Opinion
G062333
08-14-2024
PARADIGM SPORTS MANAGEMENT, LLC, Plaintiff and Respondent, v. EMMANUEL DAPIDRAN PACQUIAO, Defendant and Appellant.
Haight Brown & Bonesteel, Arezoo Jamshidi, Kaitlyn A. Jensen, Bruce Cleeland, Frances Brower and M. Jason Aniel for Defendant and Appellant. Judd Burstein, Judd Burstein and Peter B. Schalk; Price Pelletier, Virginia L. Price and John W. Nielsen; Niddrie | Addams | Fuller | Singh and Victoria E. Fuller for Plaintiff and Respondent.
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County No. 30-202101207553 Walter P. Schwarm, Judge. Affirmed.
Haight Brown & Bonesteel, Arezoo Jamshidi, Kaitlyn A. Jensen, Bruce Cleeland, Frances Brower and M. Jason Aniel for Defendant and Appellant.
Judd Burstein, Judd Burstein and Peter B. Schalk; Price Pelletier, Virginia L. Price and John W. Nielsen; Niddrie | Addams | Fuller | Singh and Victoria E. Fuller for Plaintiff and Respondent.
OPINION
DELANEY, J.
Defendant Emmanual Dapidran Pacquiao appeals from an order denying his motion to disqualify Judd Burstein (Burstein), Judd Burstein, P.C. (the Burstein firm), and local counsel Price Pelletier from representing plaintiff Paradigm Sports Management, LLC (Paradigm), in this action. It is undisputed that Burstein and the Burstein firm represented Pacquiao in a 2005 lawsuit. Pacquiao contends disqualification was required under the applicable test for successive representation cases, and that the trial court abused its discretion in denying the motion. We affirm the order.
FACTS
The following facts are drawn from the trial docket and the declarations and exhibits submitted on the motion to disqualify, except for parts to which the trial court sustained objections. (Jayone Foods, Inc. v. Aekyung Industrial Co. Ltd. (2019) 31 Cal.App.5th 543, 552, fn. 5 [failure to challenge trial court's evidentiary rulings on appeal means the issue is forfeited and reviewing court does not consider excluded evidence].)
We also note Burstein's declaration was not signed under penalty of perjury, as required by Code of Civil Procedure section 2015.5. Pacquiao did not object to the declaration on this ground, either below or on appeal, and has thus forfeited any challenge on appeal. (Robinson v. Grossman (1997) 57 Cal.App.4th 634, 648 ["Issues not presented to the trial court are waived on appeal"].)
I.
THE 2005 CASE
In April 2005, Pacquiao-represented by the Burstein firm and Burstein-sued his former boxing promoter M&M Sports Inc. (M&M Sports) in federal district court, alleging it failed to pay his taxes, allowed business managers to divert millions of dollars away from him, failed to provide him with required disclosures, and failed to secure a promised bout (the 2005 case). The complaint alleged causes of action for breach of contract, breach of fiduciary duty, failure to make disclosures required by promoters under 15 U.S.C. § 6307(e), declaratory relief, and a permanent injunction. In addition to money damages, Pacquiao sought to be released from his promotional agreement with M&M Sports.
On June 1, the federal district court issued a preliminary injunction barring Pacquiao from fighting for a promoter other than M&M Sports. That same month, the case went to a five-day jury trial. Burstein served as Pacquiao's lead trial counsel.
While the jury was deliberating, the parties settled. Burstein negotiated the confidential settlement for Pacquiao. Although the settlement conference transcript was sealed, the court ordered it "may be released to counsel for the parties." According to Burstein, "the case settled on terms that were overwhelmingly favorable to Pacquiao."
II.
THE CURRENT CASE
In June 2021, Paradigm-represented by the Burstein firm, Burstein, and Price Pelletier (collectively, Paradigm's counsel)-sued Pacquiao. It is undisputed that Pacquiao did not consent to Burstein representing Paradigm in the current case. Paradigm alleged Pacquiao refused to honor exclusive rights it had under the agreement to manage and negotiate professional fights and promotion services for Pacquiao, and that he instead secretly contracted to fight with Errol Spence. The complaint alleged causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and declaratory relief. Paradigm sought money damages and an injunction to stop the Pacquiao-Spence bout.
About a month later, Paradigm moved for a preliminary injunction barring Pacquiao from fighting in bouts not arranged through Paradigm, including the Pacquiao-Spence bout. The motion was ultimately denied.
Pacquiao cross-complained, alleging Paradigm falsely promised it would secure him a "mega-fight" with Conor McGregor to induce Pacquiao to retain Paradigm as a manager. Pacquiao also alleged his business manager and Paradigm secretly conspired to negotiate contracts for Pacquiao that served their interests over his. The cross-complaint alleged causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, false promise, fraudulent concealment, and declaratory relief. In addition to money and punitive damages, Pacquiao sought a declaration that the Pacquiao-Spence bout did not violate his agreement with Paradigm.
Pacquiao was originally represented by the law firm of Kinsella Weitzman Iser Kump Holly, from July 2021 (when he first appeared in the current case) to July 2022 (when the firm was permitted to withdraw as counsel). At the outset of the current case, Burstein advised Pacquiao's original firm about the 2005 case. From July until December 2022, Pacquiao represented himself in the lawsuit, but he hired another law firm to help him informally settle with Paradigm. Burstein also raised the 2005 case with Pacquiao's settlement counsel at the start of negotiations. During this time, Paradigm obtained an order deeming admitted requests for admission propounded on Pacquiao.
On December 13, 2022, the law firm of Haight, Brown &Bonesteel substituted in as Pacquiao's counsel. The next day, Pacquiao applied ex parte to continue the trial date-then set for January 6, 2023-for six months and to extend discovery and motion cutoffs to correspond with the new trial date. The court granted a two-month trial continuance but otherwise denied the application.
III.
THE DISQUALIFICATION MOTION
On January 6, 2023, Pacquiao filed a motion to disqualify Paradigm's counsel in the current case. The motion was based on Burstein's representation of Pacquiao in the 2005 case. Pacquiao declared that since boxing was his livelihood, he asked Burstein to do what he could to settle the 2005 action "as quickly as possible so that I could return to boxing." He further declared, "Burstein was intimately familiar with my financial situation, the contracts I had with my managers and promoter, my desire to fight, and what I wanted from settlement discussions." Pacquiao "relied wholly on Mr. Burstein to represent [his] interests in the [2005 case] and to do what was necessary so that [he] could continue boxing." Pacquiao also asked the trial court to strike all discovery motions or pleadings filed by Paradigm's counsel in the current case.
In opposition to the motion, Burstein acknowledged he previously represented Pacquiao in the 2005 case, but Paradigm argued there was no substantial relationship between the 2005 case and the current case (collectively, the two cases). Burstein declared: They involved two different contracts and different theories of damages; Pacquiao acknowledged the contract in the 2005 case was initially binding, but he denies entering into a binding contract with Paradigm; the alleged contract damages are strictly one of contractual interpretation; it was public knowledge that Pacquiao wanted to be released from his contract in the 2005 case so he could work with other promoters; Pacquiao's 2005 financial situation is not relevant to the current case given that he has earned over $500 million from bouts in the intervening 18 years; and in any event Burstein advised Pacquiao's former attorneys at the outset of the current case. Burstein declared disqualification would unfairly prejudice Paradigm, given that Pacquiao was seeking to undo all of Burstein's work on the case since inception, and that the motion was unreasonably late and purely tactical.
IV.
THE TRIAL COURT'S RULING
The trial court denied the disqualification motion. It noted the parties did not dispute Burstein represented Pacquiao in the 2005 case. The court found no substantial relationship between the 2005 case and the current case, for five reasons: (1) they involved different contracts; (2) Pacquiao's financial condition is not an element of Paradigm's claims against him and Pacquiao hasn't shown how his financial condition is relevant to those claims; (3) Pacquiao hasn't shown how his financial condition in 2005 specifically is relevant to Paradigm's claims; (4) one can reasonably expect a preliminary injunction would impact a litigant in any civil action; and (5) Paradigm presented evidence that Pacquiao's financial condition is a matter of "public interest." For these reasons, the court found the confidential information acquired by Burstein in the 2005 case, as set forth in Pacquiao's declaration, "is not directly at issue or critically important in" the current case. The court thus found no substantial risk of confidential information acquired in the 2005 case being used in the current case. Finally, the court noted Pacquiao unreasonably delayed in bringing the motion.
We think the court meant to say public knowledge, not public interest. Paradigm's opposition argues certain allegedly confidential information was "public knowledge."
The case proceeded to trial, and the jury entered a 9-3 verdict in favor of Paradigm for breach of contract, awarding Paradigm $5.1 million in damages, and a 10-2 verdict in favor of Paradigm on Pacquiao's crosscomplaint.
DISCUSSION
Pacquiao argues the trial court applied the incorrect legal standard for a disqualification motion, for three reasons: (1) The court disregarded the presumption that Burstein obtained material confidential information when he previously represented Pacquiao; (2) it required Pacquiao to prove exactly what confidential information Burstein possessed and its relevance to the current case; and (3) it didn't analyze the nature and extent of Burstein's prior representation of Pacquiao. Pacquiao also argues the court erred in finding he unreasonably delayed in bringing the disqualification motion, an alternative basis for denying the disqualification motion. We disagree.
I.
STANDARD OF REVIEW
"Generally, a trial court's decision on a disqualification motion is reviewed for abuse of discretion. [Citations.] If the trial court resolved disputed factual issues, the reviewing court should not substitute its judgment for the trial court's express or implied findings supported by substantial evidence. [Citations.] When substantial evidence supports the trial court's factual findings, the appellate court reviews the conclusions based on those findings for abuse of discretion." (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143-1144 (SpeeDee Oil).)
Where the decision is against the party with the burden of proof and "'"the issue on appeal turns on a failure of proof,"'" that party has "a heavy, perhaps insurmountable, burden on appeal." (Victaulic Co. v. American Home Assurance Co. (2022) 80 Cal.App.5th 485, 505.) Under those circumstances, "'"the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant's evidence was (1) 'uncontradicted and unimpeached' and (2) 'of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.'"'" (Ibid.) And "'unless the trial court makes specific findings of fact in favor of the losing [party], we presume the trial court found the [ ] evidence lacks sufficient weight and credibility to carry the burden of proof.'" (Patricia A. Murray Dental Corp. v. Dentsply Internat., Inc. (2018) 19 Cal.App.5th 258, 270.)
But "where there are no material disputed factual issues, the appellate court reviews the trial court's determination as a question of law. [Citation.] In any event, a disqualification motion involves concerns that justify careful review of the trial court's exercise of discretion." (SpeeDee Oil, supra, 20 Cal.4th at p. 1144.)
II.
THE SUBSTANTIAL RELATIONSHIP TEST
An attorney who accepts employment adverse to a former client without that client's informed written consent may be disqualified if "the subjects of the two representations are substantially related." (SpeeDee Oil, supra, 20 Cal.4th p. 1146; Rules Prof. Conduct, rule 1.9.) In cases of successive representation, "'the chief fiduciary value jeopardized is that of client confidentiality.'" (In re Charlisse C. (2008) 45 Cal.4th 145, 159 (Charlisse C.).) To that end, an attorney must "at every peril to himself or herself" preserve client secrets. (Bus. &Prof. Code, § 6068, subd. (e)(1); Acacia Patent Acquisition, LLC v. Superior Court (2015) 234 Cal.App.4th 1091, 1097 (Acacia Patent).) The disqualification standards "for such cases focus on the former client's interest 'in ensuring the permanent confidentiality of matters disclosed to the attorney in the course of the prior representation.'" (Charlisse C., at p. 159.)
The former client has the burden to show the two representations are substantially related. (Flatt v. Superior Court (1994) 9 Cal.4th 275, 283 (Flatt).) If the burden is met, "access to confidential information by the attorney in the course of the first representation (relevant, by definition, to the second representation) is presumed and disqualification of the attorney's representation of the second client is mandatory." (Ibid.) This presumption avoids an inquiry into privileged or other confidential information (i.e., requiring the attorney and former client to testify about such matters to advocate for or against disqualification). (Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698, 706 (Jessen).)
To decide whether successive representations are substantially related, a court must first determine whether the attorney's representation of the former client was "direct and personal." (Jessen, supra, 111 Cal.App.4th at p. 711; City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 847 (Cobra Solutions).) A direct and personal relationship exists when "the attorney personally provided legal advice and services [to the former client] on a legal issue that is closely related to the legal issue in the present representation." (Cobra Solutions, supra, 38 Cal.4th at p. 847.)
If the representation was direct and personal, the test is whether there is "a substantial relationship" between the subjects of the prior and the current representations. (Fiduciary Trust Internat. of California v. Superior Court (2013) 218 Cal.App.4th 465, 479 (Fiduciary Trust).) The term "subjects" enjoys "a broader definition than the discrete legal and factual issues involved in the compared representations." (Jessen, supra, 111 Cal.App.4th at p. 712.) This is because "limiting the comparison of the two representations to their precise legal and factual issues might operate unrealistically to the detriment of the first client." (Ibid.)
A different version of this test applies to "'situations where the former attorney-client relationship was peripheral or attenuated, rather than direct and personal.'" (Fiduciary Trust, supra, 218 Cal.App.4th at p. 479.) In that situation, the court will presume the attorney received confidential information if the former client shows "'the attorney was in a position vis-[a]-vis the client to likely have acquired confidential information material to the current representation.'" (Ibid.)
"Thus, successive representations will be 'substantially related' when the evidence before the trial court supports a rational conclusion that information material to the evaluation, prosecution, settlement or accomplishment of the former representation given its factual and legal issues is also material to the evaluation, prosecution, settlement or accomplishment of the current representation given its factual and legal issues." (Jessen, supra, 111 Cal.App.4th at p. 713; see also Knight v. Ferguson (2007) 149 Cal.App.4th 1207, 1213 ["'"substantial relationship" exists whenever the "subjects" of the prior and the current representations are linked in some rational manner'"].) "In assessing whether there is a 'substantial relationship' between two matters, courts 'should "focus on the similarities between the two factual situations, the legal questions posed, and the nature and extent of the attorney's involvement with the cases."'" (Acacia Patent, supra, 234 Cal.App.4th at pp. 1097-1098.)
III.
PRESUMPTION THAT ATTORNEY POSSESSES CONFIDENTIAL INFORMATION
Pacquiao contends the trial court misapplied the law by disregarding the presumption that Burstein obtained material confidential information in the 2005 case. We agree that a trial court abuses its discretion when it applies the wrong legal standard. (Charlisse C., supra, 45 Cal.4th at p. 159.) But that did not happen here.
The trial court correctly recited the presumption by quoting from our high court in Flatt, supra, 9 Cal.4th at p. 283: "'Where the requisite substantial relationship between the subjects of the prior and the current representations can be demonstrated, access to confidential information by the attorney in the course of the first representation (relevant, by definition, to the second representation) is presumed and disqualification of the attorney's representation of the second client is mandatory; indeed, the disqualification extends vicariously to the entire firm.'" As Flatt instructs, the presumption is triggered when the substantial relationship test is met. (Ibid.) The court here did not disregard the presumption; it found Pacquiao hadn't satisfied the substantial relationship test to benefit from the presumption.
IV.
BURDEN REGARDING CONFIDENTIAL INFORMATION
Pacquiao next contends the court improperly placed the burden on him "to prove exactly what confidential information Burstein possessed and how such information would be relevant" in the current case.
Specifically, Pacquiao complains of the court's remark that his "motion does not explain why Mr. Pacquiao's financial condition in 2005 is relevant to the alleged causes of action in the [c]omplaint." According to Pacquiao, the law does not require him to "prove the present relevance of confidential information actually acquired by his former counsel." We disagree any burden shifting occurred.
The court's statement is in harmony with the applicable legal standard. As the former client, Pacquiao had the burden to show the 2005 case and the current case are substantially related. (Flatt, supra, 9 Cal.4th at p. 283.) Pacquiao could have met this burden by providing evidence to "support[ ] a rational conclusion that information material to the evaluation, prosecution, settlement or accomplishment of the former representation given its factual and legal issues is also material to the evaluation, prosecution, settlement or accomplishment of the current representation given its factual and legal issues." (Jessen, supra, 111 Cal.App.4th at p. 713.)
In the ruling, the court found "no substantial relationship" between the 2005 case and the current case. It then listed five items, including the observation that Pacquiao didn't explain why his financial condition in 2005 was relevant to the current case. Nowhere in the ruling does the court state Pacquiao bears the burden of proving "exactly what confidential information" Burstein possessed. Reasonably construed, the court's remark indicates it accepted (at least for the purposes of argument) that "Burstein was intimately familiar with [Pacquiao's 2005] financial situation," yet it did not understand how the information was material to the current case. To meet his burden, Pacquiao could have explained why the court should come to his preferred "rational conclusion" (Jessen, supra, 111 Cal.App.4th at p. 713), without needing to prove Burstein's knowledge of any confidential information. The court's remark simply noted that Pacquiao had not done so.
V.
ANALYSIS OF THE NATURE AND EXTENT OF THE PRIOR RELATIONSHIP
Pacquiao argues the court misapplied the substantial relationship test by (1) failing to analyze the nature and extent of Burstein's representation in the 2005 case, one factor to consider in determining the substantial relationship of cases; and (2) improperly evaluating the confidential information acquired by Burstein in the 2005 case. We are not persuaded.
A. Application of the Substantial Relationship Test
Pacquiao contends the two cases are "strikingly similar contract dispute[s] regarding Pacquiao's boxing services." They "involve claims of breach of contract, breach of fiduciary duty, declaratory relief and injunctive relief." Pacquiao contends that Burstein was "[f]ollowing the script" of the 2005 case by seeking a preliminary injunction in the current case. He points out, "Burstein would have seen firsthand how these tactics [referring to the preliminary injunction] affected Pacquiao."
To determine the existence of a substantial relationship between cases, "courts 'should "focus on the similarities between the two factual situations, the legal questions posed, and the nature and extent of the attorney's involvement with the cases."'" (Acacia Patent, supra, 234 Cal.App.4th at pp. 1097-1098.)
The 2005 case and the current case are factually similar in that they involve (1) contracts between Pacquiao and companies that manage or promote fighting careers; and (2) disagreements over the enforceability of those contracts given the conduct of the parties. Pacquiao, however, acknowledges the two cases concern different contracts with different entities. As to the terms of the contracts, Pacquiao did not provide a copy of the contract at issue in the 2005 case for comparison with the current case. Nor did he argue the disputed contract terms in the two cases were similar. As for the parties' conduct, Pacquiao alleged in the 2005 case that M&M Sports failed to pay his taxes, failed to provide him required disclosures, diverted money from him, and failed to secure him a promised bout. In the current case, Pacquiao alleged Paradigm failed to secure him a different bout and conspired to negotiate contracts for Pacquiao that served their interests over his. Although the alleged wrongful acts in the cases are generally similar, they involve different contracts with different entities. In short, the factual similarities between the two cases are general and minimal.
The same is true for the legal questions posed in the two cases. They involve alleged contract breaches and fraudulent conduct to induce Pacquiao to contract. The general legal principles would be similar, but the 2005 case was filed in New York federal district court and the current case in California state court. And because the two cases involve different contracts and opposing parties, the legal questions posed would be tied to specific contract terms and conduct of different parties. It thus was proper for the trial court to conclude there was no similarity in the legal issues posed by the two cases.
As for the nature and extent of Burstein's involvement in the two cases, we agree with Pacquiao that this factor weighs in his favor. It is undisputed that in the 2005 case Burstein was Pacquiao's lead trial counsel and settled the case, and that in the current case Burstein is lead counsel for Paradigm. It is reasonable to conclude Burstein acquired confidential information in the 2005 case. However, we are unpersuaded, as was the trial court, by Pacquiao's argument that Burstein sought a preliminary injunction in the current case because he saw firsthand the effect it had on Pacquiao in the 2005 case. Such motions are commonplace in civil litigation. That a motion for preliminary injunction was filed in both cases is of no moment.
In sum, we conclude the trial court acted within its discretion in finding Pacquiao failed to establish a substantial relationship between the 2005 and the current case.
B. Evaluation of Confidential Information
In its ruling, the court stated that Paradigm "provided evidence that Mr. Pacquiao's financial condition is a matter of public [knowledge]." The referenced evidence appears to be to Burstein's declaration that the 2005 case "was settled only after a full jury trial at which all relevant facts about Pacquiao's contract with M&M, as well as the monies he had earned to date in his career, were made public." To support his assertion, Burstein attached several printouts from websites listing some of Pacquiao's purse winnings through the years.
Under the circumstances of the current case, we agree with Pacquiao that it is not relevant whether information of his financial condition was or became public knowledge. But this was not the court's sole, dispositive, or primary reason for finding that the substantial relationship test had not been met. As discussed ante in Section IV of the Discussion, the court found-and we agree-that information about Pacquiao's finances in 2005 was not material to the current case. For these reasons, we conclude the court's errant statement about the public nature of Pacquiao's financial condition did not infect its other proper findings.
VI.
UNREASONABLE DELAY
Pacquiao also contends that if the trial court denied the disqualification motion in part due to his delay in bringing it, the ruling was error. On this record, however, we cannot conclude the court abused its discretion in finding the delay was unreasonable and prejudicial to Paradigm.
Although disqualification is usually "automatic[ ]" when the substantial relationship test is satisfied (Cobra Solutions, supra, 38 Cal.4th at p. 847), a "'narrow exception'" applies when the current client "'offers prima facie evidence of an unreasonable delay by the former client in making the motion and resulting prejudice to the current client.'" (Fiduciary Trust, supra, 218 Cal.App.4th at p. 490.) "Delay is . . . an indication that the alleged breach of confidentiality was not seen as serious or substantial by the moving party." (Liberty Nat. Enterprises, L.P. v. Chicago Title Ins. Co. (2011) 194 Cal.App.4th 839, 847.) The delay and prejudice, however, "'must be extreme.'" (Fiduciary Trust, at p. 490.)
If the current client makes this showing, the burden shifts to the former client "to justify the delay" (Fiduciary Trust, supra, 218 Cal.App.4th at p. 490), by "address[ing]: (1) how long it has known of the potential conflict; (2) whether it has been represented by counsel since it has known of the potential conflict; (3) whether anyone prevented the moving party from making the motion earlier, and if so, under what circumstances; and (4) whether an earlier motion to disqualify would have been inappropriate or futile and why." (River West, Inc. v. Nickel (1987) 188 Cal.App.3d 1297, 1309.)
Here, the trial court implicitly found, as an alternative ground for denying the motion, that Pacquiao unreasonably delayed in seeking disqualification. The court found that even if Pacquiao showed a substantial relationship between the two cases, Paradigm presented evidence that Pacquiao unreasonably delayed in bringing the motion, which "reflect[s] a lack of concern over the alleged breach [ ] of confidentiality," and that Paradigm would be prejudiced by having to retain new counsel less than a month before trial. These findings are supported by the record.
At the outset of the current case filed in June 2021, Burstein advised Pacquiao's original attorneys of the 2005 case, and again raised it with Pacquiao's settlement counsel at the start of settlement negotiations. Pacquiao, however, waited until January 6, 2023-after the court ordered that requests for admissions propounded on Pacquiao were deemed admitted, after the close of discovery and settlement negotiations, on the day of the initial date for trial, and within two months of the continued trial date-to bring the motion. Nothing in the record shows Pacquiao was prevented from filing the motion earlier. For these reasons, the trial court was within its discretion to deny the motion for undue delay.
DISPOSITION
The order is affirmed. Respondent shall recover costs on appeal.
WE CONCUR: MOORE, ACTING P. J., MOTOIKE, J.