Reed v. Superior Court

• Decision Date: 20 September 2001
• Docket Number: No. B151210.,B151210.
• Citation: 92 Cal.App.4th 448,111 Cal.Rptr.2d 842
• Court: California Court of Appeals Court of Appeals
• Parties: Morton C. REED et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; Case Financial, Inc., Real Party in Interest.

111 Cal.Rptr.2d 842

92 Cal.App.4th 448

Morton C. REED et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent Case Financial, Inc., Real Party in Interest.

No. B151210.

Court of Appeal, Second District, Division 4.

September 20, 2001.

As Modified October 17, 2001.

Law Offices of Kramer, Kaslow, Rubenstein and Steven M. Rubenstein, Encino, for Petitioners.

No appearance for Respondent.

Sheppard, Mullin, Richter & Hampton, Andre J. Cronthall, Los Angeles, Barry Sullivan, Lexington, VA, Mary E. Gram; Benedon & Serlin, Gerald M. Serlin, Westbury, NY, and Douglas G. Benedon, Woodland Hills, for Real Party in Interest.

INTRODUCTION

CHARLES S. VOGEL, P.J.

We hold an appeal from a pretrial order denying a motion to disqualify opposing counsel for a conflict of interest does not, automatically, stay all trial proceedings pursuant to Code of Civil Procedure section 916, subdivision (a),¹ which provides, in pertinent part, "the perfecting of an appeal stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby." An order denying disqualification of counsel is appealable as an order on a collateral matter or an order denying an injunction, but such an appeal does not lead to an automatic stay of the trial. If, pending an appeal of an order denying disqualification of counsel, the unsuccessful moving party desires a stay or a continuance of the trial proceedings on the merits, which the trial court in its discretion denies, the party must seek a writ of supersedeas or other discretionary stay from the appellate court. In the present case we grant a peremptory writ of mandate compelling the trial court to vacate its order that erroneously stayed all trial proceedings pursuant to section 916, subdivision (a).

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff and real party in interest Case Financial, Inc. (Plaintiff) sued defendants and petitioners Morton C. Reed, Elliot Kalt, Litfunding Corp., and Innocent Child Films, Inc. (Defendants) alleging five causes of action involving misappropriation of trade secrets and unfair competition. The complaint alleged that Plaintiff is one of the largest companies providing presettlement case financing for plaintiffs and plaintiffs' law firms. Plaintiff alleged that Reed and Kalt, former employees of Plaintiff, were wrongfully competing by using confidential information and trade secrets and soliciting Plaintiffs employees and customers. Plaintiff alleged this conduct violated Reed's and Kalt's prior employment agreements with Plaintiff, and Reed's settlement agreement terminating his employment with Plaintiff.

Attorney Steven M. Rubenstein of the Law Offices of Kramer Kaslow Rubenstein filed an answer on behalf of Defendants, generally denying the allegations of the complaint, and a cross-complaint on behalf of Reed only, alleging that Plaintiffs conduct including the filing of the complaint violated Reed's employment and settlement agreements.

Plaintiff moved to disqualify Steven M. Rubenstein and the Law Offices of Kramer Kaslow Rubenstein from representing Defendants. The merits of the claim of disqualification are not before us in this proceeding, nor does the record contain all the documents relevant thereto. We can only briefly summarize to provide the background facts. Plaintiff contended Rubenstein had previously represented Plaintiff on other matters and obtained confidential information relating to Plaintiffs business, and in addition Rubenstein had previously offered "assistance" to both Reed and Plaintiff to resolve their dispute about Reed's employment, leading to execution of the written settlement agreement terminating Reed's employment with Plaintiff. Plaintiff contended Rubenstein thus had either a present or a prior attorney-client relationship with Plaintiff that should bar Rubenstein and his law firm from representing Reed and Defendants in this case. Rubenstein contended that he always represented Reed, never Plaintiff, in connection with the settlement agreement terminating Reed's employment, and that he only discussed potential representation of Plaintiff on unrelated matters, causing no conflict with his representation of Reed and Defendants in this case.

On May 8, 2001, the trial court by minute order denied Plaintiffs motion to disqualify Defendants' counsel. Defendants' notice of ruling states the trial court found, "there was no attorney-client relationship, actually or impliedly, between Steven M. Rubenstein and/or Kramer Kaslow Rubenstein, on the one hand, and Plaintiff, on the other hand."

On May 17, 2001, Plaintiff filed a notice of appeal from the May 8 order denying the motion to disqualify counsel. That appeal is currently pending in Case Financial, Inc. v. Reed, No. B150385; the record in that appeal was recently filed.

On the same date as filing its notice of appeal, Plaintiff filed a "notice of stay of proceedings pending appeal." This notice asserted that the filing of the notice of appeal "stays all proceedings in the trial court" pursuant to section 916, subdivision (a).

Thereafter, Defendants filed a motion in the trial court to compel Plaintiff to respond to form interrogatories, special interrogatories, and demands for production of documents. Defendants' memorandum contended Plaintiff was wrong in asserting that all further proceedings were automatically stayed by Plaintiffs appeal from the order denying Plaintiffs motion to disqualify Defendants' counsel.

Plaintiff filed opposition to Defendants' motion to compel discovery. Plaintiff contended the trial court had no jurisdiction to compel discovery, because all further trial proceedings were automatically stayed by Plaintiffs appeal from the denial of Plaintiffs motion to disqualify Defendants' counsel.

On May 24, 2001, the trial court held a hearing on Defendants' motion to compel discovery. The court's minute order states, "Matter is called for hearing. [¶] Court after reading and considering all moving party and opposing party papers, and arguments of counsel, makes the following ruling: [¶] Court takes matter under submission, and later after further review of the documents filed, the Court denies the . . . application [for order compelling discovery]. Case is to be stayed until the appeal of the Court's ruling re: disqualification is pending."

Defendants timely petitioned this court for a writ of mandate directing the trial court to vacate its May 24 order and proceed with pretrial proceedings.

We issued an order to show cause, in order to consider an important question of law, whether an appeal from the denial of a motion to disqualify opposing counsel automatically stays all further proceedings in the trial court.

DISCUSSION

Median v. Hopps (1955) 45 Cal.2d 213, 288 P.2d 267, held that an order denying a pretrial motion to disqualify opposing counsel is appealable. The Supreme Court stated two grounds for this holding: (1) Such an order is a final order on a collateral matter. "The matter of disqualification of counsel is unquestionably collateral to the merits of the case. . . . Because the trial court's order denying Hopps' motion left nothing further of a judicial nature for a final determination of his rights regarding opposing counsel, the order was final for purposes of appeal." (Id. at pp. 216-217, 288 P.2d 267.)(2) Such an order is in effect, an order refusing to grant an injunction to restrain counsel from participating in the case. (Id. at p. 215, 288 P.2d 267; former § 963, subd. 2, now § 904.1, subd. (a)(6) [appeal may be taken "[f]rom an order granting or dissolving an injunction, or refusing to grant or dissolve an injunction"].)

Section 916, subdivision (a) provides, in pertinent part, "the perfecting of an appeal stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby." (Italics added.) The question presented here is whether an appeal from an order denying a pretrial motion to disqualify counsel automatically stays all proceedings in the trial court, such as discovery and the trial, pursuant to section 916, subdivision (a). No California case squarely or explicitly addresses this issue.

Applying Meehan's reasoning that an appeal from an order regarding disqualification of counsel is "unquestionably collateral to the merits of the case," we conclude the appeal does not automatically stay the trial proceedings relating to the merits.² Generally, an appeal of a "collateral" order or judgment "does not suspend trial court proceedings on the remaining components of the litigation . . . although, in an appropriate case, the appellate court can order such proceedings stayed by writ of supersedeas." (Eisenberg, Horvitz & Wiener, Cal. Practice Guide, Civil Appeals and Writs (The Rutter Group, rev. # 1 1999) ¶ 7:36, p. 7-10 (italics omitted); see id., ¶ 7:12 et seq., p. 7-5 et seq.; id., ¶ 7:272.1, p. 7-52.) Accepting the premise that the appeal only involves a collateral matter, then by definition the trial is not "embraced [in] or affected [by]" the order appealed from, within the meaning of section 916, subdivision (a).

Applying Meehan's alternative holding that an order denying disqualification of counsel is an order denying an injunction, we likewise conclude the appeal does not automatically stay the trial proceedings.³ Generally, the appeal of an order denying a preliminary injunction does not automatically stay the trial. (Gray v. Bybee (1943) 60 Cal.App.2d 564, 571, 141 P.2d 32; Major v. Miraverde Homeowners Assn. (1992) 7 Cal.App.4th 618, 623, 9 Cal.Rptr.2d 237.) The rationale is that a preliminary injunction is a provisional remedy "distinct from the main action." (6 Witkin, Cal. Procedure (4th ed. 1997) Provisional Remedies, § 399, p. 324.) This is consistent with Meehan's description that an appeal from an order denying disqualification involves a "collateral" matter...