Mirch Law Firm, LLP v. Elias Nakhleh ( 2022 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAY 26 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
MIRCH LAW FIRM, LLP; et al., No. 20-56207
Appellants, D.C. No.
2:20-cv-05734-PA-MAA
v.
ELIAS NAKHLEH; et al., MEMORANDUM*
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Percy Anderson, District Judge, Presiding
Argued and Submitted May 12, 2022
Pasadena, California
Before: IKUTA and NGUYEN, Circuit Judges, and DANIELS,** District Judge.
Mirch Law Firm, LLP (“Mirch”) appeals the district court’s order
disqualifying it as plaintiffs’ counsel in a RICO action brought by Seyed Zia Eddin
Ahmadi Abhari, Donya Entertainment, Inc., and Noureen Entertainment, Inc.
against defendants Elias Nakhleh, Slater’s 50/50 Franchise, LLC, and Elite
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable George B. Daniels, United States District Judge for the
Southern District of New York, sitting by designation.
Restaurant Group, Inc. We have jurisdiction under 28 U.S.C. § 1291, and we
affirm.1
1. Defendants argue that Mirch lacks standing to challenge the
disqualification order. Where a disqualification order “clearly and intentionally
sanction[s] an attorney,” the attorney has suffered sufficient injury-in-fact to have
standing. United States v. Ensign, 491 F.3d 1109, 1118 (9th Cir. 2007); see also
United States v. Talao, 222 F.3d 1133, 1137-38 (9th Cir. 2000) (finding an
attorney had standing to appeal a district court ruling that she violated an ethical
rule because it constituted a “per se” sanction). Here, given the district court’s
clear findings of ethical violations, we are satisfied that Mirch has standing to
appeal.
2. We review disqualification orders for abuse of discretion. Trone v.
Smith, 621 F.2d 994, 999 (9th Cir. 1980). “[A]n order disqualifying counsel will
not be disturbed if the record reveals ‘any sound’ basis for the court’s action,” Paul
E. Iacono Structural Eng’r, Inc. v. Humphrey, 722 F.2d 435, 438 (9th Cir. 1983),
which may include a violation of ethical rules, see id. at 440. The district court
properly applied California law in determining whether disqualification was
proper. Wininger v. SI Mgmt. L.P., 301 F.3d 1115, 1122 (9th Cir. 2002); see also
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We grant appellees’ request for judicial notice (Dkt. 55) and deny Mirch’s request
for judicial notice (Dkt. 15).
2
C.D. Cal. Local R. 83-3.1.2 (requiring attorneys in the Central District of
California to comply with California’s Rules of Professional Conduct). Relevant
here, an attorney may be disqualified based on his presumed or actual acquisition
of an adversary’s privileged information. See Humphrey, 722 F.2d at 440; see also
Shadow Traffic Network v. Superior Court, 24 Cal. App. 4th 1067, 1085 (Cal. Ct.
App. 1994).
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. See Cal. Evid. Code § 950. “[I]t is the intent and
conduct of the parties that controls the question as to whether an attorney-client
relationship has been created.” Zenith Ins. Co. v. O’Connor, 148 Cal. App. 4th
998, 1010 (Cal. Ct. App. 2007). Defendants reasonably believed Reiner was acting
as their 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 party seeking disqualification need not “disclose the actual information
contended to be confidential.” In re Complex Asbestos Litigation, 232 Cal. App.
3d 572, 596 (Cal. Ct. App. 1991). The court should be given “the nature of the
information and its material relationship to the proceeding.” Id. Defendants did so
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here, outlining the categories of confidential business materials Nakhleh disclosed
to Reiner, which materially relate to many of the allegations in this case.
Where a law firm witness or employee has an adversary’s relevant,
privileged information, a “rebuttable presumption arises that the information has
been used or disclosed” to the law firm. Shadow Traffic Network, 24 Cal. App. 3d
at 1085 (citing Complex Asbestos, 232 Cal. App. 3d at 596). Reiner claimed to be
Mirch’s witness, and although 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 Mirch
because there is a “sound basis,” Humphrey, 722 F.2d at 438 (internal quotation
marks omitted), for the district court’s conclusion that disqualification was
required to remedy the unfair advantage that Plaintiffs obtained through Mirch’s
representation.
3. The district court did not violate Mirch’s due process rights by taking the
motion to disqualify under submission. See Fed. R. Civ. P. 78(b); C.D. Cal. Local
R. 7-15; Morrow v. Topping, 437 F.2d 1155, 1156-57 (9th Cir. 1971) (per curiam)
(holding that a district court’s failure to hold oral argument on a motion to dismiss
was not an abuse of discretion or a denial of due process).
AFFIRMED.
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