Thursday, October 12, 2017

State Farm/Rico DQ Order Automatically Stayed Pending Appeal

URS Corp. v. Atkinson/Walsh Joint Venture, No. G055271 (D4d3 Sept. 26, 2017)

Plaintiffs attorneys got disqualified under the State Farm/Rico doctrine for improperly using documents that had been provided to them in connection with a mediation. They have appealed that order and seek, by writ of supersedeas, to stay any proceedings in the trial court pending the appeal. Which raises some interesting questions: 

1. Does an appeal of a DQ order give rise to automatic stay under Code of Civil Procedure § 916? 

2. And if so, does it just stay the DQ order, or the whole case?

So far as the stay goes, the default rule set out in § 916(a), is that a perfected appeal stays a case, except that the trial court can proceed on any issue that isn’t bound up in the appealed judgment. There are a bunch of exceptions in §§ 917.1 to 917.9, but none are really addressed to an order disqualifying an attorney. Moreover, the general purpose behind an automatic stay—preserving the status quo so the Court of Appeal can rule on an unaltered order or judgment—is fulfilled by staying a DQ order. 

But even if it’s textually justifiable and good policy, the Court of Appeal decides that for a stay to attach, it should also square with the rationale for why a DQ order is immediately appealable. Meehan v. Hopps, 45 Cal. 2d 213 (1955), in which the Supreme Court first held that DQ orders are appealable, rested its result on two grounds. First, an order disqualifying an attorney is a final collateral order appealable under the collateral order doctrine. And second, a DQ order is, more or less, the granting of an injunction preventing the disqualified attorney from continuing to represent the party.
 
But an appeal of a collateral order does not merit an automatic stay. As to whether an automatic stay applies to an order granting an injunction, that depends. A mandatory injunction gives rise to an automatic stay, but a prohibitory one does not. 

Of course, the difference between a mandatory and prohibitory injunction can be elusive. It is here. Is the court prohibiting the DQ’ed counsel from doing work (prohibitory)? Or is it upsetting the status quo by requiring the party to hire a new lawyer (mandatory)? The court lands on the latter, finding that a disqualification is sufficiently status-quo-upsetting as to be able to characterize the order as mandatory. So characterized, Meehans injunction rationale would confirm that an automatic stay applies when a granted DQ order is appealed, consistent with the text and policy of § 916

But it does not stay the whole case. Under the text of § 916(a), the stay only applies to matters embraced in the order up on appeal. Given Meehan’s description of an order granting a DQ as collateral, and the fact that having the case generally proceed poses no risk of interference with the appeal, there’s no reason to find that the remainder of the case embraced by the DQ issue. Whatever prejudice to defendants in having to litigate against someone the court DQed while the appeal is pending is minimal, particularly under the circumstances of the DQ in this case. (Given that the DQ is based on State Farm/Rico, it’s not like Defendant is litigating against its own former lawyer who knows its deepest secrets.) Although the stay would potentially reach any further litigation regarding the misuse of the docs that gave rise to the DQ, since the docs have been purportedly destroyed on order of the trial court, it seems like that’s not an issue. 

That all said, there is still a potential for a discretionary stay of the rest of the case. But no request for a discretionary stay was made to the trial court in the first instance. So if there are issues with the sufficiency or scope of the automatic stay, they should be presented by motion to the trial court. 

Writ of supersedeas granted, in part.

No comments:

Post a Comment

The Jurisprudence of Signification

Wood v. Superior Court , No. A168463 (D1d2 Mar. 14, 2024). Yes. You can change your legal name to Candi Bimbo Doll if you want to. See Cod...