M'Guinness v. Johnson

• Citation: 196 Cal.Rptr.3d 662,243 Cal.App.4th 602
• Decision Date: 30 December 2015
• Docket Number: No. H040614,H040614
• Court: California Court of Appeals
• Parties: James J. M'GUINNESS, Plaintiff, Cross–Defendant and Appellant, v. Steven JOHNSON, Defendant, Cross–Complainant and Respondent; Scott Stuart et al., Cross–Complainants, Cross–Defendants and Appellants.

243 Cal.App.4th 602

196 Cal.Rptr.3d 662

James J. M'GUINNESS, Plaintiff, Cross–Defendant and Appellant,

v. Steven JOHNSON, Defendant, Cross–Complainant and Respondent;Scott Stuart et al., Cross–Complainants, Cross–Defendants and Appellants.

No. H040614

Court of Appeal, Sixth District, California.

Filed December 30, 2015

Attorneys for Plaintiff, Cross–Defendant and Appellant, James J. M'guinness: Ned Morrison Gelhaar, Enenstein Ribakoff LaVina & Pham.

Attorneys for Defendant, Cross–Complainant and Respondent, Steven Johnson: Daniel Casas, Gregory C. Simonian, Anthony F. Basile, Casas, Riley & Simonian.

Attorneys for Cross–Complainants, Cross–Defendants and Appellants, Scott Stuart et al.: Joseph Dozier, Dozier & Dozier, Stephen J. Rafferty, Law Office of Stephen J. Rafferty.

Márquez, J. James J. M'Guinness brought suit in 2013 against his fellow shareholder, Steven Johnson, for breach of fiduciary duty and other claims arising out of the operation of a small construction firm, Think It, Love It, Construct It, Inc. (TLC). M'Guinness also named TLC in the suit. The claims against TLC included involuntary dissolution of the corporation and the appointment of a receiver. Johnson cross-complained against M'Guinness, TLC, and the third TLC shareholder, Scott Stuart. Johnson was represented by the law firm of Casas, Riley & Simonian, LLP (Law Firm or Firm).

M'Guinness, Stuart, and TLC (collectively, Appellants) moved to disqualify the Law Firm. They contended the Firm had been retained by TLC as its counsel in 2006, TLC had never discharged the Firm, and the Firm had never withdrawn as counsel. Appellants argued that because of the Law Firm's concurrent representation of TLC and Johnson, the Firm had a conflict of interest that required its disqualification in this case. Appellants argued, alternatively, that even if the Law Firm were no longer TLC's counsel, the Firm's representation of Johnson constituted a subsequent conflict of interest that required the Firm's disqualification because of the substantial similarities between the prior corporate representation and the current suit. Johnson opposed the motion, contending (1) the Law Firm ceased representing TLC, (2) there was no substantial relationship between the Firm's prior representation of TLC and the current litigation, and (3) Appellants prejudicially delayed in filing the motion and therefore waived their right to pursue it.

The court denied the disqualification motion on the first two grounds asserted by Appellants. It found, among other things, that the evidence was insufficient to warrant automatic disqualification based upon a concurrent representation conflict of interest. In doing so, it reasoned that "[b]ecause disqualification is a drastic measure, it is generally disfavored and should only be imposed when absolutely necessary." The court also rejected Appellants' contention that the Law Firm should be disqualified on the ground that it had a subsequent representation conflict of interest. In their appeal, Appellants assert the trial court abused its discretion in denying their motion. (See Metro-Goldwyn-Mayer, Inc. v. Tracinda Corp. (1995) 36 Cal.App.4th 1832, 1838 ( MGM ) [order denying motion to disqualify is an appealable order].)

We conclude the trial court abused its discretion in denying the motion to disqualify. The undisputed facts demonstrate that the Law Firm continued to represent TLC through the time the lawsuit was instituted. If a party moving to disqualify an attorney establishes concurrent representation, the court is required, "in all but a few instances," to automatically disqualify the attorney without regard to whether the subject matter of the representation of one client relates to the representation of a second client in the lawsuit. ( Flatt v. Superior Court (1994) 9 Cal.4th 275, 284-285[36 Cal.Rptr.2d 537, 885 P.2d 950] ( Flatt ).) Thus, the Law Firm should have been automatically disqualified. ( Ibid. )

We also conclude that, while disqualification is a drastic measure and motions to disqualify are sometimes brought by litigants for improper tactical reasons, disqualification is not "generally disfavored." Indeed, when the circumstances of a disqualifying conflict exist–such as here, where the Law Firm concurrently represented TLC at the time it appeared on behalf of Johnson in this litigation–disqualification is required. ( Flatt, supra, 9 Cal.4th at pp. 284-285, 36 Cal.Rptr.2d 537, 885 P.2d 950.) Accordingly, we will reverse and remand to the trial court with directions that it vacate its prior order and enter a new order granting Appellants' motion to disqualify the Law Firm.¹

PROCEDURAL BACKGROUND

This action involves a complaint and three cross-complaints arising out of the operation of TLC. The pleadings reflect that M'Guinness, Johnson, and Stuart each own one-third of the outstanding stock of TLC, and that each is an officer and director of the corporation.

On January 23, 2013, M'Guinness filed a complaint against Johnson and TLC, alleging five causes of action. As against TLC, M'Guinness alleged a claim for involuntary dissolution due to (1) a deadlock in its business operations, (2) Johnson's appropriation of control of the company, and (3) Johnson's mismanagement of the business. M'Guinness alleged causes of action against Johnson for breach of fiduciary duty, fraudulent concealment, and unjust enrichment arising out of Johnson's operation of TLC's business and his alleged diversion of corporate opportunities. And, as against both Johnson and TLC, M'Guinness sought the appointment of a receiver or the issuance of an injunction.

On or about February 28, 2013, Johnson, represented by the Law Firm, filed an answer to the complaint. He also filed a cross-complaint, apparently naming M'Guinness and Stuart as cross-defendants.² On or about April 19, 2013, Johnson, through the Firm, filed a first amended cross-complaint against M'Guinness, Stuart, and TLC, alleging five causes of action for (1) breach of fiduciary duty against M'Guinness, (2) conversion against M'Guinness, Stuart, and TLC, (3) breach of contract against M'Guinness, Stuart, and TLC, (4) money had and received against TLC, and (5) for an accounting against TLC.

Cross-complaints were thereafter filed on behalf of TLC and Stuart. TLC filed a cross-complaint against M'Guinness, Stuart, and Johnson seeking declaratory relief. Stuart filed a cross-complaint against Johnson and TLC that mirrored M'Guinness's complaint. Stuart alleged a claim for involuntary dissolution against TLC; claims of breach of fiduciary duty, fraud, and unjust enrichment against Johnson; and a claim for appointment of a receiver or for preliminary injunction against TLC and Johnson.

Appellants M'Guinness, Stuart, and TLC filed a joint motion to disqualify the Law Firm on May 31, 2013. They contended the Firm had represented TLC continuously since May 2006, and that the Firm had "impermissible conflicts of interest based on [its] concurrent and prior representation of TLC" that precluded it from representing Johnson in the litigation.

Johnson, represented by the Law Firm, opposed the motion. He argued, among other things, that (1) the Firm had "concluded its representation of TLC in early March 2012–months before the instant dispute arose"; and (2) any prior representation of TLC did not create a conflict of interest in the Firm's representation of Johnson in the current litigation because its "prior engagements, arising primarily from TLC's interactions with its customers, have nothing to do with this action."

The court heard argument on the motion on July 23, 2013. In its order dated September 20, 2013, the court denied the motion to disqualify.

DISCUSSION

I. Timeliness of Appeal

Johnson contends that Appellants' notice of appeal was not timely filed. He has not filed a separate motion to dismiss to have us address this question. But because the timely filing of a notice of appeal is a jurisdictional prerequisite for our review ( Van Beurden Ins. Services, Inc. v. Customized Worldwide Weather Ins. Agency, Inc. (1997) 15 Cal.4th 51, 56[61 Cal.Rptr.2d 166, 931 P.2d 344] ), and we must dismiss an untimely appeal either upon motion of a party or upon our own motion ( Hollister Convalescent Hosp., Inc. v. Rico (1975) 15 Cal.3d 660, 667[125 Cal.Rptr. 757, 542 P.2d 1349] ), we will address Johnson's contention.

The order denying Appellants' motion to disqualify was dated September 18, 2013, and file-endorsed September 20, 2013. The record indicates a corrected proof of service by the trial court dated September 20, 2013, reflecting that the clerk mailed copies of the order to all counsel on that date. No notice of entry of the order was served by the court or by any of the parties. Appellants filed their notice of appeal on January 14, 2014.

Johnson argues the notice of appeal was required to have been filed within 60 days of September 20, 2013, the date the order was filed and served by the clerk of the court. Because the notice was not filed until January 14, 2014–nearly two months after the jurisdictional deadline of November 19, 2013–he contends the appeal is untimely.

Unless an exception applies, a party must file a notice of appeal of a civil judgment or other appealable order 180 days after entry of the judgment or order. There are three exceptions to that time frame—two resulting from actions taken by the clerk and the third resulting from action by one of the parties. The general rule and the three exceptions are specified in the California Rules of Court, as follows: "[A] notice of appeal must be filed on or before the earliest of: [¶] (A) 60 days after the superior court clerk serves on the party filing the notice of appeal a document entitled ‘Notice of Entry’ of judgment or a file-stamped copy of the judgment, showing the date either was served; [¶] (B) 60 days after the party filing the notice of appeal serves or is served by a party with a document entitled ‘Notice of Entry’ of judgment...