Court Opinion

ID: 4695331
Source: CourtListenerOpinion
Date Created: 2021-06-14 20:02:58.870128+00
Date Added: 2024-06-11T08:05:33.405388
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        JUN 14 2021
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

JAMES ESTAKHRIAN; et al.,                       No. 19-55459

                Plaintiffs-Appellees,           D.C. No. 2:11-cv-03480-FMO-CW

 v.
                                                MEMORANDUM*
MARK RICHARD OBENSTINE,

                Defendant-Appellant,

and

BENJAMIN F. EASTERLIN IV; et al.,

                Defendants.

                    Appeal from the United States District Court
                       for the Central District of California
                   Fernando M. Olguin, District Judge, Presiding

                              Submitted June 10, 2021**
                                Pasadena, California

Before: GRABER, CALLAHAN, and FORREST, Circuit Judges.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      After a bench trial, the district court ordered Defendant Mark Richard

Obenstine to disgorge $12 million in attorney’s fees from a state court case.

Obenstine appeals from the district court’s judgment on various grounds.1 We

have jurisdiction under 28 U.S.C. § 1291 and affirm.

      1.     Obenstine argues that the district court lacked subject matter

jurisdiction because named plaintiff James Estakhrian testified at trial that he was

not “aware of any negative financial impact . . . Mr. Obenstine has done with

respect to [him].” We review a district court’s determination of subject matter

jurisdiction de novo and the district court’s factual findings on jurisdictional issues

for clear error. Stock W., Inc. v. Confederated Tribes of Colville Rsrv., 873 F.2d

1221, 1225 (9th Cir. 1989).

      Obenstine’s argument is not persuasive. First, the other named plaintiff,

Abdi Naziri, had standing. See Bates v. United Parcel Serv., Inc., 511 F.3d 974,

985 (9th Cir. 2007) (en banc) (“In a class action, standing is satisfied if at least one

named plaintiff meets the requirements.”). Naziri testified that Obenstine and the

other defendants caused him to lose money by encouraging him and the other class

members to accept a settlement of the state court case that would return only a

fraction of the deposits they paid to purchase condos. Second, Estakhrian testified

1
      Because the parties are familiar with the facts, we restate only those
necessary to explain our decision.

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at trial that he did not get the total amount of the deposit back and was not returned

the full retainer he advanced to Obenstine. Finally, we note that the district court

reasonably found that “the $12 million in fees Obenstine received directly diluted

the compensation paid to the class” in the state case, of which class the named

plaintiffs were a part.

      2.     Obenstine contends that the district court erred in granting class

certification. “We review the district court’s class certification order for abuse of

discretion and the findings of fact upon which it relied for clear error.” Ruiz

Torres v. Mercer Canyons Inc., 835 F.3d 1125, 1132 (9th Cir. 2016).

      First, Obenstine asserts that because Estakhrian lacked standing, he could

not assert claims on behalf of the class. This assertion fails because both named

plaintiffs had standing. See Bates, 511 F.3d at 985.

      Second, Obenstine argues that the district court should not have certified the

class because the class’s claims arise under California law, but “nearly 50% of the

class members are residents of Nevada or other states who complain, if at all, of

actions taken in Nevada.” However, “a forum State may exercise jurisdiction over

the claim of an absent class-action plaintiff, even though that plaintiff may not

possess the minimum contacts with the forum which would support personal

jurisdiction over a defendant.” Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811

(1985). Also, Obenstine worked from his office in California, which work

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included sending and receiving the retainer agreements. In addition, even

assuming the unlawful conduct happened in Nevada, the claims mainly concern

Obenstine’s violations of his obligations as a California lawyer under California

law, which obligations were binding wherever he was working. Cal. Rules Prof.

Conduct 1-100(D) (“These rules shall govern the activities of members in and

outside this state.”).2

       Third, Obenstine contends that by ruling on his motion for summary

judgment before the motion for class certification, the district court violated the

general rule against deciding motions for summary judgment before the class has

been certified and notified. The Ninth Circuit has explained, though, that “[i]t is

reasonable to consider a Rule 56 motion first when early resolution of a motion for

summary judgment seems likely to protect both the parties and the court from

needless and costly further litigation.” Wright v. Schock, 742 F.2d 541, 544 (9th

Cir. 1984). Here, it was reasonable for the district court to address the issues

raised in the summary judgment motion first because they could have been

dispositive as to whether the suit could even move forward. Moreover, Obenstine

waived this objection by moving for summary judgment before the class was

certified. See Schwarzschild v. Tse, 69 F.3d 293, 297 (9th Cir. 1995). Last, he

2
       We quote from the “1992” California Rules of Professional Conduct
effective from September 14, 1992 to October 31, 2018, the version in effect at the
time of the relevant events.

                                          4
does not explain how he was harmed by the district court deciding the motion

before certifying the class.

      3.     Obenstine asserts that the district court erred in granting Plaintiffs

leave to file a second amended complaint after the close of discovery. A district

court’s order granting leave to amend a complaint is reviewed for an abuse of

discretion. Raynor Bros. v. Am. Cyanimid Co., 695 F.2d 382, 384 (9th Cir. 1982).

      Obenstine claims that adding Naziri as a class representative “provided

[Plaintiffs] a completely new set of facts by which they could seek recovery. Mr.

Naziri owned property in a different tower than Mr. Estakhrian and he did not

retain any of the defendants and counsel.” However, no additional discovery was

necessary because the First Amended Complaint already encompassed claims

relating to both towers. Also, this litigation has always centered on the allegation

that due to an undisclosed conflict of interest, Obenstine and the other defendants

secured for the class an undervalued settlement in the state court case, of which

class Naziri was a part. Accordingly, it is of no moment that Naziri was not one of

the class members who specifically retained Obenstine or another defendant.

      We do not consider Obenstine’s argument concerning Federal Rule of

Procedure 8 because he failed to raise this issue in his opening brief. See Friends

of Yosemite Valley v. Kempthorne, 520 F.3d 1024, 1033 (9th Cir. 2008).

      4.     Finally, Obenstine argues that the district court erred in ordering him

                                           5
to disgorge the $12 million in attorney’s fees he received in the underlying state

litigation. “We review orders of disgorgement for an abuse of discretion.” SEC v.

Platforms Wireless Int’l Corp., 617 F.3d 1072, 1096 (9th Cir. 2010).

      Obenstine first contends that only certain of the class members signed

retainers with him and, of the remaining class members, approximately 50% are

not eligible for relief under California law. But under California law, the issue is

“the wrongdoer’s enrichment, not the victim’s loss.” County of San Bernardino v.

Walsh, 158 Cal. App. 4th 533, 542 (2007). The district court found that Obenstine

wronged all class members in the state court case—whether they retained

Obenstine or not, and whether they were California residents or not—and profited

$12 million from it.

      Obenstine also asserts that the amount ordered disgorged was excessive

because the district court “did not attempt any inquiry into the amount of that

award that Mr. Obenstine received after paying costs, taxes, and other necessary

expenses.” Obenstine’s reliance on Liu v. SEC, 140 S. Ct. 1936 (2020) for this

argument is inapposite because there the question was whether 15 U.S.C.

§ 78u(d)(5) “authorizes the SEC to seek disgorgement beyond a defendant’s net

profits from wrongdoing.” Id. at 1942. Under California’s Unfair Competition

Law, claims for restitution are measured simply “by what was taken from the

plaintiff.” Clark v. Superior Court (Nat’l W. Life Ins. Co.), 50 Cal. 4th 605, 615

                                          6
(2010).

        Finally, Obenstine argues that the $12 million order should be offset by the

amount two other defendants paid in settlement. That amount, though, was

“allocated to alleged damages and recovery pled other than claims of disgorgement

or restitution,” while the order against Obenstine was designed to disgorge the

attorney’s fees he improperly received.

        AFFIRMED.3

3
        Obenstine’s Motion for Summary Disposition, Dkt. No. 43, is DENIED as
moot.

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