Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-00787/USCOURTS-cand-5_05-cv-00787-8/pdf.json

Nature of Suit Code: 423
Nature of Suit: Bankruptcy Withdrawal 28 USC 157
Cause of Action: 28:0157 Motion for Withdrawal of Reference

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ORDER, page 1

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

In re:

EXDS, Inc. (f/k/a EXODUS

COMMUNICATIONS, INC.), et al.,

Debtor

___________________________________

EXDS, Inc.,

Plaintiff,

v.

DEVCON CONSTRUCTION, INC., et al.,

Defendants.

___________________________________

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Case No.: C 05-0787 PVT

ORDER DENYING PLAINTIFF’S MOTION TO

DISQUALIFY DEFENDANTS’ COUNSEL

On June 20, 2005, Plaintiff EXDS, Inc. (“EXDS”) filed a Motion to Disqualify Defendants’

Counsel. After EXDS filed the motion, it became evident that the parties were about to embark on

extensive discovery and motion work in connection with a disqualification motion that appeared

unwarranted on its face. The court vacated the hearing schedule. However, the court does not take

lightly claims of attorney misconduct. Thus, rather than summarily denying the motion, the court

solicited supplemental briefing from EXDS in order to allow EXDS an opportunity to supply the

elements missing from its moving papers if it could do so. EXDS has now filed its supplemental

briefing. Having reviewed the papers submitted by EXDS, the court finds it appropriate to rule on

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28 1 Earlier this year, this action was withdrawn from the bankruptcy court and transferred to

this court.

ORDER, page 2

the motion without further briefing or oral argument. Based on the briefs and supporting

declarations submitted by EXDS, 

IT IS HEREBY ORDERED that EXDS’s motion is DENIED for the reasons discussed

herein.

I. BACKGROUND

On September 26, 2001, EXDS filed for bankruptcy under Chapter 11 of the Bankruptcy

Code in the United States Bankruptcy Court for the District of Delaware.1 On January 22, 2002, the

bankruptcy court approved the sale of substantially all of EXDS’ operating assets to Cable &

Wireless PLC and Digital Island, Inc (collectively “C&W”). On June 5, 2002, the bankruptcy court

issued its order confirming EXDS’ plan of reorganization. Under that plan, EXDS continues to exist

solely for the limited purposes of distributing all of the assets of the bankruptcy estate. The plan also

allows EXDS to pursue claims it has against third parties. The plan does not authorize EXDS to

continue to operate internet data centers or engage in any other business endeavors.

On September 25, 2003, EXDS filed an adversary proceeding against Defendants Devcon

Construction, Inc. (“Devcon”) and Sharp Development Company, Inc. f/k/a Sharp Lafayette LLC

(“Sharp”). In its 51 page complaint, EXDS described its construction agreements with Devcon and

its lease agreements with Sharp, as well as numerous specific details regarding various issues related

to those agreements. EXDS filed its complaint in the public docket in the bankruptcy action.

Sometime in the spring or early summer of 2004, Devcon’s CEO Gary Filizetti asked one of

EXDS’ former employees, Janice Fetzer, if she would be willing to talk to Defense counsel. She

agreed. Shortly thereafter she was contacted by one of Sharp’s attorneys, Jay Ross. Fetzer agreed to

meet with him, and to see if she had any materials pertaining to certain projects at issue in this

lawsuit. Fetzer flew to California from Reno at Defendants’ expense to meet with Defense counsel. 

On June 9, 2004, in preparation for the meeting, Fetzer printed out copies of documents she still had

in her possession (in electronic form) related to some of the projects at issue in this lawsuit. The

next day she met with Defense counsel for “a couple of hours.” Fetzer has also had many follow-up

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2 One such circumstance is where counsel for a party is also a witness. EXDS’s reference

to the Comden v. Superior Court case is ironic, given that the California Supreme Court there held

disqualification of two attorneys was mandated because the attorneys were likely to be called as

witnesses on behalf of their client. See Comden v. Superior Court, 20 Cal.3d 906 (1978). In the present

case EXDS’ lead counsel witnessed facts relevant to Devcon’s affirmative defense of release. While

California has loosened the rules in this regard (now requiring only that an attorney obtain his client’s

informed written consent before testifying before a jury in a matter in which he is also trial counsel), the

concerns underlying the former rule remain. “An attorney who attempts to be both advocate and witness

impairs his credibility as witness and diminishes his effectiveness as advocate.” Comden v. Superior

Court, 20 Cal.3d 906, 912 (1978). 

ORDER, page 3

communications with Defense counsel, and gave Defense counsel recommendations for potential

expert witnesses.

EXDS’s counsel also attempted to interview Fetzer. She declined.

On June 20, 2005, EXDS filed the instant motion. Attached to Richard Levy’s declaration in

support of the motion were various documents EXDS claims are confidential EXDS documents that

Fetzer gave to Defense counsel. Nothing on the face of the documents states they are confidential.

EXDS filed Levy’s declaration, with the purportedly confidential EXDS documents, in the public

docket in this action. In support of its supplemental brief, EXDS attached two leases as exhibits to

another declaration by Richard Levy (one appears to be a general form of lease, the other purports to

be a copy of a lease between EXDS and 300 Boulevard East LLC). Again, EXDS filed Levy’s

second declaration, with the two leases attached, in the public docket in this action.

II. STANDARDS FOR DISQUALIFYING COUNSEL

Under California law, the factors considered in a motion to disqualify opposing counsel vary

depending on the factual circumstances. Different factors are considered, or are given varying

degrees of weight, depending on whether: 1) the attorney previously represented the party seeking

disqualification (direct conflict of interest cases); 2) one of the attorney’s employees or experts

previously worked for an attorney for the party seeking disqualification (indirect conflict of interest

cases); 3) through other means the attorney obtained relevant privileged information belonging to the

party seeking disqualification; or 4) other unique circumstances exist which impinge on the integrity

of the judicial process.2

Only in direct conflict of interest cases is disqualification absolutely mandated. In other

circumstances, an attorney’s exposure to an adversary’s privileged information does not necessarily

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ORDER, page 4

warrant disqualification:

“Mere exposure to the confidences of an adversary does not, standing

alone, warrant disqualification. Protecting the integrity of judicial

proceedings does not require so draconian a rule. Such a rule would

nullify a party’s right to representation by chosen counsel any time

inadvertence or devious design put an adversary’s confidences in an

attorney’s mailbox. Nonetheless, we consider the means and sources of

breaches of attorney-client confidentiality to be important

considerations.” Widger v. Owens-Corning Fiberglass Corp. (In re

Complex Asbestos Litig.), 232 Cal.App.3d 572, 589 (1991).

In evaluating a motion to disqualify opposing counsel under California law, courts start with

the proposition that “[t]he right of a party to be represented in litigation by the attorney of his or her

choice is a significant right and ought not to be abrogated in the absence of some indication the

integrity of the judicial process will otherwise be injured....” Johnson v. Superior Court, 159

Cal.App.3d 573, 580 (1984) (citation omitted); see also,Gregori v. Bank of America, 207 Cal.App.3d

291, 300 (1989) (“[I]t must be kept in mind that disqualification usually imposes a substantial

hardship on the disqualified attorney’s innocent client, who must bear the monetary and other costs

of finding a replacement.”) 

Courts also consider whether the motion to disqualify is improperly being used for purely

tactical reasons: “‘After all, in cases that do not involve past representation [direct conflict of

interest cases] the attempt by an opposing party to disqualify the other side’s lawyer must be viewed

as part of the tactics of an adversary proceeding. As such it demands judicial scrutiny to prevent

literalism from possibly overcoming substantial justice to the parties.’” See Graphic Process Co. v.

Superior Court, 95 Cal.App.3d 43, 52 n. 5 (1979), quoting J.P. Foley & Co., Inc. v. Vanderbilt, 523

F.2d 1357, 1360 (2d Cir. 1975); see also Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 441

(1985) (Brennan, J., concurring) (“the tactical use of attorney-misconduct disqualification motions is

a deeply disturbing phenomenon in modern civil litigation.”).

Without more, an attorney’s ex parte contact with an opposing party’s former employee is

insufficient grounds for disqualification. See Continental Ins. Co. v. Superior Court, 32 Cal.App.4th

94, 118-21 (1995) (Rule 2-100 of the California Rules of Professional Conduct, which prohibits

attorneys from communicating with a represented party without the consent of that party’s lawyer,

does not apply to the party’s former employees). California cases have stressed that prohibiting

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3 EXDS complains that the information Defense counsel obtained from Fetzer aided their

discovery strategy. However, the Continental Ins. Co. and Bobele cases show that California allows ex

parte contacts with an opponent’s former employees precisely for that purpose (absent improper

conduct, such as seeking and using another party’s privileged information).

4 This is exactly the procedure the former employer used in In re Data General

Corporation Antitrust Litigation, 1986 U.S. Dist. LEXIS 21923 (N.D. Cal. 1986), cited by EXDS.

ORDER, page 5

attorneys from contacting an opponent’s former employees would unfairly hinder litigants from

investigating and pursuing factual evidence relevant to their case. See id. at 120-121 (noting that ex

parte contacts with an opponent’s former employees facilitates identification of those witnesses with

relevant knowledge and reduces the need for expensive and unnecessary formal depositions); and

Bobele v. Superior Court, 199 Cal.App.3d 708, 713-714 (1988) (noting that limiting attorneys’

contact with opponents’ former employees to formal depositions makes litigation too costly).

3

And there appears to be no general duty to “warn” the opposing party’s former employee not

to disclose confidential or privileged information. On the contrary, California courts have eschewed

any duty of that kind:

“We emphasize that our analysis does not mean that there is or should

be any broad duty owed by an attorney to an opposing party to

maintain that party’s confidences in the absence of a prior

attorney-client relationship. The imposition of such a duty would be

antithetical to our adversary system and would interfere with the

attorney’s relationship with his or her own clients. The courts have

recognized repeatedly that attorneys owe no duty of care to adversaries

in litigation or to those with whom their clients deal at arm’s length.” 

Widger, 232 Cal.App.3d at 588. 

Instead, it is incumbent on the former employer to seek a protective order if it is concerned

that there is a risk that a former employee might disclose privileged information. See Continental

Ins. Co., 32 Cal.App.4th at 119.4 EXDS did not seek any such protective order in this action.

In support of its contention that an attorney must warn an opposing parties’ former employee

not to disclose confidential information, EXDS cites Camden v. Maryland, 910 F.Supp. 1115

(D. Md. 1996) (applying “no contact” rule to an opposing party’s former employee who was

extensively exposed to confidential client communications, and disqualifying counsel who had

interviewed the former employee without warning him not to disclose confidential information). 

However, that case was decided under Maryland law, and is not consistent with California’s rule

placing the burden on the former employer to seek a protective order if it has concerns that a former

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5 Camden is also factually distinguishable. In that case Camden brought an employment

discrimination suit against her former employer, Bowie State University (“BSU”). Camden’s attorney

contacted Richard Redmond, BSU’s former affirmative action specialist who had been responsible for

handling Camden’s claims. Redmond had regularly discussed Camden’s claims with BSU’s attorneys

while he still worked for BSU. When Camden had originally initiated her claim, BSU told her attorney

that Redmond was the “principal contact person,” but also asked Camden’s attorney to refrain from any

ex parte contacts with him. Thus, when Redmond later left BSU’s employ, Camden’s attorney knew

he had been extensively exposed to BSU’s privileged communications regarding the defense of

Camden’s case.

6

In Widger, a different California court expressed concern that the Gregori court’s

emphasis on attorney “misconduct” and use of “improper means” detracted from the prophylactic

purpose of disqualification. Widger, 232 Cal.App.3d at 591-92. It noted that such a formulation would

not cover a situation involving misconduct by an attorney’s employee, which was there the case. That

distinction is not material to the present motion. Nor is that court’s concern regarding preserving public

trust and the integrity of the judicial system, which would arise only if it were shown that Fetzer

disclosed privileged information to Defense counsel. Finally, no issue has been raised here regarding

whether EXDS must disclose actual information covered by a privilege, rather than just the general

nature of the information.

7 EXDS also seems to argue that purported discrepancies between Fetzer’s declarations

and her deposition testimony support disqualification ofDefense counsel. While any such discrepancies

may certainly be used for impeachment purposes, EXDS cites no case in which a court disqualified an

attorney based on discrepancies between a witness’ declarations and oral testimony.

ORDER, page 6

employee is at risk of disclosing confidential information.5

Further, contrary to EXDS’ argument, in the context of attorney disqualification (other than

direct conflict of interest cases) California does have a “no harm, no foul” rule:

“Since the purpose of a disqualification order must be prophylactic,

not punitive, the significant question is whether there exists a genuine

likelihood that the status or misconduct of the attorney in question will

affect the outcome of the proceedings before the court.” Gregori, 207

Cal.App.3d at 308-09.6 

Even where a court finds attorney misconduct occurred, “[d]isqualification is inappropriate,

however, simply to punish a dereliction that will likely have no substantial continuing effect on

future judicial proceedings.” Gregori, 207 Cal.App.3d at 309 (noting that where attorney

misconduct does not affect the outcome of the proceedings, sanctions other than disqualification,

such as fee awards, are the proper remedy.)

III. DISCUSSION

EXDS concedes that Defense counsel are allowed to contact EXDS’ former employees, but

argues that Defense counsel should be disqualified because they improperly sought and obtained

confidential and/or privileged information from Fetzer.7 However, EXDS fails to show there is any

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8 While the court is unaware of any case in which a court disqualified counsel based on

counsel having obtained non-privileged, but commercially confidential, information from an opposing

party’s former employee, such a result might be appropriate if the facts supported a finding that the

integrity of the judicial process had been injured. Here, it has not even been established that Fetzer

disclosed any commercially confidential information. The “self-help” cases cited by EXDS did not

involve any order disqualifying counsel, nor discuss the standards for such an order, and thus are of little

assistance. See Pillsbury, Madison & Sutro v. Schectman, 55 Cal.App.4th 1279 (1997); and Conn v.

Superior Court, 196 Cal.App.3d 774 (1987).

ORDER, page 7

reason to suspect Defense counsel sought to obtain, or that Fetzer in fact disclosed to them, any of

EXDS’ confidential and/or privileged information. Nor has EXDS shown that any “remedial” relief

is warranted here.

A. EXDS HAS NOT SHOWN THAT DEFENSE COUNSEL AFFIRMATIVELY SOUGHT ANY

CONFIDENTIAL OR PRIVILEGED INFORMATION FROM FETZER

The sole basis for EXDS’ claim that Defense counsel affirmatively sought confidential8

and/or privileged information from Fetzer is the fact they knew the nature of EXDS’ “high-tech

business in Silicon Valley and Ms. Fetzer’s role within the company,” and their purported failure to

warn Fetzer not to disclose any confidential and/or privileged information. However, Fetzer’s work

did not involve the “high tech” part of EXDS’ business. She was the Vice President of Facilities,

and later Vice President of New Project Development, in which capacities she oversaw facilities and

real estate, including overall project management for constructing and outfitting the buildings for

EXDS’ internet data centers. And as discussed above, attorneys have no duty to warn an opponent’s

former employee not to disclose confidential information. Neither Defense counsel’s knowledge of

the nature of EXDS’ business and Fetzer’s role therein, nor any failure to warn Fetzer not to disclose

any confidential and/or privileged information, evidences any intent to obtain confidential or

privileged information. A contrary finding would effectively impose a rule requiring a warning

which is not currently required under California law. 

B. EXDS HAS NOT SHOWN THAT FETZER DISCLOSED ANY CONFIDENTIAL

INFORMATION TO DEFENSE COUNSEL 

EXDS proffers five bases for its contention that the information Fetzer disclosed to Defense

counsel was confidential: 1) Fetzer herself believes some of the information she disclosed was

confidential; 2) the nature of the information in Fetzer’s declarations; 3) Fetzer purportedly told

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9 The analysis might be different if Fetzer were also a party to this action. In that case, her

testimony that she disclosed confidential information would likely be an admission that was binding on

her and her counsel. But Fetzer is not a party in this case, and in any event her statements do not bind

Defendants.

10 EXDS argues it is still entitled to enforce the confidentiality agreements Fetzer signed.

EXDS cites to Section 2.1(b)(v) of its Asset Purchase Agreement with C&W as evidence that Fetzer’s

confidentiality and severance agreements were not sold to C&W. Section 2.1(b)(v) provides only that

the “Purchased Assets” shall not include any of EXDS’ contracts other than the “Assigned Contracts.”

The Asset Purchase Agreement provides that the term “Assigned Contracts” shall “have the meaning

set forth in Section 2.3(d).” Whether any given contract is an “Assigned Contract” under Section 2.3(d)

cannot be determined without reference to numerous schedules as well as evidence of whether later

events occurred, none of which has been provided to the court. Thus, EXDS has not shown that it

retains any right to enforce the confidentiality agreement with Fetzer with regard to events occurring

after the sale of assets to C&W. In any event, whether EXDS has the right to enforce its prior agreement

with Fetzer is irrelevant to the question of whether Fetzer possessed any information in which EXDS

continued to have any confidentiality interest, and if so, whether Defense counsel had reason to believe

she did.

11 The fact Fetzer signed confidentiality agreements does not establish that she was in fact

exposed to any truly confidential information while at EXDS. Not all information a business may

consider confidential qualifies as confidential with respect to those who are not signatories to a

confidentiality agreement. 

ORDER, page 8

Defense counsel “everything . . . [she] knew that they asked her about;” 4) Defense counsel’s refusal

to turn over their notes of conversations with Fetzer; and 5) Defense counsel’s failure to warn Fetzer

not to disclose confidential information. None of the foregoing show that Fetzer disclosed any

information to Defense counsel in which EXDS had any confidentiality interest at the time of the

disclosure. This is particularly evident given EXDS’ disclosure of similar information in the public

record well before Defense counsel interviewed Fetzer.

Fetzer’s belief that she disclosed confidential information to Defense counsel is not sufficient

to establish that the information was in fact confidential at the time she disclosed it.9 As EXDS

points out, Fetzer “is not an expert on what can and cannot be disclosed.” And even for information

that may have been confidential at the time Fetzer worked at EXDS, she would not know if it lost its

confidential status through EXDS’ later actions. The question is not whether Fetzer thinks she

violated her confidentiality agreement,10 but whether the information was in fact confidential at the

time she disclosed it to Defense counsel in 2004, and if so, whether Defense counsel should have

known it was confidential.11

EXDS also points to the nature of the information in Fetzer’s two declarations. But the

information in Fetzer’s declarations does not appear to be confidential, and EXDS has not shown

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12 Contrary to EXDS’ representation to this court, Fetzer did not say at her recent deposition

that she told Defense counsel “everything . . . I knew that they asked about.” She expressly stated she

should not have used the word “everything” in her prior testimony, and she did not use it as part of her

statement that she told Defense counsel “what I knew that they asked about.” Nor has EXDS shown that

Defense counsel asked her about any confidential information.

13 In fact, Section 24.11 of the 300 Boulevard East lease expressly anticipates that it might

become public, and the language suggests that it was the landlord seeking confidentiality, not EXDS.

14 There is no rule against an attorney accepting such help from an opposing party’s former

employee. The unpublished case EXDS cites regarding an attorney hiring an opposing party’s former

employee as an expert is inapplicable here, as well as not properly citable. This court is applying

California law, and thus will not rely on a case on which California courts are precluded from relying.

In any event, the additional risks created when expert fees are paid to an opposing party’s former

employee are simply not present when no such fees are paid.

ORDER, page 9

otherwise. Moreover, EXDS never sought an order to seal Fetzer’s declarations. Thus, it is apparent

that EXDS does not truly believe there is any information of a confidential nature in the Fetzer

declarations.

Even assuming Fetzer told Defense counsel “everything she knew that they asked about,”12

this would only show she disclosed confidential information if she had in her possession information

that was confidential at that time, and if Defense counsel asked about such information. EXDS has

not shown either to be the case. EXDS’ public disclosure in its complaint of detailed information

regarding its leasing and construction activities belies its claim that it considers such information to

be confidential. Similarly, EXDS’ public filing of copies of documents Fetzer gave Defense counsel

shows it does not consider those documents to be confidential. In sum, none of the information

which Fetzer testified Defense counsel inquired about appears to be substantially different from the

information currently on file in the public record which EXDS has never sought to have sealed. 

Under these circumstances, it is hard to see how any of the information or documents13 Fetzer

disclosed to Defense counsel was confidential. Nor does the mere fact that Fetzer met with Defense

counsel several times over the course of year in an effort to “help” them14 imply that the information

she gave them was somehow confidential.

Neither Defense counsel’s purported “failure to warn,” nor their refusal to turn over their

notes to EXDS’ counsel, creates any inference that they obtained confidential information from

Fetzer. As discussed above, California courts put the burden on the employer to obtain a protective

order if it is concerned there is a risk that its former employees might disclose privileged

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15 The court does not consider litigation to be a “business.” Courts provide a venue for

resolving legal disputes, not for running businesses.

16 EXDS has made no showing that it has made any effort after filing bankruptcy to keep

confidential any of the information Fetzer had access to while at EXDS, such as: 1) lease negotiations;

2) facilities construction; and/or 3) EXDS’ business strategies regarding either lease issues or facilities

construction.

ORDER, page 10

information. Continental Ins. Co., 32 Cal.App.4th at 119. And, absent evidence of misconduct (or a

showing that the circumstances justify discovery of non-opinion work product), Defense counsel are

entitled to withhold their work product from opposing counsel.

EXDS complains that it does not know what information Fetzer gave Defense counsel. 

However, it knows what kind information Fetzer had access to in the course of her employment with

EXDS. And it has deposed her twice. Thus, EXDS should have been able to articulate what kind of

information Fetzer might have had in which EXDS had a confidentiality interest in the Summer of

2004. EXDS has simply failed to do so. For example, EXDS has not explained how it could have

benefitted commercially, after its bankruptcy, from maintaining the confidentiality of any

information that Fetzer may have disclosed to Defense counsel in 2004. EXDS concedes it is no

longer in the internet data center business, but claims that for the past three years it has been in the

“litigation business.”15 However, the reasons for protecting a corporation’s proprietary information

do not apply to litigation.

The law generally protects a company’s trade secrets in order to preclude the company’s

competitors from obtaining an unfair commercial advantage. See DVD Copy Control Association,

Inc. v. Bunner, 31 Cal.4th 864, 880-882 (2003) (noting that public policies underlying trade secret

law are intended to protect the owner's moral entitlement to the fruits of his or her labors, to

encourage research and invention, and to enforce a standard of commercial ethics); see also, Calcor

Space Facility, Inc. v. Superior Court (1997) 53 Cal.App.4th 216, 226 (“courts should be

particularly sensitive to the potential for creating an unfair commercial advantage to a party seeking

discovery of [trade secret] materials”). Even then, the party seeking protection must establish that it

made reasonable efforts to maintain secrecy.16 See, e.g., CAL.CIV.CODE § 2436.1(d)(2).

In the litigation context, absent a privilege, the law allows a company’s opponent to obtain

discovery of relevant information, regardless of whether it discloses the company’s proprietary or

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ORDER, page 11

trade secret information (though upon a showing of good cause courts will enter protective orders to

preclude the company’s competitors from obtaining and using the information for business

purposes). See Hypertouch, Inc. v. Superior Court, 128 Cal.App.4th 1527, 1555 n.16 (2005); see

also, Beckman Indus., Inc. v. International Ins. Co., 966 F.2d 470, 476 (9th Cir. 1992) (“Broad

allegations of harm, however, unsubstantiated by specific examples or articulated reasoning, do not

satisfy the Rule 26(c) test.”). 

Finally, even if any of the information Fetzer disclosed to Defense counsel was confidential,

there is no reason to think Defense counsel knew it was confidential. EXDS’ public disclosure of

detailed lease and construction information in its complaint, the lack of any confidentiality marks on

the face of the documents Fetzer provided, and the fact EXDS did not continue as an operating

company after its bankruptcy, would lead a reasonable attorney to believe that EXDS no longer had

any confidentiality interests in the information, if it ever did. EXDS neither articulates nor provides

factual support for its contrary claim that Defense counsel “must have known” that the information

was somehow confidential.

C. THERE IS NO REASON TO SUSPECT FETZER DISCLOSED ANY PRIVILEGED

INFORMATION TO DEFENSE COUNSEL 

EXDS claims Fetzer must have divulged some privileged information to Defense counsel

because she participated in meetings with EXDS’ attorneys while she worked there. EXDS seems to

be under the impression that any information mentioned during a meeting with counsel is privileged. 

That is not the standard. 

The attorney-client privilege covers confidential communications between a client and its

lawyer. See CAL.EVID.CODE § 954. The privilege is strictly construed in the interest of bringing to

light relevant facts. See People ex rel. Dept. of Public Works v. Donovan, 57 Cal.2d 346, 354

(1962). The privilege does not embrace matters that are otherwise unprivileged merely because the

client communicated those matters to its attorney. Id. at 355. The attorney-client privilege does not

apply where the attorney acts merely as a negotiator or business agent. See Montebello Rose Co. v.

Agricultural Labor Relations Bd., 119 Cal.App.3d 1, 32 (1981); and Watt Industries, Inc. v. Superior

Court 115 Cal.App.3d 802, 805 (1981). And because the privilege only applies to communications

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17 “‘The communication must be intended by the client to be treated in confidence.’” La

Jolla Cove Motel and Hotel Apartments, Inc. v. Superior Court, 121 Cal.App.4th 773, 791 (2004),

quoting Alpha Beta Co. v. Superior Court, 157 Cal.App.3d 818, 824-25 (1984).

ORDER, page 12

that are intended to be kept confidential,17 it does not apply to communications the client intends for

its lawyer to pass on to a third party.

EXDS asks the court to presume that Fetzer disclosed privileged information to Defense

counsel, citing Widger, 232 Cal.App.3d 572; and Shadow Traffic Network v. Superior Court, 24

Cal.App.4th 1067 (1994). These cases applied a presumption developed in the context of indirect

conflict of interest cases (the “Widger Presumption”). See Widger, 232 Cal.App.3d at 594-96. 

Under Widger the party seeking disqualification must first show that the employee or expert in

question possesses confidential attorney-client information materially related to the proceedings

before the court. If the party makes this showing, a rebuttable presumption arises that the employee

or expert has disclosed the privileged information during the course of his or her work for the

attorney whose disqualification is sought. See Widger, 232 Cal.App.3d at 596. 

The Widger Presumption has limited application, if any, in situations involving counsel’s ex

parte contact with an adverse party’s former employee. The latter situation implicates policies

regarding counsel’s ability to investigate the facts relevant to his client’s case which are not

implicated in conflict of interest cases. Having carefully considered California case law on

disqualification motions, the court finds it unlikely California courts would apply the Widger

Presumption in the context of ex parte contacts with an opposing party’s former employee. This

conclusion is supported by the recent case of La Jolla Cove Motel and Hotel Apartments, Inc. v.

Superior Court, 121 Cal.App.4th 773 (2004). 

La Jolla Cove Motel involved an action against a corporation by its minority shareholder and

its former president. The plaintiff’s attorney had ex parte contacts with two dissident directors of the

defendant without consent of defendant’s counsel (but with the consent of directors’ separate

counsel). The defendant’s counsel submitted a declaration stating that the directors had received

attorney-client privileged case status reports relating to litigation concerning defendant and one of

the plaintiffs. Although the directors possessed privileged information, the court expressly placed on

the defendant the burden of showing that the directors actually disclosed any such privileged

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information to the plaintiff’s counsel:

“‘Once a party claims the attorney-client privilege, the communication

sought to be suppressed is presumed confidential. A party opposing the

privilege has the burden of proof to show the communication is one

not made in confidence. (Evid. Code, § 917.) However, the party

claiming privilege has the burden to show that the communication

sought to be suppressed falls within the terms of the statute. * * * * ’

¶ Here, the showing made by La Jolla Cove at best demonstrated that

Durisoe and Baxter possessed certain information protected by the

attorney-client privilege, but was inadequate to prove that any

protected communications were divulged by them to the Jackmans’

counsel.” La Jolla Cove Motel, 121 Cal.App.4th at 791 (citations

omitted) (emphasis added). 

Given that California did not apply the Widger Presumption to current corporate directors, it

is unlikely that California would apply the presumption to a former employee. 

In any event, EXDS has not established the facts necessary to trigger the Widger

Presumption. In order to trigger the presumption, “[t]he party seeking disqualification must show

that its present or past attorney’s former employee possesses confidential attorney-client information

materially related to the proceedings before the court.” Widger, 232 Cal.App.3d at 596. The court

specifically cautioned that “showing merely potential access to confidences without actual exposure

is insufficient. The threat to confidentiality must be real, not hypothetical.” Widger, 232 Cal.App.3d

at 596 n. 13. 

Fetzer herself is not an attorney. EXDS submitted deposition testimony from Hamilton

Southworth, one of EXDS’ former outside attorneys (who it later hired in a business capacity) with

whom Fetzer had contact during lease negotiations. Southworth testified that while he was outside

counsel for EXDS he would mark up initial draft leases, send the markups to one of EXDS’ in house

attorneys, Mary Anne Wellman, and they would then discuss the markups, and problems and issues

with the lease. He further testified that “if there was a business point that we didn’t know the answer

to, Mary Anne Wellman would have a weekly meeting with Janice Fetzer and would run through a

list of issues that Janice was responsible for giving guidance on.” Southworth did not indicate

whether the “business points” Wellman asked Fetzer about were used for the purpose of Southworth

or Wellman providing EXDS with legal advice, as opposed to simply supplying business points

(such as rental rates or other agreed terms) to insert into a draft lease.

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ORDER, page 14

Fetzer herself testified that EXDS’ attorneys “wouldn’t really give me advice.” And she

made it clear that her involvement with EXDS’ attorneys occurred in the context of negotiations in

which “there’s probably all kinds of things [EXDS’ attorneys] said that have been disclosed to third

parties in all sorts of ways because they’re part of a team that sits at a table and works things out.” 

Based on the record submitted by EXDS, the court finds that EXDS has not shown that

Fetzer actually “possesses confidential attorney-client information materially related to the

proceedings before the court.” The record establishes that Fetzer worked with EXDS’ attorneys in

the context of negotiating leases with third parties. As noted above, the attorney-client privilege

does not apply where the attorney acts merely as a negotiator. See Montebello Rose, 119 Cal.App.3d

at 32. EXDS has not shown that any communications to which Fetzer was privy were intended by

EXDS to be confidential. On the contrary, Fetzer’s testimony suggests the communications were

intended to be shared with the third parties with whom EXDS was negotiating.

At most, EXDS has shown only that Fetzer potentially had access to attorney-client

confidences, not that she was actually exposed to any such confidences. Thus, even if the court were

to find the Widger Presumption applies in the context of mere ex parte contacts with an opposing

party’s former employee, EXDS has not made a sufficient showing to trigger the presumption.

Moreover, under the rationale of La Jolla Cove Motel and Gregori even if Fetzer was

exposed to some privileged communications at EXDS, disqualification is not warranted absent a

showing that: 1) she actually disclosed to Defense counsel any of those privileged communications

(as opposed to unprivileged information which may have been discussed during the privileged

communications); and 2) Defense counsel improperly used or may use the information in a way that

will have a substantial continuing effect on future judicial proceedings. See, La Jolla Cove Motel,

121 Cal.App.4th at 791; and Gregori, 207 Cal.App.3d at 309. EXDS has made no such showing.

Nothing in the record suggests that Fetzer disclosed to Defense counsel any confidential

communications with EXDS’ attorneys, nor any advice EXDS’ counsel gave to EXDS. To the

extent some of the information Fetzer disclosed to Defense counsel is information that she may have

previously conveyed to EXDS’ counsel–such as EXDS’ business strategies in connection with lease

negotiations–that information did not become privileged just because it was conveyed to an attorney. 

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18 EXDS sold substantially all of its operating assets C&W in 2002. EXDS has not shown

that the documents Fetzer retained in her possession are copies of documents which were not sold in that

transaction. EXDS does not cite to any portion of its Asset Purchase Agreement with C&W, or any

other evidence, showing that the documents and data in Fetzer’s possession were excluded from the

“Purchased Assets” under Section 2.1 of that agreement.

19 Since Defense counsel were not acting improperly when they first obtained the

documents, it is likely Defendants would be allowed relief from the discovery cutoff to request

production of the documents.

ORDER, page 15

See, e.g., La Jolla Cove Motel, 121 Cal.App.4th at 791 (information that was not privileged to begin

with may not be made so by later delivery to an attorney).

D. NO “REMEDIAL” RELIEF IS WARRANTED

In addition to seeking disqualification of Defense counsel, EXDS asks the court to order

Defense counsel to turn over all remaining documents they received from Fetzer, as well as

counsel’s notes of their interviews with her. EXDS also asks the court to strike Fetzer’s

declarations. Finally, EXDS asks for monetary sanctions.

Because EXDS has not shown Defense counsel engaged in any improper conduct, nor that

they obtained any confidential or privileged information from Fetzer, none of the “remedial” relief

requested by EXDS is warranted. 

The question of whether to order Defendants to turn over the remaining documents they

obtained from Fetzer is a close question. If the documents were originals rather that printouts from

electronic data in Fetzer’s possession, and if EXDS were still the owner of any such original

documents, a turn-over order might be appropriate. Here, however, the documents at issue are

apparently copies, not originals. And EXDS has not established that it owns the documents.18

Moreover, requiring Defense counsel to turn over the documents would only create

unnecessary work for all concerned, since Defendants would be entitled to seek production of the

documents to the extent the information is relevant to this action.19 

IV. CONCLUSION

EXDS has patched together a few pithy quotes without addressing the policy considerations

underlying the quoted language or how those considerations apply in this case. Many of the cases

are inapplicable either because they do not involve mere ex parte contact with an opposing party’s

former employee, or they are from jurisdictions whose laws are inconsistent with California law. 

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Application of the proper analysis and policy considerations under California law shows that

disqualification is clearly not warranted. The motion is nothing more than a strategic attempt to

deprive Defendants of their chosen attorneys at a late stage in these proceedings and to eliminate

unfavorable evidence. No improper conduct has been shown. Defense counsel interviewed one of

EXDS’ former employees, as they are entitled to do. The former employee declined to grant similar

interviews to EXDS’ counsel, as she is entitled to do. While this turn of events may not be to

EXDS’ liking, it is not grounds for disqualifying opposing counsel.

Dated: 8/24/05

 /s/ Patricia V. Trumbull 

PATRICIA V. TRUMBULL

United States Magistrate Judge

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