DP Pham, LLC v. Cheadle

• Decision Date: 15 April 2016
• Docket Number: G050964
• Citation: 246 Cal.App.4th 653,200 Cal.Rptr.3d 937
• Court: California Court of Appeals Court of Appeals
• Parties: DP PHAM, LLC, Cross-complainant, Cross-defendant, and Respondent, v. C. Tucker CHEADLE, as Administrator, etc., Cross-defendant, Cross-Complainant, and Appellant.

246 Cal.App.4th 653

200 Cal.Rptr.3d 937

DP PHAM, LLC, Cross-complainant, Cross-defendant, and Respondent,

v.C. Tucker CHEADLE, as Administrator, etc., Cross-defendant, Cross-Complainant, and Appellant.

G050964

Court of Appeal, Fourth District, Division 3, California.

Filed April 15, 2016

C. Tucker Cheadle, in pro. per.; Callahan, Thompson, Sherman & Caudill, Robert W. Thompson and Bryan S. Owens, Irvine, for Cross-defendant, Cross-complainant, and Appellant.

Phan Trial Group and Luan K. Phan, Los Angeles, for Cross-complainant, Cross-defendant, and Respondent.

OPINION

ARONSON

, J.

Appellant C. Tucker Cheadle (Cheadle), as administrator of the estate of Robert F. Obarr (Obarr), appeals from an order denying his motion to disqualify counsel for respondent DP Pham LLC (Pham). Cheadle contends disqualification was required because Pham's counsel improperly obtained copies of privileged communications between Obarr and his attorney, and used those communications to oppose another party's summary adjudication motion in this case. The trial court denied the disqualification motion because it concluded the communications were not privileged.

We reverse. After reviewing copies of the communications, the trial court concluded they were not privileged based on their content. A court, however, may not review the contents of a communication to determine whether the attorney-client privilege protects that communication. The attorney-client privilege is an absolute privilege that prevents disclosure, no matter how necessary or relevant to the lawsuit. The privilege attaches to all confidential communications between an attorney and a client regardless of whether the information communicated is in fact privileged. Accordingly, it is neither necessary nor appropriate to review a communication to determine whether the attorney-client privilege protects it.

Once the proponent makes a prima facie showing of a confidential attorney-client communication, it is presumed the communication is privileged and the burden shifts to the opponent to establish waiver, an exception, or that the privilege does not for some other reason apply. The opponent may not rely on the communication's content to make that showing.

Here, the trial court relied exclusively on the content of the communications to conclude they were not privileged and Pham points to no other evidence to support the trial court's determination. The court also concluded the communications fell with certain statutory exceptions the Evidence Code establishes for the privilege.¹ As explained below, we conclude the trial court erred in applying these statutory exceptions because to do so here would expand them well beyond their intended scope.

Although we reverse the trial court's order denying the disqualification motion, we remand for the trial court to determine whether the receipt and use of the privileged communications by Pham's counsel warrants disqualification. As explained below, the decision whether to disqualify counsel is vested in the trial court's sound discretion based on its careful balancing of a variety of factors concerning the disclosure and use of the privileged information. The court never considered those factors based on its determination the communications were not privileged.

I

FACTS AND PROCEDURAL HISTORY

Pham made three loans to Obarr totaling nearly $3 million, and Obarr secured each loan by granting Pham a lien on a mobilehome park he owned in Westminster, California (Property). This action arose when Obarr allegedly agreed to sell the Property to two different buyers.

In March 2013, Obarr allegedly contracted to sell the Property to S.C.D. Enterprises (SCD) for $7 million based on a right of first refusal under a lease SCD held on the Property. SCD promptly assigned the purchase agreement to Westminster MHP Associates, LP (Westminster), which allegedly opened escrow on the Property with Obarr. According to Westminster, it satisfied all contingencies for the sale within 10 days of opening escrow.

Shortly after Westminster opened escrow, Obarr allegedly contracted to sell the Property to Pham for $8 million, which included the balance due on Pham's loans to Obarr. According to Pham, it opened escrow with a separate escrow company and deposited $25,000 toward its purchase of the Property a few days after contracting with Obarr. Obarr also allegedly executed a deed conveying the Property to Pham and deposited the deed with this escrow.

Christi Torres Galla served as Obarr's bookkeeper and personal assistant, managing his business affairs and communicating with others on his behalf. She regularly opened and reviewed Obarr's mail and also typed letters and e-mails for him. At Obarr's instructions, people who communicated with him often copied Galla on their written communications. Obarr regularly discussed his business affairs with Galla and sought her advice. She also attended business meetings with Obarr, and he asked her to witness his signature whenever he signed important documents. Shapleigh Kimes is a licensed attorney who represented Obarr on a variety of matters, and Al Gausewitz was a broker Obarr hired to market and sell the Property.

In April 2013, Westminster filed this action, alleging claims against Obarr for specific performance of the SCD purchase agreement, breach of the SCD purchase agreement (as an alternative to specific performance), breach of the implied covenant of good faith and fair dealing, and declaratory relief. Westminster also alleged claims against Pham and Galla for intentional interference with the SCD purchase contract, and against Pham for declaratory relief.² Pham answered Westminster's complaint and filed a cross-complaint against Obarr, alleging claims for specific performance of Pham's purchase agreement, breach of contract, intentional interference with a written contract, breach of the implied covenant of good faith and fair dealing, declaratory relief, and constructive trust.

Obarr died unexpectedly in August 2013. The trial court appointed Cheadle as a special administrator for Obarr's estate and in that capacity substituted Cheadle for Obarr as a party to this action. Cheadle then filed a cross-complaint alleging an interpleader claim against both Westminster and Pham concerning the Property. Based on Pham's loans to Obarr, Cheadle also alleged claims against Pham for usury, intentional misrepresentation, negligent misrepresentation, money had and received, unjust enrichment, reformation, and violation of the unfair competition law (Bus. & Prof. Code, § 17200

).

In July 2014, Westminster sought summary adjudication on its specific performance claim. In opposition, Pham submitted Galla's declaration that described her working relationship with Obarr and her role in his efforts to sell the Property. She also described Obarr's relationship with Kimes, when Kimes stopped representing Obarr regarding the Property's sale, and Kimes's knowledge about certain offers to purchase the Property. The exhibits Galla attached to her declaration included a September 2012 e-mail from Kimes to Obarr, and a January 2013 letter from Kimes to Obarr. Galla was copied on both communications and both clearly identified Kimes as an attorney.

Cheadle promptly filed evidentiary objections, claiming the January letter and a paragraph in Galla's declaration discussing it were inadmissible because the letter was a privileged attorney-client communication between Obarr and Kimes. A few days later, Cheadle filed an ex parte application for an order (1) excluding as evidence the letter and the paragraph discussing it, and (2) disqualifying Pham's counsel. According to Cheadle, Pham's counsel improperly interviewed Galla and "coerce[d]" her to disclose privileged attorney-client communications between Obarr and Kimes to which she was privy as Obarr's bookkeeper and personal assistant. Cheadle argued disqualification was required because Pham's counsel inadvertently received materials that were clearly privileged and confidential, but failed to notify Cheadle and used them to oppose the summary adjudication motion. Pham opposed the ex parte application, arguing Galla voluntarily provided Pham's counsel with the communications, the January 2013 letter was not privileged on its face, and Obarr and Cheadle nonetheless waived the privilege by disclosing the letter and other communications to third parties, by failing to make reasonable efforts to preserve the privilege, and by putting the communications at issue.

The trial court heard Westminster's summary adjudication motion and Cheadle's ex parte application at the same time. The court sustained Cheadle's evidentiary objections and denied Westminster's motion without considering the January letter or the paragraph in Galla's declaration discussing it, but the court declined to decide the disqualification request on an ex parte basis and ordered Cheadle to file a noticed motion to address the issue. Cheadle filed the motion, and based on the attorney-client privilege sought to (1) exclude as evidence the September e-mail, the January letter, and three paragraphs in Galla's declaration discussing those communications; (2) disqualify Pham's counsel for obtaining and using Obarr's privileged communications; and (3) seal Galla's declaration. The trial court twice continued the hearing on Cheadle's motion to allow supplemental briefing on whether any statutory exception to the attorney-client privilege applied to the e-mail and letter.

After considering the supplemental briefs, the trial court denied the motion in its entirety because it found the attorney-client privilege did not protect the e-mail and letter. The court explained Cheadle presented evidence making a prima facie showing the e-mail and letter were confidential communications between an attorney and a client, but the court's in camera review of the communications led it to conclude the privilege did not apply because Kimes's statements in the communications...