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Tritek Telecom, Inc. v. Superior Court of San Diego County

January 7, 2009

TRITEK TELECOM, INC., PETITIONER,
v.
SUPERIOR COURT OF SAN DIEGO COUNTY, RESPONDENT, CHIK-LUN MAK, REAL PARTY IN INTEREST.



PETITION for a writ of mandate challenging an order of the Superior Court of San Diego County, Yuri Hofmann, Judge. Petition granted. (San Diego County Super. Ct. No. 37-2008-00080152-CU-WM-CTL).

The opinion of the court was delivered by: McINTYRE, J.

CERTIFIED FOR PUBLICATION

Although corporate directors have an "absolute right" to "inspect and copy all [corporate] books, records and documents of every kind" (Corp. Code, § 1602), including documents protected by the attorney-client privilege, we conclude that a corporate director does not have the right to access documents covered by the attorney-client privilege that were generated in defense of a suit for damages that the director filed against the corporation. (All undesignated statutory references are to the Corporations Code unless otherwise specified.) As such, we grant the petition and direct the trial court to conduct further proceedings to determine whether: (1) the requested documents are covered by the attorney-client privilege and (2) if the requested documents are privileged, whether an exception exists or there was an express or implied waiver of the privilege.

FACTUAL AND PROCEDURAL BACKGROUND

Tritek Telecom, Inc. (Tritek) is a California corporation with two equal shareholders, Andre Rerolle and Prospect Development Inc. (Prospect), a company solely owned by Chik-Lun Mak. Tritek initially had three members on its board of directors, Alvin Ly, Rerolle and Mak. In May 2007, Rerolle and Mak hired L. Michael Wilson of the Apollo Law Group to act as Tritek's corporate counsel in relation to Ly's resignation from the board, leaving Rerolle and Mak as the sole members of Tritek's board of directors.

The following month, conflicts arose between Rerolle and Mak regarding the operation of Tritek and management responsibilities. Mak claimed, among other things, that Rerolle improperly locked him out of Tritek facilities, stopped paying his salary and misappropriated Tritek assets. In turn, Rerolle claimed that Mak engaged in numerous corporate improprieties.

Mak and Prospect sued Tritek, Rerolle and others, alleging various causes of action and seeking return of their $410,000 investment and damages against all defendants. (Prospect Development, Inc. v. Tritek Telecom, Inc., (Super. Ct. San Diego County, 2007, No. 37-2007-00072571-CU-MC-CTL (the shareholder action).) The shareholder action was assigned to the Honorable Ronald S. Prager. Tritek later filed a cross-complaint against Mak, Prospect, Ly and others alleging, among other things, that Mak breached his fiduciary duties to and defrauded the corporation. Wilson initially represented Tritek and Rerolle in the shareholder action, but Judge Prager granted a motion to disqualify him as counsel, noting that Wilson removed himself as counsel for Tritek and finding that Wilson had previously given advice to both Mak and Rerolle and was now precluded from representing one against the other.

Mak and Prospect later filed a complaint against Tritek and Rerolle, seeking the removal of Rerolle as a director for Tritek (which is pending before Judge Prager) and a separate petition for the appointment of a provisional director which was assigned to the Honorable Joan M. Lewis. Judge Lewis has since entered a judgment appointing Richard M. Kipperman as a provisional director of Tritek.

Mak filed the instant petition under section 1603 against Tritek, Rerolle and Wilson, seeking to enforce his right as a director of Tritek to inspect Tritek's books and records and the matter was assigned to the Honorable Yuri Hofmann. Tritek, Rerolle and Wilson answered, asserting the petition sought attorney-client privileged documents generated by Tritek and Rerolle in defense of Mak's related actions. Tritek also raised the attorney work product doctrine. After Mak dismissed Wilson and Rerolle, the trial court tentatively granted the petition, stating that Tritek's evidentiary showing was insufficient to justify withholding the documents and noting that Tritek had previously given Mak access to the requested documents and this "seemingly render[ed] the privilege objections moot."

At a hearing on the ruling, the trial court denied Tritek's requests for an evidentiary hearing and for judicial notice of additional documents. The trial court concluded that Tritek failed to meet its burden to show cause why the records should not be produced and adopted its tentative ruling.

After Mak filed a proposed judgment and proposed peremptory writ of mandate, Tritek objected to them on the ground they ordered disclosure of confidential attorney-client communications generated by Tritek in defense of litigation brought by Mak in other related actions. Wilson substituted out as Rerolle's attorney and objected to the proposed judgment and writ because they ordered disclosure of confidential attorney-client communications between himself and Rerolle. Rerolle also objected to the proposed judgment and writ on the same grounds and suggested submitting a privilege log. The trial court took no action on the objections, entered the proposed judgment and issued the peremptory writ of mandate.

Among other things, the judgment ordered Tritek to produce: (1) the entire content of the Apollo Law Group case files relating to the shareholder action and any other matters for which Apollo Law Group has been consulted or employed by Tritek; (2) all communications between Apollo Law Group and any officer, director or employee of Tritek; and (3) any case files evidencing Tritek's involvement in any litigation.

Tritek sought writ review of the judgment, arguing the trial court abused its discretion by failing to continue the evidentiary hearing and ordering disclosure of documents covered by the attorney-client privilege and attorney work product doctrine. We stayed production of the documents and the subsequent judgment and issued an order to show cause why the relief sought should not be granted. During the pendency of this proceeding, the parties settled the underlying case; however, they requested a decision on the unresolved legal issue presented in this writ proceeding.

(Mak's requests for judicial notice of various documents in the related actions are granted. (Evid. Code, ยง 452, subd. (d).) Tritek's request to strike portions of ...


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