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Deluca v. State Fish Co., Inc.

California Court of Appeals, Second District, Third Division

June 27, 2013

JOHN MICHAEL DELUCA et al., Plaintiffs and Appellants,
v.
STATE FISH CO., INC., a California corporation, Defendant and Respondent.

APPEAL from an order of the Superior Court of Los Angeles County, Nos. BC353346 & NC041884 Ross M. Klein, Judge.

Law Offices of John A. Schlaff and John A. Schlaff; Vakili & Leus and Sa’id Vakili for Plaintiff and Appellant.

Law Offices of Michael Leight and Michael Leight for Defendant and Respondent.

CROSKEY, J.

Following trial and appeal in cross-actions, a single cause of action remained for trial between the parties. The plaintiff in the remaining action informed the defendant that he would be using, as an expert witness, an expert who had testified on behalf of the defendant in the prior trial. The defendant objected, on the ground that the expert possessed confidential attorney-client and work product information, learned when retained on behalf of the defendant. The defendant then moved to disqualify plaintiff’s counsel from further representing plaintiff, on the basis that plaintiff’s counsel had obtained access to the confidential information possessed by the expert. The trial court granted the motion and disqualified plaintiff’s counsel. On appeal by the plaintiff and his disqualified counsel, we conclude that the defendant failed in its burden to establish the expert possessed confidential information materially relevant to the pending proceedings. We therefore will reverse.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Underlying Action

The attorney disqualification issue arose in the context of a dispute between State Fish Company, Inc. (State Fish), a seafood business owned and operated by the DeLuca family, and John DeLuca, a former director of State Fish who has since opened a competing seafood business. More particularly, the instant litigation involved a dispute over the ownership of a fish storage, packing, and processing plant known by the parties as “Plant 2.” Both State Fish and DeLuca claimed ownership of Plant 2.

It was undisputed that, for approximately 15 years, while DeLuca was affiliated with State Fish, State Fish paid DeLuca $30, 000 per month rent for Plant 2. In 2004, DeLuca obtained an appraisal of Plant 2, to determine the fair market rent of the plant. The written appraisal calculated the fair market rent as of January 1, 2004 to be $45, 453 per month, and indicated a minimum increase of 3% per year. Based on this appraisal, DeLuca gave State Fish notice of a rent increase, effective January 1, 2005, to $46, 800.[1] State Fish refused to pay the increased rent.

Although the notice of rent increase set in motion DeLuca’s departure from State Fish, his actual departure was delayed for various reasons. On May 1, 2006, DeLuca served State Fish with a 30-day notice to quit, terminating its tenancy at Plant 2. A 3 day notice to quit followed on May 26, 2006. On June 2, 2006, when State Fish had not vacated the premises, DeLuca filed an unlawful detainer action, seeking possession of Plant 2 and its fair rental value from June 1, 2006.

On August 2, 2006, State Fish filed a multi-count complaint against DeLuca, for, among other things, rescission of the deed to Plant 2 and breach of the corporate opportunity doctrine. The cases were deemed related and eventually consolidated.

The actions proceeded to trial. At trial, State Fish took the position that DeLuca held only nominal title to Plant 2. It further argued that DeLuca had violated the corporate opportunity doctrine by taking title to Plant 2. As is relevant to the instant dispute, State Fish offered testimony of Leo Vusich, an industrial real estate broker. Vusich testified to the unique qualities of Plant 2 and its critical importance to State Fish’s business. He testified that, if State Fish were to build a similar facility, it would take two years, cost upwards of $16 million, and would not be located as well as Plant 2. In cross-examination by DeLuca’s counsel, Vusich was asked to determine the fair market rent for a facility such as Plant 2; he testified that $70, 000 per month would be reasonable. When presented with the hypothetical of being asked his advice if offered the opportunity to rent Plant 2 for $46, 800 per month, he replied, “Great deal.” In other words, Vusich, as State Fish’s expert, indicated a fair rental value for Plant 2 which was substantially higher than the amount indicated by DeLuca’s appraiser. Vusich not only confirmed that DeLuca’s appraiser’s valuation of the fair rental value was reasonable; his testimony strongly implied that DeLuca’s appraiser had undervalued the property.

At the close of evidence, State Fish decided it wished to waive jury and/or proceed solely on its causes of action in equity. The trial court then severed and declared a mistrial in DeLuca’s unlawful detainer action, and excused the jury.

The trial court then ruled in favor of State Fish, concluding that DeLuca had violated the corporate opportunity doctrine, and rescinding the deed in favor DeLuca. DeLuca appealed and we reversed, concluding that the trial court erred in its application of the corporate opportunity doctrine. We further concluded that DeLuca had established the defense of laches as a matter of law, and was therefore entitled to judgment in his favor. We therefore remanded for a retrial on DeLuca’s mistried complaint for unlawful detainer.

2. DeLuca Retains Vusich on Remand

Our remittitur issued on September 26, 2011. As several years had passed since the initial trial, it was necessary for DeLuca and his experts to reinspect Plant 2, in order to reevaluate it for the unlawful detainer retrial. In the course of scheduling the inspection of Plant 2, DeLuca’s counsel indicated to State Fish’s counsel that Vusich would be inspecting Plant 2 on DeLuca’s behalf.

State Fish’s counsel immediately objected, on the basis that Vusich had been State Fish’s expert and was prohibited from switching sides in the litigation. Numerous letters were exchanged among counsel, [2] and the scheduled inspection of Plant 2 was cancelled by State Fish, until such time as the dispute regarding Vusich could be resolved.

The inspection was cancelled on December 27, 2011; the trial was set for February 14, 2012. DeLuca intended to bring discovery motions, including a motion to reset the cancelled inspection. On January 10, 2012, DeLuca brought an ex parte application to specially set his discovery motions as soon as possible. DeLuca noted that the earliest date the court could give him was January 31, 2012, which was too close in time to the trial date to enable him to move for summary adjudication following discovery.[3] On January 11, 2012, the court denied the motion, leaving DeLuca’s discovery motions set on January 31, 2012. The court further added[4] that, should State Fish seek to file a motion to disqualify DeLuca’s counsel, such a motion should also be set for January 31, 2012. The court set a shortened briefing schedule for such a motion.[5]

3. State Fish’s Disqualification Motion

Pursuant to the briefing schedule set by the trial court, State Fish filed its motion to disqualify DeLuca’s counsel on January 17, 2012.[6] The motion was supported by a declaration of State Fish’s counsel, Attorney Michael Leight, which stated the following course of events. On July 19, 2006, [7] Attorney Leight first contacted Vusich advising him of Attorney Leight’s desire to retain him as a consultant to assist with preparation in the consolidated cases.[8] Thereafter, Attorney Leight had a number of telephone conversations with Vusich where he “asked for Mr. Vusich’s advice, and consultation, concerning issues in the consolidated cases.”[9] During those conversations, Attorney Leight “also disclosed to Mr. Vusich some of [his] own impressions, conclusions, opinions and theories about certain issues in the consolidated cases.” Thereafter, Attorney Leight associated Attorney Mitchell Stein to assist in the representation of State Fish in the consolidated cases, and it was Attorney Stein, not Attorney Leight, who subsequently decided to retain Vusich to testify at trial.[10] Attorney Stein designated Vusich as an expert on October 29, 2007. In addition to his discussions with counsel as an expert, Vusich had been contacted directly by State Fish, prior to the initial contact by Attorney Leight, and had been “communicating with State Fish personnel regarding State Fish’s business operations, need for facilities, etc.”[11] In the course of his work for State Fish, Vusich came into possession of ...


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