O'Gara Coach Co. v. Ra
| Decision Date | 07 January 2019 |
| Docket Number | B286730 |
| Citation | 30 Cal.App.5th 1115,242 Cal.Rptr.3d 239 |
| Parties | O'GARA COACH COMPANY, LLC, Cross-complainant and Appellant, v. Joseph RA, Cross-defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
Brown, Neri, Smith & Khan, Ethan J. Brown, Rowennakete P. Barnes, Los Angeles, and James F. Warren IV for Joseph Ra.
Greines, Martin, Stein & Richland, Marc J. Poster and Jonathan H. Eisenman, Los Angeles, for O'Gara Coach Company, LLC.
Darren Richie, the former president and chief operating officer of O'Gara Coach Company, LLC, is a principal of Richie Litigation, P.C. O'Gara Coach moved to disqualify Richie Litigation from representing its former senior executive Joseph Ra in litigation, including cross-actions between O'Gara Coach and Ra, arising from allegations by Marcelo Caraveo that O'Gara Coach and Ra had committed fraud in connection with Caraveo's acquisition of luxury vehicles from O'Gara Coach. In support of its motion O'Gara Coach relied on evidence that, while president of O'Gara Coach, Richie had been a client contact for outside counsel investigating the charges of fraudulent conduct that ultimately led to Caraveo's lawsuit. The trial court denied the motion. We reverse.
In March 2016 Caraveo and two related limited liability companies filed a complaint, and in June 2016 a first amended complaint, against O'Gara Coach, Ra and several other entities asserting causes of action for fraud, conversion and unfair business practices based on their allegedly wrongful conduct with respect to Caraveo's acquisition of luxury vehicles from O'Gara Coach.
In October 2016 Ra filed a cross-complaint for defamation, intentional interference with contractual relations and indemnity against O'Gara Coach, its principal owner and chief executive officer Thomas O'Gara and various other individuals. Ra claimed O'Gara Coach was obligated to indemnify him because the allegations in Caraveo's complaint arose from his actions as an employee of the company. As for his tort claims, Ra alleged, in part, that shortly after he was forced to resign from his position with O'Gara Coach in early 2016, the cross-defendants "all repeated the same thing: that Ra stole vehicles, stole money from O'Gara Coach, improperly rented O'Gara Coach's cars and stole the revenues from those rentals, and committed other criminal acts that resulted in both the Federal Bureau of Investigation and the Los Angeles District Attorney in search of Ra for prosecution."
In January 2017 O'Gara Coach filed its own cross-complaint, and on March 27, 2017 a first amended cross-complaint, against Caraveo, Ra, Thomas Wu, another former employee of O'Gara Coach, and others for breach of contract, fraud and related torts, and as to Ra and Wu for breach of fiduciary duties arising from employment. O'Gara Coach's cross-complaint alleged that Caraveo and Ra were the primary architects of a multi-pronged fraudulent scheme involving the sale, leasing and financing of vehicles from unsuspecting automobile dealerships.
O'Gara Coach hired Richie in September 2013 as general manager for its Westlake Village location. He was subsequently promoted to director of sales operations for the company and then in November 2014 to president and chief operating officer.
In his declaration in support of O'Gara Coach's motion to disqualify Richie Litigation, Thomas O'Gara stated O'Gara Coach does not employ in-house lawyers and, while serving as president, Richie was a primary point of contact for the company's outside counsel on many legal matters: "Mr. Richie would regularly engage and direct legal counsel on O'Gara Coach's behalf, regarding day-to-day advice on a litany of subjects, the development and implementation of policies and procedures, and on all aspects of pending litigation, and pre and post-litigation functions."
When Richie was initially hired by the company, Thomas O'Gara knew Richie had graduated from law school and had experience overseeing legal matters. (Richie graduated from law school in 2003.) According to O'Gara, it was this "legal education and professed experience that provided me comfort in assigning to him decision-making authority during his tenure, including without limitation engaging outside legal counsel and overseeing (on a companywide basis) all legal matters affecting the company."
Richie's employment with O'Gara Coach was terminated on February 2016. In his declaration Thomas O'Gara states O'Gara Coach and Richie executed a severance agreement in which Richie agreed not to file claims against O'Gara Coach or to assist others in bringing claims against the company. That document, which is described as subject to confidentiality provisions, was not filed with the trial court, but counsel offered to make it available to the court for in camera inspection.1
When he filed his answer to Caraveo's first amended complaint and his own cross-complaint in October 2016, Ra was represented by Ethan J. Brown of the law firm of Brown Neri Smith & Khan LLP.
1 Richie sat for the California bar examination in February 2017. On May 19, 2107 Richie filed articles of incorporation of a professional corporation for Richie Litigation, P.C. with the California Secretary of State. A statement of information for Richie Litigation, P.C. filed on June 26, 2017 with the Secretary of State identified Robert K. Lu as the sole officer and director, as well as the agent for service of process of the professional corporation. Richie was admitted to the State Bar in August 2017. A new statement of information for Richie Litigation, P.C., filed on September 13, 2017 with the Secretary of State, identified Richie as the sole officer, director and agent for service of process for the professional corporation.2
On June 8, 2017, two months before Richie was admitted to practice in California, Robert Lu of Richie Litigation substituted for Ethan J. Brown as counsel of record for defendant and cross-complainant Ra in this lawsuit. Richie Litigation also appeared as counsel for Jorge Loera and Thomas Wu, two other former O'Gara Coach employees, in lawsuits they filed against O'Gara Coach.
On October 11, 2017 O'Gara Coach moved to disqualify Richie Litigation. O'Gara Coach asserted, even though Richie was not a member of the California bar while serving as president and chief operating officer of the company, given his role in coordinating legal matters for O'Gara Coach, including interfacing with outside counsel, the court should apply the rule requiring disqualification of attorneys representing adverse parties in successive representations when, as here, the matters are substantially related, as well as the rule that, when a former client's confidential information is known to any attorney at a law firm, the entire firm must be disqualified. O'Gara alternatively argued, even if no attorney-client relationship existed between Richie and O'Gara Coach, Richie Litigation should be disqualified because Richie was privy to the company's privileged information while employed as one of its most senior executives. As such, whether or not Richie has a continuing fiduciary obligation to O'Gara Coach, Richie Litigation is not entitled to exploit that information in litigation adverse to the company.
In support of its motion O'Gara Coach submitted the declaration of Halbert Rasmussen, who was a partner at the Arent Fox law firm when Richie was president of O'Gara Coach. Rasmussen stated he had regularly communicated with Richie in the course of his representation of O'Gara Coach "in various legal matters, as did other attorneys at Arent Fox LLP who were assisting me with the representation of O'Gara Coach." In January 2016 Rasmussen and his firm were retained to conduct an internal investigation concerning the activities of Joseph Ra and Thomas Wu. In the course of the investigation, Rasmussen explained, he sent attorney-client communications and attorney work product to Richie through e-mail, included Richie in phone calls and meetings during which attorney-client communications pertaining to the investigation occurred and sought Richie's assistance in discovering the nature of Ra's and Wu's activities and "his view on the propriety of their conduct." According to Rasmussen, the internal investigation uncovered facts used as the basis for O'Gara Coach's cross-claims in this action and developed legal issues that "greatly informed O'Gara Coach's strategy in defending the claims filed against it, and prosecuting the cross-claims in the above captioned action."
O'Gara Coach's motion papers also included declarations from Keith D. Kassan, who acted as outside general counsel to O'Gara Coach, and Usama Kahf of Fisher & Phillips LLP, O'Gara Coach's labor and employment counsel. Both men described interacting with Richie on legal matters, both litigation and nonlitigation, on an ongoing basis while he was president of O'Gara Coach.
In his opposition to the motion to disqualify, Ra argued the case law regarding successive representation was inapplicable because Richie had never been an attorney while an executive of O'Gara Coach and no attorney-client relationship existed between him and the company, either while he was employed by O'Gara Coach or afterward when he became a licensed attorney. Ra also argued, even if Richie owed a continuing fiduciary duty to O'Gara Coach, a nonlawyer's fiduciary obligation to an employer or former employer is different from a lawyer's and cannot provide the basis for disqualifying a law firm with which that individual becomes affiliated. The opposition papers included a brief declaration from Richie establishing the basic facts regarding the timing of his employment at O'Gara Coach...
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