Advanced Steel Recovery, LLC v. X-Body Equipment, Inc. et al

Filing 110

ORDER signed by District Judge Kimberly J. Mueller on 10/8/2019 GRANTING 80 Motion to Withdraw Lauren Katzenellenbogen and Arthur Saunders Rose, of the law firm Knobbe, Martens, Olson & Bear, LLP, as counsel of record for defendant Allstate Paper & Metal Recycling Co., Inc. Allstate is GRANTED 30 days to file a substitution of counsel. (York, M)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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ADVANCED STEEL RECOVERY, LLC,

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Plaintiff/Counter-defendant,

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v.

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No. 2:16-cv-00148-KJM-EFB

ORDER

X-BODY EQUIPMENT, INC., JEWELL
ATTACHMENTS, LLC, J.D.M.L., INC.
dba STANDARD INDUSTRIES, and
ALLSTATE PAPER & METAL
RECYCLING CO., INC.,
Defendants/Counterclaimants.

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Counsel Lauren Keller Katzenellenbogen and Arthur S. Rose, of the law firm

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Knobbe, Martens, Olson & Bear, LLP, renew their motion to withdraw as counsel of record for

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defendant Allstate Paper & Metal Recycling Co., Inc. Mot., ECF No. 80. Counsel first moved to

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withdraw on April 19, 2017, ECF No. 67, but the court denied the motion without prejudice due

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to concerns regarding the thoroughness of counsel’s efforts to notify Allstate of the intended

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withdrawal and because withdrawal would leave Allstate, a corporate party, without counsel, in

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contravention of Local Rule 183(a), ECF No. 72, at 2–4.

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Counsel have since addressed the court’s concerns and now renew their motion to

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withdraw. Mot. The motion is unopposed by all parties, including Allstate itself. Id. at 2, 4. As

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explained below, the motion is GRANTED.

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I.

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LEGAL STANDARD
If withdrawal would leave a client without counsel, Local Rule 182(d) requires the

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withdrawing party to seek leave of court, file a formal motion and provide notice of the

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withdrawal to the client and all other parties who have appeared. The attorney must also provide

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an affidavit stating the current or last known address or addresses of the client and the efforts

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made to notify the client of the motion to withdraw. E.D. Cal. L.R. 182(d). Withdrawal must

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also comply with the Rules of Professional Conduct of the State Bar of California. Id. Rule of

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Professional Conduct Rule 1.16(d) requires an attorney to “take[] reasonable[] steps to avoid

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reasonably[] foreseeable prejudice to the rights of the client, such as giving the client sufficient

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notice to permit the client to retain other counsel, and complying with paragraph (e).” Cal. R.

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Prof. Conduct Rule 1.16(d). The Rules permit withdrawal if the client “breaches a material term

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of an agreement with, or obligation, to the lawyer relating to the representation, and the lawyer

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has given the client a reasonable[] warning after the breach that the lawyer will withdraw unless

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the client fulfills the agreement or performs the obligation,” as well as when “the client

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knowingly[] and freely assents to termination of the representation.” Id. 1.16(b)(5)–(6).

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Whether to grant a motion to withdraw is within the court’s discretion. Liang v.

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Cal-Bay Int’l, Inc., No. 06CV1082-WMC, 2007 WL 3144099, at *1 (S.D. Cal. Oct. 24, 2007)

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(citing LeGrand v. Stewart, 133 F.3d 1253, 1269 (9th Cir. 1998)). Courts consider several factors

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when evaluating a motion to withdraw, including the reasons for withdrawal, possible prejudice

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to the client and other litigants, harm to the administration of justice and possible delay. Deal v.

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Countrywide Home Loans, No. 09-01643, 2010 WL 3702459, at *2 (N.D. Cal. Sept. 15, 2010)

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(citation omitted).

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II.

DISCUSSION

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Here, counsel have established good cause for withdrawal and have complied with

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the applicable local rules, the rules of professional conduct and addressed the concerns previously
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expressed by the court. Principally, counsel seek to withdraw because Allstate is unable to meet

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its financial obligations: “Allstate Paper still has not paid any portion of its long overdue balance,

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is in bankruptcy proceedings, and has been notified of Knobbe’s seeking to withdraw as counsel

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of record in this action[.]” Mot. at 1; see also Lin Decl., ECF No. 80-2, ¶¶ 4–5 (“Allstate Paper

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has ceased operations and is no longer an active business [and] . . . has a significant past-due

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balance and is not in a position to pay Knobbe to represent it going forward in this action.”).

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It is well established that failure to pay attorney’s fees provides grounds for

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withdrawal. Milliner v. Bock Evans Fin. Counsel, Ltd., No. 15-CV-01763-TEH, 2016 WL

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409799, at *1 (N.D. Cal. Feb. 3, 2016) (“[F]ailure to pay attorneys’ fees constitutes good cause

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for withdrawal under Rule [1.16(b)(5)].”). And when a party willingly consents to withdrawal,

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all the more reason exists to permit withdrawal. See Austin Inv. Fund, LLC v. United States, No.

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SACV 11-750 DOC (ANx), 2011 WL 4947550, at *2 (C.D. Cal. Oct. 17, 2011) (listing party’s

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non-objection to counsel’s motion to withdraw as one of numerous reasons to grant withdrawal);

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see also Lin Decl. ¶ 8 (“Allstate Paper hereby knowingly and freely assents and consents to the

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termination of the employment of Knobbe’s motion to withdraw as counsel for Allstate Paper

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. . . .”). Moreover, although corporate parties may not appear before the court without counsel,

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E.D. Cal. L.R. 183(a), “federal courts routinely include, in orders granting motions to withdraw, a

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directive that corporate parties file a substitution of counsel by a date certain or face default,”

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Milliner, 2016 WL 409799, at *2 (citing United States v. High Country Broad. Co., Inc., 3 F.3d

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1244, 1245 (9th Cir. 1993)). For these reasons, and because as explained below Allstate

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acknowledges its need to locate new counsel, its current counsel has provided ample justification

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to permit withdrawal.

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The court is also satisfied that counsel’s withdrawal complies with California

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Rule of Professional Conduct 1.16(d), which requires the withdrawing attorney to “take[]

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reasonable[] steps to avoid reasonably[] foreseeable prejudice to the rights of the client . . . .” In

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addressing the court’s concerns regarding the thoroughness of counsel’s notification efforts,

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counsel contacted Vincent Y. Lin, the personal bankruptcy attorney for the Chief Executive

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Officer of Allstate, James P.Y. Lin, and through attorney Vincent Y. Lin, fully informed Allstate
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of the issues raised in the court’s prior order that may arise as a result of the withdrawal. Mot. at

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2. Counsel also obtained a signed declaration from James P.Y. Lin acknowledging the company

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has been notified of counsel’s intent to withdraw, the circumstances and timing affecting when

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the stay of this action against Allstate1 may be lifted, the requirements of Local Rule 183(a) and

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Allstate’s risk of default should it fail to secure substitute counsel. Id. (citing Lin Decl. ¶¶ 6–8).

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Additionally, counsel obtained CEO Lin’s knowing consent to their withdrawal. Id. (citing Lin

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Decl. ¶ 10). These efforts satisfy the court’s notification concerns and satisfy California Rule of

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Professional Conduct 1.16(d).

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Additionally, withdrawal will not prejudice the remaining parties or delay

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proceedings. Counsel have notified the remaining parties of their intent to withdraw, “and the

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other litigants have all indicated that they will not oppose Knobbe’s motion.” Mot. at 4 (citing

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Rose Decl., ECF No. 69, ¶ 7). Moreover, the parties acknowledge withdrawal will not cause

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them prejudice because the case “is stayed against Allstate Paper pending resolution of the action

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against X-Body and Jewell . . . .” Id.; see also id. at 5 (“[T]his case will likely remain stayed as to

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Allstate Paper for at least another year [as of the motion’s November 9, 2017 filing date], and

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Knobbe’s withdrawal will have no effect on the schedule for the case against X-Body and

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Jewell.”).

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Finally, counsel have satisfied Local Rule 182(d) by providing Allstate’s most

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current address. Lin Decl. ¶ 9.

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III.

CONCLUSION

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For each of these reasons, the motion by Lauren Keller Katzenellenbogen and

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Arthur S. Rose, of the law firm Knobbe, Martens, Olson & Bear, LLP, to withdraw as counsel of

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record for defendant Allstate Paper & Metal Recycling Co., Inc. is GRANTED. The law firm of

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Knobbe, Martens, Olson & Bear, LLP is immediately withdrawn as counsel of record. The Clerk

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On March 30, 2016, the court severed and stayed the action against Allstate pending
resolution of the patent infringement claim by Advanced Steel Recovery, LLC against X-Body
Equipment, Inc. and Jewell Attachments, LLC. See ECF No. 23. The stay of the action against
Allstate remains in effect.
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of Court is directed to temporarily designate Allstate as proceeding without counsel and list

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Allstate CEO James P.Y. Lin, at 8889 Etiwanda Ave, Etiwanda, California 91739, as the

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individual designated to receive all case-related filings. Allstate is granted 30 days to file a

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substitution of counsel. If Allstate has not filed a substitution of counsel within 30 days, then it

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will be subject to further orders of the court, including a possible order to show cause or a notice

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of the potential for default proceedings upon the lifting of the stay.

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IT IS SO ORDERED.
DATED: October 8, 2019.

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UNITED STATES DISTRICT JUDGE

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