Judge: Joel L. Lofton, Case: 22AHCV00723, Date: 2023-02-27 Tentative Ruling

Case Number: 22AHCV00723    Hearing Date: February 27, 2023    Dept: X

   Tentative Ruling

Judge Joel L. Lofton, Department X

HEARING DATE:     February 27, 2023                               TRIAL DATE: No date set.

CASE:                         MIMI LIN, an individual, WEI ZHANG, an individual; CITEAUSA, a California corporation; CITEA DRINKS, an California corporation; CITEA RH, a California corporation; HIITORY CAFÉ LLC, a California limited liability company, and DOES 1 through 25, inclusive.  

CASE NO.:                 22AHCV00723

MOTION TO DISQUALIFY COUNSEL

MOVING PARTY:               Plaintiff Mimi Lin

RESPONDING PARTY:      Defendant Wei Zhang

SERVICE:                              Filed January 5, 2023

OPPOSITION:                       Filed February 15, 2023

REPLY:                                   No reply filed.

RELIEF REQUESTED

            Plaintiff filed this motion to disqualify CHH Law, P.C., counsel for Defendants.

BACKGROUND

             This case arises out of Plaintiff Mimi Lin’s (“Plaintiff”) claims that she was improperly excluded from the business operations of Defendant CiTeaUSA (“CiTeaUSA”) by Defendant Wei Zhang (“Zhang”). Plaintiff alleges CiTeaUSA was formed and registered on or about May 20, 2019. Plaintiff alleges Zhang represented that Plaintiff would be a 50% shareholder of CiTeaUSA. Plaintiff alleges she contributed capital totaling $68,700. Plaintiff alleges she was initially the secretary of CiTeaUSA and a signatory to CiTeaUSA’s checking account. Plaintiff alleges that Zhang unilaterally removed Plaintiff as a signatory to CiTeaUSA’s checking account and removed Plaintiff as secretary. Plaintiff alleges that Zhang subsequently incorporated additional businesses using CiTeaUSA’s capital.

            Plaintiff filed this complaint on September 22, 2022, alleging nine causes of action for (1) accounting, (2) declaratory relief, (3) accounting and dissolution, (4) accounting and dissolution, (5) accounting and dissolution, (6) fraud, (7) breach of fiduciary duty, (8) conversion, and (9) violation of Corporations Code section 1150.

TENTATIVE RULING

Plaintiff’s motion to disqualify CHH Law is DENIED.

DISCUSSION

             Plaintiff argues that CHH Law should be disqualified because it is engaged in concurrent adverse representation. The crux of Plaintiff’s argument is that she is a shareholder in CiTeaUSA and each of the other defendant corporations, thus CHH Law’s representation of the defendant corporations is adverse to its representation of Zhang.

            Rules of Professional Conduct, rule 1.7, subdivision (a) and (b) provide:

(a) A lawyer shall not, without informed written consent1 from each client and compliance with paragraph (d), represent a client if the representation is directly adverse to another client in the same or a separate matter.

(b) 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.

            In support of her position, Plaintiff relies on Blue Water Sunset, LLC v. Markowitz (2011) 192 Cal.App.4th 477 (“Blue Water”). Blue Water is instructive but unhelpful to Plaintiff.

            “A complaining party who files a motion to disqualify is required to have standing. [Citation.] Some cases hold that the complaining party must prove a present or past attorney-client relationship with the attorney who is the target of the motion." (Blue Water, supra, 192 Cal.App.4th 477, 485.) “Other courts permit disqualification on a different basis, holding that standing is established so long as the lawyer owed a duty of confidentiality to the complaining party and breached it.” (Ibid.) “If an attorney simultaneously represents two clients with adverse interests, automatic disqualification is the rule in all but a few instances.” (Id. at p. 487.)

            In Blue Water, supra, the plaintiff and one of the defendants were each 50 percent members of several limited liability companies. (192 Cal.App.4th at p. 482.) Plaintiff filed a dissolution claim for the limited liability companies, and both the plaintiff and defendant separately filed derivative claims against the limited liability companies. (Id. at pp. 482-83.) The Court held that the counsel for the defendant had also represented the limited liability companies. (Id. at p. 487-88.) The Court also held a conflict of interest existed because the defendant had interests adverse to the limited liability companies because there was a dispute regarding the ownership rights to certain real property, and a ruling favoring the plaintiff would benefit the limited liability companies but harm the defendant. (Id. at p. 489.)

            Here, Plaintiff’s arguments that CHH Law should be disqualified are unavailing. First, Plaintiff has failed to establish that Zhang’s interests are adverse to the Defendant’s interests in the present case. Plaintiff essentially argues that because her interests are adverse to Zhang’s, her adverse interests should be imputed onto the defendant corporations. Plaintiff’s strained logic, however, fails to establish that CHH Law is representing two clients with adverse interests.

            Additionally, in Blue Water, supra, the fact that the plaintiff and the defendants were equal shareholders was not in dispute. (192 Cal.App.4th at p. 482.) This is an important distinction because in the present case, Plaintiff is merely alleging she is a shareholder. (Complaint ¶ 17.) Plaintiff’s allegations merely approximate her shares in the defendant corporations, with her estimates ranging from “at least 50%” to “79%” based on capital contribution. (Id. ¶¶ 17-18.) However, Plaintiff also alleges that no shares were issued by CiTeaUSA. (Id. ¶ 21.) Plaintiff’s arguments seeking to establish that CHH Law is representing clients with adverse interests are too speculative to establish an actual conflict of interest.

            Lastly, Plaintiff has failed to establish standing to bring this suit. In Blue Water, supra, the Court created “a limited exception to the rule that a complaining party lacks standing to seek disqualification of an attorney unless the party and attorney have some sort of attorney-client or fiduciary relationship. If an attorney simultaneously represents a limited liability company and a member with conflicting interests in a derivative action filed by the second and only other member, and if the limited liability company's consent to concurrent representation is required by California Rules of Professional Conduct, rule 3–310, the second member has vicarious standing to move to disqualify. (192 Cal.App.4th at p. 481, fn. omitted.)

            Here, neither Plaintiff nor Zhang is bringing a derivative action against CiTeaUSA or any of the other defendant corporations. Plaintiff also asserts no other means of establishing standing for her to file this motion.

CONCLUSION

            Plaintiff’s motion to disqualify CHH Law is DENIED.

            Moving Party to give notice.

Dated:   February 27, 2023                                         ___________________________________

                                                                                    Joel L. Lofton

                                                                                    Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court indicating their

intention to submit.  Parties intending to appear are strongly encouraged to appear remotely.  alhdeptx@lacourt.org