Judge Ronald F. Frank, Case Number: 23TRCV03809, Date: 2024-07-31 Tentative Ruling

Judge: Ronald F. Frank, Case: 23TRCV03809, Date: 2024-07-31 Tentative Ruling

Case Number: 23TRCV03809 Hearing Date: July 31, 2024 Dept: 8

Tentative Ruling

HEARING DATE: July 31, 2024

CASE NUMBER: 23TRCV03809

CASE NAME: Ellen Goodwill v. Costco Wholesale Corporation, et al.

MOVING PARTY: Defendant, Costco Wholesale Corporation

RESPONDING PARTY: Plaintiff, Ellen Goodwill

TRIAL DATE: Not Set.

MOTION: Motion to Disqualify Counsel

Tentative Ruling: ARGUE. The Court tentatively finds that Werbin himself would be disqualified from representing a plaintiff in a bodily injury suit against Costco, but that the DTLA Law Group’s implementation of the ethical wall and software firewall may save the firm from vicarious disqualification on the facts presented. Issues and questions for oral argument are noted after the discussion of the law and factual record

I. BACKGROUND

A. Factual

On November 15, 2023, Plaintiff, Ellen Goodwill (“Plaintiff”) filed a complaint against Defendants, Costco Wholesale Corporation, DOE 1 (Store Manager), and DOES 2 through 50. The complaint alleges causes of action for: (1) General Negligence; and (2) Premises Liability. The complaint is based on Plaintiff’s allegation that on November 16, 2021, Plaintiff was on the premises of Costco Wholesale Corporation, located at or near 2640 Lomita Blvd., Torrance, CA 90505. Plaintiff contends that as Plaintiff was walking within the subject premises, she was struck by a metal cart and/or similar object being pushed and operated by Defendants’ employees, thereby causing Plaintiff to sustain the serious injuries and damages.

Defendant, Costco Wholesale Corporation (“Costco”) now files a Motion to Disqualify Plaintiff’s attorney of record, DTLA L.A. Law Group, predicated on the prior representation of Costco by Mr. Werben, a lawyer who has since joined the Plaintiff’s law firm but who is not himself working on the prosecution of this lawsuit.

B. Procedural

On July 3, 2024, Defendant Costco filed a Motion to Disqualify Plaintiff’s Attorney of Record, DTLA L.A. Law Group. On July 24, 2024, Plaintiff filed an opposition brief. On July 24, 2024, Costco filed a reply brief. On July 30, 2024, both sides waived the financial conflict of interest previously disclosed by Judge Frank, who thereafter reviewed the merits of the motion and prepared this Tentative Ruling.

II. ANALYSIS

A. Legal Standard

Code of Civil Procedure section 128, subdivision (a)(5) authorizes the 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.” This statutory provision derives from a trial court’s inherent authority to control the proceedings before it to ensure the ethical conduct of the lawyers involved. (See In re Charlisse C. (2008) 45 Cal.4th 145, 159.) This authority necessarily includes the power to disqualify an attorney and her or his entire law firm from the representation in the event of a conflict of interest or other ethical concerns. (Id.; Metro-Goldwyn Mayer, Inc. v. Tracinda Corp. (1995) 36 Cal.App.4th 1832, 1837–38.) The Court of Appeal stated:

The issue of disqualification ultimately involves a conflict between the clients’ right to counsel of their choice and the need to maintain ethical standards of professional responsibility. The paramount concern, though, must be the preservation of public trust in the scrupulous administration of justice and the integrity of the bar. The recognized and important right to counsel of one’s choosing must yield to considerations of ethics that run to the very integrity of our judicial process.

(Id. at p. 1838, citation marks omitted.)

“Whether an attorney should be disqualified is a matter addressed to the sound discretion of the trial court.” (Henriksen v. Great Am. Sav. & Loan (1992) 11 Cal.App.4th 109, 113.) “In exercising that discretion, the trial court is required to make a reasoned judgment which complies with the legal principles and policies applicable to the issue at hand.” (Ibid.) Conflicts of interest that give rise to disqualification motions commonly arise in two factual contexts: (1) cases of successive representation, where an attorney is claimed to represent or to be a member of a law firm that represents a client with interests potentially adverse to a former client of the attorney; and (2) cases of simultaneous representation, where an attorney seeks to represent in a single action multiple parties with potentially adverse interests. (In re Charlisse C., supra, 45 Cal.4th at p. 159.) This motion presents a claim of successive representation.

The California Rules of Professional Conduct have a specific rule bearing on successive representation, which is quoted below. (See Cal. Rules of Prof. Conduct, rule 1.9.) “When disqualification is sought because of an attorney's successive representation of clients with adverse interests,” the trial court balances the current clients’ right to the counsel of their choosing against the former client's right to ensure that his confidential information will not be divulged or used by his former counsel. (Capra v. Capra (2020) 58 Cal.App.5th 1072, 1093.)

The rule of “vicarious disqualification” extends the application of the consequences of violating these ethical prohibitions from the individual lawyer to her or his entire law firm. (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1153.) Thus, “[w]hen a conflict of interest requires an attorney's disqualification from a matter, the disqualification normally extends vicariously to the attorney's entire law firm. [Citation.]” (Id. at p. 1139.) Vicarious disqualification is based upon the doctrine of imputed knowledge, i.e., that the knowledge of one attorney in a law firm is the knowledge of all attorneys in the firm. (Adams v. Aerojet–General Corp. (2001) 86 Cal.App.4th 1324, 1333.) By “recogniz[ing] the everyday reality that attorneys, working together and practicing law in a professional association, share each other's, and their clients', confidential information” (SpeeDee Oil, supra, 20 Cal.4th at pp. 1153–1154), the vicarious disqualification rule “safeguards clients' legitimate expectations that their attorneys will protect client confidences. [Citation.]” (Id. at p. 1139; in re Charlisse C., supra, 45 Cal.4^th at p. 161.)

B. Discussion

Defendant Costco argues that Attorney Anthony Werbin (“Werbin”) is engaged in successive representation, or that his current firm has run afoul of that rule, because Werbin is now an associate at DTLA Law Group – the same firm representing Plaintiff as counsel of record in this matter. Costco asserts that prior to joining DTLA Law Group approximately four years ago, Werbin was counsel for Costco on twenty-one (21) cases from July 5, 2017 to January 16, 2020, while working for Manning & Kass, Ellrod, Ramirez, Trester LLP. Costco also asserts that when Werbin represented Costco, he represented them in matters relating to personal injury suits substantially similar to the claims made by Plaintiff in this case. Further, Costco argues that in connection with his work on the nearly two dozen prior cases representing Costco, Werbin was privy to Costco’s pre-litigation strategies, case handling procedures, attorney-client communications, confidential and proprietary information concerning Costco’s operations, confidential client documentation, policies and procedures, and trade secrets. Moreover, Costco also asserts that in March 2019, Werbin was an active participant in a day-long California Defense Counsel Conference that Costco held for its panel of defense lawyers, a conference where Costco and its outside counsel including Mr. Werbin discussed tools and strategies among its defense counsel.

Defendant Costco has brought this motion on the grounds that while Werbin is not himself representing Plaintiff in this matter against Werbin’s former client Costco, his conflict is imputed to DTLA Law Group and cannot be remedied by the imposition of an ethical wall. Further, Costco asserts that given Werbin’s knowledge of Costco’s proprietary information and litigation strategy, Costco contends they are reasonably concerned that, even if inadvertently, such information could be disclosed to DTLA Law Group. Because of this, Costco contends that the importance of safeguarding a client’s confidential information and fostering candid communication between attorneys and clients, disqualification of DTLA Law Group is essential.

i. Substantial Relationship Test

In successive representation cases, where the primary ethical value at stake is client confidentiality, the correct legal standard generally requires disqualification of the attorney if “the [former] client demonstrate[s] a “substantial relationship” between the subjects of the antecedent and current representations.’ [Citation.]” (In re Charlisse C., supra, 45 Cal.4^th at p. 161 [emphasis in original]; Flatt v. Superior Court (1994) 9 Cal.4th 275, 283.) “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.” (Flatt, supra.) “However … in the proper circumstances, the presumption is a rebuttable one, which can be refuted by evidence that ethical screening will effectively prevent the sharing of confidences in a particular case.” (California Self-Insurers’ Security Fund v. Superior Court (2018) 19 Cal.App.5th 1065, 1076.)

In applying the “substantial relationship” test, the trial court considers three factors: “(1) factual similarities between the two representations, (2) similarities in legal issues, and (3) the nature and extent of the attorney's involvement with the case and whether he was in a position to learn of the client's policy or strategy.” (Adams v. Aerojet-General Corp. (2001) 86 Cal.App.4th 1324, 1332.) “The subject of a current representation is substantially related to the subject of a prior representation only if the issues are sufficiently similar to support a reasonable inference that the attorney in the course of the prior representation was likely to have obtained confidential information material to the current representation.” (See Fremont Indemnity Co. v. Fremont General Corp. (2006) 143 Cal.App.4th 50, 67 [court concluded that disqualification “based on the prior representation of a party in a substantially related matter is not warranted”].)

California Rules of Professional Conduct, rule 1.9 provides in part (the asterisks represent terms with definitions in the Rules):

(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person1 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.*

(b) A lawyer shall not knowingly* represent a person* in the same or a substantially related matter in which a firm* with which the lawyer formerly was associated had previously represented a client

(1) whose interests are materially adverse to that person;* and

(2) about whom the lawyer had acquired information protected by Business and Professions Code section 6068, subdivision (e) and rules 1.6 and 1.9(c) that is material to the matter;

unless the former client gives informed written consent.*

(c) A lawyer who has formerly represented a client in a matter or whose present or former firm* has formerly represented a client in a matter shall not thereafter:

(1) use information protected by Business and Professions Code section 6068, subdivision (e) and rule 1.6 acquired by virtue of the representation of the former client to the disadvantage of the former client except as these rules or the State Bar Act would permit with respect to a current client, or when the information has become generally known;* or

(2) reveal information protected by Business and Professions Code section 6068, subdivision (e) and rule 1.6 acquired by virtue of the representation of the former client except as these rules or the State Bar Act permit with respect to a current client.

The law states that “[d]isqualification 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.’” (See H.F. Ahmanson & Company v. Salomon Brothers, Inc. (1991) 229 Cal.App.3d 1445, 1451.) The attorney's possession of confidential information “will be presumed only when ‘a substantial relationship has been shown to exist between the former representation and the current representation, and when it appears by virtue of the nature of the former representation or the relationship of the attorney to his former client confidential information material to the current dispute would normally have been imparted to the attorney.’” (Id. at 1452.)

Here, Costco’s moving papers argue that it satisfies the two-prong test in determining whether a court must conclusively presume that an attorney has knowledge of confidential information about a prior client such that disqualification is mandatory because: (1) there is a substantial relationship between Werbin’s former representation and the current representation; and (2) that it must appear that “by virtue of the nature of the former representation or the relationship of the attorney to his former client” that “confidential information material to the current dispute would normally have been imparted to the attorney.” Costco notes that including the fact that Werbin was counsel for Costco on 21 different cases between July 5, 2017 and January 16, 2020, he was also the lead attorney who handled many of Defendant’s cases – including serving as one of two trial counsels in the case of Guo Jun Chen v. Costco (Case No. BC654699). A review of the complaint filed in Guo Jun Chen v. Costco reveals that that case, along with other complaints attached to the moving papers of this motion, involved a General Negligence and Premises Liability complaint involving allegations of “dangerous conditions” and typically involved plaintiff’s complaining of slipping on the floors of the subject premises.

In opposition, Plaintiff argues that Defendant Costco fails to demonstrate that cases such as Guo Jun Chen v. Costco are substantially related and/or similar to the case at bar other than it being a personal injury case. Plaintiff also attaches his own declaration to the motion, where he asserts that he was never provided with any confidential or proprietary information by Defendant during his employment at his former firm, and that any information he has regarding defense of personal injury/premises liability claims derives from his own personal knowledge and experience gained during his eight years as an insurance defense attorney both before and while in the employ of his former firm, and not from the handling of claims for Costco. (Werbin Decl., ¶¶ 9-10.) The Court does not accept this assertion without reservation, but rather weighs these self-interested statements in the overall context of credibility determinations as a finder of fact on this motion. Nor does the Court blindly accept Costco’s assertion that Guo Jun Chen is substantially related to the case at bar. The allegations here are not of a slip and fall on the floor, but rather an injury that occurred from a Costco employee allegedly pushing a cart into a standing plaintiff who was injured in an upright position rather than by a fall to a prone position.

However, in the Court’s view, a substantial relationship between this case and Werbin’s prior representations must be viewed in the broader sense. From the Court’s extensive experience as a lawyer, the Court is aware that client’s strategy in defending bodily injury cases generally does not materially change with slight variations in the fact patterns presented, i.e., a slip and fall versus a trip and fall versus a falling item or parcel from a shelf versus being struck by a cart or other equipment. This Court practiced law for 33 years before being appointed to the bench, including the representation of several clients who were sued for bodily injury claims in scores of cases, and including both self-insured and insured clients.

It is with that background and personal experience that the Court approaches Costco’s claim that relevant confidential information was actually provided from Costco to Werbin. (See Jessen v. Hartford Cas. Ins. Co. (2003) 111 Cal.App.4th 698, 711 [“[T]he court must assess whether the attorney was positioned during the first representation so as to make it likely the attorney acquired confidential information relevant to the current representation, given the similarities or lack of similarities between the two.”]; see also Adams, 86 Cal.App.4th at 1332.) “Possession of confidential information will not be presumed from the mere fact counsel once represented the opposing party.” (Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 301 [footnote omitted].) An attorney, generally, may act adversely to a former client in an unrelated matter, and without the use of confidential information acquired while representing the former client, (Wutchumna Water Co. v. Bailey (1932) 216 Cal. 564, 573-74), and thus nothing prohibits an attorney “from accepting employment adverse to a former client if the matter has no relationship to confidential information acquired by reason of or in the course of employment by the former client.” (Goldstein v. Lees (1975) 46 Cal.App.3d 614, 619.) To create a conflict requiring disqualification, “the information acquired during the first representation [must] be ‘material’ to the second; that is, it must be found to be directly at issue in, or have some critical importance to, the second representation.” (Farris v. Fireman's Fund Ins. Co. (2004) 119 Cal.App.4th 671, 680.)

Costco asserts that Werbin did in fact learn confidential information pertaining to it during his representations. The declaration of Leigh An Ruijters asserts that “[w]hile serving as Costco's attorney, Werbin handled virtually every aspect of Costco's file, which included, but was but not limited to, developing strategy, communicating with Costco employees as well as its Claims Administrator, Gallagher Bassett, reviewing confidential and privileged documents, preparing responses to discovery, preparing witnesses to testify at depositions and defending numerous depositions of Costco employees, and developing litigation strategy.” (Ruijters Decl., ¶ 5.) She further asserts that “[i]n connection with his work for Costco, Werbin was privy to Costco's pre-litigation strategies, case handling procedures, attorney-client communications, confidential and proprietary information concerning Costco's operations, confidential client documentation, policies and procedures, and trade secrets. (Ruijters Decl., ¶ 6.)

In Plaintiff’s opposition, she argues that Costco’s moving papers do not submit any evidence demonstrating that Werbin is privy to any confidential information involving the store at issue in this matter that Werbin gained from his prior representation of Defendant. Plaintiff further asserts that billing 1,195 hours over a three-year period and attendance at a conference are not sufficient to justify disqualification in this case. The Court is not persuaded that Costco’s defense of bodily injury cases arising from customer activity or shopping in a Costco store must necessarily vary from store location to store location, nor that a lawyer to expended over a thousand hours in the representation of a now adverse client could not have learned considerable confidential and proprietary information about the Costco “playbook” and more. The Court is mindful of published decisions that recognized an attorney’s “exposure to playbook information in prior … cases” is insufficient to disqualify the attorney without any showing of the information’s materiality to current representation. (See Khain v. Ford Motor Co. (2013) 215 Cal.App.4th 916, 922.) “To create a conflict requiring disqualification, … the information acquired during the first representation [must] be “material” to the second; that is, it must be found to be directly at issue in, or have some critical importance to, the second representation.” (Farris, 119 Cal.App.4th at 680.) “Thus, for example, the attorney's acquisition during the first representation of general information about the first client's ‘overall structure and practices’ would not of itself require disqualification unless it were found to be ‘material’—i.e., directly in issue or of critical importance—in the second representation. [Citation] The same is true about information such as the first client's ‘litigation philosophy’ or ‘key decision makers.’” (Ibid.) Consequently, general playbook information can warrant disqualification if the information is material to the successive representation. While the Court is mindful that majority of the trial-level judges to hear similar motions have ruled against Costco on a DQ motion, this Court may have more of a background than the other bench officers on the materiality of case-handling strategies and tools and procedures from this Court’s own trial lawyer experience before being appointed to the Bench.

This Court finds that Costco’s evidence illustrates that the information privy to Werbin during is former representation is material to the current case. Werbin’s knowledge of Defendant’s “litigation strategies, case handling procedures, attorney-client communications, confidential and proprietary information concerning Costco' s operations, confidential client documentation, policies and procedures, and trade secrets” are confidential and material to this and other bodily injury cases filed against Costco in Southern California arising from premises liability claims in a Costco store or parking lot. (See Cal. Rules of Professional Conduct, Rule 1.9 comment 1 [“The lawyer may not (i) do anything that will injuriously affect the former client in any matter in which the lawyer represented the former client, or (ii) at any time use against the former client knowledge or information acquired by virtue of the previous relationship.”].) As such, the Court makes the factual finding on the record presented here that Werbin himself would be disqualified from representing Plaintiff in this matter. However, because Werbin is not the attorney named in this matter, and because his current lawfirm has presented proof that it erected an ethical wall specific to Costco litigation and Werbin, this Court must determine whether Werbin’s conflict is imputed to DTLA Law Group and thus whether the vicarious disqualification remedy is required or if DTLA Law Group has rebutted the presumption of vicarious presumed knowledge.

Although disqualification is generally extended vicariously to the entire law firm, disqualification is not absolute and may be rebutted if the evidence shows that an ethical wall will prevent the sharing of confidential information. (See Kirk v. First American Title Ins. Co. (2010) 183 Cal.App.4th 776, 809-10; see also Goldberg v. Warner/Chappell Music, Inc. (2005) 125 Cal.App.4th 752, 755 [“an attorney's presumed possession of confidential information concerning a former client should not automatically cause the attorney's former firm to be vicariously disqualified where the evidence establishes that no one other than the departed attorney had any dealings with the client or obtained confidential information…”].) “Once the moving party in a motion for disqualification has established that an attorney is tainted with confidential information, a rebuttable presumption arises that the attorney shared that information with the attorney's law firm. The burden then shifts to the challenged law firm to establish ‘that the practical effect of formal screening has been achieved.’ ” (Kirk, 183 Cal.App.4th at 809-10, footnote omitted.)

The specific elements of an effective screen will vary from case to case, although two elements are necessary: First, the screen must be timely imposed; a firm must impose screening measures when the conflict first arises. It is not sufficient to wait until the trial court imposes screening measures as part of its order on the disqualification motion. (Klein v. Superior Court, supra, 198 Cal.App.3d at pp. 906, 913–914, 244 Cal.Rptr. 226; see also Hitachi, Ltd. v. Tatung Co. (N.D.Cal.2006) 419 F.Supp.2d 1158, 1165 [“The time to have moved the matter [to another office] would have been when the ethical conflict was discovered, not after losing a motion to disqualify.”].) Second, it is not sufficient to simply produce declarations stating that confidential information was not conveyed or that the disqualified attorney did not work on the case; an effective wall involves the imposition of preventive measures to guarantee that information will not be conveyed. (SpeeDee Oil, supra, 20 Cal.4th at pp. 1142, 1151–1152 & fn. 5 [parallel citations omitted].) “To avoid inadvertent disclosures and establish an evidentiary record, a memorandum should be circulated warning the legal staff to isolate the [tainted] individual from communications on the matter and to prevent access to the relevant files.”

“The typical elements of an ethical wall are: [1] physical, geographic, and departmental separation of attorneys; [2] prohibitions against and sanctions for discussing confidential matters; [3] established rules and procedures preventing access to confidential information and files; [4] procedures preventing a disqualified attorney from sharing in the profits from the representation; and [5] continuing education in professional responsibility.” …

(Kirk, supra, 183 Cal.App.3d at pp. 810-11, footnote omitted.)

In the case at bar, this Court finds that the confidential information Werbin obtained or may have obtained from his former representation of Costco is material to this litigation. Plaintiff’s opposition attaches the declaration of Lusine Ghzaryan, Esq., and Werbin who argue that a physical and departmental separation of attorneys at DTLA Law Group has been implemented such that Werbin was prohibited both physically (by way of their system) and procedurally (by way of strict company protocol) from accessing any cases involving Defendant. Plaintiff also contends that DTLA Law Group prohibits discussions of such confidential matters and all attorneys are aware of the company policy to this effect, as well as (unspecified) disciplinary action if compliance is breached. DTLA Law Group confirms that its organization of teams as well as the firewall software clearly establish rules and procedures preventing access to any of Defendant’s files. Ghazaryan’s declaration indicates that in December of 2021, DTLA implemented a change to its software and file management system, prohibiting Werbin from accessing any of the cases with Defendant as a party and this ethical wall was instituted approximately two (2) years prior to the filing of the lawsuit in this matter. (Ghazaryan’s Decl., ¶ 6.) Werbin’s declaration admits that he did handle a case while at DTLA Law Group against Costco, the Staats case, where Costco did not file a disqualification motion. The Staats case indicates to the Court that DLTA Law Group did not implement any ethical wall in Costco cases after Werbin joined the firm, but rather only did do in response to either a DQ motion or a DQ ruling against the firm. Although not expressly stated in the opposition papers, it is inferred that Werbin has not personally handled a Costco case since December of 2021.

On reply, Costco argues that the Plaintiff failed to mention that the implementation of its new software was after an adverse court ruling on a prior disqualification motion in 2021, and that prior to that, all client files were viewable by all DTLA Law employees. The fact that DTLA Law Group neglected to mention the prior adverse ruling and its trigger to impose safeguards is troubling to the Court in a case where the firm’s and Werbin’s ethical strictures are the focus of the pending motion.

Topics for Oral Argument.

The Court will take oral argument as to the software implementation and other aspects of the ethical wall safeguards in place dating back to Werbin’s entry into the law firm. The Court would be interested to know what safeguards were in place to protect Costco’s confidences and secrets before DTLA Law Group lost the Reid v Costco motion in 2021, whether Werbin disclosed his prior representation of Costco to DTLA Law Group in his hiring process, whether DTLA Law Group considered declining to take bodily injury cases in which Costco would be a party, and what ethical alternatives to declining Costco cases, if any, were implemented for Werbin’s first 1-2 years at the firm. Further, the Court will need to hear from DTLA Law Group as to Werbin’s status on Costco cases, i.e., was the Staats case the only Costco case he worked on or consulted on at the firm, what is the expected duration of the software and ethical wall that is now in place, and has anyone ever been disciplined for mentioning any Costco case in Werbin’s presence in the last 2-1/2 years? Has DTLA LA Group provided notice to Costco describing the screening process and/or ethical wall procedures the firm has implemented as indicated in the ABA Model Rules Rule 1.10(a)(2), and if not, why not?

On the vicarious disqualification issue, the Court’s tentative ruling is to find that the screening process implemented by DTLA Law Group would be sufficient to rebut the presumption given the ethical wall’s and computer firewall implementation two years before the filing of this lawsuit. However, the Court is interested to hear how potential access to other Costco case filings on behalf of Werbin prior to the filing of this case, and access of Costco team members at the lawfirm to Werbin before the implementation of the screening software and ethical wall would affect the screening in the case at bar.