Fox Searchlight Pictures, Inc. v. Paladino

• Decision Date: 22 May 2001
• Docket Number: No. B142129.,No. B143537.,B142129.,B143537.
• Citation: 106 Cal.Rptr.2d 906,89 Cal.App.4th 294
• Court: California Court of Appeals Court of Appeals
• Parties: FOX SEARCHLIGHT PICTURES, INC., Plaintiff and Respondent, v. Gia PALADINO, Defendant and Appellant. Gia Paladino, Plaintiff and Respondent, v. Fox Searchlight Pictures, Inc., Defendant and Appellant.

106 Cal.Rptr.2d 906

89 Cal.App.4th 294

FOX SEARCHLIGHT PICTURES, INC., Plaintiff and Respondent, v. Gia PALADINO, Defendant and Appellant.

Gia Paladino, Plaintiff and Respondent, v. Fox Searchlight Pictures, Inc., Defendant and Appellant.

No. B142129.

No. B143537.

Court of Appeal, Second District, Division 7.

May 22, 2001.

Jeffrey F. Webb and Theodore A. Russell, San Francisco, for Plaintiff and Respondent Fox Searchlight Pictures, Inc., and for Defendant and Appellant Fox Searchlight Pictures, Inc.

Zimmerman, Koomer, Connolly & Finkel, Alan H. Finkel; Cochran-Bond, Connon & Ben-Zvi and Nicholas P. Connon, Los Angeles, for Plaintiff and Respondent and for Defendant and Appellant Gia Paladino.

JOHNSON, J.

Upon learning its former in-house counsel planned to sue for wrongful termination of employment, a company struck first by suing the former counsel for disclosing confidential and privileged information to the attorneys handling her wrongful termination case. The former inhouse counsel moved to strike the company's complaint as a SLAPP suit.¹ The company responded with motions to disqualify the attorneys representing its former counsel on the ground they possessed confidential and privileged information belonging to the company and material to the issues between the parties. The trial court denied the SLAPP motion and the motions to disqualify counsel. Both sides appealed.

We affirm the trial court's orders denying the motions to disqualify the attorneys representing the former in-house counsel. We reverse the order denying the SLAPP motion.

FACTS AND PROCEEDINGS BELOW

From June 1996 until July 1999 Gia Paladino (Paladino) was employed under a written contract as an attorney in the legal department of Fox Searchlight Pictures, Inc. (Fox). A few months before her contract expired, Paladino's supervisor told her the contract would not be renewed. The reason given for not renewing the contract was that a film project on which Paladino had provided legal advice "did not go well." Paladino believed, however, the true reason for her termination was that Fox management was upset over her frequent use of pregnancy leave.

Believing Fox terminated her on the basis of her sex and pregnancy, Paladino consulted a law firm for legal advice as to her rights. Paladino admits, in the course of these consultations, she disclosed ostensibly confidential and privileged information pertaining to Fox.

The attorneys representing Paladino sent Fox a draft of the complaint for wrongful termination of employment which they intended to file on Paladino's behalf. In an accompanying letter Paladino's attorneys advised Fox they did not believe the draft complaint disclosed any privileged information but they wished to give Fox an opportunity to examine the complaint before it was filed and to alert them as to any material Fox believed was protected by the attorney-client privilege.

Upon reviewing the proposed complaint Fox concluded it contained privileged and confidential information. Fox responded by filing a complaint against Paladino alleging the disclosure of its confidences to her attorneys constituted a violation of her ethical duties as well as a breach of her fiduciary duty and her employment contract with Fox.² In its brief on appeal, Fox describes the confidences Paladino disclosed in general terms as "information about the way Fox structures business transactions and legal advice rendered in connection with a film project which was the subject of ongoing litigation." In its complaint, Fox seeks compensatory and punitive damages and injunctive relief to prevent further disclosure of its confidences and to require Paladino to return all of Fox's documents and files in her possession.

Paladino countered with a motion to strike Fox's complaint as a SLAPP suit.

The day after filing the SLAPP motion, Paladino filed her complaint for wrongful termination. Fox reacted by seeking an ex parte order striking and sealing the complaint on the ground it disclosed privileged information. The order was denied without prejudice after Paladino agreed to rewrite the complaint to remove certain language deemed by Fox to reveal matters protected by the attorney-client privilege. The re-written complaint, however, did not completely eliminate the material to which Fox objected and another order was entered substituting a second revised complaint and placing the previous complaint under seal. In the meantime, the unredacted complaint was picked up by an internet news service and made available for downloading by the public.³

Fox then moved to disqualify Paladino's attorneys on the grounds they had been exposed to confidential information concerning Fox's affairs and they had a conflict of interest with their own client.

In opposition to Paladino's SLAPP motion and in support of its own disqualification motions, Fox submitted documents under seal which purported to establish certain information contained in Paladino's complaint for wrongful termination was privileged or confidential. The trial court denied Paladino's request to inspect the sealed documents in order to respond to Fox's opposition to her motion. The court reviewed the sealed documents in ruling on the SLAPP and disqualification motions.

The trial court denied Fox's motions to disqualify Paladino's counsel and denied Paladino's motion to strike Fox's complaint as a SLAPP suit. Both parties filed timely appeals.⁴

I. PALADINO'S COUNSEL ARE NOT SUBJECT TO DISQUALIFCATION BASED ON A COFLICT OF INTEREST.

Fox moved to disqualify Paladino's counsel from both lawsuits on the grounds they had previously represented Fox and they had a conflict of interest with their current client, Paladino. Fox failed to make the requisite showing for disqualification based on a conflict of interest.

A. Fox Failed To Establish Paladino's Attorneys Possess Relevant Confidential Material Acquired From Their Prior Representation of Fox.

A former client may disqualify a former attorney from representing an adverse party by showing the attorney presumably possesses confidential information adverse to the former client.⁵ Such a presumption arises if the former client can establish a "substantial relationship" between the prior and current representations.⁶ A "substantial relationship" is shown by the factual and legal similarities in the two representations and the extent of the attorney's involvement with the cases.⁷

Fox failed in its attempt to establish a substantial relationship between any prior representation of Fox and representation of Paladino. The declarations submitted by Fox merely show Paladino's attorneys were formerly associated with a law firm, Proskauer Rose, which provided Fox with advice and counsel on "intellectual property issues," among other things. Fox provided no evidence these attorneys had, through their former employment, acquired confidential or privileged information material to the present litigation. Fox did not explain what an "intellectual property issue" is nor did any Fox employee aver Proskauer Rose handled any matter even remotely similar in law or fact to the current actions.

For their part, Paladino's counsel filed declarations denying involvement with Fox in any matter related to the present litigation. Mr. Finkel stated during his employment at Proskauer Rose he never worked on any Fox matters, never met anyone from Fox and never obtained any confidential Fox information. Mr. Cochran Bond and Mr. Connon stated the only work they did for Fox was in connection with toxic tort litigation against a film laboratory. This former representation is insufficient to justify disqualification. Possession of confidential information will not be presumed from the mere fact counsel once represented the opposing party.⁸ The threshold question remains whether the former representation is substantially related to the current representation. Here it is not.

Fox contends there is another way Paladino's attorneys could have obtained confidential information from Fox relevant to Paladino's wrongful termination action. Paladino herself worked for Proskauer Rose before joining Fox's legal department. From this fact Fox reasons "it should be presumed that Proskauer attorneys learned information about their former associate's job performance at Fox during the course of Proskauer's continued representation of Fox." We see no basis for indulging this presumption. We can imagine that while meeting with Fox executives, Proskauer Rose attorneys might ask about their former colleague, Paladino. But we cannot imagine Fox's response to such a casual inquiry would be intended by Fox to be a confidential communication between client and lawyer or that the response would eventually find its way to Finkel, Cochran-Bond or Connon who, three years later, would use it in a lawsuit against Fox. Fox produced no evidence such a conversation ever took place or that information about Paladino's job performance at Fox ever reached her attorneys except through Paladino.

B. Fox Failed To Establish A Conflict Between Paladino And Her Own Attorneys.

An attorney violates the duty of loyalty to the client by assuming a position adverse or antagonistic to the client.⁹ Fox posits the following scenario. Suppose Fox offers Paladino a settlement based in part on her acknowledgement the information she provided her attorneys constituted a breach of her duty to protect Fox's confidences, secrets and privileged information. Her attorneys might pressure her to reject the offer in order to protect themselves from an action by Paladino or Fox. Or, in another scenario, suppose Fox amends its complaint to name Paladino's attorneys as defendants in a cause of action for interference with contract. This would put the attorneys' interests directly at odds with Paladino's.

A motion to disqualify will not be granted when only a hypothetical conflict exists.¹⁰ We find Fox's scenarios too speculative to justify...