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Sahlolbei v. Montgomery

COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO
Jan 12, 2012
E051804 (Cal. Ct. App. Jan. 12, 2012)

Opinion

E051804

01-12-2012

HOSSAIN SAHLOLBEI, Plaintiff and Appellant, v. STEVEN MONTGOMERY, Defendant and Respondent.

Law Offices of Wendy C. Arenson and Wendy Arenson for Plaintiff and Appellant. Stutz Artiano Shinoff & Holtz, Jeffery A. Morris, and Paul Carelli IV, for Defendant and Respondent.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super.Ct.No. INC076108)

OPINION

APPEAL from the Superior Court of Riverside County. John G. Evans, Judge. Affirmed.

Law Offices of Wendy C. Arenson and Wendy Arenson for Plaintiff and Appellant.

Stutz Artiano Shinoff & Holtz, Jeffery A. Morris, and Paul Carelli IV, for Defendant and Respondent.

This is the third lawsuit involving both plaintiff Hossain Sahlolbei and defendant Steven Montgomery. In the first two, Montgomery, along with other defendants, was represented by attorney Abbie Maliniak.

In this action, Sahlolbei was represented by Fenton & Nelson (the Fenton firm). While the action was pending, Maliniak joined the Fenton firm. As soon as Montgomery's attorneys discovered this, they asserted that the Fenton firm was disqualified. The Fenton firm denied that Maliniak had been involved in the case. However, it proceeded to set up an ethical wall preventing Maliniak from being further involved.

The trial court granted Montgomery's motion to disqualify the Fenton firm. Sahlolbei appeals. He contends:

1. Maliniak was not disqualified from representing Sahlolbei, because:

a. Maliniak's former representation of Montgomery was peripheral and attenuated, rather than direct and personal.

b. There was no substantial relationship between the former representation and the current representation.

2. Even assuming that Maliniak was disqualified, the Fenton firm was not vicariously disqualified.

We find no abuse of discretion. Hence, we will affirm.

I


FACTUAL AND PROCEDURAL BACKGROUND

A. The Sources of the Facts.

1. We may consider documents of which Montgomery asked the trial court to take judicial notice.

The facts below are taken from the evidence offered in support of and in opposition to the disqualification motion. That includes documents of which Montgomery asked the trial court to take judicial notice. Sahlolbei did not oppose the request (indeed, he cited some of the same documents), and the trial court indicated that it had considered and relied on some of the documents.

In his brief, Montgomery cites some of the judicially noticeable materials— including some of our unpublished opinions—as support for his statement of facts. However, while we can take judicial notice of the existence and legal effect of court records, we cannot take judicial notice that statements in them are true. (Unruh-Haxton v. Regents of University of California (2008) 162 Cal.App.4th 343, 364-365.)

2. We may not consider declarations submitted with the motion for reconsideration.

After the trial court granted the disqualification motion, Sahlolbei filed a motion for reconsideration, supported by new declarations. The trial court refused to rule on the motion because this appeal had already been filed. Sahlolbei has not appealed from that ruling (which appears to be unimpeachably correct). "'[A]n appeal reviews the correctness of [an order] as of the time of its rendition, upon a record of matters which were before the trial court for its consideration.' [Citation.]" (In re Zeth S. (2003) 31 Cal.4th 396, 405.) Accordingly, the new declarations are irrelevant to this appeal.

B. The Facts as Shown by the Sources.

In April 2002, Medical Staff of Palo Verde Hospital v. Palo Verde Hospital, case No. BLC 002111 (Medical Staff case) was filed. The plaintiff was an unincorporated association of which Sahlolbei was a member. The defendants included Province Healthcare, Inc. (Province); Palo Verde Hospital; and Montgomery, as the chairman of the board of Palo Verde Hospital. The complaint alleged that the hospital had recruited doctors with dubious qualifications and had retaliated against the medical staff when it objected.

In June 2002, Sahlolbei filed Sahlolbei v. Province Healthcare, Inc., case No. BLC 002160 (Province Healthcare case). Again, the defendants included Province, Palo Verde Hospital, and Montgomery. The complaint alleged that the defendants had wrongfully interfered with Sahlolbei's staff privileges in retaliation for his criticism of other doctors.

The complaint in the Medical Staff case referred to the other doctors by pseudonyms, whereas the complaint in the Province Healthcare case referred to them by name. Thus, it is impossible to tell whether the cases involved any of the same third party doctors.
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Province hired the Fulbright firm, including Maliniak, to represent all of the defendants in both cases.

In the Medical Staff case, Maliniak's name appeared on all of the defendants' filings as one of the two attorneys for "[d]efendants." She personally signed the majority of the defendants' filings—at least 10 separate documents, including the defendants' answer.

In the Province Healthcare case, Maliniak's name likewise appeared on all of the defendants' filings. She signed a memorandum of points and authorities. Her name was on a "Declaration of Steven Montgomery" that was filed in support of that memorandum of points and authorities. When the case resulted in an appeal to this court, Maliniak personally signed the defendants' brief, as well as the defendants' reply to the petition for review to the California Supreme Court.

Montgomery testified that he and Maliniak "exchanged numerous telephone conversations, correspondences, and emails. During these conversations, confidential information was passed to Ms. Maliniak[,] including facts, strategies, and defenses . . . ." He spoke to her "personally" in connection with the preparation of his declaration.

Montgomery also testified that Maliniak prepared him and his wife to testify in a related administrative hearing. According to Maliniak, however, another attorney prepared Montgomery in one room while she prepared Montgomery's wife in a different room.

In 2003, the Medical Staff case was dismissed. In 2004, efforts to settle the Province Healthcare case began. Maliniak conceded that she was involved "in the early stages of settlement negotiation." Around September 2004, however, those negotiations broke down.

In October 2004, a different law firm took over the representation of the defendants, and the settlement negotiations resumed. However, the Fulbright firm and Maliniak continued to be the attorneys of record for all defendants.

In February 2005, the parties entered into a settlement agreement (the settlement agreement). As a result, the Province Healthcare case was dismissed. One witness testified that the Fulbright firm reviewed and had some input into the settlement agreement. According to Maliniak, however, once the other firm took over, in the fall of 2004, she and the Fulbright firm were no longer involved in the case. In the fall of 2006, Maliniak left the Fulbright firm.

In March 2008, Sahlolbei filed this action against Montgomery. In it, he alleged that Montgomery had breached the settlement agreement. Specifically, he alleged that Montgomery had breached a nondisparagement covenant of the settlement agreement by making disparaging statements about Sahlolbei to a journalist, and he had breached a covenant to forbear from prosecuting released claims by recommending that Sahlolbei be suspended based on a released claim. He further alleged that Montgomery had refused to submit their dispute to arbitration, as the settlement agreement required.

Sahlolbei was represented by the Fenton firm, including partners Benjamin J. Fenton and Harry J. Nelson. Nelson had also represented Sahlolbei in the Province Healthcare case. Thus, he was aware that Maliniak had represented Montgomery.

Around June 2008, Nelson learned that the firm that Maliniak was with was dissolving. Because the Fenton firm needed an attorney with "healthcare and hospital-related experience," he recruited her. In August 2008, Maliniak joined the Fenton firm.

Maliniak testified that she never worked on the present case and did not know anything about it. Nelson testified, "I did not discuss or involve Ms. Maliniak in any way in the instant . . . case" and "[s]he has never performed any work on the . . . case . . . ."

Because Nelson was "very busy," he did ask Maliniak to "help" write a letter on Sahlolbei's behalf to the chief executive officer of Palo Verde Hospital. Maliniak wrote and signed the letter, which was sent on September 23, 2008. The parties disagree as to whether the letter had anything to do with the subject matter of Maliniak's previous representation.

The letter alerted Montgomery's attorneys to the fact that Maliniak had joined the Fenton firm. On September 29, 2008, they wrote to the Fenton firm, asserting that both Maliniak and the Fenton firm had a conflict.

As a result of that letter, on October 6, 2008, the Fenton firm set up an ethical wall preventing Maliniak from any involvement in any matters pertaining to Sahlolbei.

On October 13, 2008, the Fenton firm wrote back to Montgomery's counsel, denying the existence of any conflict but noting that, out of an excess of caution, they had set up an ethical wall.

In November 2008, Montgomery filed a motion to disqualify Maliniak and the Fenton firm. The trial court granted the motion.

The trial court found that Maliniak "formerly represented Montgomery and . . . there is a substantial relationship between the subjects of the former representation and the current representation inasmuch as the current representation involves an alleged breach of the settlement agreement fashioned to resolve the subjects of the former representation. Because there exists a substantial relationship, it is presumed that Maliniak had access to confidential information in the first representation. When an attorney obtains confidential information from a client, that attorney is prohibited from accepting a representation adverse to the client in a matter in which the confidential information would be material. Maliniak is therefore disqualified from representing Sahlolbei in this matter."

The trial court further found that the Fenton firm was disqualified because it did not put up an ethical wall until after Maliniak wrote the letter on behalf of Sahlolbei.

II


DISCUSSION

"'Generally, a trial court's decision on a disqualification motion is reviewed for abuse of discretion. [Citations.]' [Citation.] As to disputed factual issues, a reviewing court's role is simply to determine whether substantial evidence supports the trial court's findings of fact; 'the reviewing court should not substitute its judgment for . . . express or implied [factual] findings [that are] supported by substantial evidence. [Citations.]' [Citation.] As to the trial court's conclusions of law, however, review is de novo; a disposition that rests on an error of law constitutes an abuse of discretion. [Citations.] The trial court's 'application of the law to the facts is reversible only if arbitrary and capricious.' [Citation.]" (In re Charlisse C. (2008) 45 Cal.4th 145, 159.)

A. Disqualification of Maliniak.

Sahlolbei contends the trial court erred by ruling that Maliniak was disqualified.

"Where, as in this case, the potential conflict arises from an attorney's successive representation of clients with potentially adverse interests, . . . the correct legal standard generally requires disqualification of the attorney if 'the [former] client demonstrate[s] a "substantial relationship" between the subjects of the antecedent and current representations.' [Citation.]" (In re Charlisse C., supra, 45 Cal.4th at p. 161.)

There are two different versions of the substantial relationship test, depending on whether the attorney's representation of the former client was "direct and personal" or "peripheral [and] attenuated." (Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698, 710-711; see also City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 847; Med-Trans Corp., Inc. v. City of California City (2007) 156 Cal.App.4th 655, 664-666.)

If the representation was direct and personal, the only question is whether there is a substantial relationship between the subject of the prior representation and the subject of the current representation. If the answer is yes, there is a conclusive presumption that the attorney has material confidential information, and disqualification is required. (City and County of San Francisco v. Cobra Solutions, Inc., supra, 38 Cal.4th at p. 847; Med- Trans Corp., Inc. v. City of California City, supra, 156 Cal.App.4th at pp. 664-665; Jessen v. Hartford Casualty Ins. Co., supra, 111 Cal.App.4th at pp. 709-710.)

If, on the other hand, the representation was peripheral and attenuated, the court considers not only whether there is a substantial relationship between the subjects of the prior representation and the current representation, but also whether "'the attorney was in a position vis-à-vis the client to likely have acquired confidential information material to the current representation.' [Citation.]" (Med-Trans Corp., Inc. v. City of California City, supra, 156 Cal.App.4th at pp. 665-666.) "In these circumstances, the relationship between the compared representations shares equal billing with the relationship between the attorney and the former client, and the two aspects . . . are assessed in combination in determining whether disqualification is mandated." (Jessen v. Hartford Casualty Ins. Co., supra, 111 Cal.App.4th at p. 710.)

Montgomery argues that the "direct" or "peripheral" nature of the relationship between the former client and the particular attorney is irrelevant, citing Koo v. Rubio's Restaurants, Inc. (2003) 109 Cal.App.4th 719. Koo says no such thing. Even assuming it did, however, in 2006, the California Supreme Court endorsed the view that the analysis of a disqualification motion differs depending on whether the prior representation was direct and personal or peripheral and attenuated. (City and County of San Francisco v. Cobra Solutions, Inc., supra, 38 Cal.4th at p. 847.) Any previous appellate court cases holding otherwise would no longer be good law.

1. The representation was direct and personal.

Sahlolbei argues that Maliniak's representation of Montgomery was "attenuated," rather than "direct," because supposedly Maliniak "primarily" represented Province and represented Montgomery only "for the limited purpose of defense of the corporate action."

Sahlolbei complains that the trial court never made any express finding on this issue. That is not true. While it did not address this point in its written order, it specifically found during the hearing on the motion that Maliniak had had a substantial role in representing Montgomery.

In any event, in reviewing a ruling on a disqualification motion, we must "'accept[] as correct all of [the trial court's] express or implied findings supported by substantial evidence.' [Citation.]" (Rhaburn v. Superior Court (2006) 140 Cal.App.4th 1566, 1573 [Fourth Dist., Div. Two], italics added.) Because the trial court expressly presumed that Maliniak had confidential information, it implicitly found that she represented Montgomery directly and personally.

Sahlolbei does not contend that there was insufficient evidence to support this finding. Actually, there was ample evidence that the representation was personal and direct. Montgomery was a named defendant in the former actions, and Maliniak was counsel of record for him, as well as for Province. Montgomery testified that he and Maliniak had "numerous" communications about the litigation, in which they discussed "facts, strategies, and defenses . . . ." She spoke to him about the preparation of a declaration, which ultimately he signed and she filed.

Maliniak never actually denied this testimony by Montgomery. She testified to her version of her meeting with Montgomery and his wife, but she did not testify that this was her only meeting with him. She did not deny participating in the preparation of his declaration. Moreover, she did not deny communicating with him in telephone calls, letters, or e-mails. Rather conspicuously, she did not even deny receiving confidential information from him. She never testified that she "primarily" represented Province, rather than Montgomery.

Belatedly, and only in connection with the motion for reconsideration, Maliniak did testify: "Our principal client was Province." She also testified: "Other than a single meeting with Mr. Montgomery which I described in my previously filed declaration, I had no interaction with him." However, for the reasons already discussed (see part I.A.2), this testimony is irrelevant.

Sahlolbei complains that the trial court supposedly "did not consider" the evidence that the representation was attenuated. However, this turns the standard of review on its head. The question is whether there was substantial evidence to support the trial court's implied finding, not whether there was substantial evidence to support some other finding. In any event, there was no such evidence.

Even assuming Maliniak "primarily" represented Province, that would not mean that she did not directly and personally represent Montgomery. Cases that have concluded that a prior representation was peripheral or attenuated have involved much more indirect representations than we have in this case.

In Rhaburn v. Superior Court, supra, 140 Cal.App.4th 1566, Cary Barnett was a witness against the defendant. The public defender's office had represented Barnett in 1996. However, the particular assistant public defender who was representing the defendant had not joined the public defender's office until 2000. (Id. at pp. 1569-1570.) We concluded that "trial counsel [did not] have a 'direct and personal' relationship with the witness . . . ." (Id. at p. 1581.)

Similarly, in Faughn v. Perez (2006) 145 Cal.App.4th 592, one of the plaintiffs' attorneys had previously represented the parent corporation of one of the defendants. (Id. at pp. 596-597.) The court held that, at least in the absence of additional facts (see id. at pp. 605-610), this was not a sufficiently direct and personal representation to justify a presumption that the attorney had obtained material confidential information (id. at pp. 603, 611).

Here, by contrast, Maliniak was the attorney of record for Montgomery. Her name appeared on pleadings and documents filed on his behalf. Even though she was also representing Province, she could do so only as long as there was no conflict of interest between Province and Montgomery. Until then, she had an obligation to represent both clients zealously. Even in the absence of Montgomery's uncontradicted testimony that he shared confidential information with her, this would be a sufficiently direct representation to justify a presumption that he did.

2. There was a substantial relationship between the subjects of the two representations.

"[S]uccessive 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. [Citations.]" (Jessen v. Hartford Casualty Ins. Co., supra, 111 Cal.App.4th at p. 713, fn. omitted.)

It seems almost tautological that an action for breach of an agreement to settle a prior action is substantially related to the prior action. Moreover, Maliniak admitted that she was involved in negotiations to settle the Province Healthcare case. She did claim that those negotiations broke down and that the final settlement agreement was negotiated by a different law firm. Her testimony on this point, however, was contradicted by another witness, and the trial court specifically found the other witness more credible. In any event, this dispute is beside the point. It seems reasonable that confidential information that is material to the "early stages" of settlement would also be material to the eventual settlement agreement. Maliniak cannot prove the contrary without disclosing confidential information.

In addition, in this action, Sahlolbei is alleging that in June 2007, when Montgomery recommended that Sahlolbei be suspended, the alleged basis for the suspension "had been raised in 2004 prior to the execution of the [settlement agreement] and was a released claim under . . . the [settlement agreement]." It seems reasonable that, even assuming that Maliniak would not have any confidential information about the release, she would have confidential information about any potential claims that already existed among the parties as of 2004.

Similarly, Sahlolbei is alleging that Montgomery has breached an agreement to arbitrate claims arising out of the settlement agreement. It seems reasonable that Maliniak would have confidential information relating to Montgomery's attitudes and goals regarding arbitration in general and regarding arbitration of claims involving Sahlolbei in particular.

Finally, it seems reasonable to view all three lawsuits as part of an ongoing dispute between Sahlolbei, on one hand, and Province, Palo Verde Hospital, and Montgomery on the other. Thus, Maliniak would have been privy to confidential information regarding Montgomery's attitudes toward Sahlolbei and the relationship between the two sides in general. Such information logically would be material to the current action. "Where an attorney acquires knowledge about the former client's 'attitudes,' practices, business customs, 'litigation philosophy,' strengths, weaknesses or strategy, disqualification may be required for that reason alone. [Citation.]" (Knight v. Ferguson (2007) 149 Cal.App.4th 1207, 1215.)

In sum, the evidence amply supports a "rational conclusion" that information material to the Province Healthcare case would also be material to this case. Accordingly, the trial court did not err by ruling that Maliniak was disqualified.

B. Disqualification of the Fenton Firm.

Sahlolbei also contends that, even assuming that Maliniak was disqualified, the trial court erred by ruling that the entire Fenton firm was vicariously disqualified.

There is some authority for the proposition that the disqualification of an attorney extends automatically to his or her entire firm. (See Kirk v. First American Title Ins. Co. (2010) 183 Cal.App.4th 776, 796-799.) However, the better rule appears to be that there is merely a rebuttable presumption that the firm is disqualified, "which can be refuted by evidence that ethical screening will effectively prevent the sharing of confidences in a particular case." (Id. at p. 801.)

"[T]he inquiry before a trial court considering the efficacy of any particular ethical wall is . . . a case-by-case inquiry focusing on whether the court is satisfied that the tainted attorney has not had and will not have any improper communication with others at the firm concerning the litigation." (Kirk v. First American Title Ins. Co., supra, 183 Cal.App.4th at p. 811, italics added; see also In re Charlisse C., supra, 45 Cal.4th at p. 166.)

The law firm has the burden of demonstrating the effectiveness of the ethical wall. (In re Charlisse C., supra, 45 Cal.4th at p. 166.) "'As a practical matter, were the burden allocated otherwise, it would seldom if ever be possible for the opposing party to demonstrate that the lawyer in question had not been adequately screened.' [Citation.] 'If the adviser has been screened, it should be relatively easy for [the firm] to explain the screening procedures in effect. On the other hand, if there has been improper contact, it would likely be known only to the lawyers involved and perhaps to [the firm]. A party challenging the dual representation would have virtually no way of obtaining evidence to demonstrate any impropriety.' [Citation.]" (Rondon v. Alcoholic Beverage Control Appeals Bd. (2007) 151 Cal.App.4th 1274, 1287-1288.)

Here, Maliniak joined the Fenton firm in August 2008. The Fenton firm, however, did not put up the ethical wall until October 2008. The trial court could reasonably find that the ethical wall was not "timely" (In re Charlisse C., supra, 45 Cal.4th at p. 166) and that this evidence failed to rebut the presumption that Maliniak had already had improper communications.

Maliniak and Nelson both testified that Maliniak had never worked on the present case. Maliniak additionally testified that she did not know anything about it. However, they never specifically testified that Maliniak had not talked to anyone at the Fenton firm about the previous cases. Nelson recruited her precisely because he remembered her from litigating opposite her in that case and because she had experience representing hospitals in health care matters. It seems only natural that, at some point, they would discuss her former representation of Montgomery.

"With respect to purely factual findings, we will defer to the trial court's assessment of the parties' credibility, even though the determination was made on declarations rather than live testimony. [Citations.]" (In re Marriage of Nurie (2009) 176 Cal.App.4th 478, 492.) Here, the trial court was entitled to find that Nelson and Maliniak's declarations were unconvincing. It could also find that the Fenton firm had failed to prove that it had put up a timely, effective ethical wall. Thus, it properly granted the disqualification motion.

Finally, Sahlolbei contends that Montgomery filed the disqualification motion for abusive tactical reasons. His whole argument, however, is that because the motion was unfounded, it must have been abusive. As we have already held, it was not unfounded. We also note that this is not a case in which "a party 'attempt[s] to disrupt [the] case at a critical juncture' by belatedly moving for disqualification, or where a party 'trie[s] to increase an opponent's litigation burdens by seeking disqualification only after the challenged counsel performed a substantial amount of work.' [Citation.]" (Kirk v. First American Title Ins. Co., supra, 183 Cal.App.4th at p. 808, fn. 28.) No grounds for disqualification existed until Maliniak joined the Fenton firm in August 2008. Montgomery and his counsel did not become aware that she had done so until she wrote the letter on Sahlolbei's behalf in September 2008. Montgomery's counsel immediately asserted that there was a conflict of interest. In October 2008, the Fenton firm denied the existence of a conflict; in November 2008, Montgomery filed the disqualification motion. This sequence of events lacks any of the hallmarks of a tactical misuse of disqualification.

III


DISPOSITION

The order appealed from is affirmed. Montgomery is awarded costs on appeal against Sahlolbei.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

RICHLI

J.
We concur:

RAMIREZ

P.J.

KING

J.


Summaries of

Sahlolbei v. Montgomery

COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO
Jan 12, 2012
E051804 (Cal. Ct. App. Jan. 12, 2012)
Case details for

Sahlolbei v. Montgomery

Case Details

Full title:HOSSAIN SAHLOLBEI, Plaintiff and Appellant, v. STEVEN MONTGOMERY…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO

Date published: Jan 12, 2012

Citations

E051804 (Cal. Ct. App. Jan. 12, 2012)