Judge Michael Small, Case Number: 20STCV29691, Date: 2023-10-30 Tentative Ruling

Inform the clerk if you submit on the tentative ruling. If moving and opposing parties submit, no appearance is necessary.

Plaintiffs Danny and Shirley Suleminian have moved to disqualify the law firm of McMurry Henriks, LLP ("the Firm") from concurrently representing the corporate Defendant, International Vintage Watch Company ("IVWC"), and the individual Defendants, Jack Abramov and Ronen Cohen, who are majority shareholders, directors, and officers of IVWC. Danny Suleminian is a minority shareholder of IVWC. The Court is denying the Suleminians' motion to disqualify the Firm.

A party seeking to disqualify counsel for another party must have standing to do so. The moving party has standing if he or she is or was represented by counsel for the non-moving party. That situation does not exist here. The Firm is not representing, and has not, represented the Suleminians. Additionally, a party bringing a derivative action on behalf of a corporation against corporate insiders has standing to seek disqualification of counsel who is representing both the corporation and the insiders. That situation does not exist here either. Indeed, the Suleminians vociferously insist that they are not suing IVWC derivatively.

The Suleminians contend that three precedents support their motion to disqualify the Firm. But in two of them, Metro-Golden Mayer, Inc. v. Tracinda Corp. (1995) 36 Cal.App.4th 1832, and M'Guinnes v. Johnson (2015), 243 Cal.App.4^th 602, the law firms that were the targets of the disqualification motions in question had ongoing relationships in which they represented the moving parties. Again, there is no such relationship here between there Suleminians and the Firm.

In the third case, Gong v. RFG Oil., Inc. (2008) 166 Cal.App.4th 209, the moving party sued a corporation and its majority shareholder for, inter alia, dissolution of the corporation. The plaintiff sought to disqualify a law firm from representing both defendants on the ground that the defendants' interest conflicted. The Court of Appeal in Gong reversed and held that the plaintiff's disqualification motion should have been granted because the plaintiff alleged that the majority shareholder had run the corporation to further his own interests thereby damaging the corporation, and because the cause of action for dissolution threatened the very existence of the corporation. Thus, the interests of the corporation and the shareholder were said to conflict. (Id. at p. 216).

Gong does not govern here. That is the teaching of Coldren v. Hart, King & Coldren, Inc. (2015), 239 Cal.App.4^th 237. In that case, the Court of Appeal stated that "Gong should be read for the narrow proposition that where a plaintiff's allegations are essentially derivative in nature, the failure to label them as such may still prohibit dual representation of the corporation and the defendant shareholder." (Id. at p. 251.) The Court of Appeal construed the dissolution claim in Gong as essentially derivative in nature even though it was not labeled as such. In Coldren, the plaintiff's claims were not derivative in nature. And, as indicated above, the Suleminians maintain that their case against IVWC, even though it contains a cause of action for dissolution of the corporation, is not a derivative suit.