REV 973 LLC v. John Mouren-Laurens, et al

REPLY

C.D. Cal.November 5, 2018

F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS FRANKLIN R. FRALEY, JR.—SBN 151879 KELLY F. ROBERTS—SBN 319040 Fraley & Associates Ste. 702 617 W. 7th St. Los Angeles CA 90017 Tel 213.550.4000 cmecf@fraleylaw.com Attorneys for Plaintiff and Counter-Defendant REV 973, LLC, and Third-Party Defendants REVERE FINANCIAL CORPORATION and JERROLD A. FINE UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA (Western Division) REV 973, LLC, a California limited liability company, Plaintiff, v. JOHN MOUREN-LAURENS, an individual; et al., Defendants, Case No. CV98-10690 DSF (Ex) REPLY FOR OBJECTION BY REV 973, LLC, TO VARIOUS MOUREN- LAURENS DEFENDANTS’ PROPOSED SUBSTITUTIONS OF ATTORNEYS AND RELATED COUNTER-, CROSS-, AND THIRD-PARTY CLAIMS. Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 1 of 18 Page ID #:38537 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -i- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS TABLE OF CONTENTS Title Page/Ex. No. Tables Table of Contents ........................................................................................................ i Table of Authorities ................................................................................................... iii Table of Original Parties ............................................................................................ v Text I. Introduction .................................................................................................... 1 II. Summary of Procedural Facts ...................................................................... 1 A. The Mouren-Laurens Defendants Inform R9 Of Unwaivable Conflicts. ................................................................................................ 1 B. Separate R9-MLOC-Defendants Mediation/Confidentiality Agreement .............................................................................................. 2 III. Legal Argument .............................................................................................. 2 A. Cronin Cannot Appear For The MLOC Defendants On This Objection ........................................................................................ 2 B. Regardless Of R9’s Standing, This Court Has The Inherent Power To Deny Substitutions Of Attorney For Any Justified Reason ..................................................................................... 3 1. A Court Has The Duty To Control And Supervise Attorneys, Not Simply Rubber-Stamp A Substitution Of Attorneys ................................................................................ 3 2. Approving The Substitution Will Cause R9 To Suffer Extreme Prejudice—A “Justified Reason” To Deny Substitution ................................................................... 3 3. The MLOC Defendants Will Suffer No Harm From Denial ................................................................................. 4 4. A Court Also Has An Independent Duty To Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 2 of 18 Page ID #:38538 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -ii- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS Examine Conflicts ....................................................................... 5 5. As A Matter Of Law, A Conflict Arises When Counsel Represents Multiple Clients With Adverse Interests In The Same Proceeding ............................................... 6 6. This Court Should Independently Examine Mouren-Laurens Conflicts ........................................................... 7 C. R9 Will Suffer An Injury In Fact And, Therefore, Has Standing .......................................................................................... 8 1. The Test For Constitutional Standing Requires An Injury In Fact ......................................................................... 8 2. The Disclosure Of Privileged Mediation Communications To R9’s Adversaries Will Cause R9 To Suffer An Injury In Fact. ....................................... 9 3. No Reason Exists For This Court To Exercise Prudential Limits ....................................................................... 10 4. R9 Does Not Seek To Disqualify Any Party’s Attorney, So Whether R9 Has Standing To Disqualify Cronin Is Irrelevant .................................................. 11 IV. Conclusion ...................................................................................................... 12 Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 3 of 18 Page ID #:38539 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -iii- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS TABLE OF AUTHORITIES Cases Federal Bernhoft Law Firm, S.C. v. Pollock, 2013 WL 3520267 (S.D. Cal. July 11, 2013) ........................................................... 12 Coyler v. Smith, 50 F. Supp. 2d 966 (C.D. Cal. 1999) ........................................................................ 12 Erickson v. Newmar Corp., 87 F.3d 298 (9th Cir. 1996) ........................................................................................ 3 Federal Election Comm’n v. Akins, 118 S. Ct. 1777 (1998). ................................................................................... 8, 9, 10 Lexmark Int’l v. Static Control Components, Inc., 134 S. Ct. 1377 (2014). ............................................................................................ 10 State Comp. Ins. Fund v. Drobot, 192 F. Supp. 3d 1080 (C.D. Cal. 2016) .................................................. 5, 6, 9, 11, 12 U.S. v. Gov't of Guam, 2013 WL 4309814 (D. Guam Aug. 13, 2013) ........................................................ 3, 5 State Cassel v. Super. Ct., 51 Cal. 4th 113 (Cal. 2011) .................................................................................. 4, 11 Flatt v. Super. Ct., 9 Cal. 4th 275 (Cal. 1994) .......................................................................................... 7 San Diego Navy Fed. Credit Union v. Cumis Ins. Soc., Inc., 162 Cal. App. 3d 358 (1984) ...................................................................................... 7 Zador Corp. v. Kwan, 31 Cal. App. 4th 1285 (1995) ................................................................................... 12 Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 4 of 18 Page ID #:38540 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -iv- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS Statutes State Cal. Evid. Code § 1119(c) (West Desktop Ed. 2018) ................................................ 4 Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 5 of 18 Page ID #:38541 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -v- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS TABLE OF ORIGINAL PARTIES Rev 973 Parties (all Fraley) • Plaintiff and Counter-Defendant Rev 973, LLC (“R9”) • Defendant Revere Financial Corporation (“RFC”) • Third-Party Defendant Jerrold A. Fine Mouren-Laurens Defendants • MLOC Defendants (all Michel) Defendants, Counter-Claimants, Cross-Claimants, Cross-Defendants, and Third-Party Plaintiffs o John Mouren-Laurens o Mireille Mouren-Laurens o Mouren-Laurens Oil Company (“MLOC”) • JML Estate (Artiano) o Claudine Mouren-Laurens as Administrator of the Estate of Joseph Mouren-Laurens, Sr. • EML Estate (Cronin) o Nicole Mouren-Laurens as Administrator of the Estate of Emma Mouren-Laurens • Leach Defendants (all Fitzgerald) Defendants, Counter-Claimants, Cross-Claimants, Cross-Defendants, and Third-Party Plaintiffs o Roy Leach o Patricia Leach o Leach Oil Company, Inc. (“LOC”) o Leach Property Management Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 6 of 18 Page ID #:38542 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -1- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS I. INTRODUCTION R9 does not ask this Court to disqualify or strip any party of its attorney. R9 merely asks this Court to exercise its inherent power to independently examine and supervise the attorneys practicing before it, especially when failing to do so will cause harm to R9 and/or allow for unresolvable conflicts of interests against the public interest. Accordingly, R9’s objection raises more than justified reasons for the Court to deny the proposed substitutions of attorney, which ask this Court to authorize Cronin to jointly and simultaneously represent all of the adverse interests of the MLOC Defendants, the JML Estate, and the EML Estate. Only the MLOC Defendants purport to respond to R9’s objection, purportedly through Cronin, even though this Court has not authorized Cronin to represent the MLOC Defendants. The MLOC Defendants argue only that R9 lacks standing to disqualify an attorney. As a matter of law, however, irrespective of R9’s standing, this Court has the inherent duty to not merely rubber-stamp a substitution of attorney, but to independently examine the harm a substitution may cause and to independently examine whether or not conflicts exist. R9’s standing, therefore, is of no moment. In any event, R9 has standing because R9 will suffer actual injury; R9 does not seeking redress others’ injuries. This Court, therefore, should deny the substitution. II. SUMMARY OF PROCEDURAL FACTS1 A. The Mouren-Laurens Defendants Inform R9 Of Unwaivable Conflicts. For some twenty years, the MLOC Defendants, the JML Estate, and the EML Estate each had separate and distinct counsel to represent each’s separate and distinct, adverse interests—i.e., Michel, Artiano, and Cronin, respectively. Reply 1R9 generally summarizes the relevant procedural history here. The concurrently-filed declaration of Franklin R. Fraley, Jr., for this reply, however, contains the detailed, evidentiary facts for this summary, including a detailed description of the conflicts of interests between the MLOC Defendants, the JML Estate, and the EML Estate, the separate mediation between R9 and the MLOC Defendants, the confidentiality agreement between R9 and the MLOC Defendants, etc. Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 7 of 18 Page ID #:38543 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -2- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS Declaration by Franklin R. Fraley, Jr., for Objections by Rev 973, LLC, to Various Mouren-Laurens Defendants’ Proposed Substitutions of Attorneys (2018-11-05), ¶¶ 4–5 at 1–2 [“Fraley Decl.”]. Throughout this action, Michel, Artiano, and/or Cronin have reported unwaivable conflicts of interests between the MLOC Defendants, the JML Estate, and the EML Estate to the Court, the Special Master, and the parties to claim separate rights in all proceedings, including all filings, discovery, site investigation, etc. Id., ¶¶ 4–10 at 1–7. B. Separate R9-MLOC-Defendants Mediation/Confidentiality Agreement. In August 2016, after the Court declined to approve a settlement that included all Mouren-Laurens Defendants, the Rev 973 Parties and the MLOC Defendants engaged in a separate, thirteen-month-long series of mediation sessions and communications. Id., ¶¶ 14–19 at 10–13. Other than the attorneys for the Rev 973 Parties and the MLOC Defendants, no other attorneys or parties participated in these mediation sessions/communications. Id. During these mediation sessions/communications, both the Rev 973 Parties and the MLOC Defendants repeatedly emphasized the need to keep communications confidential and instructed each other to not disclose any information to any other person, especially to Cronin because Cronin would seek to disrupt any settlement. Id. III. LEGAL ARGUMENT A. Cronin Cannot Appear For The MLOC Defendants On This Objection. Only the MLOC Defendants purport to respond to R9’s objection; neither the JML Estate nor the EML Estate do so. However, Cronin, attorneys of record for the EML Estate, purports to represent the MLOC Defendants on their response, even though this Court has not approved any substitution of attorney and even though Michel, not Cronin, currently are the attorneys of record for the MLOC Defendants. Because Cronin has no authority to act on behalf of the MLOC Defendants without this Court’s approval, this Court should disregard the MLOC Defendants’ response entirely. Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 8 of 18 Page ID #:38544 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS B. Regardless Of R9’s Standing, This Court Has The Inherent Power To Deny Substitutions Of Attorney For Any Justified Reason. 1. A Court Has The Duty To Control And Supervise Attorneys, Not Simply Rubber-Stamp A Substitution Of Attorneys. “Courts have the duty and responsibility to control and supervise the conduct of the attorneys practicing before it.” Erickson v. Newmar Corp., 87 F.3d 298, 300 (9th Cir. 1996); U.S. v. Gov't of Guam, 2013 WL 4309814, *15 (D. Guam Aug. 13, 2013). This is because the “courts, as well as the bar, have a responsibility to maintain public confidence in the legal profession.” Guam, 2013 WL 4309814 at *15. Accordingly, a court should “not blindly rubber stamp substitutions of counsel presented for its approval, especially if there is a justified reason for refusing to do so.” Id. “[A]ll substitutions of counsel are contingent on court approval.” Id. The reason is because “[d]istrict courts have clear statutory authority to promulgate rules governing the admission and conduct of attorneys who appear before them.” Erikson, 87 F.3d at 301. 2. Approving The Substitution Will Cause R9 To Suffer Extreme Prejudice—A “Justified Reason” To Deny Substitution. R9, relying on the fact that the MLOC Defendants, JML Estate, and the EML Estate had distinct, separate, attorneys, with distinct, conflicting, adverse interests, engaged in extensive mediation sessions with only the MLOC Defendants. Fraley Decl., ¶¶ 14–19 at 10–13. In doing so, R9 shared substantial information, proposals, incentives, strategies and tactics to the MLOC Defendants only, in confidence—indeed, some of th3 information that R9 shared was adverse to R9’s interests in litigating/mediating with the JML Estate and the EML Estate.2 Id. 2The MLOC Defendants assert, without evidence, that the MLOC Defendants never had a separate mediation with R9. Pursuant to Case Management Order No. 3, to the extent that this Court has any doubts regarding whether or not the MLOC Defendants and R9 participated in a separate mediation, this Court may verify the occurrence/participants/scope of that mediation with the Mediator. Fraley Decl., ¶ 13 at 9. Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 9 of 18 Page ID #:38545 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -4- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS Approving the substitution and allowing Cronin, the EML Estate’s counsel, to now also represent the MLOC Defendants, will cause the disclosure of such privileged mediation communications to R9’s adverse parties—i.e., the JML Estate and the EML Estate, parties with whom R9 expressly did not want to share such confidential information. Doing so directly contravenes the law/policy behind confidential mediation communications. “All communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation shall remain confidential.” Cal. Evid. Code §1119(c) (West Desktop Ed. 2018).3 “The statutory purpose [of this rule] is to encourage the use of mediation by promoting ‘a candid and informal exchange regarding events in the past.”’ Cassel v. Super. Ct., 51 Cal. 4th 113, 123 (2011). “This frank exchange is achieved only if the participants know that what is said in the mediation will not be used to their detriment through later court proceedings and other adjudicatory processes.” Id. “The protection afforded by these statutes is not limited by the identity of the communicator, by his or her status as a “party,” “disputant,” or “participant” in the mediation itself, by the communication's nature, or by its specific potential for damage to a disputing party.” Id. at 130. Given the public policy behind confidential mediation communications and given that approving the substitution would necessarily result in the disclosure of confidential mediation communications to R9’s adverse parties to R9’s detriment, a “justified reason” exists to deny the substitutions under the Court’s inherent power. 3. The MLOC Defendants Will Suffer No Harm From Denial. The MLOC Defendants do not argue, and offer no evidence, that the Court’s denying the substitutions will harm the MLOC Defendants at all. Presumably, the MLOC Defendants do not do so because no harm will occur: 3All Original Parties agreed, and this Court ordered, that California law would apply to all mediation. Fraley Decl., ¶ 13 at 9. Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 10 of 18 Page ID #:38546 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -5- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS First, Michel has represented the MLOC Defendants for over twenty years; Cronin has not. So, the long-term investment that the MLOC Defendants made in money, attorney work-product/brain-power, familiarity with facts/issues/parties, and analysis of case strategy/tactics/goals was in Michel, not Cronin. Not substituting Cronin, therefore, will not result in any loss of the MLOC Defendants’ long-term investment in Michel—indeed, denying the substitutions will allow the MLOC Defendants to continue to reap the benefits of their long-term investment. Second, the MLOC Defendants have not explained why Michel’s continued representation of the MLOC Defendants should terminate—e.g., the MLOC Defendants offer no evidence that a break-down in the attorney-client relationship occurred, no evidence that any breach occurred, and no evidence that any other reason exists why the MLOC Defendants need new attorneys. Guam, 2013 WL 4309814 at *16. Finally, to the extent that some justified reason exists for the MLOC Defendants to retain new attorneys, the MLOC Defendants have over two years to prepare for trial—i.e., ample time for new attorneys (other than Cronin) to become familiar with, and prepare for, trial. 4. A Court Also Has An Independent Duty To Examine Conflicts. Whether or not a non-client has standing to raise an attorney’s conflict of interest is irrelevant: “[E]ven if [non-clients] somehow didn't [have standing], 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.”’ State Comp. Ins. Fund v. Drobot, 192 F. Supp. 3d 1080, 1090 (C.D. Cal. 2016). The power to independently examine conflicts is “inherent in every court to control in furtherance of justice, the conduct of its ministerial officers.” Id. at 1087. Given various policy concerns, not only does a court have the power, but, indeed, a “court has the duty to raise a conflict of interest issue even if it is not raised by a party to the action in order to Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 11 of 18 Page ID #:38547 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -6- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS maintain the integrity of the judicial process.” Guam, 2013 WL 4309814 at *14. This independent duty arises given important policy concerns: 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. State Comp., 192 F. Supp. at 1083–84. Accordingly, a 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.” Id. at 1088. 5. As A Matter Of Law, A Conflict Arises When Counsel Represents Multiple Clients With Adverse Interests In The Same Proceeding. Given the importance of the duty of loyalty, a conflict of interest arises when an attorney simultaneously represents multiple clients with adverse interests: • It is “patently improper” for “attorneys in the same firm to represent adverse parties in the same litigation;” doing so is the “most egregious conflict of interest.” State Comp., 192 F. Supp. 3d at 1088–89. • “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.” Id. at 1088. • “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.” Id. at 1088. Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 12 of 18 Page ID #:38548 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS • “[A]s a matter of law a purported consent to dual representation of litigants with adverse interests at a contested hearing would be neither intelligent nor informed. Such representation would be per se inconsistent with the adversary position of an attorney in litigation, and common sense dictates that it would be unthinkable to permit an attorney to assume a position at a trial or hearing where he could not advocate the interests of one client without adversely injuring those of the other.” Id. at 1095; accord Flatt v. Super. Ct., 9 Cal. 4th 275, 282 (Cal. 1994). 6. This Court Should Independently Examine Mouren-Laurens Conflicts. Regardless of R9’s standing, given the conflict between the MLOC Defendants, the JML Estate, and the EML Estate, whose interests are adverse, this Court has the inherent power to deny the substitution. Indeed, given these unresolvable conflicts, another “justified reason” exists for denying the substitution: • Each of the MLOC Defendants, the JML Estate, and the EML Estate4 has potential contribution and indemnity claims against each other for any adverse judgment that R9 obtains. Fraley Decl., ¶¶ 7–8 at 3–5. • Each has information/incentives to shift liability to one another. Id. • Michel, Artiano, and Cronin represent each as Cumis counsel, i.e., attorneys who represent the interests of an insured. Id.; San Diego Navy Fed. Credit Union v. Cumis Ins. Soc., Inc., 162 Cal. App. 3d 358 (1984). • Each has different insurance policies for different coverages, different amounts (MLOC Defendants: $ 6.25M; JML Estate: $12.2M; EML Estate: $50K (all approx.)), and different years. Fraley Decl., ¶ 9 at 5. 4The MLOC Defendants offer no evidence of any informed, signed, written consent for Cronin’s simultaneous, joint representation of all of MLOC Defendants, the JML Estate’s, and the EML Estate’s adverse interests. Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 13 of 18 Page ID #:38549 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS • Each insurer has an incentive to shift liability to the defendant that the insurer does not insure to reduce the amount of any judgment that the insurer might have to cover, creating the possibility that the defendant with the least insurance coverage will suffer the greatest judgment. Id., ¶ 8(b) at 5. So, the EML Estate, having the least amount of coverage, bears the greatest risk of an adverse judgment that far exceeds EML’s potential insurance coverage and the greatest incentive to shift liability to the MLOC Defendants and the JML Administrator. Id., ¶ 9 at 5–6. So, if the same attorneys control the defense of all of the Mouren-Laurens Defendants, that attorney can protect the EML Estate at the expense of other Mouren-Laurens Defendants. Id. Because approving the substitution would allow Cronin to represent all of the MLOC Defendants, the JML Estate, and the EML Estate in the same proceeding, when each has adverse interests to the others, the Court should deny the substitution to prevent an egregious conflict of interest and “unthinkably” permitting “an attorney to assume a position at a trial or hearing where he could not advocate the interests of one client without adversely injuring those of the other.” C. R9 Will Suffer An Injury In Fact And, Therefore, Has Standing. While R9’s standing is irrelevant given this Court’s inherent power, indeed duty, to examine the propriety of a substitution of attorney for harm/conflicts, nonetheless, contrary to the MLOC Defendants’ arguments, R9 does have standing to object because approval of the substitution will cause R9 actual harm: 1. The Test For Constitutional Standing Requires An Injury In Fact. To determine if a party has standing, a person must show an “injury in fact”— a “requirement that helps assure that courts will not pass upon . . . abstract, intellectual problems, but adjudicate concrete, living contest[s] between adversaries.” Fed. Election Comm’n v. Akins, 118 S. Ct. 1777, 1784 (1998). If a Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 14 of 18 Page ID #:38550 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -9- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS party can establish an injury in fact, the party has met the test for constitutional standing, and a federal court may exercise jurisdiction over that party. Id. 2. The Disclosure Of Privileged Mediation Communications To R9’s Adversaries Will Cause R9 To Suffer An Injury In Fact. As R9 explained above, approving the substitution would necessarily cause the disclosure of privileged mediation communications to the JML Estate and the EML Estate, to the detriment of R9’s prosecution, defense, mediation, and/or settlement of claims/counterclaims. As a matter of law, a non-client party has standing to object to an attorney’s representation if that representation affects the non-client party’s prosecution/defense of a claim: • Where joint representation “so infects the litigation . . . that it impacts the [non-client] 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” State Comp., 192 F. Supp. 3d at 1089. • Where a conflict affects a party’s ability to obtain discovery, ability to win a lawsuit, and ability to settle, including the need for a court to decide whether or not any settlement between parties was “made in good faith so that [a] settling co-conspirator would be protected from indemnity actions from other co-conspirators,” non-clients have standing to disqualify an attorney because such joint representation would “so infect” litigation as to “affect the defendants’ ability to defendant themselves.” Id. at 1089–93. Similarly, here, R9 has standing to challenge Cronin’s representation of the MLOC Defendants and the JML Estate because Cronin’s doing so would affect R9’s ability to prosecute and settle against some, but not all defendants:5 5The MLOC Defendants contend that R9 does not offer detailed information regarding the scope, contents, and extent of the mediation communications that R9 had with the MLOC Defendants. R9’s disclosing such information would waive any mediation communication privilege and completely defeat the purpose that R9 is trying to accomplish—i.e., prevent the disclosure of such information to the JML Estate and the EML Estate! Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 15 of 18 Page ID #:38551 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -10- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS • Approving the substitution would lead to the disclosure of mediation communications, including communications regarding R9’s strategy/tactics against the JML Estate and EML Estate, R9’s adversaries. • Approving the substitution would hinder R9’s ability to settle with at least some of the defendants. Specifically: o While the MLOC Defendants, the JML Estate, and the EML Estate each had separate attorneys that represented each’s distinct interests, settling with each/some of the MLOC Defendants, the JML Estate, and the EML Estate separately would be easier/more likely. Substituting one attorney for all defendants would make R9’s ability to settle with some of these defendants nearly impossible. o Because the MLOC Defendants, the JML Estate, and the EML Estate have distinct indemnity and contribution rights against each other, any settlement that R9 reaches with one may require a “court to decide whether or not any settlement between parties was made in good faith so that [a] settling co-[obligors] would be protected from indemnity actions from other co-[obligators]”—i.e., raising issues that affect litigation and R9’s resolution of this case. 3. No Reason Exists For This Court To Exercise Prudential Limits. After a party establishes constitutional standing, some courts will exercise prudential limits on standing—i.e., self-imposed limits so that courts are only deciding actual controversies and not merely “generalized grievances.” Akins, 118 at 1783. “Prudential standing is satisfied when the injury asserted by a plaintiff ‘arguably [falls] within the zone of interests to be protected or regulated by the statute . . . in question.”’ Id. Nonetheless, “a federal court’s ‘obligation to hear and decide cases within its jurisdiction is virtually unflagging.” Lexmark Int’l v. Static Control Components, Inc., 134 S. Ct. 1377, 1386 (2014). For example, addressing Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 16 of 18 Page ID #:38552 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -11- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS an egregious conflict of interest overrides any “prudential barrier to litigating the rights and claims of third parties.” State Comp., 192 F. Supp. 3d at 1090. No prudential limits, therefore, exist relating to a non-client’s standing to object to an attorney’s joint representation of multiple parties where that joint representation affects the non-client’s ability to prosecute. Id. No reason exists for the Court to exercise any prudential limits here. Because R9 has established an actual injury in fact and purports only to protect R9’s own interests—i.e., prevent the disclosure of confidential mediation communications that would harm R9’s ability to prosecute this action—not the interests of others—R9 has prudential standing. Indeed, R9 is within the “zone of interests” of the parties that the mediation confidentiality rule protects: “This frank exchange is achieved only if the participants know that what is said in the mediation will not be used to their detriment through later court proceedings and other adjudicatory processes.” Cassel v. Super. Ct., 51 Cal. 4th at 123. 4. R9 Does Not Seek To Disqualify Any Parties’ Attorney, So Whether R9 Has Standing To Disqualify Cronin Is Irrelevant. The MLOC Defendants argue that R9 does not have standing to disqualify Cronin. R9, however, does not seek to disqualify any attorney, so whether or not R9 has standing to disqualify any attorney is irrelevant. R9 does not assert the rights of the MLOC Defendants and/or the JML Estate—instead R9 asserts R9’s own rights. Because the MLOC Defendants only cite cases relating to standing to move to disqualify an attorney, because R9 does not seeking to disqualify any attorney, and because R9 does not seek redress for the MLOC Defendants, but for Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 17 of 18 Page ID #:38553 F R A L E Y & A S S O C I A T E S S T E . 702 617 W . 7 T H S T . L O S A N G E L E S CA 90017 T E L 213 .550 .4000 C M E C F@ F R A L E Y L A W .C O M 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -12- REPLY FOR R9’S OBJECTION TO MOUREN-LAURENS DEFENDANTS’ ATT’Y SUBS R9 itself, none of those cases apply.6 R9’s standing to seek disqualification, therefore, is of no moment.7 IV. CONCLUSION This Court has the inherent power and, indeed, duty to independently examine susbtitutions of attorney for possible harm/conflicts. When a justified reason exists, a court should should deny a substitution of attorney. R9 has raised more than justified reasons to deny the substitution—i.e., prevent harm to R9 and conflicts of interests against public policy. The Court should, therefore, exercise the Court’s inherent power and deny the substitutions. Dated: 2018-11-05 Respectfully submitted, FRANKLIN R. FRALEY, JR. KELLY F. ROBERTS Fraley & Associates By: /s/ Franklin R. Fraley, Jr. Attorneys for Plaintiff and Counter- Defendant REV 973, LLC, and Third- Party Defendants REVERE FINANCIAL CORPORATION and JERROLD A. FINE 6See e.g., Zador Corp. v. Kwan, 31 Cal. App. 4th 1285, 1294 (1995) (no grounds for disqualification exist when former client was apprised, in detail, of conflicts as the conflicts arose from joint representation and repeatedly consented in writing to continued representation); Coyler v. Smith, 50 F. Supp. 2d 966 (C.D. Cal. 1999) (non-client had no standing to move to disqualify, when non-client did not raise any injury to itself, but only injury to a former client: “Coyler’s conflict of interest arguments all turn on Bell, Orrock’s purported breach of its duties of loyalty and confidentiality to its current and former client, Watson . . . Any breach of Watson’s confidence committed by Bell, Orrock in this case only intrudes upon Watson’s expectation of confidence.”). Here, R9 is specifically raising an injury to R9—i.e., the MLOC Defendants’ intruding on R9’s expectation of confidence in mediation communications. 7In any event, the MLOC Defendants argument that a non-client lacks standing to move to disqualify fails “to acknowledge the body of authority which provides the circumstances in which a non-client has standing to move to disqualify counsel due to a conflict of interest [citing cases].” Bernhoft Law Firm, S.C. v. Pollock, 2013 WL 3520267, *3 (S.D. Cal. July 11, 2013). Indeed, “no California case has held that only a client or former client may bring a disqualification motion.” Id.; see also, State Comp., 192 F. Supp. 3d at 1089 (“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”). Case 2:98-cv-10690-DSF-EX Document 2829 Filed 11/05/18 Page 18 of 18 Page ID #:38554