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Indymac Federal Bank, F.S.B. v. McComic

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA


May 18, 2010

INDYMAC FEDERAL BANK, F.S.B., FORMERLY KNOWN AS INDYMAC BANK, F.S.B., PLAINTIFF,
v.
R. BARRY MCCOMIC, AN INDIVIDUAL; MCCOMIC CONSOLIDATED, INC., A CALIFORNIA CORPORATION; TRANS WEST HOUSING, INC., A CALIFORNIA CORPORATION; AND DOES 1-100, INCLUSIVE, DEFENDANTS.

The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER GRANTING MOTION TO WITHDRAW AS ATTORNEY [Doc. No. 18]

The law firm of Hecht Solberg Robinson Goldberg & Bagley LLP and Jerold H. Goldberg (collectively, "Movants") represent all Defendants in this case. They move to withdraw as counsel for all of Defendants due to Defendants' failure to pay their legal fees as agreed upon. They state that Defendants have also assented to the withdrawal and indicated that they will secure new counsel. However, no new counsel has been retained yet. For the reasons set forth below, the Court GRANTS the motion to withdraw and ORDERS that corporate Defendants McComic Consolidated, Inc. and Trans West Housing, Inc. obtain new counsel within 30 days of the filing of this Order.

BACKGROUND

I. Procedural History

This is a breach of guaranty case. Plaintiff filed its complaint on August 22, 2008 in the Superior Court for the County of San Bernardino. On October 14, 2008, Defendants removed the case to this Court. Defendants filed an answer to the complaint on October 21, 2008.

II. Present Motion

Movants now request the Court's permission to withdraw as counsel for all of Defendants. According to Movants, good cause for withdrawal exists because Defendants have failed to pay their legal fees and have also assented to the withdrawal. (Goldberg Decl. ¶ 8.) Movants also indicate that the corporate Defendants were informed that they do not have the right to appear in propria persona in federal court. (Id. ¶ 13.) Finally, Movants point out that there are currently no immediately scheduled hearings in this matter except for a mandatory settlement conference on June 3, 2010. (Id. ¶ 14.) Accordingly, Movants argue there is no resulting prejudice from their withdrawal.

DISCUSSION

"An attorney may not withdraw as counsel except by leave of court, and the decision to grant or deny counsel's motion to withdraw is committed to the discretion of the trial court." Beard v. Shuttermart of Cal., Inc., No. 07-CV-594-WQH (NLS), 2008 WL 410694, at *2 (S.D. Cal. Feb. 13, 2008) (internal quotation marks and citations omitted); see also CIV. L.R. 83.3(g)(3). In ruling on a motion to withdraw as counsel, courts consider: (1) the reasons why withdrawal is sought; (2) the prejudice withdrawal may cause to other litigants; (3) the harm withdrawal might cause to the administration of justice; and (4) the degree to which withdrawal will delay the resolution of the case. Beard, 2008 WL 410694, at *2 (citations omitted).

In the present case, good cause for withdrawal exists. First, Defendants have failed to pay Movants their legal fees as agreed upon and have indicated that they would be unable to make those payments. (Goldberg Decl. ¶¶ 4, 8-9.) Failure to pay attorney's fees can be a valid ground for withdrawal. See Canandaigua Wine Co. v. Edwin Moldauer, No. 1:02-cv-06599 OWW DLB, 2009 WL 89141, at *2 (E.D. Cal. Jan. 14, 2009); Cal. Rules of Professional Conduct Rule 3-700(C)(1)(f). Second, Defendants have assented to the Movants' withdrawal as counsel. (Goldberg Decl. ¶ 8.) Rule 3-700(C)(5) of the California Rules of Professional Conduct expressly allows withdrawal where the client "knowingly and freely assents to termination of the employment."

There is also no indication that the Movants' withdrawal would cause any prejudice to other litigants or that it would harm or delay the administration of justice. Rather, this case is still in its infancy and, except for a mandatory settlement conference, there are no immediately scheduled hearings. Moreover, there is no prejudice to Defendants because they have been on notice of the Movants' intent to withdraw at the very least since March 25, 2010. (See Goldberg Decl. ¶ 6.)

Granting the motion, however, would leave corporate Defendants McComic Consolidated, Inc. and Trans West Housing, Inc. without counsel. "It is a longstanding rule that corporations and other incorporated associations must appear in court through an attorney." CE Res., Inc. v. Magellan Group, LLC, No. 2:08-cv-02999-MCE-KJM, 2009 WL 3367489, at *2 (E.D. Cal. Oct. 14, 2009) (citing In re Am. West Airlines, 40 F.3d 1058, 1059 (9th Cir. 1994) (per curiam)). Moreover, the Civil Local Rules for the Southern District of California provide that corporations may appear in court only through an attorney. See CIV. L.R. 83.3(k). While some courts have relied on this requirement to deny a motion to withdraw as counsel,*fn1 the Court believes that such outcome would not be in everyone's best interest in this case. Accordingly, GOOD CAUSE appearing, the Court GRANTS the motion to withdraw, but also ORDERS that corporate Defendants McComic Consolidated, Inc. and Trans West Housing, Inc. obtain substitute counsel within 30 days of the filing of this Order. This should not be prejudicial to the corporate Defendants because they already had almost a month since receiving the Movants' formal notice of intent to withdraw to find new counsel. (See Goldberg Decl. ¶ 12.)

CONCLUSION

For the foregoing reasons, the Court GRANTS the Movants' motion to withdraw as counsel for all Defendants and ORDERS the corporate Defendants to obtain new counsel within 30 days of the filing of this order. The new counsel should make an appearance on behalf of Defendants McComic Consolidated, Inc. and Trans West Housing, Inc. by no later than June 17, 2010.

IT IS SO ORDERED.


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