Judge: Martha K. Gooding, Case: 2021-01238852, Date: 2022-09-19 Tentative Ruling
Motion to Disqualify Attorney of Record
The Motion by Plaintiff Nowarta Biopharma, Inc. (“Plaintiff”) to disqualify Madison Law, APC from representing Defendant Merchant Star International General Trading, LLC (“Defendant”) in this litigation is granted.
Both Plaintiff’s and Defendant’s requests for judicial notice of court filings are granted to the following extent: the court takes judicial notice of the filed documents but not of the truth of the matters asserted in them.
“A trial court's authority to disqualify an attorney derives from the power inherent in every court ‘[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.’” (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145 (quoting Code Civ. Proc., § 128, subd. (a)(5).)
“Where the potential conflict is one that arises from the successive representation of clients with potentially adverse interests, the courts have recognized that the chief fiduciary value jeopardized is that of client confidentiality.” (Flatt v. Superior Court (1994) 9 Cal.4th 275, 283.) “Thus, where a former client seeks to have a previous attorney disqualified from serving as counsel to a successive client in litigation adverse to the interests of the first client, the governing test requires that the client demonstrate a ‘substantial relationship’ between the subjects of the antecedent and current representations.” (Id.)
“Where the requisite substantial relationship between the subjects of the prior and the current representations can be demonstrated, access to confidential information by the attorney in the course of the first representation (relevant, by definition, to the second representation) is presumed and disqualification of the attorney's representation of the second client is mandatory; indeed, the disqualification extends vicariously to the entire firm.” (Id.)
California Rules of Professional Conduct, Rule 1.9 provides in part that a “lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed written consent.”
It is not disputed that Madison Law owes Nowarta the duty of loyalty as a former client. It also is not disputed that there exists a substantial relationship between the subjects of the prior and the current representations. Madison Law was counsel to Nowarta during the formation of the company and the time that the shares were distributed. Now, Madison Law is representing Defendant Merchant Star, an entity with interests adverse to Nowarta, in a dispute regarding the purchase by Merchant Star of those share.
In opposition, Defendant tries to reframe the Complaint, arguing that the targets of the litigation are actually Parvaneh and Madison Law, not Merchant Star. Defendant contends that whoever represents it makes no difference (aside from delaying the case and increasing the costs) because new counsel would be privy to identical knowledge of any purported confidences of Nowarta.
Defendant also contends the basic purpose of disqualification in successive representation situations is to prevent the disclosure of client confidences and disqualification here would not prevent the disclosure of client confidences. (See e.g., Carlson, Collins, Gordon & Bold v. Banducci (1967) 257 Cal.App.2d 212, 227-228 ["Accordingly, when, in litigation between an attorney and his client, an attorney's integrity, good faith, authority, or performance of his duties is questioned, the attorney is permitted to meet this issue with testimony as to communications between himself and his client"]; Arden v. State Bar (1959) 52 Cal.2d 310.)
Plaintiff’s Complaint does not name Madison Law, Parvaneh or any other associated individuals as Defendants. Only Merchant Star is a party to this action. Attached to the Complaint as Ex. 5 are the stock certificates showing the 250k shares of Nowarta stock that were provided to Merchant Star. Stock was not issued to Parvaneh or Madison Law according to the Complaint. The agreement that was allegedly breached was between Nowarta and Merchant Star. Because this is not a direct malpractice or fee action, Madison Law is not permitted under the law to reveal Nowarta’s confidential information in the defense of this matter. (See Styles v. Mumbert (2008) 164 Cal.App.4th 1163, 1168.) “The preservation of confidentiality contributes to the trust that is the hallmark of the client-lawyer relationship. (Rule 3–100, Discussion § 1.) [Counsel] may not reveal or use confidential information, gained through his prior representation … because it would be contrary to public policy and would undermine the very nature of the attorney client relationship.” (Id.)
Because Madison Law, through Parvaneh, acted as Nowarta’s general counsel for the duration of the time (2018 to July 2021) in which Nowarta alleges wrongful conduct on behalf of Merchant Star, it is not proper (absent a conflict waiver, which was not given) for Madison Law to now represent Merchant Star in this case.
Accordingly, the motion to disqualify Madison Law is GRANTED.
Plaintiff is ordered to give notice.