Opinion
D070876
06-26-2017
BRETT D. GOBAR, Plaintiff and Respondent, v. DAVID R. GONG, Individually and as Trustee, etc. et al., Defendants and Appellants.
Rosenberg, Shpall & Zeigen, Tomas A. Shpall and Amy C. Lea for Defendants and Appellants. Herzlich & Blum, Allan Herzlich and Jerome J. Blum for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2015-00031763-CU-OR-CTL) APPEAL from an order of the Superior Court of San Diego County, Joel M. Pressman, Judge. Affirmed. Rosenberg, Shpall & Zeigen, Tomas A. Shpall and Amy C. Lea for Defendants and Appellants. Herzlich & Blum, Allan Herzlich and Jerome J. Blum for Plaintiff and Respondent.
Plaintiff and respondent Brett D. Gobar (Gobar) brought this fraudulent conveyance action against defendant and appellant David R. Gong, individually and as Trustee for Ray Trust No. 1 and OKG Trust #929. Other named defendants and appellants include Gong's related business entities RFG Oil, Inc., and Raygon 2124 LP (referred to collectively as Gong, see fn. 5, post). Gobar seeks to set aside as fraudulent numerous transfers of real property Gong allegedly made to prevent Gobar from collecting on an underlying money judgment he obtained in 2013 against Gong, in a prior action on a lease and guaranty.
In response, Gong brought a motion to disqualify the law firm Gobar hired to represent him, Herzlich & Blum, LLP (Herzlich), based on alleged conflicts of interest from Herzlich's previous representation of Gong's discharged law firm, Luce, Forward, Hamilton & Scripps, LLP (Luce). During 2005-2007, Gong hired Luce to represent him in a corporate dissolution matter that was eventually settled, but Gong stopped paying Luce attorney fees. Luce hired Herzlich to sue Gong for attorney fee recovery and also to set aside allegedly fraudulent conveyances of assets, and both of those actions (the Luce Litigation; see fns. 2-3, post) were eventually settled as of 2012.
When Gobar could not collect his 2013 monetary judgment against Gong in the lease and personal guaranty matter, he hired Herzlich to bring this 2015 fraudulent conveyance action. In Gong's motion to disqualify Herzlich from acting as Gobar's attorneys, Gong contended that during the settlement proceedings in the Luce Litigation, he had made broad disclosures of his own privileged financial information to both Luce and to Herzlich. He argues that Herzlich is now presumably able to use such disclosures of confidential information to litigate the new Gobar fraudulent conveyance claims, and that "a substantial relationship exists between the two matters." (Acacia Patent Acquisition, LLC v. Superior Court (2015) 234 Cal.App.4th 1091, 1104, 1107-1108 (Acacia) [holding that in the "limited realm of cases featuring attorneys as parties opposed to their former clients, lawyers representing the attorney party must avoid participation in substantially related matters, whereby their access to privileged information in the former action would potentially serve as an advantage in the latter."].)
On review of a ruling on a disqualification motion, we examine whether the trial court's conclusions represent an abuse of discretion, when viewed in light of the applicable legal principles. (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143 (SpeeDee Oil Change Systems).) "If the trial court resolved disputed factual issues, the reviewing court should not substitute its judgment for the trial court's express or implied findings supported by substantial evidence." (Ibid.) Applying these rules to this record, we affirm the order denying the disqualification motion.
I
BACKGROUND OF MOTION PROCEEDINGS
A. History of Luce Litigation: Matters Nos. 1, 2, and 3
From 1989 to 2005, Gong and his brother, Jeff Gong, used their corporate entity RFG Oil, Inc. for the operation of numerous oil change centers in Southern California. In 2005, Jeff Gong filed an action against Gong and RFG for dissolution of RFG, which we designate as Matter No. 1. Gong hired Luce to represent him, RFG and other entities regarding these corporate dissolution matters. In Matter No. 1, the disputes "primarily concerned the valuation of RFG and the amount of money and damages Jeff sought related to the dissolution of RFG, allegations of breach of fiduciary duties, wrongful termination, and partition of certain property." Pursuant to an engagement and fee agreement, Luce charged Gong an hourly rate for services provided by attorneys, paralegals and law clerks. Gong paid Luce more than $700,000, and he and his corporation prevailed to some extent in Matter No. 1. He then stopped paying Luce's fees.
Following the format used by the court in Acacia, supra, 234 Cal.App.4th 1091, we identify the relevant sequence of litigation by labeling each action as "Matter No. 1," etc. Matter No. 1 was the 2005-2007 corporate dissolution and partition matter between the Gong brothers. (Gong v. RFG Oil (Super. Ct. San Diego County, 2005, No. GIC854633).)
In Matter No. 2, Luce filed suit against Gong for over $180,000 in unpaid attorney fees. Luce hired Herzlich to represent it in filing the complaint, providing it with billing statements and the Gong engagement and fee agreement from Matter No. 1. Gong responded with a cross-complaint for malpractice and breach of fiduciary duty. After some discovery and litigation, the cross-complaint was dismissed and a default judgment for Luce was entered. Luce started trying to collect it.
Matter No. 2 is Luce Forward v. Gong (Super. Ct. San Diego County, 2009, No. 37-2009-0095130-CU-CL-CTL).
In Matter No. 3, Luce sued Gong to set aside allegedly fraudulent conveyances of his assets, concerning six different San Diego properties. Herzlich again represented Luce. Through a settlement, Luce obtained a monetary judgment for over $265,000. The settlement agreement dated March 31, 2012 included several provisions, such as a stipulation to forbear from enforcing the judgment while Gong made payments on it and security agreements (collectively, the settlement agreement; a redacted version is in the record). According to Gong's declaration, the stipulation on forbearance attached a confidential "Real Estate Schedule" listing a large number of properties owned by Gong, RFG and other entities or trusts in which Gong or RFG had an interest. This confidential document does not appear to be in the current record.
Matter No. 3 is Luce Forward v. Ray Trust #1 (Super. Ct. S. D. County, 2011, No. 37-2011-86565-CU-OR-CTL).
In the settlement agreement in Matter No. 3, paragraph 15 contained a confidentiality provision, "Each of the parties hereto agrees to hold all information received from the other party hereto and the contents of this Stipulation in confidence; provided, however, that they may make such disclosures to each of their respective attorneys, accountants, auditors, and/or tax preparers, each of whom will be informed of and agree to be bound by this confidentiality clause, or other such disclosures as may be required by law . . . . This confidentiality provision shall not apply to information lawfully received from other sources or in the public domain. Additionally, Defendants may disclose settlement terms to lenders and certain others, as they deem necessary." (Italics added.)
B. Current Complaint by Gobar; Matters Nos. 4 and 5
In Matter No. 4, Gobar brought a successful breach of lease action against Gong (personal guarantor of the lease) and another entity, the lessee and co-defendant RFG-SJG, LLC. Recovery was for the amount in default pursuant to the terms of a 2009 lease of Gobar's property to RFG-SFG, LLC. Gobar obtained a November 26, 2013 judgment against the defendants, including Gong, in the amount of $492,379.46.
Matter No. 4 is Gobar v. RFG-SJG, LLC (Super. Ct. San Diego County, 2012, No. 37-2012-00077478- CU-BC-SC).
Gobar began trying to collect the Matter No. 4 judgment. Gobar hired Herzlich to file the instant action, Matter No. 5, alleging Gong was attempting to hinder and defraud him from enforcing the judgment. The complaint alleges that Gong participated in transferring assets, without payment of value, with his entities such as the Ray Trust, RFG (an alter ego), Raygon, Citi, The OKG Trust, FastAuto and/or Nevada. Gobar sought relief to void the allegedly fraudulent transfers of assets, against Gong and additional defendants Raygon 2124 LP and FastAuto, LLC.
In Matter No. 5, Gobar v. Gong (Super Ct. San Diego County, 2015, No. 37-2015-00031763-CU-OR-CTL), the named defendants include Gong, individually and as trustee of The Ray Trust No. 1, dated 08-01-97, a revocable trust (also written as The Ray Trust #1). Gong is also sued as trustee of the OKG Trust #929. Other limited partnerships or corporations that were sued here include Raygon, 2124 LP; the Citi Properties Fund #28; RFG Oil, Inc.; FastAuto, LLC; Nevada Partners Properties Fund, LP; and 1405 North Sepulveda MB, LLC.
Gobar filed a similar case to set aside fraudulent conveyances in Los Angeles, and we designate it as Matter No. 6. (Gobar v. Gong (Super. Ct. Los Angeles County, 2015, No. BC595225).) Also as to that case, Herzlich asserted in opposition to the disqualification motion that it received no financial or asset information from Luce, so could not have used it in that representation of Gobar. We have been given no information on any coordination of these actions.
In addition to naming the same six properties previously targeted in the Luce Litigation, Gobar's complaint sought relief as to two additional San Diego properties: 1517 Calle Vaquero, and 1905 North Grand Ave. In the related Los Angeles action to set aside fraudulent conveyances (Matter No. 6), Gobar is pursuing a ninth property, 1405 North Sepulveda.
C. Gong's Motion to Disqualify Herzlich in Matter No. 5; Opposition
Gong filed a motion to disqualify Herzlich as Gobar's attorneys, on the ground that during the previous Luce Litigation (Matters Nos. 2 and 3), Herzlich had access to confidential financial information about Gong. Gong contended that it would be a violation of the confidentiality provision of the settlement agreement to use his "highly sensitive and confidential information" against him in the current action by Gobar.
In Gong's declaration, he stated that during the settlement negotiations with Luce, he had supplied to both Luce and its attorney (Herzlich) confidential financial and tax information about his personal and real estate holdings, with the expectation the information would be kept secret and was protected by the attorney-client privilege. He described the cross-complaint he filed against Luce in its attorney fee action, Matter No. 2, to allege it had committed malpractice and breach of fiduciary duty during its 2005-2007 representation of him and RFG in Matter No. 1. That cross-complaint was disposed of when the trial court struck it and his answer, resulting in a $265,127 default judgment against him and RFG. Luce then filed Matter No. 3, for fraudulent conveyance.
Gong argued that as Luce's attorney, Herzlich was likewise bound by the settlement agreement's confidentiality clause. He claims, "most of the information provided . . . would otherwise not be known or readily available to the public." For example, his personal financial strategies involving the use of trusts, and the identities of their trustors and beneficiaries, or the financial status of the trusts, are not necessarily evident in public records. The Luce Litigation (Matter No. 3) had focused on six particular properties as potential subjects of fraudulent conveyances. Gong represented that the Real Estate Schedule that was part of the settlement agreement had also given confidential information about the three additional properties that had not been previously pursued. He lodged the redacted version of the settlement agreement. Gong claims this shows Herzlich must have used this confidential information from Luce, on behalf of Gobar, to identify and plead those additional possible subjects of fraudulent conveyances (including the Los Angeles property).
In opposition to the motion to disqualify Herzlich, one of its partners, Attorney Jerome Blum, provided a declaration stating that during the fee portion of the Luce Litigation (Matter No. 2), Herzlich was only supplied by its client with billing statements, a ledger and the Luce engagement and fee agreement. Blum and another partner, Allan Herzlich, each provided declarations stating that the former client, Luce, did not supply to them information about Gong's assets. Attorney Herzlich's declaration also stated that in 2011, he obtained information about some of Gong's assets from Bill Raven, who was an attorney for the brother, Jeff Gong, in Matter No. 1.
Attorney Blum's declaration stated that the Herzlich firm is highly experienced in collections and enforcement of judgments, and he had his staff perform extensive searches of Gong's assets, using publicly available sources. In the discussion portion of this opinion, we shall further describe the declarations from Herzlich employees, to the effect that they found out information about Gong's assets from searching public records. Herzlich thus argued that it did not obtain from Luce any confidential or privileged information about Gong that it would be using against him in Gobar's action.
Herzlich's attorney Blum described in his declaration the judgment debtor examination proceedings that his firm was attempting to use in Matter No. 4, to obtain information from Gong about his available assets. Gong was resisting those efforts.
Herzlich previously argued that collateral estoppel might apply to the current action, based on a prior ruling in Matter No. 4, but this (erroneous) idea is no longer raised on appeal.
Gong's reply papers showed there was, at that time, a pending trial date of November 10, 2016. He continued to contend that Herzlich had access to some confidential information Gong had previously provided to Luce and Herzlich during the 2012 settlement agreement proceedings, and it should not make any difference that Herzlich was saying it did not use it.
D. Ruling and Appellate Proceedings
The trial court heard argument on the motion. Gong argued he previously had to supply confidential financial information in settlement to get Luce to accept a payment plan, and he expected Luce and its attorney, Herzlich, to keep it confidential. Such confidential information included the identity of the grantors and beneficiaries of the various trusts, which were not public knowledge, as well as liens upon the property.
After hearing opposing argument, the court ruled that although Gong made allegations about Herzlich receiving such confidential financial information from Luce, the only proof he provided was his own statements and his belief that "there would be no other way for [Herzlich] to obtain this information except through Luce. [Herzlich] explain[ed] that they never received any financial information about Mr. Gong from Luce and obtained all the information used in the present case from independent research, public records, or third parties unrelated to Luce." Hence, the court denied the disqualification motion for lack of a sufficient showing by the moving party.
Gong appeals. Although he applied to the trial court to stay the action pending appeal, the request was denied. Gong then filed a petition for a writ of supersedeas, mandate, or other appropriate relief, directing the trial court to vacate its order denying the motion to disqualify. This court denied his writ petition in September 2016.
The rulings in Matter No. 4 are the subject of a separate appeal, D071195. The parties' stipulated request to consolidate that case with this one, D070876, was denied in an order dated December 22, 2016. In this appeal, Herzlich as the respondent designated a number of documents from Matter No. 4 to be part of the record in this case, and some of them are attached as exhibits to declarations on file.
II
APPLICABLE STANDARDS
A. Review of Attorney Disqualification Issues
In reviewing a trial court's discretionary ruling on a disqualification motion, we accept as correct all express or implied findings that are supported by substantial evidence. (SpeeDee Oil Change Systems, supra, 20 Cal.4th at pp. 1143-1144.) "However, the trial court's discretion is limited by the applicable legal principles. [Citation.] Thus, where there are no material disputed factual issues, the appellate court reviews the trial court's determination as a question of law. [Citation.] In any event, a disqualification motion involves concerns that justify careful review of the trial court's exercise of discretion." (Id. at p. 1144.)
"The important right to counsel of one's choice must yield to ethical considerations that affect the fundamental principles of our judicial process." (SpeeDee Oil Change Systems, supra, 20 Cal.4th at p. 1145.) "Depending on the circumstances, a disqualification motion may involve such considerations as a client's right to chosen counsel, an attorney's interest in representing a client, the financial burden on a client to replace disqualified counsel, and the possibility that tactical abuse underlies the disqualification motion." (Ibid.) "The paramount concern is the preservation of public trust in the scrupulous administration of justice and the integrity of the bar." (Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698, 705.)
B. Circumstances Giving Rise to Acacia Analysis
In order to resolve the dispute in Acacia, the court set out these basic rules: "A lawyer representing a law firm in a fee dispute is not automatically disqualified from opposing the defendant client in future litigation, even in future litigation that has some factual nexus with the prior litigation. Rather, a court must examine (1) whether the first representation resulted in a broad disclosure of the nonclient's privileged information (i.e., something beyond the attorney-client retainer agreement and the number of hours worked) and (2) whether a substantial relationship exists between the two matters. Not every attorney fee dispute results in the law firm plaintiff's counsel receiving broad access to privileged information from the underlying dispute. Nor will every attorney fee dispute be substantially related to a subsequent action against the same nonclient." (Acacia, supra, 234 Cal.App.4th 1091, 1104; italics added.)
In this case, Gong was never a client of Herzlich, but seeks its disqualification. He relies on Acacia, supra, 234 Cal.App.4th 1091, to argue that because of Herzlich's prior representation of Luce against Gong (Luce's former client in Matter No. 1), Herzlich must now be disqualified from representing Gobar, based on an arguably substantial relationship between the settled (collection) Matters Nos. 2 and 3 and this (collection) Matter No. 5.
The analysis in Acacia included a statement of the general rule that "attorneys owe no duty of care to adversaries in litigation or to those with whom their clients deal at arm's length." (Acacia, supra, 234 Cal.App.4th at p. 1107.) Likewise, an attorney generally has no duty to preserve the confidences of nonclients. (Id. at pp. 1098-1099.) Herzlich would ordinarily have no duty to preserve the confidence of its nonclient, Gong, unless such a duty independently arose from the settlement agreement in Matter No. 3 and its confidentiality clause, or other "unique" circumstances. (Id. at pp. 1098-1099 [" 'A conflict of interest can . . . arise because of specific obligations, such as the obligation to hold information confidential, that the lawyer has assumed to a nonclient.' "].)
In Acacia, the court found there were distinguishing factors that undermined the applicability of the general rule that an attorney does not owe confidentiality duties to nonclients. The court was presented with an unusual scenario on a disqualifying conflict of interest, "whether a law firm's representation of a lawyer [Floyd] in a fee dispute results in a disqualifying conflict of interest when the law firm [AlvaradoSmith] opposes the fee dispute defendant [affiliated business owners Acacia] in another matter." (Acacia, supra, 234 Cal.App.4th 1091, 1102.) The court's reasoning began with disqualification rules developed in the successive representation context, to the effect that " 'an attorney will be disqualified from representing a client against a former client when there is a substantial relationship between the two representations.' " (In re Complex Asbestos Litigation (1991) 232 Cal.App.3d 572, 587; Acacia, supra, at p. 1102.) The problem in such a case is that the substantial relationship gives rise to a presumption that the attorney possesses confidential information of the former client that is material to the present representation. (Id. at pp. 1097-1098.)
In Acacia, supra, 234 Cal.App.4th 1091, 1094-1096, there were two moving parties (business owners Acacia and its affiliate SM Graphics) seeking to disqualify the law firm (AlvaradoSmith), and they were being charged by the plaintiff (Reddy) with being the alter egos of one another. We can refer to the business owners collectively here. The court's analyses of the disqualification issues as between the different related matters were unaffected by the alter ego component of business owners, given the facts in that particular case. (Id. at pp. 1105-1106.)
The circumstances in Acacia involved three separate litigation matters, and the court was required to examine whether a substantial relationship existed between the second and third, due to the law firm's participation in them. (Acacia, supra, 234 Cal.App.4th at pp. 1097, 1105-1108.) The facts were unusual because the moving party Acacia (the business owner) that was seeking disqualification of the law firm (AlvaradoSmith) had never been a client of the law firm. Successive representation rules were analogous, however. In the underlying lawsuit (Acacia No. 1), the business owners were plaintiffs who hired lawyer Floyd to pursue a patent infringement action. Floyd settled their case and that defendant (Samsung) provided settlement proceeds that were divided among the business owners' affiliates. Floyd received a contingent fee award based on the value of the settlement proceeds. (Id. at p. 1094.)
In Acacia, after that settlement of the first suit, the lawyer Floyd decided it had been shortchanged in the manner in which its fees award was calculated based on certain patents, so it sued its former clients (business owners) in Acacia No. 2. Floyd alleged the owners had manipulated the settlement proceeds in order to allocate an artificially low amount on which to calculate the professional fees that were due. (Acacia, supra, 234 Cal.App.4th at p. 1095.) Floyd was represented in Acacia No. 2 by the law firm of AlvaradoSmith, which obtained extensive files from Floyd about the underlying patent litigation, to assist it in seeking more contingency attorney fees from the business owners. (Ibid.)
Due to the attorney fees dispute, Floyd no longer had to preserve the confidentiality of the business owners' privileged information, and could reveal it to its counsel "to the extent necessary to litigate the action." (Acacia, supra, 234 Cal.App.4th at p. 1098; Evid. Code, § 958 ["There is no privilege under this article as to a communication relevant to an issue of breach, by the lawyer or by the client, of a duty arising out of the lawyer-client relationship."].) --------
Another participant in the earlier Acacia No. 1 litigation was an expert witness (Reddy) who later hired the same law firm (AlvaradoSmith) to sue the business owners. His action, Acacia No. 3, was brought on a similar complaint alleging that his contingent expert witness fee arrangement should have entitled him to a larger award of fees, but the business owners had unfairly manipulated the settlement proceeds to minimize the calculation of his fee award. (Acacia, supra, 234 Cal.App.4th at p. 1095.) In Acacia No. 3, the business owners were the moving parties which sought to enforce the law firm's duty of confidentiality toward them, based on the firm's having access to the business owners' confidential materials, which they obtained during the earlier attorney fee litigation (Acacia No. 2) about a proper settlement allocation. (Id. at pp. 1102, 1105-1106.)
In Acacia, it was deemed highly significant that the issues being litigated in Acacia No. 3 would involve substantive examination by the law firm of the same confidential materials obtained during the previous litigation, Acacia No. 2 (which litigation in turn depended on how the settlement proceeds in Acacia No. 1 had been allocated). In both Acacia Nos. 2 and 3, the merits of the actions involved determining the base amount (in the settlement) upon which the fees awards under the respective contingency fee agreements should be calculated. (Acacia, supra, 234 Cal.App.4th at pp. 1105-1106.) In both, the business owners' previously disclosed confidential files would be used to prove the true value (that the business owners had allegedly concealed) of the assets in dispute during the Acacia No. 1 settlement proceedings. In view of the unique situation giving rise to the rules applied in Acacia, we next examine the disqualification issues arising from this record.
III
ANALYSIS
A. Respective Showings and Contentions
In support of his claim, Gong's declaration generally stated that he disclosed extensive confidential information about his assets to Luce in settlement of Matter No. 1, the corporate dissolution matter, and Luce in turn must have shared that information with Herzlich, which could have used it during its prosecution of the Luce Litigation (Matter Nos. 2 & 3). Gong lodged a redacted version of the Matter No. 3 confidential settlement agreement, which does not expressly refer to the attached schedule of properties that made the disclosures. In his points and authorities at the trial level, Gong mainly discussed Herzlich's participation in litigating Matter No. 3, fraudulent conveyance. On appeal, he also argues the malpractice cross-complaint litigation against Luce in its attorney fee action, Matter No. 2, must have resulted in disclosure of some confidential information to Luce and its counsel, Herzlich. Herzlich responds that not only is this a new argument on appeal, but it has little merit, because that cross-complaint was stricken and a default judgment entered in Matter No. 2, so not much litigation on the merits took place in that respect.
We agree with Herzlich that Gong's arguments sometimes "conflate" the issues about which disclosures would require disqualification of Herzlich. Gong sometimes seems to argue that the crucial disclosures of confidential information were made to his former attorneys, Luce, during Matter No. 1, or in connection with his cross-complaint in Matter No. 2. At other times, he seems to rely on his disclosures of "additional" confidential asset information to both Luce and Herzlich, during the settlement and creation of a payment plan in Matter No. 3. As to Gong's attorney-client privileged material disclosed to Luce in Matter No. 1, Luce and Herzlich could use it as necessary to litigate the attorney fees claim. (See fn. 9, ante.) To the extent that Herzlich, as an adversary to Gong, obtained confidential asset information during the settlement process in Matter No. 3, it did not do so in an attorney-client capacity. However, it did undertake a separate confidentiality duty about the issues in Matter Nos. 2 and 3.
Gong has provided little support other than speculation that Herzlich, on behalf of Gobar, obtained or used confidential asset information from Luce to identify the three additional properties that were possible subjects of fraudulent conveyances (including the Los Angeles property). Although Gong claims that "most" of the information he provided to Luce and Herzlich, in Matter No. 3, "would otherwise not be known or readily available to the public," the examples he gives are the "real estate owned by me, RFG, or all other entities or trusts in which I had any interest or relationship history, the formation for the entities, the grantors of the trusts, the beneficiaries of the trusts, the trustees of the trusts, the terms of the trust documents themselves, the details of the debts related to the real estate . . . , how the real estate was acquired, the market value [and financial status] of the real estate . . . ." Such ownership details might well assist in collection efforts, but more generic information is also available in public records, as the Herzlich declarations show.
Herzlich provided declarations stating that Luce only gave it limited information about Gong in connection with Matter No. 2, such as the fee agreement and the billing statements. Herzlich thus argues, "No attorney-client privileged information was involved in any disclosure pursuant to the Stipulation between . . . Gong and Luce (and their attorneys), when settling the Luce cases against Gong." Herzlich independently developed other sources of asset information. It received from Bill Raven, Gong's brother's attorney previously involved in Matter No. 1, a copy of a 2010 letter from Jeff Gong stating that the Gongs' interests (RFG Oil, Ltd.) may have included a Sepulveda Blvd., Los Angeles property and a 1905 Grand Avenue location. Luce was not a source of such information.
Herzlich's staff person Sandra Cannavan provided a declaration stating that she found a recorded quitclaim deed that showed Gong had signed it as trustee. Another public record transfer deed reflected that the grantee that requested recording was OKG Trust #929, and the recipient of the recorded deed was to be Gong individually. From this, Herzlich's attorney Blum concluded that Gong must have been acting for the trust, as its trustee. Cannavan found two deeds reflecting that Gong had transferred property into two of the trusts. Blum concluded that the recorded deeds reflected Gong was the settlor of those trusts, since by transferring property into them, he showed he had interests in both the property and the trusts.
Herzlich's staff person Anna Liao gave a declaration stating that in 2009, she searched Gong's assets and learned he owned the Calle Vaquero property. The public record also showed Gong, as a trustee, was a co-owner of property with the Ray Trust No. 1. Blum said this asset information was not gained from the Luce documents, but from searching public records and contacting another attorney.
B. Application of Rules
In Acacia, the disqualification inquiry focused on two factors, (1) whether the first representation resulted in a broad disclosure of the nonclient's privileged information and (2) whether a substantial relationship exists between the two matters. (Acacia, supra, 234 Cal.App.4th at p. 1104.) The result in that case hinged upon a finding that in Acacia No. 2, the law firm (AlvaradoSmith) had obtained broad access to numerous privileged documents in its attorney fee litigation against the business owner, "because the nature of the litigation in [Acacia] No. 2 required it. Evidence submitted with defendants' motion to disqualify established the extent of this exposure." (Ibid.) This factor was determinative in applying the substantial relationship test. (Id. at pp. 1097-1098 ["substantial relationship" test focuses " ' "on the similarities between the two factual situations, the legal questions posed, and the nature and extent of the attorney's involvement with the cases." ' "].) That is, the nature of the litigation in Acacia No. 2 involved the actual values of the underlying settlement items as necessary to calculate the contingency fees properly due.
The court in Acacia, supra, 234 Cal.App.4th 1091, acknowledged that a nonclient (such as Gong) can establish that an opposing attorney has a disqualifying conflict of interest "based on the conjunction of (1) implicit obligations a lawyer takes on to maintain the confidences of a nonclient received in the course of representing a client, and (2) the unfair advantage that might accrue were such a lawyer to pursue substantially related litigation against the nonclient." (Id. at p. 1099.) However, "[n]ot every attorney fee dispute results in the law firm plaintiff's counsel receiving broad access to privileged information from the underlying dispute. Nor will every attorney fee dispute be substantially related to a subsequent action against the same nonclient." (Id. at p. 1104.)
We first determine whether the "nature" of the litigation in Matters Nos. 2 and 3 required Herzlich to gain access to Gong's privileged asset information that had possibly been provided to Luce during Matter No. 1, or during settlement in Matter No. 3. Gong did not submit substantial evidence in his motion to establish there was such a broad or extensive exposure to Herzlich of Gong's confidential financial information. (Acacia, supra, 234 Cal.App.4th at pp. 1104-1105.) His declaration shows nothing more than speculation that access to confidential asset information could have been used and abused in this manner. Regarding the settlement agreement for Matter No. 3, we have not been able to evaluate the contents of its confidential "Real Estate Schedule" listing the properties owned by Gong, RFG and other entities or trusts in which Gong or RFG had an interest, since it was not lodged here.
In any case, the redacted version of the settlement agreement shows that its confidentiality clause does not apply to matters of public record (e.g., title searches). Herzlich provided declarations about the searches of public records made by its staff members, and the results they were able to obtain. Gong could not show such information was exclusively available from the Matter No. 3 settlement agreement. To the extent that credibility determinations were made as to the public or private nature of the asset searches, the trial court evidently found Herzlich's denials of access to or utilization of Luce's confidential information to be persuasive. We can accept as correct all such implied findings that are supported by substantial evidence, which is the case here. (SpeeDee Oil Change Systems, supra, 20 Cal.4th at pp. 1143-1144.)
On the separate issue of substantial relationship, we observe that in contrast to the unusual circumstances set out in Acacia, the Luce matters involved not a professional contingency fee agreement but an hourly fee for service attorney fee agreement. In Acacia, disqualification was required in part because of "the essential similarities between [Acacia] Matters No. 2 and No. 3. Both contingency agreements pertain to the potential recovery in [Acacia] Matter No. 1. Both [the former lawyer and expert witness] allege that [the business owners] manipulated the settlement in [Acacia] Matter No. 1 to shortchange their recoveries. Relevant issues in both matters include defendants' intent in structuring the contingency agreements (rather than paying hourly fees) and in dividing the proceeds of the [defendant] Samsung settlement between various affiliates in [the business owners'] corporate family. The similarity of the legal and factual issues in [Acacia] Matters No. 2 and 3 distinguishes the instant action from standard, hourly rate fee dispute cases, which might not be substantially related to the underlying action or to other fee disputes. Any privileged information [Floyd] received with regard to the valuation of the [plaintiff's] patents vis-à-vis [settling defendant], or even more general insights into the internal operations of [the business owners], are relevant to this action in a way it would not be in a straight fee recovery based on the number of hours worked." (Acacia, supra, 234 Cal.App.4th 1091, 1105-1106; italics added.)
In applying the tests set forth in Acacia, supra, 234 Cal.App.4th 1091, the appellate court found it determinative that confidential information about the underlying contingency fee arrangements had to be taken into account in determining the merits of the subject case. (Id. at pp. 1104-1106.) In the case before us, the issues presented in Matter No. 5 do not require inquiry into the underlying value of any of the previous matters, such as if the dispute involved contingencies. The Matter No. 5 dispute does not relate to fact intensive substantive work that Luce performed for Gong. Herzlich will not be required to revisit the merits of the earlier Luce Litigation, while representing Gobar.
In assessing whether there is a "substantial relationship" between two matters, courts " 'should "focus on the similarities between the two factual situations, the legal questions posed, and the nature and extent of the attorney's involvement with the cases." ' " (Acacia, supra, 234 Cal.App.4th at pp. 1097-1098; H.F. Ahmanson & Co. v. Salomon Brothers, Inc. (1991) 229 Cal.App.3d 1445, 1455.) These were not "identical" collection cases, as Gong contends. He cannot show that the Luce Litigation resulted in Luce's counsel, Herzlich, "receiving broad access to privileged information from the underlying dispute." (Acacia, supra, at p. 1104.) No substantial relationship has been demonstrated between the earlier matters and the current action by Gobar against Gong. (Ibid.) The record does not indicate that the trial court's exercise of discretion contravened any of the applicable legal principles on disqualification of counsel.
DISPOSITION
The order denying the motion to disqualify counsel is affirmed. Costs to Respondent.
/s/_________
HUFFMAN, J. WE CONCUR: /s/_________
BENKE, Acting P. J. /s/_________
HALLER, J.