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Gianni Versace, S.P.A. v. Versace 19.69 Abbigliamento Sportivo SRL

United States District Court, N.D. California

July 14, 2017

GIANNI VERSACE, S.P.A., et al., Plaintiffs,


          HAYWOOD S. GILLIAM, JR. United States District Judge

         Defendants in this action include V1969 Versace SMO, LLC; V1969 Versace HG, LLC; and V1969 USA, LLC (collectively “Licensee Defendants”).[1] On January 27, 2017, the Court granted Licensee Defendants' motion to substitute Adams Rossman (“Attorney Rossman”) for their former counsel, Dkt. No. 85, who had sought withdrawal because Licensee Defendants “breached an agreement as to expenses and fees, ” Dkt. No. 61. On May 22, 2017, Attorney Rossman filed a motion to withdraw as counsel for Licensee Defendants on the ground that they had “breached the retainer agreement with Mr. Rossman as to fees and expenses.” Dkt. No. 115. He has given notice to the principals of the Licensee Defendants that he is seeking withdrawal and that, as corporate entities, they cannot proceed without counsel. See Id. at 3-4, 6. On June 5, 2017, Plaintiffs Versace, S.p.A. and Versace USA, Inc. (collectively, “Versace”) opposed withdrawal, Dkt. No. 136, and on June 12, 2017, Attorney Rossman filed a reply declaration in support of the motion, Dkt. No. 140. On July 13, 2017, the Court held a hearing, which was attended by the following individuals: Attorney Rossman; Eran Brosh, a principal for Licensee Defendants; and Rosemarie Ring, an attorney for Plaintiffs (“Attorney Ring”). The Court held an in camera portion of the hearing with only Attorney Rossman and Mr. Brosh, followed by an open portion of the hearing, during which the Court also heard from Attorney Ring. Based on the relevant legal authority, the papers, and the representations made at the hearing, the Court granted the motion to withdraw as counsel, and issues this order to explain its reasoning in more detail.


         In this District, “[c]ounsel may not withdraw from an action until relieved by order of Court after written notice has been given reasonably in advance to the client and to all other parties who have appeared in the case.” Civil L.R. 11-5(a). Moreover, “[w]hen withdrawal by an attorney from an action is not accompanied by simultaneous appearance of substitute counsel or agreement of the party to appear pro se, leave to withdraw may be subject to the condition that papers may continue to be served on counsel for forwarding purposes, unless and until the client appears by other counsel or pro se.” Civil L.R. 11-5(b).

         Withdrawal is also governed by the California Rules of Professional Conduct. See j2 Glob. Commc'ns, Inc. v. Blue Jay, Inc., No. C 08-4254 PJH, 2009 WL 464768, at *1 (N.D. Cal. Feb. 24, 2009)); see also Civil L.R. 11-4(a)(1) (requiring compliance with the California Rules of Professional Conduct). Under these rules, permissive withdrawal may only be granted by leave of the Court. CA ST RPC, Rule 3-700(A)(1). The professional rules provide for permissive withdrawal on various grounds, including when “[t]he client . . . breaches an agreement or obligation to the member as to expenses or fees[, ]” or when “[t]he member believes in good faith . . . that the tribunal will find the existence of other good cause for withdrawal.” Id., Rule 3-700(C)(1), (6). However, an attorney may not withdraw before he or she “has taken reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client, including giving due notice to the client, allowing time for employment of other counsel, complying with rule 3-700(D), and complying with applicable laws and rules.” Id., Rule 3-700(A)(2); see also id., Rule 3-700(D) (regarding the refund of fees and the release of property and papers).

         Finally, courts assessing withdrawal balance the equities, considering such factors as why counsel seeks to withdraw and whether permitting withdrawal may prejudice other litigants, harm the administration of justice, or delay the case's resolution. Robinson v. Delgado, No. CV 02-1538 NJV, 2010 WL 3259384, at *2 (N.D. Cal. Aug. 18, 2010) (citing cases).


         Local Civil Rule 11-5(a) is satisfied because the filing of the motion almost two months ago gave all parties reasonable advance notice of withdrawal, and because Attorney Rossman has given notice to his client. See Dkt. No. 115 at 3-4, 6. The filing of the motion was also permitted by the California Rules of Professional Conduct. Based upon the information disclosed during the in camera portion of the hearing, the Court is persuaded that Attorney Rossman filed the motion with a good faith belief in the existence of good cause for withdrawal. CA ST RPC, Rule 3-700(C)(6). Balancing the equities, the Court finds that permitting withdrawal is just, while imposing certain conditions (described below) will minimize delay and prejudice. See Robinson, 2010 WL 3259384, at *2 (discussing equities). In the exercise of its discretion, the Court finds that withdrawal is warranted. See Gong, 2008 WL 160964, at *1.

         However, Licensee Defendants, as a business entity, may appear in federal court only through counsel. See U.S. v. High Country Broad. Co., Inc., 3 F.3d 1244, 1245 (9th Cir. 1993); see also N.D. Cal. L.R. 3-9(b). Consequently, the Licensee Defendants must obtain new counsel within 30 days. During this period, the Court directs Attorney Rossman to accept service of papers for forwarding to the Licensee Defendants. See Civil L.R. 11-5(b).

         If the Licensee Defendants are unable to obtain counsel within 30 days, the Court will be inclined to strike their answer and allow Plaintiffs' counsel to seek entry of a default and a default judgment. See Baeza v. Assisted Credit Servs., Inc., No. 8:15-cv-01451-ODW (JCG), 2016 WL 3912016, at *2-4 (C.D. Cal. July 19, 2016); see also Emp. Painters' Trust v. Ethan Enters., Inc., 480 F.3d 993, 998 (9th Cir. 2007) (affirming entry of a default judgment where the corporate defendant had failed to obtain substitute counsel); High Country, 3 F.3d at 1245 (same). Licensee Defendants have never answered the amended complaint. Therefore, the Court sets July 18, 2017 as the deadline for the Licensee Defendants to file their answer to the amended complaint.


         For the foregoing reasons, the Court grants the motion to withdraw as counsel.

         IT IS ...

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