Filed 9/28/16; pub. order 10/28/16 (see end of opn.)
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
STACEY WALKER et al., D069713
Plaintiffs and Appellants,
v. (Super. Ct. No. 37-2015-00012943- CU-OE-CTL APPLE, INC.,
Defendant and Respondent.
APPEAL from an order of the Superior Court of San Diego County, Ronald L.
Styn, Judge. Affirmed.
Law Offices of Martin N. Buchanan and Martin N. Buchanan for Plaintiffs and
Appellants.
Carothers Disante & Freudenberger, Timothy M. Freudenberger, Kent J. Sprinkle,
Steven A. Micheli and Teresa W. Ghali for Defendant and Respondent. Stacey Walker and Tyler Walker (together, the Walkers),1 the plaintiffs in this
putative class action against their former employer, Apple, Inc. (Apple), appeal the trial
court's order disqualifying their counsel, Hogue & Belong (the Firm). The trial court
found automatic disqualification was required on the basis the Firm had a conflict of
interest arising from its concurrent representation of the putative class in this case and the
certified class in another wage-and-hour class action pending against Apple (Felczer v.
Apple, Inc. (Super. Ct. San Diego County No. 37-2011-00102573-CU-OE-CTL)
(Felczer)). Specifically, based on the parties' litigation strategies and evidence Apple
submitted in support of its disqualification motion, the trial court concluded that to
advance the interests of its clients in this case, the Firm would need to cross-examine a
client in the Felczer class (the Walkers' store manager) in a manner adverse to that client.
On appeal, the Walkers contend the trial court erred by concluding (1) the store
manager, as an unnamed member of the Felczer class, is a Firm client; (2) the Walkers'
and the store manager's interests conflict; and (3) disqualification was automatic in the
class action context. On the record before us—where a class has been certified in
Felczer, and undisputed evidence establishes the store manager's identity and her likely
significant role in this case—we conclude the trial court did not err in finding the Firm
represents the store manager and that a disqualifying conflict exists between her interests
and the Walkers' interests. Therefore, we affirm.
1 The record does not indicate whether Stacey Walker and Tyler Walker are related. For convenience, we will refer to them collectively as "the Walkers"; we do not intend to suggest any relation between them. 2 FACTUAL AND PROCEDURAL BACKGROUND
The Felczer Class Action
In 2011, Brandon Felczer and others, represented by the Firm, filed the Felczer
wage-and-hour class action against Apple in San Diego County Superior Court. The
operative fourth amended complaint alleges Apple's meal and rest period policies are
facially noncompliant with California law, and that Apple systematically failed to timely
pay employees upon termination. The complaint also alleges that as a result of the meal
and rest period violations, Apple failed to provide accurate wage statements as required
by Labor Code section 226 and implementing regulations.
The Felczer plaintiffs sought certification of a class of current and former
nonexempt Apple employees who had worked for Apple since December 16, 2007, at
any of its California locations. In July 2014, the Felczer court granted plaintiffs' motion
and certified six subclasses. The first four subclasses relate to meal and rest period
violations; the fifth subclass relates to former nonexempt employees who were not
provided timely payment upon termination; and the sixth subclass relates to nonexempt
employees' derivative claim that they were not provided timely and accurate wage
statements. The court noted the final-payment and wage-statement claims were merely
"derivative" of the meal and rest period claims because "wherever meal and rest period
penalties should have been paid but were not, the corresponding wage statement is
inaccurate."
In January 2015, a class notice was sent to more than 20,000 identified Felczer
class members. Nearly 20,000 opted to remain in the class.
3 The Walkers' Class Action Complaint
In April 2015, nine months after the Felczer class was certified, the Walkers, also
represented by the Firm, filed this putative class action against Apple in San Diego
County Superior Court. The Walkers are former nonexempt employees of Apple who
worked at Apple's Carlsbad store until their employment ended in 2014. They allege
Apple did not furnish them with final wage statements upon termination of their
employment, in violation of Labor Code section 226 and applicable wage orders.
The complaint alleges Apple's failure to provide final wage statements is part of a
uniform policy and practice applicable to all of its nonexempt California employees.
Specifically, the complaint alleges that employees who receive their wage statements via
Apple's online "myPage" portal never receive a final wage statement because Apple
immediately terminates access to myPage upon termination of employment—before
terminated employees can obtain a final wage statement. The complaint asserts Apple
never provided terminated employees with final wage statements "in any other manner."
The Walkers allege that during their employment, Apple paid them by direct
deposit and furnished their wage statements through myPage. Once their employment
ended, however, Apple immediately terminated their access to myPage. Consequently,
they never received final pay wage statements in any format.
The complaint seeks certification of a class of employees who have worked for
Apple since April 17, 2011, and to whom Apple failed to provide final wage statements,
in violation of Labor Code section 226 and applicable wage orders.
4 Apple denies it has a uniform policy of denying terminated employees their final
wage statements. Instead, Apple asserts its retail store managers (which Apple calls
"Store Leaders") are responsible for handling voluntary and involuntary terminations.
Their responsibilities in the termination process include delivering final paychecks and
wage statements to terminated employees. Apple claims this process establishes a "good
faith dispute" defense to the Walkers' claims.
Apple's Disqualification Motion
Apple moved to disqualify the Firm as plaintiffs' counsel in this case. Apple
contended the Firm had "irreconcilable conflicts of interest" by virtue of its concurrent
representation of both the certified Felczer class and the putative Walker class. Apple
argued that in advocating on behalf of the Walkers, the Firm will necessarily have to take
a position adverse to the interests of certain of the Firm's clients in the Felczer class.
Apple supported its motion with pleadings and evidence from Felczer, and a
declaration from Marnie Olson (the Olson Declaration), the human resources manager
responsible for Apple's Southern California retail stores, including the Carlsbad store
where the Walkers worked. Olson stated "Meg Karn was the Store Leader for the
Carlsbad Apple retail store where [the Walkers] worked at the time of [their] termination
in late 2014. As Store Leader, Meg Karn was . . . involved in the terminations of the
Walkers and the process of getting the Walkers their final pay and paystubs."
Olson explained in her declaration that Karn had been a nonexempt Apple
employee during the Felczer class period, before she was promoted to the exempt Store
Leader position. Consequently, as shown by other evidence submitted by Apple, Karn
5 was a member of the certified Felczer class. Olson noted "there were many other Apple
employees" who, like Karn, had been nonexempt employees during the Felczer class
period but had been subsequently promoted to exempt positions and "were responsible
for terminations of non-exempt employees."
Based on this evidence, Apple argued the Firm had a conflict because it "would
have to cross-examine its own client—Ms. Karn—about the alleged failure to comply
with the law." In other words, to establish the Walkers' claim that Apple had a uniform
policy of not providing final wage statements, the Firm would have to cross-examine
Karn to have her contradict Apple's assertion that she was ultimately responsible for
providing the Walkers' final wage statements. Alternatively, the Firm would force Karn
to admit on cross-examination that she was either unaware of this responsibility, or was
aware of it but failed to fulfill it—neither of which would reflect well on her managerial
competence.
The Walkers opposed Apple's disqualification motion on grounds including the
following: (1) there was no actual, existing conflict, and Apple's motion was based on
speculation and conjecture that such a conflict might arise in the future; (2) Apple's
motion to disqualify was a tactical strategy to delay the proceedings and drive up costs;
and (3) the claims asserted in Felczer and this action are separate and distinct. The
Walkers supported their opposition with Apple's certification briefs from two other cases,
but submitted no other opposing evidence.
6 The Disqualification Order
On January 8, 2016, the trial court heard Apple's motion and, later that day, issued
a minute order disqualifying the Firm. The court found it was undisputed that Store
Leader Karn was a Felczer class member and was also responsible for timely providing
the Walkers their final wage statements. The court rejected the Walkers' argument that
"it is Apple's company-wide policies and practices that form the basis of Plaintiff's
claims"; rather, the court explained, "it is Apple's employees such as Karn who
implement[ed] these policies." Consequently, the court concluded "there exists the
potential that [Firm] client Karn (in Felczer) will be called by Apple in this case to testify
on issues relating to whether Karn/Apple knowingly and intentionally failed to provide
timely final wage statements to [the Walkers]. This will put [the Firm] in the position of
having to cross-examine Karn—[the Firm]'s client in Felczer. Such circumstance
establishes that [the Firm] is simultaneously representing clients who have conflicting
interests. Under the authorities set forth herein, disqualification is automatic."
The court explained it was "not persuaded by the [Walkers'] argument that
disqualification is speculative and premature" because the court concluded the law " 'does
not permit even the appearance of divided loyalties of [class] counsel.' "
In addition, although the trial court identified Karn as a specific example of a
disqualifying conflict, the court did not limit potential conflicts to Karn alone. Rather,
the trial court rejected the Walkers' argument that "Karn and other members of the
Felczer class are not clients of [the Firm] for purposes of a conflict/disqualification
analysis." (Italics added & omitted.)
7 Finally, the trial court rejected the Walkers' claim that Apple's motion constituted
tactical abuse.
DISCUSSION
The Walkers contend the trial court erred in making three predicate findings that
underlie its disqualification order: (1) that Karn, as an unnamed member of the Felczer
class, is a Firm client; (2) that, even assuming Karn is a Firm client, a conflict exists
between her and the Walkers' interests; and (3) that any conflict requires automatic
disqualification. As we will explain, on the specific record before us, we conclude these
contentions are without merit.
I. General Disqualification Principles and Standard of Review
"A trial court's authority to disqualify an attorney derives from the power inherent
in every court '[t]o control in furtherance of justice, the conduct of its ministerial officers,
and of all other persons in any manner connected with a judicial proceeding before it, in
every matter pertaining thereto.' " (People ex rel. Dept. of Corporations v. SpeeDee Oil
Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145 (SpeeDee), quoting Code Civ. Proc.,
§ 128, subd. (a)(5).) "[D]isqualification motions involve a conflict between the clients'
right to counsel of their choice and the need to maintain ethical standards of professional
responsibility." (Ibid.) "The paramount concern must be to preserve public trust in the
scrupulous administration of justice and the integrity of the bar. The important right to
counsel of one's choice must yield to ethical considerations that affect the fundamental
principles of our judicial process." (Ibid.)
8 Rule 3-310 of the Rules of Professional Conduct provides in pertinent part: "(C)
A member shall not, without the informed written consent of each client: [¶] . . . [¶] (3)
Represent a client in a matter and at the same time in a separate matter accept as a client a
person or entity whose interest in the first matter is adverse to the client in the first
matter."
In evaluating alleged conflicts, a court first looks to whether the challenged
representation is concurrent or successive. (See Gong v. RFG Oil, Inc. (2008) 166
Cal.App.4th 209, 214 (Gong).) The Firm's representation of the Felczer class and the
Walkers is concurrent. The "primary value" at issue in concurrent "or dual representation
is the attorney's duty—and the client's legitimate expectation—of loyalty . . . ." (Flatt v.
Superior Court (1994) 9 Cal.4th 275, 284 (Flatt).) "The most egregious conflict of
interest is representation of clients whose interests are directly adverse in the same
litigation. [Citation.] Such patently improper dual representation suggests to the
clients—and to the public at large—that the attorney is completely indifferent to the duty
of loyalty and the duty to preserve confidences. However, the attorney's actual intention
and motives are immaterial . . . ." (SpeeDee, supra, 20 Cal.4th at p. 1147.) "[I]n all but a
few instances, the rule of disqualification in simultaneous representation cases is a per se
or 'automatic' one." (Flatt, supra, 9 Cal.4th at p. 284.)
"[I]n a class action context, disqualification is more likely because putative class
counsel are subject to a 'heightened standard' which they must meet if they are to be
allowed by the Court to represent absent class members." (Huston v. Imperial Credit
Commercial Mortg. Inv. Corp. (C.D. Cal. 2001) 179 F.Supp.2d 1157, 1167; Moreno v.
9 AutoZone, Inc. (N.D. Cal., Dec. 6, 2007, No. C05-04432 MJJ) 2007 WL 4287517, at *7
(Moreno).) However, "[i]n the realm of class actions, the rules of disqualification cannot
be applied [mechanically] so as to defeat the purpose of the class proceedings." (Sharp v.
Next Entertainment Inc. (2008) 163 Cal.App.4th 410, 434 (Sharp).) "Rather, the
circumstances of each case must be evaluated." (Ibid.)
"Generally, a trial court's decision on a disqualification motion is reviewed for
abuse of discretion. [Citations.] 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. [Citations.] When substantial evidence
supports the trial court's factual findings, the appellate court reviews the conclusions
based on those findings for abuse of discretion. [Citation.] 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."
(SpeeDee, supra, 20 Cal.4th at pp. 1143-1144.)
II. The Firm's Representation of Karn
The threshold issue is whether the Firm, which represents the certified Felczer
class, also represents Karn by virtue of her status as an unnamed member of that class.
Based on the facts that the Felczer class has been certified, and that Karn's identity and
significance to this action are known to the parties, we conclude the trial court did not err
by finding the Firm represents Karn for purposes of determining conflicts. To be clear,
10 we do not reach this conclusion merely because a class has been certified in Felczer;
rather, it is also because of the additional undisputed evidence regarding Karn's identity
and likely role in this case.
Certification of a class alters the relationship between class counsel and absent
class members for some purposes. For example, once a class is certified, class counsel
represent absent class members for purposes of the ethical rule that prohibits
communication with represented parties.2 (See Hernandez v. Vitamin Shoppe Industries
Inc. (2009) 174 Cal.App.4th 1441, 1459; Parks v. Eastwood Ins. Services, Inc. (C.D. Cal.
2002) 235 F.Supp.2d 1082, 1083.) This is the principle on which the trial court found the
Firm represented Karn.
Similarly, many courts and commentators have recognized that postcertification
communications between class counsel and unnamed class members are protected by the
attorney-client privilege. (See Harris v. Vector Marketing Corp. (N.D. Cal. 2010) 716
F.Supp.2d 835, 847 [" '[o]nce a class has been certified, the rules governing
communications [with class members] apply as though each class member is a client of
the class counsel' "], quoting Manual of Complex Litigation (4th ed. 2004) § 21.33, p.
300; Harlow v. Sprint Nextel Corp. (D. Kan., Feb. 28, 2012, No. 08-2222-KHV-DJW)
2012 WL 646003, at *6; Rubenstein, 3 Newberg on Class Actions (5th ed. 2013) § 9:21
2 Rule 2-100 provides: "(A) While representing a client, a member shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer." 11 [it "is surely the case after class certification" that "the relationship between absent class
members and class counsel is one of client to counsel"].)
The court in Del Campo v. Mealing (N.D. Cal., Dec. 7, 2011, No. C 01-21151 JW)
2011 WL 6176223 (Del Campo) extended these principles by holding that class
certification is also the demarcation point for determining representation for conflict
purposes.3 (Id. at pp. *3-*4.) The conflict in Del Campo arose from class counsel's
concurrent representation of the certified class in that case and the putative class in
another case. (Id. at p. *1.) Although class counsel had obtained conflict waivers from
the named class representatives in Del Campo (id. at p. *3), the court found the waivers
untimely because a class had already been certified and, thus, the class representatives
could no longer consent on behalf of absent class members (id. at p. *4).
The Walkers urge us not to adopt class certification as the defining event for
determining representation for conflicts purposes. They contend such a rule would be
impractical because the identities of absent class members will often be unknown.
However, considering the circumstances of this particular case (Sharp, supra, 163
Cal.App.4th at p. 434), we need not adopt such a broad rule because undisputed evidence
established Karn's identity and likely significant role in this case. Thus, it is the
combination of class certification in Felczer—which transformed the Firm's relationship
with class members for some purposes—and the undisputed evidence regarding Karn's
3 "Although not binding precedent on our court, we may consider relevant, unpublished federal district court opinions as persuasive." (Futrell v. Payday California, Inc. (2010) 190 Cal.App.4th 1419, 1433, fn. 6.)
12 identity and role in this case—which minimizes the concern regarding the impracticalities
of dealing with unknown, unnamed class members—that persuades us that the trial court
did not err in finding the Firm represents Karn for conflicts purposes.
The Walkers' reliance on a comment to the American Bar Association's Model
Rules of Professional Conduct (ABA Model Rules) to support a contrary outcome is
unavailing.4 ABA Model Rule 1.7 addresses conflicts between concurrently represented
clients.5 Comment 25 to that rule provides: "When a lawyer represents or seeks to
represent a class of plaintiffs or defendants in a class-action lawsuit, unnamed members
of the class are ordinarily not considered to be clients of the lawyer for purposes of
applying paragraph (a)(1) of this Rule. Thus, the lawyer does not typically need to get
the consent of such a person before representing a client suing the person in an unrelated
4 "California has not adopted the ABA Model Rules [citation], although they may serve as guidelines absent on-point California authority or a conflicting state public policy [citation]." (City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 852.)
5 ABA Model Rule 1.7 provides: "(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
(1) the representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer."
Paragraph (b) of ABA Model Rule 1.7 sets forth the conditions under which a concurrent conflict of interest may be waived. 13 matter. Similarly, a lawyer seeking to represent an opponent in a class action does not
typically need the consent of an unnamed member of the class whom the lawyer
represents in an unrelated matter." The Walkers assert "California courts look to [the
ABA Model Rules] for guidance in this area." (See Sharp, supra, 163 Cal.App.4th 410;
Kullar v. Foot Locker Retail, Inc. (2011) 191 Cal.App.4th 1201 (Kullar).)6 A closer look
at those cases, however, indicates they are distinguishable with respect to whether a class
had yet been certified and whether evidence established the identities of unnamed class
members.
In Sharp, supra, 163 Cal.App.4th 410, the defendant moved to disqualify
plaintiffs' counsel on the basis they had conflicts arising from the concurrent
representation of parties with conflicting interests (a class of reality-television employees
and the guild that sought to organize them). (Id. at p. 416.) The named representatives of
the putative class signed conflict waivers, but the defendant argued they were inadequate.
(Id. at p. 431.) The appellate court disagreed, reasoning (1) "no classes have been
certified" (id. at p. 432), and (2) it would be impractical to obtain consent from unnamed
class members "as the names of the absent class members are most likely unknown"
(ibid.).
Kullar, supra, 191 Cal.App.4th 1201 is similarly distinguishable. There, the
defendant moved to disqualify the plaintiff's counsel based on an alleged conflict arising
6 The Walkers also cite this court's decision in City of San Diego v. Haas (2012) 207 Cal.App.4th 472. However, Haas is inapposite because it involves an alleged conflict arising from a third party's payment of legal fees, not the type of concurrent representation conflict at issue here. (Id. at pp. 501-502.) 14 from counsel's concurrent representation of (1) class members who supported settlement
of an earlier-filed class action, and (2) members of a later-filed, overlapping class action
who objected to settlement of the earlier-filed case. (Id. at pp. 1202, 1204-1205.) The
trial court denied the motion, and the appellate court affirmed. (Id. at pp. 1204, 1208.)
Among its reasons for affirming, the appellate court explained—citing Sharp, supra, 163
Cal.App.4th 410 and comment 25 to ABA Model Rule 1.7—"no class has yet been
certified in [the later-filed class action]" (Kullar, at p. 1205), and the parties supporting
the settlement in the earlier-filed action were unknown (id. at p. 1207, citing Moreno,
supra, 2007 WL 4287517, at pp. *4-*5.)
In light of these cases, and on this record—where the Felczer class has been
certified, where Karn is a member of that class, and where Karn's identity and likely
significant role in this litigation are known to the parties—we conclude the trial court did
not err in concluding the Firm represents Karn for purposes of determining conflicts.
III. Conflicting Interests
The Walkers contend the trial court erred by finding their interests conflict with
Karn's. They assert any potential conflict is merely hypothetical and speculative, and
they challenge the sufficiency of the evidence supporting the trial court's finding. They
argue—for the first time on appeal—that any conflict can be avoided by retaining
independent cocounsel to cross-examine Karn (should it become necessary to do so).
Finally, they maintain the trial court applied an incorrect "appearance of divided
loyalties" standard. None of these contentions has merit.
15 " 'A conflict of interest exists when a lawyer's duty on behalf of one client
obligates the lawyer to take action prejudicial to the interests of another client . . . .' "
(Havasu Lakeshore Investments, LLC v. Fleming (2013) 217 Cal.App.4th 770, 778; Flatt,
supra, 9 Cal.4th at p. 282, fn. 2.) " 'A conflict arises when the circumstances of a
particular case present "a substantial risk that the lawyer's representation of the client
would be materially and adversely affected by the lawyer's own interests or by the
lawyer's duties to another current client, a former client, or a third person." ' " (Sharp,
supra, 163 Cal.App.4th at p. 426.) An "adverse" interest is one that is "hostile, opposed,
antagonistic . . . , detrimental, [or] unfavorable" to another's interests. (Ames v. State Bar
(1973) 8 Cal.3d 910, 917.) Although disqualification is required when an attorney
represents clients with directly adverse interests (Sharp, at p. 428), disqualification is not
required "when only a hypothetical conflict exists" (Fox Searchlight Pictures, Inc. v.
Paladino (2001) 89 Cal.App.4th 294, 302).
Substantial evidence supports the trial court's finding that, under "the
circumstances of [this] particular case" (Sharp, supra, 163 Cal.App.4th at p. 426), the
Walkers' and Karn's interests are adverse. The Walkers allege Apple violated California
labor laws as a result of a uniform policy of terminating employees' access to the myPage
portal immediately upon termination and before terminated employees are able to obtain
an electronic final wage statement. Apple, however, suggests via the Olson Declaration
that any failure to timely deliver final wage statements to the Walkers was not the result
of a uniform policy, but rather was the result of an error by the Store Leader—Karn.
Specifically, the Olson Declaration states the Store Leader of each retail store is
16 ultimately "responsible for handling voluntary and involuntary terminations," which
includes "obtaining and delivering physical final paychecks with final wage statements
('paystubs') attached to the checks to [terminated] employees." As to the Walkers, the
Olson Declaration further states "Karn was . . . involved in the terminations . . . and the
process of getting the Walkers their final pay and paystubs." This specific reference to
the Walkers contradicts their suggestion that Olson's description of Karn's termination-
related duties excludes those employees who were paid by direct deposit and received
only electronic paystubs through the myPage portal.
The trial court found these conflicting litigation strategies implicated the Walkers'
burden of showing Apple's failure to provide final wage statements was "knowing and
intentional," and Apple's "good faith dispute" defense. The court further found Karn's
testimony will be relevant to the parties' burdens on these issues. Thus, it is not merely
hypothetical or speculative that Karn will eventually testify in some capacity during this
case.
Nor is it merely hypothetical or speculative that the Walkers' and Karn's interests
will conflict when Karn does testify. While the parties focus on the degree to which their
interests in the outcomes of the litigation conflict, the conflict is much more practical and
fundamental: the Firm may jeopardize Karn's employment prospects. For instance, to
support the Walkers' position that Apple's failure to provide a final wage statement was
the result of a uniform policy, the Firm will likely cross-examine Karn to establish she
had no duty to provide the Walkers with final paystubs. But because Apple has already
staked out a contrary position in this litigation (via its disqualification motion and the
17 Olson Declaration), Karn will be in the unenviable position of being pressured by her
own counsel to contradict her employer's class action litigation strategy. On the other
hand, if Karn testifies she was either unaware she had a duty to provide the Walkers with
their final wage statements, or was aware of this duty but simply failed to fulfill it, she
may undermine Apple's confidence in her as a Store Leader. Under these unusual
circumstances, it would be unseemly for Karn's own counsel to force this Hobson's
choice on her for the potential benefit of other clients. Doing so would violate the Firm's
duty of loyalty to Karn.
Under similar circumstances, the court in Baas v. Dollar Tree Stores, Inc. (N.D.
Cal. Apr. 1, 2008, C 07-03108 JSW) 2008 WL 906496 (Baas) declined to certify a class
on the basis plaintiffs' counsel had a conflict of interest. In that case, the plaintiffs'
counsel represented two named plaintiffs (Baas and Lofquist) in a class action against
their employer for altering time records and failing to compensate employees for all time
worked. (Id. at p. *1.) In another lawsuit against the same defendant, the same firm
represented the manager of the store (Hansen) in which the two named plaintiffs worked.
(Id. at p. *2.) Lofquist's and Hansen's deposition testimony conflicted: Lofquist testified
"Hansen was aware that she worked off the clock in his presence and that Hansen
encouraged her to do so," while "Hansen testified that Lofquist was paid for the time she
worked," that "he never asked anyone to come in and work off the clock," and that he
"knew it was against [his employer's] policy to misrepresent the time employees worked
or took breaks." (Id. at p. *3.) The court found that "[t]o reconcile the testimony of
Hansen and Lofquist, Plaintiffs' counsel will either need to portray Hansen as a liar or as
18 a manager who knowingly violated his company's policies." (Ibid.) The court reasoned
that even though "Hansen is merely involved as a witness" and "is not placed in any
jeopardy of being liable" (ibid.), plaintiffs' counsel was in the untenable position of
having to either "cross-examine Hansen and impeach his credibility, or 'soft-pedal' their
examination of Hansen to the detriment of their representation of the class members in
this action" (id. at p. *4). The court observed, " 'The spectacle of an attorney skewering
her own client on the witness stand in the interest of defending another client demeans
the integrity of the legal profession and undermines confidence in the attorney-client
relationship.' " (Id. at p. *2, quoting Hernandez v. Paicius (2003) 109 Cal.App.4th 452,
467 [finding disqualifying conflict existed where defense counsel in medical malpractice
case cross-examined plaintiff's medical expert, whom defense counsel also represented in
other malpractice litigation].)
As did the trial court, we find Baas persuasive. Even though Karn does not have a
direct stake in the outcome of this litigation—that is, she is neither a class member nor
"in any jeopardy of being liable" to the Walkers (Baas, supra, 2008 WL 906496 at p.
*3)—she has a practical interest in not being portrayed "as a liar or as a manager who
knowingly violated [her] company's policies" (ibid.). And she has a right to not have her
counsel put her in such a position. (See Hernandez v. Paicius, supra, 109 Cal.App.4th at
p. 467.)
The Walkers argue that, as in Sandoval v. Ali (N.D. Cal. 2014) 34 F.Supp.3d 1031
(Sandoval), Baas is distinguishable on the basis the factual record here is not sufficiently
developed. In Sandoval, the defendant-employer argued in its motion to dismiss that
19 plaintiffs' wage-and-hour class counsel should be disqualified because (among other
reasons) counsel also represented the office manager who handled payroll at one of the
stores covered by the class action who had also sued the same employer in a separate
action. (Sandoval, at p. 1045.) The court found this simultaneous representation
"troubling." (Id. at p. 1047.) However, at the early stage of a motion to dismiss, and
without any declarations or deposition testimony, the court denied without prejudice the
request to disqualify plaintiff's counsel. (Id. at p. 1048.)
Unlike the defendant in Sandoval, Apple supported its disqualification motion
with evidence. Further, that evidence discloses Apple's litigation strategy and reveals
that the Walkers' and Apple's competing strategies jeopardize Karn's employment
interests. Under the circumstances, the trial court did not err in finding the Firm had a
conflict of interest by virtue of its simultaneous representation of the Walkers and Karn.
The Walkers also argue it is premature to address disqualification in that Karn
may never testify because a class may never be certified or the case may settle before
trial. Deferring disqualification concerns for these reasons would create an exception that
would swallow the rule—the vast majority of conflicts would go unremedied simply
because the case eventually settled or was resolved before trial.
The Walkers next contend that "even if Karn were to be deposed or called as a
witness, [the Firm] could steer clear of any potential conflict by associating co-counsel
for the limited purpose of examining her." The Walkers did not make this argument to
the trial court. It " 'is fundamental that a reviewing court will ordinarily not consider
claims made for the first time on appeal which could have been but were not presented to
20 the trial court.' " (Newton v. Clemons (2003) 110 Cal.App.4th 1, 11; Ochoa v. Pacific
Gas & Electric Co. (1998) 61 Cal.App.4th 1480, 1488, fn. 3.) Although we have the
discretion to consider an issue of law raised for the first time on appeal (Waller v. Truck
Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 24), we decline to exercise that discretion here
because the issue is not purely legal. For example, the Olson Declaration indicates it is
not only Karn whose interests conflict with the Walkers, but also the other Felczer class
members like Karn who later assumed roles that gave them responsibility for providing
final wage statements. Apple and the trial court were denied the opportunity to develop a
factual record regarding the number and identity of such other employees, as well as
whether a single independent cocounsel could represent them all, or whether each would
require his or her own counsel. In light of these unresolved questions, we decline to
address the issue in the first instance on appeal.7
Finally, the Walkers contend the trial court erred by applying an "appearance of
divided loyalties" standard. We need not address this challenge in any detail because it is
essentially a reformulation of the Walkers' argument that any conflict is merely
speculative. (See DCH Health Services Corp. v. Waite (2002) 95 Cal.App.4th 829, 833
[rejecting " 'appearance of impropriety' " standard where defense counsel's wife was
attorney who had served on board of plaintiff hospital; " ' "Speculative contentions of
7 Although we do not reach the merits of the issue, the Del Campo court did. That court stated it was unaware of any California authority supporting "the proposition that the addition of non-conflicted counsel can 'cure' a conflict of interest where previous counsel continue to be involved in the case . . . ." (Del Campo, supra, 2011 WL 6176223, at p. *2.) 21 conflict of interest cannot justify disqualification of counsel.". . .' "]; In re Jasmine S.
(2007) 153 Cal.App.4th 835, 843, 844 [" 'appearance' of a conflict" standard inapplicable
to simultaneous representation of siblings in juvenile dependency proceedings; actual
conflict is required, per California Rules of Court and California Supreme Court
authority].) Based on our conclusion above that the conflict between the Walkers' and
Karn's interests are sufficiently tangible, we need not address whether the trial court
correctly applied an appearance of divided loyalties standard.
IV. Automatic Disqualification
Citing recent federal appellate authority (Radcliffe v. Hernandez (9th Cir. 2016)
818 F.3d 537 (Radcliffe)), the Walkers argue class actions are one of those "few
instances" (Flatt, supra, 9 Cal.4th at p. 284) in which the rule of automatic
disqualification arising from concurrent representation conflicts does not apply.8 We are
not persuaded.
In Radcliffe, the Ninth Circuit affirmed the district court's order denying a motion
to disqualify one group of plaintiffs' class counsel, who had "created a conflict of interest
by conditioning incentive awards for the class representatives on their approval of the
proposed settlement agreement." (Radcliffe, supra, 818 F.3d at p. 539.) After an earlier
appeal invalidated that settlement, the district court heard a motion to disqualify the
conflicted group of counsel. (Ibid.) Finding the asserted conflict did "not seriously
8 Apple argues the Walkers forfeited this argument by failing to raise it with the trial court. We will exercise our discretion to consider the issue as one of law. (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 24.) 22 threaten the policy concerns underlying the duty of loyalty" (White v. Experian
Information Solutions (C.D. Cal. 2014) 993 F.Supp.2d 1154, 1167 (White)), the district
court applied a balancing test instead of the automatic disqualification rule, and denied
the disqualification motion (id. at pp. 1167-1168).
The Ninth Circuit held the district court properly applied a balancing test.
(Radcliffe, supra, 818 F.3d at pp. 547.) The court reasoned the "policy justifications . . .
for the automatic disqualification rule are not fully transferrable to class action cases,"
but instead "envisioned simultaneous conflicts of interest as they generally occurred in
individual litigant suits rather than in class actions." (Id. at p. 544.) The Radcliffe court
stated that the policy considerations underlying the automatic disqualification rule do not
"fit[] the circumstances of the lawyer who represents a class of plaintiffs whose interests
may in some ways be adverse to each other, but all of whose interests are adverse to the
defendant. In a class action, conflicts often arise not because an attorney simultaneously
represents litigation adversaries but because they simultaneously represent different
members of the same class who develop divergent interests regarding how to prevail on
their shared claims." (Ibid.)
On the record before us, Radcliffe is inapposite. While it might make sense to
apply a balancing test to concurrent representation conflicts that arise in circumstances
unique to class actions—an issue on which we express no opinion here—that rationale
has no application here where the conflict between the Walkers' and Karn's interests is
the type that can arise in individual litigant suits—it just happens to have arisen in a class
action. More fundamentally, unlike an intraclass dispute regarding the advisability of a
23 settlement in the same case, the conflict here arises between members of different classes
in different cases and does "seriously threaten the policy concerns underlying the duty of
loyalty" (White, supra, 993 F.Supp.2d at p. 1167)—Karn's right to be represented by
counsel whose interests are not encumbered.
The trial court did not err in concluding the automatic disqualification rule
applied.
DISPOSITION
The order is affirmed. Apple is entitled to its costs on appeal.
HALLER, J.
WE CONCUR:
NARES, Acting P. J.
O'ROURKE, J.
24 Filed 10/28/16 CERTIFIED FOR PUBLICATION
v. (Super. Ct. No. 37-2015-00012943- CU-OE-CTL APPLE, INC., ORDER CERTIFYING OPINION Defendant and Respondent. FOR PUBLICATION
THE COURT:
The opinion dated September 28, 2016 is ordered certified for publication.
NARES, Acting P.J.