Judge Lee W. Tsao, Case 19NWCV00375 2023-03-28 Tentative Ruling

Judge: Lee W. Tsao, Case: 19NWCV00375, Date: 2023-03-28 Tentative Ruling

Case Number: 19NWCV00375 Hearing Date: March 28, 2023 Dept: C

AMERICOLOR, LLC v. HWANG

CASE NO.: 19NWCV00375

HEARING: 3/28/23 @ 1:30 PM

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TENTATIVE RULING

Defendant Dae Shin USA, Inc.’s motion to disqualify Steven C. Kim and Law Offices of Steven C. Kim & Associates is GRANTED.

Moving Party to give NOTICE.

Defendant Dae Shin USA, Inc. moves to disqualify Attorney Steven C. Kim from representing Plaintiff Americolor, LLC and Cross-Defendants Paul Om, Lisa Om, OMC Industries, and Protex Supply Company pursuant to B&P Code § 6068(e).

A member shall not, without the informed written consent of each client: (1) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or (2) Accept or continue representation of more than one client in a matter in which the interests of the clients actually conflict; or (3) Represent a client in a matter and at the same time in a separate matter accept as a client a person or entity whose interest in the first matter is adverse to the client in the first matter. (Rules of Prof. Conduct 3-310(C).) A member shall not, 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 of Prof. Conduct 3-310(E).) “It is the duty of an attorney to do all of the following… To maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client. (B&P Code § 6068(e).)

It is beyond dispute a court may disqualify an attorney from representing a client with interests adverse to those of a former client. Disqualification in cases of successive representation is based on the prohibition against employment adverse to a former client where, by reason of the representation of the former client, the attorney has obtained confidential information material to the employment. Where such a conflict of interest exists, and the former client has not consented to the current representation, disqualification follows as a matter of course. The court does not engage in a "balancing of equities" between the former and current clients. The rights and interests of the former client will prevail…. The conclusive presumption of knowledge of confidential information has been justified as a rule of necessity, for it is not within the power of the former client to prove what is in the mind of the attorney. Nor should the attorney have to engage in a subtle evaluation of the extent to which he acquired relevant information in the first representation and of the actual use of that knowledge and information in the subsequent representation…. it is well settled actual possession of confidential information need not be proved in order to disqualify the former attorney. It is enough to show a "substantial relationship" between the former and current representation… The court should focus on the similarities between the two factual situations, the legal questions posed, and the nature and extent of the attorney's involvement with the cases. As part of its review, the court should examine the time spent by the attorney on the earlier cases, the type of work performed, and the attorney's possible exposure to formulation of ¶policy or strategy. (H. F. Ahmanson & Co. v. Salomon Bros. (1991) 229 Cal. App. 3d 1445, 1451.)

In 2003, Attorney Kim represented Defendant Dae Shin in a prior action, Dae Shin USA v. Fantasy Activewear, Inc. (Case No. 03CC09878). When Kim represented Dae Shin in the 2003 Action, Dae Shin, through Jae Weon Lee, disclosed to Kim confidential information which included the ownership structure Dae Shin, its parent company, Jae Weon Lee’s personal interest in Dae Shin, Dae Shin’s business operations, and accounting policies and procedures. (JWLee Supp. Dec. ¶¶ 9-10.) Defendant never consented to Attorney Kim’s representation of Americolor and the Americolor Parties in the pending matter. (JWLee Decl. ¶ 9; JWLee Suppl. Decl., ¶ 14.)

Regarding the Ahmanson factors, Attorney Kim contends that the prior action involved a narrow dispute over chargebacks and credits claimed by Defendant Fantasy Activewear. (Kim Decl., ¶ 8.) That case, like the present one, is a collections matter involving Dae Shin’s accounting policies and procedures. Attorney Kim’s involvement in the prior case was substantial. According to the Register of Actions, he filed the complaint and a demurrer to the Cross-Complaint. He designated Dae Shin’s expert witness, the former controller of Dae Shin with knowledge in the field of bookkeeping, auditing, compilation of data, and invoices. Attorney Kim also designated Jaeweon Lee, Dae Shin’s CEO, as the PMK and participated in at least one deposition. There is a substantial relationship between the two cases as to the claims against Dae Shin. The law conclusively presumes Kim’s receipt of confidential information during such representation. (Jessen v. Hartford Casualty Insurance Company (2003) 111 Cal.App.4th 698, 709-13.) The court finds the instant case is “linked in some rational manner” to the 2003 case wherein Kim acted as Plaintiff’s counsel for Dae Shin. (See Jessen, supra, 111 Cal.App.4th at 709-13.) Thus, it is presumed that Kim obtained knowledge of Dae Shin’s litigation strategy, settlement strategy and approach in dealing with cases involving its corporate practices.

Attorney Kim contends any confidential information acquired in the 2003 action has long since been forgotten. (Kim Decl., ¶ 33.) However, “[t]he conclusive presumption of knowledge of confidential information has been justified as a rule of necessity, for it is not within the power of the former client to prove what is in the mind of the attorney.” (H. F. Ahmanson & Co. v. Salomon Bros. (1991) 229 Cal. App. 3d 1445, 1451.)

Attorney Kim argues that the motion to disqualify is made in bad faith. He points out that the ex parte motion to disqualify him was made almost three and one-half years into the case and two days before trial. Attorney Kim argues that Jaeweon Lee should have known of his involvement since at least January 15, 2021, the date of Jae Won Lee’s deposition. As Americolor points out, however, Plaintiff was represented by Gabriel Colorodo at the deposition, not Attorney Kim. (Gi Nam Lee Suppl. Decl., ¶ 3, Ex. H; JWLee Suppl. Decl., ¶ 5-6.) Therefore, knowledge of Attorney Kim’s involvement in this matter cannot be imputed to Jaeweon Lee by virtue of the January 15, 2021 deposition.

Attorney Kim also contends that he should not be disqualified from representing Americolor against the other defendants. The allegations against Dae Shin, however, are intertwined with allegations against the other defendants. “Americolor contends that because Kay Hwang and the owner of Dae Shin USA were long-time friends or business acquaintances, Dae Shin USA must have known or reasonably suspected that Kay Hwang was engaged in acts of fraud against Americolor which involved diverting payments from Americolor’s customers to himself.” (Kim Decl. ¶ 15; Case No. 19NWCV00375 Complaint, ¶¶ 14, 21-26; Case No. 19NWCV00983 Complaint, ¶ 20-25.) Given the nature of these allegations, it would be impractical and a waste judicial resources to bifurcate the claims against Dae Shin from the other defendants because the same evidence would be produced in both proceedings.

The court recognizes that disqualifying Attorney Kim will result in a hardship to Plaintiff, who must now obtain new counsel after three years of litigation. Clearly, Plaintiff would not be in this position had Attorney Kim complied with his ethical duties. (Rules of Prof. Conduct 3-310(C) and (E).) It is equally clear to this court that Attorney Kim’s ethical breach should not come at the expense of Defendants or the integrity of these judicial proceedings.

Accordingly, the motion is GRANTED. Attorney Kim and Law Offices of Steven C. Kim & Associates are disqualified from further representing Plaintiff Americolor, LLC in Case Nos. 19NWCV00375 and 19NWCV00983.