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  • Smartmed, Inc. vs. Firstchoice Medical Group, Inc.16 Unlimited - Fraud document preview
  • Smartmed, Inc. vs. Firstchoice Medical Group, Inc.16 Unlimited - Fraud document preview
  • Smartmed, Inc. vs. Firstchoice Medical Group, Inc.16 Unlimited - Fraud document preview
  • Smartmed, Inc. vs. Firstchoice Medical Group, Inc.16 Unlimited - Fraud document preview
						
                                

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Richard P. Sybert, Bar No. 80731 rsybert@grsm.com Joni B. Flaherty, Bar No. 272690 jflaherty@grsm.com Patrick J. Mulkern, Bar No. 307272 pmulkern@grsm.com GORDON REES SCULLY MANSUKHANI, LLP 101 W. Broadway, Suite 2000 San Diego, California 92101 tel (619) 696-6700 / fax (619) 696-7124 Attorneys for Plaintiff SMARTMED, INC. dba MEDSMART CONSULTING SUPERIOR COURT OF CALIFORNIA COUNTY OF FRESNO Gordon Rees Scully Mansukhani, LLP SMARTMED, INC., dba MEDSMART CASE NO. CECG CONSULTING, a California Corporation, PLAINTIFF SMARTMED, INC. AND 92101 Plaintiff, NON-PARTY MATHEW ABRAHAM’S 101 W. Broadway REPLY IN SUPPORT OF THEIR Suite 2000 San Diego, CA MOTION TO DISQUALIFY DEFENDANT VANTAGE MEDICAL GROUP, INC.’S FIRSTCHOICE MEDICAL GROUP, INC., COUNSEL a California Corporation; VANTAGE MEDICAL GROUP, INC., a California Date: April 4, 2018 Corporation; Dr. Manthani Reddy; Dr. Time: 3:30 PM Kiran Reddy; Dr. Chinnapa Nareddy; Dr. Jose Luis Bautista; Dr. Pam Janda; Dr. Judge: Hon. Mark W. Snauffer Tarlochan Tagore; Dr. Madhava Narala; and Dept.: Dr. Ajit Khaira, and DOES 1-10, Complaint filed: October 31, 2017 Defendants. INTRODUCTION Despite the technical arguments and protestations in Defendant Vantage Medical Group, Inc.’s (“Vantage”) Opposition, Sheppard Mullin’s attempted representation of Vantage does not pass the “smell test.” Not only did Sheppard Mullin extensively represent the sole owner and principal of Plaintiff SmartMed, Inc. (“SmartMed”), Mathew Abraham, for many years, two of the attorneys who did so are admittedly still partners there. More recently, Sheppard Mullin has also represented, at various times, different and opposing parties to the Asset Purchase -1- PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF MOTION TO DISQUALIFY VANTAGE’S COUNSEL Agreement—the central document in this dispute—to the point that the Arbitrator scathingly noted, “Sheppard Mullin was on both sides of the deal with the conflict waiver.” Attorney conflicts are not just about technical rules; they are also about appearances and impressions, and the impact they have on the perception of the legal profession and the judicial system. Given this background, Sheppard Mullin simply should not be representing any party to this litigation. It speaks poorly that they have continued to press to do so. II. ARGUMENT Sheppard Mullin’s Opposition must fail because it does not acknowledge the importance of recognizing everyday realities when providing practical guidance in the face of realistic 10 concerns—not just blindly apply technical requirements. See, e.g., People ex rel. Dept. of Corps. 11 v. SpeeDee Oil Change Sys., Inc., 20 Cal.4th 1135, 1153-54 (1999) (“recognize the everyday 12 reality that attorneys, working together” share client’s confidential information). “Ultimately, 13 disqualification motions involve a conflict between the clients’ right to counsel of their choice 14 and the need to maintain ethical standards of professional responsibility.” SpeeDee Oil, supra, 15 20 Cal.4th at 1145 (citing Comden v. Superior Court, 20 Cal.3d 906, 915 (1978)). 16 Therefore, when deciding whether a conflict requires disqualification, the trial court must 17 look beyond the interests of the parties. Fiduciary Trust Int’l of Cal. v. Superior Ct., 128 18 Cal.App.4th 465, 478 (2013) (quoting SpeeDee Oil, supra, 20 Cal.4th at 1145). The 19 paramount concern must be to preserve public trust in the scrupulous administration of 20 justice and the integrity of the bar. The important right to counsel of one’s choice must yield 21 to ethical considerations that affect the fundamental principles of our judicial process.” SpeeDee 22 Oil, supra, 20 Cal.4th at 1145-46 (emphasis added). 23 A. Sheppard Mullin Has Conflicts with SmartMed 24 A disqualifying conflict of interest arises under the Rules of Professional Conduct, Rule 25 3-310(E), “in cases of successive representation, where an attorney seeks to represent a client 26 with interests that are potentially adverse to a former client of the attorney[.]” In re Charlisse C., 27 45 Cal.4th 145, 159 (2008). The governing test requires that the client only demonstrate a 28 “substantial relationship” between the subjects of the antecedent and current representations. See -2- PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF MOTION TO DISQUALIFY VANTAGE’S COUNSEL Flatt v. Superior Court, 9 Cal.4th 275, 283 (1994). When the attorney’s prior representation was “direct and personal”—and substantially related—access to confidential information is presumed and disqualification in the second action is mandatory. See Fiduciary Trust Int’l of Cal., supra, 218 Cal.App.4th at 479 (quoting Flatt, supra, 9 Cal.4th at 283). This conclusive presumption of having confidential information is “justified as a rule of necessity because it is not within the power of the former client to prove what is [or is not] in the mind of the attorney.” Jessen v. Hartford Cas. Ins. Co., 111 Cal.App.4th 698, 706 (2003). A “substantial relationship” exists between prior and potentially current representations whenever the “subjects” of the two are linked in some rational manner. Fiduciary Trust Int’l of 10 Cal., supra, 218 Cal.App.4th at 480 (quoting Knight v. Ferguson, 149 Cal.App.4th 1207, 1213 11 (2007)). This need not be identity of claims or identity of opponents, as exacting specificity in 12 the law is unrealistic; instead, the legal principal “must be applied to individual cases by the 13 exercise of the court’s considered judgment based in reason, logic and common sense.” Jessen, 14 supra, 111 Cal.App.4th at 714 (citing Lipton v. Superior Court, 48 Cal.App.4th 1599, 1612 15 (1996)). “Thus, successive representations will be ‘substantially related’ when the evidence 16 before the trial court supports a rational conclusion that information material to the valuation, 17 prosecution, settlement or accomplishment of the former presentation given its factual and legal 18 issues is also material to the evaluation, prosecution, settlement or accomplishment of the current 19 representation given its factual and legal issues.” Fiduciary Trust Int’l of Cal., supra, 218 20 Cal.App.4th at 480. 21 The importance of protecting intangible confidential information like litigation tactics has 22 been recognizing and accepted. See Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft, 23 69 Cal.App.4th 223, 236-37 (1999) (confidential information included information concerning 24 similar matters which would be useful to current client, including “litigation philosophy”); 25 Global Van Lines v. Superior Court, 144 Cal.App.3d 483, 488-89 (1983) (issuing writ of 26 mandate commanding disqualification where attorney, as former general counsel, must have 27 “acquired substantial knowledge of the policies, attitudes and practices of [former client’s] 28 management”); Gray v. Commercial Union Ins. Co., 468 A.2d 721, 725-26 (N.J. Super. 1983) -3- PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF MOTION TO DISQUALIFY VANTAGE’S COUNSEL (attorney privy to information about former client’s claims and litigation philosophy, methods and procedures in handling and defending claims and litigation, and strengths and weaknesses of decision makers); Kaselaan & D’Angelo Assocs., Inc. v. D’Angelo, 144 F.R.D. 235, 244 (D.N.J. 1992) (attorney’s close contacts with president of former corporate client made attorney privy to confidential information about client’s overall structure and practices”). Here, Sheppard Mullin had a long and involved representation of Mr. Abraham. That led to Sheppard Mullin’s generation, knowledge, and retention of significant tangible and intangible confidential information, simply as the normal consequence of the attorney-client relationship. Further, Sheppard Mullin has admitted that two of the attorneys—both now partners--who 10 worked intimately with Mr. Abraham are still at Sheppard Mullin. They were careful to not 11 submit declarations themselves regarding the present dispute, and instead Sheppard Mullin relies 12 on the unsupported hearsay from an interested attorney who was not even at the firm during the 13 prior engagement. Notably, Sheppard Mullin gave no assurances for—indeed, not even a 14 suggestion of—instituting a “ethical wall” to seclude Mr. Raygor and Ms. Towill. 15 Any assertion that Sheppard Mullin is permitted to represent Vantage because Mr. 16 Burgess joined the firm after the prior engagement with Mr. Abraham ended (or the fact that his 17 associate “was a toddler when the Abraham Litigation as going on”) ignores the application and 18 purpose of vicarious disqualifications. “When a conflict of interest requires an attorney’s 19 disqualification from a matter, the disqualification normally extends vicariously to the attorney’s 20 entire law firm.” Charlisse C., supra, 45 Cal.4th at 161 (quoting SpeeDee Oil, supra, 20 Cal.4th 21 at 1139); see also Henriksen v. Great Am. Savings & Loan, 11 Cal.app.4th 109, 117 (1992) 22 (“[W]here an attorney is disqualified because he formerly represented and therefore posses 23 confidential information regarding the adverse party in the current litigation, vicarious 24 qualification of the entire firm is compelled as a matter of law.”). The rule is based on the 25 doctrine of imputed knowledge, “which posits that the knowledge of one attorney in a law firm is 26 the knowledge of all attorneys in the firm.” Carlisse C., supra, 45 Cal.4th at 161 (citing Adams 27 v. Aerojet-General Corp., 86 Cal.App.4th 1324, 1333 (2001)). This is an example of conflict 28 rules “recognizing the everyday reality”—specifically that “attorneys, working together and -4- PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF MOTION TO DISQUALIFY VANTAGE’S COUNSEL practicing law in a professional association, share each others’, and their clients’, confidential information”—thus safeguarding clients’ “legitimate expectations that their attorneys will protect client confidences.” Id. at 161 (quoting SpeeDee Oil, supra, 20 Cal.4th at 1139, 1153-54). Similarly, the issue of Sheppard Mullin’s conflict of interest vis-à-vis SmartMed must be viewed in practice—not hyper-technical concerns, but practical realities. Mr. Abraham (the subject of Sheppard Mullin’s former representation) is the principal actor behind SmartMed and the only shareholder of the corporate entity. There is no meaningful distinction in this analysis between Mr. Abraham and the entity—all the information that Sheppard Mullin has gained by virtue of his individual prior engagement is highly relevant to the subsequent adversity of his 10 corporation. Recognizing this fact is consistent with the purposes of conflict rules (e.g. to protect 11 the public from the actual or perceived compromise of client interests or confidences) and is not 12 just about checking off some “informed consent” box. Ultimately, the knowledge and familiarity 13 Sheppard Mullin came to have of Mr. Abraham, in litigation generally, is the confidential 14 information that is relevant to both matters. 15 At a minimum, SmartMed should be permitted to conduct limited discovery on what files 16 Sheppard Mullin actually generated, actually retained, and actually destroyed regarding that prior 17 representation. This would allow the parties and the Court to more fully understand the scope of 18 what information Sheppard Mullin has with respect to Mr. Abraham and how that may or may 19 not bear on its desired representation of SmartMed’s adversary. 20 B. Sheppard Mullin Has Conflicts with FirstChoice 21 The attorney-client relationship often triggers two ethical duties: first, the duty to 22 maintain the client’s confidences, and second, the duty of undivided loyalty. See City & Cty. of 23 S.F. v. Cobra Soln’s, Inc., 38 Cal.4th 839, 846 (2006). These duties intersect with the conflict of 24 interests rules that govern attorneys and help to explain why “an attorney may not switch sides 25 during pending litigation[,] representing first one side and then the other.” Id. (citing City of 26 Santa Barbara v. Superior Court, 122 Cal.App.4th 17, 23 (2004)). This simple rule is true 27 because “the duty to preserve client confidences . . . survives the termination of the attorney’s 28 representation.” Id. (citing SpeeDee Oil, supra, 20 Cal.4th at 1147). -5- PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF MOTION TO DISQUALIFY VANTAGE’S COUNSEL Here, the inquiry should not be misled by the subsequent fact that another law firm, Nossaman, formally represented FirstChoice in the execution of the Asset Purchase Agreement, but instead look at the fact that Sheppard Mullin initially represented FirstChoice in the preliminary negotiations of the Asset Purchase Agreement. That FirstChoice purportedly waived then (and, waives now) any conflict, is immaterial to the astonishing optics of this arrangement. Sheppard Mullin is playing fast and loose with its obligations to maintain client confidences, which is undoubtedly what led the Arbitrator to note how “Sheppard Mullin was on both sides of the deal with the conflict waiver.” The importance of protecting the ongoing duty 10 to maintain confidences of a former client is imperative where, as here, there is substantial 11 likelihood of the parties becoming (if not already in fact) directly adverse to each other. 12 III. CONCLUSION 13 For the foregoing reasons, Plaintiff SmartMed and non-party Mathew Abraham 14 respectfully request this Court disqualify Sheppard Mullin from serving as Defendant Vantage’s 15 counsel in this litigation. 16 Dated: March 27, 2018 GORDON REES SCULLY MANSUKHANI, LLP 17 by 18 Richard P. Sybert Joni B. Flaherty 19 Patrick J. Mulkern Attorneys for Plaintiff 20 SMARTMED, INC. dba MEDSMART CONSULTING 21 22 23 24 25 26 27 28 1140667/37383141v.1 -6- PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF MOTION TO DISQUALIFY VANTAGE’S COUNSEL