Bona Fide Conglomerate, Inc. v. Usdc-Casd

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 27, 2018
• Docket: 17-70130
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 27 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: BONA FIDE CONGLOMERATE, No. 17-70130 INC., ______________________________ D.C. No. 3:14-cv-00751-GPC-AGS

BONA FIDE CONGLOMERATE, INC., MEMORANDUM* Petitioner,

v.

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA, SAN DIEGO,

Respondent,

SOURCEAMERICA,

Real Party in Interest.

Petition for Writ of Mandamus to the United States District Court for the Southern District of California Gonzalo P. Curiel, District Judge, Presiding

Argued and Submitted March 8, 2018 Pasadena, California

Before: REINHARDT and NGUYEN, Circuit Judges, and SIMON,** District

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Michael H. Simon, United States District Judge for the Judge.

Petitioner Bona Fide Conglomerate, Inc. seeks the issuance of a writ of

mandamus directing the district court to vacate its order disqualifying Bona Fide’s

attorney, Daniel Cragg, and Cragg’s law firm, and to reinstate Cragg as Bona

Fide’s counsel in the underlying action.1 We deny the petition because Bona Fide

has failed to demonstrate that intervention of this court by means of the

extraordinary remedy of mandamus is justified. See Bauman v. U.S. Dist. Court,

557 F.2d 650 (9th Cir. 1977).

1. “The writ of mandamus is an ‘extraordinary’ remedy limited to

‘extraordinary’ causes.” Burlington N. & Santa Fe Ry. Co. v. U.S. Dist. Court, 408

F.3d 1142, 1146 (9th Cir. 2005) (quoting Cheney v. U.S. Dist. Court, 542 U.S. 367,

380 (2004)). “Although we determine de novo whether the writ should issue, we

must be firmly convinced that the district court has erred [before doing so].”

Cohen v. U.S. Dist. Court, 586 F.3d 703, 708 (9th Cir. 2009) (citation omitted); see

also Burlington N., 408 F.3d at 1146 (“In order to gain the benefit of the writ . . .

the right to the writ must be ‘clear and indisputable’ . . . .”). In deciding whether

the writ should issue, we consider whether:

District of Oregon, sitting by designation. 1 Bona Fide also moves to strike SourceAmerica’s March 14, 2018 supplemental filing. Because we did not request supplemental briefing, and the letter does not meet the requirements of Fed. R. App. P. 28(j), we grant the motion to strike. Ninth Cir. R. 28-1(a).

2 (1) the party seeking the writ has no other means, such as a direct appeal, of attaining the desired relief, (2) the petitioner will be damaged in a way not correctable on appeal, (3) the district court’s order is clearly erroneous as a matter of law, (4) the order is an oft-repeated error, or manifests a persistent disregard of the federal rules, and (5) the order raises new and important problems, or issues of law of first impression. Cole v. U.S. Dist. Court, 366 F.3d 813, 817 (9th Cir. 2004) (citing Bauman, 557

F.2d at 654–55). Although “[n]o single Bauman factor is determinative in every

case,” the third factor, clear error, is “highly significant” and “may be dispositive

of the petition.” Cohen, 586 F.3d at 708 (citations omitted). Based on this

factually complex record, we cannot say that the district court clearly erred when it

issued the disqualification order.

2. Even if, as Bona Fide contends, we must apply federal law to examine

the “Eight Excerpts” at issue, see United States v. Ruehle, 583 F.3d 600, 607 (9th

Cir. 2009), the district court did not clearly err in finding that these excerpts were

covered by the attorney-client privilege. The Eight Excerpts contained statements

by Jean Robinson, Real-Party-in-Interest SourceAmerica’s then-general counsel,

about her private conversations with SourceAmerica’s former CEO, executives,

and outside counsel regarding internal matters requiring legal advice. During these

conversations, Robinson informed Lopez that she was not authorized to disclose

some of the information she was providing him, and at one point told him that

SourceAmerica’s board of directors had limited her role in certain matters. Later,

3 when SourceAmerica learned of the existence of the recordings, it asserted the

attorney-client privilege over their content. The district court’s findings that the

excerpts were privileged, and that the privilege was not waived, were not clearly

erroneous.

3. The district court also did not clearly err in finding that Cragg violated

his ethical duties under California law with respect to his handling of the Eight

Excerpts and the recordings from which they were taken. Under California law,

when (1) a lawyer “receives materials that obviously appear to be subject to an

attorney-client privilege or otherwise clearly appear to be confidential and

privileged,” and (2) “it is reasonably apparent that the materials were provided or

made available through inadvertence,” that lawyer (1) “should refrain from

examining the materials any more than is essential to ascertain if the materials are

privileged,” and (2) “immediately notify the sender that he or she possesses

material that appears to be privileged.” Rico v. Mitsubishi Motors Corp., 42 Cal.

4th 807, 817 (2007) (quoting State Compensations Ins. Fund v. WPS, Inc., 70 Cal.

App. 4th 644, 656 (1999)). “The parties may then proceed to resolve the situation

by agreement or may resort to the court for guidance with the benefit of protective

orders and other judicial intervention . . . .” Id. (quoting State Fund, 70 Cal. App.

4th at 656–57).

Bona Fide shared the full set of recordings with Cragg, who then had the

4 entirety of the recordings transcribed for review. Even assuming that the

privileged nature of the recordings was not obvious when Cragg first received and

transcribed them, that no longer appeared to be the case when SourceAmerica

notified Cragg in writing on October 6, 2014, of its privilege claim and demanded

return of the recordings. Yet in the face of SourceAmerica’s claim—and

Robinson’s statements to Lopez that she was disclosing information beyond what

she was authorized to do—Cragg responded that he had no privileged information

in his possession. Neither Cragg nor Bona Fide responded to SourceAmerica’s

follow-up letter. In light of Cragg’s actions (or lack thereof), SourceAmerica

turned to the magistrate judge and the district court in an attempt to protect any

privileged information. For a period of almost two years, Cragg and Bona Fide

maintained that no privileged information was in their possession and that any

privilege was waived. Cragg possessed even more recordings than SourceAmerica

initially realized, and his stance never wavered even after a federal court in a

different case expressed concern that these same recordings contained privileged

communications. On this record, the district court did not clearly err in concluding

that Cragg violated his ethical duties under California law.

4. Finally, the district court did not clearly err in concluding that

disqualifying Cragg and his law firm was an appropriate remedy. We apply state

law to matters of disqualification. In re Cty. of L.A., 223 F.3d 990, 995 (9th Cir.

5 2000). A disqualification order “must be prophylactic, not punitive.” Gregori v.

Bank of America, 207 Cal. App. 3d 291, 308–09 (1989). “[T]he 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.” Id. at 309. “[D]isqualification is proper where . . . 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.”

Id.

Here, the Eight Excerpts come from the same set of recordings as the non-

privileged excerpts already used in this case. It is not clear on this record that the

Eight Excerpts are irrelevant to this action and could not be used going forward to

prosecute Bona Fide’s claims. First, while Bona Fide argues on appeal that the

Eight Excerpts “are irrelevant to any issue in the case,” it notably did not advance

this claim before the district court or the magistrate judge. Second, in support of

its argument on appeal, Bona Fide cites to two documents in the record that were

filed after the district court’s disqualification order—the protective order

precluding the use of the Eight Excerpts in Bona Fide’s case-in-chief and a

declaration by Bona Fide’s counsel promising not to use the Eight Excerpts in

litigation. Neither document actually shows that the Eight Excerpts are irrelevant

to the underlying action. Finally, given Cragg’s entire course of conduct in the

6 handling of the recordings, the district court did not err in concluding that

disqualification was an appropriate remedy. See Gregori, 207 Cal. App. 3d at 309

(“Though [privileged] information cannot be unlearned, and the lawyer who

obtained it cannot be prevented from giving it to others, disqualification still serves

the useful purpose of eliminating from the case the attorney who could most

effectively exploit the unfair advantage.”); see also McDermott Will & Emery LLP

v. Superior Court, 10 Cal. App. 5th 1083, 1124–25 (2017) (noting that an order

that merely precludes the use of the privileged information is an insufficient

remedy because the attorney who improperly reviewed the privileged information

retains personal knowledge that can be used to his client’s advantage).

Accordingly, the petition is DENIED.