Court Opinion

ID: 3156825
Source: CourtListenerOpinion
Date Created: 2015-11-23 19:03:06.34831+00
Date Added: 2024-06-11T12:01:16.016256
License: Public Domain

Filed 11/23/15 Payan v. Superior Court CA4/1

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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                    COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                  DIVISION ONE

                                           STATE OF CALIFORNIA

FIROOZ PAYAN,                                                    D067852

         Petitioner,                                             (Super. Ct. No.
                                                                  37-2013-00078078-CU-BT-CTL)
         v.

THE SUPERIOR COURT OF SAN
DIEGO COUNTY,

         Respondent;

OVERLAND DIRECT, INC., et al.,

        Real Parties in Interest.

         ORIGINAL PROCEEDING in mandate. Eddie Sturgeon, Judge. Petition granted.

         Thornton~Koller, Audrey Powers Thornton; and H. Paul Kondrick for Petitioner.

         No appearance for Respondent.

         Law Offices of George Rikos and George Rikos for Real Parties in Interest.

         "'The right of a party to be represented in litigation by the attorney of his or her

choice is a significant right [citation] and ought not to be abrogated in the absence of
some indication the integrity of the judicial process will be otherwise injured.'" (Smith,

Smith & Kring v. Superior Court (1997) 60 Cal. App. 4th 573, 580.)

       Here, the trial court granted a motion to disqualify attorney H. Paul Kondrick,

counsel for Firooz Payan, although there is no evidence Kondrick represented any

adverse party or inappropriately obtained confidential information. The trial court's one-

sentence order disqualifying Kondrick contains no findings or analysis. For that reason

alone it would have to be vacated. (Smith, Smith & Kring v. Superior Court, supra, 60

Cal.App.4th at p. 582.) Moreover, on this record, Kondrick's disqualification is

unwarranted. Therefore, we grant Payan's petition for a writ of mandate directing the

trial court to vacate its order disqualifying Kondrick and enter a new order denying the

motion to disqualify Kondrick.

                   FACTUAL AND PROCEDURAL BACKGROUND

       A. The Petition's Allegations Are Deemed True

       After the trial court granted the motion to disqualify Kondrick, Payan filed a

petition for a writ of mandate. We issued an order to show cause, stating that absent

objection, the informal response by real party in interest, Overland Direct, Inc.

(Overland), would be deemed its return to the order to show cause. Overland filed an

objection, stating it intended to file a return, and later Overland filed a document entitled

return/answer.

       When the Court of Appeal issues an order to show cause, the real party in interest

may file "a return by demurrer, verified answer, or both." (Cal. Rules of Court, rule

8.487(b)(1).) "The return must conform to the rules governing an answer in a civil

                                              2
action, and the usual rules of pleading apply." (8 Witkin, Cal. Procedure (5th ed. 2008)

Writs, § 195, p. 1099.)

       Overland's return/answer is unverified and includes neither an answer nor a

demurrer. Instead, Overland's return consists of a memorandum of points and authorities,

in the style of an appellate brief.

       Citing Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal. App. 4th 365,

Payan asserts Overland's failure to answer or demurrer requires the factual allegations in

Payan's petition to be deemed true. Payan is correct. An attempted response that is not a

demurrer or verified answer—for example, "'a document consisting only of a discussion

of points and authorities—is not a "return" and is not effective to deny the facts alleged in

the writ petition.'" (Id. at p. 372, fn. 5.) As a result, facts alleged in Payan's petition are

accepted as true, comprising the facts stated below.

       B. Aurora Lends Money to Overland

       In 2007 Aurora Fidelity Trust Company, Ltd., and certain bondholders (Aurora)

loaned Overland Direct (Israel) Ltd. approximately $25 million, which Overland-Israel

invested in its wholly owned subsidiary, Overland Direct, Inc. (Overland).

      C. Overland Lends Money to Cartwright Termite and Pest Control, Inc. and
Addisu Worku

       Overland used the $25 million to make real estate loans. Overland made one such

loan to Cartwright Termite and Pest Control, Inc. (Cartwright), secured by Cartwright's

real property in El Cajon, California. Overland made another secured real estate loan to

Addisu Worku.

                                               3
       D. Overland Defaults and Is Sued by Aurora

       In 2010 Overland defaulted in its obligations to Aurora. Aurora hired Dan Tepper

to collect the debt from Overland. Tepper manages Esola Capital Investment, LLC

(Esola), a real estate management, financial, and collection business. On Aurora's behalf,

Esola retained a law firm, Krane & Smith, to sue Overland and its president, Doran Ezra

(the Aurora action). Attorney Mark E. Goodfriend is named as one of seven attorneys on

Krane & Smith's letterhead.

       Tepper contends that he advanced "hundreds of thousands of dollars" to collect the

debt owed by Overland to Aurora. To compensate Tepper for his services, Aurora

assigned certain of its rights against Overland to Esola.

       E. The Aurora Settlement

       The Aurora action settled. As part of the settlement, Overland assigned certain

assets to Esola, including the Cartwright and Worku notes and trust deeds.

       At about the same time, to avoid being thrown into bankruptcy or incurring

significant legal fees, Ezra agreed to relinquish control of Overland's business to Tepper.

Ezra gave Tepper/Esola copies of Overland's financial documents and business records.

       F. Worku Sues Overland

       After Aurora settled, Overland was sued by Worku to invalidate Overland's trust

deed that secured the $1.3 million loan Worku obtained from Overland. However, Esola

now held the Worku note and trust deed, as Overland's assignee.

       Esola hired attorney Mark E. Goodfriend to file a motion to intervene in the

Worku action. The caption of the intervention motion identifies Esola as "partial

                                             4
Successor in Interest" to Overland. Elswhere, however, the motion states Esola acquired

its rights "by [a]ssignment." Other pleadings Goodfriend filed in Worku also identified

Esola as "partial Successor in Interest" to Overland.

       G. Cartwright Sues Esola

       Meanwhile, in November 2011 Esola began a nonjudicial foreclosure against the

El Cajon property securing Cartwright's loan, which was in default. Esola asserted it held

these rights as Overland's assignee from the Aurora settlement.

       To stop the foreclosure, Cartwright sued Esola, Tepper, and others for wrongful

foreclosure and other relief in a case entitled Cartwright Termite & Pest Control, Inc., et

al. v. Esola Capital Investment, LLC, et al. (Super. Ct. San Diego County, 2011, No. 37-

2011-00071216-CU-OR-EC.) Kondrick represented Esola and Tepper in this action (the

Cartwright action) until he withdrew in October 2014.

       H. Esola Assigns Its Rights to Payan, Who Sues for Judicial Foreclosure

       In November 2012 Esola assigned its rights in the Cartwright loan and trust deed

to Payan. In May 2013 Payan filed a judicial foreclosure action against Cartwright in a

case entitled Firooz Payan v. Cartwright Termite & Pest Control, Inc., et al. (Super. Ct.

San Diego County, 2013, No. 37-2013-00049616-CU-OR-CTL.) Kondrick represents

Payan in this action (the Payan action).

       I. Overland Sues Esola, Tepper, and Payan

       In November 2013 Michael Cartwright purchased Overland for $15,000 through a

sale in the bankruptcy court. The next month, Overland sued Esola, Tepper, and Payan

for alleged fraud in the transfer of assets (including the Cartwright note and trust deed)

                                              5
from Overland to Esola in the Aurora settlement. In the Overland action, which is the

instant case, Kondrick represents Payan; until his disqualification, Goodfriend

represented Esola and Tepper. The trial court coordinated Cartwright, Payan, and

Overland.

       J. Motion To Disqualify Counsel

       In February 2015 Overland moved to disqualify (1) Kondrick from representing

Payan and (2) Goodfriend from representing Esola and Tepper. Most of Overland's

motion (12 out of 15 pages) was directed against Goodfriend. Ezra submitted a

declaration stating that as Overland's president from September 2006 through November

2013 he consulted Goodfriend to obtain legal advice. Ezra declared he gave Goodfriend

"confidential information regarding [Overland's] strategies, defenses, strengths and

weaknesses as it related to . . . [a] lawsuit involv[ing] all of the properties and assets of

[Overland]." In opposition, Goodfriend filed a declaration asserting, "I never met with

Doron Ezra to consult with him or any of his companies."

       Turning to Kondrick, Overland asserted "Kondrick has undoubtedly obtained

confidential information from at least three sources which warrant disqualification."

These alleged sources are: (1) Kondrick's prior representation of Esola; (2) Kondrick's

representation of Tepper; and (3) Kondrick's joint representation of Esola and Tepper

with Mark Goodfriend.

       Overland's theory was that Kondrick must be presumed to have obtained

Overland's confidential information because Kondrick represented Esola in the

Cartwright litigation while Esola was representing itself to be the "partial Successor in

                                               6
Interest" to Overland in the Worku litigation. Overland asserted this established an

attorney-client relationship between Kondrick and Overland.

       Overland also asserted Kondrick was "clearly . . . working in conjunction with

Mark Goodfriend" as shown by cooperation between Kondrick and Goodfriend in filing a

motion for summary adjudication. Overland ended its motion by stating that "a mere

appearance of impropriety is all that is required" to disqualify counsel.1

       In opposition, Kondrick filed a declaration asserting he never had an attorney-

client relationship with Overland or Ezra. Moreover, despite Goodfriend's

characterization of Esola in the Worku litigation as "partial Successor in Interest" to

Overland, Kondrick asserted Esola was not a successor in interest. Rather, Esola was an

assignee of Overland's rights in certain assets.2

       Additionally, Kondrick stated any communications between him and Goodfriend

were privileged by the "joint defense" privilege3—and in any event, he and Goodfriend

"had no discussions whatsoever insofar as his participation in the Worku-Overland

lawsuit . . . ." Kondrick also declared he received no confidential documents or

information from Overland.

1      This is a misstatement of law. In California, an "appearance of impropriety . . . is
not a sufficient ground for disqualification of an attorney." (Oaks Management
Corporation v. Superior Court (2006) 145 Cal. App. 4th 453, 471.)

2       At the hearing on the disqualification motion, Kondrick remarked, "Nobody in
their right mind wants to be the successor in interest to Overland. . . . There are millions
of dollars in judgments against that corporation . . . ."

3      This is a misstatement of law. "California has no joint-defense privilege."
(Citizens for Ceres v. Superior Court (2013) 217 Cal. App. 4th 889, 900.)
                                              7
       Payan also filed a declaration, stating he had worked closely with Kondrick for

more than two years in the coordinated cases and has incurred more than $100,000 in

attorney fees and costs. Kondrick estimated that if he were disqualified, new counsel

representing Payan would need 600 to 800 hours to prepare for trial.

       In reply, Overland's attorney stated, "There is more than sufficient evidence to

demonstrate an appearance of impropriety and certainly disqualification is warranted to

assure fairness in this judicial proceeding . . . ." Additionally, Overland's lawyer seized

on Kondrick's assertion of a "joint defense privilege" with Goodfriend. Relying

exclusively on a Ninth Circuit case, he asserted the joint defense privilege Kondrick

invoked resulted in Kondrick having an implied attorney-client relationship with

Overland:

            "The Ninth Circuit has held that entering into a joint defense
            agreement establishes an implied in fact attorney-client relationship
            between all defendants and attorneys who are parties to the
            agreement, thereby creating a disqualifying conflict . . . ."

       Overland also argued Kondrick inappropriately possessed Overland's confidential

information.

       K. The Trial Court's Ruling

       After hearing counsels' oral argument, the trial court granted Overland's motion to

disqualify Goodfriend and took the matter under submission with respect to Kondrick.

Later the same day, the court entered a minute order granting the motion to disqualify

Kondrick.

                                              8
       L. Payan's Writ Petition

       Payan filed a petition for a writ of mandate, directing the trial court to vacate its

order granting Overland's motion to disqualify Kondrick and to enter a new order

denying the motion. We issued an order to show cause and issued a stay.

       Esola and Tepper did not file a writ petition to challenge the order disqualifying

Goodfriend. Therefore, we do not consider and express no opinion on the trial court's

order disqualifying Goodfriend.

                                       DISCUSSION

                            I. PROPRIETY OF WRIT RELIEF

       An order granting an attorney disqualification motion is both directly appealable

and reviewable by writ petition in the reviewing court's discretion. (Sharp v. Next

Entertainment, Inc. (2008) 163 Cal. App. 4th 410, 424, fn. 7; Apple Computer, Inc. v.

Superior Court (2005) 126 Cal. App. 4th 1253, 1263–1264.) "'[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.'"

(Smith, Smith & Kring v. Superior Court, supra, 60 Cal.App.4th at p. 581.) Because the

trial court's order deprives petitioner of the important right to counsel of his choice,

mandate is an appropriate remedy to restore the right if the disqualification is improper.

                             II. THE STANDARD OF REVIEW

       "Generally, a trial court's decision on a disqualification motion is reviewed for

abuse of discretion." (People ex rel. Dept. of Corporations v. SpeeDee Oil Change

Systems, Inc. (1999) 20 Cal. 4th 1135, 1143 (SpeeDee Oil).) In exercising its discretion,

                                              9
the court must be guided by the principle that "[t]he right of a party to be represented in

litigation by the attorney of his or her choice is a significant right [citation] and ought not

to be abrogated in the absence of some indication the integrity of the judicial process will

otherwise be injured or the adverse party will otherwise be unfairly disadvantaged by the

use of confidential information obtained as a result of the earlier representation."

(Johnson v. Superior Court (1984) 159 Cal. App. 3d 573, 580.) If the trial court resolves

disputed factual issues and substantial evidence supports its factual findings, its legal

conclusions based on those findings are reviewed for abuse of discretion. (SpeeDee Oil

at p. 1144.)

       "In any event, a disqualification motion involves concerns that justify careful

review of the trial court's exercise of discretion." (SpeeDee Oil, supra, 20 Cal.4th at p.

1144.) "In exercising its discretion, the trial court must make a reasoned judgment that

complies with applicable legal principles and policies." (Strasbourger Pearson Tulcin

Wolff Inc. v. Wiz Technology, Inc. (1999) 69 Cal. App. 4th 1399, 1403 (Strasbourger).) If

the trial court's order "is not supported by sufficient reason, an order disqualifying an

attorney and thereby depriving a litigant of the attorney of his choice constitutes an abuse

of discretion that must be reversed . . . ." (McPhearson v. Michaels Co. (2002) 96
Cal. App. 4th 843, 851.)4

4      Payan contends a de novo standard of review should apply. It is unnecessary to
resolve that issue because the order must be vacated even under the abuse of discretion
standard.
                                              10
                  III. THE TRIAL COURT ABUSED ITS DISCRETION
                           IN DISQUALIFYING KONDRICK

       A. The Order Is Defective Because It Contains No Findings or Analysis

       The order granting Overland's motion to disqualify Kondrick is a single sentence

containing no findings or legal analysis, stating:

          "After additional consideration, Plaintiff's motion to disqualify
          counsel for Defendant Payan [Mr. Kondrick] is GRANTED. [¶] A
          court may disqualify an attorney upon 'a showing that
          disqualification is required under professional standards governing
          avoidance of conflicts of interest or potential adverse use of
          confidential information.' (Oaks [Management Corporation] v.
          [Superior Court, supra] 145 Cal.App.4th [at p.] 462.)"

       The order is deficient. "In light of the importance the law places on clients' ability

to retain an attorney of their choice and waive any potential conflict, we hold that trial

judges must indicate on the record they have considered the appropriate factors and make

specific findings of fact when weighing the conflicting interests involved in recusal

motions." (Smith, Smith & Kring v. Superior Court, supra, 60 Cal.App.4th at p. 582.)

       In ordering Kondrick's disqualification, the trial court did not make any findings or

identify any particular conflict of interest, confidential information, or adverse use of

such information. Neither the minute order quoted above, nor the transcript of the

hearing shows the trial court considered or weighed the relevant facts and legal factors in

disqualifying Kondrick.

       Overland contends the court complied with its obligation to state findings and

reasons because at the hearing, the court stated it had "read everything again" and "made

an outline, so I think I am really up to speed on this . . . ." However, saying one has "read

                                             11
everything" and is "up to speed" does not assist a reviewing court in determining whether

proper legal standards were applied to findings supported by substantial evidence. In

other contexts, but equally applicable here, courts have noted that a statement of reasons

"'acts as an inherent guard against careless decisions, insuring that the judge himself

analyzes the problem and recognizes the grounds for his decision; and it aids in

preserving public confidence in the decision-making process by helping to persuade the

parties and the public that the decision-making is careful, reasoned and equitable.'"

(People v. Garcia (1995) 32 Cal. App. 4th 1756, 1770.)

       The usual remedy for such error would be a remand for the trial court to either

make the requisite findings or vacate its order. We decline to do so in this case, however,

because as discussed next, the record does not support disqualifying Kondrick under the

applicable legal principles and undisputed facts in this record.

       B. Kondrick Never Represented the Adverse Party, Overland

       Overland's motion to disqualify Kondrick was substantially based on rule 3-310

(E) of the Rules of Professional Conduct of the California State Bar, which provides:

          "A member shall not, without the informed written consent of the
          client or former client, accept employment adverse to the client or
          former client where, by reason of the representation of the client or
          former client, the member has obtained confidential information
          material to the employment."

       "[R]ule 3-310 [of the Rules of Professional Conduct] controls conflicts of interest

and disqualification motions only in the context of attorney-client relationships." (Oaks

Management Corporation v. Superior Court, supra, 145 Cal.App.4th at p. 465.)

"'"Before an attorney may be disqualified from representing a party in litigation because

                                             12
his representation of that party is adverse to the interest of a current or former client, it

must first be established that the party seeking the attorney's disqualification was or is

'represented' by the attorney in a manner giving rise to an attorney-client relationship."'"

(Shen v. Miller (2012) 212 Cal. App. 4th 48, 56.)

       There is no evidence Kondrick ever represented Overland. The two theories

advanced by Overland: (1) an implied attorney-client relationship arising from

Kondrick's assertion of a "joint defense privilege" with Goodfriend; and (2) an attorney-

client relationship because Kondrick represented Esola (who claimed to be "partial

Successor in Interest" to Overland in Worku) do not support Kondrick's disqualification.

       There is no "joint defense privilege" under California law. (Citizens for Ceres v.

Superior Court, supra, 217 Cal.App.4th at p. 900.) Rather, California follows a

common-interest doctrine that allows disclosure between parties, without waiver of

privileges, where the disclosure is necessary to accomplish the purpose for which legal

advice was sought. (Id. at p. 914.) This common-interest doctrine "does not mean there

is 'an expanded attorney-client relationship encompassing all parties and counsel who

share a common interest.'" (Ibid.)

       In the trial court, Overland's attorney cited United States v. Henke (9th Cir. 2000)

222 F.3d 633, 637 for the proposition that "entering into a joint defense agreement

establishes an implied in fact attorney-client relationship between all defendants and

attorneys who are parties to the agreement . . . ." However, in Oxy Resources California

LLC v. Superior Court (2004) 115 Cal. App. 4th 874, the appellate court rejected that

                                               13
federal court's approach because creating a nonstatutory "joint defense privilege" is

prohibited by the California Evidence Code. (Id. at pp. 888-889; Evid. Code, § 911.)

       Overland's second theory—based on Esola's assertion it was Overland's "partial

Successor in Interest"— fails under any analysis. If Esola were Overland's successor in

interest, then Overland would have no right to confidentiality or attorney-client privilege

to assert against Esola, because Esola, as Overland's successor, would be the current

holder of the right to confidentiality or privilege. (See Moeller v. Superior Court (1997)

16 Cal. 4th 1124, 1139 [power to assert attorney-client privilege regarding confidential

communications passes from predecessor trustee to successor trustee].)

       Moreover, Esola is not and never has been Overland's successor in interest, despite

Goodfriend's loose language characterizing it as such on captions in Worku. "'In order to

be a "successor in interest," a party must continue to retain the same rights as original

owner without change in ownership and there must be change in form only and not in

substance, and transferee is not a "successor in interest."'" (California Concrete Co. v.

Beverly Hills Savings & Loan Assn. (1989) 215 Cal. App. 3d 260, 272, italics omitted.)

Unlike a successor in interest, an assignee is simply the recipient of a transfer of property,

or of a right or interest in property, from one person or entity to another. Whereas a

successor in interest becomes for legal purposes the entity it replaces, an assignee

receives certain rights and no others under an agreement.

       There is no evidence Esola was Overland's successor in interest. Overland still

exists. Esola is a separate entity. According to both Ezra (Overland's former president)

                                             14
and Cartwright (Overland's current president), Overland never had any successor in

interest.

       Esola is an assignee of certain assets formerly owned by Overland, which Esola

allegedly acquired in settling the Aurora litigation. Indeed, even the pleadings

Goodfriend filed that captioned Esola as "partial Successor in Interest" explained Esola's

rights arose "by [a]ssignment."

       In short, Goodfriend's erroneous characterization of Esola as "partial Successor in

Interest" cannot create an attorney-client relationship where none exists.

      C. There Is No Evidence Kondrick Improperly Obtained Overland's Confidential
Information

       Disqualification of an attorney may be proper even where there has been no prior

attorney-client relationship. (Oaks Management Corporation v. Superior Court, supra,

145 Cal.App.4th at p. 464.) For example, "counsel may be disqualified where counsel

has obtained the secrets of an adverse party in some other manner, such as where

counsel's newly hired paralegal had access to the adversary's confidences while working

for opposing counsel [citation], or where counsel obtained confidential information from

an expert with whom opposing counsel had consulted [citations]. Disqualification is

warranted in these cases . . . because the situation implicates the attorney's ethical duty to

maintain the integrity of the judicial process." (Roush v. Seagate Technology, LLC

(2007) 150 Cal. App. 4th 210, 219.)5

5     Although the parties and certain published opinions (e.g., Great Lakes
Construction, Inc. v. Burman (2010) 186 Cal. App. 4th 1347, 1356 (Great Lakes)) discuss
                                             15
       Moreover, even without an attorney-client relationship, a party may successfully

move to disqualify an attorney if "some sort of confidential or fiduciary relationship"

exists between the attorney and the party moving for disqualification. (Dino, supra, 145

Cal.App.4th at p. 353.) And "where [an] ethical breach is '"manifest and glaring"' and so

'infects the litigation in which disqualification is sought that it impacts the moving party's

interest in a just and lawful determination of [his or] her claims' [citation], a nonclient

might [be authorized] to bring a motion to disqualify based upon a third party conflict of

interest or other ethical violation." (Great Lakes, supra, 186 Cal.App.4th at p. 1357.)

However, to assert such a claim, "the nonclient must meet stringent . . . requirements, that

is, harm arising from a legally cognizable interest which is concrete and particularized,

not hypothetical." (Id. at p. 1358.)

       Overland contends that even in the absence of an attorney-client relationship,

Kondrick should be disqualified because he improperly obtained confidential information

"from Overland." Overland apparently concedes there is no evidence Kondrick obtained

any confidential information directly from Overland. Nevertheless, Overland asserts

Kondrick obtained Overland's confidential information from Esola and Tepper, who

Kondrick represented "for almost three years." Moreover, although Kondrick solely

a nonclient's ability to disqualify an attorney as a matter of "standing," other courts have
noted that characterization is incorrect because "standing refers to an aggrieved party's
right to bring an action in the first instance, rather than an existing party's right to bring a
motion seeking some sort of relief from the trial court." (Dino v. Pelayo (2007) 145
Cal. App. 4th 347, 353, fn. 2.) Like the Court in Dino, we need not decide whether the
issue is properly framed as one of standing; we review the record to determine whether
Overland had a sufficient relationship with Kondrick to prevail on its motion to
disqualify him.
                                               16
represents Payan now, Overland argues Kondrick, Esola, Tepper, and Goodfriend are

working together, as evidenced by Kondrick's attempt to file a motion for summary

judgment on Esola and Tepper's behalf.

       Overland's argument fails because even assuming everything Overland argues is

true, the most it shows is Kondrick obtained information about Overland from Kondrick's

own former clients, Esola and Tepper. "'Mere exposure to the confidences of an

adversary does not, standing alone, warrant disqualification.' [Citation]. '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.'" (Oaks

Management Corporation v. Superior Court, supra, 145 Cal.App.4th at p. 467.)

       Where the attorney's client is the source of privileged or confidential information

relating to the litigation, disqualification is not appropriate because (1) clients do not act

inappropriately in providing information to their attorney; and (2) a client should not be

expected to make distinctions between what can and cannot be told to the attorney at the

risk of losing the attorney's services; and (3) disqualification would accomplish nothing

because the client still has the information and may pass it on to new counsel, leaving the

adversary in the same position. (Roush v. Seagate Technology, LLC, supra, 150

Cal.App.4th at pp. 219-220.)

       There is no evidence Kondrick did anything improper, even if he obtained

information about Overland from his client or former client, Esola. "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." (Strasbourger, supra, 69

                                              17
Cal.App.4th at p. 1410.) "'If the disclosure is made by the attorney's own client,

disqualification is neither justified nor an effective remedy.'" (Ibid.)

       Moreover, there is another reason why disqualification is improper in this case.

"'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. Thus, disqualification is proper where, as a result of a prior representation or

through improper means, there is a reasonable probability counsel has obtained

information the court believes would likely be used advantageously against an adverse

party during the course of the litigation. . . . Disqualification is inappropriate . . . simply

to punish a dereliction that will likely have no substantial continuing effect on future

judicial proceedings." (Oaks Management Corporation v. Superior Court, supra, 145

Cal.App.4th at p. 467.)

       Here, when pressed by the trial court at the hearing on the motion to identify

"exactly where the conflict is," and "what was communicated," and "what the prejudice

is," Overland's attorney was unable to identify any specific confidential information

Kondrick improperly obtained. Instead, counsel talked generally about bank records and

e-mails, concluding, "There are so many layers of overlapping conflicts, Your Honor,

that it cannot stand."6

6     Overland's counsel stated, "But let me get to Overland's confidential
communication. I produced, as consistent with the Oak Management case, an email from
Doran Ezra . . . that was produced in discovery by Mr. Kondrick's office, an email from
                                              18
         The party seeking disqualification of an attorney must show actual prejudice in the

form of potential harm to that party. "'"'Speculative contentions;"'" concerning such harm

are insufficient to justify disqualification. (Oaks Management Corporation v. Superior

Court, supra, 145 Cal.App.4th at p. 471.) Instead, "'"[s]pecific facts must point to a

marked danger that the perceived evil . . . will result."'" (Ibid.)

         Where, as here, there has not been a prior representation, cases in which courts

have concluded that an attorney must be disqualified have turned on findings of a clear,

specific conflict, such as a finding that "the attorney's positions with the bank placed his

firm on both sides of the lawsuit" (Oaks Management Corporation v. Superior Court,

supra, 145 Cal.App.4th at p. 465, citing William H. Raley Co. v. Superior Court (1983)

149 Cal. App. 3d 1042, 1044–1045); or that the opposing attorney and his firm had

represented the insurance underwriter of the parent corporation of the moving party, a

wholly owned subsidiary, and were "deeply involved" in all aspects of the litigation of

the moving party's cases (Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft

(1999) 69 Cal. App. 4th 223, 235–236). In sharp contrast here, Overland's contentions

concerning Kondrick's possession and potential use in this litigation of relevant

confidential information from Overland are stated in the most general and speculative

terms.

Mr. Ezra, containing Overland Direct, Inc.'s bank records to . . . Daniel Tepper, cc to
Mark Smith of Krane & Smith, and then Mark Goodfriend. So, that's one prejudice."
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                                     DISPOSITION

      Let a writ issue directing the superior court to vacate the order granting the motion

to disqualify Kondrick and enter an order denying the motion to disqualify Kondrick.

The stay issued by this Court on April 22, 2015, is vacated. Costs are awarded to Payan.

                                                                                NARES, J.

WE CONCUR:

BENKE, Acting P. J.

McDONALD, J.

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