La Jolla Cove v. Superior Court, D043922.

Citation17 Cal.Rptr.3d 467,121 Cal.App.4th 773
Decision Date16 August 2004
Docket NumberNo. D043922.,D043922.
PartiesLA JOLLA COVE MOTEL AND HOTEL APARTMENTS, INC., Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent; Helen H. Jackman, as Trustee, etc., et al., Real Parties in Interest.
CourtCalifornia Court of Appeals

Mazzarella, Dunwoody & Caldarelli, Steven A. Micheli, Michael D. Fabiano, San Diego; Soden & Steinberger, Stephen R. Soden and Jason W. Coberly for Real Parties in Interest.

NARES, J.

In this case we are presented with the issue of whether it is appropriate under the California State Bar Rules of Professional Conduct, rule 2-1001 for attorneys to contact directors for a represented corporation where the directors' separate counsel consents to the contact, but counsel for the corporation does not. We conclude that under the facts of this case, such contact is not barred by rule 2-100. We further conclude that even if there were a violation of rule 2-100, the court was correct not to order the disqualification of the offending attorneys as there is no evidence that they obtained any confidential information that could give their clients an unfair advantage or impact upon the fairness of the trial or integrity of the judicial system.

This action involves a complaint for dissolution of a corporation, the petitioner La Jolla Cove Motel and Hotel Apartments, Inc. (La Jolla Cove), in which the real party in interest Helen H. Jackman (Jackman), as trustee for the Helen H. Jackman Trust, owns a minority (one-third) interest, and of which her son Lawrence Jackman, Jr. (Lawrence Jackman) was formerly the president (collectively the Jackmans). La Jolla Cove brought a motion to disqualify two members of the law firm representing the Jackmans, Steven Micheli and Michael Fabiano, on the ground that they had had improper ex parte contact with two directors of La Jolla Cove who had been elected to the board by Jackman. In support of the motion, La Jolla Cove pointed to two declarations from the directors that the Jackmans had submitted in support of their application for appointment of a receiver for La Jolla Cove. La Jolla Cove asserted that the Jackmans' counsel's contacts violated rule 2-100.

The court denied La Jolla Cove's motion, finding that (1) assuming counsel made the allegedly improper contacts, there was no evidence that they obtained confidential attorney-client communications; and (2) disqualification was not warranted even if rule 2-100 was violated where there was no showing of disclosure of confidential communications, an unfair advantage having been obtained, or impact upon the fairness of the trial or integrity of the judicial system.

La Jolla Cove filed this petition for writ of mandate, seeking to overturn the court's ruling on the grounds that (1) counsel violated rule 2-100's absolute prohibition against ex parte contacts with active directors of a corporation; and (2) the court should have disqualified attorneys Micheli and Fabiano because of their violation of section 2-100. The petition is denied.

FACTUAL AND PROCEDURAL BACKGROUND
A. Nature of Dispute

La Jolla Cove is a family business, in which Jackman owns a minority one-third interest. The other two-thirds interest is owned by one of Jackman's siblings and the two children of another sibling. Jackman and the other family members are each entitled to vote their one-third interest to appoint two persons to La Jolla Cove's board of directors. Lawrence Jackman was formerly the president of La Jolla Cove and general manager of two hotels owned by La Jolla Cove. Several disputes have arisen among the family members, resulting in three civil actions being filed. In one action, La Jolla Cove sought to recover monies that Lawrence Jackman allegedly improperly took from La Jolla Cove. In another, Lawrence Jackman filed a derivative action against the majority shareholders/directors of La Jolla Cove for their allegedly improper actions in running the corporation. In this action, the Jackmans seek a dissolution of La Jolla Cove, appointment of a receiver and an accounting. In their complaint, the Jackmans alleged that the family members with a controlling two-thirds interest in La Jolla Cove have improperly excluded them and the two directors they appointed to represent their interests, Behram Baxter and Tom Durisoe, from any role in the company. The Jackmans also alleged that under control of the other family members, the hotel properties La Jolla Cove owns had been mismanaged and deteriorated to such an extent that La Jolla Cove was in danger of financial collapse.

B. Alleged Improper Attorney Contacts

After attorney Micheli began his representation of the Jackmans, he sent a letter to La Jolla Cove's attorney, Richard J. Annen, discussing the parties' disputes concerning the running of that entity and a related partnership. In that letter, Micheli stated, "In light of the fact that you have indicated in your letter that you represent the corporation and the partnership, you have not indicated that you represent the individuals, and it would be clearly a conflict of interest for you to represent the entities as well as one side of the disputing factions of the entities, I am forwarding a copy of this letter to some of the other family members. If the other family members are represented by counsel, I would appreciate it if they could contact me so that I could talk to their counsel." Micheli sent a copy of the letter to the controlling family members and directors of La Jolla Cove. Annen objected to Micheli sending the letter to La Jolla Cove directors, calling that action "ethically questionable," and told Micheli that the directors had advised him to tell Micheli not to contact them directly. Micheli responded in a letter that he believed it was proper to contact the directors because Annen only represented the corporation, not the individual directors. Annen in turn sent a letter to Micheli advising him that any further attempt to contact any officers or directors of La Jolla Cove would be considered a violation of rule 2-100.

Thereafter, Lawrence Jackman sent a letter to Krista Baroudi, president and chief executive officer of La Jolla Cove, concerning possible settlement offers. Annen accused Micheli of directing Lawrence Jackman to send the letter. Micheli responded by denying that he had directed Lawrence Jackman to send the letter and questioned Annen's ability to represent individual officers and directors given the dispute among the parties concerning the operation of La Jolla Cove.

After they filed their complaint, the Jackmans brought an ex parte application for appointment of a receiver. In support of the application, counsel for the Jackmans submitted declarations from the Jackmans' representatives on the board of directors of La Jolla Cove, Durisoe and Baxter. In both declarations, they explained that they were elected as board members by a vote of shares owned by the Jackmans. Their declarations discussed the alleged mismanagement of the hotel properties owned by La Jolla Cove, and shareholder and directors meetings. They asserted that improper agreements were made by the majority board members to relieve non-Jackman family members of liability for using corporate assets and that the majority on the board refused to allow them to participate in the running of La Jolla Cove.

C. Motion To Disqualify

La Jolla Cove brought a motion to disqualify the Jackmans' attorneys Micheli and Fabiano, asserting that they had engaged in improper contacts with La Jolla Cove directors and officers without the consent of La Jolla Cove's attorney, in violation of rule 2-100. La Jolla Cove asserted that the Jackmans' attorneys could not contact any board members of that entity, including ones they elected to the board, because the corporation was represented by counsel. As evidence of a violation of rule 2-100, La Jolla Cove pointed to the declarations of Durisoe and Baxter. While La Jolla Cove did not base its motion upon the earlier letters by Micheli and Lawrence Jackman, they pointed to those as evidence that improper contacts would continue if Micheli and Fabiano were not disqualified.

The Jackmans opposed the motion to disqualify, arguing that (1) Lawrence Jackman obtained the declarations of Durisoe and Baxter on his own without direction of counsel; (2) Durisoe and Baxter were not represented by La Jolla Cove's counsel within the meaning of rule 2-100; (3) Durisoe and Baxter were represented by separate counsel who did not object to the Jackmans' use of their declarations; (4) La Jolla Cove had not provided any evidence that any privileged communications were disclosed by Durisoe and Baxter to Fabiano or Micheli; (5) there was no continuing effect of any allegedly improper contact; and (6) disqualification would be inequitable.

Micheli filed a declaration in support of the opposition, stating that Lawrence Jackman delivered the declarations of Durisoe and Baxter and Micheli had his secretary prepare the caption pages. He also stated that he never had any contact with Durisoe or Baxter concerning their declarations and he had only spoken with Baxter once at a mediation, where they only introduced themselves. He had only spoken with Durisoe briefly at that mediation and at a meeting where he discussed representation of Durisoe's wife. Micheli also stated that he spoke with counsel for Baxter and Durisoe and counsel did not object to him using their declarations in support of the motion for appointment of a receiver. Fabiano also filed a declaration, wherein he stated that that he did not have any contact with Durisoe or Baxter concerning their declarations. The only time he met either Baxter or Durisoe was at a mediation. Lawrence Jackman filed a declaration in opposition to the motion...

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