detriment, it declines to exercise its discretion to disqualify Margarian. 

CONCLUSION

The Defendant’s Motion to Disqualify Counsel is denied.