The National Grange of the Order of Patrons of Husbandry v. California State Grange
Filing
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ORDER signed by Senior Judge William B. Shubb on 5/11/17 ORDERING that plaintiff's Motion to disqualify the Ellis Law Group from this case be, and the same hereby is, DENIED. (Becknal, R)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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NATIONAL GRANGE OF THE ORDER
OF PATRONS OF HUSBANDRY,
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CIV. NO. 2:14-676 WBS DB
MEMORANDUM AND ORDER RE: MOTION
TO DISQUALIFY
Plaintiff,
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v.
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CALIFORNIA GUILD, formerly
doing business as “California
State Grange,”
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Defendant.
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On March 6, 2017, defendant California Guild filed a
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notice with the court (“March 6 notice”) stating that one of its
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attorneys of record, Amanda Griffith of the Ellis Law Group,
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would be withdrawing from this case, and attorney Anthony Valenti
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of the same firm would “remain [one of its] attorneys of
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record.”1
(Docket No. 186.)
Four days after defendant filed the
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Valenti had not appeared in this case prior to the
March 6 notice.
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March 6 notice, plaintiff National Grange notified the court, via
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the present Motion, that Valenti had previously represented
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plaintiff in a related case while at the firm of Porter Scott,
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plaintiff’s current counsel of record.
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(“Pl.’s Mem.”) at 3-4 (Docket No. 190-1).)
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Valenti from this case on the day plaintiff filed its Motion.
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(Docket No. 191.)
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seeks to disqualify the Ellis Law Group from this case on grounds
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that Valenti’s conflict of interest should be imputed to the
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Ellis Law Group.
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I.
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(See Pl.’s Mot., Mem.
Defendant withdrew
Plaintiff’s Motion, now before the court,
(Pl.’s Mot. (Docket No. 190).)
Factual and Procedural Background
Plaintiff brought this action against defendant on
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March 12, 2014, alleging trademark infringement, false
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designation of origin, and unfair competition under the Lanham
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Act.
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judgment to plaintiff on July 14, 2015.
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(Docket No. 60).)
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plaintiff, the parties have continued to engage in extensive
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litigation over defendant’s failure to comply with the court’s
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orders requiring that it cease using the “Grange” trademark, (see
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Mot. for Inj. (Docket No. 126)), and pay plaintiff attorneys’
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fees, (see Mot. for Assignment Order (Docket No. 178)).
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Defendant has been represented by the Ellis Law Group in this
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action since October 11, 2016.
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(Compl. (Docket No. 1).)
The court granted summary
(July 14, 2015 Order
Since the court granted summary judgment to
(See Docket No. 162.)
On March 6, 2017, defendant filed a notice with the
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court stating that it would be withdrawing Amanda Griffith of the
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Ellis Law Group from this case and Anthony Valenti of the same
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firm would “remain [one of its] attorneys of record.”
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(See
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Docket No. 186.)
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Before being hired by the Ellis Law Group, Valenti had
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been employed by Porter Scott, plaintiff’s current counsel of
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record, from March 10 to October 6, 2014.
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Jensen (“Jensen Decl.”) ¶ 6 (Docket No. 190-2).)
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Scott did not represent plaintiff in this action during the time
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it employed Valenti, it did represent plaintiff in a related
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action plaintiff had brought against defendant in the California
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Superior Court (“state action”) during that time.2
(See Decl. of Martin
While Porter
(See id. ¶
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7.)
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working on the state action.
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Decl.”) Ex. 5, Valenti Timesheet (Docket No. 201-1).)
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involvement in the state action included “assist[ing] with
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discovery, draft[ing] memoranda, perform[ing] case law research,
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and communicat[ing] by phone and email with Plaintiff’s former
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president” regarding case-related matters.
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see also Valenti Timesheet (corroborating Jensen declaration).)
While at Porter Scott, Valenti billed twenty-six hours
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(Decl. of Mark Ellis (“Ellis
His
(Jensen Decl. ¶ 7;
Four days after defendant filed the March 6 notice,
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plaintiff filed the present Motion, seeking to disqualify Valenti
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and the Ellis Law Group from this case.
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(Pl.’s Mot.)
As
The state action, like this action, concerns property
disputes which arose between the parties after the parties
disaffiliated in 2012. (See Docket No. 188-1 Ex. 3, Oct. 20,
2015 State Ct. Order at 2.) Whereas this action concerns
ownership of the “Grange” trademark, (see Compl. at 1), the state
action concerns ownership of tangible property, (see Oct. 20,
2015 State Ct. Order at 2). The court judicially notices the
October 20, 2015 state action order submitted by defendant for
the fact that it addresses disputes between the parties over
ownership of tangible property, a fact which neither party
disputes. See Harris v. Cty. of Orange, 682 F.3d 1126, 1132 (9th
Cir. 2012) (noting that federal courts “may take judicial notice
of undisputed matters of public record”).
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defendant has already withdrawn Valenti from this case,3 (see
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Docket No. 191), the only issue presented in plaintiff’s Motion
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that remains pending before the court is whether the Ellis Law
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Group should be disqualified from this case.
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that the Ellis Law Group should be disqualified from this case
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because Valenti’s conflict of interest should be imputed to the
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Ellis Law Group.
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the Ellis Law Group should not be disqualified from this case
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because the Ellis Law Group has screened Valenti from working on
(See Pl.’s Mem. at 7.)
Plaintiff argues
Defendant argues that
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this case since the day it hired him.
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(Docket No. 201).)
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March 6 notice, defendant claims, was a clerical mistake.
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at 5-6.)
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II.
(See Def.’s Opp’n at 4-5
Listing Valenti as an active attorney on the
(Id.
Discussion
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In determining whether the Ellis Law Group should be
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disqualified from this case, the court must apply California law.
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See S.E.C. v. King Chuen Tang, 831 F. Supp. 2d 1130, 1141 (N.D.
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Cal. 2011) (“Federal courts in California look to [California]
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law to decide motions to disqualify.”); see also E.D. Cal. L.R.
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180(e) (“[A]ny attorney permitted to practice in this Court . . .
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shall become familiar with and comply with the standards of
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professional conduct required of members of the State Bar of
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California and contained in the State Bar Act, the Rules of
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Professional Conduct of the State Bar of California, and court
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decisions applicable thereto, which are hereby adopted as
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It is undisputed that Valenti has a conflict of
interest with respect to, and thus may not participate in, this
case. (See Pl.’s Mem. at 4-6; Def.’s Opp’n at 4-6 (Docket No.
201).)
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standards of professional conduct in this Court.”).
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The law of vicarious disqualification, whereby a law
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firm is disqualified from a case on account of its employment of
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an attorney who has a conflict of interest with respect to that
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case, remains unsettled in California.
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unsettled under California law as to when vicarious
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disqualification of a firm is required, and when it is subject to
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a flexible case-by-case analysis.
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Specifically, it remains
In Henriksen v. Great Am. Sav. & Loan, 11 Cal. App. 4th
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109 (1st Dist. 1992), a California appellate court held that a
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firm must be vicariously disqualified from a case when one of its
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attorneys “switche[d] sides” during that case.
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such situations, Henriksen held, no amount of screening will be
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sufficient to remove the taint of conflict from the firm.
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116.
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Id. at 115.
In
Id. at
The California Supreme Court extended Henriksen’s
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holding in Flatt v. Superior Court, 9 Cal. 4th 275 (1994), where
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it stated that a firm must also be vicariously disqualified from
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a case when one of its attorneys previously represented a party
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opposing the firm in the case in a “substantial[ly] relat[ed]”
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but different case.
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Henriksen’s holding, however, was dictum, as Flatt did not decide
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whether a firm should be disqualified.
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(addressing whether an attorney with multiple clients has a duty
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to continue advising one client upon learning that the client’s
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interests conflict with those of another client’s); see also Kirk
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v. First Am. Title Ins. Co., 183 Cal. App. 4th 776, 796 (2d Dist.
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2010) (“The Flatt case . . . was not concerned with whether a
See id. at 283-84.
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Flatt’s extension of
See id. at 279
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tainted attorney’s law firm was subject to vicarious
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disqualification.”).
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The California Supreme Court then called into question
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Flatt’s extension of Henriksen’s holding in People ex rel. Dep’t
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of Corps. v. SpeeDee Oil Change Sys., Inc., 20 Cal. 4th 1135
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(1999), where it stated, after dispositively applying Henriksen’s
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holding to vicariously disqualify the firm in question, that it
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“need not consider” whether the firm in question would also have
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been disqualified from the case had it employed an attorney who
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previously represented the party opposing the firm in the case in
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a “substantially related” but different case and “imposed
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effective screening procedures” to prevent the attorney from
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participating in the case at hand.
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California appellate court decisions have interpreted SpeeDee Oil
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to stand for its unstated assumption that a firm need not be
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vicariously disqualified from a case when it employs an attorney
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who previously represented a party opposing the firm in the case
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in a “substantially related” but different case so long as it
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imposes effective screening procedures to ensure that the
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attorney does not participate in the case at hand.
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Farris v. Fireman’s Fund Ins. Co., 119 Cal. App. 4th 671, 689
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n.17 (5th Dist. 2004).
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Id. at 1151.
Subsequent
See, e.g.,
In view of SpeeDee Oil and the subsequent cases which
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have interpreted it, a California appellate court has summarized
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the present status of vicarious disqualification law in
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California to be as follows: (1) Henriksen’s holding, which
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requires that a firm be vicariously disqualified from a case when
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one of its attorneys switched sides during that case, remains
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good law, and (2) where Henriksen’s holding does not apply,
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including situations where the attorney in question previously
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represented a party opposing his firm in a substantially related
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but different case, the court should conduct a “case-by-case
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analysis,” with a focus on screening procedures implemented by
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the attorney’s firm, to determine whether the firm should be
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vicariously disqualified from the case at hand.
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Cal. App. 4th at 800.
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See Kirk, 183
Because the court is not aware of a California case
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that has disputed Kirk’s summary of California’s vicarious
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disqualification law,4 it will rely on Kirk’s summary in deciding
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the present Motion.
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1016, 1023 (9th Cir. 2016) (“[W]e will generally follow a
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published intermediate state court decision regarding California
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law unless we are convinced that the California Supreme Court
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would reject it.”).
See Tompkins v. 23andMe, Inc., 840 F.3d
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The conflict of interest in this case arises from
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Valenti’s previous representation of plaintiff in the state
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action.
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Because the state action and this action are related but
Plaintiff notes that Hitachi, Ltd. v. Tatung Co., 419
F. Supp. 2d 1158 (N.D. Cal. 2006), in contrast to Kirk, held that
SpeeDee Oil did not invalidate Flatt’s extension of Henriksen’s
holding and Flatt’s extension of Henriksen’s holding remains good
law. (See Pl.’s Mem. at 7.) Hitachi, however, relied partially
on the premise that “no California court case after Henriksen . .
. ha[d] expressly allowed the use of an ethical wall where an
attorney moves from one private firm to another.” Hitachi, 419
F. Supp. 2d at 1164. That premise is no longer true after Kirk.
See Kirk, 183 Cal. App. 4th at 814 (“In sum, we have concluded
that, when a tainted attorney moves from one private law firm to
another, the law gives rise to a rebuttable presumption of
imputed knowledge to the law firm, which may be rebutted by
evidence of effective ethical screening”). Thus, Hitachi is of
limited persuasive value.
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separate cases, Henriksen’s holding does not resolve plaintiff’s
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Motion, and the court must conduct the “case-by-case analysis”
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set forth in Kirk.
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See Kirk, 183 Cal. App. 4th at 800.
Kirk’s case-by-case analysis involves a two-step
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burden-shifting process whereby the party moving for
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disqualification must first “establish[] that [the] attorney [in
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question] is tainted with confidential information” adverse to
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that party.
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“a rebuttable presumption arises that the attorney shared [such]
Id. at 809.
If the moving party meets its burden,
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information with [his] firm,” the non-moving party’s counsel.
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Id. at 809-10.
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rebut the presumption of shared confidences by establishing that
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the attorney’s firm has imposed “ethical screening [that] will
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effectively prevent the sharing of confidences in [the]
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particular case.”
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The burden then shifts to the non-moving party to
Id. at 801.
Here, plaintiff has met its burden of establishing that
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Valenti is tainted with confidential information adverse to it.
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Under California law, a “court will conclusively presume that
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[an] attorney possesses confidential information adverse to [his]
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former client” if “the former client establishes the existence of
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a substantial relationship between” the attorney’s “former and
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current representation[s].”
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see also City Nat. Bank v. Adams, 96 Cal. App. 4th 315, 327 (2d
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Dist. 2002) (same).5
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Henriksen, 11 Cal. App. 4th at 114;
“[A] ‘substantial relationship’ exists” for
Defendant cites Adams v. Aerojet-Gen. Corp., 86 Cal.
App. 4th 1324 (3d Dist. 2001) for the proposition that the
presumption of exposure to confidential information can be
rebutted. (See Def.’s Sur-Reply at 4-7 (Docket No. 208).) Even
if the court were to follow that case, the evidence before the
court does not indicate that Valenti was not exposed to
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these purposes “whenever the subjects of the prior and the
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current representations are linked in some rational manner.”
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Jessen v. Hartford Cas. Ins. Co., 111 Cal. App. 4th 698, 711 (5th
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Dist. 2003).
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this action “are linked in [a] rational manner,” as both actions
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concern property disputes which arose between the parties after
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the parties disaffiliated in 2012.
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It is clear to the court that the state action and
See supra note 2.
Defendant contends that the state action and this
action are not substantially related because this action concerns
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ownership of the “Grange” trademark while the state action
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concerns ownership of tangible property, and plaintiff stated in
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its Complaint that “[t]his . . . action involves . . .
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substantially different claim[s]” from the claims alleged in the
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state action.
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(Docket No. 208).)
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contention that the distinction between tangible and intangible
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property is material to whether this action is substantially
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related to the state action for vicarious disqualification
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purposes.
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property at issue, they each concern, at core, the same question
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of whether defendant may properly assume the identity of the
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California State Grange6 after it disaffiliated from plaintiff in
(Def.’s Sur-Reply at 7-8 (citing Compl. ¶¶ 5-6)
The court disagrees with defendant’s
While the two actions may differ in terms of the type
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confidential information at Porter Scott. Valenti’s Porter Scott
billing records indicate that he “communicated by phone and email
with Plaintiff’s former president” and conducted “discovery,
drafted memoranda, [and] performed case law research” on
plaintiff’s behalf while at Porter Scott. (Jensen Decl. ¶ 7; see
also Valenti Timesheet (corroborating Jensen declaration).) Each
of those activities indicates exposure to client confidences.
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The court judicially notices paragraph nine of the
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2012.
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action in a rational manner.
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plaintiff’s Complaint, the court will not accord any material
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weight to that representation because it was not addressed to the
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issue of vicarious disqualification.
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That question clearly links the state action and this
As for the representation stated in
Because the state action and this action are linked in
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a rational manner, they are “substantially related.”
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court must presume that Valenti is tainted with confidential
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information adverse to plaintiff.
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Thus, the
See Henriksen, 11 Cal. App.
4th at 114; City Nat. Bank, 96 Cal. App. 4th at 327.
Having found that Valenti is tainted with confidential
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information adverse to plaintiff, the court next considers
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whether defendant has rebutted the presumption of shared
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confidences by establishing that the Ellis Law Group has imposed
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“ethical screening [that] will effectively prevent the sharing of
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confidences in [this] case.”
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Defendant represents, citing declarations from
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attorneys and other employees at the Ellis Law Group, that
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Valenti has been screened from participating in this action since
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the beginning of his employment at the Ellis Law Group.
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Opp’n at 4 (citing Ellis Decl. ¶ 5 (Docket No. 201-1) and Decl.
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of Anthony Valenti (“Valenti Decl.”) ¶ 8 (Docket No. 201-14)).)
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According to defendant, all employees assigned to this action at
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the Ellis Law Group “were instructed not to talk to Mr. Valenti
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declaration of Ed Komski (Docket No. 54-2) filed in National
Grange and California State Grange v. California Guild and Robert
McFarland, Civ. No. 2:16-201 WBS DB (E.D. Cal. filed Feb. 1,
2016) (“Grange II”) for the undisputed fact that the California
State Grange is plaintiff’s California affiliate. See Harris,
682 F.3d at 1132.
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(Def.’s
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about the Grange matters, and [Valenti] was so instructed as
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well.”
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Decl. of Paula Mahan-Crary (“Mahan-Crary Decl.”) ¶ 2 (Docket No.
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201-11), Decl. of Amanda Griffith (“Griffith Decl.”) ¶ 6 (Docket
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No. 201-7), and Decl. of Aleysya Nalbandyan (“Nalbandyan Decl.”)
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¶ 4 (Docket No. 201-2)).)
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“segregated from Grange files, which are stored in a Grange war
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room, to which he has no access.”
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¶ 7 and Mahan-Crary Decl. ¶ 4).)
(Id. at 4-5 (citing Ellis Decl. ¶ 8, Valenti Decl. ¶ 8,
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Valenti has also purportedly been
(Id. at 5 (citing Ellis Decl.
The “ethical wall” imposed on Valenti since his arrival
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at the Ellis Law Group, according to defendant, has been
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effective.
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has “communicated with Mr. Valenti regarding information he
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learned or work he did at Porter Scott,” defendant represents,
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and Valenti has purportedly “never worked on any Grange matter,”
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“participated in conferences on Grange cases,” or “participated
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in internal communications about the [Grange] cases” while at the
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Ellis Law Group.
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¶ 6, Mahan-Crary Decl. ¶ 6, Griffith Decl. ¶ 4, Nalbandyan Decl.
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¶ 4, and Decl. of Robert McFarland (“McFarland Decl.”) ¶ 11).)
No Ellis Law Group employee assigned to this action
(Id. (citing Valenti Decl. ¶¶ 8-9, Ellis Decl.
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Notwithstanding the ethical wall that the Ellis Law
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Group has imposed on Valenti, the March 6 notice filed by the
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Ellis Law Group lists Valenti as an active attorney in this case.
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(Docket No. 186.)
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plaintiff show that Mark Ellis, an attorney at the Ellis Law
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Group, copied Valenti on scheduling emails relevant to a separate
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action involving the California State Grange (“scheduling
Additionally, a set of emails submitted by
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emails”).7
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202-1).)
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suggests, show that the Ellis Law Group’s ethical wall has not
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been effective in preventing Valenti from actively participating
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in “Grange”-related cases, including this case, and, in doing so,
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using confidential information he obtained at Porter Scott
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against plaintiff in this case.
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Reply at 7 (Docket No. 202).)
(See Pl.’s Reply Ex. C, Scheduling Emails (Docket No.
The March 6 notice and scheduling emails, plaintiff
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(See Pl.’s Mem. at 8; Pl.’s
While the March 6 notice and scheduling emails
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establish that Ellis Law Group employees have not been perfect in
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their efforts to isolate Valenti from “Grange”-related cases,
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including this case, they do not establish that Valenti is
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actively participating in this case, as plaintiff suggests.
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The March 6 notice, defendant explains, lists Valenti
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as an active attorney in this case because the Ellis Law Group
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paralegal who filed the notice forgot to add another attorney’s
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name in place of Valenti’s name before filing the notice.
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Law Group paralegals, according to defendant, have created a
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number of “template” attorney withdrawal notices which use
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Valenti’s name as a “placeholder” until other attorneys’ names
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are added.
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Jennifer Mueller (“Mueller Decl.”) ¶¶ 3-4 (Docket No. 201-10)).)
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The March 6 notice, defendant explains, was one such “template”
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attorney withdrawal notice, and Valenti’s name was left on the
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notice by “pure mistake.”
Ellis
(Id. at 5 (citing Ellis Decl. ¶ 9 and Decl. of
(Id. at 6.)
Valenti, defendant
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That action is entitled California State Grange and Ed
Komski v. California Grange Foundation, No. 34-2016-192665 CU MC
GDS (Cal. Sup. Ct. filed Apr. 5, 2016).
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represents, “was never expected to be [an] active . . . attorney”
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in this case.
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Rosanne Estrella (“Estrella Decl.”) ¶ 5 (Docket No. 201-12), and
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Mueller Decl. ¶ 5).)
(Id. at 5 (citing Ellis Decl. ¶ 9, Decl. of
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The scheduling emails, defendant explained at oral
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argument, include Valenti as a copied party because the name
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recognition function on Ellis’ computer recognized part of
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another attorney’s name, which Ellis had typed, to be Valenti’s
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name, and added Valenti to the emails without Ellis’ knowledge.
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Defendant represented that Ellis never intended to copy Valenti
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on the emails, and that doing so was also a pure mistake.
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emails did not address any substantive legal matters, and Valenti
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did not actively participate in the emails.
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Emails.)
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The
(See Scheduling
In sum, the March 6 notice and scheduling emails both
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appear to have included Valenti by mistake.
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documents appear to have included Valenti by mistake, they do not
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establish that Valenti is actively participating in this case.
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Having been satisfied that neither document establishes Valenti’s
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active participation in this case, the court is left with no
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evidence showing that Valenti is using or sharing confidential
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information he obtained at Porter Scott in this case.8
Because both
Without
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Plaintiff cites the fact that the Ellis Law Group is an
eight-attorney firm and the fact that Valenti shares a secretary
with another Ellis Law Group attorney who is assigned to “Grange”
cases as circumstantial evidence supporting a reasonable
inference that Valenti disclosed confidential information to
Ellis Law Group staff. (See Pl.’s Reply at 8-9.) Neither fact
cited by plaintiff supports that inference. The relevant issue
here is whether Valenti disclosed confidential information to
Ellis Law Group staff. How many attorneys comprise the Ellis Law
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such evidence, and in light of the numerous declarations
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submitted by defendant testifying that the Ellis Law Group has
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taken steps to ethically screen Valenti from this case and
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Valenti has not actively participated in this case, the court
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will not disqualify the Ellis Law Group from this case.
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Kirk, 183 Cal. App. 4th at 801.
7
See
The court’s decision here is guided in part by the
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Ninth Circuit’s admonition that in deciding motions to
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disqualify, courts should give consideration to a client’s “right
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to choice of counsel.”
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(9th Cir. 2016) (quoting William H. Raley Co. v. Superior Court,
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149 Cal. App. 3d 1042, 1048 (4th Dist. 1983)).
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disqualify counsel “ultimately . . . involves a conflict between
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a client’s right to counsel of his choice and the need to
15
maintain ethical standards of professional responsibility.”
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Comden v. Superior Court, 20 Cal. 3d 906, 915 (1978).
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need to maintain ethical standards of professional
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responsibility” is an important policy consideration, it does not
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always outweigh a party’s right to choice of counsel.
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183 Cal. App. 4th at 807-808, 817.
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whose counsel is at issue has offered extensive affidavit
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evidence indicating that its counsel has put in place ethical
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screening with respect to the attorney in question, and no
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evidence shows that the attorney has breached confidences, the
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need to maintain ethical standards of professional responsibility
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does not outweigh the party’s right to choice of counsel.
Radcliffe v. Hernandez, 818 F.3d 537, 547
A motion to
While “the
See Kirk,
Where, as here, the party
See
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Group and who Valenti’s secretary is have no bearing upon that
issue.
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id. at 801, 817.
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For the reasons stated in this Order, the court will
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deny plaintiff’s Motion to disqualify the Ellis Law Group from
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this case.
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IT IS THEREFORE ORDERED that plaintiff’s Motion to
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disqualify the Ellis Law Group from this case be, and the same
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hereby is, DENIED.
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Dated:
May 11, 2017
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