Urs Corp. v. Venture

• Decision Date: 26 September 2017
• Docket Number: G055271
• Citation: 223 Cal.Rptr.3d 674,15 Cal.App.5th 872
• Parties: URS CORPORATION, Plaintiff, Cross-defendant and Appellant; AECOM, Cross-defendant and Appellant, v. ATKINSON/WALSH JOINT VENTURE, Defendant, Cross-complainant and Respondent.
• Court: California Court of Appeals Court of Appeals

15 Cal.App.5th 872

223 Cal.Rptr.3d 674

URS CORPORATION, Plaintiff, Cross-defendant and Appellant;AECOM, Cross-defendant and Appellant,

v.ATKINSON/WALSH JOINT VENTURE, Defendant, Cross-complainant and Respondent.

G055271

Court of Appeal, Fourth District, Division 3, California.

Filed September 26, 2017

O'Melveny & Myers, Charles C. Lifland, Dawn Sestito, and Catalina J. Vergara, Los Angeles, for Plaintiff, Cross-defendants and Appellants.

Horvitz & Levy, Lisa Perrochet, Eric S. Boorstin, Burbank; Hanson Bridgett and Scott E. Hennigh, San Francisco, for Defendant, Cross-complainant and Respondent.

OPINION

THE COURT:^*

Does an appeal of an order disqualifying counsel result in an automatic stay pursuant to Code of Civil Procedure section 916 ?¹ If so, how far does the automatic stay extend—solely to enforcement of the disqualification order or to all trial court proceedings? Surprisingly, these precise questions have not yet been answered by California courts.

The trial court ruled that nothing was stayed by the appeal. We conclude the appeal automatically stayed enforcement of the order disqualifying counsel, but not all trial court proceedings. We therefore grant, in part, appellants' petition for writ of supersedeas.²

We decline to address appellants' request for a discretionary stay of all trial court proceedings pursuant to section 923. Given our holding with regard to the automatic stay of the disqualification order, we deem it prudent for the parties to submit any remaining disputes to the trial court in the first instance.

PROCEDURAL HISTORY

This action commenced in March 2017. The dispute is between a contractor (respondent) and subcontractor (appellants). The parties sued each other for alleged damages arising out of a construction project on State Route 91.

On June 26, 2017, respondent filed a motion to disqualify Pepper Hamilton LLP and its individual attorneys (collectively, Pepper Hamilton) from representing appellants in this action and to issue additional injunctive relief pertaining to confidential documents. Respondent claimed that Pepper Hamilton, appellants' litigation counsel, had improperly accessed documents made available by respondent solely for mediation sessions that preceded the commencement of the action.

Appellants opposed the motion, primarily asserting that Pepper Hamilton did not violate the parties' written confidentiality agreement by accessing the documents or subsequently filing a complaint on behalf of appellants while in possession of those documents.

On July 31, 2017, the court granted the motion. The court found "that Pepper Hamilton has obtained confidential and privileged documents that would likely be used advantageously against [respondent] during the course of litigation. Disqualification is therefore appropriate to eliminate the possibility that Pepper Hamilton would exploit the unfair advantage."

Appellants promptly filed notices of appeal. On August 3, 2017, the trial court denied appellants' ex parte application to stay proceedings pending the appeal, rejecting the assertion that the appeal automatically stayed proceedings.

On August 4, 2017, appellants filed a petition for writ of supersedeas, arguing: (1) their appeal of the disqualification order resulted in an automatic stay of all trial court proceedings; or (2) if there is no automatic stay, this court should exercise its discretionary power to stay all trial court proceedings. Respondent filed an initial opposition to the petition.

On August 10, 2017, we issued a temporary stay of all trial court proceedings and invited further briefing by the parties. The parties responded and this matter is now set for determination.

DISCUSSION

Among other contentions, the petition presents two pure questions of law: (1) is a party who appeals an order disqualifying an attorney statutorily entitled to an automatic stay; and (2) if so, does the automatic stay extend to all trial court proceedings? ( § 916, subd. (a).) We have chosen to focus solely on these two questions in this opinion and forego (for the time being) determining whether a discretionary stay of all trial court proceedings would be appropriate. (See § 923 ["reviewing court" has discretion "to make any order appropriate to preserve the status quo ... or otherwise in aid of its jurisdiction"].)

Given the narrow issues under consideration, supersedeas is the proper remedy and our review is de novo. ( Quiles v. Parent (2017) 10 Cal.App.5th 130, 136, 215 Cal.Rptr.3d 858 ( Quiles ).) It is therefore unnecessary to describe the particular factual and procedural details that would be pertinent to discretionary relief under section 923, such as the merits of the disqualification motion and the specific harms to the parties of either granting or denying a discretionary stay. ( Quiles , at p. 136, 215 Cal.Rptr.3d 858.)

A Step Back: Why are Attorney Disqualification Orders Appealable in the First Place?

Asking whether this appeal automatically stays proceedings in the trial court presupposes that attorney disqualification orders are appealable. Of course, orders granting or denying attorney disqualification motions are immediately appealable in California state courts. (E.g., Costello v. Buckley (2016) 245 Cal.App.4th 748, 752, 199 Cal.Rptr.3d 891 ; Kennedy v. Eldridge (2011) 201 Cal.App.4th 1197, 1203, 135 Cal.Rptr.3d 545 ; Machado v. Superior Court (2007) 148 Cal.App.4th 875, 882, 55 Cal.Rptr.3d 902 ( Machado ).)

The basis for this rule is not obvious or inevitable. "A trial court's authority to disqualify an attorney derives from the power inherent in every court ‘[t]o control in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial proceeding before it, in every matter pertaining thereto.’ " ( People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145, 86 Cal.Rptr.2d 816, 980 P.2d 371, quoting § 128, subd. (a)(5).) Section 904.1 does not explicitly mention attorney disqualification orders or section 128 orders among its list of appealable orders. Federal courts do not allow an immediate appeal of attorney disqualification orders. (See Gregori v. Bank of America (1989) 207 Cal.App.3d 291, 300, fn. 4, 254 Cal.Rptr. 853.) California courts have expressed a preference for resolving attorney disqualification issues in writ proceedings, which "are determined more speedily than appeal." ( Reed v. Superior Court (2001) 92 Cal.App.4th 448, 455, 111 Cal.Rptr.2d 842 ( Reed ).)

Our Supreme Court, however, long ago held that an order denying a disqualification motion was appealable. ( Meehan v. Hopps (1955) 45 Cal.2d 213, 214-218, 288 P.2d 267 ( Meehan ).) Subsequent cases applied Meehan consistently to a variety of orders granting and denying disqualification motions. It is worth examining the question of why attorney disqualification orders are appealable because the answer to this question bears on whether an automatic stay is a consequence of such an appeal. ( Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937 ; Loshonkohl v. Kinder (2003) 109 Cal.App.4th 510, 517, 135 Cal.Rptr.2d 114 ["As an intermediate appellate court we are bound by decisions of our Supreme Court and we must follow the reasoning found therein"].)

To be precise, Meehan was an appeal of an order denying a "motion to enjoin ... counsel from further participation in the case and to restrain such counsel from disclosing certain confidential information pertaining thereto." ( Meehan , supra , 45 Cal.2d at p. 214, 288 P.2d 267.) The Supreme Court denied a motion to dismiss the appeal on two grounds. ( Id . at pp. 215-218, 288 P.2d 267.)

First, the order in Meehan was one refusing to grant an injunction. ( Meehan , supra , 45 Cal.2d at pp. 215-216, 288 P.2d 267 ; see § 904.1, subd. (a)(6) [current version of statute making orders granting or denying injunctions immediately appealable].) Meehan acknowledged that trial courts have the power to disqualify counsel under inherent section 128 powers, but explained "it is beyond question that [the moving party] specifically invoked the equity power of the court by his motion." ( Meehan , at p. 215, 288 P.2d 267.) "Both the language of the motion and the order itself meet the test for an injunction laid down in ... section 525, where an injunction is defined as ‘... a writ or order requiring a person to refrain from a particular act.’ " ( Meehan , at p. 215, 288 P.2d 267.) Moreover, under established authority, the moving party could have filed a separate action for injunctive relief to disqualify counsel. ( Id . at p. 216, 288 P.2d 267.) Hence, the order denied injunctive relief and was appealable. ( Id . at pp. 215-216, 288 P.2d 267.)³

Second, the order appealed in Meehan was appealable because it was "a final order upon a collateral issue." ( Meehan , supra , 45 Cal.2d at p. 216, 288 P.2d 267 ; see In re Marriage of Skelley (1976) 18 Cal.3d 365, 368, 134 Cal.Rptr. 197, 556 P.2d 297 [the immediate appealability of collateral orders is "a necessary exception to the one final judgment rule" because a final order on a collateral issue "is substantially the same as a final judgment in an independent proceeding"].) The disqualification order was "unquestionably collateral to the merits of the case." ( Meehan, at pp. 216-217, 288 P.2d 267 ) Moreover, because it "left nothing further of a judicial nature for a final determination of [the parties'] rights regarding [the disqualification of] counsel, the order was final for purposes of appeal." ( Id . at p. 217, 288 P.2d 267.)⁴

In sum, the order disqualifying Pepper Hamilton is appealable, both because it is an order granting an injunction and an order granting a final collateral order. The premises accepted by our Supreme Court in making this rule are important to the remainder of our analysis.

The Text of the Relevant Statutes Suggest an Automatic Stay is Plausible.

We begin...