Cole Asia Business Center Inc v. Robert D Manning et al, No. 2:2012cv00956 - Document 70 (C.D. Cal. 2012)
Court Description: ORDER GRANTING DEFENDANT AND COUNTER/THIRD PARTY CLAIMANT DEEBTORWISES MOTION TO DISQUALIFY AURORA TALAVERA AND THE AURORA LAW GROUP AS COUNSEL FOR THIRD PARTY DEFENDANT ACCESS COUNSELING, INC. 57 by Judge Dean D. Pregerson (lc). Modified on 10/30/2012 (lc).
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Cole Asia Business Center Inc v. Robert D Manning et al Doc. 70 1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 COLE ASIA BUSINESS CENTER, INC., a Philippines corporation, 13 Plaintiff, 14 15 16 v. ROBERT D. MANNING, an individual; DEBTORWISE FOUNDATION, a Delaware corporation, 17 Defendants. 18 ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 12-00956 DDP (Cwx) ORDER GRANTING DEFENDANT AND COUNTER/THIRD PARTY CLAIMANT DEEBTORWISE’S MOTION TO DISQUALIFY AURORA TALAVERA AND THE AURORA LAW GROUP AS COUNSEL FOR THIRD PARTY DEFENDANT ACCESS COUNSELING, INC. [Dkt. No. 57] 19 Presently before the court is Defendant and 20 21 Counterclaimant/Third Party Claimant DebtorWise Foundation 22 (“DebtorWise”)’s Motion to Disqualify Aurora Talavera and the 23 Aurora Law Group as Counsel of Record for Third Party Defendant 24 Access Counseling, Inc. (“Access”). 25 submissions of the parties, including the documents submitted by 26 DebtorWise for in camera review, and heard oral argument, the court 27 grants the motion and adopts the following order. 28 /// Having considered the Dockets.Justia.com 1 I. Background 2 The following background facts are not in dispute: 3 DebtorWise provides online and telephonic credit counseling 4 and debtor education courses required by the Federal Courts to 5 obtain bankruptcy discharge. In September 2010, DebtorWise entered 6 into a written agreement with Cole Asia, who agreed to provide 7 credit counseling services to DebtorWise clients through a call 8 center in Makati City, Philippines. 9 problems with Cole Asia’s performance, including language 10 11 12 13 DebtorWise alleges a number of deficiencies of the counselors and overbilling. (Compl. ¶¶ 13-20.) Access became an approved provider of credit counseling courses around March 2011. On December 30, 2011, Cole Asia filed a complaint against 14 Manning and DebtorWise for breach of contract, book account, 15 account stated, and quantum meruit, claiming that DebtorWise had 16 failed to pay for services provided and for an agreed-upon 17 termination fee. 18 Asia, Cole Group, Inc., Sevan Aslayan, Roes 1-10, and Access 19 Counseling. 20 Debtorwise alleged that Aslanyan himself had opened the competing 21 business Access, which “poached” DebtorWise clients in violation of 22 an agreement not to compete and copied some of DebtorWise’s 23 materials. 24 Aurora Talavera, denied all allegations and denied that Aslanyan is 25 or ever has been a corporate officer or Board member of access. 26 (Answer by Access Counseling Inc. to Counter Claim, passim.) DebtorWise filed a counterclaim against Cole (Counterclaim and Party Complaint (“Counterclaim”) (Countercl. at ¶ 23.) Access, through its attorney 27 Attorney Talavera, principal and sole attorney for The Aurora 28 Law Group, represented DebtorWise on two occasions. (Opp. at ¶ 3.) 2 1 First, on May 12, 2011, Talavera signed a letter to Sage Personal 2 Finance stating that her firm served as DebtorWise’s California 3 counsel. 4 Group as Counsel of Record for Third party Defendant Access 5 Counseling (“Motion”), Decl. of Robert D. Manning (“Manning 6 Decl.”), Exh. A.) 7 sent Sage a letter demanding that it cease any wrongful use of the 8 DebtorWise name and any trademark violations. 9 the cease-and-desist demand and requested confirmation of receipt (Motion to Disqualify Aurora Talavera and the Aurora Law The letter stated that the Adair Law Firm had The letter repeated 10 and compliance with the demand. 11 Aurora Law Group did not receive a response. 12 indicate whether this letter settled the matter in question. 13 It threatened legal action if the The parties do not The second representation appears to have been more sustained. 14 On July 25, 2011, Talavera signed a letter to James David Johnson 15 P.A., stating that the Aurora Law Group was representing DebtorWise 16 Foundation in a licensing agreement dispute with Start Fresh Today 17 Inc. (“Start Fresh”). (Mot., Manning Decl., Exh. B.) 18 26, 2011, Talavera wrote to Manning stating that she had received a 19 letter about arbitration of the Start Fresh dispute in Chicago and 20 requesting additional clarification on the arbitration to 21 “determine what the status of the ‘case’ is.” 22 would contact the arbitrator Gilbert Camarena and requested all 23 additional correspondence to be forwarded to her. 24 On November 22, 2011, Talavera emailed Manning regarding the 25 arbitration. 26 email, she stated that she had not received a response to her 27 October 26 letter and that “consequently, [her] office cannot 28 represent [Manning] or DebtorWise at this scheduled arbitration” on On October She stated that she (Opp., Exh. 7.) (Mot., Manning Decl. Exh. D; Opp. Exh. 8.) In that 3 1 November 30 and that “DebtorWise will have to make other 2 arrangements.” On May 14, 2012, Talavera filed a Motion to Quash Service of 3 4 Process as counsel to Access. 5 Access in all proceedings in this case. 6 II. 7 Since then, Talavera has represented Legal Standard “The trial court is vested with the power ‘[t]o control in 8 furtherance of justice, the conduct of its ministerial officers.’” 9 Henriksen v. Great Am. Sav. & Loan, 14 Cal. Rptr. 2d 184, 186 (Ct. 10 App. 1992). 11 disqualify an attorney. 12 determining matters of disqualification. 13 F.3d 990, 995 (9th Cir. 2000). 14 The court’s inherent power includes the power to Id. The court applies state law in In re Cnty. of L.A., 223 The starting point for the court’s analysis is California 15 Rules of Professional Conduct, Rule 3-310(e) (“Avoiding the 16 Representation of Adverse Interests”).1 17 part, that “A member shall not, without the informed written 18 consent of the client or former client, accept employment adverse 19 to the client or former client where, by reason of the 20 representation of the client or former client, the member has 21 obtained confidential information material to the employment.” “The 22 purpose of [this] rule is to protect the confidential relationship 23 which exists between attorney and client, a relationship which 24 continues after the formal relationship ends. 25 of that relationship requires the application of strict standards. It provides, in relevant The fiduciary nature 26 1 27 28 The Central District of California has adopted the Rules of Professional Conduct of the State Bar of California, and the decisions construing them, as the governing standards of professional conduct. See C.D. Cal. L.R. 83-3.1.2. 4 1 For that reason, a former client may seek to disqualify a former 2 attorney from representing an adverse party . . . .” 3 Cal. Rptr. 2d at 186 (internal citations omitted). 4 Henriksen, 14 In order to prevail on a motion to disqualify, the moving 5 party and former client must demonstrate either: (1) that the 6 former attorney actually possesses confidential information adverse 7 to the former client; or (2) that there is a "’substantial 8 relationship’ between the former and current representation.” 9 Ahmanson & Co. v. Salomon Bros., Inc., 229 Cal. App. 3d 1445, 1452 10 (Ct. App. 1991) (“Ahmanson”). 11 H.F. III. Discussion 12 A. Actual possession of confidential information 13 There is no dispute that Talavera represented DebtorWise on 14 two occasions. 15 letter to stop Sage Personal Finance from using the DebtorWise name 16 and violating its trademark rights. 17 2011, Talavera represented DebtorWise in its dispute with Start 18 Fresh. 19 information was imparted and whether confidentiality was waived. 20 First, on May 5, Talavera wrote a cease-and-desist Second, starting around July The parties disagree on whether any confidential Manning and DebtorWise assert that Talavera came into actual 21 possession of confidential information adverse to them in the 22 current action. 23 camera review, the court agrees. 24 information about DebtorWise’s business plan, account volume, and 25 litigation strategy, all of which is confidential. (Decl. Of Robert 26 D. Manning regarding Motion to Disqualify Aurora Talavera and the 27 Aurora Law Group as Counsel of Record for Third Party Defendant 28 Access Counseling, Inc., Exhs. 1-6.) Talavera is thus in possession Based on the documents submitted under seal for in The documents under seal contain 5 1 of confidential information about DebtorWise that is adverse to 2 DebtorWise in the current action, while also representing Access, 3 an opposing party in the action. 4 by the California Rules of Professional Conduct. This is a conflict and is barred 5 B. Waiver of Confidentiality 6 Talavera argues that Manning waived confidentiality because 7 “everything was shared with business associates who are now 8 involved in the case herein.” 9 Sevan Aslanyan, owner of Cole Asia, was present for all her (Opp. at ¶ 9.) She states that 10 conversations with Manning and was copied on all their email 11 correspondence. 12 (Opp. at ¶¶ 4-5). Manning denies that all communications between himself and 13 Talavera were made in the presence of or copied to Aslanyan. 14 Manning declares that they did speak directly without Aslanyan and 15 that “some email messages were just between her and I, as 16 exemplified in the moving papers.” (Reply, Manning Decl. ¶¶3-4). 17 Manning offered as an exhibit one such email, in which Talavara 18 informed Manning that she could not represent DebtorWise in the 19 Start Fresh arbitration. (Mot., Manning Decl., Exh.E) 20 declares that if Aslanyan participated on all phone calls, it was 21 unbeknownst to Manning. (Reply, Manning Decl. ¶ 3.) He further 22 Typically, communications disclosed to third parties are not 23 considered to be confidential communications between attorney and 24 client. 25 for the presence of certain third parties; it considers as 26 confidential all information transmitted “in confidence by a means 27 which, so far as the client is aware, discloses the information to 28 no third parties other than those who are present to further the Nonetheless, the California Evidence Code makes allowances 6 1 interest of the client in the consultation or those to whom 2 disclosure is reasonably necessary for the transmission of the 3 information or the accomplishment of the purpose for which the 4 lawyer is consulted.” Cal. Evid. Code § 952. 5 to a lawyer is nonetheless confidential even though it is made in 6 the presence of another person--such as a spouse, parent, business 7 associate, or joint client--who is present to further the interest 8 of the client in the consultation.” 9 Review Commission Comments). Thus “a communication Cal. Evid. Code § 952 (Law If Aslanyan can be considered a 10 business associate, then even if he was involved in all 11 communications between Talavera and Manning, those communications 12 would remain confidential. 13 California courts have been strict about how far the business 14 associate exception may be extended. While the presence of an 15 officer of a wholly owned subsidiary will not destroy 16 confidentiality, Ins. Co. of N. Am. v. Superior Court, 108 Cal. 17 App. 3d 758, 771 (Ct. App. 1980), communications within a “sellers 18 group” that were also shared with an attorney were not subject to 19 attorney-client privilege. 20 234 (N.D. Cal. 1990). 21 representatives of different entities which were apparently 22 associated with each other only through a contractual relationship. 23 Absent additional facts, the court finds that Aslanyan was not a 24 business associate and that Manning did waive confidentiality when 25 communicating with his attorney in Aslanyan’s presence. McCaugherty v. Siffermann, 132 F.R.D. Here, Aslanyan and Manning were 26 Although Manning waived confidentiality of all communications 27 that he shared with Aslanyan, he has provided evidence of at least 28 one instance of an apparently private communication with his 7 1 attorney. The court finds that, lacking evidence to the contrary, 2 it is unlikely that Aslanyan was involved in all other 3 communications. 4 Debtorwise did not waive confidentiality with respect to all their 5 communications with their attorney Talavera. 6 if an attorney wishes to involve a third party in all 7 communications with her client, that attorney would best fulfill 8 her duty of loyalty to the client by obtaining the client’s express 9 consent and by explaining to the client any resulting waiver of 10 The court notes that confidentiality. 11 The court therefore finds that Manning and IV. Conclusion 12 The court finds that Talavera was in possession of 13 confidential information adverse to a former client. The court 14 finds further that Manning and DebtorWise did not waive 15 confidentiality with respect to all his communications with 16 Talavera. 17 Aurora Talavera and The Aurora Law Group are disqualified and must 18 be withdraw from representing Access or any other party in the 19 current action. Therefore, DebtorWise’s motion is hereby GRANTED. 20 21 IT IS SO ORDERED. 22 23 24 Dated:October 30, 2012 DEAN D. PREGERSON United States District Judge 25 26 27 28 8
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