United States District Court, C.D. California
EVOLV HEALTH, LLC; EVOLVHEALTH MEXICO SERVICIOS, S. de R.L. de C.V., Plaintiffs,
COSWAY USA, INC. dba ECOSWAY USA, INC.; GLEN JENSEN; JEFFREY N. ALDOUS; and VINCENT TRAN, Defendants.
ORDER GRANTING MOTIONS TO WITHDRAW AS COUNSEL OF
RECORD [41, 53]
D. WRIGHT, II UNITED STATES DISTRICT JUDGE.
before the Court are the motions of Carter Scholer, PLLC and
Lewis Brisbois Bisgaard & Smith LLP (“LBBS”)
to withdraw as counsel of record for Plaintiffs Evolv Health,
LLC and EvolvHealth Mexico Servicios, S. de R.L. de C.V.
(collectively “Evolv Health”). (ECF Nos. 41, 53.)
For the reasons discussed below, the Court
GRANTS both Motions.
case stems from a dispute between competitors in the
nutritional health industry. In a nutshell, Evolv Health
alleges that Defendants stole proprietary information from it
and started a competing business. (See generally
First Am. Compl. ¶¶ 10-49, ECF No. 31.) In October
2013, Evolv Health retained Michael L. Gaubert of Friedman
& Feiger LLP and J. Robert Arnett, II of Carter Scholer
Arnett Hamada & Mockler, PLLC (now Carter Scholer PLLC)
to represent it in a civil action against various entities
involved in this dispute, including the Defendants in this
action. (Arnett Decl. ¶¶ 3-4, ECF No. 43.) Under
the retainer agreement, both firms agreed to work for their
fees on a contingency basis, but Evolv Health agreed to
reimburse the firms on a monthly basis for costs incurred.
(Id., Ex. 1.) The agreement expressly provides that
the firms may withdraw from the representation if Evolv
Health “disregards an agreement or obligation to the
Firm to pay attorneys' fees and expenses.”
and Arnett filed an action against several persons and
entities, including Defendants, in Texas state court.
(Id. ¶ 4.) The Texas court dismissed Defendants
based on a forum selection clause, and thus Evolv Health
filed this action against Defendants in March 2016.
(Id. ¶ 5.) Evolv Health retained Craig Holden
of LBBS to act as local counsel in California, and Arnett-who
is not licensed to practice in California-appeared in this
action pro hac vice. (Id. ¶ 8; ECF
Nos. 11, 12.) Only LBBS and Carter Scholer are counsel of
record in this action; neither Gaubert nor Friedman &
Feiger have made an appearance. (Id. ¶ 8.)
Gaubert,  and Carter Boisvert of Friedman &
Feiger continued as counsel for Evolv Health in the Texas
action against the other non-dismissed defendants. The Texas
action proceeded to trial in August 2016, which resulted in a
favorable verdict for Evolv Health. (Id. ¶ 10.)
Carter Scholer incurred “significant” out of
pocket expenses in connection with that trial, which Evolv
Health failed to pay on a timely basis. (Id. ¶
11.) In fact, Evolv Health had failed to pay expenses in
connection with that lawsuit as early as March 2016.
(Id.) In October 2016, and again in November 2016,
Evolv Health's chairman, Trey White, assured Arnett that
the company would reimburse Carter Scholer for those expenses
before the end of November 2016. (Id. ¶¶
12-13.) Arnett informed Evolv Health that Carter Scholer
would need to withdraw from the representation in both
actions if the expenses were not reimbursed by January 1,
2017. (Id. ¶ 13-14.) Having failed to pay the
expenses by November 2016, White again assured Arnett that
Evolv Health would reimburse those expenses by January 1,
2017, but nonetheless failed to do so. (Id. ¶
15.) Two days later, Arnett personally paid portions of the
outstanding expenses, and notified Evolv Health that Carter
Scholer intended to withdraw from the representation.
(Id. ¶¶ 16-17.) Following this, Gaubert
requested that Arnett remain as counsel in both this action
and the Texas action until after post-trial motions in the
Texas action were adjudicated, to which Arnett agreed.
(Id. ¶ 18.)
February 2017, the Texas court denied all post-trial motions.
(Id. ¶ 22.) Arnett immediately e-mailed both
White and Gaubert and informed them that Carter Scholer
intended to withdraw, and asked whether substitute counsel
would appear in the actions. (Id. ¶ 23.)
Neither White nor Gaubert provided a definitive answer.
(Id.) On March 8, 2017, Arnett informed White and
Gaubert that Carter Scholer could no longer wait for a
response regarding substitute counsel and would immediately
move to withdraw as counsel. (Id. ¶ 25.) That
same day, Evolv Health-which, during the first part of 2017,
had made steady payments on outstanding invoices to various
vendors-delivered a check to Arnett for reimbursement of the
last of the outstanding invoices (although Evolv Health was
still making direct payments to another trial expert).
(Id. ¶¶ 19, 21, 26.) Evolv Health insisted
that Carter Scholer not withdraw from this action because all
outstanding invoices were now fully paid (or, in the case of
the expert, was being paid in accordance with an agreed-upon
payment schedule). Arnett explained, however, that Carter
Scholer still intended to withdraw from this action based on
the drawn out process of obtaining payment from Evolv Health
over the past year. (Id. ¶¶ 27-28.)
March 16, 2017, Carter Scholer moved to withdraw as counsel
of record in this action. (ECF No. 41.) Evolv Health, through
LBBS, opposed the Motion. (ECF No. 51.) Evolv Health argued
that Arnett, having acted as lead trial counsel in both the
Texas action and this action, is the only attorney with
sufficient knowledge of the underlying facts to try this
case, and that permitting his withdrawal from this action
only a few months before the trial date would be
extremely prejudicial to Evolv Health. (Id.) One
week after LBBS opposed Carter Scholer's Motion, LBBS
filed its own motion to withdraw as counsel, citing its lack
of in-depth knowledge of the facts underlying this action and
Evolv Health's refusal to pay a retainer fee to LBBS to
act as lead counsel (as opposed to local counsel). (ECF No.
53.) No opposition was filed to LBBS's motion. Those
Motions are now before the Court for decision.
attorney may not withdraw as counsel except by leave of
court. A motion for leave to withdraw must be made upon
written notice given reasonably in advance to the client and
to all other parties who have appeared in the action. The
motion for leave to withdraw must be supported by good
cause.” C.D. Cal. L.R. 83-2.3.2. In determining whether
good cause is shown, the court may 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.” Liang v. Cal-Bay Int'l,
Inc., No. 06CV1082-WMC, 2007 WL 3144099, at *1 (S.D.
Cal. Oct. 24, 2007) (citations and internal quotation marks
omitted). The court may also consider any relevant rules of
professional conduct. Austin Inv. Fund, LLC v. United
States, No. SACV 11-750 DOC ANX, 2011 WL 4947550, at *1
(C.D. Cal. Oct. 17, 2011). However, “[u]nless good
cause is shown and the ends of justice require, no
substitution or relief of attorney will be approved that will
cause delay in prosecution of the case to completion.”
C.D. Cal. L.R. 83-2.3.5. “The trial court has
discretion in determining whether to grant counsel's
motion for withdrawal.” Austin Inv. Fund, LLC,
2011 WL 4947550, at *1; United States v. Carter, 560
F.3d 1107, 1113 (9th Cir. 2009).
Carter Scholer's Motion to Withdraw
Scholer cites two reasons why it should be permitted to
withdraw from this action: (1) Evolv Health's repeated
failure to pay expenses from the Texas action in a timely
manner in breach of the retainer agreement; and (2) breakdown
in the attorney-client relationship, as evidenced by White
and Gaubert's failure to meaningfully respond to
Arnett's emails regarding Evolv Health's discovery
responses in this action and the “increasingly bitter
and acrimonious” communications between Arnett and
Evolv Health. (See generally Mot. at 6-8, ECF No.
42; Reply at 9, ECF No. 52.) The Court concludes ...