Judge: Daniel S. Murphy, Case: 21STCV45709, Date: 2022-10-12 Tentative Ruling

Case Number: 21STCV45709    Hearing Date: October 12, 2022    Dept: 32

BACKGROUND

            On December 15, 2021, Plaintiffs Kostiv & Associates and Petro R. Kostiv filed this action against various Defendants, asserting 16 causes of action stemming from an alleged conspiracy to embezzle money from Plaintiffs. The allegations mainly revolve around the actions of Defendant Diego Gonzalez (“Diego”), the former finance director for Plaintiff Kostiv & Associates, who fraudulently entered into contracts with Defendants Ezlawpay and Payink on behalf of Plaintiff, resulting in false invoices charged to Plaintiff. Plaintiffs allege that Diego and his co-conspirators embezzled money from Plaintiffs. Plaintiffs bring this suit against Ezlawpay, Payink, Diego, Diego’s wife (allegedly the owner of Ezlawpay), two corporate officers of Payink, and various employees who worked under Diego at Plaintiff’s finance department.

            On September 12, 2022, Diego filed the instant motion to disqualify Plaintiffs’ attorney, Michael Quiroga, on the grounds that Quiroga represented Diego in a prior lawsuit involving Petro Kostiv’s other company, Kostiv Group. Diego contends that Quiroga obtained confidential information from the prior action which can be employed against Diego in the present action, resulting in an impermissible conflict of interest.   

LEGAL STANDARD

“A trial court's authority to disqualify an attorney derives from the court's inherent power 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. (Code Civ. Proc., § 128, subd. (a)(5).) An attorney is required to avoid the representation of adverse interests and cannot, without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the member has obtained confidential information material to the employment. (Rules Prof. Conduct, rule 3-310(E).)” (Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698, 705.)

“[W]hether an attorney should be disqualified in a successive representation case turns on two variables: (1) the relationship between the legal problem involved in the former representation and the legal problem involved in the current representation, and (2) the relationship between the attorney and the former client with respect to the legal problem involved in the former representation.” (Jessen, supra, 111 Cal.App.4th at p. 709.)

DISCUSSION

            Mr. Quiroga represented Petro Kostiv and Kostiv Group in a prior action where a former employee of Kostiv Group, Adrian de Loza, sued Kostiv Group for unpaid commissions and mileage. Diego avers that he retained Quiroga to represent him in the Loza matter, tendering payment which Quiroga accepted. (Gonzalez Decl. ¶ 5.) Diego was set to be deposed in the Loza action, though the deposition never took place. Quiroga received deposition notices for Diego and Petro, and informed Loza’s counsel that he would confirm availability with Diego and Petro. (Id., Ex. B.) Diego avers that Quiroga provided him with legal advice regarding the deposition and the case in general, and that he imparted confidential information to Quiroga. (Id., ¶ 9.) Diego was not a party to the Loza action. Quiroga denies representing Diego in the Loza action and denies discussing confidential information with Diego. (Quiroga Decl. ¶¶ 3-4, 12.)

            An attorney-client relationship can exist in the absence of a formal retainer agreement and regardless of whether the client is named in a lawsuit. (See Lister v. State Bar (1990) 51 Cal.3d 1117, 1125-26.) Diego could have reasonably believed Quiroga was representing him based on the conduct of the parties. Accordingly, it is possible for confidential information to have been exchanged while Quiroga discussed the Loza case and deposition with Diego.

However, that is insufficient to warrant disqualification in the present action. The critical inquiry is “whether confidential information material to the current dispute would normally have been imparted to the attorney by virtue of the nature of the former representation.” (Jessen, supra, 111 Cal.App.4th at p. 708.) There must be a “substantial relationship” between the two cases such that information obtained from the first representation is “directly at issue in, or ha[s] some critical importance to, the second representation.” (Farris v. Fireman's Fund Ins. Co. (2004) 119 Cal.App.4th 671, 679-80.) This depends on the legal and factual issues involved in each action. (Ibid.)  

            Here, there is no substantial relationship between the Loza action and the present action. The Loza action was prosecuted by a former employee of a different company, seeking recovery for different misconduct. Neither Kostiv Group nor Loza are parties to the present dispute. The issue of whether Kostiv Group adequately compensated Loza for mileage is distinct from the question of whether Diego embezzled money from Kostiv and Associates. The two actions are not substantially related merely by the common involvement of Diego, who handled financial matters for both Kostiv Group and Kostiv and Associates. The factual and legal issues in the Loza action are not similar to the factual and legal issues in the present action. In other words, the information obtained from the Loza matter is neither directly at issue nor critically important to the present action. (See Farris, supra, 119 Cal.App.4th at p. 679-80.)

            Although strict identity of the issues and facts is not required for a finding of substantial relationship, the test still depends upon “the similarities between the two factual situations, the legal questions posed . . . .” (See Knight v. Ferguson (2007) 149 Cal.App.4th 1207, 1213.) It requires that “the subjects of the prior and the current representations are linked in some rational manner.” (Ibid.) This was satisfied in Knight because in an earlier action, “Knight retained Wideman to discuss a lease and partnership relating to the creation of the restaurant which is the subject of this action.” (Ibid.) As another example, “[a]n attorney who, in the former representation of an insurance company, prepared a form of insurance policy for the company's use cannot in the second representation sue the insurance company for a breach of that policy on behalf of a person to whom a form of the policy was subsequently issued.” (Farris, supra, 119 Cal.App.4th at p. 682.) There is no similar connection between the two representations at issue here.

CONCLUSION

            Defendant Diego Gonzalez’s motion to disqualify counsel is DENIED.