Huston v. Imperial Credit Commercial Mortg. Inv.
| Decision Date | 21 December 2001 |
| Docket Number | No. CV00-02751ABCRNBx,CV00-02751ABCRNBx |
| Citation | 179 F.Supp.2d 1157 |
| Court | U.S. District Court — Central District of California |
| Parties | John HUSTON, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. IMPERIAL CREDIT COMMERCIAL MORTGAGE INVESTMENT CORP., et al., Defendant. |
Bruce C. Fishelman, Alec B. Wisner, H. Scott Leviant, Stanbury & Fishelman, Los Angeles, CA, for plaintiff.
Peter K. Rosen, Christopher P. Murphy, Teresa A. Beaudet, Mayer Brown & Platt, Los Angeles, CA, for defendants.
ORDER GRANTING DEFENDANTS' MOTION TO DISQUALIFY PLAINTIFF'S COUNSEL
Defendants Imperial Credit Commercial Mortgage Corp. ("ICCMIC"), Mark S. Karlan ("Karlan"), H. Wayne Snavely ("Snavely") and Kevin E. Villani ("Villani") (collectively, "Defendants") filed a Motion to Disqualify Plaintiff's Counsel on August 20, 2001 ("Motion to Disqualify"). Defendants assert that Plaintiff's counsel, Stanbury Fishelman Wisner & Adsit ("Stanbury Fishelman") and Joseph R. Parise ("Parise") should be disqualified and enjoined from any further participation as counsel in the instant action.
After considering the materials submitted by the parties, argument of counsel, and the case file, the Court GRANTS Defendants' Motion to Disqualify.
The instant motion arises from a securities action filed on March 17, 2000, in which Plaintiff John Huston ("Huston" or "Plaintiff") asserts claims pursuant to Section 11 of the 1933 Securities Act, 15 U.S.C. § 77k, related to the initial public offering ("IPO") of defendant ICCMIC (the "Securities Action"). See Motion to Disqualify at 1. Plaintiff is suing ICCMIC and three of the seven ICCMIC directors who signed the ICCMIC initial public offering registration statement. See Motion to Disqualify at 1.
On June 7, 2000, the Court denied a motion to dismiss brought by Defendants. Plaintiff subsequently moved for class certification and for the appointment of lead counsel and lead plaintiff ("Motion for Class Certification"). See Motion to Disqualify at 1. Defendants opposed Plaintiff's motion on the ground that Plaintiff and his counsel of record, Stanbury Fishelman, had a conflict of interest with the members of the putative class because of their relationship with Parise. According to Defendants, Parise was Plaintiff's brother-in-law, a former officer of ICCMIC, who was personally involved in ICCMIC's IPO and was now acting as both Plaintiff's counsel (although not of record) and co-counsel with Stanbury Fishelman. Defendants also opposed Plaintiff's motion on the ground that Plaintiff's counsel of record, Stanbury Fishelman, was not competent to act as class counsel. See Motion to Disqualify at 1.
In addition to opposing Plaintiff's Motion for Class Certification, Defendants moved to strike Plaintiff's class allegations ("Motion to Strike Class Allegations"). This motion was made on the ground that (1) Plaintiff had given defective public notice regarding the action,1 and (2) neither Plaintiff nor any other putative class member had timely moved to be appointed lead plaintiff. See Motion to Disqualify at 1.
The Court struck Plaintiff's Motion for Class Certification on the ground that Plaintiff's public notice of the Securities Action did not comply with 15 U.S.C. § 77z-1(a)(3)(A)(i). See Order Denying Defendants' Motion to Strike Class Allegations and Striking Plaintiff's Motion for Class Certification, entered March 27, 2000 ("March 2000 Order"); Motion to Disqualify at 1. The Court ordered Plaintiff to issue a new notice to ICCMIC's 100 largest shareholders to allow such institutional investors the opportunity to move to be appointed as lead plaintiff. See Motion to Disqualify at 1-2; March 2000 Order. The Court also found Defendants' Motion to Strike Class Allegations moot and struck that motion.
In accordance with the Court's March 2000 order, Plaintiff issued the required public notice of the instant Securities Action. See Motion to Disqualify at 2. Plaintiff also moved to be appointed lead plaintiff and for the appointment of Stanbury Fishelman as lead counsel. See Motion to Disqualify at 2. Defendants opposed those motions based on conflict of interest and competence issues, and further argued that Stanbury Fishelman should not be appointed lead counsel because the firm was subject to disqualification as a result of its connections with Parise. See Motion to Disqualify at 2. After those motions were fully briefed, the Court informed the parties that the appropriate way to assess whether the Stanbury Fishelman should be disqualified was in a motion to disqualify rather than in a motion for appointment of lead plaintiff and lead counsel. See Civil Minutes dated July 31, 2001, at 1. The Court ordered Defendants to bring a motion to disqualify Plaintiff's counsel. See Civil Minutes dated July 31, 2001, at 2.
On August 20, 2001, Defendants filed the instant Motion to Disqualify Plaintiff's Counsel. Plaintiff opposed on October 9, 20012 and Defendants filed their reply on October 23, 2001.3
Imperial Credit Commercial Mortgage Investment Corp. ("ICCMIC"), which was organized on or about July 31, 1997, is a Maryland corporation with its principal place of business in California. Imperial Credit Commercial Mortgage Asset Management Corp. ("ICCAMC" or the "Manager"), a California corporation and investment fund, was hired by ICCMIC to select and manage the assets of ICCMIC. The directors of both ICCMIC and ICCAMC, at the time of the IPO, were Snavely, Villani and Karlan. Parise was the managing director and senior vice president of both entities. See Prospectus at 41, 51. ICCAMC is a wholly-owned subsidiary of Imperial Credit Industries, Inc. ("ICII"), which was organized in 1986 as a residential mortgage lender. See Cpt. ¶ 11.
An initial public offering ("IPO") of approximately 34,500,000 shares of the common stock of ICCMIC was held on or about October 22, 1997. See Cpt. ¶ 1. ICCMIC paid the Manager its fees and expenses for investing the monies of ICCMIC. These fees and expenses were set forth in a management contract entered into between ICCMIC and the Manager ("Management Contract"). See Cpt. ¶ 27; Deposition of Irwin L. Gubman ("Gubman Dep.") at 90.
ICII organized the group of individuals who would constitute the principal management of ICCMIC and put up the initial capital for ICCMIC. ICII also worked with those who would soon be ICCMIC's officers to retain the investment bankers. All of the officers of ICCMIC were also officers of the Manager. See Cpt. ¶ 27. After the IPO, ICCMIC sold shares to ICII. Therefore, ICII was a shareholder of, and through its subsidiary ICCAMC, manager of, ICCMIC. See Gubman Dep. at 96.
On March 20, 2000, one business day after the instant lawsuit was filed, the shareholders of ICCMIC approved the merger of ICCMIC into a wholly-owned subsidiary of ICII. On March 28, 2000, the merger transaction was consummated.4
Stanbury Fishelman is a law firm and the attorney of record for Parise. In early 2000, Parise engaged the Stanbury Fishelman firm as his attorneys. See Motion to Disqualify at 6; Parise Dep. at 7-8, 56-59; Deposition of John Huston ("Huston Dep.") at 104, 230-32. Parise also referred Huston to the Stanbury Fishelman firm. See Huston Dep. at 9. Parise and Stanbury Fishelman executed an undated "Memorandum of Understanding" concerning prospective litigation, which stated in pertinent part as follows:
"1. Parise will share information about the prospective litigation with [Stanbury Fishelman].
2. If [Stanbury Fishelman] and Parise agree that the prospective litigation is warranted, they will negotiate in good faith regarding the terms and conditions applicable to their joint representation of such litigation.
3. If, for whatever reason, the parties are unable to reach an agreement regarding the terms and conditions applicable to their joint representation of such litigation, [Stanbury Fishelman] will not, directly or indirectly, become involved in such litigation, disclose information about the prospective litigation to other law firms, refer claims about it, or otherwise attempt to utilize or exploit any of the information shared by Parise."
Murphy Decl., Ex. I.
Stanbury Fishelman and Parise subsequently entered into a fee-splitting agreement regarding this action. See Declaration of Christopher P. Murphy, Ex. J.
Parise is an attorney who was admitted to the New York bar in 1984. See Deposition of Joseph R. Parise ("Parise Dep.") at 359. Parise worked for four years at two different New York law firms as a tax lawyer and then worked for Salomon Brothers in New York for five years as the vice president for mortgage finance. Id. at 359-360, 391-96.
Parise moved to California, was admitted to the California bar around 1995 and was subsequently employed as a managing director at Imperial Credit Industries, Inc. ("ICII") in 1996. See Parise Dep. at 360-61, 424. Defendants have submitted declarations stating that Parise, in performing his duties at ICII, gave and received legal advice and at one time issued a legal opinion under New York law.5 See Motion to Disqualify at 3; Declaration of Irwin L. Gubman ("Gubmar Decl.") ¶ 3.
In 1997, Parise became an officer and managing director of both ICCMIC and ICCAMC. See Seifert Decl. ¶ 2; Motion to Disqualify at 4. In ICCMIC's IPO documents Parise was specifically referenced as managing director and senior vice president of both ICCMIC and ICCAMC In March 1998, Parise was identified by the ICCMIC Board of Directors as one of the five Section 16 of the Securities Exchange Act of 1934 ("Securities Act") officers of ICCMIC and Parise signed a Form 4 pursuant to section 16(a).6 Parise also became a shareholder of ICCMIC, buying 15,000 shares in...
To continue reading
Request your trial
-
Walker v. Apple, Inc.
...which they must meet if they are to be allowed by the Court to represent absent class members.” (Huston v. Imperial Credit Commercial Mortg. Inv. Corp. (C.D. Cal. 2001) 179 F.Supp.2d 1157, 1167 ; Moreno v. AutoZone, Inc. (N.D. Cal., Dec. 6, 2007, No. C05–04432 MJJ) 2007 WL 4287517, at *7 (M......
-
Lopez v. Banuelos
...the judicial process and will have a continuing effect on the proceedings before the court. See Huston v.Imperial Credit Commer. Mortg. Inv. Corp., 179 F.Supp.2d 1157, 1168 (C.D. Cal. 2001); Koo v. Rubio's Restaurants, Inc., 109 Cal.App.4th 719, 734 (2003); Gregori, 207 Cal.App.3d at 300. 2......
-
Bona Fide Conglomerate, Inc. v. Sourceamerica
...of the judicial process and will have a continuing effect on the proceedings before the court." Huston v. Imperial Credit Commer. Mortg. Inv. Corp., 179 F. Supp. 2d 1157, 1168 (C.D. Cal. 2001). In Clark, the California Court of Appeals affirmed disqualification of an attorney who retained p......
-
U.S. v. Clark
...969, 973 (7th Cir.2004), or provide the lawyer with an unfair advantage against his former client, Huston v. Imperial Credit Commer. Mortg. Inv. Corp., 179 F.Supp.2d 1157, 1168 (C.D.Cal.2001). Federal courts have an independent interest in ensuring that criminal trials are conducted within ......