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)

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