Conflicts: Court Of Appeal Affirms Order Denying Motion To Disqualify Counsel Who Allegedly Learned Confidential Information Through Settlement
A Hypothetical Question: What If Confidential Information That Could Be The Basis For Disqualifying An Attorney Is Obtained Through Mediation?
Gobar v. Gong, D070876 (4/1 6/26/17) (Huffman, Benke, Haller) (unpublished) involves unsuccessful efforts by defendant Gong to disqualify plaintiff Gobar's attorney who earlier represented a law firm seeking to collect a money judgment from Gong, as a result of which Gobar's attorney allegedly received confidential information giving him an unfair advantage. That's a mouthful, so let's unpack it.
Plaintiff Gobar sought to collect a money judgment obtained against defendant Gong, and to set aside allegedly fraudulent conveyances by Gong. In order to do so, Gobar hired Herzlich & Blum, LLP (Herzlich). However, the Herzlich law firm had previously represented Luce, Forward, Hamilton & Scripps, LLP (Luce) in its efforts to collect attorney's fees from Gong. So Gong moved to disqualify Herzlich, alleging a conflict of interest existed because Luce had previously represented Gong, and during the course of settling the Luce lawsuit against Gong, Herzlich had learned confidential information about Gong's assets that Herzlich could only have learned because it represented Gong's former attorney.
Gong relied on Acacia Patent Acquisition, LLC v. Superior Court, 234 Cal.App.4th 1091 (2015) to make his disqualification argument, because Acacia holds 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, whether thereby their access to privileged information in the former action would potentially serve as an advantage in the latter."
Both the trial court and the Court of Appeal rejected Gong's argument. The Court of Appeal concluded that Gong had not shown that Herzlich had discovered confidential information about Gong's assets through settlement, that the asset information was independently available through the public record, and that the lawsuit by Gobar was not substantially similar to the lawsuit by Luce.
All of this is a set up for my hypothetical question. What if the allegedly confidential information had been learned by Herzlich through mediation? Would the nigh absolute mediation privilege have made it impossible for Gong to introduce information about conflicts into evidence? Would the same privilege that prevents introducing evidence of malpractice prevent introducing evidence of conflicts?
Arbitration/Employment/Class Actions/Pending Cases: Office Of The Solicitor General Changes Its Position On NLRB v. Murpy Oil, USA
The Issue: Do Employee Agreements To Waive Class Actions And Arbitrate Violate The Right Of Employees To Engage In Collective Action Under The National Labor Relations Act?
Amy Howe reports on June 19, 2017, in SCOTUSBlog, that the Office of the Solicitor General, after the change of administration, has done a volte-face in a pending Supreme Court Case, National Labor Relations Board v. Murphy Oil USA. On behalf of the NLRB, the Office of the Solicitor General had previously asked SCOTUS to review and overturn a decision that had allowed the arbitration provision and class-action waiver in employer-employee agreements. The Solicitor General had argued that such provisions violate the National Labor Relations Act, because it protects the rights of employees to act collectively. The Acting Solicitor General, Jeffrey Wall, has now announced, "since the change in administration, the Office reconsidered the issue and reached the opposite conclusion." The upshot is that the NLRB will likely file its own pro-employee brief, without the support of the Solicitor General.
While under normal circumstances it is unusual for the Office of the Solicitor General to change its position just because the administration has changed, can anyone be very surprised?
See my posts of November 3, 2016 and January 17, 2017, referencing the Murphy Oil case.
Arbitration/Agents: Third District Rules That Care Facility For Elderly Could Not Enforce Arbitration Provision, Because Sister’s Power Of Attorney Did Not Provide Authority To Make Health Care Decisions
Trial Court And Court Of Appeal Agreed That The Residential Care Facility For The Elderly Provided Health Care.
Hutcheson v. Eskalon Fountainwood Lodge, C074846 (3rd Dist. 6/14/17) (Nicholson, Mauro, Duarte), is one of many cases in which a care facility for the elderly seeks to enforce an arbitration provision after an elderly person in the facility has died, and a successor in interest sues for elder abuse and related claims. We note that in two cases the United States Supreme Court has invoked the Federal Arbitration Act to enforce arbitration clauses entered into by nursing homes. State courts seem to have struggled to find ways to give the alleged tort victim a judicial forum. Kindred Nursing Centers, L.P. v. Clark, No. 16-32 (US S.Ct. 5/15/17 (see my May 17, 2017 post); Marmet Health Care Center, Inc. v. Brown,132 S. Ct. 1201, 1202 (2012) (see my March 27, 2012 post).
Here the trial court and the Court of Appeal held the arbitration clause was unenforceable, because the sister who signed the admission agreement with an arbitration clause lacked the power to make health care decisions for the admittee. The case provides a disquisition on the differences between a health care power of attorney, executed under the Health Care Decisions Law, and a personal power of attorney. In this case, it was the decedent's niece who had the power under a health care power of attorney to make health care decisions, but she did not execute the admissions agreement with the arbitration provision. Instead, the decedent's sister executed the admissions agreement under a power of attorney that specifically excluded the power to make health-care decisions.
The facts necessarily required the court to consider the difference between personal care and health care. Under the facts of the case, the court determined that the care facility for the elderly provided health care in addition to personal care. Therefore, no one with the authority to do signed the admissions agreement, as it provided for health care. This result is likely to alarm elder care facilities that may not have been universally viewed as providing for health care (alas, the lack of health care is part of the problem).
The court also rejected that ostensible authority existed to enter into the arbitration agreement, because no facts showed that the decedent, who was the principal, had intentionally or negligently caused it to be believed that her sister was her agent for purposes of executing the admission agreement. In fact, the elder care facility had possession of the niece's health care power of authority, showing that she was the person with the power to make health care decisions — and she did not execute the admissions agreement.
Arbitration/Fees/Settlement: Sixth District Holds That Party May Ask Arbitrator For Attorney’s Fees Based On Section 998 Settlement Offer, After The Arbitrator Has Ruled On The Merits
The Case Is Heimlich v. Shivji, Case No. H042641 (6th Dist. May 31, 2017).
Ordinarily, a prevailing party's request for fees and costs in an arbitration is presented to the arbitrator, before an award is rendered, unless the arbitrator and the parties agree to address fees and costs after an interim award is made. But what if the arbitrator has already rendered a final award, and the basis for the fees/cost request is a Cal. Code of Civ. Proc. section 998 procedure, allowing the prevailing party to seek fees/costs? In the ordinary situation, the trier of fact doesn't even know that a section 998 offer has been made until after a party has prevailed and seeks costs and fees based on that provision. Here, the arbitrator believed that the arbitrator's jurisdiction to rule on the request had expired after the arbitrator's final award had been made. Not so, ruled the Court of Appeal, in an interesting disposition of the matter:
The court is directed to enter an order partially vacating the award and, with the parties’ consent, to order a hearing on Client’s request for section 998 costs before the same arbitrator so that the arbitrator may make an additional award. If the parties do not consent or the arbitrator again refuses to reach the merits of the section 998 request, the court shall hear and determine Client’s request for section 998 costs.
Miscellaneous: California Mediation And Arbitration Went On Vacation In May
Three Photos From The Blogger's Travels.
My astute readers will have noticed that I slacked off a bit in May. I traveled to Petra in Jordan, to Israel, and to Spain. Here are three photos from my travels.
In front of Petra's Treasury (Al-Khazneh) in Jordan.
View of Baha'i Gardens, Haifa, Israel.
On top of Antonin Gaudi's La Pedrera, Barcelona.
Construction Of Arbitration Agreements/Non-Signatories: Homes Sellers Will Be Required To Arbitrate Disputes With Brokers And Service Providers
Must Reading For Home Sellers, Brokers And Service Providers Who Want To Understand Their Obligations To Arbitrate.
Home sellers sign Residential Listing Agreements (RLAs) with their brokers, and Residential Purchase Agreements (RPAs) with their buyers. Both RLAs and RPAs constantly undergo drafting revisions in California. And both types of standard agreements include arbitration agreements, leading to issues about the seller's obligations to arbitrate with the broker and with any service providers to the broker. Those issues were addressed in Laymon v. J. Rockliff and Hernandez v. Mason-McDuffie Real Estate, Inc., A147464 & A147469 (consolidated appeals) (1/1 6/9/17) (Margulies, Humes, Dondero). Originally unpublished, the case is now certified for publication — thankfully, because it will be useful for home sellers, brokers, and service providers (e.g., providers of title insurance, escrow, natural hazard disclosure reports, and home-warranty contracts).
In this case, home sellers sued their brokers and their brokers' service providers, alleging that the brokers "violated their fiduciary duties by failing to disclose alleged kickbacks paid by the service providers to the brokers in connection with the sales." The home sellers signed an RLA, a 2007 RPA, a 2010 RPA, or some combination thereof. The Court of Appeal held that home sellers who signed any of those agreements were bound to arbitrate with their brokers, as well as with the service providers, who were non-signatories, but able to take advantage of the doctrine of equitable estoppel. This required a liberal reading of the arbitration provisions — a reading that promotes "a strong public policy in favor of arbitration" such that "any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration . . . . " Rice v. Downs, 248 Cal.App.4th 175, 184-186 (2016). This is a good example of a case that plaintiffs want to try to a jury and defendants want to arbitrate!