Court Opinion

ID: 7802997
Source: CourtListenerOpinion
Date Created: 2022-08-23 21:02:30.91968+00
Date Added: 2024-06-11T16:29:33.807131
License: Public Domain

Filed 8/23/22 RJS Financial v. Dos Potrillos CA2/2
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                        DIVISION TWO

RJS FINANCIAL, INC.,                                                   B316465

         Plaintiff and Respondent,                                     (Los Angeles County
                                                                       Super. Ct. No. 20STCV43490)
         v.

DOS POTRILLOS LLC et al.,

         Defendants and Appellants.

     APPEAL from an order of the Superior Court of
Los Angeles County. Terry A. Green, Judge. Affirmed.

     Law Office of Nick A. Alden and Nick A. Alden for
Defendants and Appellants.

       Anderson, McPharlin & Conners, Elmira R. Howard and
Ali Z. Vaqar for Plaintiff and Respondent.
               ______________________________
      Counsel for plaintiff and respondent RJS Financial, Inc.
(RJS), inadvertently forwarded a privileged e-mail to opposing
counsel, Nick A. Alden (Alden) and the Law Office of Nick A.
Alden (collectively the Alden firm). When the Alden firm failed to
delete the privileged e-mail, and in fact used it in court
proceedings, RJS brought a motion to disqualify the Alden firm
from representing defendants and appellants Dos Potrillos LLC
and David A. Romero, individually and as trustee of the Laguna
Seca Living Trust, in this matter. The trial court granted RJS’s
motion, and defendants appeal.
      We affirm.
       FACTUAL AND PROCEDURAL BACKGROUND
Factual Background
      RJS initiated this action to establish the enforceability of a
mortgage on real property owned by defendants. Defendants in
                                                   1
turn allege that the terms of the loan were illegal.
      RJS hired Richard D. Marks (Marks) to be its attorney of
record in this matter. RJS had also hired Frandzel Robins Bloom

1
       The appellate record presented is incomplete, rendering the
procedural history of this case unclear. After the complaint was
filed and served, defendants’ defaults seem to have been entered.
But they were able to file an answer and cross-complaint. On
August 23, 2021, defendants filed a motion to set aside their
defaults (although they did not concede that their defaults had in
fact been entered). That same day, RJS filed a motion to strike
defendants’ answer on the grounds that their defaults had been
entered. RJS also opposed defendants’ motion to set aside their
defaults. Ultimately, the trial court granted defendants’ motion
to set aside defendants’ defaults and denied RJS’s motion to
strike.

                                 2
& Csato, L.C., and Brett L. McClure (McClure) to represent its
interests in this case. The Alden firm represented defendants.
      On August 3, 2021, Marks inadvertently forwarded an
e-mail between himself and McClure to Alden. The e-mail
contained attorney-client privileged information and/or material
covered by the work product doctrine related to matters in this
    2
case. At the time, Marks was still counsel of record for RJS.
        Within two hours, Marks sent an e-mail to Alden, stating:
“An unintentional and inadvertent e-mail to you from me today
. . . included communications from counsel for RJS to me that
were privileged and not intended to be sent to you. Under the
Rules of Professional Conduct, I request that you delete in its
entirety the entire email, refrain from reading the email, and
disregard the contents.” Marks’s e-mail also drew Alden’s
attention to Rico v. Mitsubishi Motors Corp. (2007) 42 Cal.4th
807 (Rico) and State Comp. Ins. Fund v. WPS, Inc. (1999)
70 Cal.App.4th 644 (State Fund). The e-mail continued: “I know
that you are an honorable attorney at law having practiced in
Southern California almost as long as the undersigned. So, I
assume that the email will be deleted by you and not saved or
printed out. And, of course, you cannot use the communication as
evidence in this case. [¶] I do apologize for the unintended
email. In my haste to respond to you, I did not look carefully at
the emails that followed mine to you. [¶] Please confirm that you
will comply with the Rules of Professional Conduct, Rico and
State [Fund].”

2
      We have carefully reviewed the subject e-mail. Given our
conclusion that it is privileged, we decline to quote it.

                                3
       “Despite receiving notice of the inadvertent disclosure and
demand to delete and destroy the privileged communication, the
Alden Firm . . . refused to do so.” In fact, the Alden firm
repeatedly used the e-mail in public filings and court hearings.
Motion for Disqualification
       On October 6, 2021, RJS filed a motion seeking to
disqualify the Alden firm. According to McClure’s declaration
filed in connection with RJS’s reply brief: “The privileged email
which is the subject of RJS’[s] motion to disqualify . . . contains
my thoughts and impressions and legal strategy as an attorney
for RJS as well as instructions from RJS to its counsel,
Mr. Marks. I intended the subject email to be completely
privileged and confidential, including under the work product
doctrine and attorney-client privilege.” RJS argued that the
Alden firm’s refusal to delete the privileged communication,
coupled with its use and dissemination of it, constituted unethical
conduct and compelled disqualification.
       Defendants opposed the motion, arguing that the
communication was not confidential because (1) the information
contained therein was taken from public records, and (2) it was
between two attorneys representing conflicting interests.
Hearing on RJS’s Motion
       The parties appeared for the hearing on November 3, 2021.
                            3
At the onset of the hearing, the trial court noted: “Well, this is a
bit disturbing Mr. Alden. I read this, and it appears you’ve got
clearly what was an attorney-client communication. You got it

3
      We grant RJS’s motion to augment the appellate record
with a copy of the reporter’s transcript of the November 3, 2021,
hearing on its motion to disqualify the Alden firm.

                                 4
from essentially in-house counsel to outside counsel directing how
to deal with the case. And the one counsel was expressing
displeasure at the way the—directed the plaintiff’s counsel was
handling the case and gave instructions. I mean, it’s a classic
attorney-client communication. It’s obvious on its face.”
       The trial court continued by noting that it had never
inadvertently received an attorney-client communication, but if it
had, its “instincts would be to return it immediately to counsel
because that’s what I would want if the situation was reversed.
       “But instead, you seized upon this communication, and not
only didn’t return it after being notified, but used it in court
apparently taking the position that it showed the hypocrisy on
the part of the opposing party and that the opposing party didn’t
really have that much confidence in the case they were
presenting to the court.
       “I don’t know what to say. I mean, I’m rather shocked,
actually. This is a – this is a substantial breach. You know, the
Rules of Professional Conduct exist as a default position. How we
treat each other as professionals should be intuitive. . . . [¶] . . .
       “I’m sure, Mr. Alden, if through sheer inadvertence, an
attorney-client communication by you was sent to an opposing
party by accident, that you would expect the opposing party to
return it immediately. I would expect that.
       “I don’t understand why you took a course of action like
this, that not only not return it, but to use it in court against
them.”
       Thereafter, the trial court entertained oral argument;
ultimately, it indicated that it would be granting RJS’s motion.

                                  5
Trial Court Order
       On November 5, 2021, the trial court issued its written
order granting RJS’s motion. It found: “The facts underlying
this motion are undisputed. On August 3, 2021, Defense counsel
received an email that was not meant for him. The email was
sent by Mr. Brett L. McClure and addressed to Mr. Richard
Marks, who accidentally forwarded it to Mr. Alden. At the time,
Mr. Marks and Mr. McClure were both known to be counsel for
Plaintiff. Mr. Marks was insurance counsel, hired by a title
company to represent Plaintiff; his name appears on the caption
of Plaintiff’s Complaint and all subsequent pleadings prior to his
substitution out of the case. Mr. McClure was Plaintiff’s direct
counsel, in a position analogous to that of an in-house attorney.
       “The email stated that Mr. McClure had reviewed the
docket in this case and was not impressed with Mr. Marks’s
work, since a series of filings had been rejected over a time span
of six months. Mr. McClure conveyed his impression of the legal
risks to which he feared this had exposed Plaintiff, and expressed
his displeasure with those risks. The email closes with a direct
client instruction . . . to negotiate a settlement of the case.
       “2 hours and 19 minutes after this email was forwarded to
Mr. Alden, counsel for Plaintiff realized their mistake and sent a
follow-up note, identifying the email by precise date and time and
explaining that it contained privileged material. Counsel for
Plaintiff asked Mr. Alden to delete the email and disregard the
contents. Instead, Mr. Alden chose to submit the email as
evidence in multiple court filings and to quote from it in open
court during a subsequent hearing.
       “The email Mr. Alden received is clearly and on its face a
privileged communication. It contains the legal impressions and

                                6
analysis of in-house counsel, followed by a direct client
instruction to outside counsel. Even a cursory review of the email
would lead any reasonable counsel to believe that their ethical
obligations under Rule 4.4 had been triggered, with or without
any subsequent warning or request from opposing counsel. But
in this case, a warning and a request for deletion was provided
almost immediately. There could be no doubt that this was a
privileged communication, which Mr. Alden was obligated to
delete and disregard. Yet he did not.”
       The trial court then turned to the question of whether to
remove the Alden firm from the case. “Removal of counsel by
court order at the behest of the opposition is a serious matter.
Defendants rightly point out that they are entitled to their choice
of counsel. But this is a serious ethical violation, and counsel of
Mr. Alden’s experience and standing should have known better.
Any counsel, no matter their experience or lack thereof, should
have been able to tell that the email Mr. Alden received was
privileged. His decision, not only to retain the email but
repeatedly make it part of the public record in an effort to hold
privileged statements against the Plaintiff, directly undermines
the integrity of these proceedings. No lesser or alternative
remedy than disqualification has been proposed by either side,
and disqualification is appropriate under these circumstances.”
(Fn. omitted.)
       While the trial court disqualified the Alden firm, it denied
plaintiff’s request for monetary sanctions, noting: “[T]he court’s
power to disqualify counsel is protective in nature, based on the
need to safeguard both the actual and apparent integrity of the
proceedings in each case. With Defense counsel now out of the
case, that protective interest has been served. An award of

                                 7
monetary sanctions against counsel would be more punitive than
protective in nature. The power to discipline attorneys lies with
other agencies than the Superior Court. How they choose to
proceed (or not) is up to them.”
Appeal
      Defendants filed a notice of appeal from the trial court’s
November 9, 2021, order disqualifying the Alden firm.
Motion to Stay Proceedings
      Despite being disqualified, the Alden firm continued to
actively represent defendants in this litigation. For example, on
November 19, 2021, it filed a first amended cross-complaint on
defendants’ behalf against RJS. The Alden firm’s conduct
prompted RJS to file a motion to stay the proceedings pending
defendants’ appeal from the order disqualifying the Alden firm.
On January 26, 2022, the trial court granted RJS’s motion to stay
the proceedings.
      Defendants’ petition for a writ of mandate was summarily
denied.
                            DISCUSSION
I. Scope of this appeal
      As set forth above, defendants have only filed a notice of
appeal challenging the trial court’s order disqualifying the Alden
firm. In fact, in their opening brief, defendants specifically
recognize that the only order on appeal is the disqualification
order. Nevertheless, defendants devote much time and argument
in their appellate briefs to issues outside the scope of this appeal.
We decline to address these issues. (Soldate v. Fidelity National
Financial, Inc. (1998) 62 Cal.App.4th 1069, 1073 [“‘Our
jurisdiction on appeal is limited in scope to the notice of appeal
and the judgment or order appealed from’”].)

                                  8
       With that in mind, we turn to the propriety of the trial
court’s order disqualifying the Alden firm from representing
defendants in this litigation.
II. Standards of review
       We ordinarily review an order granting a motion to
disqualify under the deferential abuse of discretion standard, and
any subsidiary factual questions for substantial evidence.
(McDermott Will & Emery LLP v. Superior Court (2017)
10 Cal.App.5th 1083, 1117, 1121 (McDermott); Rico, supra,
42 Cal.4th at p. 819.) But where the material facts are
undisputed, our review is de novo. (People ex rel. Dept. of
Corporations v. SpeeDee Oil Change Systems, Inc. (1999)
20 Cal.4th 1135, 1148.)
       “‘The question whether the attorney-client privilege applies
to a particular communication is a question of fact if the evidence
is in conflict.’ [Citation.] ‘“When the facts, or reasonable
inferences from the facts, shown in support of or in opposition to
the claim of privilege are in conflict, the determination of
whether the evidence supports one conclusion or the other is for
the trial court, and a reviewing court may not disturb such
finding if there is any substantial evidence to support it . . . .”’
[Citation.]” (DP Pham LLC v. Cheadle (2016) 246 Cal.App.4th
653, 664.) Likewise, “[w]e review the trial court’s conclusion that
a document is protected by the attorney work product doctrine to
determine whether it is supported by substantial evidence.
[Citations.]” (League of California Cities v. Superior Court (2015)
241 Cal.App.4th 976, 993.)

                                 9
III. Relevant law
       A. Privilege
       “‘The party claiming the [attorney-client] privilege has the
burden of establishing the preliminary facts necessary to support
its exercise, i.e., a communication made in the course of an
attorney-client relationship. [Citations.] Once that party
establishes facts necessary to support a prima facie claim of
privilege, the communication is presumed to have been made in
confidence and the opposition of the claim of privilege has the
burden of proof to establish the communication was not
confidential or that the privilege does not for other reasons
apply.’ [Citations.]” (DP Pham LLC v. Cheadle, supra,
246 Cal.App.4th at p. 665.)
       “A writing that reflects an attorney’s impressions,
conclusions, opinions, or legal research or theories is not
discoverable under any circumstances.” (Cal. Code Civ. Proc.,
§ 2018.030, subd. (a).) “Parties claiming the benefit of the work
product rule have the burden to show preliminary facts to
support its applicability.” (Carehouse Convalescent Hospital v.
Superior Court (2006) 143 Cal.App.4th 1558, 1563.)
       B. Disqualification of counsel
       Trial courts have the power to disqualify counsel as part of
their inherent authority to control the proceedings before them.
(In re Complex Asbestos Litigation (1991) 232 Cal.App.3d 572,
585.) Among other instances, disqualification of counsel may be
warranted if (1) counsel does not comply with the procedures set
forth in State Fund, which are also now codified in rule 4.4 of the
California Rules of Professional Conduct, for what to do if counsel
inadvertently receives privileged documents, and (2) “other

                                10
factors compel disqualification.” (State Fund, supra, 70
Cal.App.4th at p. 657; Rico, supra, 42 Cal.4th at pp. 817, 819.)
       The procedures set forth in State Fund apply when a
lawyer “inadvertent[ly]” receives materials that objectively
“appear to be subject to an attorney-client privilege” or to be
otherwise “confidential and privileged” (State Fund, supra,
70 Cal.App.4th at pp. 656–657; Rico, supra, 42 Cal.4th at p. 818),
but those procedures vary depending on the degree to which the
privileged or confidential nature of the materials is obvious
(McDermott, supra, 10 Cal.App.5th at pp. 1108–1109): “[W]hen
an attorney receives materials that obviously or clearly appear to
be privileged . . . ,” the attorney must “refrain from examining
them any more than . . . necessary,” must notify the privilege
holder, and must try to resolve the situation by agreement or,
failing that, by resort to the court (id. at p. 1108; State Fund, at
pp. 656–657); however, when the materials received are “not
obviously or clearly privileged,” the attorney’s duties are “more
limited” and he or she need only “notify the privilege holder,” who
at that point has the “onus” of “tak[ing] appropriate steps to
protect the materials if the holder believes [they] are privileged
and were inadvertently disclosed” (McDermott, at pp. 1108–1109;
see Great Am. Assur. Co. v. Liberty Surplus Ins. Corp. (N.D. Cal.
2009) 669 F.Supp.2d 1084, 1093–1094).
IV. Analysis
       Applying these legal principles, we conclude that the trial
court properly granted RJS’s motion to disqualify the Alden firm.
The forwarded e-mail obviously is protected by the attorney-
client privilege and/or contains protected attorney work product.
It is a communication between Marks and McClure, two
attorneys representing RJS. It sets forth McClure’s criticism of

                                11
Marks’s representation of RJS in this matter. And, McClure
gives instructions to Marks to settle the case immediately. Upon
receipt, Alden should have immediately notified RJS’s attorneys
that he received a confidential communication not intended for
him or his clients.
       Defendants contend that the e-mail was not obviously
privileged because neither they nor Alden knew at that time that
McClure also represented RJS (or was an agent of RJS). Even if
that is true, within two hours of inadvertently sending it to
Alden, Marks notified Alden of his unintentional error, reminded
him of the law regarding inadvertent receipt of attorney work
product, asked him to delete the e-mail and not use it as
evidence, and apologized. Despite the rapid advisement from
Marks, Alden did not delete the e-mail. Worse, he affirmatively
used the privileged communication in court filings. As the trial
court aptly found, Alden’s misconduct constitutes a “serious
ethical violation,” warranting disqualification.
       Defendants’ arguments on appeal wholly lack merit. For
example, they argue that “even if the email was to be considered
a privileged communication, that privilege was lost by [being]
communicated to others.” Regardless of who held the privilege
               4
over the e-mail, “waiver requires an intention to voluntarily
waive a known right.” (McDermott, supra, 10 Cal.App.5th at
p. 1104.) Here there is no evidence that RJS or its attorneys

4
     “The attorney, not the client, is the exclusive holder of the
work product privilege.” (Melendrez v. Superior Court (2013)
215 Cal.App.4th 1343, 1353.) “The attorney-client privilege,
however, is held by the client.” (Ibid.)

                                12
intentionally waived either the attorney-client or work product
         5
privilege.
       Defendants further argue that the e-mail was not
privileged because it discussed defaults, information about which
could be gleaned from the publicly available court docket. But, it
is the nature of the communication, not the information, that
determines whether a communication is privileged. “The
attorney-client privilege attaches to a confidential communication
between the attorney and the client and bars discovery of the
communication irrespective of whether it includes unprivileged
material.” (Costco Wholesale Corp. v. Superior Court (2009)
47 Cal.4th 725, 734.)
       Citing Fremont Indemnity Co. v. Fremont General Corp.
(2006) 143 Cal.App.4th 50, 69 and Khani v. Ford Motor Co. (2013)
215 Cal.App.4th 916, 921–922, defendants assert that because
the e-mail is not material to this litigation, the Alden firm should
not have been disqualified. Defendants’ reliance upon these two
cases is misplaced; those cases address successive and concurrent
representation of clients with adverse interests. (Khani v. Ford
Motor Co., supra, at p. 920; Fremont Indemnity Co. v. Fremont
General Corp., supra, at pp. 65–67.) They did not address the
issue presented in this case. (Association for Los Angeles Deputy
Sheriffs v. County of Los Angeles (2021) 60 Cal.App.5th 327, 342

5
       Defendants assert that there is no evidence that the e-mail
was sent inadvertently as there is no declaration from Marks
attesting to this fact. We disagree. Marks’s follow-up e-mail to
Alden evinces inadvertence. The fact that Marks intentionally
sent Alden other e-mails that day does not mean that he
intentionally sent this one.

                                13
[“A case is not authority for a proposition not even mentioned,
must less discussed, in it”].) Even if materiality were relevant to
the issue presented here, the comments made by McClure to
Marks concerning this matter, particularly the demand for a
quick settlement, are highly material.
       In addition, defendants contend that RJS failed to
demonstrate “how the information contained in the email,
assuming it is privileged, would or could affect the outcome of
this case.” We disagree with defendants’ characterization of the
contents of the e-mail. At the risk of sounding redundant,
McClure’s insistence that Marks immediately settle the case
could absolutely affect the outcome of this case.
       In a similar vein, defendants advance an absurd argument:
“[N]ow that the ‘cat is out of the bag’ so to speak, what will
prevent new counsel from taking advantage.” As RJS points out,
this approach “is completely at odds with California law and the
Alden Firm’s ethical obligations.” Pursuant to well-settled legal
authority and the California Rules of Professional Conduct, upon
receipt of the e-mail, Alden should have immediately notified
Marks, Alden should have deleted the e-mail, and Alden certainly
should not have used it against RJS. His ethical violations let
the cat out of the bag, so to speak.
       Defendants further contend that RJS’s motion to disqualify
the Alden firm was an improper motion for reconsideration (Code
Civ. Proc., § 1008) of two prior filings: (1) RJS’s opposition to
defendants’ motion to set aside their defaults, and (2) RJS’s
motion to strike defendants’ answer and cross-complaint.
Defendants did not raise this argument below, thereby forfeiting
it on appeal. (P&D Consultants, Inc. v. City of Carlsbad (2010)
190 Cal.App.4th 1332, 1344.) Regardless, defendants have not

                                14
demonstrated how the motion to disqualify constitutes an
improper motion for reconsideration. The motion to strike does
not even mention the privileged e-mail. And, in its opposition to
defendants’ motion to set aside their defaults, RJS objected to
defendants’ use of the privileged e-mail in support of their motion
and advised the trial court that it would “be filing a formal
motion for disqualification and sanctions.”
      Finally, we reject defendants’ unfounded argument that
RJS only filed the motion to disqualify because it knows that
defendants “lack the financial means to hire a new counsel.”
Defendants not only offer no evidence in support of this claim,
but they also fail to provide any legal authority for the
proposition that a party’s motivation for filing a motion to
disqualify counsel for ethical violations is relevant.
V. Referral to State Bar
      Canon 3(D)(2) of the California Code of Judicial Ethics
provides: “Whenever a judge has personal knowledge, or
concludes in a judicial decision, that a lawyer has committed
misconduct or has violated any provision of the Rules of
Professional Conduct, the judge shall take appropriate corrective
action, which may include reporting the violation to the
appropriate authority.” In light of Alden’s egregious misconduct,
we refer this matter to the State Bar.

                                15
                           DISPOSITION
       The order granting RJS’s motion to disqualify Nick A.
Alden and the Law Office of Nick A. Alden is affirmed. The clerk
of this court is ordered to forward a copy of this opinion to the
California State Bar upon issuance of the remittitur. RJS is
entitled to costs on appeal.
       NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

                               _____________________, J.
                               ASHMANN-GERST

We concur:

________________________, P. J.
LUI

________________________, J.
HOFFSTADT

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