Mirch Law Firm, LLP v. Elias Nakhleh

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 26, 2022
• Docket: 20-56207
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAY 26 2022 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

MIRCH LAW FIRM, LLP; et al., No. 20-56207

Appellants, D.C. No. 2:20-cv-05734-PA-MAA v.

ELIAS NAKHLEH; et al., MEMORANDUM*

Defendants-Appellees.

Appeal from the United States District Court for the Central District of California Percy Anderson, District Judge, Presiding

Argued and Submitted May 12, 2022 Pasadena, California

Before: IKUTA and NGUYEN, Circuit Judges, and DANIELS,** District Judge.

Mirch Law Firm, LLP (“Mirch”) appeals the district court’s order

disqualifying it as plaintiffs’ counsel in a RICO action brought by Seyed Zia Eddin

Ahmadi Abhari, Donya Entertainment, Inc., and Noureen Entertainment, Inc.

against defendants Elias Nakhleh, Slater’s 50/50 Franchise, LLC, and Elite

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable George B. Daniels, United States District Judge for the Southern District of New York, sitting by designation. Restaurant Group, Inc. We have jurisdiction under 28 U.S.C. § 1291, and we

affirm.1

1. Defendants argue that Mirch lacks standing to challenge the

disqualification order. Where a disqualification order “clearly and intentionally

sanction[s] an attorney,” the attorney has suffered sufficient injury-in-fact to have

standing. United States v. Ensign, 491 F.3d 1109, 1118 (9th Cir. 2007); see also

United States v. Talao, 222 F.3d 1133, 1137-38 (9th Cir. 2000) (finding an

attorney had standing to appeal a district court ruling that she violated an ethical

rule because it constituted a “per se” sanction). Here, given the district court’s

clear findings of ethical violations, we are satisfied that Mirch has standing to

appeal.

2. We review disqualification orders for abuse of discretion. Trone v.

Smith, 621 F.2d 994, 999 (9th Cir. 1980). “[A]n order disqualifying counsel will

not be disturbed if the record reveals ‘any sound’ basis for the court’s action,” Paul

E. Iacono Structural Eng’r, Inc. v. Humphrey, 722 F.2d 435, 438 (9th Cir. 1983),

which may include a violation of ethical rules, see id. at 440. The district court

properly applied California law in determining whether disqualification was

proper. Wininger v. SI Mgmt. L.P., 301 F.3d 1115, 1122 (9th Cir. 2002); see also

1 We grant appellees’ request for judicial notice (Dkt. 55) and deny Mirch’s request for judicial notice (Dkt. 15).

2 C.D. Cal. Local R. 83-3.1.2 (requiring attorneys in the Central District of

California to comply with California’s Rules of Professional Conduct). Relevant

here, an attorney may be disqualified based on his presumed or actual acquisition

of an adversary’s privileged information. See Humphrey, 722 F.2d at 440; see also

Shadow Traffic Network v. Superior Court, 24 Cal. App. 4th 1067, 1085 (Cal. Ct.

App. 1994).

The record supports the district court’s finding that Martin Reiner obtained

privileged information from Defendants during a prior lawsuit through an implied

attorney-client relationship. See Cal. Evid. Code § 950. “[I]t is the intent and

conduct of the parties that controls the question as to whether an attorney-client

relationship has been created.” Zenith Ins. Co. v. O’Connor, 148 Cal. App. 4th

998, 1010 (Cal. Ct. App. 2007). Defendants reasonably believed Reiner was acting

as their attorney and that their communications were privileged.

The record also supports the district court’s finding that Defendants

disclosed confidential information to Reiner that was materially relevant to this

case. The party seeking disqualification need not “disclose the actual information

contended to be confidential.” In re Complex Asbestos Litigation, 232 Cal. App.

3d 572, 596 (Cal. Ct. App. 1991). The court should be given “the nature of the

information and its material relationship to the proceeding.” Id. Defendants did so

3 here, outlining the categories of confidential business materials Nakhleh disclosed

to Reiner, which materially relate to many of the allegations in this case.

Where a law firm witness or employee has an adversary’s relevant,

privileged information, a “rebuttable presumption arises that the information has

been used or disclosed” to the law firm. Shadow Traffic Network, 24 Cal. App. 3d

at 1085 (citing Complex Asbestos, 232 Cal. App. 3d at 596). Reiner claimed to be

Mirch’s witness, and although Mirch denies receiving confidential information

from Reiner, the district court’s weighing of the evidence is entitled to deference.

On this record, the district court did not abuse its discretion in disqualifying Mirch

because there is a “sound basis,” Humphrey, 722 F.2d at 438 (internal quotation

marks omitted), for the district court’s conclusion that disqualification was

required to remedy the unfair advantage that Plaintiffs obtained through Mirch’s

representation.

3. The district court did not violate Mirch’s due process rights by taking the

motion to disqualify under submission. See Fed. R. Civ. P. 78(b); C.D. Cal. Local

R. 7-15; Morrow v. Topping, 437 F.2d 1155, 1156-57 (9th Cir. 1971) (per curiam)

(holding that a district court’s failure to hold oral argument on a motion to dismiss

was not an abuse of discretion or a denial of due process).

AFFIRMED.