Preview
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
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PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF
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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
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PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF
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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)
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PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF
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(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
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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).
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PLAINTIFF AND NON-PARTY MATHEW ABRAHAM’S REPLY IN SUPPORT OF
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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
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by
18 Richard P. Sybert
Joni B. Flaherty
19 Patrick J. Mulkern
Attorneys for Plaintiff
20 SMARTMED, INC. dba MEDSMART
CONSULTING
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