Retirement Housing Foundation v. Cain
Bros.

















Filed 1/29/13 Retirement Housing Foundation v. Cain Bros.
CA2/7











>NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

>



California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115>.





IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



SECOND
APPELLATE DISTRICT



DIVISION
SEVEN




>

RETIREMENT HOUSING FOUNDATION, et al., Plaintiffs and Appellants, v. CAIN BROTHERS & CO., Defendant and Respondent.

B235160 (Los Angeles County Super. Ct. No. BC404726)

APPEAL
from an order of the Superior Court
of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County. William F. Highberger, Judge. Affirmed.




Reuben
Raucher & Blum, Timothy D. Reuben, Stephen L. Raucher and Gregory P.
Barchie for Plaintiffs and Appellants.



Caldwell
Leslie & Proctor, David K. Willingham and Aron Ketchel; Arkin Kaplan Rice,
Kaplan Rice and Howard J. Kaplan (pro hac
vice) for Defendant and Respondent.



_____________________________

INTRODUCTION

This is an
appeal from an order denying a motion for revocation of pro hac vice status. We
affirm.

FACTUAL
AND PROCEDURAL SUMMARY

Retirement
Housing Foundation and several related entities (Retirement Housing) filed a
complaint against Cain Brothers & Co., LLC (Cain Brothers) and others, for
claims involving transactions in which Cain Brothers served as Retirement
Housing’s financial advisor.

In
May 2010, the trial court granted Cain Brothers’ unopposed applications for
admission pro hac vice of New
York attorneys Howard J. Kaplan and Lisa C. Solbakken
of Arkin Kaplan Rice LLP (Arkin Kaplan).href="#_ftn1" name="_ftnref1" title="">^[1] Later, the trial court granted Cain Brothers’
third application for admission pro hac
vice, allowing Justin M. Garbaccio of Arkin Kaplan to appear in this matter
as well.

On
June 21, 2011, Cain
Brothers’ New York counsel sent a
letter (on Arkin Kaplan letterhead signed by Kaplan with copies to Solbakken
and Garbaccio) to Retirement Housing’s counsel (Timothy D. Reuben of Reuben
Raucher & Blum PC) via email.
Retirement Housing’s President (Laverne R. Joseph) received a
substantially similar letter which was also dated June 21, 2011; this letter,
on Cain Brothers letterhead and signed by Cain Brothers’ Managing Director
Scott D. Smith, was addressed to both Dr. Joseph and Donald W. King, Retirement
Housing’s Chairman of the Board and was sent via overnight delivery.href="#_ftn2" name="_ftnref2" title="">^[2]

Both
letters bore the following heading (in bold and all capital letters): “CONFIDENTIAL
SETTLEMENT COMMUNICATION PURSUANT TO CAL. EVIDENCE CODE § 1152.” Further, both letters contained a two-column
chart with the following headings:
“[Retirement Housing’s] Allegation” and “Exemplar of Evidence
Demonstrating the Falsity of [Retirement Housing’s] Allegation.” According to the letters, discovery
demonstrated that both Retirement Housing and its counsel were aware of the
facts “that undermine entirely” Retirement Housing’s position, and Cain
Brothers intended to file a “counterclaim” and seek sanctions unless Retirement
Housing withdrew its claims against Cain Brothers. In addition, both letters asserted Retirement
Housing’s allegations triggered the indemnification and hold harmless
provisions set forth in Section 10 of the parties’ Certificate Purchase
Agreement executed in 1998, and Cain Brothers would pursue all relief to which
it was entitled, including but not limited to attorneys’ fees. “This is an amount that grows with each day
that passes, until this action is resolved.”


One
week later, Retirement Housing filed and served a motion for an order revoking
the pro hac vice status of Kaplan,
Solbakken and Garbaccio of Arkin Kaplan on the ground these Cain Brothers
attorneys had engaged in ex parte indirect communication about the action with
Retirement Housing officers and directors they knew to be represented by Reuben
Raucher & Blum, in violation of Rule 2-100 of the California Rules of
Professional Conduct. According to
Retirement Housing’s motion, Cain Brothers’ continued representation by its New
York attorneys would “improperly perpetuate the intimidation of [Retirement
Housing], particularly since Cain seeks to depose letter recipient Dr. Laverne
Joseph, along with other senior officers.”
Given the “obvious substantial similarities” between the two letters, as
well as the “liberal use of legal jargon and analysis,” Retirement Housing
asserted, “it is clear that the letter to [Retirement Housing] was ‘directed
by’ Cain’s New York counsel,” and “the clear intent of this tactic is to
intimidate [Retirement Housing] and undermine its relationship with its
attorneys . . . .”
If the court failed to take action, Retirement Housing urged, “[its]
perception of the Court will be permanently undermined.”

The
motion was supported by Joseph’s brief declaration, attaching the letter signed
by Smith on Cain Brothers’ letterhead as an exhibit, and stating: “Upon receipt of the letter signed by Mr.
Smith, [Retirement Housing] forwarded same to its counsel, Reuben Raucher &
Blum.” Retirement Housing’s counsel
(Timothy Reuben) also submitted a declaration, attaching the letter from Kaplan
to him, and stating: “I did not learn of
Mr. Smith’s June 21, 2011 letter to [Retirement Housing] until [Retirement
Housing] notified me of their [sic] receipt of said letter. Neither I nor any attorney at Reuben Raucher
& Blum authorized or consented to such communication from Arkin Kaplan Rice
LLP to [Retirement Housing].” (In
addition, Reuben attached to his declaration a Word Perfect “Document Compare
Summary” of the two letters at issue, the original pro hac vice applications of Cain Brothers’ New York counsel and
pages of Smith’s June 2, 2011 deposition transcript in which he testified to
his educational background (a bachelor’s degree in accounting).href="#_ftn3" name="_ftnref3" title="">^[3]

At
the same time (on June 28), in a cover letter enclosed with service copies of
its motion to revoke pro hac vice
status and citing the motion as justification, Retirement Housing notified all
counsel: “[W]e are taking all scheduled depositions off calendar[,]” including
Dr. Joseph’s previously scheduled deposition.
“We will not be producing any witnesses and we will not be taking any
depositions until the motion has been resolved.”href="#_ftn4" name="_ftnref4" title="">^[4]

Cain
Brothers filed opposition to Retirement Housing’s motion to revoke, supported
by identical declarations from Smith (Cain Brothers’ Managing Director and
Executive Committee member who signed the June 21, 2011 letter to Retirement
Housing) as well as Rhett D. Thurman (also a Cain Brothers’ managing Director
and its Chief Financial Officer).
According to Smith and Thurman, “the idea of undertaking the
principal-to-principal communication originated with Cain Brothers. The content of our letter was derived from a
communication our lawyers had prepared and directed to counsel for [Retirement
Housing].”

According to
both Smith and Thurman, “Our lawyers did not, at any time, encourage, request
or direct that we send any communication to [Retirement Housing;] Cain Brothers
was acting on our own behalf (and not on behalf of our lawyers) in connection
with this communication. [¶] Cain
Brothers’ letter was meant to convey a sincere bilateral settlement offer in an
effort to resolve this litigation. [¶]
Cain Brothers’ letter explained that it was willing to forgo claims and
remedies to which it believes it is entitled as a result of the positions taken
by [Retirement Housing] in this case in exchange for [Retirement Housing’s]
agreement to do the same. [¶] Cain
Brothers’ letter does not seek from [Retirement Housing] the disclosure of any
information at all, much less confidential information, pertaining to the
subject of this litigation. Nor was the
letter intended to accomplish the same.”


Retirement
Housing filed a reply along with supplemental declarations from Joseph and
Reuben. In his supplemental declaration,
Joseph said he was an ordained minister in the Church of Christ and had been
President and CEO of Retirement Housing for 23 years. When he received Cain Brothers’ letter on
June 22, 2011, Joseph said, he “felt surprised, shocked, troubled and
offended. Based on [his] previous
experience and dealings with Mr. Smith, Cain
Brothers . . . and the language of the letter, [he] knew
immediately that the letter was not written by him nor [sic] anyone else at
Cain, and that this was a letter written by a lawyer.” Furthermore, Joseph said, “I do not wish to
deal in any manner with attorneys who act unethically as in the instant
case. Under the circumstances, it would
shake my faith and confidence in the Court if Cain’s New York counsel were
allowed to continue their representation of Cain [Brothers], particularly if
any of these attorneys took any part in my deposition. These attorneys targeted me personally, and I
feel they will continue to target me as a method of harassment. [¶] I know our Chairman of the Board feels
the same as I do on this subject.”

According
to Reuben, the email attached as an exhibit to his declaration established that
Solbakken transmitted the Arkin Kaplan letter from New York at 4:12 p.m. EDT on
June 21, 2011, while the FedEx Shipment Travel History of the Smith letter
(also an exhibit) demonstrated that the Smith letter was sent to FedEx at 3:57
p.m. New York time—before Solbakken sent the Arkin Kaplan letter to
Reuben.

Cain
Brothers filed objections to the Joseph and Reuben supplemental declarations
filed as “new evidence” in support of Retirement Housing’s reply and filed its
own sur-reply.

It its
tentative ruling, the trial court stated as follows: “The motion does not present a close
question. To grant it would be manifest
error and an extreme overreaction to the alleged misconduct on which the motion
is premised.

“Whether
proven unethical conduct by litigation counsel deserves disqualification (or
here[,] revocation of pro hac [vice] admission status) is a matter left to the
Court’s prudent exercise of discretion, based primarily on an analysis of
whether there will be an adverse continuing effect on the proceedings from the
past misconduct. The Court’s only
legitimate goal is remedial action, not punitive reaction, which is properly
left to the cognizant disciplinary authorities.
[(]Chronometrics, Inc. v. Sysgen,
Inc. (1980) 110 Cal.App.3d 597, 607; Vapnek, Tuft, et al., Cal[.] Practice
Guide: Professional Responsibility (The
Rutter Group [(2011)]) ¶ 8:412[, p. 8-70.4,] and authorities cited there; [1]
Witkin, Cal[.] Procedure[ (5^th ed. 2010) ]Attorneys[,] § 537.[)]

“The Court
finds that moving party has not made a sufficient showing in the moving papers
of continuing effect even if the offending letter was knowingly sent at the
direction of defense counsel. Plaintiffs
continue to use their original litigation counsel of record, and there is no
indication that these events have damaged that relationship. The parties recently had a full and fair
opportunity to meet with each other in the presence of their chosen counsel to
try to resolve the case through a court-ordered Mandatory Settlement
Conference, and there was no settlement, so it does not appear that these
events have intimidated the plaintiffs’ executives and directors. A party does not get to pick its adversary’s
attorney, including the attorney who takes an oral deposition under oath. This is the inherent nature of contested
litigation.

“The Court
is also not persuaded by the timing to conclude that Cain Brothers’ counsel in
fact knowingly directed their client to send the letter directly to their
adversaries’ principals. Maybe, maybe
not. The simultaneous nature of the two
communications does not automatically prove attorney direction. The court does not, in any case, need to make
any final resolution of the factual quandary given the clear lack of continuing
adverse effect even assuming that Arkin Kaplan Rice LLP knowingly caused the
client to client letter to be sent.

“There is
no need to spend scarce judicial resources conducting a live evidentiary
hearing.

“The new
matters raised by [Retirement Housing] in its reply papers are irrelevant and
not considered in ruling on the merits.

“Court’s
Sua Sponte Order in Response to Motion:

“As an
alternative remedy, however, the Court directs all parties to communicate with
their adversaries (on any topic whatsoever during the continued pendency of
this case) exclusively through their respective counsel of record going forward
unless some party, for good cause show, persuades this Court in advance by
noticed ex parte application or motion on regular notice why direct principal
to principal contact is necessary and appropriate. There is no current ongoing business
relationship which requires such direct contact—about this litigation or
otherwise.”

At the
hearing, in response to the tentative ruling, Retirement Housing argued
revocation of an out-of-state attorney’s pro
hac vice status does not require a showing of continued effect on the
underlying proceedings—only a showing of unethical conduct of sufficient
gravity. Even if so, the trial court
concluded, the court’s ruling would be the same, reiterating: “[I]t was an excessive overreaction and
purely an effort [at] a tactical or strategic advantage that is not warranted
by what’s brought before the court.”

Retirement
Housing filed objections to Cain Brothers’ proposed order. Ultimately,
the trial court’s tentative ruling denying Retirement Housing’s motion was
“adopted in full with the following additional alternative findings:

“a) Even if the Court adopted [Retirement
Housing’s] proposed standard that unethical conduct alone is sufficient to
justify disqualification of counsel, the Court finds that [Retirement Housing]
failed to establish any such conduct and the Court would therefore still deny
the Motion; and

“b) Even if the Court did not consider the
participation in or outcome of the court-ordered Mandatory Settlement
Conference, the Court would still deny the Motion.”

Retirement
Housing appeals.

DISCUSSION

Retirement
Housing contends (1) the trial court erred in applying the standard applicable
to a motion to disqualify counsel (whether the alleged misconduct will have a
continuing effect on the proceeding) to a motion to revoke pro hac vice status, arguing that in the case of an attorney
granted pro hac vice status,
revocation is proper whenever the conduct of an out-of-state attorney impacts
the administration of justice; (2) the trial court erred in finding no
violation of rule 2-100 of the Rules of Professional Conduct or, at a minimum,
in refusing to conduct a “reasonable inquiry” and (3) assuming the
disqualification standard applies, the trial court erred in finding no
continuing effect.

Applicable Law

Rule
2-100 of the Rules of Professional Conduct

“Rule
2-100 Communication With a Represented Party

“(A) While representing a
client, a member shall not communicate directly or indirectly about the subject
of the representation with a party the member knows to be represented by
another lawyer in the matter, unless the member has the consent of the other
lawyer.

“(B) For purposes of this
rule, a ‘party’ includes:

“(1) An officer,
director, or managing agent of a corporation or
association . . . .”
(Rules Prof. Conduct, rule 2-100(A) & (B)(1) [all further rule
references are to the Rules of Professional Conduct unless otherwise
indicated].)

“Rule
2-100 is not intended to prevent the parties themselves from communicating with
respect to the subject matter of the representation, and nothing in the rule
prevents an attorney from advising the client that the communication can be
made.” (1 Witkin, Cal. Procedure (5th
ed. 2008) Attorneys, § 423, p. 537, citing discussion to rule 2-100; see also Weil & Brown, Cal. Practice
Guide: Civil Procedure Before Trial (The
Rutter Group 2011), ¶¶ 1:471.5 to 1:471.6, pp. 1-108.13 to 1-108.14, citing >Abeles v. State Bar of California (1973)
9 Cal.3d 603, 607 [improper indirect effort to use client to induce opposing
party to meet with attorney without opposing counsel’s consent] and discussion
following Rule 2-100 [“It is improper for an attorney to use the client to
‘lure’ the opposing party into a conference with the attorney behind opposing
counsel’s back (e.g., ‘Ask him to meet you at my office to work this thing
out’)[,]” but “Rule 2-100 does not
prevent the parties themselves from
communicating with each other[, n]or does it prevent a lawyer from >advising the client to do so. (E.g., ‘Why don’t you talk to him directly
and ask what he will take to settle the case?’)”].)

As
our Supreme Court explained in addressing the predecessor to rule 2-100 (and
resulting discipline by the State Bar
as a result), “This rule is necessary to the preservation of the
attorney-client relationship and the proper functioning of the administration
of justice . . . . It shields the opposing party
not only from an attorney’s approaches which are intentionally improper, but,
in addition, from approaches which are well intended but misguided. (Mitton
v. State Bar of California (1969) 71 Cal.2d 525, 534.) “The rule was designed to permit an attorney
to function adequately in his proper role and to prevent the opposing attorney
from impeding his performance in such role.
If a party’s counsel is present when an opposing attorney communicates
with a party, counsel can easily correct any element of error in the
communication or correct the effect of the communication by calling attention
to counteracting elements which may exist.
Consequently, before any direct communication is made with the opposing
party, consent of the opposing attorney is required.” (Ibid.)

Disqualification of
Counsel for Violation of Rule 2-100

Violation
of rule 2-100 may expose counsel to disciplinary charges.href="#_ftn5" name="_ftnref5" title="">^[5] (Bus. & Prof. Code, §§ 6077 [State Bar has
power to discipline members for willful breach of rules of professional
conduct], 6078; Crane v. State Bar of
California (1981) 30 Cal.3d 117.)
However, whether an attorney is to be disqualified from representing the
client in a pending case rests within the trial court’s discretion. (Chronometrics,
Inc. v. Sysgen, Inc. (1980) 110 Cal.App.3d 597, 607-608.) As the Chronometrics
court commented, “We detect a common theme in the cases relating to
disqualification of attorneys by trial courts.
If the status or misconduct which is urged as a ground for
disqualification will have a continuing
effect on the judicial proceedings
which are before the court, it is justified in refusing to permit the
lawyer to participate in such proceedings. . . . If,
on the other hand, the court’s purpose is to punish a transgression which has no substantial continuing effect
on the judicial proceedings to occur in the future, neither the court’s
inherent power to control its proceedings nor Code of Civil Procedure section
128 can be stretched to support the disqualification.” (Id. at
p. 607, italics added.)

In the Chronometrics case, the trial court found the attorney had
communicated with the opposing party regarding the subject matter of the
controversy, knowing the party was represented by counsel but without the
consent of that counsel, in violation of the predecessor to rule 2-100, >and improperly
obtained information from the opposing party as a result. (Id. at
pp. 603, 607-608.) Under such
circumstances, the Chronometrics court
found, “It was not an abuse of the court’s discretion to refuse to permit the
wrongfully obtained information to be used by [the attorney] directly in the
proceedings before the court. The
extension of the disqualification beyond [the attorney] personally to his law
firm has, however, no purpose but a punitive one.^{[ ]} As we have indicated, such purposes should be
accomplished through established disciplinary proceedings.” (Id.
at p. 608, fn. omitted.)

“Rule
2-100 is intended to preserve the attorney-client relationship.” (McMillan
v. Shadow Ridge at Oak Park Homeowner’s Association (2008) 165 Cal.App.4th
960, 967 (McMillan).) “‘“Trial courts in civil cases have the power
to order disqualification of counsel when necessary for the furtherance of
justice. [Citations.] Exercise
of that power requires a cautious balancing of competing interests. The court must weigh the combined effect of a
party’s right to counsel of choice, an attorney’s interest in representing a
client, the financial burden on a client of replacing disqualified counsel and
any tactical abuse underlying a disqualification proceeding against the
fundamental principle that the fair resolution of disputes within our adversary
system requires vigorous representation of parties by independent
counsel . . . .”’” (>McMillan, supra, 165 Cal.App.4th at p.
965, original italics, citation omitted.)

Therefore, the >McMillan court observed, even if a
communication is deemed to be within the ambit of rule 2-100, a trial court’s
denial of a motion to disqualify counsel is properly upheld where the trial
court finds “nothing occurred in the conversation that would ‘have any effect
on either the outcome of the litigation or on the way in which the litigation
is going to proceed.’” (>Id. at p. 968.) “‘The court’s goal is not to impose a >penalty, as the propriety of punishment
for violation of the Rules of Professional Conduct is a matter within the
purview of the State Bar, not of a court presiding over the affected case. (See Bus. & Prof. Code, § 6077; >Noble v. Sears, Roebuck & Co. (1973)
33 Cal.App.3d 654, 658–659 [109 Cal. Rptr. 269].) Instead, what the court must do is focus on
identifying an appropriate remedy for whatever improper effect the attorney’s
misconduct may have had in the case before it.’” (McMillan,
supra, 165 Cal.App.4th at p. 968, original italics, further citation
omitted.)

Pro Hac Vice >Admission and Revocation

Although
no such right is guaranteed by the federal Constitution, “[m]ost, if not all,
states allow an out-of-state attorney to appear pro hac vice. (>Sheller v. Superior Court (2008) 158
Cal.App.4th 1697, 1712, citation omitted (Sheller).) “California Rules of Court, rule 9.40 governs
the admission of attorneys pro hac vice
in California.” (Ibid.) In some
jurisdictions, the State Bar has no power to discipline attorneys appearing >pro hac vice, but “an attorney appearing
pro hac vice in California is
‘subject to the disciplinary jurisdiction of the State Bar with respect to any
of his or her acts occurring in the course of such appearance.’ (Cal. Rules of Court, rule 9.40(f); see also >Birbrower, Montalbano, Condon & Frank v.
Superior Court (1998) 17 Cal.4th 119, 130 [70 Cal. Rptr. 2d 304, 949 P.2d
1]; Cal. Rules of Prof. Conduct, rule 1-100(D)(2).) Additionally, once permitted to appear >pro hac vice, a foreign attorney in
California ‘is subject to the jurisdiction of the courts of this state with
respect to the law of this state governing the conduct of attorneys to the same
extent as a member of the State Bar of California.’[] (Cal. Rules of Court, rule 9.40(f).)” (Sheller,
supra, 158 Cal.App.4th at p. 1713, fn. omitted.)

The
Sheller court considered “whether a
trial court has the inherent authority to revoke an attorney’s >pro hac vice status.” (Sheller,
supra, 158 Cal.App.4th at p. 1709.)
“No case in California has yet addressed whether a trial court has the
authority to revoke an attorney’s pro hac
vice status. Numerous other courts,
however, have considered the issue, and determined that trial courts possess
that authority.” (Id. at pp. 1713-1714, citation omitted.) However, “jurisdictions differ on the conduct
of the pro hac vice attorney that
will be sufficient to justify revocation of pro
hac vice status.” (>Id. at p. 1714.) “California has no express provision granting
trial courts the right to revoke an attorney’s pro hac vice status,” but “California trial courts do possess the
inherent power to regulate practice before them and protect the integrity of
their proceedings.” (>Id. at p. 1716.)

“Given
that a California trial court’s inherent power includes the authority to
disqualify a California attorney, and that revocation of an out-of-state
attorney’s pro hac vice status is, in
effect, a disqualification of the out-of-state attorney,” the >Sheller court concluded, “a California
trial court’s inherent powers include the authority to revoke an attorney’s >pro hac vice status when that attorney
has engaged in conduct that would be sufficient to disqualify a California
attorney. While it may be that a California trial court has the authority to
revoke an attorney’s pro hac vice status under other circumstances as well, we
need not reach the issue of the precise limits of a trial court’s authority in this
appeal.” (Id. at p. 1716, italics added.)


Standard of Review

Relying
on the italicized language in the preceding quotation from Sheller, supra, 158 Cal.App.4th at p. 1716, Retirement Housing says
“these ‘precise limits’” are the subject of its appeal and therefore the
appropriate standard of review is de novo.
To the extent Retirement Housing suggests there is no place for the
trial court’s exercise of discretion in this case, we disagree.

“[I]n
the consideration of an appeal from an order made upon [declarations under
penalty of perjury (or affidavits under Code of Civil Procedure section
2015.5)] involving the decision of a question of fact, an appellate court is
bound by the same rule that controls it where oral testimony is presented for review. If there is any conflict in the affidavits,
those in favor of the prevailing party must be taken as true, and the facts
stated therein must be considered established.”
(Chronometrics, supra, 110
Cal.App.3d at p. 603 and fn. 2.) “A
trial court’s decision on a disqualification motion is reviewed for abuse of
discretion. [Citation.] The judgment of the trial court is presumed
correct, all intendments and presumptions are indulged to support the judgment,
conflicts in the declarations must be resolved in favor of the prevailing
party, and the trial court’s resolution of any factual disputes arising from
the evidence is conclusive.” (>McMillan, supra, 165 Cal.App.4th at pp.
964-965, citations omitted.) We accept
as correct all of its express or implied findings supported by substantial
evidence, and where the trial court has drawn reasonable inferences, we have no
power to draw different inferences, even though different inferences may also
be reasonable. (City Nat. Bank v. Adams (2002) 96 Cal.App.4th 315, 322.) “We will reverse the trial court’s ruling
only where there is no reasonable basis for its action. However, we must also ensure that the trial
court has made a reasoned judgment that
complies with the applicable legal standard.” (Ibid.,
italics added, citation omitted.)

The Trial Court Did
Not Abuse Its Discretion in Denying Retirement Housing’s Motion to Revoke Pro
Hac Vice Status of Cain Brothers’ New
York Counsel.

According
to Retirement Housing, because pro hac
vice status is a privilege and not a right, revocation of >pro hac vice status is appropriate as a
matter of public policy “whenever it appears that misconduct by >pro hac vice counsel could adversely
impact the administration of justice, whether or not there is a sufficient
showing of an actual ethical violation.”
In Retirement Housing’s view, such adverse impact on the administration
of justice occurred in this case and the trial court erred because it
erroneously applied the same standard applicable to a motion to disqualify California
counsel—that is, a continuing effect on the judicial
proceedings before the court. We
disagree.

First,
in its own moving papers filed in the trial court, Retirement Housing said
“revocation of an out-of-state attorney’s pro
hac vice status is, in effect, a disqualification” and argued the conduct
of Cain Brothers’ New York counsel was “grounds for disqualification because
the communication will have a continuing
effect on the judicial proceedings before the court.”href="#_ftn6" name="_ftnref6" title="">^[6] (Italics added.) At the hearing, however, in response to the
trial court’s ruling that Retirement Housing had not made a sufficient showing
of continuing effect, Retirement Housing’s counsel said, “We contend that the
law does not require such a showing, and that the contrary is the case.” The trial court asked, “What do you state to
be the standard then? Just whether
you’ve shown unethical conduct of sufficient gravity?” “Correct,” counsel answered. The trial court then stated, “I’ll apply
that standard and make the same ruling.”
“[A]pplying the standards you invoke, I would not find the showing
adequate.”

In
other words, by failing to argue any standard other than a “continuing effect”
on the proceedings before the court, Retirement Housing would have waived any
other argument for purposes of appeal.
Nevertheless, though untimely, the trial court did consider the standard
of “unethical conduct of sufficient gravity” Retirement Housing proposed at the
hearing. Based on the record presented,
however, the trial court expressly determined—even under “that standard,”
Retirement Housing’s “showing [was in]adequate.” Consequently, Retirement Housing’s argument
that the trial court erred because it erroneously applied the same “continuing
effect” standard applicable to a motion to disqualify a California attorney to
a motion to revoke pro hac vice
status is both disingenuous and unavailing.


In
any event, the trial court did not abuse its discretion in ruling as it
did. In Sheller, supra, 158 Cal.App.4th 1697, the court recognized
“jurisdictions differ on the conduct of the pro
hac vice attorney that will be sufficient to justify revocation of >pro hac vice status.” (Id. at
p. 1714.) In some jurisdictions, the
trial court may revoke an out-of-state attorney’s pro hac vice status for any conduct which “‘adversely impacts the
administration of justice’”; in some jurisdictions, “violation of an
established disciplinary standard” justifies revocation; other jurisdictions
require “bad faith”; still others grant trial courts “very broad discretion” to
include “reasons which do not amount to misconduct” for revocation; in some,
the courts have not established “outer limits” of trial court authority but “at
the least, conduct which would support disqualification of a local attorney” is
sufficient; and elsewhere, pro hac vice
status may be revoked for “conduct that constitutes contempt, adversely affects
the conduct of the litigation, or violates the code of professional
responsibility.” (Id. at pp. 1714-1715, citations omitted.)

In
the context of “this admittedly nonuniform state of the law” (>Sheller, supra, 158 Cal.App.4th at p.
1715), the Sheller court “look[ed] at
the language of the governing court rule” in California. (Id.
at p. 1716.) Pursuant to rule 9.40,
“[a]n attorney appearing pro hac vice
submits to the ‘jurisdiction of the courts of this state with respect to the
law of this state governing the conduct of attorneys to the >same extent as a member of the State Bar
of California.’”href="#_ftn7" name="_ftnref7"
title="">^[7] (Id. at
p. 1717, quoting rule 9.40(f), italics added.)
Reasoning that the attorney appearing pro hac vice does not submit to the disciplinary jurisdiction of
the California courts to a greater extent
than California attorneys, the Sheller court
found the trial court had erred in sanctioning the out-of-state attorney by
ordering him to pay the opposing party’s attorney fees when the court would
have had no jurisdiction to impose such a sanction on a California attorney.href="#_ftn8" name="_ftnref8" title="">^[8] (Id. at
pp. 1716-1717.) “The attorney appearing >pro hac vice does not submit to the
disciplinary jurisdiction of the California courts to a greater extent than California attorneys.” (Id. at
p. 1717, original italics.) Accordingly,
the Sheller court remanded the matter
to the trial court for consideration of whether the attorney’s conduct was
worthy of the sanction of revocation of his pro
hac vice status or any other permissible sanction. (Ibid.) “Attorney Sheller’s status as a >pro hac vice attorney does not permit
the trial court to sanction him in a manner that a California attorney could
not be sanctioned . . . .”
(Ibid.)



In
this case, as evidence in support of its motion to revoke pro hac vice status, Retirement Housing presented two virtually
identical letters—one on Cain Brothers’ New York counsel’s letterhead addressed
and sent to Retirement Housing’s counsel, the other on Cain Brothers’ own
letterhead addressed and sent directly to Retirement Housing’s officers
(forwarded upon receipt to counsel).
According to Smith (author of the Cain Brothers’ letter) and Thurman,
although the letter’s content was “derived” from their attorneys’ letter, it
was Cain Brothers’ idea to undertake the “principal-to-principal” communication
“in an effort to resolve the litigation.”


Noting
opinions of ethics committees in California are “not binding” but “should be consulted by members for
guidance on proper professional conduct” under rule 1-100, Retirement Housing
quotes Formal Opinion 1993-131 of the State Bar of California Standing Committee
on Professional Responsibility and Conduct as follows: “When the content of the communication to be
had with the opposing party originates with or is directed by the attorney, it
is prohibited by rule 2-100. Thus, an
attorney is prohibited from drafting documents, correspondence, or other
written materials, to be delivered to an opposing party represented by counsel
even if they are prepared at the request of the client, are conveyed by the
client and appear to be from the client rather than the attorney. An attorney is also prohibited from sending
the opposing party materials and simultaneously sending copies to the party’s
counsel. Providing copies to opposing
counsel does not diminish the prohibited nature of the communications with the
opposing party. An attorney is also
prohibited from scripting the questions to be asked or statements to be made in
the communications or otherwise using the client as a conduit for conveying to
the represented opposing party words or thoughts originating with the
attorney.”

Retirement
Housing emphasizes the fact the Cain Brothers letter was presented for
overnight delivery minutes before the letter on attorney letterhead was emailed
to Retirement Housing’s counsel, but the trial court was “not persuaded by the
timing to conclude Cain Brothers’ counsel in fact knowingly directed their
client to send the letter directly to their adversaries’ principals.” (Of course, Cain Brothers’ counsel may well
have transmitted the text to its letter addressed to counsel for Retirement
Housing for review and Cain Brothers, in turn, could then have substituted its
own letterhead and signatures along with Retirement Housing’s contact
information before Cain Brothers’ counsel emailed its final draft to Retirement
Housing’s counsel.) Such factual
determinations are for the trial court in its exercise of discretion. (Baugh
v. Garl (2006) 137 Cal.App.4th 737, 744.)


More
importantly, even if the trial court had found a violation of rule 2-100, it
would not compel revocation of New York counsel’s pro hac vice status. As
Retirement Housing recognized, “[R]evocation of an out-of-state attorney’s >pro hac vice status is, in effect, a
disqualification of the out-of-state attorney.”
(Sheller, supra, 158
Cal.App.4th at p. 1716.) “‘Motions to
disqualify counsel present competing policy considerations. On the one hand, a court must not
hesitate to disqualify an attorney when it is satisfactorily established that
he or she wrongfully acquired an unfair
advantage that undermines the integrity of the judicial process and will have a
continuing effect on the proceedings before the court. [Citations.]
On the other hand, it must be kept in mind that disqualification usually
imposes a substantial hardship on the disqualified attorney’s innocent client,
who must bear the monetary and other costs of finding a replacement. A client deprived of the attorney of his
choice suffers a particularly heavy penalty where, as appears to be the case
here, his attorney is highly skilled in the relevant area of the law.’” (La
Jolla Cove Motel & Hotel Apartments, Inc. v. Superior Court (2004) 121
Cal.App.4th 773, 791, italics added, citations omitted.)

“‘It
must be remembered . . . that disqualification is a drastic
course of action that should not be taken simply out of hypersensitivity to
ethical nuances or the appearance of impropriety.’ [Citation.]
‘The purpose of disqualification is not to punish a transgression of
professional ethics. [Citation.] Disqualification is only justified where the
misconduct will have a “continuing effect” on judicial proceedings.’” (Sheller,
supra, 158 Cal.App.4th at p. 1711, citing Baugh v. Garl, supra, 137 Cal.App.4th at p. 744.) “‘The court’s goal is not to impose a >penalty, as the propriety of punishment
for violation of the Rules of Professional Conduct is a matter within the
purview of the State Bar, not of a court presiding over the affected case. (See Bus. & Prof. Code, § 6077; >Noble v. Sears, Roebuck & Co. (1973)
33 Cal.App.3d 654, 658–659 [109 Cal. Rptr. 269].) Instead, what the court must do is focus on
identifying an appropriate remedy for whatever improper effect the attorney’s misconduct may have had in the case
before it.’” (McMillan, supra, 165 Cal.App.4th at p. 968, original italics,
citation omitted.)

The
trial court in this case found nothing about the duplicative settlement letter
sent from Cain Brothers to Retirement Housing that would have any continuing
effect on the litigation (or would satisfy Retirement Housing’s belatedly urged
additional standard). In fact, the trial
court expressly stated that it found Retirement Housing’s filing of its motion
for revocation (accompanied by its refusal to proceed with previously scheduled
depositions among other actions) was “an excessive overreaction and purely an
effort [to gain] a tactical or strategic advantage that is not warranted by
what’s brought before the court.” There
was no evidence of any improperly obtained information or any other indication
that the communication created an unfair advantage or otherwise had any
continuing effect on the proceedings.href="#_ftn9" name="_ftnref9" title="">^[9] On this record, Retirement Housing has failed
to demonstrate any abuse of the trial court’s discretion in this regard. (McMillan,
supra, 165 Cal.App.4th at p. 968;
Chronometrics, supra, 110 Cal.App.3d at p. 607 [if the court’s purpose is
to punish a transgression which has no substantial continuing effect on the
judicial proceedings to occur in the future, neither the court’s inherent power
to control its proceedings nor Code of Civil Procedure section 128 can be
stretched to support the disqualification”].)


Because
revocation of pro hac vice status is,
in effect, a disqualification of the out-of-state attorney (>Sheller, supra, 158 Cal.App.4th at p.
1716, citation omitted), and an attorney appearing pro hac vice submits to the “jurisdiction of the courts of this
state with respect to the law of this state governing the conduct of attorneys
to the same extent as a member of the State Bar of California” (rule 9.40(f)),
we conclude the trial court properly applied the “continuing effect” test
applicable to a motion to disqualify counsel to Retirement Housing’s motion for
revocation. (Even if Retirement
Housing’s alternative higher standard applied, Retirement Housing could not
demonstrate prejudicial error because the trial court reached the same
conclusion (that Retirement Housing’s showing was inadequate) under Retirement
Housing’s proposed standard.)

On
the evidence presented, the trial court did not err in finding no violation of
rule 2-100 for the reasons we have explained, and we reject Retirement
Housing’s argument the trial court erred in refusing to conduct an evidentiary
hearing. (Baugh v. Garl, supra, 137 Cal.App.4th at p. 744 [no error where
trial court refused to hold special hearing to determine veracity regarding
alleged violation of rule 2-100 and decision based on what was said and not
said in declarations; no evidence of receipt of confidential information or of
continuing effect on outcome of litigation or likelihood of prejudice]; and see
Chronometrics, supra, 110 Cal.App.3d
at p. 603 [in consideration of appeal from an order made upon declarations, we
are bound by same rule that controls where oral testimony is presented; facts
in favor of prevailing party must be taken as true and considered
established].) Moreover, even if a
violation of rule 2-100 had been established, it was still not enough in the
absence of a “continuing effect” on the proceedings. (Baugh
v. Garl, supra, 137 Cal.App.4th at p. 744 [even if the trial court had
believed a violation of rule 2-100 had occurred, it would not compel
disqualification which is only justified where misconduct will have a
“continuing effect” on judicial proceedings]; McMillan, supra, 165 Cal.App.4th at pp. 967-968; and see >Continental Ins. Co. v. Superior Court (1995)
32 Cal.App.4th 94, 111, fn. 5, citation omitted [“the ‘business’ of the court
is to dispose of ‘litigation’ and not to oversee the ethics of those that
practice before it unless the behavior ‘taints’ the trial”].)



DISPOSITION



The
order is affirmed. Cain Brothers is
entitled to its costs of appeal.







>WOODS, J.



We concur:







PERLUSS,
P. J. JACKSON,
J.