Neal v. Health Net, Inc.

• Decision Date: 30 July 2002
• Docket Number: No. B153290.,B153290.
• Citation: 123 Cal.Rptr.2d 202,100 Cal.App.4th 831
• Court: California Court of Appeals Court of Appeals
• Parties: Khybrette NEAL, Plaintiff and Appellant, v. HEALTH NET, INC. et al., Defendants and Respondents.

123 Cal.Rptr.2d 202

100 Cal.App.4th 831

Khybrette NEAL, Plaintiff and Appellant, v. HEALTH NET, INC. et al., Defendants and Respondents.

No. B153290.

Court of Appeal, Second District, Division 5.

July 30, 2002.

Rehearing Denied August 19, 2002.

Review Denied October 30, 2002.

Michael S. Traylor, Los Angeles, for Plaintiff and Appellant.

Ballard Rosenberg Golper & Savitt, Wendy Moss, Dawn Cushman, and Christine T. Hoeffner, Sherman Oaks, for Defendants and Respondents.

TURNER, P.J.

I. INTRODUCTION

In Flatt v. Superior Court (1994) 9 Cal.4th 275, 283, 36 Cal.Rptr.2d 537, 885 P.2d 950, the California Supreme Court recognized the presumption that exists when a client seeks to disqualify a former lawyer in subsequent litigation. The court held: "[W]here a former client seeks to have a previous attorney disqualified from serving as counsel to a successive client in litigation adverse to the interests of the first client, the governing test requires that the client demonstrate a `substantial relationship' between the subjects of the antecedent and current representations." (Ibid.) Once a substantial relationship exists, it is presumed that the lawyer who the former client seeks to be disqualified is in possession of confidential information pertinent to the present lawsuit and disqualification is mandatory. (Ibid.) The same presumption applies when an attorney has an of counsel relationship with the prior attorney. (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1144 1156, 86 Cal.Rptr.2d 816, 980 P.2d 371.) But what happens when a lawyer is representing a plaintiff in an existing lawsuit and is subsequently retained by a former legal secretary for the defendant in that very same litigation; in the context of the specific facts before us, is there a presumption the new client is in possession of confidential information such as to mandate or even permit disqualification? And if the new client, the legal secretary formerly employed by the defendant, exposes the lawyer to confidential information, is disqualification in the existing lawsuit a proper remedy under California law? We answer each of these questions in this very, very close and difficult case in the negative.

Plaintiff, Khybrette Neal, appeals from an order disqualifying her attorney, Michael S. Traylor, from representing her in an employment discrimination lawsuit filed against defendants, Health Net, Inc., Foundation Health System (Health Net) and Gil Gallegos, her former employer and supervisor, respectively. Relying on Hull v. Celanese Corporation (2d Cir.1975) 513 F.2d 568, 569-571, the trial court granted defendants' motion to disqualify Mr. Traylor from representing plaintiff after he agreed to represent Cynthia Brockett, a legal secretary formerly employed by Health Net. Ms. Brockett was terminated after she accessed a Health Net computer file containing attorney-client information related to plaintiffs action against defendants. Ms. Brockett accessed the computer file while employed by Health Net. Mr. Traylor later agreed to represent Ms. Brockett in her own separate discrimination lawsuit against Health Net. No applicable legal principle allows for disqualification under the circumstances of this case. Accordingly, the disqualification order must be reversed.

II. BACKGROUND

On June 1, 2001, plaintiff filed this action against her former employer and supervisor alleging she had been wrongfully discharged from her position as human resources manager due to race and gender discrimination. She alleged causes of action for contract breach, fraud, intentional infliction of emotional distress, assault, and slander. Ms. Brockett also was employed by Health Net and had made complaints that she was the victim of gender and disability discrimination. As the human resources manager, plaintiff had reviewed and responded to at least one of Ms. Brockett's discrimination complaints. Needless to note, this review occurred prior to plaintiffs termination.

On September 10, 2001, during the pendancy of the present lawsuit, defendants filed a motion to disqualify Mr. Traylor as counsel of record for plaintiff. Defendants contended that Mr. Traylor met with and began representing Ms. Brockett, a member of Health Net's legal department. Ms. Brockett admitted accessing and reviewing plaintiffs litigation file. The file contained confidential documents including attorney notes and memoranda. In support of these contentions, defendants filed the declaration of Cory Sotolov, a manager of litigation administration. Ms. Sotolov oversaw the activities of the legal department's support staff. From March 9, 1998, to August 22, 2001, Ms. Brockett was employed as a secretary in the legal department. As a legal secretary, Ms. Brockett was under the direct supervision of an attorney who handled managed care litigation. Ms. Brockett was responsible for tendering all claims to Health Net's insurance carrier. Ms. Brockett had no day-to-day involvement in handling employment litigation problems. The legal department utilizes "Case Track," a document management database that permits a user to access all information pertinent to a particular litigation matter rather than reviewing the "hard file." The legal department's practice is to input all information into the system including attorney notes of privileged communications. Because the system has the ability to scan documents, the files include privileged correspondence and reports from outside litigation counsel. The legal department also maintains a physical file for each litigation matter. In an employment related case, the file includes a copy of the plaintiffs personnel file, including any internal investigation conducted at the request of counsel.

On August 9, 2001, Ms. Sotolov received an e-mail from the legal department's administrative assistant, Michelle Hart Molina. Ms. Hart Molina advised Ms. Sotolov that Ms. Brockett had been looking for plaintiffs file earlier that day. Ms. Hart Molina became suspicious and tried to access plaintiffs file in the computer. The system advised her that the file had been "locked" by Ms. Brockett for two and one-half hours. The file included attorney notes and memoranda.

Also on August 9, 2001, a person identifying herself as Cynthia Brockett telephoned the office of Ballard, Rosenberg, Golper & Savitt, LLP, requesting to speak to Linda Miller Savitt, who is the lead trial counsel in this action. Ms. Brockett spoke to Lori Liebman, Ms. Savitt's assistant. Ms. Brockett stated she worked in the Health Net legal department. Ms. Brockett wished to speak to Ms. Savitt. Ms. Liebman informed Ms. Brocket that Ms. Savitt represented Health Net. Ms. Liebman's declaration relates, "Ms. Brockett thanked me for my time and hung up."

On August 13, 2001, Ms. Sotolov met with Phillip Davis, vice-president and assistant general counsel of litigation for Health Net, to discuss the issues raised by Ms. Brockett's access to plaintiffs file and the apparent attempt to contact Ms. Savitt. Mr. Davis subsequently met with Ms. Brockett. Ms. Brockett admitted requesting plaintiffs litigation file. Ms. Brockett admitted reviewing plaintiffs case track file. Ms. Sotolov's declaration stated: "[Ms.] Brockett advised Mr. Davis that she was a `very close friend' of [plaintiff] and that she wished to review her employment file because she was `concerned' about her." However, Ms. Brockett denied calling outside counsel. Ms. Brockett was placed on a one-week paid suspension, pending completion of a further investigation.

In investigating the matter, Ms. Sotolov discovered that on August 13, 2001, Ms. Brockett attempted to delete all personal documents stored in her computer. However, they retrieved the documents from Ms. Brockett's "recycle bin" including two notes dated August 9, 2001. One note confirmed Ms. Brockett's telephone call to Ms. Savitt's assistant, Ms. Liebman. The second note confirmed that she had a meeting with Mr. Traylor on August 11, 2001. On August 14, 2001, Mr. Davis received a letter from Mr. Traylor. In the letter, Mr. Traylor stated he would be representing Ms. Brockett in addition to plaintiff.

Plaintiff opposed the disqualification motion on the grounds: defendants failed to articulate a recognized theory for disqualification given that Mr. Traylor never represented defendants; there was no basis for disqualification because the evidence did not show and it could not be presumed Ms. Brockett passed on confidential information; defendants failed to provide evidence that Ms. Brockett actually accessed any confidential information; defendants failed to disclose the nature of the confidential information allegedly accessed; Ms. Brockett could not be held to the same standard as an attorney; plaintiff had not obtained an unfair advantage because Ms. Brockett did not obtain or disclose any information; plaintiff rebutted any presumption of disqualification because Ms. Brockett was a client and not an employee of Mr. Traylor; Ms. Brockett would not have any involvement with the case at issue; and the motion was brought to delay discovery.

In opposition to the motion, Mr. Traylor declared that he had never represented Health Net. On August 9, 2001, Ms. Brockett contacted him regarding legal representation for herself. When the two met on August 11, 2001, Mr. Traylor specifically advised Ms. Brockett that she could not give him any information that she might have regarding the case at bench. Mr. Traylor advised her that to do so would be unethical. Ms. Brockett indicated that she had no such information. He denied receiving any information or documents from Ms. Brockett.

Ms. Brockett declared that, while employed by Health Net, she became the victim of discrimination based on disability, gender, and sexual orientation. She complained numerous times to Health Net employees. Plaintiff was one of the people who responded to Ms. Brockett's...