California Mediation and Arbitration

Arbitration, Conflicts, Stay & Celebrities: Second District, Div. 7 Rules That Disqualification Motion Was Premature While Motion To Compel Arbitration And To Stay Were Pending

The Code Of Civil Procedure 1281.4 Stay Is Mandatory.

    Top Kick Productions, Inc., Chuck Norris's production company, sued CBS Broadcasting Inc. over allegations of what might be characterized as Hollywood Accounting. CBS moved to compel arbitration, and to stay the litigation pursuant to CCP 1281.4, while Top Kick had a pending motion to disqualify CBS's attorneys based on conflict of interest. In true kick-ass Walker, Texas Ranger style, Top Kick convinced the trial court to hear the disqualification motion first, and to deny the stay request. Next, CBS obtained a temporary stay in the Court of Appeal, and the Court issued an OSC to determine whether the trial court had abused its discretion by denying the stay. CBS Broadcasting Inc., et al., Petitioners,  v. Superior Court of Los Angeles County, Respondent; Top Kick Productions, Inc., et al., Real Parties in Interest, No. B292277 (2/7  2/21/19) (Zelon, Segal, Feuer) (not for publication).

    The Court held that the trial court erred, because the 1281.4 stay is mandatory, once a petition to compel arbitration is brought. So now the stay will go into effect, the motion to compel arbitration will be heard, and if the motion is granted, then the arbitrator would get to rule on the disqualification motion. 

    The Court acknowledged that there are  New York state law cases and federal law Second Circuit cases providing disqualification is not a matter for arbitrators to determine, but explains those cases are contrary to California law where disqualification motions have been decided by arbitrators. Furthermore, the Court acknowledges a situation might arise where the issue of disqualification is intertwined with the issue of arbitrability "so that the potentially disqualified lawyer should not be permitted to argue the motion to compel". However, because Top Kick conceded the disqualification motion had nothing to do with arbitrability, the Court did not need to address the issue.

    The opening theme to Walker, Texas Ranger, is available on YouTube:

 

 

Conflicts: Court Of Appeal Affirms Order Denying Motion To Disqualify Counsel Who Allegedly Learned Confidential Information Through Settlement

A Hypothetical Question:  What If Confidential Information That Could Be The Basis For Disqualifying An Attorney Is Obtained Through Mediation?

        Gobar v. Gong, D070876 (4/1  6/26/17) (Huffman, Benke, Haller) (unpublished) involves unsuccessful efforts by defendant Gong to disqualify plaintiff Gobar's attorney who earlier represented a law firm  seeking to collect a money judgment from Gong, as a result of which Gobar's attorney allegedly received confidential information giving him an unfair advantage.  That's a mouthful, so let's unpack it.

        Plaintiff Gobar sought to collect a money judgment obtained against defendant Gong, and to set aside allegedly fraudulent conveyances by Gong.  In order to do so, Gobar hired Herzlich & Blum, LLP (Herzlich).  However, the Herzlich law firm had previously represented Luce, Forward, Hamilton & Scripps, LLP (Luce) in its efforts to collect attorney's fees from Gong.  So Gong moved to disqualify Herzlich, alleging a conflict of interest existed because Luce had previously represented Gong, and during the course of settling the Luce lawsuit against Gong, Herzlich had learned confidential information about Gong's assets that Herzlich could only have learned because it represented Gong's former attorney. 

    Gong relied on Acacia Patent Acquisition, LLC v. Superior Court, 234 Cal.App.4th 1091 (2015) to make his disqualification argument, because Acacia holds that in the "limited realm of cases featuring attorneys as parties opposed to their former clients, lawyers representing the attorney party must avoid participation in substantially related matters, whether thereby their access to privileged information in the former action would potentially serve as an advantage in the latter."

    Both the trial court and the Court of Appeal rejected Gong's argument.  The Court of Appeal concluded that Gong had not shown that Herzlich had discovered confidential information about Gong's assets through settlement, that the asset information was independently available through the public record, and that the lawsuit by Gobar was not substantially similar to the lawsuit by Luce. 

    All of this is a set up for my hypothetical question.  What if the allegedly confidential information had been learned by Herzlich through mediation?  Would the nigh absolute mediation privilege have made it impossible for Gong to introduce information about conflicts into evidence?  Would the same privilege that prevents introducing evidence of malpractice prevent introducing evidence of conflicts?

Conflicts: Disqualification Of Conflicted Attorney Does Not Extend To Law Firm Whose Retention Attorney Facilitates And To Whom Attorney Transfers Files

Mediation Of Dispute Between Brothers Drew Our Attention To This Case.

     Jogani v. Jogani, B268162 (2/1 11/25/16, mod. 11/28/16) (Chaney, Rothschild, Johnson) (unpublished) is about attorney disqualification and conflicts.  The underlying dispute among the Jogani brothers appears to have been sliding up and down the California courts for fifteen years, involving a number of reversals by the Courts of Appeal.  Perhaps the intensity of the brotherly dispute about how to carve up profits of a real estate portfolio has been fueled by “apartment units with a value in excess of $1 billion and equity of around $550 million.”

     What caught my attention was that the transactional attorney who initially represented Shashikant and Haresh Jorgani in their real estate matters “at first attempted to mediate the dispute between the brothers, but ultimately ceased representing Haresh and continued representing only [Shashikant] Jogani by assisting Jogani’s trial attorneys . . . “  An attorney who tries to mediate a dispute between clients steps into a perilous situation.  As the saying goes, “no good deed goes unpunished.”  Resulting conflicts can become a quagmire.

     In a prior appeal, the Court held that the transactional attorney violated the Rule of Professional Conduct governing concurrent conflicting representation, that subsequent representation of Shashikant only, violated the ethical rule against successive conflicting representation, and that as a result, the transactional attorney was disqualified from representing.

     In the current appeal, the issue was whether the transactional attorney’s disqualification required that the trial attorneys to whom the transactional attorney transferred his file also had to be disqualified.

     While the disqualification of the transactional attorney would have resulted in the vicarious disqualification of his own law firm, it did not lead here to the disqualification of the law firm to whom he transferred files.  The record showed the transactional attorney had only assisted “to prosecute the lawsuit” by facilitating the retention of the trial attorneys and delivery of files to the law firm.  While that was enough to disqualify the transactional attorney, it was not enough to disqualify an independent law firm that did not employ him.  “To hold otherwise would be to disqualify not only a conflicted attorney but also any subsequent attorney to whom he delivered the client’s file.”

     COMMENT:  Rather than try to mediate a dispute among two existing clients, the transactional attorney could have suggested that the clients retain independent counsel and try mediating with someone other than himself.  Of course, given a soured relationship among the parties, legal nuclear warfare might still have been the unhappy result.