Novelty Textile Inc v. Windsor Fashions Inc et al

Filing 25

ORDER DENYING MOTION TO DISQUALIFY PLAINTIFFS COUNSEL 18 by Judge Dean D. Pregerson . (lc). Modified on 3/20/2013 (lc).

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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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NOVELTY TEXTILE, INC., a
California corporation,

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Plaintiff,
v.
WINDSOR FASHIONS, INC., a
California corporation;
XTAREN, INC., a California
corporation,

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Defendants.
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___________________________

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Case No. CV 12-05602 DDP (MANx)
ORDER DENYING MOTION TO
DISQUALIFY PLAINTIFF’S COUNSEL
[Dkt. No. 18]

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Presently before the court is Defendant Xtaren, Inc.

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(“Xtaren”)’s Motion to Disqualify Plaintiff’s Counsel.

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I. BACKGROUND

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Plaintiff Novelty Textile, Inc. is “engaged in the apparel

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industry as a textile converter of imported and domestic

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fabrications.”

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exclusive rights to “unique two-dimensional graphic artworks” that

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(Compl. ¶ 1.)

Plaintiff creates and purchases

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are primarily used on textiles and garments sold within the fashion

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industry.

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Fashions, Inc. (“Windsor”) (collectively “Defendants”) sold,

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manufactured and/or distributed fabric and/or garments featuring a

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design identical or substantially similar to a design to which

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Plaintiff owns a registered copyright.

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Xtaren is a paying member of the Korean American Manufacturers

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Association (“KAMA”).1

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April 11, 2012, the Law Offices of Jeong sent a cease-and-desist

(Id.)

Plaintiff alleges that Xtaren and Windsor

(Id. at 4.)

(Chong Decl. ¶ 12, Exh. D.)

On or about

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letter2 to Windsor on behalf of Plaintiff alleging copyright

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infringement for an apparel product Windsor once sold.

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¶ 8.)

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demanding indemnification according to the terms of their purchase

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agreement.

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the cease-and-desist letter sent to Windsor by Jeong’s office.

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(Id. ¶ 8.)

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(Kim Decl.

Windsor’s counsel, Manning & Kass, sent a letter to Xtaren

(Id. ¶ 5.) Attached to the indemnification letter was

Dean Kim (“Kim”) is Xtaren’s general management assistant.

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(Id. ¶ 2.)

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Windsor, he called several of the KAMA attorneys to discuss it.

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(Id. ¶ 7.)

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KAMA attorneys, and prior to the meeting realized that Jeong’s

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office had sent the cease-and-desist letter to Windsor.

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Kim made an appointment with Jeong, who was one of the

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(Id. ¶ 8.)

KAMA appears to be a “non-profit, member based service
organization” which offers many services to its paying members,
including “Free Legal Consulting Referral.” (Motion to Disqualify
(“Motion”) 7; Chong Decl., Exh. C.) As discussed below, all of
Xtaren’s Exhibits regarding KAMA are inadmissible translations of
the KAMA website into English using Google Translate. The court
therefore does not rely on any of these translated Exhibits except
as background.
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Kim states that after receiving the letter from

This letter was not provided to the court.
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At that point, Kim consulted KAMA and Xtaren management and decided
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to go ahead with the meeting with Jeong, “since Jeon was KAMA’s
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General Counsel and the consultation was free.”

(Id. ¶ 10.)

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Kim asserts that he met with Jeong and told him he was from
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Xtaren, but did not show him the cease-and-desist letter.

(Id. ¶

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11.)
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According to Kim:
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[Kim] told Jeong the exact situation except for the
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actual product in dispute or the company Xtaren had to
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indemnify.

Instead, [Kim] disclosed to Jeong exactly

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half of the number of units Xtaren sold and exactly half
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of the price it was sold for and simply stated to Jeong
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that Xtaren received a demand for indemnification from a
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retailer for an apparel product that Xtaren sold them.
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[Kim] told Jeong that the apparel product that
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Xtaren sold to the retailer was manufactured by a Chinese
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company in China and was purchased by Xtaren for sale to
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third parties.

Jeong advised [Kim] that the Chinese

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company who manufactured the apparel product may be
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jointly liable, but that it would be difficult for Xtaren
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to pursue litigation against a Chinese company because of
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jurisdiction issues and advised [Kim] that the best way
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to resolve this case was to reach settlement before
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Plaintiff filed suit.
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3

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(Id. ¶¶ 12-13.)

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from Xtaren.

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Xtaren but I did not show Jeong the actual cease and desist

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letter.”), with Kim Reply Decl. ¶ 9 (“When Jeong asked what company

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I was from, I told him I was from ‘Cal’s’ and he understood and

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wrote it down as ‘Kar’s’.”).)

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Kim may or may not have told Jeong that he was

(Compare Kim Decl. ¶ 8 (“I told Jeong that I was from

Kim claims that Jeong advised him that the case could be

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settled for “somewhere between $4,000 to $6,000,” and that Jeong

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would charge $2,000 in legal fees for a settlement, and more to

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represent Xtaren if it did not settle. (Id. ¶ 14.)

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Jeong has no record of a meeting with Kim.

(Jeong Decl. ¶ 5.)

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Xtaren claims that some handwritten notes from the meeting prove

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that it took place.

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1.)

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content pertains to a different case involving Star Fabrics and LA

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Printex.

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notes.

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II. LEGAL STANDARD

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(For the alleged notes, see Jeong Decl., Exh.

Jeong identified the handwriting as his own, but believes the

(Id. ¶ 8.) Kim disagrees with that interpretation of the

(Kim Reply Decl., ¶¶ 6-10.)

“The trial court is vested with the power ‘[t]o control in

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furtherance of justice, the conduct of its ministerial officers.’”

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Henriksen v. Great Am. Sav. & Loan, 14 Cal. Rptr. 2d 184, 186 (Ct.

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App. 1992).

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disqualify an attorney.

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determining matters of disqualification.

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F.3d 990, 995 (9th Cir. 2000).

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The court’s inherent power includes the power to
Id.

The court applies state law in
In re Cnty. of L.A., 223

The starting point for the court’s analysis is Rule 3-310(E)
of the California Rules of Professional Conduct (“Avoiding the

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Representation of Adverse Interests”).3

It provides, in relevant

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part, that “[a] member shall not, without the informed written
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consent of the client or former client, accept employment adverse
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to the client or former client where, by reason of the
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representation of the client or former client, the member has
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obtained confidential information material to the employment.”
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In order to prevail on a motion to disqualify, the moving
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party and former client must demonstrate either: (1) that the
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former attorney actually possesses confidential information adverse
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to the former client; or (2) that there is a "’substantial
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relationship’ between the former and current representation.”

H.F.

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Ahmanson & Co. v. Salomon Bros., Inc., 229 Cal. App. 3d 1445, 1452
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(Ct. App. 1991).
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III. DISCUSSION
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The threshold question is whether an attorney-client
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relationship was formed between Jeong and Xtaren. Without such a
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relationship, there is no basis on which to disqualify Jeong.
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Defendants offer two sources of an attorney-client relationship.
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First, they argue that because Xtaren is a paying member of KAMA,
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and because Jeong is one of several attorneys serving as general
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counsel for KAMA, Jeong had a “legal, business, financial,
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professional, or personal relationship” with Xtaren that would make
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him subject to the disclosure requirements of California Rules of
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The Central District of California has adopted the Rules
of Professional Conduct of the State Bar of California, and the
decisions construing them, as the governing standards of
professional conduct. See C.D. Cal. L.R. 83-3.1.2.

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Professional Conduct Rule 3-310(B)(1).

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assert that the alleged meeting between Kim and Jeong created an

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attorney-client relationship and involved the transmission of

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confidential information to Jeong.

Additionally, Defendants

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A. Attorney-Client Relationship Based on KAMA Membership

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Defendants have provided evidence purporting to indicate the

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benefits that Xtaren derives from its KAMA membership.

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notes, first, that a translation by Google Translate is not

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sufficiently reliable to make it admissible.

The court

The pages of the KAMA

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website offered as Exhibits were translated by Google Translate.

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(Chong Decl. ¶ 6.)

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face.

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nonsensical positions “Torture CPA” and “Torture customs,” along

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with “General Counsel.”

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the translated website information in determining the services

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offered by KAMA and its membership benefits.

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KAMA does offer, as stated on the website translation, “Free Legal

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Consulting Referral” (Chong Decl., Exh. C), this is not sufficient

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to create a relationship that would “substantially affect [the

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attorney’s] representation” of Novelty, absent an actual

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communication between a KAMA attorney and a KAMA member.

The translation’s unreliability is clear on its

Exhibit B to Chong’s Declaration gives information on the

The court therefore cannot rely on any of

Even assuming that

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B. Attorney-Client Relationship Based on Meeting

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The parties dispute whether the meeting between Kim and Jeong

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took place.

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place, disqualifying Jeong in this situation would clear the way

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for one party to disqualify opposing counsel at will.

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knew that Jeong represented the opposing party in this action and

The court finds that even assuming that a meeting took

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Here, Kim

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concedes that he withheld this information from Jeong, such that
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Jeong “had no reason to know of Xtaren’s indemnification clause
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with Windsor or that [Kim] was in receipt of the letter Jeong sent
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to Windsor.”

(Kim Decl. ¶ 11.)

Kim may well have received bad

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advice from KAMA and Xtaren’s management which led him to consult
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with Jeong, but the fact remains that he went into the meeting with
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Jeong knowing that Jeong represented the opposing party.

In that

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meeting Kim withheld from Jeong the information that would have
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triggered Jeong’s duty to consider conflicts of interest.

In such

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circumstances, disqualifying Jeong does not protect a client from
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an attorney’s conflict of interest because the client has knowingly
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created the conflict.

If a client knowingly creates a conflict of

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interest, he cannot then ask the court to protect him from himself
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by disqualifying the innocent attorney.
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The court is aware that Kim is not an attorney and that
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English is apparently not his first language.

If Kim had in fact

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innocently disclosed significant confidential information, the
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court might attempt to craft a solution to preserve the client’s
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interests.

In this case, however, Kim intentionally altered the

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facts of the case that he was presenting to Jeong, demonstrating
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that he had some sense that he should not be giving Jeong certain
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information and reducing the likelihood that he actually
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communicated confidential information.
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Although under normal circumstances a preliminary meeting
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between an attorney and a potential client creates a confidential
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relationship, where, as here, the client went into the meeting with

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opposing counsel knowingly and intentionally, it is not appropriate

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to disqualify the innocent attorney.

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IV. CONCLUSION

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For the reasons stated above, the Motion is DENIED.
IT IS SO ORDERED.

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Dated: March 20, 2013
DEAN D. PREGERSON
United States District Judge

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