Court Opinion

ID: 3180359
Source: CourtListenerOpinion
Date Created: 2016-02-25 18:07:30.718011+00
Date Added: 2024-06-11T09:36:29.886077
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

READING INTERNATIONAL, INC., a            No. 14-16827
Nevada corporation,
                 Plaintiff-Appellant,        D.C. No.
                                          1:13-cv-00133-
                 v.                         JMS (KSC)

THE MALULANI GROUP, LIMITED, a
Hawaii corporation,                          ORDER
                Defendant-Appellee.

      Appeal from the United States District Court
               for the District of Hawaii
     J. Michael Seabright, District Judge, Presiding

              Submitted to Motions Panel
                 September 14, 2015

                Filed February 25, 2016

    Before: Stephen Reinhardt, A. Wallace Tashima,
       and Johnnie B. Rawlinson, Circuit Judges.
2           READING INT’L V. THE MALULANI GRP.

                           SUMMARY*

                  Disqualification of Counsel

    The panel granted appellee The Malulani Group, Inc.’s
motion to disqualify counsel for appellant Reading
International, Inc., Bronster Fujichaku Robbins.

    The panel applied Hawaii law, which has adopted the
“substantial relationship” test for reviewing attorney
disqualification where a representation may be adverse to the
interests of a former client, codified at Hawaii Rules of
Professional Conduct (“HRCP”) 1.9(a). The panel concluded
that two representations – the pending appeal and a prior case
– were substantially related, and held that attorney Kenneth
Robbins was barred from representing Reading in the pending
appeal under HRCP 1.9. The panel further held that Robbins’
disqualification was imputed to the Bronster Firm under
HRCP 1.10(c). The panel also held that The Malulani Group
had not waived its right to seek disqualification of the
Bronster Firm. The panel concluded that the Bronster Firm
was disqualified from representing Reading in this appeal.

                            COUNSEL

Margery S. Bronster and Rex Yoshio Fujichaku, Bronster
Fujichaku Robbins, Honolulu, Hawaii, for Plaintiff-
Appellant.

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
           READING INT’L V. THE MALULANI GRP.                   3

Jay S. Handlin and Lindsay N. McAneeley, Carlsmith Ball
LLP, Honolulu, Hawaii, for Defendant-Appellee.

                            ORDER

    Appellee The Malulani Group, Limited (“TMG”) moves
to disqualify counsel for appellant Reading International, Inc.
(“Reading”), Bronster Fujichaku Robbins (“Bronster Firm”).
TMG seeks disqualification because attorney Kenneth
Robbins, a partner at the Bronster Firm, previously
represented TMG while a partner at the firm Robbins &
Associates.

   We have jurisdiction over the appeal pursuant to
28 U.S.C. § 1291. We grant the motion to disqualify counsel.
We express no opinion on the merits of the pending appeal.

    The pending appeal challenges the district court’s
judgment in favor of TMG in Reading’s diversity action.
Reading alleges that TMG breached a 2009 settlement
agreement stemming from an action in the First Circuit Court,
State of Hawaii, Magoon Investments, LLC v. Malulani
Investments, Limited, Civil No. 06-1-2156 GWBC (“Prior
Action”). TMG, represented by the firm Robbins &
Associates, intervened in the Prior Action as the parent
corporation of the defendant Malulani Investments. Reading,
represented by the Bronster Firm, was a plaintiff,
counterclaim defendant, and defendant in intervention in the
Prior Action.1

  1
    Before April 15, 2015, the Bronster Firm was known as Bronster
Hoshibata.
4         READING INT’L V. THE MALULANI GRP.

    Most of the legal work done by Robbins & Associates for
TMG in the Prior Action was performed by attorney Kenneth
Robbins and his associate attorney Sergio Rufo. TMG paid
Robbins & Associates a total of $1,211,803.17 in fees and
costs in the Prior Action.

    The parties to the Prior Action mediated their dispute
beginning in June 2008. On March 11, 2009, the parties to
the Prior Action placed the broad terms of a settlement on the
record with the Hawaii Circuit Court. The mediator indicated
on the record that the parties had reached a settlement in
principle and had a form of settlement and release, but that
these documents were not in their final form, and additional
settlement documents needed to be completed as well. The
parties confirmed through counsel that they agreed to the
substance of the settlement and release agreements put on the
record.

    On March 16, 2009, TMG’s president gave notice to
Robbins & Associates that TMG was terminating its
engagement, effective immediately. On June 18, 2009,
Robbins & Associates moved to withdraw as counsel for
TMG in the Prior Action. The motion to withdraw included
a declaration by Robbins & Associates associate attorney
Sergio Rufo that “the firm’s engagement as counsel for
[TMG] was terminated on March 17, 2009,” and that Robbins
& Associates “did not participate in negotiating the
settlement of, and has no further role in” the Prior Action.

    The parties in the Prior Action negotiated a final set of
settlement documents which were executed on July 2, 2009.
On the same day, the Hawaii Circuit Court dismissed the
claims and counterclaims of all parties in the Prior Action
with prejudice, and granted Robbins & Associates’ motion to
            READING INT’L V. THE MALULANI GRP.                          5

withdraw as counsel for TMG. As a condition of withdrawal,
the Circuit Court required Robbins & Associates to sign the
stipulation to dismiss the Prior Action. However, the
stipulation included a statement that “TMG agrees that
Robbins & Associates has provided no legal services on
behalf of TMG in this matter since March 17, 2009.”

    In 2013, Reading filed the pending action in the United
States District Court for the District of Hawaii, contending
that TMG had breached terms of the 2009 settlement
documents.2 The 2009 settlement documents have been
publicly filed. Reading is again represented by the Bronster
Firm in this action.

    On February 4, 2015, the Bronster Firm filed Reading’s
opening brief in this appeal. On February 20, 2015, the
Bronster Firm informed TMG in writing that Robbins was
joining the Bronster Firm as a partner, and that Robbins
would be screened from participation in the pending action
and would be apportioned no part of the fees. The Bronster
Firm’s letter requested that TMG confirm in writing its
consent to the Bronster Firm’s continuing representation of
Reading pursuant to Hawaii Rules of Professional Conduct
(“HRPC” or Rules) 1.9 and 1.10. TMG did not provide oral
or written consent. Robbins joined the Bronster Firm
effective March 16, 2015.

 2
  Reading initially filed an action alleging breach of the 2009 settlement
documents in the Superior Court of Los Angeles County in May 2011.
The California action was dismissed for lack of personal jurisdiction.
Reading Int'l v. Malulani Invs., B238331, 2012 WL 4243892 (Cal. App.
2d Dist. Sept. 21, 2012) (affirming dismissal).
6          READING INT’L V. THE MALULANI GRP.

    On April 23, 2015, the Bronster Firm filed in the district
court a notice of change of firm name, reflecting that the firm
had changed its name to Bronster Fujichaku Robbins. On
May 20, 2015, the Bronster Firm filed Reading’s reply brief
in the pending appeal. TMG then filed the instant motion to
disqualify counsel on June 24, 2015, asserting that Robbins
is personally disqualified from representing Reading, and that
Robbins’ disqualification is imputed to the Bronster Firm.

    “Because [federal courts] apply state law in determining
matters of disqualification, we must follow the reasoned view
of the state supreme court when it has spoken on the issue.”
In re Cty. of L.A, 223 F.3d 990, 995 (9th Cir. 2000).

    The Hawaii Supreme Court has adopted the “substantial
relationship” test for reviewing attorney disqualification
where a representation may be adverse to the interests of a
former client. See Otaka v. Klein, 71 Haw. 376 (1980). The
substantial relationship test was codified in HRCP 1.9(a),
which provides that “[a] lawyer who has formerly represented
a client in a matter shall not thereafter represent another
person in the same or a substantially related matter in which
that person’s interests are materially adverse to the interests
of the former client unless the former client consents after
consultation, and confirms in writing.”3

   For the purposes of this motion, we accept that Robbins
& Associates’ representation of TMG in the Prior Action
ended on March 17, 2009, and that Robbins & Associates

    3
    HRCP 1.9 does not incorporate the “appearance of impropriety”
doctrine found in the former Canon 9 of the Code of Professional
Conduct. See Otaka, 71 Haw. 376 (discussing disqualification under
former appearance of impropriety standard).
          READING INT’L V. THE MALULANI GRP.               7

performed no work for TMG after that date. Additionally, the
parties do not dispute that the current representation by the
Bronster Firm in the pending appeal is materially adverse to
TMG’s interests because TMG is the defendant-appellee in
the action and Reading has asserted claims against TMG.
However, the parties vigorously dispute whether the Prior
Action is the same or substantially related to the current
representation.

    Comment 3 to HRCP 1.9 further addresses when matters
are substantially related:

       Matters are “substantially related” for
       purposes of this Rule if they involve the same
       transaction or legal dispute or if there
       otherwise is a substantial risk that confidential
       factual information as would normally have
       been obtained in the prior representation
       would materially advance the client's position
       in the subsequent matter. . . . Information that
       has been disclosed to the public or to other
       parties adverse to the former client ordinarily
       will not be disqualifying. Information
       acquired in a prior representation may have
       been rendered obsolete by the passage of time,
       a circumstance that may be relevant in
       determining whether two representations are
       substantially related. In the case of an
       organizational client, general knowledge of
       the client's policies and practices ordinarily
       will not preclude a subsequent representation;
       on the other hand, knowledge of specific facts
       gained in a prior representation that are
       relevant to the matter in question ordinarily
8         READING INT’L V. THE MALULANI GRP.

       will preclude such a representation. A former
       client is not required to reveal the confidential
       information learned by the lawyer in order to
       establish a substantial risk that the lawyer has
       confidential information to use in the
       subsequent matter. A conclusion about the
       possession of information may be based on
       the nature of the services the lawyer provided
       the former client and information that would
       in ordinary practice be learned by a lawyer
       providing such services.

    TMG contends the pending appeal is substantially related
to the Prior Action, which culminated in the 2009 settlement,
in which Robbins was counsel for TMG. In particular, TMG
points to Reading’s argument before the district court and on
appeal that the parties in the Prior Action had intended that
TMG would not have a right to cure claimed breaches of the
settlement documents. TMG futher asserts that Robbins had
confidential information related to the current action by virtue
of his representation of TMG in the Prior Action, including
TMG’s strategies with respect to settlement.

    Reading maintains that the current action is not
substantially related to the Prior Action, because it asserts
that Robbins did not personally participate in the drafting,
negotiation, or execution of settlement documents in the Prior
Action, Robbins’ firm was terminated as of March 17, 2009,
and the current action involves only TMG’s post-settlement
performance of its obligations under the publicly filed 2009
settlement documents.

  In the Prior Action, Robbins represented TMG until
March 17, 2009. During the course of the representation,
          READING INT’L V. THE MALULANI GRP.                 9

Robbins and his associate actively participated in mediation
of the dispute that led to the broad settlement terms entered
on the record in March 11, 2009. The pending appeal
addresses alleged breaches of the final settlement documents
finalized on July 2, 2009. Because the appeal raises issues of
the parties’ intent in entering into those settlement
documents, the factual context of the two representations
overlaps, and confidential factual information regarding the
parties’ settlement positions and strategies, even prior to
March 11, 2009, would materially advance the client’s
position in the subsequent matter. Although Reading argues
that the public filing of the settlement makes the information
non-confidential, this does not address confidential
information Robbins would have obtained in the course of his
representation regarding settlement strategy.

   Accordingly, we conclude that the two representations are
substantially related, and Robbins is barred from representing
Reading in the pending appeal under HRCP 1.9.

    We must therefore determine whether Robbins’
disqualification is imputed to the Bronster Firm. When an
attorney joining a new firm brings conflicts from his prior
firm, imputed disqualification is governed by HRCP 1.10(c).
See HRCP 1.10, comment 2. HRPC 1.10(c) provides that
“[w]hen a lawyer becomes associated with a firm, and the
lawyer is prohibited from representing a client because the
lawyer’s former firm has represented a person whose interests
are materially adverse to that client in the same or a
substantially related matter, other lawyers in the firm may not
thereafter represent the client unless” the provisions of HRCP
10          READING INT’L V. THE MALULANI GRP.

1.10(c)(1)–(3) are met.4 If all requirements of HRCP 1.10(c)
are satisfied, the new firm is required to provide a written
notice to the client of the prior firm, but is not required to
obtain the prior client’s consent to the representation.
Reading contends that the screening and notification
requirements provided in Rule 1.10(c) have been satisfied in
this case, and the Bronster Firm therefore was not required to
obtain written consent from TMG pursuant to HRCP
1.7(b)(4) in order to continue its representation of Reading.

   The Hawaii Supreme Court has not yet spoken on the
applicability or interpretation of HRPC 1.10(c) since it
adopted the Rule, which became effective January 1, 2014.
Additionally, while the HRPC are modeled on the American
Bar Association’s Model Rules of Professional Conduct, the
Model Rule regarding imputation of conflicts does not
contain a screening provision similar to that in HRCP 1.10(c).
See ABA Model Rule of Professional Conduct 1.10
(imputation of conflicts of interest).5 We therefore look to

 4
    HRPC 1.10 (c): “When a lawyer becomes associated with a firm, and
the lawyer is prohibited from representing a client because the lawyer’s
former firm has represented a person whose interests are materially
adverse to that client in the same or a substantially related matter, other
lawyers in the firm may not thereafter represent the client unless: (1) the
disqualified lawyer did not participate in the matter and has no
confidential information regarding the matter; (2) the disqualified lawyer
is timely screened from any participation in the matter and is apportioned
no part of the fee therefrom; and (3) written notice is promptly given to
any affected former client to enable it to ascertain compliance with the
provisions of this Rule.”
     5
    Other states have also adopted screening provisions in their rules
regulating imputation of attorney conflicts when an attorney is newly
associated with a firm. The provisions vary in how broadly they allow
firms to apply the screening procedures to avoid the imputation of
            READING INT’L V. THE MALULANI GRP.                         11

the plain terms of HRCP 1.10(c), and to the comments to the
Rule, to the extent they provide insight on how it should be
construed.

    “Where the conditions of [HRCP 1.10] paragraph (c) are
met, imputation is removed, and consent to the new
representation is not required.” HRCP 1.10, comment 6.
However, the screening procedure provided in HRCP 1.10(c)
can only be utilized when “the disqualified lawyer did not
participate in the matter and has no confidential information
regarding the matter.” HRCP 1.10(c)(1). “In situations
where the personally disqualified lawyer was involved in a
matter, or had confidential information, the new firm will
generally only be allowed to handle the matter if the former
client at the former law firm of the personally disqualified
lawyer consents and the new firm reasonably believes that the
representation will not be adversely affected, all as required
by Rule 1.7 of these Rules.” HRCP 1.10, comment 11.

    Reading contends that the phrase “the matter” in HRCP
1.10(c)(1) refers only to the currently pending matter, and not
any “substantially related matter” that gave rise to the

conflicts from newly associated attorneys. See, e.g., Rhode Island Rules
of Professional Conduct 1.10(c) (permitting screening of newly associated
attorneys who are personally disqualified from a matter, without
qualification as to the level of the disqualified attorney’s involvement in
the prior matter); Arizona Rule of Professional Conduct 1.10(d)
(permitting screening of newly associated attorneys where “the matter
does not involve a proceeding before a tribunal in which the personally
disqualified lawyer had a substantial role”); Indiana Rule of Professional
Conduct 1.10(c)(1) (permitting screening of newly associated attorneys so
long as “the personally disqualified lawyer did not have primary
responsibility for the matter that causes the disqualification under Rule
1.9”).
12          READING INT’L V. THE MALULANI GRP.

conflict. TMG argues that the phrase must refer back to the
reference to “the same or a substantially related matter” found
in Rule 1.10(c) in order to give those words meaning. The
court need not resolve this issue becuase we find Reading
cannot satisfy the requirement of HRCP 1.10(c)(1) that the
disqualified lawyer have “no confidential information
regarding the matter”, even if “the matter” refers only to the
currently pending action. As counsel for TMG in the Prior
Action, Robbins and his associate participated in the
mediation that led to the settlement of the Prior Action, and
had confidential communications and meetings with TMG’s
principals. Although Robbins had no role in the Prior Action
after March 17, 2009 and asserts he was not personally
involved in the drafting of the settlement documents, Robbins
and his firm represented TMG at the time the parties to the
Prior Action placed the broad terms of a settlement on the
record with the Hawaii Circuit Court. The Prior Action
resulted in the settlement documents that Reading alleges
were breached in the current action, and Reading has raised
issues on appeal regarding the intent of the parties in those
settlement documents. Based on these facts, we find Robbins
has confidential information regarding the currently pending
matter.6

  6
    HRPC 1.10, comment (10) notes that: “[a] transitioning lawyer very
well may have no confidential information if the lawyer did no work on
the matter at the former firm and the matter was not the subject of
discussion with the lawyer generally, for example at firm or working
group meetings. The lawyer must search his or her files and recollections
carefully to determine whether he or she has confidential information. The
fact that the lawyer does not immediately remember any details of the
former client's representation does not mean that he or she does not in fact
possess confidential information regarding the matter. However, even if
the lawyer has no confidential information about the representation of the
            READING INT’L V. THE MALULANI GRP.                      13

    All conditions of Rule 1.10(c) must be satisfied in order
to employ the notice-only screening procedure. Because we
find that Rule 1.10(c)(1) cannot be satisfied, we need not
reach the parties arguments regarding compliance with the
requirements of Rule 1.10(c)(2) and (3).7

    We turn next to Reading’s argument that TMG has
waived its right to seek disqualification because it was aware
of Robbins’ association with the Bronster Firm for four
months before filing the motion to disqualify in this court.
We disagree. The Bronster Firm notified TMG that Robbins
was joining its firm on February 20, 2015, requested a written
conflict waiver, and did not receive one. While the Bronster
Firm filed a notice of firm name change in the district court
docket on April 2015, its next filing in this court on behalf of
Reading was the reply brief filed on May 22, 2015. The
disqualification motion was filed one month later on June 24,
2015. Under these circumstances, Reading has not met its
burden to show that TMG has waived its right to seek
disqualification of the Bronster Firm.

    This court has warned that a “motion to disqualify a law
firm can be a powerful litigation tactic to deny an opposing
party’s counsel of choice.” In re Cty. of L.A., 223 F.3d 990,
995 (9th Cir. 2000); see also Optyl Eyewear Fashion Int'l
Corp. v. Style Cos., 760 F.2d 1045, 1050 (9th Cir. 1985)
(motions to disqualify “subjected to particularly strict judicial

former client, the new firm is disqualified unless all of the screening
procedures are followed.”
  7
    We also need not reach TMG’s argument that the Bronster Firm’s
February 20, 2015 request for consent constitutes an admission that a
disqualifying conflict exists.
14        READING INT’L V. THE MALULANI GRP.

scrutiny”). We are mindful of the drastic nature of
disqualification. See HRCP 1.9. comment 4 (“If the concept
of imputation were applied with unqualified rigor, the result
would be radical curtailment of the opportunity of lawyers to
move from one practice setting to another and of the
opportunity of clients to change counsel.”). However, this is
not an occasion where a firm was caught unaware of a newly
associated attorney’s potential conflicts, or where the
connection between the actions is attenuated. The Bronster
firm was well aware of both Robbins’ previous representation
of TMG and the existing action before Robbins became
associated with the firm. In associating with Robbins, the
Bronster firm accepted the risk of disqualification.
Accordingly, despite the drastic nature of disqualification, we
find that under the particular circumstances presented in this
case, HRCP 1.9 and 1.10 require imputed disqualification of
the Bronster Firm. The motion to disqualify is GRANTED.
The Bronster Firm is disqualified from representing Reading
in this appeal.

    A corporation must be represented by counsel. See In re
Highley, 459 F.2d 554, 55 (9th Cir. 1972). Accordingly,
within 35 days after the date of this order, appellant shall
obtain new counsel and file a notice of appearance with the
court.

    The opening and answering briefs have been filed. We
strike Reading’s reply brief, filed May 22, 2015 after the
disqualifying conflict arose. Reading may file a substitute
reply brief within 35 days after new counsel’s notice of
appearance is filed with the court.