Judge: Armen Tamzarian, Case: 22STCV02823, Date: 2024-07-10 Tentative Ruling

Please notify Department 52 via email at smcdept52@lacourt.org and indicate that the parties are submitting on the tentative ruling. Please provide the attorney's name and represented party. Please notify the opposing side via email if submitting on the Court's tentative ruling.

Case Number: 22STCV02823    Hearing Date: July 10, 2024    Dept: 52

Plaintiff Maneesh Bansal’s Motion to Disqualify Counsel

Plaintiff Maneesh Bansal, M.D. moves to disqualify Michael W. Caspino and Forward Counsel LLP from representing defendants Arunpal Sehgal, M.D. and Paramjot Mann, M.D.  Plaintiff contends Forward Counsel LLP must be automatically disqualified due to simultaneous adverse representation.  Generally, “there is a per se rule requiring disqualification of an attorney or a law firm when there is a conflict of interest based upon concurrent representation of multiple clients.  [Citations.]  This is the case irrespective of whether the representation of one client has anything to do with the representation of the other client.”  (M’Guinness v. Johnson (2015) 243 Cal.App.4th 602, 625.)

Plaintiff does not show Forward Counsel simultaneously represents adverse clients.  Forward Counsel currently represents Shelby Hospitality, LLC (Shelby) in another action (the Shelby Litigation).  (Bansal Decl., ¶ 6.)  Plaintiff is one of three managing members of Shelby.  (Id., ¶¶ 3-4.)  Shelby has nine members: one LLC and eight individuals, including plaintiff.  (Id., ¶ 4.)  Shelby’s operating agreement provides that, when it was executed in 2018, the LLC and five of the eight individuals had 10% membership interests, Bansal and two other individuals had an 11.1% interest, and the final member had a 16.67% interest.  (Id., Ex. A, p. 13.)

Representing Shelby does not mean Forward Counsel represents plaintiff himself.  “Generally, when ‘representing a corporation, an attorney’s client is the corporate entity, not individual shareholders or directors, and the individual shareholders or directors cannot presume that corporate counsel is protecting their interests.’  [Citation.]  ‘An attorney representing a corporation does not become the representative of its stockholders merely because the attorney’s actions on behalf of the corporation also benefit the stockholders; as attorney for the corporation, counsel’s first duty is to the corporation.’ ”  (Sprengel v. Zbylut (2019) 40 Cal.App.5th 1028, 1042 (Sprengel).)

Representing an entity, however, “may create an implied attorney-client relationship with” its individual owners.  (Sprengel, supra, 40 Cal.App.5th at p. 1043.)  “When assessing the existence of an implied attorney-client relationship between a corporate attorney and the entity’s individual members, the key inquiry is whether ‘the totality of the circumstances’ implies an agreement that the corporate attorney will not act adversely to the individual shareholder’s interests with respect to the issues in dispute.”  (Id. at p. 1047.)  The court “must assess whether the parties conducted themselves in a way that would reasonably cause a shareholder to believe the attorney would protect the shareholder’s individual interests.”  (Ibid.) 

When determining this issue, courts consider factors including “[t]he type and size of” the entity, “the nature and scope of the attorney’s engagement,” “[t]he kind and extent of contacts, if any, between the attorney and the individual” owner, and “the attorney’s access to information (e.g., partnership financial information) relating to the individual.”  (Responsible Citizens v. Superior Court (1993) 16 Cal.App.4th 1717, 1733 (Responsible Citizens).)

The evidence in the record does not show that, under the totality of the circumstances, plaintiff reasonably believed Forward Counsel would protect his individual interests.  The type and size of Shelby Hospitality, LLC do not support that conclusion.  One primary purpose of a limited liability company is to limit the individual members’ liability for the company’s debts.  An LLC’s debts or liabilities “are solely the debts, obligations, or other liabilities of the limited liability company” (Corp. Code, § 17703.04(a)(1)) and “do not become the debts, obligations, or other liabilities of a member or manager solely by reason of the member acting as a member or manager acting as a manager for the limited liability company” (id., subd. (a)(2)).  Shelby has nine members.  (Bansal Decl., ¶ 4.)  Plaintiff does not identify his current membership interest in Shelby, but he owned 11.1% of the company when it was formed.  (Id., Ex. A, p. 13.)    

In contrast, in Responsible Citizens, the individual moving for disqualification was one of two partners in a general partnership.  (Responsible Citizens, supra, 16 Cal.App.4th at p. 1722 [remanding issue to trial court])  In Sprengel, the individual was one of two members who each owned 50 percent of a limited liability company.  (Sprengel, supra, 40 Cal.App.5th at p. 1033 [affirming summary judgment of malpractice action].)  Plaintiff’s interest in Shelby is far smaller.

The nature and scope of the engagement also do not support the finding that Forward Counsel represents Bansal.  Shelby operates a hotel.  (Bansal Decl., ¶ 3.)  Forward Counsel is defending Shelby in an action by a corporation that unsuccessfully tried to purchase the hotel property before Shelby purchased 83.33% of it.  (Id., Ex. B, Complaint in Bhuvneshwari Corp. v. Ken Pansurai, et al., ¶¶ 16-31.)  The retainer agreement between Forward Counsel and Shelby “states the Engagement is only for the persons or entities identified in the incorporated Letter Agreement which only lists Shelby (along with nonparties Fine Hospitality and Eurocan) and does not mention Bansal.”  (Caspino Decl., ¶ 9.)  It further provides, “ ‘Unless expressly agreed in writing, the Firm is not undertaking the representation of any related or affiliated person or entity… nor any of your or their officers, directors, shareholders, managers, members, agents, partners, or employees.’ ”  (Ibid.)  Nothing about the nature and scope of the representation involves plaintiff’s individual interests.  It only impacts him incidentally as a member of the LLC.

Plaintiff largely relies on the fact that Forward Counsel planned to prepare him for his deposition in the action against Shelby (before the deposition was postponed).  (Bansal Decl., ¶¶ 12-14.)  Preparing a witness for a deposition does not constitute personally representing the witness.  Moreover, the email asking to prepare Bansal for his deposition was sent to five individual members of Shelby about their depositions.  (Id., Ex. D.)  Each deposition was scheduled for two hours.  (Ibid.)  Forward Counsel asked to “have a short call with each” witness only one to three days before their depositions and stated “[e]ach call should not take more than 15-20 minutes.”  (Ibid.)  This email shows Forward Counsel’s plan to prepare plaintiff to testify at deposition was no different from how it treated four other members.  A brief phone call to prepare for an unusually short deposition does not demonstrate any personal attorney-client relationship.  Nothing in the circumstances would cause a reasonable person in plaintiff’s shoes to believe Forward Counsel represents his personal interests. 

The only factor supporting a finding of concurrent adverse representation is the kind and extent of contacts between plaintiff and Forward Counsel.  Plaintiff states he “had at least four phone calls and videoconferences with Mr. Caspino” (Bansal Decl., ¶ 9), and he “exchanged at least 68 emails” with Forward Counsel (id., ¶ 11). 

Plaintiff, however, explains the reason for having extensive communication with Forward Counsel.  He states, “I was elected by the non-interested members of Shelby (i.e., those without a personal interest in the Shelby Litigation) to represent their interests and deal with Forward Counsel and Mr. Caspino on their behalf.  I am currently the only manager of Shelby that can make decisions for the entity without consideration of the needs and desires of the other two defendants, given that Gaurang Patel owns one of the named defendants and Nishant Karod is the business partner of another named defendant.  I am the only manager or member of Shelby who has interacted with Forward Counsel on behalf of the non-interested members.”  (Id., ¶ 7.) 

He thus acknowledges he does not have “a personal interest in the Shelby Litigation” and interacts with Forward Counsel in his capacity as Shelby’s managing member on behalf of Shelby and, in particular, the other “non-interested members of Shelby.”  Except for being one of the three managing members, his relationship with Forward Counsel is the same as all the other individuals who own Shelby.  None of these individuals, including Bansal, are parties in the Shelby Litigation and Forward Counsel does not represent them. 

Plaintiff also states he asked Caspino “a personal legal question and requested advice on an issue personal to me” in January 2023.  (Bansal Decl., ¶ 12.)  He did not explain the nature of the legal issue.  Defendants show it was not personal.  After the opposing counsel cancelled plaintiff’s deposition, plaintiff wrote, “Can we seek sanctions for this behavior.  Scheduling a deposition takes time and planning.  I have to reschedule my patients in clinic and can’t switch schedules so capriciously.”  (Caspino Decl., ¶ 3, Ex. 1.)  Caspino replied, “Absolutely.  I am setting him up for this right now.”  (Ibid.)

These emails involve at most a modicum of legal advice.  The issue was plaintiff’s frustration about how the litigation impacted his schedule as a practicing physician.  Any witness, regardless of their relationship with Shelby or Forward Counsel, in plaintiff’s shoes might share such frustration.  And, as defendants argue, any sanctions would be paid to Shelby, not plaintiff, who is not a party to that action. 

Plaintiff does not identify any information relating to his individual interests that Forward Counsel can access.  Under the circumstances, any information Forward Counsel has about Shelby only incidentally relates to plaintiff based on his status as one of its nine members.    

The totality of the circumstances does not imply an agreement that Forward Counsel would not act adversely to plaintiff’s individual interests.  Plaintiff states, “I viewed Forward Counsel as my trusted lawyers.  Forward Counsel has never communicated to me that it does not represent me or my interests.”  (Bansal Decl., ¶ 17.)  His view was not reasonable under the totality of the circumstances.  And Forward Counsel did expressly communicate that it does not represent him or his interests.  It did so via the retainer agreement that serves as the basis for its relationship with Shelby (and therefore any resulting relationship with plaintiff).  (Caspino Decl., ¶ 9.)  That Bansal purportedly “never saw a copy of” the agreement until recently (Bansal Decl., ¶ 8) does not excuse him.  An objectively reasonable member of Shelby Hospitality LLC would expect that the written contract between Shelby and Forward Counsel governs their relationship. 

Disposition

            Plaintiff Maneesh Bansal, M.D.’s motion to disqualify counsel is denied.

Defendants Arunpal Sehgal and Paramjot Mann’s Motion to Compel Arbitration

Defendants/cross-complainants Arunpal Sehgal, M.D. and Paramjot Mann, M.D. move to compel arbitration of the entire action.  A court may deny a motion to compel arbitration when “[t]he right to compel arbitration has been waived.”  (CCP § 1281.2(a).)

Defendants waived any right to compel arbitration of this action.  “[M]erely participating in litigation, by itself, does not result in a waiver.”  (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1203 (St. Agnes).)  When determining waiver, courts consider factors including “(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place.”  (Id. at p. 1196, internal quotes omitted.)

Defendants’ actions have been wholly inconsistent with the right to arbitrate.  Before plaintiff filed this action, Bansal brought a demand for arbitration with JAMS against Sehgal in September 2021.  (Beatty Decl., ¶ 2, Ex. A.)  Rather than pursuing his counterclaims before JAMS, Sehgal demurred to the demand for arbitration on the basis that Bansal’s claim was not subject to arbitration.  (Id., ¶ 3, Ex. B.)  Before a ruling on the demurrer, “the parties met and conferred and reached an agreement whereby Bansal agreed to voluntarily dismiss his Demand for Arbitration without prejudice and refile his claims in state court.”  (Id., ¶ 4.)  Resisting arbitration and agreeing to proceed in court is a paradigmatic example of acts inconsistent with the right to arbitrate. 

Defendants’ conduct in this litigation has also been inconsistent with arbitration.  They first appeared in this action by filing a case management statement on April 5, 2022.  Defendants offer no explanation for not seeking to compel arbitration of this action until December 2023.  Until filing this motion, defendants never indicated an intent to arbitrate.  In their initial case management statement, defendants did not check the box indicating they were willing to arbitrate.  (Apr. 5, 2022 Case Management Statement, ¶ 10.c(5).)  Neither their demurrer to the initial complaint (Beatty Decl., Ex. E), answer to the first amended complaint (id., Ex. F), initial cross-complaint (id. Ex. G), first amended cross-complaint (id., Ex. H), nor second amended cross-complaint (id., Ex. I) assert any demand to arbitrate.  

Defendants now argue, for the first time, the action is subject to arbitration.  They seek to justify their change in position by arguing that plaintiff’s initial demand for arbitration was different than plaintiff’s operative complaint.  But defendants’ initial cross-complaint alleges, “Bansal initially filed a demand for arbitration asserting similar claims against Cross-Defendants as he alleges in this action.  Cross-Complainant objected to arbitration.”  (Beatty Decl.., Ex. G, ¶ 20.)    

Defendants substantially invoked the litigation machinery.  Together, the two defendants “have served three sets of Requests for Production of Documents (totaling 190 requests), two sets of Special Interrogatories (totaling 81 special interrogatories), two sets of Form Interrogatories, and two sets of Requests for Admission (totaling 43 requests).”  (Beatty Decl., ¶ 10, Exs. J-R.)  They filed three motions to compel compliance with requests for production.  (Id., ¶ 11, Exs. S & T.)  In response to defendants’ requests for production, Bansal produced almost one million pages of documents.  (Id., ¶ 12.)  Furthermore, plaintiff’s counsel states, “Bansal has incurred more than $300,000 in attorneys’ fees in litigating this matter.”  (Id., ¶ 15.)  The parties are well into preparation for the trial scheduled for July 28, 2025.  Defendants also filed a cross-complaint (and two amended cross-complaints) without asking to stay this action.    

Plaintiff demonstrates that defendants’ delay has substantially prejudiced him.  “[C]ourts assess prejudice with the recognition that California’s arbitration statutes reflect ‘ “a strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution” ’ and are intended ‘ “to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of their differences by a tribunal of their own choosing.” ’  [Citation.]  Prejudice typically is found only where the petitioning party’s conduct has substantially undermined this important public policy or substantially impaired the other side’s ability to take advantage of the benefits and efficiencies of arbitration.”  (St. Agnes, supra, 31 Cal.4th at p. 1204.)  Such prejudice has occurred here.  Beginning arbitration over two years after this action has been at issue and after extensive discovery, multiple discovery motions, and several demurrers would not be speedy or inexpensive.

After considering all relevant factors, the court finds defendants waived any right to compel arbitration of this action. 

Plaintiff also argues defendants are judicially estopped from moving to compel arbitration.  The court does not reach the issue.

Disposition

Defendants/cross-complainants Arunpal Sehgal, M.D. and Paramjot Mann, M.D.’s motion to compel arbitration is denied.