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In re Amber Hotel Corporation

United States District Court, C.D. California

October 27, 2014

IN RE: AMBER HOTEL CORPORATION, Debtor.
v.
Stephen K. Post & Amber Hotel Corporation, Appellees. James J. Little, Appellant,

ORDER AFFIRMING THE JUDGMENT OF THE BANKRUPTCY COURT

VIRGINIA A. PHILLIPS, District Judge.

Appellant James J. Little moved to disqualify Lewis Landau, Appellee Stephen Post's attorney in the underlying bankruptcy of Post's Amber Hotel Corporation ("Amber"). The bankruptcy court denied Little's motion, and Little appeals. The bankruptcy court's ruling is AFFIRMED.

I. BACKGROUND

It was a spring night in 2008. Frank Martini had his driver bring him to an office in Malibu. He went in. The office looked new; not yet lived-in. Stephen Post met Martini at the office. Post opened a litigation bag and removed one hundred thousand dollars in cash. He gave it to Martini. Martini did not consider the space consumed by that much money, and had no way to carry it home. Martini asked Post for his litigation bag. Post gave it to him. They parted. (ER 23-25.)

At least, that is what Martini testified. Previously, Little defended Martini's interests in litigation against Amber - and Little won a judgment in Martini's favor, including attorney's fees. But before he could collect, Post allegedly paid Martini to settle the case behind Little's back - the litigation bag full of money - and thereby deprived Little of his fee award. (See ER 13, 29-31.) Little sued Amber (and others) for this and won a judgment, but Post threatened to seek bankruptcy protection for Amber unless Little settled for less than the amount he was owed. (ER 13-14.)

Little wanted to know what his options were. In the spring of 2011, working with Jeffrey Helfer, a financial advisor (and also a licensed attorney), Little got in touch with Lewis Landau, a bankruptcy lawyer. (See ER 14.) The depth of the discussions between Little, Helfer, and Landau is a subject of dispute between the parties. For now, it suffices to say that they consisted of an approximately half-hour long telephone call and the exchange of a few terse e-mail messages - attached to one of which was a draft bankruptcy filing given to Little by Amber's counsel, and to another, a copy of a state court judgment against Amber. (See ER 35-40, 94-98, 105-06.) The exchange contained a message from Landau reminding Little and Helfer that Landau had "not yet agreed to take on any responsibility for this matter and you should proceed in whatever manner you deem best unless and until we have entered into a written retention agreement." (ER 35.) Little and Landau never executed a retainer agreement, Amber filed for bankruptcy protection in March 2013, and Little went elsewhere to find representation for those proceedings.

That was not, however, the end of Landau's involvement with the Amber bankruptcy: Post retained Landau in May 2013, but Little said nothing of it until November 2013, when he filed a motion to disqualify Post's and Amber's attorneys. (See ER 15, 67.) (Little appeals only the denial of his motion as to Landau.)

In his motion, Little argued that he shared with Landau a significant amount of confidential strategic information about his position vis-à-vis Amber. (See ER 6-8.) Consequently, Little argued, even though Landau disclaimed an attorney-client relationship with him specifically, one nevertheless existed, and California Rule of Professional Conduct 3-310(E) therefore required Landau to obtain Little's informed written consent before undertaking his representation of Post.

Landau responded by attacking the sufficiency of Little's evidence that the two formed an attorney-client relationship, and posited instead that at most they had preliminary discussions about the possibility of Landau representing Little. (See ER 52-54.) Nothing disclosed in those discussions was confidential to Little, Landau argued, and as Little and Landau never agreed on Landau's fees, Landau explicitly disclaimed his representation of Little. Moreover, Landau observed, Little did not complain about his representation of Post until months after Landau undertook it. Little's contention that he was unaware until then of Landau's representation of Post rang hollow, Landau insisted: A few months before filing his motion, Little himself wrote to Landau regarding discovery in the case, and sent the letter to Landau at the same e-mail address by which they corresponded two years earlier. (See ER 71.) Indeed, Landau responded to the letter (see ER 85), and Little received and replied to that response (see ER 89-91).

The bankruptcy court was inclined to agree with Landau, and issued a tentative ruling: "Deny the Motion because Little has not satisfactorily shown that he is a former client of Landau's or that confidential information was disclosed during the initial consultation such that a fiduciary relationship was formed." (Ex. 1 to Appellee's ER.) After receiving the tentative ruling, the night before the bankruptcy court was to hold a hearing on the matter, Little sought to file a supplemental declaration from Helfer purporting to further bolster his case. The bankruptcy judge refused to review it, and declined Little's offer to present evidence supporting his position in camera. (ER 157-58.) The court then issued an order confirming its tentative ruling. (ER 174-75.) This appeal followed.

II. LEGAL STANDARD

The bankruptcy court's decision to disqualify - or, in this case, not to disqualify - counsel is reviewed for an abuse of discretion. Cohn v. Rosenfeld , 733 F.2d 625, 631 (9th Cir. 1984). A bankruptcy court abuses its discretion if it fails to identify the correct legal rule to apply to the matter before it (a question reviewed de novo), or if it the applies that rule to the facts in a way that is illogical, implausible, or finds no support in inferences that can be drawn from those facts. In re Taylor , 599 F.3d 880, 887-88 (9th Cir. 2010) (citing United States v. Hinkson , 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)).

III. DISCUSSION

The California Rules of Professional Conduct require an attorney to seek the "informed written consent" of a former client before "accept[ing] employment adverse to the... former client where, by reason of representation of the... former client, " the attorney "has obtained confidential information material to the employment." Cal. Rules of Prof'l Conduct 3-310(E). Failure to comply with this Rule normally results in the disqualification of counsel from representing the latter client in a proceeding adverse to the former. Flatt v. Super. Ct. , 9 Cal.4th 275, 283 (1994); see generally L.B.R. 2090-2(a) (subjecting attorneys appearing before the bankruptcy court to the standards of professional conduct applicable in the district ...


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