Judge: Virginia Keeny, Case: 19VECV00805, Date: 2022-09-29 Tentative Ruling


Case Number: 19VECV00805    Hearing Date: September 29, 2022    Dept: W

Smith v. dix, et al.

 

motion for order disqualifying opposing counsel

 

Date of Hearing:          9/29/2022                               Trial Date: 3/20/2023

Department:               W                                             Case No.:  19VECV00805       

 

Moving Party:             Defendant Grant & Weber

Responding Party:       Plaintiff Carole Smith

 

BACKGROUND

 

This action arises out of an attorney-client relationship between Defendant Lloyd Dix and Plaintiff Carole Smith. Plaintiff alleges she hired Defendant Dix to negotiate resolution of her debts. Plaintiff alleges that Defendant Dix did not pay the creditors with whom they represented settlements had been reached on her behalf, and that they still possess approximately $150,000 in funds belonging to her.

 

Plaintiff filed her Complaint on June 6, 2019 against Defendants Dix, Grant & Weber (a corporation), Dix & Associates APLC, Dix Law APLC, and Does 1 through 10, alleging:

 

1) Conversion and Misappropriation of Client Funds

2) Attorney Malpractice

3) Breach of Fiduciary Duty

4) Fraud

5) Breach of Contract

6) Breach of the Covenant of Good Faith and Fair Dealing

7) Accounting

 

On November 2, 2020, after considering the relevant motion, the Court vacated the default that had previously been entered against Defendant Grant & Weber (“Defendant”). Later that same day, Defendant Grant & Weber (“Defendant”) filed its Answer.

 

On June 21, 2022, the undersigned judicial officer issued the Court’s Order Granting [Defendant’s] Motion to be Relieved as Counsel.

 

On July 20, 2022, Defendant filed a Substitution of Attorney with the Court, notifying the Court and the parties that Defendant has new counsel.

 

On August 17, 2022, Defendant filed its Motion for Order Disqualifying Opposing Counsel (“Motion”). Defendant concurrently filed its Proposed Order Granting Motion.

 

On September 15, 2022, Plaintiff filed her Opposition to Defendant’s Motion (“Opposition”). Plaintiff concurrently filed: (1) her Request for Judicial Notice (“Request”); (2) her Proposed Order Granting Request; (3) her Proof of Service; and (4) Declaration of Alisha C. Burgin.

 

On September 20, 2022, Defendant filed Supplemental Declaration of Steven S. Loeb.

 

[Tentative] Ruling

 

Defendant Grant & Weber’s Motion for Order Disqualifying Opposing Counsel is DENIED. Plaintiff Carole Smith’s associated request for sanctions is also DENIED.

 

LEGAL STANDARD

 

Authority of the Court to Disqualify Counsel

 

(a)                Every court shall have the power to do all of the following:

 

…

 

(5)               To 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.

 

(Code Civ. Proc., § 128, subd. (a)(5).)

 

(a)                A lawyer shall not act as an advocate in a trial in which the lawyer is likely to be a witness unless:

 

(1)               the lawyer’s testimony relates to an uncontested issue or matter;

 

(2)               the lawyer’s testimony relates to the nature and value of legal services rendered in the case; or

 

(3)               the lawyer has obtained informed written consent* from the client. If the lawyer represents the People or a governmental entity, the consent shall be obtained from the head of the office or a designee of the head of the office by which the lawyer is employed.

 

(b)               A lawyer may act as advocate in a trial in which another lawyer in the lawyer’s firm* is likely to be called as a witness unless precluded from doing so by rule 1.7 or rule 1.9.

 

(Cal. R. Prof. Conduct 3.7, subds. (a–b).)

 

“Notwithstanding a client’s informed written consent,* courts retain discretion to take action, up to and including disqualification of a lawyer who seeks to both testify and serve as an advocate, to protect the trier of fact from being misled or the opposing party from being prejudiced.” (Id., Comment [3].)

 

“Trial courts in civil cases have the power to order disqualification of counsel when necessary for the furtherance of justice. Exercise of that power requires a cautious balancing of competing interests. The court must weigh the combined effect of a party's right to counsel of choice, an attorney's interest in representing a client, the financial burden on a client of replacing disqualified counsel and any tactical abuse underlying a disqualification proceeding against the fundamental principle that the fair resolution of disputes within our adversary system requires vigorous representation of parties by independent counsel unencumbered by conflicts of interest.” (William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042, 1048 (citations omitted).)

 

“Ultimately, disqualification motions involve a conflict between the clients' right to counsel of their choice and the need to maintain ethical standards of professional responsibility. The paramount concern must be to preserve public trust in the scrupulous administration of justice and the integrity of the bar. The important right to counsel of one's choice must yield to ethical considerations that affect the fundamental principles of our judicial process.” (People ex rel. Dept. of Corps. V. SpeeDee Oil Change Sys., Inc. (1999) 20 Cal.4th 1135, 1145–46 (citations omitted).)

 

“Under the present rule, if a party is willing to accept less effective counsel because of the attorney's testifying, neither his opponent nor the trial court should be able to deny this choice to the party without a convincing demonstration of detriment to the opponent or injury to the integrity of the judicial process. In other words, under the present rule the trial court can disqualify counsel only where it is confronted with manifest interests which it must protect from palpable prejudice.” (Lyle v. Superior Court (1981) 122 Cal.App.3d 470, 482 (citations omitted).)

 

Disqualification of opposing counsel based solely on the applicable California rule of professional responsibility is only applicable in jury trials, not bench trials. (See In re Marriage of Murchison (2016) 245 Cal.App.4th 847, fn. 4.)

 

Standing

 

“Standing generally requires that the plaintiff be able to allege injury, that is, an invasion of a legally protected interest. A ‘standing’ requirement is implicit in disqualification motions. Generally, before the disqualification of an attorney is proper, the complaining party must have or must have had an attorney-client relationship with that attorney. (Great Lakes Constr., Inc. v. Burman (2010) 1347, 1356 (citations omitted).)

“We reject [movants’] argument that Code of Civil Procedure section 128, subdivision (a)(5), permits a court to dispense with standing requirements when evaluating attorney disqualification motions. That statute gives courts authority to grant disqualification motions brought by a party who meets the standing requirements. Thus, a moving party must have standing, that is, an invasion of a legally cognizable interest, to disqualify an attorney.” (Id. at 1357 (citations omitted).)

“Although we have found no cases which directly prohibit a party without such a relationship from moving for disqualification, case law shows parties moving for disqualification had standing and the standing was due to the relationship between the moving party and the targeted counsel. Even under a minority view, as explained in Colyer v. Smith (C.D.Cal. 1999) 50 F.Supp.2d 966, 971, a moving ‘nonclient must establish a “personal stake” … that is sufficient to satisfy the standing requirements of article III of the United States Constitution.’” (In re Marriage of Murchison (2016) 245 Cal.App.4th 847, 851–52 (quoting Great Lakes, supra, at 1357) (emphasis in original).)

 

“The most egregious conflict of interest is representation of clients whose interests are directly adverse in the same litigation. Such patently improper dual representation suggests to the clients—and to the public at large—that the attorney is completely indifferent to the duty of loyalty and the duty to preserve confidences. However, the attorney's actual intention and motives are immaterial, and the rule of automatic disqualification applies. (People ex rel., supra, at 1147 (citation omitted).)

 

Waiver

“We recognize that there are some courts that have held that disqualification of counsel cannot be waived even when the motion is brought after an extremely long passage of time. The rationale of these cases is that ethical rules serve a public interest, which precludes representation by a lawyer who should be disqualified. California, however, is not one of the jurisdictions adhering to this view. In fact, the majority view appears to be that attorney disqualification can be impliedly waived by failing to bring the motion in a timely manner.” (Liberty Nat’l Enter., L.P. v. Chicago Tit. Ins. Co. (2011) 194 Cal.App.4th 839, 844 (citations omitted).)

“It appears that, at least in California, the delay has to be extreme or unreasonable before it operates as a waiver. It has been held that when the party opposing the motion has made a prima facie showing of unreasonable delay causing prejudice, disqualification should not be ordered, and the burden shifts to the moving party to justify the delay. It has also been held that the prejudice to the opponent must be extreme.” (Id. at 845 (finding that a two-year delay met standard) (citations omitted).)

Disqualification of Associated Counsel

 

“As a general rule, ‘[if] a lawyer is required to decline employment or to withdraw from employment under a Disciplinary Rule, no partner, or associate, or any other lawyer affiliated with him or his firm, may accept or continue such employment.’ (ABA Code of Prof. Responsibility, DR 5-105(D); see Chambers v. Superior Court, supra, 121 Cal.App.3d at p. 898, fn. 3.) Automatic or mechanical application of the vicarious disqualification rule can be harsh and unfair to both a law firm and its client. The better approach is to examine the circumstances of each case in light of the competing interests noted above.” (William H. Raley Co., supra, at 1048–49.)

 

ANALYSIS

 

Requests for Judicial Notice

 

I.                    Defendant’s Request for Judicial Notice

 

Defendant requests judicial notice of “prior documents filed in this matter on behalf of Plaintiff.” (Mot., p. 4:10–11.) Putting aside procedural issues with the way Defendant requests judicial notice, the Court denies judicial notice because any party that wishes to draw the Court’s attention to a matter filed in this action may simply cite directly to the document by execution and filing date. (See Cal. Rules of Court, rule 3.1110(d).)

 

II.                  Plaintiff’s Request for Judicial Notice

 

Plaintiff requests judicial notice of the following items:

 

1) Declaration of Plaintiff in Support of her Motion for Default Judgment in this case

2) The docket in this case

3) The docket for case number SBC-20-O-305529

4) Order of the California Supreme Court in In re Lloyd Douglas Dix on Discipline, dated March 29, 2021, case number S267250

5) The following items from In re Lloyd Douglas Dix, case number SBC-20-)-305529:

a) Stipulation re Facts, Conclusions of Law and Disposition and Order Approving

             b) Order of Involuntary Inactive Enrollment

 

The Court takes judicial notice of items three, four, and five (both subitems). Judicial notice is denied as to items one and two, since those items may be cited to directly under the California Rules of Court.

 

The Court notes that “[w]hile courts take judicial notice of public records, they do not take notice of matters stated therein.” (Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375 (citing Love v. Wolf (1964) 226 Cal.App.2d 378, 403.) “When judicial notice is taken of a document, however, the truthfulness and proper interpretations of the document are disputable.” (StorMedia Inc. Superior Court (1999) 20 Cal.4th 449, fn. 9 (citing Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374).)

 

Motion for an Order Disqualifying Opposing Counsel

 

Defendant moves the Court to disqualify Plaintiff’s counsel (Michael Wise, Esq., and associated counsel at his law firm, Perkins Coie, LLP) because: (1) Mr. Wise is the brother-in-law of Plaintiff; (2) Mr. Wise has a “decades long friendship” with Defendant Dix; and (3) “[i]t is clear that Mr. Wise [is] a percipient witness in this matter on a contested issue involving whether Plaintiff was referred to [Defendant Grant & Weber] or [Defendant Dix] and his own law practice.” (Mot., p. 4:2–9 and p. 5:19–28; Supp. Decl. Loeb, Ex. A., p. 1.) According to Defendant, “[t]he jury is entitled to hear [Counsel Wise’s] testimony to evaluate its truthfulness and motivation which cannot be done independently while he is representing his sister and Plaintiff herein.” (Id. at p. 5–6.)

 

Plaintiff opposes the Motion, arguing that the Court should deny it because: (1) Defendant lacks standing to pursue disqualification of Plaintiff’s counsel; (2) Defendant has not adequately invoked California Rule of Professional Conduction 3.7; and (3) a balancing of the competing interests weigh against disqualification.

 

For the following reasons, the Court agrees with Plaintiff that disqualification would be inappropriate here.

 

First, with respect to standing, the court finds that Defendant has standing to seek to disqualify Wise (and his firm) on the grounds that Wise may be a witness in this case.  The standing to bring this motion is not based on any attorney client relationship between Wise and Defendant, but on any party’s standing to seek relief under the witness-advocate rule.  (See Lopez v. Lopez (2022) 81 Cal.App.5th 412.)

 

Second, on the issue of waiver, the court agrees that Defendant has impliedly waived any relief to attorney disqualification by failing to bring this motion in a timely manner. (Liberty Nat’l, supra, at 844.) Plaintiff filed her Complaint, through the same counsel she has now, on June 6, 2019. Defendant had more than three years to bring this request for relief yet chose not to. The Court of Appeals has upheld such a waiver when the period of time was only two years. (Id. at 846–49.) Upon considering that it was already almost two years ago when the Court granted Defendant relief by vacating its prior default, the Court finds that Defendant’s delay in bringing this Motion is both unreasonable and extreme. (Id. at 845.)

 

Third, the possibility that a party may call Mr. Wise as a witness in this case is not an automatic disqualification of his firm.  Ms. Burgin is lead counsel on the case and presumably will be lead counsel at trial, unless the parties agree that neither will call Mr. Wise as a witness, in which case Mr. Wise could serve that role. In the unlikely event that plaintiff indicated she wanted to call Mr. Wise as a witness, the court would require proof that  Mr. Wise had her written consent at a minimum and might preclude such witness on the grounds that it could be more prejudicial than probative.  Moreover,  court doubts that Mr. Wise has any relevant testimony to offer to either  side.  The circumstances of how plaintiff first learned of the Dix office or the fact that her brother, Mr. Wise, had a long relationship with Mr. Dix, does not make it any more likely that Mr. Dix had a financial or business relationship with Grant & Weber such that Grant & Weber would then be liable for his acts.  

 

Finally, the court weighs the following factors: “‘ “ ‘whether counsel's testimony is, in fact, genuinely needed’ ” ’; (2) ‘the possibility [opposing] counsel is using the motion to disqualify for purely tactical reasons’; and (3) ‘the combined effects of the strong interest parties have in representation by counsel of their choice, and in avoiding the duplicate expense and time-consuming effort involved in replacing counsel already familiar with the case.’ [Citation.]’”’”  (Lopez, at 424.)  Here, those factors weigh against disqualification: neither side has presented any evidence that Mr. Wise’s testimony is actually needed on any material element or defense; the long delay in bringing the motion indicates that it is being brought for a tactical advantage a few months before trial to as to disrupt plaintiff’s trial preparation;  obtaining new counsel would be expensive and further delay resolution of this matter; plaintiff has a strong interest in being represented by counsel of her choice and particularly a family member in whom she has great confidence;  and the tangential nature of the information to be elicited from Mr. Wise if he were called by defendant as a witness. 

 

The Court notes that even if there were reason to disqualify Mr. Wise, which it has not found, it would not be appropriate to also disqualify his co-counsel at Perkins Coie, LLP. (William H. Raley Co., supra, at 1048–49.)   Thus, if it is determined that Mr. Wise will be called by defendant as a witness, the court can protect against any confusion or possible prejudice by having someone else from the law firm serve as trial counsel. 

 

Accordingly, the Court shall deny Defendant’s Motion.

 

Request for Sanctions

 

Plaintiff requests that the Court permit her to move for sanctions against Defendant and Defendant’s counsel “for filing this frivolous motion.” (Opp’n, p. 10:16–18.) The Court denies Plaintiff’s request. The motion was not frivolous.

 

CONCLUSION

 

Defendant Grant & Weber’s Motion for Order Disqualifying Opposing Counsel is DENIED. Plaintiff Carole Smith’s associated request for sanctions is also DENIED.