Judge: Stephen P. Pfahler, Case: 21STCV25399, Date: 2024-07-03 Tentative Ruling
Case Number: 21STCV25399 Hearing Date: July 3, 2024 Dept: 68
Dept. 68
Date: 7-3-24
Case: 20STCV38935 c/w 21STCV25399
Trial Date: Not Set
PRIVILEGE DETERMINATION
MOVING
PARTY: Plaintiffs, 828 Media Capital, et al.
RESPONDING
PARTY: Defendants, SSS Film Capital, LLC, et al.
RELIEF REQUESTED
Motion for Determination of
Privileged Material
SUMMARY OF ACTION
20STCV38935
On February 11, 2020, Plaintiffs 828 Media Capital, LLC
and Todd Lunbohm and Defendants David Brown, Clear Distribution, LLC, Clear
Entertainment Inc., and Fallout, LLC, entered into “various agreements” for the
financing and production of a “film” entitled “Fallout.” The terms required a
“commitment amount” of $1,500,000 from 828 Media, with a promised return of
$1,800,000 at or prior to the maturity date established under the terms. The
parties also executed a separate “side letter,” whereby the 828 Media and Clear
Distribution, LLC agreed to an equal distribution of “any and all sales”
following distribution. “throughout the world.”
Following investment of $285,000, the project shut down
due to Covid restrictions. New terms were orally agreed upon whereby 828 Media
would only invest $365,000. Plaintiff denies ever executing any written amended
contract.
Meanwhile, production “unilaterally” continued without
the knowledge of 828 Media and its principal, plaintiff Lundbohm, until the
fourth day of principal photography. Plaintiff was subsequently presented a
follow-up offer to return the $285,000 loan proceeds, due to new investors
joining the project. Plaintiffs maintains the resumption of production without
notice, along with other actions by Defendants, violated the terms of the
contract.
On October 9, 2020, Plaintiffs filed a complaint for
Breach of Contract, Breach of Good Faith and Fair Dealing, Breach of Fiduciary
Duty, Aiding and Abetting, and Promissory Fraud. A 170.6 challenge to the
assigned officer led to a transfer of the action to Department 68.
On January 11, 2021, the case was ordered to arbitration.
On May 30, 2023, the court lifted the stay on the matter.
On April 3, 2024, defaults were entered as to Clear
Distribution, LLC, David Brown, and Fallout, LLC.
21STCV25399
In the subject action, Plaintiffs 828 Media Capital, LLC,
828 Productions, LLC, and Todd Lunbohm allege said failure of the other referenced
financing agreement with Fallout, LLC, et al. was the result of new financing
obtained from Defendants SSS Film Capital LLC. In exchange, SSS Film Capital
LLC was purportedly provided a “first position producer credit” in direct
conflict with the 828 Plaintiffs’ agreement, as well as sales commission
agreement. Plaintiffs also allege a similar commission agreement with Defendant
SSS Entertainment LLC. Both commission agreements purportedly violate the 50%
commission agreement with the 828 plaintiffs.
On July 9, 2021, Plaintiff filed a complaint for
Intentional Interference with Contract, and Declaratory Relief. On October 8,
2021, Defendants filed a notice of removal to federal court. On November 6,
2023, the United States District Court, Central District, filed a notice of
remand.
On January 2, 2024, Plaintiffs filed a first amended
complaint for Intentional Interference with Contract; Fraudulent Conveyance;
False UCC-Filings (Cal. Comm. Code § 9625); Conversion; Breach of Contract; Breach of Fiduciary Duty;
Aiding and Abetting Breach of Fiduciary Duty;
Fraud; Declaratory Relief;
Judicial Foreclosure on Collateral; and, Intentional Interference with
Prospective Economic Advantage. Plaintiffs added new defendants Shaun Sanghani,
Fallout LLC; Clear Entertainment, Inc.; Clear Horizon Entertainment, LLC; Clear
Distribution LLC; David Raymond Brown F/K/A David Brown F/K/A David Brown Levy;
and, Warner Bros. Pictures.
On February 14, 2024, the court deemed the cases related.
On February 28, 2024, the court entered the stipulation
for leave to file a second amended complaint. On March 13, 2024, Plaintiffs
filed their second amended complaint: 1. Intentional Interference with Contract
2. Fraudulent Conveyance 3. False UCC-Filings (Cal. Comm. Code § 9625) 4.
Aiding and Abetting False UCCFilings (Cal. Comm. Code § 9625) 5. Conversion 6.
Breach of Contract 7. Breach of Fiduciary Duty 8. Aiding and Abetting Breach of
Fiduciary Duty 9. Fraud 10. Declaratory Relief 11. Judicial Foreclosure on
Collateral 12. Intentional Interference with Prospective Economic Advantage.
Plaintiffs added in Warner Bros. Pictures (WB) on grounds that the SSS
defendants contracted with WB for “worldwide distribution” of the film for
$5,000,000, thereby violating Plaintiffs’ contract with the Fallout defendants.
Plaintiffs depends on a conspiracy allegation among the parties.
On May 30, 2024, Plaintiffs dismissed Warner Brothers
Pictures from the first cause of action for Intentional Interference with
Contract without prejudice.
RULING: Granted.
Evidentiary Objections to the Declaration of Vikram
Amritra: Overruled/Not Relied upon for Content or Truth of the Subject Matter
Asserted, Except for the Admitted Disclosed Emails by Brown.
Evidentiary Objections to the Declaration of Crystal Jonelis and Shaun Sanghani:
Overruled.
The court
declines to rule on objections submitted under the Federal Rules of Evidence.
The declarations are otherwise relevant and admissible, including hearsay
exceptions.
Plaintiffs 828 Media Capital, LLC, 828 Productions, LLC, and
Todd Lunbohm move for a determination of whether certain documents categorized
by Defendants SSS Film Capital LLC, SSS Entertainment LLC and Shaun Sanghani as
privileged, contain attorney client privileged information. The motion was
originally presented in the District Court action. The court accepted the stipulation of the parties allowing use of
the federal court filed pleadings to serve as the basis for the subject motion
on February 28, 2024.
The subject
discovery initially involves two sets of disclosed email communications: 1)
communications between the SSS defendants, transactional counsel Adam Rosen,
and David Brown (Fallout defendant entities principal); 2) emails between
defendants Brown and Sanghani. Plaintiffs also proactively seek an order
effectively deeming potentially related communications also subject to
discovery.
The origin of
the dispute appears to originate from two knowingly recorded conversations
between defendant Brown, purportedly unrepresented by counsel at the time (four
days after counsel terminated its representation of the Fallout parties), and
Plaintiffs’ counsel Vikram Amritraj. [Declaration of Vikram Amritaj, ¶¶
13-17.] Counsel maintains Brown provided “numerous revelations” regarding the
position of Brown as to Plaintiffs’ claims against the Fallout and SSS
defendants. [Amritaj Decl., ¶¶ 14, 18-23.] On May 25, 2022, Brown sent two
e-mails with attached email chains among certain parties and counsel from
August 2021 and September 2021. [Amritaj Decl., ¶ 20(f-g).] The actual e-mails
themselves are not incorporated into the motion, but purportedly contain a
chain of communications between Brown, Adam Rosen, and former attorneys for the
Fallout entities, Daniel Rozansky and Crystal Jonelis, in August 2021. For context, Armitraj states that Adam
Rosen contacted counsel regarding potential settlement of the claims against
the SSS defendants, thereby establishing Rosen as counsel for the SSS parties.
[Amritaj Decl., ¶ 7.]
The SSS
defendants in opposition counter that the receipt of the emails prompted
immediate notification of defense counsel regarding receipt of the information.
SSS categorically maintains the emails are attorney client privileged, and
challenges use of the emails following the disclosure of the emails as part of
the motion for leave to file the first amended complaint. SSS notes that all
email exchanges occurred while all parties were represented by counsel
[Declaration of Crystal Jonelis], all emails are classified as confidential
communications under the attorney client privilege, and protected from
disclosure under the joint client exception and common interest doctrine.
Plaintiffs in
reply challenges any attorney client privilege on grounds that the underlying
exchange was in collusion to perpetrate a fraud, thereby undermining any claim
of privilege. Plaintiffs also challenge any claim of attorney client privilege
as to attorney Rosen relative to the non SSS entities and Sanghani. Plaintiffs
also challenge the content of the email as privileged “strategic” discussion or
intended as confidential under the retainer agreement of former counsel. Thus,
no joint client or common interest exception applies.
The represented emails included parties Brown, Sanghani, individually
and as principals of their respective corporate entities under their control,
and attorneys Adam Rosen, Daniel Rozansky and Crystal Jonelis, as counsel in
various capacities for the SSS entities and Sanghani. Attorneys Rozansky and
Crystal Jonelis participated as employees of Stubbs Alderton & Markiles,
LLP (SAM). The SAM firm represented SSS and Sanghani as well as Brown and the
Fallout entities, during the relevant email exchange as litigation counsel.
[Joneliss Decl., ¶ 4.] According to Joneliss, counsel specifically informed
both Brown and Sanghani about their rights and obligations as “joint
attorney-client privilege holders.” [Joneliss Decl., ¶ 7.]
The court initially addresses whether the subject emails
actually constitute attorney client privileged material. While the refenced
material itself was only an incorporated as exhibits before the federal court
motion for leave to amend, barring a subsequent finding for the need to further
review the material, the court declines to conduct any in camera review for
purposes of determining the actual existence of any privilege. (DP Pham, LLC v. Cheadle (2016) 246
Cal.App.4th 653, 665-669; Costco Wholesale Corp. v. Superior Court (2009) 47
Cal.4th 725, 736-740.) The court instead relies to and refers to the
summary of arguments regarding the circumstances of the disclosure.
“As used in
this article, ‘client’ means a person who, directly or through an authorized
representative, consults a lawyer for the purpose of retaining the lawyer or
securing legal service or advice from him in his professional capacity…” (Evid.
Code, § 951.) The court finds the statement of the SAM firm representing both
Sanghani and Brown, as well as their entities under control, factually
unchallenged. Plaintiffs tacitly acknowledge this and instead challenge the
underlying foundation for claimed privilege among the jointly represented
defendants.
The email content descriptions provided by the opposition,
and arguments seeking to characterize the subject matter of the emails as
highly supportive of the claims in support of the second amended complaint,
directly render the subject matter as well within the definition of clients
seeking the advice of counsel. Plaintiffs concede as much in reply by
characterizing the exchange as part of a scheme to commit fraud rather squarely
denying the representation of the individual parties by multiple attorneys, or maintaining
the representation addressed unrelated personal matters. The court therefore
concludes both an attorney client relationship among the parties and exchange
of privileged information.
Plaintiffs present a challenge based on the participation of
attorney Rosen in the subject email exchange as constituting an effective form
of waiver due to the incorporation of a third person not within the scope or
furtherance of the representation. While Plaintiffs correctly note the lack of
any representation by Rosen of any other parties other than SSS and Sanghani, both
Plaintiffs’ counsel and Sanghani categorically represent Rosen’s participation
as a “transactional” attorney on behalf of the clients.
“As used in this article, ‘confidential communication
between client and lawyer’ means information transmitted between a client and
his or her lawyer in the course of that relationship and in confidence by a
means which, so far as the client is aware, discloses the information to no
third persons other than those who are present to further the interest of the
client in the consultation or those to whom disclosure is reasonably necessary
for the transmission of the information or the accomplishment of the purpose
for which the lawyer is consulted, and includes a legal opinion formed and the
advice given by the lawyer in the course of that relationship.” (Evid. Code, §
952.) Given the SAM firm undisputably engaged in dual representation of
multiple parties, the court finds the participation of Rosen at a minimum
served the coordinated interests of the SSS parties. As discussed further
below, Rosen therefore participated within the attorney client umbrella within
the purview of Evidence Code section 952 for purposes of coordinating in any defense
or even settlement of the claims.
Plaintiffs next challenge the joint representation as not
covered under the joint client exception or common interest doctrine. The
argument arises as a form of “conflict” between the interests of the Fallout
and SSS parties. “Case law has established that joint
clients are two or more persons who have retained one attorney on a matter of
common interest to all of them ...” (Roush
v. Seagate Technology, LLC (2007) 150
Cal.App.4th 210, 223.) “The common-interest doctrine allows disclosure between
parties, without waiver of privileges, of communications protected by the
attorney-client privilege or the attorney work-product doctrine where the
disclosure is necessary to accomplish the purpose for which the legal advice
was sought.” (Citizens for Ceres v. Superior
Court (2013) 217 Cal.App.4th 889, 914; McKesson HBOC, Inc. v. Superior Court (2004) 115 Cal.App.4th 1229, 1238 [“The Court of Appeal
found no waiver of the attorney-client privilege as a result of the sharing of
documents during the negotiations].)
Plaintiffs rely on a “conflict”
based on said dual representation and alleged plan to “wrongfully convert[]”
the approximately three million dollars from the sale of the film. (First Pacific Networks, Inc. v. Atlantic Mut. Ins. Co. (N.D. Cal. 1995) 163 F.R.D. 574, 579.) The court finds no
basis for Plaintiffs to challenge Defendants’ choice of representation, and
make further argument for a conflict based on the agreed upon change in
financing, disposition of funds pending adjudication of the claims, concern
with payment from Warner Brothers, or other legal strategies taking into
account the financial condition of co-defendants and adversaries. While the
co-defendants relationship apparently soured, as discussed further below,
nothing in the motion establishes a basis of standing to assert claims
undermining the attorney client privilege claim relied upon by Defendants in
opposition to the motion. (See OXY
Resources California LLC v. Superior Court
(2004) 115 Cal.App.4th 874, 901.)
Even
without a finding of dual representation, the court finds common interest
doctrine also supports a finding of a valid attorney client relationship. “[P]arties
may share privileged information when it furthers the attorney-client
relationship. However, sharing destroys the privilege where the parties simply
have “overlapping interests.” ((Roush
v. Seagate Technology, LLC, supra,
150 Cal.App.4th at p. 224.) Plaintiff challenges the lack of a “common legal
interest” in opposition to this basis of attorney client privilege. The
argument essentially depends on a finding of adverse interests, but improperly
disregards the overriding joint representation by the SAM firm of the Brown and
Sanghani parties’ interests. (See Behunin
v. Superior Court (2017) 9 Cal.App.5th 833, 846; Cooke v. Superior Court
(1978) 83 Cal.App.3d 582, 588 [“The law is that privilege extends to
communications which are intended to be confidential, if they are made to
attorneys, to family members, business associates, or agents of the party or
his attorneys on matters of joint concern, when disclosure of the communication
is reasonably necessary to further the interests of the litigant”]; Walsh v. Northrop Grumman Corp.
(E.D.N.Y. 1996) 165 F.R.D. 16, 18 [Federal law may differ on the applicability
of joint interest doctrine, but neither party addresses this potential
distinction: “The doctrine is limited to situations where multiple parties are
represented by separate counsel but share a common interest about a legal
matter”].)
The
strenuous argument in reply regarding the lack of “strategic” discussion due to
the disposition of the parties financial positions in the underlying
transaction in no way indicates an area of even tangentially removed from the
core of the underlying dispute and claims levied in the second amended
complaint. The argument both seeking to utilize the content of the email in
support of the latest iteration of the action and concurrent denial of any
privilege, even if the communications occurred prior to the realized
communications, constitutes a disingenuous denial of the clear link between the
communications of counsel and the joint defendants.
Again as referenced above, the incorporation of Rosen into
the email chain on behalf of the SSS defendants in no way establishes a waiver
of any privilege. The court finds the initiation of communications between
Rosen and Plaintiffs’ counsel necessarily supported his joint participation in
the communications with both the SSS clients and Brown controlled entities. (Evid.
Code, § 952; National Steel Products Co. v.
Superior Court (1985) 164 Cal.App.3d 476,
484; see Meza v. H. Muehlstein &
Co., Inc. (2009) 176 Cal.App.4th 969, 983.)
The court finds the emails privileged and not subject to protection under any
failure to establish a basis of joint privilege, common interest, and
fundamental attorney client privilege.
The actions of Brown however
require transition into consideration of waiver for purposes of
determining further potential impacts. Upon proof of attorney client privilege,
the burden of waiver shifts to the challenging party. (McDermott Will & Emery LLP v. Superior Court (2017) 10
Cal.App.5th 1083, 1101.)
“Subject
to Section 912 and except as otherwise provided in this article, the client,
whether or not a party, has a privilege to refuse to disclose, and to prevent
another from disclosing, a confidential communication between client and lawyer
if the privilege is claimed by:
(a) The
holder of the privilege;
(b) A
person who is authorized to claim the privilege by the holder of the privilege;
or
(c) The
person who was the lawyer at the time of the confidential communication, but
such person may not claim the privilege if there is no holder of the privilege
in existence or if he is otherwise instructed by a person authorized to permit
disclosure.
The
relationship of attorney and client shall exist between a law corporation as
defined in Article 10 (commencing with Section 6160) of Chapter 4 of Division 3
of the Business and Professions Code and the persons to whom it
renders professional services, as well as between such persons and members of
the State Bar employed by such corporation to render services to such persons.
The word ‘persons’ as used in this subdivision includes partnerships,
corporations, limited liability companies, associations and other groups and
entities.”
(Evid.
Code, § 954.)
“a) Except as otherwise provided in this section, the right
of any person to claim a privilege provided by Section 954 (lawyer-client
privilege) … is waived with respect to a communication protected by the
privilege if any holder of the privilege, without coercion, has disclosed a
significant part of the communication or has consented to disclosure made by
anyone. ...
…
“(d) A disclosure in confidence of a communication that is
protected by a privilege provided by Section 954 (lawyer-client privilege) …when
disclosure is reasonably necessary for the accomplishment of the purpose for
which the lawyer … was consulted [] is not a waiver of the privilege.”
(Evid. Code, § 912.)
A corporate entity is not a “person” for purposes of waiving
attorney-client privilege, as it can only act through management. (Commodity Futures Trading Com'n v.
Weintraub (1985) 471 U.S. 343, 348.) The court therefore presumes both
Brown and Sanghani as holder of any rights to exercise or waive the privilege
on behalf of themselves and the corporate entities. (Evid. Code, § 952, subd.
(a).) The attorney-client privilege may be waived by the holder of the
privilege. (Evid. Code, § 912, subd. (a), 954; McDermott Will & Emery LLP v. Superior Court, supra, 10
Cal.App.5th at p. 1101.)
“A ‘waiver’
does not include accidental, inadvertent disclosure of privileged information
by the attorney.” (State Compensation Ins. Fund v. WPS, Inc. (1999) 70
Cal.App.4th 644, 654.) “Generally, ‘waiver’ denotes the voluntary relinquishment
of a known right.” (Platt Pacific v. Andelson (1993) 6 Cal.4th 307,
315.) “Generally, the determination of waiver is
a question of fact, and the trial court's finding, if supported by sufficient
evidence, is binding on the appellate court. (Citations.)”
(St. Agnes Medical Center v.
PacifiCare of California (2003) 31 Cal.4th 1187, 1196.)
The undisputed presentation of the emails by Brown to
Plaintiffs’ counsel following the knowingly recorded conversations appears like
an intentional, not inadvertent action by Brown. Upon the receipt of the
documents, Plaintiffs’ counsel was arguably obliged to inform defense counsel
of the disclosure notwithstanding the finding of an intentional, rather than
unintended action. “[T]he obligation
of an attorney receiving privileged documents due to the inadvertence of
another is as follows: When a lawyer who receives materials that obviously
appear to be subject to an attorney-client privilege or otherwise clearly
appear to be confidential and privileged and where it is reasonably apparent
that the materials were provided or made available through inadvertence, the
lawyer receiving such materials should refrain from examining the materials any
more than is essential to ascertain if the materials are privileged, and shall
immediately notify the sender that he or she possesses material that appears to
be privileged. The parties may then proceed to resolve the situation by
agreement or may resort to the court for guidance with the benefit of
protective orders and other judicial intervention as may be justified. We do,
however, hold that whenever a lawyer ascertains that he or she may have
privileged attorney-client material that was inadvertently provided by another,
that lawyer must notify the party entitled to the privilege of that fact.” (State Compensation Ins. Fund v.
WPS, Inc., supra, 70 Cal.App.4th at pp. 656–657.)
Assuming Brown
held and exercised the right to waive the attorney client privilege on behalf
of the corporate entities under control however, the motion still lacks support
for any finding of the right to waive any rights of other joint
privilege holders. (See Evid. Code, § 962 [“Where two
or more clients have retained or consulted a lawyer upon a matter of common
interest, none of them, nor the successor in interest of any of them, may claim
a privilege under this article as to a communication made in the course of that
relationship when such communication is offered in a civil proceeding between
one of such clients (or his successor in interest) and another of such clients
(or his successor in interest)”]; OXY
Resources California LLC v. Superior Court
(2004) 115 Cal.App.4th 874, 893-894, 902.)
Plaintiffs offer neither an
argument for standing to assert such a claim of waiver, if applicable, or other
argument for such a waiver on behalf of other the participants. The SAM
firm engaged in dual representation, with individual obligations owed to the
individual parties. A change of mind by a fellow participant in no way alters
the relationships and rights of the parties relative to their privileges.
The court therefore finds the communications privileged and
no waiver or other basis for the denial of the attorney client privilege. The
court therefore GRANTS the motion to deem the communications privileged and
DENIES any motion for a finding of no applicable privilege.
The subject
order only applies to the disclosed emails. The court declines to offer any
proactive or open ended advisory opinion on other potential communications. As
a matter of policy, the court defers consideration of any and all potential
future discovery disputes to actual identified, sought after information. While
the parties may continue to present new argument, the court advises the parties
to adhere to the findings and guidelines before contemplating voluminous law
and motion practice. The court reserves the right to appoint a discovery
referee should the parties require potential review on an item by item basis
beyond the resources of the court.
Two special motions to strike begin the next round of law
and motion on August 6 and 22, 2024, respectively.
Plaintiffs
to provide notice to all parties.