United States District Court, C.D. California
ORDER DENYING MOTION FOR RECONSIDERATION AND
DISCUSSING DISQUALIFICATION
Andrew
J. Guilford United States District Judge
This
matter concerns whether a lawyer can represent-at the same
time, in the same litigation, in the same courthouse-a
criminal and his victim.
Being a
defendant-particularly a criminal one-can be lonely. As a
society, we don't require a defendant's friends to
stand by the defendant. We don't require a
defendant's parents to stand by the defendant. We
don't require a defendant's children to stand by the
defendant. We don't even require a defendant's spouse
to stand by the defendant, though that spouse is often
someone who took an oath to do so.
But a
lawyer is different. Representing a client creates an
unshakable loyalty that can still persist when bonds of
friendship and family fail. There's a practical reason
for this. A lawyer needs to know the worst facts to give
clients the best advice. Clients can't feel comfortable
providing such candor unless they know their lawyer is
absolutely committed to advancing the clients' interests
and advocating against the conflicting interests of others.
Though the rest of the world may be united against them,
clients need to know that at least their lawyer will reliably
remain in their corner, even in the face of great temptation.
The
importance and impact of loyalty in the attorney-client
relationship extends beyond the client and counsel, to courts
too. Judges are often confronted with important issues and
difficult disputes. Under our system of law, judges rely on
adversarial advocates to help ensure that courts reach the
right results in these situations. Adversarial advocacy
assumes that lawyers are fiercely loyal in representing their
clients. If that loyalty doesn't exist, the engine of our
legal system can't run. Justice can't be
administered.
And the
importance and impact of loyalty in the attorney-client
relationship extends even further-beyond clients, beyond
counsel, beyond courts-to our country itself. We live in a
nation governed by the rule of law. We've constructed a
powerful government to administer that law-a government that
can deprive a person of property, liberty, and even life. But
unlike governments of men, which depend on might, our
government of law ultimately depends on the consent of the
governed for its continued existence. The public must trust
that the government and the legal system that undergirds it
are fair and just. Lawyers serve as both stewards and
servants of that trust. Since well before the law was an
industry, our society looked to the profession to safeguard a
complex system that keeps our country going. When the loyalty
of a lawyer to a lawyers' clients comes into question,
the public can lose faith in both the justice system and the
bar that purportedly protects it. So while maintaining
private confidences, a lawyer must sustain the public's
confidence. In this way a lawyer leads two lives, both bound
by loyalty.
Given
all this, it's easy to see why a lawyer's duty of
loyalty is a duty recognized in the common law of every
jurisdiction of the United States. It's easy to see why a
lawyer's duty of loyalty is codified in every significant
American code of legal ethics ever promulgated. It's easy
to see why a lawyer's duty of loyalty is the most
fundamental of all duties a lawyer owes a client. And
it's easy to see why so much is endangered when a lawyer
lets opportunity affect that loyalty.
This
matter presents a uniquely complex situation that requires
the extensive review that follows. That review conclusively
reaffirms what might otherwise be considered a commonsense
proposition. That is, the duty of loyalty is improperly and
impermissibly compromised when one law firm represents-at the
same time, in the same litigation, in the same courthouse-a
criminal and his victim. That's what happened here, and
if the Court had allowed it to continue, loyalty would have
been lost in ways that the client would not-and sometimes
could not-understand until after harm had been done. Thus,
there could be no informed waiver.
1.
INTRODUCTION
Defendants
stand accused of conspiring to defraud plaintiff State
Compensation Insurance Fund ("SCIF") by submitting
fraudulent insurance bills and providing or receiving illegal
kickbacks. The litigation arising out of this purported
scheme involves dozens of defendants, two civil suits and a
criminal suit, and well over a thousand filings spanning
three years and three dockets.
The
most recent round of motion practice focused on the question
already posed about whether here a law firm could represent a
criminal and his victim. Since the answer was no, on March
22, 2016, the Court granted a motion for disqualification
("Motion for Disqualification") filed by defendants
Lokesh Tantuwaya and Dr. Lokesh Tantuwaya, M.D., Inc.
(collectively, "Tantuwaya"). The Court disqualified
the law firm of Hueston Hennigan LLP from representing SCIF
(the alleged victim) in this litigation given its concurrent
representation of Paul Randall (an admitted criminal
perpetrator). SCIF filed a motion for reconsideration
("Motion for Reconsideration").
The
Court DENIES the Motion for Reconsideration. The previous
disqualification remains, and the previous tentative opinion
is expanded here to further explain why disqualification is
required.
2.
BACKGROUND
A
review of the relevant law is, of course, necessary and
helpful. But before discussing the applicable legal
standards, it's important to understand that this
litigation is uniquely complex in ways that may limit the
applicability of some case law, particularly since one client
here has the Sixth Amendment right to counsel for those
facing criminal charges. Cases like this are reassuringly
rare. Here's a summary.
2.1The
Civil Side of this Litigation
SCIF
provides California employers with workers' compensation
insurance policies. Under those policies, SCIF reimburses
medical providers that treat employees who get sick or
injured on the job. According to SCIF, various medical
providers-including doctors, clinics, and marketers-schemed
to defraud SCIF by submitting fraudulent insurance bills for
medical services, medical hardware, and medications. There
were several components to the alleged scheme. Medical
providers allegedly entered into contracts to inflate the
costs of medical procedures and medications. Medical
providers allegedly paid kickbacks to doctors for referring
patients to preferred facilities or for using preferred
products or medications. Medical providers allegedly entered
into illegal fee-sharing agreements. And medical providers
allegedly overbilled SCIF for medical services.
In June
2013, SCIF filed a lawsuit ("SCIF 1") against a key
architect of the alleged scheme, Michael D. Drobot Sr., as
well as other alleged co-conspirators. In March 2015, those
defendants filed a third-party complaint seeking indemnity
from other medical providers, including various doctors and
their associated entities. In July 2015, the Court granted
SCIF leave to file an amended complaint that named as
defendants the parties who were already named as third-party
defendants in the third-party complaint. Accordingly, in its
third amended complaint ("TAC"), SCIF added
twenty-eight of the third-party defendants. But notably, SCIF
didn't add Randall, even though Randall was named as a
third-party defendant in the third-party complaint.
In
August 2015, SCIF filed another lawsuit ("SCIF 2")
raising similar allegations against other medical providers
that the Court didn't allow SCIF to add in SCIF 1. Again,
notably, SCIF didn't add Randall as a defendant.
Let's
summarize. By the end of August 2015, there were two
operative complaints-the TAC in SCIF 1 and the complaint in
SCIF 2. In SCIF 1, there was also an amended action for
equitable indemnity ("CC/FATPC") between the
cross-defendants and four other third-party defendants not
named in the TAC. Notably, Randall is a defendant in the
CC/FATPC.
In
November 2015, the Court heard motions to dismiss the TAC and
CC/FATPC in SCIF 1, a motion for summary judgment in SCIF 2,
and motions to dismiss the complaint in SCIF 2. In December
2015, the Court denied those motions.
2.2The
Criminal Side of this Litigation
Federal prosecutors were also involved in the litigation
arising out of the alleged fraudulent scheme, even before
they filed motions to intervene in SCIF 1 and SCIF 2. In
April 2014, Drobot Sr. pled guilty to workers'
compensation fraud against SCIF and others. In November 2015,
the U.S. Department of Justice announced that the government
had charged five other individuals in the same kickback
scheme. According to the government's press release, all
five criminal defendants were cooperating in the
government's ongoing investigation of the scheme, dubbed
"Operational Spinal Cap." The government's
press release stated that
[t]he schemes involved tens of millions of dollars in illegal
kickbacks to dozens of doctors, chiropractors and others. As
a result of the illegal payments, thousands of patients were
referred to Pacific Hospital in Long Beach, where they
underwent spinal surgeries that led to more than $580 million
in bills being fraudulently submitted during the last eight
years of the scheme alone. Many of the fraudulent claims were
paid by the California worker's compensation system and
the federal government.
Randall
was charged for his involvement in that scheme. As the
government's press release states,
Paul Richard Randall, 56, of Orange, California, a health
care marketer previously affiliated with Pacific Hospital and
Tri-City Regional Medical Center in Hawaiian Gardens, pleaded
guilty on April 16, 2012, before Judge [Josephine L.] Staton
to conspiracy to commit mail fraud. Randall, who admitted
recruiting chiropractors and doctors to refer patients to
Tri-City in exchange for kickbacks, is scheduled to be
sentenced on April 8, 2016. . . . Randall, who also
facilitated the Pacific Hospital scheme by introducing
doctors to Drobot [Sr.] and coordinating kickback
arrangements, pleaded guilty to participating in a separate,
similar scheme involving Tri-City Regional Medical Center.
Randall
hasn't been sentenced yet.
In
January 2016, the United States moved to intervene in SCIF 1
and SCIF 2 to modify several subpoenas and restrict discovery
requests. The Court granted the motions with modifications,
noting the three cases' overlap and the "countless
ways" certain civil discovery requests could thwart the
government's ongoing criminal investigation into the
fraud. The Court was also persuaded that some of the
information defendants sought was protected by the law
enforcement privilege.
2.3
The First Motion to Disqualify
Back
in July 2014, the Court denied a motion to disqualify
Plaintiff's counsel-at the time, the law firm Irell &
Manella LLP-filed by pharmacy defendants. Between May 2010
and June 2011, an Irell & Manella partner exchanged over a
hundred emails with Michael R. Drobot Jr., a current
defendant. The partner had advised Drobot Jr. about buying
three pharmacy defendants from Drobot Sr., who is his father
and a current defendant. In June 2013-two years after the
partner left Irell & Manella-Irell & Manella agreed to
represent the current plaintiff, SCIF. The firm did not have
knowledge of the former partner's emails or the conflict.
In a nineteen page order, the Court denied the motion to
disqualify Irell & Manella because there wasn't enough
evidence to show that confidential information was conveyed
to the firm. The Court stated that the motion posed a
"close question, " but ultimately held that
disqualification was inappropriate.
2.4
The Second Motion to Disqualify
The
most recent motion to disqualify also sought to disqualify
Plaintiff's counsel-at the time, Hueston Hennigan LLP.
Although the firm name had changed, SCIF's attorneys
hadn't. In January 2015, John Hueston and Brian Hennigan,
along with thirty or so other lawyers, left Irell & Manella
to form Hueston Hennigan. There Hueston and other lawyers
continued to represent SCIF. During a December 2015 mediation
session, Tantuwaya's counsel learned that Hennigan
represented Randall, one of the third-party defendants in
SCIF 1, perhaps beginning as early as 2010 or 2011. This
conflict only came to light after Judge Staton unsealed
Randall's criminal case in late November 2015. Hennigan
has maintained that he only represented Randall in his
criminal case, and not in the civil cases before this Court.
According to Hennigan, attorney Anthony Graham of Graham &
Martin LLP has been representing Randall in the civil cases.
Tantuwaya
filed the most recent motion for disqualification based on
Hueston Hennigan's concurrent representation of Randall
and SCIF. Before filing the motion, Tantuwaya and SCIF met
and conferred through each party's counsel. During that
meeting, SCIF threatened to seek sanctions against
Tantuwaya's counsel for filing the motion. SCIF did not
mention that it had gotten conflict waivers from both Randall
and SCIF. A few defendants joined the motion. Many other
defendants represented by larger law firms did not.
The
gist of Tantuwaya's motion was straightforward. He
pointed out that Hueston Hennigan was representing SCIF, the
victim of a fraud, and Randall, a perpetrator of that fraud,
at the same time in the same litigation arising out of the
same fraud. He argued that this representation created
conflicts of interest that required the Court to disqualify
Hueston Hennigan from representing SCIF.
The
Court considered everything the parties submitted, including
not only the motion, opposition, and reply, but also
sur-replies, sur-sur-replies, supplemental declarations, and
other typically-disallowed documents that the Court allowed
the parties to file. Based on those filings and before the
hearing on the motion for disqualification, the Court issued
a detailed, nineteen page tentative opinion for the
parties' benefit. The Court then provided the parties
more than ninety minutes of oral argument to address the
tentative. SCIF argued for much, and perhaps a majority, of
that time.
After
reviewing all that, the Court issued a short order granting
the motion to disqualify. Stating the obvious, this
inherently meant that the Court denied SCIF's request for
sanctions against Tantuwaya's counsel. The Court promised
the parties that it would issue a longer opinion further
explaining the decision to disqualify. This is that opinion.
2.5The
Motion for Reconsideration
SCIF
then filed the Motion for Reconsideration, which precipitated
another round of papers and another lengthy hearing, this one
spilling over from the morning into the afternoon.
That
brings us to the present. After considering about a thousand
pages of documents and more than four hours of oral argument
on this disqualification issue, the Court confirms that
disqualification was appropriate and necessary here, while
finding no grounds for the Motion for Reconsideration.
3.THE
SECOND MOTION TO DISQUALIFY
3.1Legal
Standard
"The
authority of a trial court to disqualify an attorney derives
from the power inherent in every court to control in
furtherance of justice, the conduct of its ministerial
officers." City & Cty. of San Francisco v. Cobra
Sols., Inc., 38 Cal.4th 839, 846 (2006) (alteration and
internal quotation marks omitted) (quoting People ex rel.
Dep't of Corps. v. SpeeDee Oil Change Sys., Inc., 20
Cal.4th 1135, 1139 (1999)). California's ethical rules,
including applicable California state court decisions and the
Rules of Professional Conduct of the State Bar of California,
provide guidance about when courts should disqualify
attorneys. See L.R. 83-3.1.2. But "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 [instead] as a failure to avoid the appearance
of impropriety." Gregori v. Bank of Am., 207
Cal.App.3d 291, 308 (1989), modified (Feb. 17,
1989).
Although
there are competing interests to consider when
disqualification is at issue, one interest arises above all
others. "[D]isqualification motions involve a conflict
between the clients' right to counsel of their choice and
the need to maintain ethical standards of professional
responsibility." SpeeDee Oil, 20 Cal.4th at
1145. But "[t]he paramount concern must be to preserve
public trust in the scrupulous administration of justice and
the integrity of the bar." Id. Accordingly,
"[t]he important right to counsel of one's choice
must yield to ethical considerations that affect the
fundamental principles of our judicial process."
Id.
3.2
Analysis
This
Court must exercise its inherent power in furtherance of
justice in part to protect important duties like loyalty, and
to avoid the appearance of impropriety.
As
noted, loyalty means a lot for litigants, their lawyers and
the law generally. "Attorneys have a duty to maintain
undivided loyalty to their clients to avoid undermining
public confidence in the legal profession and the judicial
process. The effective functioning of the fiduciary
relationship between attorney and client depends on the
client's trust and confidence in counsel."
Id. at 1146 (citation omitted).
So
it's not surprising that a lawyer's unfaithfulness is
unacceptable. California's ethics rules generally bar an
attorney from representing clients with adverse interests.
See Cal. Rules of Prof'l Conduct 3-310(C). That
general rule is true regardless of whether there's an
actual or merely potential conflict between the clients.
See id.
Loyalty
is a particularly important consideration when a lawyer is
thinking of concurrently representing clients with adverse
interests. Concurrent representation of clients with adverse
interests raises different, and arguably more serious, ethics
concerns than successive representation. See Ontiveros v.
Constable, 245 Cal.App.4th 686, 700 (2016).
This is
true even when the attorney is concurrently representing the
clients in unrelated matters. That's why the California
Supreme Court held in Flatt v. Superior Court that
[i]n evaluating conflict claims in [concurrent]
representation cases, the courts have . . . imposed a test
that is more stringent than that of demonstrating a
substantial relationship between the subject matter of
successive representations. Even though the simultaneous
representations may have nothing in common, and there is no
risk that confidences to which counsel is a party in the one
case have any relation to the other matter, disqualification
may nevertheless be required. Indeed, in all but a few
instances, the rule of disqualification in simultaneous
representation cases is a per se or "automatic"
one.
Flatt v. Superior Court, 9 Cal.4th 275, 284 (1994)
(footnote omitted). "[R]epresentation adverse to a
present client must be measured not so much against the
similarities in litigation, as against the duty of undivided
loyalty which an attorney owes to each of his clients."
Unified Sewerage Agency of Wash. Cty., Or. v. Jelco
Inc., 646 F.2d 1339, 1345 (9th Cir. 1981) (discussing
concurrent representation under the old ABA Code of
Professional Responsibility).
But if
the representations do happen to have something in common,
concurrent representation is even less appropriate. In
another case, the California Supreme Court remarked that
[t]he most egregious conflict of interest is representation
of clients whose interests are directly adverse in the same
litigation. Such patently improper dual representation
suggests to the clients-and to the public at large-that the
attorney is completely indifferent to the duty of loyalty and
the duty to preserve confidences.
SpeeDee Oil, 20 Cal.4th at 1147 (citing
Flatt, 9 Cal.4th at 284 n.3). It is "patently
improper" for "attorneys in the same firm to
represent adverse parties in the same litigation."
Id. at 1139 (citing Flatt, 9 Cal.4th at 284
n.3). In these situations, courts don't typically analyze
whether the representations are substantially related, as
disqualification is automatic for a concurrent conflict of
interest even on "wholly unrelated" matters.
See Flatt, 9 Cal.4th at 283.
With
these considerations in mind, the Court analyzed how this
actual, adverse, concurrent representation conflict
interfered with the Court's ability to ensure both the
actuality and appearance of justice.
3.2.1
Standing
First,
there was a question about standing. "As a general rule,
courts do not disqualify an attorney on the grounds of
conflict of interest unless the former client moves for
disqualification." Kasza v. Browner, 133 F.3d
1159, 1171 (9th Cir. 1998) (internal quotation marks omitted)
(quoting United States v. Rogers, 9 F.3d 1025, 1031
(2d Cir. 1993)). Preliminarily, the reference here to
"former client" suggests successive representation.
Indeed, requiring a client or former client to complain would
limit the ethical review of concurrent representations, since
the parties remain aligned with their counsel. SCIF argued
that all of the moving defendants lacked standing to bring
the motion for disqualification since none had ever been
clients of Hueston Hennigan.
But the
courts in this state and the parties in this
litigation-including SCIF-have acknowledged that there are
exceptions to the general rule. When there is an ethical
breach "so severe that it ‘obstructs the orderly
administration of justice, ' the party who finds his
claims obstructed has standing" to bring a motion to
disqualify. Colyer v. Smith, 50 F.Supp.2d 966, 972
(C.D. Cal. 1999). Put differently, "where the ethical
breach so infects the litigation . . . that it impacts the
moving party's interest in a just and lawful
determination of her claims, " the moving party can have
standing to bring a motion to disqualify. Id. Thus,
it's not surprising for the California Court of Appeal to
observe that "[c]ase law abounds with examples of orders
disqualifying counsel that have not been the product of
motions by present or former clients." Kennedy v.
Eldridge, 201 Cal.App.4th 1197, 1204 (2011).
This
was just one more example of the exception. Tantuwaya and the
other defendants who joined his motion had standing to
disqualify Hueston Hennigan because Hueston Hennigan's
breach so infected this litigation that it impacted
Tantuwaya's and the other defendants' ability to
defend themselves against SCIF's allegations in so many
ways.
First,
there was discovery. Hueston Hennigan's conflict of
interest had already affected Tantuwaya's and other
moving defendants' efforts to get discovery from Randall.
Tantuwaya stated that discovery on Randall's connection
to the scheme was crucial to his defense. Several defendants,
including Tantuwaya, tried to depose Randall. During
Randall's deposition with Tantuwaya's counsel,
Randall inconsistently invoked his Fifth Amendment privilege
against self-incrimination. Although Hennigan didn't
attend the deposition, it seems likely that Hennigan
counseled Randall about the risks involved in talking about
his participation in the scheme, and about the importance of
asserting the Fifth when asked about the scheme. Of course,
the attorney-client privilege protected Hennigan's
communications with Randall and thus hindered the Court's
ability to tease out the full effects of Hennigan's
advice on Tantuwaya's discovery efforts.
The
conflict had already impacted discovery in other ways too.
SCIF responded to interrogatories for documents by invoking
the law enforcement privilege, without identifying who held
that privilege. But the law enforcement privilege didn't
necessarily extend to SCIF. So was Hueston Hennigan invoking
Randall's privilege on behalf of Randall's adversary?
Tantuwaya suggested that was the only plausible explanation
why SCIF would invoke the law enforcement privilege.
Second,
there was the risk of victory lost. Tantuwaya and the other
moving defendants could have been robbed of a hard-fought win
in this years-long litigation because of the conflict. If the
third-party plaintiffs had gotten a judgment against Randall
in the civil cases, Randall might have successfully moved to
have that judgment set aside because he was represented
elsewhere by a conflicted attorney. Similarly, if a judgment
against SCIF had been obtained in the civil cases, SCIF might
have successfully moved to have that judgment set aside
because it was represented by conflicted attorneys. And in
the criminal case, Randall could have argued that he should
be allowed to change his guilty plea because his lawyer's
conflict of interest deprived him of his Sixth Amendment
right to counsel.
These
and the other concrete, particularized harms discussed
elsewhere in this opinion persuaded the Court that Tantuwaya
and the other moving defendants had sufficient personal stake
to bring the motion for disqualification. Tantuwaya and these
defendants therefore satisfied the "irreducible
constitutional minimum" of Article III standing.
Lujan v. Defs. of Wildlife, 504 U.S. 555, 560
(1992).
And
even if they somehow didn't, standing still wouldn't
have presented an issue here. District courts have an
"inherent obligation to manage the conduct of attorneys
who appear before [them] and to ensure the fair
administration of justice." Colyer, 50
F.Supp.2d at 972 (citing Chambers v. NASCO, Inc.,
501 U.S. 32, 43-44 (1991)); see also SpeeDee Oil, 20
Cal.4th at 1145 (discussing a trial court's inherent
authority to disqualify an attorney). This obligation
overrides any "prudential barrier to litigating the
rights and claims of third parties, " like standing.
Colyer, 50 F.Supp.2d at 972; cf. Woods v.
Superior Court, 149 Cal.App.3d931, 936 (1983) (emphases
removed) ("[D]isqualification should be ordered not only
where it is clear that the attorney will be adverse to his
former client but also where it appears that he
might."). The Court would have honored that obligation
by raising the disqualification issue on its own when it
found out about the conflict, as it inevitably would have.
See, e.g., People v. Peoples, 51
Cal.App.4th 1592 (1997) (affirming the ability of a trial
court to disqualify counsel on the court's motion). One
way or another, standing wasn't a problem here. With
standing satisfied, the analysis turns to the actuality and
adversity of the conflict in the concurrent representation.
3.2.2
The Actual, Adverse, Concurrent Representation
Conflict
Here,
there was an actual, adverse, concurrent representation
conflict, despite SCIF's arguments to the contrary. For
starters, it was undisputed that Hueston Hennigan represented
Randall and SCIF at the same time. It was also evident that
Randall interests were and are actually adverse to SCIF's
interests, for many reasons.
For
example, the existence of an actual, adverse conflict
uniquely explained otherwise-puzzling past events in this
litigation. The Court found it curious that Hueston Hennigan
didn't file any response to the government's motion
to intervene and modify subpoenas. That makes sense now,
because responding to the motion could have furthered either
Randall's or SCIF's interests, while undermining the
other's interests.
The
existence of an actual, adverse conflict also explained
Randall's involvement in some, but not all, parts of the
litigation. The Court found it curious that SCIF didn't
name Randall in the TAC, even though he was named in the
third-party complaint and SCIF sued virtually all of the
other third-party defendants. When the Court asked Hueston
Hennigan why SCIF didn't sue Randall, a Hueston Hennigan
attorney responded that "for Randall's case, he is
the one that they know for sure is judgment proof that they
already have a judgment against." Hennigan agreed.
The
Court isn't convinced that Randall is judgment proof. So
what would have caused SCIF to think he was? Many reasons are
troubling. For example, did SCIF think Randall was judgment
proof because Hennigan knew Randall wasn't paying his
legal bills, as Hennigan's statement at the hearing that
"[t]his is a case, in fact, where we have reason
personally to believe that Mr. Randall is judgment
proof" may have suggested? Or did SCIF think Randall was
judgment proof because Hennigan or another Hueston Hennigan
attorney had access to Randall's financial information
and shared it with the team of attorneys doing work for SCIF?
These and many other possible explanations would suggest the
attorneys working for Randall were breaching their duty of
loyalty and sharing information with the attorneys working
for SCIF in a way that improperly benefitted SCIF. The
conflict had already put Hueston Hennigan in an untenable
position regarding disclosure of information. On one hand,
the duty of loyalty (likely including the duty to inform)
dictated that the firm use the information available to it to
help its clients. On the other hand, the duty of loyalty
(and, as discussed later, a few of the waivers in this case)
dictated that Hueston Hennigan protect their clients'
confidential information. The bottom line is Hueston Hennigan
was in what the California Supreme Court called "a form
of zero sum game"-Hueston Hennigan attorneys had and
would continue to have had knowledge that could help one
client at the expense of another. Flatt, 9 Cal.4th
at 289.
And of
course, maybe it's not Randall's purported inability
to satisfy a judgment that caused SCIF to leave Randall out
of the TAC. There's lots of evidence that Randall
isn't judgment proof. Tantuwaya's counsel did an
impressive job hunting down seemingly hidden assets and other
evidence that suggest Randall has significant assets, despite
assertions to the contrary.
So if
not because he's judgment-proof, why leave Randall out?
The conflict offered many potential explanations. Maybe
Hueston Hennigan thought it was clear of ethics rules so long
as it didn't directly sue Randall. Or perhaps Hueston
Hennigan was trying to benefit a still-solvent Randall at
SCIF's expense by keeping him less involved in the civil
suit. Another moving defendant, Randy Rosen, offered his own
theory as to why Randall wasn't named.
Hueston Hennigan had notice of potential Randall resources
that Hueston Hennigan could have secured or pursued for
SCIF's benefit. Equally important, Hueston Hennigan
appears to have simply copied wholesale into its Third
Amended Complaint all the cross-defendants Drobot, Sr. named
in his cross-complaint with the glaring exception of Paul
Randall and Dr. Gross, a doctor who had sued Randall for
declaratory relief after being sent one of Randall's
extortion demands. If Hueston Hennigan had sued Dr. Gross, it
understood Dr. Gross would likely have brought Randall into
the case thereby defeating the artificial construct Hueston
Hennigan was attempting to use so it could represent both the
perpetrator Randall and his victim SCIF.
It
appears there are two more cross-defendants who didn't
make it from the CC/FATPC to the TAC, Samuel Vidauretta and
what is presumably his associated corporate entity, Prospice
Group, Inc. Neither of these defendants have appeared in the
case. Their existence doesn't do much to diminish the
viability of Rosen's theory.
The
Court could keep going with examples of the existence of the
conflict in the civil side of the litigation, like
Randall's recent deposition. At that deposition, a
Hueston Hennigan attorney representing SCIF sought to find
incriminating evidence against Randall in this litigation by
asking Randall pointed questions about his connection to the
fraudulent scheme. Among other things, the attorney asked
whether a document reflected "thousands of payments from
PSPM to Defendant entities, doctors, and to Paul
Randall" and whether Randall attended meetings where
payments for referring patients were discussed. Hueston
Hennigan's questions supported SCIF's interests in
proving up the fraud, while at the same time directly
undermining Randall's interests in protecting himself
from further criminal or civil liability.
Randall
was particularly vulnerable to Hueston Hennigan's attacks
at the deposition because there was no criminal counsel in
his corner advising him. No Hueston Hennigan attorney
appeared at the deposition on Randall's behalf.
That's perhaps because Hueston Hennigan recognized how
obvious the conflict would become when it had attorneys both
eliciting incriminating testimony from a deponent and
advising that deponent about the impact of that testimony on
his criminal case. Randall was left to inconsistently invoke
his Fifth Amendment privilege against self-incrimination.
Hueston Hennigan's failure to protect Randall was obvious
even then. According to Tantuwaya's counsel, during
Randall's deposition, "Mr. Randall's [civil]
counsel stated that he probably should have had Mr.
Randall's criminal counsel attend the deposition, based
on [the civil] counsel's lack of familiarity with the
manner in which the right against self-incrimination should
be invoked."
The
deposition was a preview of the sort of conflicts that would
have come up at trial and elsewhere. Tantuwaya submitted
emails from SCIF's current counsel stating that SCIF may
use Randall as a witness during settlement negotiations and
even at trial. It's easy to envision SCIF needing Randall
to testify but Randall needing to assert the Fifth. What
would Hueston Hennigan have done then?
Difficulties
arising from the conflict kept cropping up even in unexpected
places. There was recently a motion for approving a
settlement under California Code of Civil Procedure sections
877 and 877.6. The issue was whether a settlement between
SCIF and a co-conspirator in this litigation was made in good
faith so that the settling co-conspirator would be protected
from indemnity actions from other co-conspirators under
California law. This would include Randall, so the Court had
to address the issue about whether he was adequately
represented. To receive the settlement money, SCIF's
interests were to establish that it was a good faith
settlement. But to protect his rights, Randall's
interests were to argue it was not a good faith settlement. A
Hueston Hennigan attorney found it appropriate to submit a
declaration on behalf of SCIF, but that declaration was
contrary to the interests of one of Hueston Hennigan's
other clients, Randall.
All
this conflict existed even ignoring the more important
criminal side of this litigation, where among other things
the Sixth Amendment right to counsel was implicated. SCIF
repeatedly argued that its interests and Randall's
interests were aligned because Randall had plead guilty and
his plea agreement required him to cooperate. But under the
terms of that agreement, Randall is required to cooperate
with the government, not necessarily with SCIF. And even
setting that aside, criminal defendants sometimes fail to
fully satisfy their obligations to the government and
sometimes are dishonest. This possibility for dishonesty is
so significant that the model Ninth Circuit jury instructions
tells jurors they "should examine the testimony of
[cooperating witnesses] with greater caution than that of
other witnesses." Model Criminal Jury Instructions for
the District Courts of the Ninth Circuit 4.9.
The
plea agreement may have already been breached here. As noted,
Rosen is another one of the moving defendants. He argued that
a declaration submitted by an expert witness retained by
Randall, Albert Luna, showed that Randall had breached his
plea agreement. Luna's declaration asserted that Randall
and his girlfriend Christina Hernandez extorted $400, 000
from another defendant, Faustino Bernadett, as "hush
money, " in violation of Randall's plea agreement.
The Court need not decide whether these allegations are
true-they already illustrate the conflict issues in this
case. Would Hueston Hennigan have argued that Randall
...