Judge: Kristin S. Escalante , Case: 21STCV15788, Date: 2023-04-27 Tentative Ruling
Case Number: 21STCV15788 Hearing Date: June 20, 2023 Dept: 24
NATURE OF PROCEEDINGS: Hearing on Motion to
Disqualify Counsel Plaintiff's Counsel Phillips Lex and Robin Phillips, Esq.
The
above-captioned matters are called for hearing.
The Court has
read the moving papers in the above-captioned motions and announces its
tentative rulings in open Court.
The Motion to
Disqualify Counsel Plaintiff's Counsel Phillips Lex and Robin Phillips, Esq.
ID: 991747092613 filed by Defendant Marc A. Smith II on 05/17/2023 is DENIED.
Defendant Marc
A. Smith II (“Defendant”) moves for an order to disqualify the law firm of Phillips
Lex and Robin Phillips (collectively “Counsel”) from representing Plaintiff
Roberto Orci (“Plaintiff”) in the present suit. (Notice of Mtn., at p. 2.)
Plaintiff’s
06/06/2023 objections to the declaration of David V. Luu (“Luu”) are overruled.
Defendant’s 06/09/2023
objections to the declaration or Robin Phillips (“Phillips”) are sustained as
to numbers 12, 13, and 16 and otherwise overruled.
Defendant moves
to disqualify Counsel based on issues arising from the production of bank
records from FirstBank.
On August 25,
2022, Plaintiff served subpoenas to obtain financial records on FirstBank. (Luu
Decl., ¶3.) On September 6, 2022, Defendant served written objections upon
FirstBank. (Luu Decl., ¶5, Ex. 2.) Because of the production date of September
30, 2022, Defendant filed a motion to quash on September 21, 2022, for hearing
on January 31, 2023. (Luu Decl., ¶7, Ex. 3.) Defendant also faxed a copy of the
motion to quash to FirstBank. (Luu Decl., ¶7, Ex. 3.) In the interim, Plaintiff
received the records from FirstBank and subsequently used them during
Defendant’s deposition on January 24, 2023. (Luu Decl., ¶8.)
Then on April
27, 2023, the court heard and granted Defendant’s motion to quash Plaintiff’s
subpoena for Production of Financial Records from FirstBank. (Minute
Order, Apr. 27, 2023.) Defendant then demanded
Counsel return the FirstBank records and destroy the copies, which Counsel
refused to do. (Luu Decl., ¶10., Ex. 6.)
Later, on May 20,
2023, the court ruled on Plaintiff’s motion to compel further responses to
request for production, set one. The requests for production at issue related
to financial documents which Plaintiff argued would support his fraud cause of
action. (Minute
Order, May 30, 2023.) In his opposition to compel
further responses regarding financial documents—which includes one request for
documents from FirstBank (RFP, No. 11.)—Defendant did not raise the court’s
prior ruling on the motion to quash, though he did raise similar legal arguments
as brought in the prior motion. (Opposition
to Motion to Compel Further, at pp. 10:05-11:27.)
Finding the privacy concerns mitigated and outweighed by Plaintiff’s interest
in proving his fraud cause of action, the court granted the motion to compel
further and ordered Defendant to provide further responses to the requests for
production. (Minute Order, May 30, 2023 at p. 4.) Defendant states that there
is currently a writ petition challenging the validity of the May 30, 2023,
Minute Order. (Reply, at p. 8:11-13.)
Since the
conduct at issue regarding the FirstBank records that is the subject of this
motion occurred prior to the court’s two rulings on the FirstBank records—one
of which is now subject to a writ of petition—the court considers the instant motion.
“Every court shall have the 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).)
The authority to disqualify an attorney stems from
the trial court's inherent power “[t]o 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; see also Zador Corp. v. Kwan (1995) 31
Cal.App.4th 1285, 1292-93.)
In considering a motion to
disqualify counsel, “[t]he paramount concern must be to preserve public trust
in the scrupulous administration of justice and the integrity of the bar. The
important right to counsel of one’s choice must yield to ethical considerations
that affect the fundamental principles of our judicial process.” (Kirk v. First
American Title Ins. Co.¿(2010) 183 Cal.App.4th 776, 792 [internal citation and
quotations omitted].) The trial court in a civil case has the power to order
disqualification when necessary for the furtherance of justice. (William H. Raley
Co. v. Superior Court¿(1983) 149 Cal.App.3d 1042, 1048 (Raley).) However,
exercise of that power “requires a cautious balancing of competing interests. The
court must weigh the combined effect of a party’s right to counsel of choice,
an attorney's interest in representing a client, the financial burden on a
client of replacing disqualified counsel and any tactical abuse underlying a
disqualification proceeding against the fundamental principle that the fair
resolution of disputes within our adversary system requires vigorous
representation of parties by independent counsel unencumbered by conflicts of
interest” (Ibid.)¿
“[W]henever a lawyer seeks to
hold another lawyer accountable for misuse of inadvertently received
confidential materials, the burden must rest on the complaining lawyer to
persuasively demonstrate inadvertence.” (State Comp. Ins. Fund v. WPS, Inc.
(1999) 70 Cal.App.4th 644, 657 (State Fund).)
Defendant
primarily relies on the State Fund case as the basis of the motion. Thus, the
issue for the purpose of this motion is whether State Fund compels the court to
disqualify Counsel.
In State Fund, defendant
received copies of cross-defendant State Fund’s internal documents containing
privileged attorney client communications. State Fund’s outside lawyers
inadvertently sent the documents. Defendant then gave some of the privileged
documents to an expert witness with whom he consulted and the expert witness
gave the documents to another lawyer who was adverse to State Fund. The
documents at issue there contained attorney-client communication/work product.
(Id. at p. 648.)The court of appeal found the documents were subject to
attorney client privilege, and the attorneys’ inadvertent disclosure did not
waive the attorney client privilege as the privilege was held by State Fund. (Id.
at p. 652-53.)
The court then
held “that the obligation of an attorney receiving privileged documents due to
the inadvertence of another is as follows: When a lawyer who receives materials
that obviously appear to be subject to an attorney-client privilege or
otherwise clearly appear to be confidential and privileged and where it is
reasonably apparent that the materials were provided or made available through
inadvertence, the lawyer receiving such materials should refrain from examining
the materials any more than is essential to ascertain if the materials are
privileged, and shall immediately notify the sender that he or she possesses
material that appears to be privileged.” (Id. at p. 656.)
The first
question before this court is whether State Fund applies only to situations
involving the attorney-client privilege or if it can apply to any privilege. Since
State Fund, the California Supreme Court has found that it applies broadly other
privileges. (See Rico v. Mitsubishi (2007) 42 Cal.4th 807, 817-818, fn. 9 [agreeing
“[t]he State Fund standard applies to documents that are plainly privileged and
confidential, regardless of whether they are privileged under the
attorney-client privilege, the work product privilege, or any other similar
doctrine that would preclude discovery based on the confidential nature of the
document.”].) Accordingly, State Fund applies broadly to situations where a
lawyer receives privileged documents, not just documents subject to the
attorney client privilege.
Plaintiff
argues State Fund does not apply because (i) the bank records were not
privileged, and (ii) the records were not received through inadvertence. The
court takes each argument in turn.
1. Privilege
As to the first
point, the FirstBank documents fall within the realm of the constitutional
right to privacy. Information that is not protected by a statutory privilege
may nonetheless be shielded from discovery, despite its relevance, where its
disclosure would invade an individual’s right of privacy. (Tien v. Superior
Court (2006) 139 Cal.App.4th 528.) California has codified a person’s
unalienable right to privacy in its Constitution. (See Cal. Const., art. I, §
1.) Information regarding a party’s personal financial affairs falls under a
protected zone of privacy under Article I, Section 1 of the California
Constitution. (See generally, Cobb v. Superior Court (1979) 99 Cal.App.3d 543,
549.) The nuances of whether Defendant’s financial documents would fall under
the scope of State Fund as “privileged” because they are protected by a right
to privacy has not been adequately briefed. Defendant has not cited case law showing
a privilege as used in State Fund is identical or tantamount to a privacy
interest.
State Fund discusses what to do when “a lawyer who receives materials that obviously appear to be
subject to an attorney-client privilege or otherwise clearly appear to be
confidential and privileged. . .” (State Fund, supra, 70 Cal. App. 4th at p.
648.) Here, as discussed, it is not clear the documents were privileged.
Nevertheless, there was a strong likelihood the materials might be or contain confidential
information as Defendant had filed a motion to quash the subpoena on the
grounds of privacy and the parties had already met and conferred about this
issue. The court finds the implicit argument that Defendant, upon receiving the
documents, did not know they were confidential unconvincing.
2. Inadvertence
As to the
second point, Defendant argues that how Counsel received the material is
irrelevant to this motion. (Reply, at p. 6:16-7:01) This is an incorrect
assertion. The manner in whichthe documents were produced is relevant; State
Fund confirms this. In State Fund, the court explicitly examined how the defendant
obtained the documents—through inadvertence—and then found that an attorneys’
inadvertent production did not waive the privilege. (State Fund, supra, 70 Cal.
App. 4th at p. 652-53.) Defendant’s argument that this detail is of “little
significance” to whether an ethical breach occurred is incorrect. Defendant
cites no case law supporting its position in this regard; State Fund does not
support such a rule.
Here, FirstBank
either voluntarily or inadvertently produced the documents. Defendant argues
strenuously that it served the motion to quash and the other affiliated documents
on FirstBank via fax and that Plaintiff’s arguments to the country are improper.
(Reply, 6:16-27) Assuming Defendant served FirstBank with the motion to quash,
this fact supports a finding that a production by FirstBank was then voluntary.
Defendant provides no evidence to support the position that FirstBank inadvertently
produced the documents. Moreover, based on the information before the court, it
appears unlikely that Plaintiff upon receiving the documents would have known
FirstBank inadvertently produced them. Thus, there was no inadvertent
production triggering Plaintiff to act according to the procedures set forth in
State Fund. For these reasons, the court does not find that the State Fund rule
applies to the facts before it or that there are sufficient grounds for
disqualification.
The court is
sympathetic to Defendant’s arguments of harm and finds elements of gamesmanship
by Plaintiff in the facts before the court. Nevertheless, disqualification is
neither warranted nor appropriate.
Moving party is directed to give notice.