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Ninth Circuit:
Firm Properly Barred for Having Confidential Information
Lawyers for Plaintiffs Had Received Information From Disbarred Lawyer Who Purported to Represent Defendants in Prior Litigation
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Hearing oral argument on the disqualification of a law firm are,
from left, Ninth U.S. Circuit Court of Appeals Judges Jacqueline H. Nguyen
and Sandra S. Ikuta and District Court Judge George B. Daniels of the
Southern District of New York. |
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has affirmed an order barring a law firm from continuing to represent the plaintiff based on the firm having received confidential information about the defendants from a disbarred lawyer who gained that information from them while purporting to be their counsel in earlier litigation.
In a memorandum opinion filed Thursday, a three-judge panel found that District Court Judge Percy Anderson of the Central District of California did not abuse his discretion in disqualifying the Mirch Law Firm of San Diego from acting for Seyed Zia Eddin Ahmadi Abhari and others in an action under the Racketeer Influenced and Corrupt Organizations Act against Elias Nakhleh and others.
At a business lunch in 2019—before the RICO lawsuit was filed and while cordial relations existed—Abhari told Nakhleh about his lawyer, Martin Reiner, recommending that Nakhleh utilize his services. Nakhleh took the advice, hiring Reiner and providing him with a $10,000 check for Nakhleh which he regarded as an Nakhleh attorney retainer fee.
He signed an agreement authorizing Reiner to represent certain businesses in a trademark lawsuit. Under Anderson’s findings, Nakhleh did know that Reiner had been disbarred (on April 21, 2017) and was unaware that Reiner had arranged for a licensed lawyer to serve as counsel of record in the case.
Gains Suspicion
Nakhleh eventually developed a suspicion that Reiner was not licensed to practice law and, on March 6, 2020, queried in an email: “Is it not true that you have been suspended from practicing law? You have represented being an attorney to me multiple times.”
Reiner responded:
“It is legally not true that my law license has been suspended, nor have I been disbarred. Any order to either effect is legally null and void. Furthermore, I have never represented myself to you as acting as an attorney. I am here in the capacity as the office manager.”
The RICO action was instituted on June 26, 2020. A lawyer in the Mirch firm later represented to the defendants’ attorney that Reiner “is “a lawyer with licensing problems.”
Anderson’s Ruling
In disqualifying the firm on Nov. 13, 2020, Anderson said:
“The Court finds The Mirch Law Firm has committed several ethical violations. Based on the evidence provided, Mr. Reiner has falsely represented to Defendants that he was their attorney. The Mirch Law Firm is using Defendants’ privileged information, obtained by Mr. Reiner, to gain a tactical advantage in this case….
“Nowhere in the record did Mr. Reiner ever disclose to Defendants that he is not an attorney and has in fact been disbarred. Even in the current lawsuit, both Mr. Reiner and The Mirch Law Firm continue to falsely represent that Mr. Reiner is an attorney….
“Plaintiffs’ argument that they have not obtained any relevant privileged information from Mr. Reiner is similarly without any factual support. Mr. Reiner possesses privileged information relevant to the present action, that he obtained by pretending to be an attorney for Defendants during an action involving the businesses at issue here.”
The judge noted that The Mirch Law Firm insisted that Reiner merely acted as a witness for it and “that they have cut off contact with Mr. Reiner following this Motion,” but declared that “the damage has already been done” by giving the firm “privileged information which has allowed Plaintiffs to wrongfully acquire an unfair advantage in this case.”
Stay Denied
On Dec. 21, 2020, Anderson denied a motion to stay the disqualification order pending resolution of the appeal, explaining:
“The Court finds that a stay of its decision to disqualify The Mirch Law Firm is not warranted.
“First, The Mirch Law Firm makes no showing that it is likely to win its appeal of the Court’s decision on the merits. The Court has previously explained at length why The Mirch Law Firm should be disqualified as counsel for plaintiffs in this action….
“Second, the Court finds that the balance of hardships does not tip sharply in The Mirch Law Firm and Plaintiffs favor….
“Finally, the Court finds that the public interest lies in not staying the Court’s Order disqualifying The Mirch Law Firm. The public interest is served by ensuring that the integrity of the judicial process is upheld. That is best done by ensuring that attorneys who have received improper confidential information are disqualified.”
In affirming the order, the Ninth Circuit panel said:
“The record supports the district court’s finding that Martin Reiner obtained privileged information from Defendants during a prior lawsuit through an implied attorney-client relationship….Defendants reasonably believed Reiner was acting as then attorney and that their communications were privileged.
“The record also supports the district court’s finding that Defendants disclosed confidential information to Reiner that was materially relevant to this case.”
The panel—comprised of Circuit Judges Sandra S. Ikuta and Jacqueline H. Nguyen, joined by District Court Judge George B. Daniels of the Southern District of New York, sitting by designation—added:
“[A]lthough Mirch denies receiving confidential information from Reiner, the district court’s weighing of the evidence is entitled to deference. On this record, the district court did not abuse its discretion in disqualifying Much because there is a ‘sound basis’…for the district court’s conclusion that disqualification was required to remedy the unfair advantage that Plaintiffs obtained through Mirch’s representation.”
The
judges rejected a challenge to the Mirch Law Firm’s standing to appeal the
order, explaining that where a District Court order amounts to a sanction. “the attorney has suffered sufficient injury-in-fact to have
standing.” The opinion does not mention that the appeal was being decided
notwithstanding entry of judgment against the plaintiffs on Nov. 16, 2020 after
Anderson ordered a dismissal without leave to amend.
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Kevin
Mirch of the Mirch Law Firm is seen arguing before the Ninth Circuit. |
Oral Argument
At oral argument in Pasadena on May 12. Kevin Mirch told the panel:
“We believe we have standing because we have no due process—nothing.”
Anderson made the order, he complained, without holding a hearing.
The matter is not moot, Mirch said, because the order can have an effect of possible State Bar proceedings and on the firm’s public image. The matter has been referred to the State Bar, he noted, and “we’re waiting” to see what happens.
“The case has been settled but there’s an order in the case that says we did something wrong, terribly wrong,” Mirch pointed out, maintaining that his firm did “nothing wrong.”
Disputing a representation by Mirch, Kimberly Howatt of the San Diego firm of Gordon Rees Scully Mansukhani LLP said that “the Mirch firm did not request an evidentiary hearing in this matter.”
District Court judges routinely decide matters without a hearing, she noted, adding that a “meaning futile hearing” was not called for because the judge had a “robust record” showing that the Mirch Firm did receive confidential information from Reiner.
The opinion declares:
“The district court did not violate Mirch’s due process rights by taking the motion to disqualify under submission.”
The case is Mirch Law Firm, LLP v. Nakhleh, 20-56207.
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