Judge: Stephen I. Goorvitch, Case: 22STCV16831, Date: 2023-08-31 Tentative Ruling

Case Number: 22STCV16831    Hearing Date: January 30, 2024    Dept: 39

Original Balboa Caregivers v. Michael Moussa Yedidsion, et al.

Case No. 22STCV16831

Motion for Protective Order

Order to Show Cause re: Contempt

Case Management Conference

BACKGROUND

            Plaintiffs Original Balboa Caregivers, Inc. (“Original Balboa”) and Basil Bailey (collectively, “Plaintiffs”) filed this action against S.S.L. Investments, LLC (“SSL”), as well as Michael Moussa Yedidsion, Pedram Salimpour, Bob Kashani, Romyan Nourafchan, Mehdi Vosogh, and 9419 Mason Partners LLC (“Mason”) (collectively, “Defendants”).  This action stems from Defendants’ interest in using Original Balboa’s license to operate multiple different cannabis businesses at that location.  Plaintiffs allegedly leased industrial space from Mason Partners and Defendant Nourafchan.  Now, Defendants move for a protective order and monetary sanctions and move for an order disqualifying Plaintiff’s counsel based upon inadvertently produced documents.  The Court ordered that the parties and counsel shall not examine, use, or disclose the documents and communications at issue pending the Court’s ruling on Defendants’ motion.  Defendants alleged that there was a violation of this order, based upon which the Court issued an Order to Show Cause re: Contempt.  The Court denies Defendants’ motions and discharges its Order to Show Cause re: Contempt.

PROCEDURAL HISTORY

            On September 19, 2023, Plaintiff’s counsel issued a deposition subpoena for the production of business records to H. Troy Farahmand, Esq.  (Declaration of Michael Forman, ¶ 2.)  The subpoena sought production of documents relating to the instant dispute, e.g., documents/communications relating to business operations under Plaintiff’s license, etc.  (See id., Exh. #1.)  There was a disagreement over whether Farahmand previously acted as counsel for Defendants.  (Id., ¶¶ 2-3.)  Farahmand himself took the position that he did not previously represent SSL and Mason.  (Id., ¶ 3.)  Counsel for the parties met-and-conferred and attempted to reach an agreement concerning the scope of the attorney-client privilege.  (Id., ¶ 4.) 

            On October 20, 2023, Farahmand sent an email stating that he planned to produce documents response to the subpoena on November 9, 2023.  (Id., ¶ 5.)  Farahmand indicated that he would not abide by SSL and Mason’s objections because they had not provided evidence showing that he acted as their attorney.  (Ibid.)  In response, Plaintiff’s counsel sent Farahmand copies of seven emails purportedly demonstrating that Farahmand acted as counsel for SSL and Mason “by drafting and negotiating several legal documents.”  (Id., ¶ 6.)  The email contained attachments labeled Exhibit A through Exhibit G.  (Ibid.)  Defendant’s counsel copied Defendant’s counsel, though the parties dispute whether this was intentional or inadvertent.  (See Declaration of Michael Foreman, ¶ 7; Declaration of William Tran, ¶ 3.)  Defendant’s counsel asked Plaintiff’s counsel to destroy the attorney-client communications.  (See Declaration of Michael Foreman, ¶ 10.)  Plaintiff’s counsel refused to do so stating: “I don’t see any privileged materials requiring us to destroy it.”  (Ibid.) 

            On November 8, 2023, Defendants’ counsel filed an ex parte application to advance the hearing date on a motion for a protective order, citing exigency.  The Court granted the ex parte application, advanced the hearing to December 1, 2023, and ordered that “all parties and counsel in this case shall not examine, use, or disclose the documents and communications at issue until the Court rules on the pending motion.”  Defendants allege that Farahmand violated this order by attaching certain of the emails at issue to his declaration in support of Plaintiff’s opposition to the motion.  As a result, the Court issued an Order to Show Cause re: Contempt. 

LEGAL STANDARD

An attorney’s inadvertent disclosure of attorney-client privileged communications in discovery is not a waiver of the privilege.  (State Comp. Ins. Fund v. WPS, Inc. (1999) 70 Cal.App.4th 644, 652-654.)  If an attorney receives material that appears to be subject to the attorney-client privilege and that the holder of the privilege did not intentionally produce, the attorney must: (1) refrain from examining the materials beyond the extent necessary to determine if the materials are subject to the attorney-client privilege; (2) immediately notify the sender that the attorney received material that is apparently subject to the attorney-client privilege; and (3) resolve the situation by stipulation or via a protective order from the Court.  (Rico v. Mitsubishi Motors Corp. (2007) 42 Cal.4th 807, 817-818.)  An attorney who fails to comply with these requirements is subject to disqualification and discipline.  (Id. at 819, Cal. Rules of Professional Conduct, rule 4.4.)

DISCUSSION

            Defendants move for a protective order requiring Plaintiff’s counsel to return/destroy the documents at issue and refrain from using them in this litigation.  Defendants also move for an order disqualifying Plaintiff’s counsel from representing Plaintiff in this litigation.  Defendants argue: “The documents at issue are attorney-client communications because they reveal legal opinions and/or legal work performed by Mr. Farahmand on behalf of Defendants.”  (Defendants’ Memorandum of Points & Authorities, p. 2:8-9.)  However, Defendants have not satisfied their burden of establishing that the documents were, in fact, privileged. 

            As an initial matter, Farahmand maintains that he did not act as counsel for SSL and Mason.  (See Declaration of Michael Foreman, ¶ 3.)  In March 2017, Farahmand became a member of SSL and currently serves as one of its managers.  (Declaration of Hootan Troy Farahmand, ¶ 7.)  In November 2017, an entity controlled by Farahmand became a minority member of Defendant.  (Id., ¶ 9.)  Farahmand states: “I never agreed to provide nor did I provide any legal services to SSL, or Mason or to any of their members, at any time.”  (Id., ¶ 10.)  Farahmand states: “I have never entered into any legal services agreement with [Defendants] (written or oral), nor have I ever held myself out as counsel for SSL or Mason to anyone.”  (Id., ¶ 11.)  The mere fact that Farahmand is an attorney does not make his communications with fellow members privileged. (See United States v. Martin, 278 F.3d 988, 999 (9th Cir. 2002).)  “It is settled that the attorney-client privilege is inapplicable where the attorney merely acts as a negotiator for the client, gives business advice or otherwise acts as a business agent.”  (Chicago Title Ins. Co. v. Superior Court (1985) 174 Cal.App.3d 1142, 1151.)

Defendants rely on identical declarations from Yedidsion, Salimpour, and Kashani stating that “Farahmand agreed to provide legal services to SSL and Mason beginning in 2017” and that “Mr. Farahmand was SSL and Mason’s attorney.”  These declarations do not resolve the issue because there is a murky line when an LLC member is an attorney.  Defendants provide no documentation in support of these assertions, e.g., a retainer agreement with Mr. Farahmand or some documentation in support of their assertion that Farahmand’s role as an LLC member was incumbent upon him serving as an attorney.  Moreover, the declarations (which are boilerplate in nature and presumably drafted by counsel) do not provide sufficient information.  For example, there is a fine line between an LLC member providing “advice” in his capacity as a member and “legal advice” in his capacity as an attorney.  The declarations do not provide sufficient detail to confirm that Farahmand’s advice was, in fact, legal advice, especially considering that the declarants themselves are not attorneys.  Similarly, the declarants state that Farahmand “negotiated and drafted/edited settlement agreements,” but negotiating and editing settlement agreements are tasks often performed by clients.  Tellingly, the declarations phrase the issue as Farahmand having “drafted/edited” settlement agreements rather than “drafted and later edited” the settlement agreements.  Finally, the Court notes that Defendants have a motive to cast Farahmand in the role of an attorney, viz., they can shield all of the members’ communications from Plaintiff’s counsel, including those sought by the subpoena.

Defendants’ counsel relies on his email to Farahmand, dated November 2, 2023, at 11:06 a.m.  (See Declaration of Michael Foreman, Exh. #3.)  This email references attachments which Defendant’s counsel describes as Farahmand having performed certain tasks, e.g., having drafted a non-disclosure agreement for SSL, a promissory note on behalf of SSL, etc.  (Ibid.)  This email does not benefit Defendants’ motion.  Inexplicably, Defendants’ counsel declined to file the emails at issue in camera and under seal for the Court’s review.  (See Declaration of Michael Foreman, ¶ 3.)  Essentially, Defendants’ counsel asks the Court to “take his word for it” that the attached emails evidence an attorney-client relationship (assuming they are accurately described in the cover email).  The Court is concerned because there is contradictory evidence in the record.  Farahmand states that he “did not draft any NDA” and merely “shared a template that [he] ha[s] used for other business matters.”  (Declaration of Hootan Troy Farahmand, ¶ 18.)  Farahmand states that he hired an attorney to draft the promissory note at issue.  (See id., ¶ 19.)  In the absence of the underlying exhibits to Defendants’ counsel’s email, the Court cannot resolve this contradiction.    

Perhaps most important, some of the communications at issue do not appear to be privileged.  Defendants’ counsel acknowledges that some of allegedly privileged documents were attached to Farahmand’s declaration as Exhibit B and Exhibit C.  These communications reflect those amongst LLC members—not clients and their attorney—and actually reference outside counsel performing services.  None of these communications contradict Farahmand’s assertion that he was not acting as an attorney while he served as a member of SSL and a manager of a member of Mason. 

In sum, Defendants’ counsel provides a selective record to the Court, asking this Court to impose a drastic remedy disqualification, monetary sanctions, and potential discipline by the State Bar based upon unseen exhibits purportedly establishing that Mr. Farahmand acted as an attorney—notwithstanding his challenge to Defendants’ counsel’s summary of their contents—and insufficient declarations from his clients who have a motive to cast Farahmand in the role of an attorney.  At the end of the day, it is Defendants’ counsel’s burden to establish that the documents at issue were privileged; he has failed to do so.  To the extent there was a violation of the Court’s order of November 9, 2023, the Court accepts Plaintiff’s counsel’s explanation.  In the alternative, the Court finds that any violation was harmless since the documents attached to Farahmand’s declaration do not appear to be privileged. 

CONCLUSION AND ORDER

            Based upon the foregoing, the Court orders as follows:

            1.         The Court denies Defendants’ motion for a protective order and for an order disqualifying Plaintiff’s counsel.

            2.         The Court discharges the Order to Show Cause re: Sanctions.

            3.         The Court advances and continues the hearing on Defendants’ motion for summary adjudication from March 7, 2024, to June 14, 2024, at 8:30 a.m

            4.         The Court continues the trial setting conference to June 14, 2024, at 8:30 a.m.

            5.         The Court advances and/or continues the hearings on all pending discovery motions to March 26, 2024, at 8:30 a.m. 

            6.         Defendants’ counsel shall provide notice and file proof of such with the Court.