Rotenberg v. Brain Research Laws










Filed 9/21/11 Rotenberg v. Brain Research Laws CA4/3








NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

JOSEPH ROTENBERG, Plaintiff and Respondent, v. BRAIN RESEARCH LABS, LLC, et al., Defendants and Appellants.

G044675 (Super. Ct. No. 30-2010-00401652) O P I N I O N

Appeal from an order of the Superior Court of Orange County, Gail Andrea Andler, Judge. Affirmed.
Manatt, Phelps & Phillips, Robert H. Platt, Benjamin G. Shatz, Bruce B. Kelson and Adrianne E. Marshack for Defendants and Appellants.
Ropers, Majeski, Kohn & Bentley, Thomas H. Clarke, Jr., Susan H. Handelman and Terry Anastassiou for Plaintiff and Respondent.
* * *
Plaintiff Joseph Rotenberg sued defendants for false advertising, among other claims, in a proposed class action lawsuit relating to a product sold by defendants. During the course of litigation, Rotenberg’s attorney and putative class counsel Thomas H. Clarke, Jr., made a number of public statements about defendants’ product, and defendants sued for defamation. Defendants argue the pending defamation action creates a conflict of interest and that he and his firm should therefore be disqualified. The trial court denied the motion, and defendants now appeal. Because we find the trial court did not abuse its discretion by denying the motion, we affirm.
I
FACTS
In May 2009, Rotenberg filed a putative class action suit in Marin County Superior Court against Brain Research Labs, LLC and related defendants (collectively defendants). Rotenberg alleged that defendants promote and market a product called Procera AVH (Procera) that purportedly protects the brain and promotes healing. Rotenberg’s complaint alleged, among other things, that defendants’ claims were false and the product was dangerous. The complaint sought injunctive relief and restitution under Business & Professions Code sections 17200 and 17500 and Civil Code section 1750 et seq., the Consumer Legal Remedies Act (CLRA). The complaint also seeks attorney fees.
After some procedural wrangling, including a removal of the case to federal court and a motion to change venue,[1] in August 2009, defendants filed a lawsuit alleging defamation and other claims (the defamation suit) against Rotenberg and Clarke, his attorney, of Ropers, Majeski, Kohn & Bentley (RMKB). The defamation suit relates to statements Clarke made about Procera AVH in a local news report[2] and an Internet video posted to solicit potential plaintiffs.
In the Internet video, among other things of a similar tone, Clarke states that Procera “contains dangerous drugs with the potential to cause extensive harm or even death,” defendants are “scam artists” who “do not care if you live or die,” and that Procera “doesn’t work” and defendants’ claims to the contrary are “bogus.” In a television interview, Clarke stated that the product is “absolutely ineffective” that “people are dying from some of these products” (not referring to Procera specifically). He made other similarly negative statements about the product.
Rotenberg, Clarke and RMKB filed special motions to strike the defamation suit pursuant to Code of Civil Procedure section 425.16. In ruling on a motion to strike under Code of Civil Procedure section 425.16, the trial court undertakes a two-part analysis. “‘First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains were taken “in furtherance of the [defendant]’s right of petition or free speech under the United States or California Constitution in connection with a public issue,” as defined in the statute. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim.’ [Citation.]” (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733.)
The “probability of prevailing” requirement is not a particularly high bar to hurdle. “As we previously have observed, in order to establish the requisite probability of prevailing (§ 425.16, subd. (b)(1)), the plaintiff need only have ‘“stated and substantiated a legally sufficient claim.”’ [Citations.] ‘Put another way, the plaintiff “must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.”’ [Citations.] [¶] Only a cause of action that satisfies both prongs of the anti-SLAPP statute—i.e., that arises from protected speech or petitioning and lacks even minimal merit—is a SLAPP, subject to being stricken under the statute.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 88-89.)
The court determined that the statements at the center of the defamation suit were subject to Code of Civil Procedure section 425.16 because they were statements made “in connection with ‘an issue of public interest’. . . .” With respect to the second requirement of “minimal merit,” the trial court concluded that defendants had met that burden with respect to Clarke and RMKB, but not as to Rotenberg. Thus, the defamation case was allowed to proceed. An appeal of the court’s ruling on the anti-SLAPP motion is pending.
Meanwhile, after the case was remanded from federal court, defendants moved to change venue from Northern California to Orange County Superior Court. In June 2010, the court granted the motion and the case was transferred.
In September 2010, after this case had been pending for approximately 15 months, defendants moved to disqualify Clarke and RMKB as Rotenberg’s counsel. Defendants argued the defamation lawsuit created an inherent conflict between Rotenberg and counsel, arguing that counsel had a strong incentive to leverage the class claims to resolve the defamation case. Defendants in part relied upon statements made by Clarke in the context of settlement negotiations that any settlement of the class action should result in the dismissal of the defamation case as well. They conceded, however, that Clarke later “reversed his position.” Rotenberg opposed the motion and also filed a motion for sanctions based on defendants’ violation of the mediation privilege and their lack of standing to bring the motion to disqualify. Clarke denied that he had ever conditioned settlement of the class action on dismissal of the defamation action.
At the hearing on the motion, defendants’ counsel called into question exactly who was using what as “leverage.” He stated: “And we have—I would analogize it to two parties with cannons facing each other, and neither one wants to give up its ammunition. [¶] My client has a defamation lawsuit. Their client has a class action lawsuit. And they’re squared off against each other. And the problem is that we can’t settle one without the other, because nobody wants to give up their leverage.”
The trial court, while not questioning the legitimacy of defendants’ defamation action, pointed out an “elephant in the room” with respect to defendants’ motion to disqualify: “But if the court were to say that in a situation where somebody perhaps wanted to get rid of an attorney on the other side, who had been a thorn in their client’s side, who had been somebody who had instituted other actions against their client, and had perhaps held press conferences and said things—these are really bad guys—that the defendant who wanted to have a hand in selecting counsel for the class need only institute a defamation action.”
After the hearing, the court issued an order denying the motion.[3] “Although the Court finds that it has discretion to grant the disqualification request . . . the Court finds that in exercising its discretion and balancing the competing interests, including the important rights of the litigants in this matter, the potential for prejudice to both sides, and the nature of the purported conflict, that the motion should be denied. The Court is satisfied that based on the unique role of trial judges in supervising class action litigation, it will be able to evaluate, on an on-going basis (such as in connection with any certification motion and any motion for preliminary approval or final approval), [of settlement] whether counsel can adequately represent the class and whether any proposed settlement is fair to the class members and free from conflict or collusion. The Court has considered the damages sought and is satisfied that before any proposed settlement is [approved], the Court will be in a position to compare the value of the potential recovery to the amount of the settlement and ascertain how many ‘cents on the dollar’ the settlement represents. This ruling . . . is based solely on the Court weighing the competing interests and exercising its discretion after considering the unique facts, the applicable law, and balancing the appropriate factors.”
Defendants now appeal.
II
DISCUSSION
Standard of Review
“‘The authority to disqualify an attorney stems from the trial court’s inherent power ‘[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.” [Citations.] In reviewing a disqualification motion, we will uphold the trial court’s decision absent an abuse of discretion. [Citations.] “The trial court’s exercise of this discretion is limited by the applicable legal principles and is subject to reversal when there is no reasonable basis for the action.” [Citations.]’ [Citations.]” (Cal Pak Delivery, Inc. v. United Parcel Services, Inc. (1997) 52 Cal.App.4th l, 8-9 (Cal Pak).) In the disqualification setting, we review a trial court’s exercise of discretion with particular care. (Apple Computer, Inc. v. Superior Court (2005) 126 Cal.App.4th at 1253, 1263 (Apple).)
“‘In deciding whether the trial court abused its discretion, “[w]e are . . . bound . . . by the substantial evidence rule.”’ [Citation.] The trial court’s order is ‘“presumed correct; all intendments and presumptions are indulged to support [it]; 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.”’ [Citations.]” (Clark v. Superior Court (2011) 196 Cal.App.4th 37, 46-47 (Clark).)
Defendants assert our review should be de novo, rather than for abuse of discretion. First they argue there are no disputed factual issues, which is simply incorrect. Defendants partly based their motion in the trial court on the argument that Clarke had determined to “tie” the settlement of the class action to settlement of the defamation case. This important issue was disputed by Clarke.
Defendants also argue that this is an issue of first impression and therefore subject to de novo review. But the case defendants cite for that proposition (City of Santa Barbara v. Superior Court (2004) 122 Cal.App.4th 17) is inapposite. In that case, after noting that the standard of review was abuse of discretion — the appellate court pointed out that the trial court had not purported to exercise its discretion, but held that disqualification was mandatory. Thus, the appellate court conducted a de novo review for an error of law. (Id. at p. 22.) It is inapposite here because the trial court did exercise its discretion as it stated in its order denying the motion.[4] Thus, we find the proper standard of review is abuse of discretion.

Trial Court’s Exercise of Discretion
“A disqualification motion involves a conflict between a client’s right to counsel of his or her choice, on the one hand, and the need to maintain ethical standards of professional responsibility, on the other. [Citation.] Although disqualification necessarily impinges on a litigant’s right to counsel of his or her choice, the decision on a disqualification motion ‘involves more than just the interests of the parties.’ [Citation.] When ruling on a disqualification motion, ‘[t]he paramount concern must be to preserve public trust in the scrupulous administration of justice and the integrity of the bar. The important right to counsel of one’s choice must yield to ethical considerations that affect the fundamental principles of our judicial process.’ [Citations.]” (Clark, supra, 196 Cal.App.4th at pp. 47-48.)
Further, “it is relatively unimportant whether the status or misconduct claimed to warrant disqualification is proscribed by a particular ethical norm or disciplinary rule or may be characterized as a failure to avoid the appearance of impropriety. Since the purpose of a disqualification order must be prophylactic, not punitive, the significant question is whether there exists a genuine likelihood that the status or misconduct of the attorney in question will affect the outcome of the proceedings before the court.” (Gregori v. Bank of America (1989) 207 Cal.App.3d 291, 308-309.)
“‘“The relation between attorney and client is a fiduciary relation of the very highest character, and binds the attorney to most conscientious fidelity—uberrima fides.” [Citations.] Among other things, the fiduciary relationship requires that the attorney respect his or her client’s confidences. [Citations.] It also means that the attorney has a duty of loyalty to his or her clients. [Citations.]’ [Citation.]” (Cal Pak, supra, 52 Cal.App.4th at p. 11.)
The essence of defendants’ claim is that Clarke’s[5] involvement as class counsel in the instant case and as a defendant in the defamation claim “creates divided loyalties.” They also insist that the trial court acknowledged that Clarke has a conflict of interest, but decided it could be “managed” or “monitored.” But the trial court did not determine that a current conflict exists; indeed, we presume the court did not make such a finding. (See Brand v. 20th Century Ins. Co./21st Century Ins. Co. (2004) 124 Cal.App.4th 594, 601 [“we accept as correct all express or implied findings that are supported by substantial evidence.”].) Had the court found that a current conflict existed, it would have granted the motion, and indeed, the court’s order refers to the “purported conflict.” What the court stated about supervising the case was that it was capable of evaluating, “on an on-going basis” whether counsel was capable of adequately representing the class, thereby insuring that a conflict had not developed.
With that clarified, we find that the trial court did not abuse its discretion. The cases defendants cite are either inapposite, or readily distinguished, and none address this precise situation. For example, defendants rely on Cal Pak Delivery, supra, 52 Cal.App.4th 1, but in that case, the attorney “admitted he had offered to sell out his client and the class which the client was seeking to represent for a payment to himself personally of approximately $ 8 to $ 10 million.” (Id. at pp. 5-6.) There is not any evidence at all that similar facts are present here, and defendants’ attempt to analogize this case without clarifying that distinction is at best disingenuous.
They also cite Apple, supra, 126 Cal.App.4th 1253, but that case concerned a class representative who was employed by one of the law firms representing the class. “‘[The] majority of courts . . . have refused to permit class attorneys, their relatives, or business associates from acting as the class representative. [¶] The most frequently cited policy justification for this line of cases arises from the possible conflict of interest resulting from the relationship of the putative class representative and the putative class attorney. Since possible recovery of the class representative is far exceeded by potential attorneys’ fees, courts fear that a class representative who is closely associated with the class attorney would allow settlement on terms less favorable to the interests of absent class members.’ [Citation.]” (Id. at p. 1264, fn. omitted.) That is not, however, the situation here, as there is no evidence that Rotenberg and Clarke are in an overly close relationship that would compromise the interests of potential class members.
Even if we were reviewing the evidence de novo, the evidence offered by defendants is simply inadequate to establish that a current conflict exists. Defendants offer every possible scenario under which the defamation action might possibly impact Clarke’s conduct of the case on behalf the class. Defendants claim to worry that Clarke might be too flexible, or too inflexible, or too aggressive and therefore inadequately represent the class. While defendants’ concerns for the interests of the class members is laudable, all they offer is speculation. The evidence does not establish a current conflict between Clarke’s duty of loyalty to the class and his own interests. The bottom line is that currently, Clarke’s interest is the same as that of the class — to prove that defendants are liable for selling a defective product.
While it is possible that somewhere down the road a conflict between Clarke and the class might develop, the court did not abuse its discretion by deciding that no such conflict exists now, and that the court’s supervisory role would allow it to monitor the case and take appropriate action if such a conflict did arise. Further, we presume that Clarke would recognize such an actual conflict and take appropriate action if necessary. “[T]he court should start with the presumption that, unless proven otherwise, lawyers will behave in an ethical manner.” (DCH Health Services Corp. v. Waite (2002) 95 Cal.App.4th 829, 834.)
Further, the potential for mischief in these cases and similar ones cannot be lightly disregarded. “Motions to disqualify counsel are especially prone to tactical abuse because disqualification imposes heavy burdens on both the clients and courts: clients are deprived of their chosen counsel, litigation costs inevitably increase and delays inevitably occur.” (City of Santa Barbara v. Superior Court, supra, 122 Cal.4th at p. 23, fn. omitted.) It is easy to see the facts of this case — where plantiff’s counsel makes public statements about the class action, leading to a defamation suit — recurring. To hold that any defamation suit automatically precludes plaintiff’s counsel of choice from representing the putative class, as defendants would have us do, would be an invitation to file such suits whenever possible, and, as defendants’ counsel admitted here, use it as “leverage” or to attempt to remove a troublesome opponent from the case. We decline to take such a radical step. Such cases, as all cases involving attorney disqualification, must be viewed individually and in light of the specific evidence presented. Given the facts here, we conclude the trial court did not abuse its discretion by denying the motion to disqualify Clarke.
III
DISPOSITION
The order is affirmed. Rotenberg is entitled to his costs on appeal.



MOORE, J.

WE CONCUR:



RYLAARSDAM, ACTING P. J.



ARONSON, J.




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