Aoki et al v. Gilbert et al

Filing 67

MEMORANDUM and ORDER signed by Judge Morrison C. England, Jr. on 6/26/2012 DENYING, without prejudice, 41 Motion to Disqualify Attorneys; DENYING, without prejudice, 7 Motion to Dismiss for Lack of Jurisdiction; DENYING, without prejudice, 8 Mo tion to Dismiss; DENYING, without prejudice, 9 Amended Motion to Dismiss for Lack of Jurisdiction; DENYING, without prejudice, 10 Motion to Dismiss/Motion for More Definite Statement; ORDERING defendants to re-notice said dispositive motions or otherwise respond to Plaintiff's Complaint within 5 days. (Michel, G)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 THOMAS T. AOKI, M.D., an individual, et al., No. 2:11-cv-02797-MCE-CKD 12 Plaintiffs, 13 MEMORANDUM AND ORDER v. 14 15 GREGORY FORD GILBERT, an individual; BIONICA, INC., a Nevada corporation; et al., 16 Defendants. 17 18 ----oo0oo---- 19 20 Through the present action, Plaintiffs Thomas Aoki, M.D. 21 (“Aoki”), and Aoki Diabetes Research Institute (“ADRI”) 22 (collectively, “Plaintiffs”) allege a variety of causes of action 23 arising around the development, patenting, and licensing of 24 therapies intended for the treatment of diabetes. 25 the Court is Plaintiffs’ Motion to Disqualify Defendant Gregory 26 Gilbert (“Gilbert”) and affiliated counsel James L. Brunello 27 (“Brunello”) as counsel for several of Gilbert’s co-Defendants. 28 /// 1 Pending before 1 For the following reasons, Plaintiffs’ Motion is DENIED without 2 prejudice.1 3 BACKGROUND2 4 5 Plaintiffs’ version of the facts.3 A. 6 7 Aoki, a physician licensed to practice in California, 8 founded ADRI in 1986 to further his research efforts into the 9 areas of diabetes and metabolism. ADRI also provides some 10 clinical care using an intravenous insulin therapy called 11 metabolic activation therapy or MAT® treatment. 12 inventor and developer of, and has received a patent for, that 13 treatment. 14 Aoki is the sole During development of the therapy and thereafter Aoki and 15 ADRI also developed trade secret know-how related to the use and 16 application of that technology. 17 additional treatment-related methods and systems for which he 18 obtained further patents (collectively, all above patents are 19 referred to as “the Patents”). 20 the Patents to ADRI. In addition, Aoki developed Aoki purportedly licensed use of 21 22 23 24 25 26 27 1 Because oral argument will not be of material assistance, the Court ordered this matter submitted on the briefing. E.D. Cal. R. 230(g). 2 The parties’ underlying dispute, and the current Motion, arise out of a business relationship between Aoki and Gilbert that dates back to the mid-1980s. Given the long history of the parties’ relationship, and the lack of clarity as to exactly what has evolved over the years, the Court recites only the bare minimum facts here. 3 28 Unless otherwise stated, these facts are taken, sometimes verbatim, from Plaintiffs’ Complaint. 2 1 According to Aoki, at some point he retained Gilbert, a 2 California attorney, to act as his personal counsel. At the same 3 time, Gilbert became engaged in business transactions with Aoki 4 and set up legal entities, including ADRI, to exploit Aoki’s 5 technology. 6 well. 7 document for both the entities and for Aoki and provided legal 8 advice to Plaintiffs over the course of many years, until their 9 relationship dissolved in late 2002 or early 2003. Gilbert acted as counsel for those legal entities as In fact, Gilbert purportedly drafted nearly every legal 10 After Plaintiffs’ relationship with Gilbert ended, Gilbert 11 allegedly proceeded to falsely assert that he, or entities with 12 which he is affiliated, holds all right, title and interest in 13 the MAT® treatment. 14 in concert with the remaining Defendants to set up clinics where 15 the MAT® treatment is now offered. 16 false and misleading statements to patients or would-be patients 17 regarding the status and efficacy of the MAT® treatment as well 18 as regarding available payment options. 19 More specifically, Gilbert purportedly acted Gilbert also allegedly made Plaintiffs thus filed this action bringing claims against 20 all Defendants for patent infringement, copyright infringement, 21 trade secret misappropriation, false and misleading advertising, 22 and unfair competition. 23 fiduciary duty and breach of confidential relationship claims 24 against Defendant Gilbert alone. 25 /// 26 /// 27 /// 28 /// In addition, Plaintiffs allege breach of 3 1 When Gilbert responded to the Complaint4 on behalf of 2 himself and several of his co-Defendants, Plaintiffs filed their 3 instant Motion seeking to disqualify him from appearing in this 4 case.5 5 given “Gilbert’s nearly 20-year history as the personal attorney 6 for Dr. Aoki and general counsel for ADRI, during which he 7 involved himself in nearly every aspect of the business which is 8 the subject and foundation of this lawsuit.” 9 According to Plaintiffs, disqualification is warranted Motion, 1:9-12. In support of their Motion, Plaintiffs submitted a 2003 10 email, purportedly drafted by Gilbert, indicating he believed 11 Aoki had “personally been [his] client for many, many years.”6 12 Declaration of Thomas T. Aoki, M.D. (“Aoki Decl.”), ¶ 2, Exh. A. 13 Plaintiffs also provided a declaration, signed under oath in 14 2004, in which Aoki claimed that: 15 16 17 18 19 20 21 22 23 24 25 26 4 Defendants filed several Motions to Dismiss and a Motion for More Definite Statement (ECF Nos. 7-10). Per its December 29, 2011, Memorandum and Order, the Court vacated the hearing on those motions pending resolution of Plaintiffs’ current Motion. For clarity of the Court’s docket, those Motions are now DENIED without prejudice to being re-filed and re-noticed for hearing on the Court’s regular civil calendar. 5 Gilbert represents two groups of Defendants. First Gilbert, along with the firm of Cella Lange & Cella LLP, represents himself and the “Bionica Defendants,” which are comprised of Bionica Inc., Bionica Int’l, LLC, Trina Health, LLC, and Trina Health of Newport Beach, LLC. In addition, along with Brunello, Gilbert represents Defendants Kevin J. Buckman, MD, Marc R. Rose, MD, Michael R. McCarthy, Melanie J. Kunz, NP, MedEdCo, LLC, and Diabetic Innovations, LLC. On its face, Plaintiffs’ current Motion targets Gilbert’s representation of the second group of Defendants only. However, by way of their requested relief, Plaintiffs really seek to prevent Gilbert from acting as counsel for any party. See Motion, 9:14-18. 6 27 28 The Court is aware that Defendants object to Plaintiffs’ evidence on a variety of grounds. See ECF No. 46. Given the Court’s rejection of Plaintiffs’ Motion, however, Defendants’ objections are now overruled as moot. 4 1 2 3 4 5 6 Gilbert served as [his] personal legal counsel, assisting [him] in various ways, including review of legal documents, drafting and preparation of legal documents, legal advice, and representing [him] in various disputes with other person(s) and entity(ies). Gilbert represented [Aoki] in a dispute with a Dr. Joseph Silva and another matter involving the Department of Internal Medicine. Gilbert prepared and filed incorporation documents for [ADRI], and also became legal counsel for ADRI. 7 8 9 10 11 12 13 Gilbert provided similar legal services to ADRI, as he had done for [Aoki], reviewing of legal documents, preparation of necessary legal documents, and provision of legal advice when applicable. On behalf of ADRI, Gilbert prepared the legal document for transferring of the MAT license from American Hospital Supply to ADRI. Id., ¶ 3, Exh. B. Finally, Plaintiffs submitted a partial transcript of 14 Gilbert’s testimony from a June 2004 evidentiary hearing before a 15 Nevada state court. 16 transcript Gilbert indicated that he “represented Dr. Aoki in 17 reference to the University of California Davis” and that he had 18 “worked on every patent [Aoki’s] ever had.” 19 noted, however, that he worked in conjunction “with [Aoki’s] 20 counsel” on patents as well. 21 Id., ¶ 4, Exh. C. Pursuant to that Id. Gilbert also Id. In addition, Gilbert stated in his testimony that he handled 22 ADRI’s “equipment and law and contracts, and all commercial 23 activity, running the company, hiring the people.” 24 also admitted that he prepared ADRI’s initial documents, budgets 25 and operating plan. 26 “did everything on the non-clinical side” of ADRI. 27 these facts, Plaintiffs believe disqualification is mandated 28 here. Id. Id. Gilbert Essentially, Gilbert testified that he 5 Id. Based on Gilbert’s version of the facts.7 B. 1 2 3 According to Gilbert, he has been involved in the 4 development of diabetes technologies for more than twenty-five 5 years, ever since his daughter was diagnosed with Type 1 diabetes 6 at age 2. 7 Chief Executive Officer (“CEO”) of an international innovative 8 pump manufacturing company. 9 Gilbert began work on designing an insulin pump for use in the At that time, Gilbert was a practicing lawyer and the After his daughter’s diagnosis, 10 treatment of diabetes. 11 work, Gilbert eventually met Aoki, and the two thereafter 12 partnered together to develop and commercialize a new approach to 13 the treatment of diabetes using Aoki’s technology and Gilbert’s 14 pumps. 15 Due to his increasing diabetes-related Gilbert formed ADRI in approximately 1986 or 1987 and 16 thereafter served as its Executive Director. After realizing 17 that fund-raising presented an issue for a non-profit entity, 18 Gilbert formed a “for profit” company, AMSys, to raise additional 19 funds. 20 his technology to that new entity. 21 continued working on pumps through his own affiliated entities, 22 namely some of the Bionica Defendants. 23 course of many years, Gilbert became the CEO of AMSys and he and 24 Aoki reverse merged AMSys into a new company. 25 /// According to Gilbert, at AMSys’ formation, Aoki licensed In the meantime, Gilbert Subsequently, over the 26 27 28 7 Unless otherwise stated, these facts are derived, at times verbatim, from the Declaration of Gregory Ford Gilbert (“Gilbert Decl.”). 6 1 Eventually, after that new company experienced difficulties, 2 Gilbert purchased the license himself via one of his other 3 entities. 4 eventually resolved by execution of a Settlement Agreement and 5 Release, which Gilbert argues operated to assign him the license 6 rights in the pertinent technology. 7 All disputes between the parties were purportedly According to Gilbert, he did not represent Aoki with respect 8 to the matters at issue in this lawsuit, which are the various 9 licenses issued or transferred to him. To the contrary, Gilbert 10 claims that in relation to each of these proceedings he 11 represented himself and his own companies. 12 Plaintiffs have shown no basis for disqualification. Gilbert thus argues 13 STANDARD 14 15 16 In deciding motions for disqualification, the court applies 17 the relevant state law. 18 990, 995 (9th Cir. 2000); see also E.D. Cal. Local Rule 180(e) 19 (adopting California’s standards of professional conduct). 20 applicable standards of professional responsibility are found in 21 the Rules of Professional Conduct of the State Bar of California, 22 which provide, in pertinent part: 23 In re County of Los Angeles, 223 F.3d A member shall not, without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the member has obtained confidential information material to the employment. The 24 25 26 27 Cal. Rules Professional Conduct, Rule 3-310(E). 28 /// 7 1 Pursuant to that rule, “[w]here an attorney successively 2 represents clients with adverse interests, and where the subjects 3 of the two representations are substantially related, the need to 4 protect the first client’s confidential information requires that 5 the attorney be disqualified from the second representation.” 6 People ex rel. Dept. of Corporations v. SpeeDee Oil Change 7 Systems, Inc., 20 Cal. 4th 1135, 1146 (1999). 8 the governing test requires that the “[former] client demonstrate 9 a ‘substantial relationship’ between the subjects of the 10 antecedent and current representations.” 11 In this context, Court, 9 Cal. 4th 275, 283 (1994). 12 Flatt v. Superior In applying the “substantial relationship” test, “courts 13 focus less on the meaning of the words substantial and 14 relationship and look instead at the practical consequences of 15 the attorney’s representation of the former client.” 16 Ahmanson & Co. v. Salomon Brothers, Inc., 229 Cal. App. 3d 1445, 17 1454 (1991). 18 material to the current dispute would normally have been imparted 19 to the attorney by virtue of the nature of the former 20 representation.” 21 the similarities between the two factual situations, the legal 22 questions posed, and the nature and extent of the attorney’s 23 involvement with the cases.” 24 quotations omitted). 25 examine the time spent by the attorney on the earlier cases, the 26 type of work performed, and the attorney’s possible exposure to 27 formulation of policy or strategy.” 28 /// H.F. “The courts ask whether confidential information Id. To this extent, courts should “focus on Id. at 1455 (internal citations and “As part of its review, the court should 8 Id. 1 Throughout its analysis, the Court should nonetheless remain 2 cognizant that “[a] motion to disqualify counsel is a drastic 3 measure which courts should hesitate to impose except when of 4 absolute necessity.” 5 America v. Claude E. Atkins Enterprises, Inc., 2006 WL 3589746, 6 *4 (E.D. Cal.). 7 motivated and tends to derail efficient progress of litigation.” 8 Id. 9 heavy burden and must satisfy a high standard of proof.” Travelers Casualty and Surety Company of “A disqualification motion is often tactically Accordingly, “[t]he party seeking disqualification has a Id. 10 Ultimately, “[d]isqualification motions are subject to strict 11 judicial scrutiny given the potential for abuse.” Id. 12 ANALYSIS 13 14 15 Plaintiffs seek to disqualify Gilbert and related counsel 16 Brunello due to “Gilbert’s nearly 20-year history as the personal 17 attorney for Dr. Aoki and general counsel for ADRI.” 18 1:9-11. 19 Motion, Plaintiffs’ Motion fails for several reasons. First, the only evidence Plaintiffs have produced to 20 demonstrate the existence of a 20-year attorney client 21 relationship is an almost decade-old e-mail, a declaration 22 submitted by Aoki in a Nevada state court proceeding and excerpts 23 of testimony Gilbert gave in another state court proceeding. Most 24 of the statements included within these documents consist of legal 25 conclusions, and they all suffer from a variety of additional 26 flaws as well, not the least of which is that they are aged, lack 27 foundation, are taken out of context and are comprised primarily 28 of hearsay. In sum, Plaintiffs’ evidence is weak, at best. 9 1 Moreover, evidentiary shortcomings aside, while it is clear 2 that Gilbert did represent ADRI and Aoki each in some capacity at 3 some time, there is nothing before the Court to indicate Gilbert 4 represented Plaintiffs with respect to matters having a 5 substantial relationship to the current dispute. 6 only statements that potentially give the Court any pause in this 7 regard are those pertaining to Gilbert’s work on the Patents. 8 That being said, it remains unclear exactly what Gilbert’s role 9 was in prosecuting those Patents. In fact, the Indeed, while Gilbert does not 10 appear to deny he did patent work for Aoki, it appears to the 11 Court that Gilbert may have been doing so on his own behalf, or 12 on behalf of the other companies of which he was a principal, in 13 furtherance of a joint venture, in which case Plaintiffs’ 14 confidential communications with counsel would not necessarily be 15 protected. 16 have retained or consulted a lawyer upon a matter of common 17 interest, none of them...may claim a privilege under this article 18 as to a communication made in the course of that relationship 19 when such communication is offered in a civil proceeding between 20 one of such clients...and another of such clients.”). See Cal. Evid. Code 962 (“Where two or more clients 21 Finally, even if the Court had been provided concrete 22 evidence that Gilbert represented Plaintiffs alone regarding the 23 prosecution of those Patents, it does not appear to this Court 24 that any such prosecution will be at issue in this litigation. 25 There is no indication in the record that Defendants intend to 26 challenge the validity of the Patents or Aoki’s development of 27 the underlying technology. 28 /// 10 1 Instead, the issues that will be litigated here arose much later 2 and involve the validity of subsequent agreements and licenses 3 purportedly transferring the rights to the Patents to third 4 parties and then to Gilbert. 5 that Gilbert represented either Plaintiff (especially outside of 6 some sort of joint representation) with respect to these 7 subsequent transactions. 8 9 No facts before the Court indicate Ultimately, the weak record before the Court, coupled with the lengthy and contentious history among the parties, leaves the 10 Court with no immediate way to parse out the facts. The Court is 11 simply not willing to take such a drastic step as to disqualify 12 counsel without a much more solid showing that counsel previously 13 acted as Plaintiffs’ attorney and that the course of that former 14 representation is substantially related to the current 15 litigation. 16 that a substantial relationship between any former and current 17 representation exists, but at present, they have failed to do so. 18 Instead, Plaintiffs are asking that the Court speculate as to, 19 rather than find, the facts. 20 now DENIED without prejudice. 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// Stated another way, Plaintiffs are obligated to show Accordingly, Plaintiffs’ Motion is 11 CONCLUSION 1 2 3 For the reasons just stated, Plaintiffs’ Motion to 4 Disqualify Attorneys (ECF No. 41) is DENIED without prejudice. 5 In addition, for clarity of the Court’s docket, the various 6 pending Motions to Dismiss and the Motion for More Definite 7 Statement originally filed in December of 2011 (ECF Nos. 7-10) 8 are DENIED without prejudice as well. 9 days following the date this Memorandum and Order is Not later than five (5) 10 electronically filed, Defendants shall either re-notice those 11 dispositive motions on the Court’s regular civil calendar or 12 otherwise respond to Plaintiffs’ Complaint. 13 14 IT IS SO ORDERED. Dated: June 26, 2012 15 16 17 _____________________________ MORRISON C. ENGLAND, JR. UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28 12

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