The National Grange of the Order of Patrons of Husbandry v. California State Grange

Filing 212

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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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---11 12 NATIONAL GRANGE OF THE ORDER OF PATRONS OF HUSBANDRY, 13 CIV. NO. 2:14-676 WBS DB MEMORANDUM AND ORDER RE: MOTION TO DISQUALIFY Plaintiff, 14 v. 15 16 CALIFORNIA GUILD, formerly doing business as “California State Grange,” 17 Defendant. 18 19 ----oo0oo---- 20 On March 6, 2017, defendant California Guild filed a 21 22 notice with the court (“March 6 notice”) stating that one of its 23 attorneys of record, Amanda Griffith of the Ellis Law Group, 24 would be withdrawing from this case, and attorney Anthony Valenti 25 of the same firm would “remain [one of its] attorneys of 26 record.”1 (Docket No. 186.) Four days after defendant filed the 27 1 28 Valenti had not appeared in this case prior to the March 6 notice. 1 1 March 6 notice, plaintiff National Grange notified the court, via 2 the present Motion, that Valenti had previously represented 3 plaintiff in a related case while at the firm of Porter Scott, 4 plaintiff’s current counsel of record. 5 (“Pl.’s Mem.”) at 3-4 (Docket No. 190-1).) 6 Valenti from this case on the day plaintiff filed its Motion. 7 (Docket No. 191.) 8 seeks to disqualify the Ellis Law Group from this case on grounds 9 that Valenti’s conflict of interest should be imputed to the 10 Ellis Law Group. 11 I. 12 (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 13 March 12, 2014, alleging trademark infringement, false 14 designation of origin, and unfair competition under the Lanham 15 Act. 16 judgment to plaintiff on July 14, 2015. 17 (Docket No. 60).) 18 plaintiff, the parties have continued to engage in extensive 19 litigation over defendant’s failure to comply with the court’s 20 orders requiring that it cease using the “Grange” trademark, (see 21 Mot. for Inj. (Docket No. 126)), and pay plaintiff attorneys’ 22 fees, (see Mot. for Assignment Order (Docket No. 178)). 23 Defendant has been represented by the Ellis Law Group in this 24 action since October 11, 2016. 25 (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 26 court stating that it would be withdrawing Amanda Griffith of the 27 Ellis Law Group from this case and Anthony Valenti of the same 28 firm would “remain [one of its] attorneys of record.” 2 (See 1 Docket No. 186.) 2 Before being hired by the Ellis Law Group, Valenti had 3 been employed by Porter Scott, plaintiff’s current counsel of 4 record, from March 10 to October 6, 2014. 5 Jensen (“Jensen Decl.”) ¶ 6 (Docket No. 190-2).) 6 Scott did not represent plaintiff in this action during the time 7 it employed Valenti, it did represent plaintiff in a related 8 action plaintiff had brought against defendant in the California 9 Superior Court (“state action”) during that time.2 (See Decl. of Martin While Porter (See id. ¶ 10 7.) 11 working on the state action. 12 Decl.”) Ex. 5, Valenti Timesheet (Docket No. 201-1).) 13 involvement in the state action included “assist[ing] with 14 discovery, draft[ing] memoranda, perform[ing] case law research, 15 and communicat[ing] by phone and email with Plaintiff’s former 16 president” regarding case-related matters. 17 see also Valenti Timesheet (corroborating Jensen declaration).) While at Porter Scott, Valenti billed twenty-six hours 18 (Decl. of Mark Ellis (“Ellis His (Jensen Decl. ¶ 7; Four days after defendant filed the March 6 notice, 19 plaintiff filed the present Motion, seeking to disqualify Valenti 20 and the Ellis Law Group from this case. 21 22 23 24 25 26 27 28 2 (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”). 3 1 defendant has already withdrawn Valenti from this case,3 (see 2 Docket No. 191), the only issue presented in plaintiff’s Motion 3 that remains pending before the court is whether the Ellis Law 4 Group should be disqualified from this case. 5 that the Ellis Law Group should be disqualified from this case 6 because Valenti’s conflict of interest should be imputed to the 7 Ellis Law Group. 8 the Ellis Law Group should not be disqualified from this case 9 because the Ellis Law Group has screened Valenti from working on (See Pl.’s Mem. at 7.) Plaintiff argues Defendant argues that 10 this case since the day it hired him. 11 (Docket No. 201).) 12 March 6 notice, defendant claims, was a clerical mistake. 13 at 5-6.) 14 II. (See Def.’s Opp’n at 4-5 Listing Valenti as an active attorney on the (Id. Discussion 15 In determining whether the Ellis Law Group should be 16 disqualified from this case, the court must apply California law. 17 See S.E.C. v. King Chuen Tang, 831 F. Supp. 2d 1130, 1141 (N.D. 18 Cal. 2011) (“Federal courts in California look to [California] 19 law to decide motions to disqualify.”); see also E.D. Cal. L.R. 20 180(e) (“[A]ny attorney permitted to practice in this Court . . . 21 shall become familiar with and comply with the standards of 22 professional conduct required of members of the State Bar of 23 California and contained in the State Bar Act, the Rules of 24 Professional Conduct of the State Bar of California, and court 25 decisions applicable thereto, which are hereby adopted as 26 27 28 3 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).) 4 1 standards of professional conduct in this Court.”). 2 The law of vicarious disqualification, whereby a law 3 firm is disqualified from a case on account of its employment of 4 an attorney who has a conflict of interest with respect to that 5 case, remains unsettled in California. 6 unsettled under California law as to when vicarious 7 disqualification of a firm is required, and when it is subject to 8 a flexible case-by-case analysis. 9 Specifically, it remains In Henriksen v. Great Am. Sav. & Loan, 11 Cal. App. 4th 10 109 (1st Dist. 1992), a California appellate court held that a 11 firm must be vicariously disqualified from a case when one of its 12 attorneys “switche[d] sides” during that case. 13 such situations, Henriksen held, no amount of screening will be 14 sufficient to remove the taint of conflict from the firm. 15 116. 16 Id. at 115. In Id. at The California Supreme Court extended Henriksen’s 17 holding in Flatt v. Superior Court, 9 Cal. 4th 275 (1994), where 18 it stated that a firm must also be vicariously disqualified from 19 a case when one of its attorneys previously represented a party 20 opposing the firm in the case in a “substantial[ly] relat[ed]” 21 but different case. 22 Henriksen’s holding, however, was dictum, as Flatt did not decide 23 whether a firm should be disqualified. 24 (addressing whether an attorney with multiple clients has a duty 25 to continue advising one client upon learning that the client’s 26 interests conflict with those of another client’s); see also Kirk 27 v. First Am. Title Ins. Co., 183 Cal. App. 4th 776, 796 (2d Dist. 28 2010) (“The Flatt case . . . was not concerned with whether a See id. at 283-84. 5 Flatt’s extension of See id. at 279 1 tainted attorney’s law firm was subject to vicarious 2 disqualification.”). 3 The California Supreme Court then called into question 4 Flatt’s extension of Henriksen’s holding in People ex rel. Dep’t 5 of Corps. v. SpeeDee Oil Change Sys., Inc., 20 Cal. 4th 1135 6 (1999), where it stated, after dispositively applying Henriksen’s 7 holding to vicariously disqualify the firm in question, that it 8 “need not consider” whether the firm in question would also have 9 been disqualified from the case had it employed an attorney who 10 previously represented the party opposing the firm in the case in 11 a “substantially related” but different case and “imposed 12 effective screening procedures” to prevent the attorney from 13 participating in the case at hand. 14 California appellate court decisions have interpreted SpeeDee Oil 15 to stand for its unstated assumption that a firm need not be 16 vicariously disqualified from a case when it employs an attorney 17 who previously represented a party opposing the firm in the case 18 in a “substantially related” but different case so long as it 19 imposes effective screening procedures to ensure that the 20 attorney does not participate in the case at hand. 21 Farris v. Fireman’s Fund Ins. Co., 119 Cal. App. 4th 671, 689 22 n.17 (5th Dist. 2004). 23 Id. at 1151. Subsequent See, e.g., In view of SpeeDee Oil and the subsequent cases which 24 have interpreted it, a California appellate court has summarized 25 the present status of vicarious disqualification law in 26 California to be as follows: (1) Henriksen’s holding, which 27 requires that a firm be vicariously disqualified from a case when 28 one of its attorneys switched sides during that case, remains 6 1 good law, and (2) where Henriksen’s holding does not apply, 2 including situations where the attorney in question previously 3 represented a party opposing his firm in a substantially related 4 but different case, the court should conduct a “case-by-case 5 analysis,” with a focus on screening procedures implemented by 6 the attorney’s firm, to determine whether the firm should be 7 vicariously disqualified from the case at hand. 8 Cal. App. 4th at 800. 9 See Kirk, 183 Because the court is not aware of a California case 10 that has disputed Kirk’s summary of California’s vicarious 11 disqualification law,4 it will rely on Kirk’s summary in deciding 12 the present Motion. 13 1016, 1023 (9th Cir. 2016) (“[W]e will generally follow a 14 published intermediate state court decision regarding California 15 law unless we are convinced that the California Supreme Court 16 would reject it.”). See Tompkins v. 23andMe, Inc., 840 F.3d 17 The conflict of interest in this case arises from 18 Valenti’s previous representation of plaintiff in the state 19 action. 20 21 22 23 24 25 26 27 28 4 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. 7 1 separate cases, Henriksen’s holding does not resolve plaintiff’s 2 Motion, and the court must conduct the “case-by-case analysis” 3 set forth in Kirk. 4 See Kirk, 183 Cal. App. 4th at 800. Kirk’s case-by-case analysis involves a two-step 5 burden-shifting process whereby the party moving for 6 disqualification must first “establish[] that [the] attorney [in 7 question] is tainted with confidential information” adverse to 8 that party. 9 “a rebuttable presumption arises that the attorney shared [such] Id. at 809. If the moving party meets its burden, 10 information with [his] firm,” the non-moving party’s counsel. 11 Id. at 809-10. 12 rebut the presumption of shared confidences by establishing that 13 the attorney’s firm has imposed “ethical screening [that] will 14 effectively prevent the sharing of confidences in [the] 15 particular case.” 16 The burden then shifts to the non-moving party to Id. at 801. Here, plaintiff has met its burden of establishing that 17 Valenti is tainted with confidential information adverse to it. 18 Under California law, a “court will conclusively presume that 19 [an] attorney possesses confidential information adverse to [his] 20 former client” if “the former client establishes the existence of 21 a substantial relationship between” the attorney’s “former and 22 current representation[s].” 23 see also City Nat. Bank v. Adams, 96 Cal. App. 4th 315, 327 (2d 24 Dist. 2002) (same).5 25 26 27 28 5 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 8 1 these purposes “whenever the subjects of the prior and the 2 current representations are linked in some rational manner.” 3 Jessen v. Hartford Cas. Ins. Co., 111 Cal. App. 4th 698, 711 (5th 4 Dist. 2003). 5 this action “are linked in [a] rational manner,” as both actions 6 concern property disputes which arose between the parties after 7 the parties disaffiliated in 2012. 8 9 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 10 ownership of the “Grange” trademark while the state action 11 concerns ownership of tangible property, and plaintiff stated in 12 its Complaint that “[t]his . . . action involves . . . 13 substantially different claim[s]” from the claims alleged in the 14 state action. 15 (Docket No. 208).) 16 contention that the distinction between tangible and intangible 17 property is material to whether this action is substantially 18 related to the state action for vicarious disqualification 19 purposes. 20 property at issue, they each concern, at core, the same question 21 of whether defendant may properly assume the identity of the 22 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 23 24 25 26 27 28 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. 6 The court judicially notices paragraph nine of the 9 1 2012. 2 action in a rational manner. 3 plaintiff’s Complaint, the court will not accord any material 4 weight to that representation because it was not addressed to the 5 issue of vicarious disqualification. 6 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 7 a rational manner, they are “substantially related.” 8 court must presume that Valenti is tainted with confidential 9 information adverse to plaintiff. 10 11 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 12 information adverse to plaintiff, the court next considers 13 whether defendant has rebutted the presumption of shared 14 confidences by establishing that the Ellis Law Group has imposed 15 “ethical screening [that] will effectively prevent the sharing of 16 confidences in [this] case.” 17 Defendant represents, citing declarations from 18 attorneys and other employees at the Ellis Law Group, that 19 Valenti has been screened from participating in this action since 20 the beginning of his employment at the Ellis Law Group. 21 Opp’n at 4 (citing Ellis Decl. ¶ 5 (Docket No. 201-1) and Decl. 22 of Anthony Valenti (“Valenti Decl.”) ¶ 8 (Docket No. 201-14)).) 23 According to defendant, all employees assigned to this action at 24 the Ellis Law Group “were instructed not to talk to Mr. Valenti 25 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. 10 26 27 28 (Def.’s 1 about the Grange matters, and [Valenti] was so instructed as 2 well.” 3 Decl. of Paula Mahan-Crary (“Mahan-Crary Decl.”) ¶ 2 (Docket No. 4 201-11), Decl. of Amanda Griffith (“Griffith Decl.”) ¶ 6 (Docket 5 No. 201-7), and Decl. of Aleysya Nalbandyan (“Nalbandyan Decl.”) 6 ¶ 4 (Docket No. 201-2)).) 7 “segregated from Grange files, which are stored in a Grange war 8 room, to which he has no access.” 9 ¶ 7 and Mahan-Crary Decl. ¶ 4).) (Id. at 4-5 (citing Ellis Decl. ¶ 8, Valenti Decl. ¶ 8, 10 Valenti has also purportedly been (Id. at 5 (citing Ellis Decl. The “ethical wall” imposed on Valenti since his arrival 11 at the Ellis Law Group, according to defendant, has been 12 effective. 13 has “communicated with Mr. Valenti regarding information he 14 learned or work he did at Porter Scott,” defendant represents, 15 and Valenti has purportedly “never worked on any Grange matter,” 16 “participated in conferences on Grange cases,” or “participated 17 in internal communications about the [Grange] cases” while at the 18 Ellis Law Group. 19 ¶ 6, Mahan-Crary Decl. ¶ 6, Griffith Decl. ¶ 4, Nalbandyan Decl. 20 ¶ 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. 21 Notwithstanding the ethical wall that the Ellis Law 22 Group has imposed on Valenti, the March 6 notice filed by the 23 Ellis Law Group lists Valenti as an active attorney in this case. 24 (Docket No. 186.) 25 plaintiff show that Mark Ellis, an attorney at the Ellis Law 26 Group, copied Valenti on scheduling emails relevant to a separate 27 action involving the California State Grange (“scheduling Additionally, a set of emails submitted by 28 11 1 emails”).7 2 202-1).) 3 suggests, show that the Ellis Law Group’s ethical wall has not 4 been effective in preventing Valenti from actively participating 5 in “Grange”-related cases, including this case, and, in doing so, 6 using confidential information he obtained at Porter Scott 7 against plaintiff in this case. 8 Reply at 7 (Docket No. 202).) (See Pl.’s Reply Ex. C, Scheduling Emails (Docket No. The March 6 notice and scheduling emails, plaintiff 9 (See Pl.’s Mem. at 8; Pl.’s While the March 6 notice and scheduling emails 10 establish that Ellis Law Group employees have not been perfect in 11 their efforts to isolate Valenti from “Grange”-related cases, 12 including this case, they do not establish that Valenti is 13 actively participating in this case, as plaintiff suggests. 14 The March 6 notice, defendant explains, lists Valenti 15 as an active attorney in this case because the Ellis Law Group 16 paralegal who filed the notice forgot to add another attorney’s 17 name in place of Valenti’s name before filing the notice. 18 Law Group paralegals, according to defendant, have created a 19 number of “template” attorney withdrawal notices which use 20 Valenti’s name as a “placeholder” until other attorneys’ names 21 are added. 22 Jennifer Mueller (“Mueller Decl.”) ¶¶ 3-4 (Docket No. 201-10)).) 23 The March 6 notice, defendant explains, was one such “template” 24 attorney withdrawal notice, and Valenti’s name was left on the 25 notice by “pure mistake.” Ellis (Id. at 5 (citing Ellis Decl. ¶ 9 and Decl. of (Id. at 6.) Valenti, defendant 26 27 28 7 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). 12 1 represents, “was never expected to be [an] active . . . attorney” 2 in this case. 3 Rosanne Estrella (“Estrella Decl.”) ¶ 5 (Docket No. 201-12), and 4 Mueller Decl. ¶ 5).) (Id. at 5 (citing Ellis Decl. ¶ 9, Decl. of 5 The scheduling emails, defendant explained at oral 6 argument, include Valenti as a copied party because the name 7 recognition function on Ellis’ computer recognized part of 8 another attorney’s name, which Ellis had typed, to be Valenti’s 9 name, and added Valenti to the emails without Ellis’ knowledge. 10 Defendant represented that Ellis never intended to copy Valenti 11 on the emails, and that doing so was also a pure mistake. 12 emails did not address any substantive legal matters, and Valenti 13 did not actively participate in the emails. 14 Emails.) 15 The (See Scheduling In sum, the March 6 notice and scheduling emails both 16 appear to have included Valenti by mistake. 17 documents appear to have included Valenti by mistake, they do not 18 establish that Valenti is actively participating in this case. 19 Having been satisfied that neither document establishes Valenti’s 20 active participation in this case, the court is left with no 21 evidence showing that Valenti is using or sharing confidential 22 information he obtained at Porter Scott in this case.8 Because both Without 23 8 24 25 26 27 28 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 13 1 such evidence, and in light of the numerous declarations 2 submitted by defendant testifying that the Ellis Law Group has 3 taken steps to ethically screen Valenti from this case and 4 Valenti has not actively participated in this case, the court 5 will not disqualify the Ellis Law Group from this case. 6 Kirk, 183 Cal. App. 4th at 801. 7 See The court’s decision here is guided in part by the 8 Ninth Circuit’s admonition that in deciding motions to 9 disqualify, courts should give consideration to a client’s “right 10 to choice of counsel.” 11 (9th Cir. 2016) (quoting William H. Raley Co. v. Superior Court, 12 149 Cal. App. 3d 1042, 1048 (4th Dist. 1983)). 13 disqualify counsel “ultimately . . . involves a conflict between 14 a client’s right to counsel of his choice and the need to 15 maintain ethical standards of professional responsibility.” 16 Comden v. Superior Court, 20 Cal. 3d 906, 915 (1978). 17 need to maintain ethical standards of professional 18 responsibility” is an important policy consideration, it does not 19 always outweigh a party’s right to choice of counsel. 20 183 Cal. App. 4th at 807-808, 817. 21 whose counsel is at issue has offered extensive affidavit 22 evidence indicating that its counsel has put in place ethical 23 screening with respect to the attorney in question, and no 24 evidence shows that the attorney has breached confidences, the 25 need to maintain ethical standards of professional responsibility 26 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 27 28 Group and who Valenti’s secretary is have no bearing upon that issue. 14 1 id. at 801, 817. 2 For the reasons stated in this Order, the court will 3 deny plaintiff’s Motion to disqualify the Ellis Law Group from 4 this case. 5 IT IS THEREFORE ORDERED that plaintiff’s Motion to 6 disqualify the Ellis Law Group from this case be, and the same 7 hereby is, DENIED. 8 Dated: May 11, 2017 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15

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