Bona Fide Conglomerate, Inc. v. Usdc-Casd ( 2018 )

NOT FOR PUBLICATION FILED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).
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(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,
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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
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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.
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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
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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.
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