HEWLETT PACKARD COMPANY v. JENSEN (1988)

OPINION

Petitioner claims it was entitled to an order disqualifying opposing counsel because he contacted its employees on an ex parte basis and talked to them about the facts of the case.   We originally summarily denied the petition, having determined the trial court did not abuse its discretion by rejecting the ultimate penalty of recusal.   A petition for hearing by the Supreme Court was granted, and the matter was returned to us with directions to issue an alternative writ.   We have done so, hearing has been held, and we conclude again the trial court did not abuse its discretion in rejecting the penalty sought by petitioner.

Real party Sean Jensen filed this lawsuit in December 1985 against his employer, petitioner Hewlett–Packard, for defamation damages arising from an unfavorable employment evaluation.   Jensen's attorney, Stephen Berger, noticed the deposition of one of Jensen's fellow employees, Paul Patti, for April 1987.   At that deposition, counsel for Hewlett–Packard discovered Berger had previously engaged Patti in ex parte discussions concerning the facts of the lawsuit.   Counsel made formal objection, advised Berger his conversations with Patti amounted to a breach of the attorney-client privilege which Hewlett–Packard had not waived and warned any further contact with any former or present Hewlett–Packard employee relative to any issue in the lawsuit could only be had with Hewlett–Packard's permission.   Berger responded:  “If you have any authority ․ for your [position] that I was not at liberty to contact Mr. Patti and arrange his deposition and discuss with him his knowledge about this matter ․ I ask that you furnish it to me forthwith.   And I will certainly abide thereby.”   The next day Berger sent opposing counsel a follow-up letter, again requesting any authority counsel might have which supported his position.   Berger concluded:  “If I do not receive such authority from you, I will assume that you have none, and that your statements yesterday were nothing more than your attempt to impose an additional procedural roadblock to Mr. Jensen's prosecution of this action, designed to divert attention from the merits herein, where defendants appear to have little (if any) chance of prevailing.”   Counsel for Hewlett–Packard did not respond to either of Mr. Berger's requests.

Hewlett–Packard filed a summary judgment motion on February 10, 1988.   Jensen opposed the motion, in part, with the declaration of Abraham Dykstra.   Dykstra, too, is a Hewlett–Packard employee, and occupies the position of district manager.   Hewlett–Packard quickly noticed Dykstra's deposition.   Dykstra testified he had recently had four telephonic exchanges with Berger on an ex parte basis.   Some of those discussions involved Dykstra's summary judgment declaration, which Berger ultimately prepared and sent to Dykstra for his signature.   Dykstra also revealed he had lunched with Jensen every two or three weeks since Jensen had filed his lawsuit and that he and Jensen had frequently discussed the litigation.

Based on these ex parte contacts, Hewlett–Packard filed its motion to disqualify Berger as counsel for Jensen and to bar Jensen's use of any Dykstra or Patti testimony at trial.   It also requested an order requiring Jensen to produce and identify documents reflecting the contacts he and Berger had had with Hewlett–Packard employees concerning this lawsuit.   Hewlett–Packard claimed Berger had violated Rule 7–103 of the California Rules of Professional Conduct and that appellate decisions had granted similar relief on far less egregious facts.   Jensen opposed the motion on the ground the rule does not proscribe ex parte communications with employees of corporate parties and that, even if it did, the remedies Hewlett–Packard sought were not warranted.

The trial court determined Berger's actions were not clearly in violation of the rule and that, even if they were, recusal was not an appropriate sanction.   It also concluded any rule violation did not constitute a basis for a blanket order excluding testimony.   The court denied Hewlett–Packard's motion to disqualify Berger, denied its motion to exclude testimony without prejudice to renewing it at trial and denied the request for identification and production of documents.   It also denied Jensen's cross-motion for sanctions.   The parties renew their arguments here.

 Rule 7–103 of the California Rules of Professional Conduct provides as follows:  “A member of the State Bar shall not communicate directly or indirectly with a party whom he knows to be represented by counsel upon a subject of controversy, without the express consent of such counsel.   This rule shall not apply to communications with a public officer, board, committee or body.”   Although the trial court was not persuaded Berger's conduct amounted to a violation of the rule, the decisions are clear it did.

In Mills Land & Water Co. v. Golden West Refining Co. (1986) 186 Cal.App.3d 116, 230 Cal.Rptr. 461, this court determined it was improper for opposing counsel to contact a director of a corporate party where the director still owed a fiduciary duty to the corporation, was permitted to attend board meetings and was potentially privy to privileged litigation information.   (Id., at pp. 127–128, 230 Cal.Rptr. 461.)   We concluded the rule applied to communications with a current director of a corporate party for four reasons:  (1) the contact might prejudice the director;  (2) the corporation would want to secure the advice of counsel before allowing a litigation opponent access to information the director acquired in the course of employment;  (3) the director's statements might bind the corporation in litigation;  and (4) it is difficult to identify those who control the corporation.  (Id., at p. 129, 230 Cal.Rptr. 461.)   Although neither Patti nor Dykstra was a director of Hewlett–Packard, the Mills rationale is equally applicable to a managerial employee presently employed by a corporate party.   Like an acting director, that employee has an active, ongoing relationship with the corporate entity and might sustain prejudice as a consequence of the contact or make statements binding on the corporate employer.   The corporation would also want to prevent the release of the manager's knowledge to an opponent without first securing the advice of counsel, and it is often difficult to gauge a manager's authority within the corporation.   Indeed, Mills specifically concluded “application of rule 7–103 should not depend on an employee's status within or without a corporation's ruling hierarchy․”  (Ibid;  original emphasis.)

In Upjohn Co. v. United States (1981) 449 U.S. 383, 391, 101 S.Ct. 677, 683, 66 L.Ed.2d 584, the United States Supreme Court held the prohibition against ex parte communications extends to all employees of a corporate party and not merely its upper management officers and agents.  (See also Bobele v. Superior Court (1988) 199 Cal.App.3d 708, 712–713, 245 Cal.Rptr. 144.)   Formal Opinion No. 410 of the Los Angeles County Bar Association (Apr. 20, 1983) concludes, “[i]t is not proper for opposing counsel or its investigator to contact ex parte an employee of a corporation that is a party to a suit knowing that the information sought from the employee relates to a subject of controversy.”   In short, Berger's contacts with Patti and Dykstra were improper.

 The major question, though, is whether disqualification of Berger was required.   Although the trial court had the power to impose that sanction (William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042, 1048, 197 Cal.Rptr. 232), determination of the issue rested in its broad discretion.  (Ibid.  See also Mills Land & Water Co. v. Golden West Refining Co., supra, 186 Cal.App.3d at p. 126, 230 Cal.Rptr. 461.)   We affirm its decision because there is a reasonable and factual basis for it.   (Westside Community for Independent Living, Inc. v. Obledo (1983) 33 Cal.3d 348, 355, 188 Cal.Rptr. 873, 657 P.2d 365.)

Ordinarily, a trial judge obliged to decide a disqualification motion must undertake “a cautious balancing of competing interests.   The court must weigh the combined effect of a party's right to counsel of choice, an attorney's interest in representing a client, the financial burden on a client of replacing disqualified counsel and any tactical abuse underlying a disqualification proceeding against the fundamental principle that the fair resolution of disputes within our adversary system requires vigorous representation of parties by independent counsel․ [Citations.]”  (William H. Raley Co. v. Superior Court, supra, 149 Cal.App.3d at p. 1048, 197 Cal.Rptr. 232.)   Disqualification is permissible “[i]f the status or misconduct which is urged as a ground for disqualification will have a continuing effect on the judicial proceedings which are before the court․”  (Chronometrics, Inc. v. Sysgen, Inc. (1980) 110 Cal.App.3d 597, 607, 168 Cal.Rptr. 196.)  “If, on the other hand, the court's purpose is to punish a transgression which has no substantial continuing effect on the judicial proceedings to occur in the future, neither the court's inherent power to control its proceedings nor Code of Civil Procedure section 128 can be stretched to support the disqualification.”  (Ibid.)

These authorities support this aspect of the trial court's order;  the factual and legal bases for its decision denying disqualification are patent.   First, Berger is apparently a sole practioner and his disqualification would deprive Jensen of his chosen attorney and force him to retain new counsel shortly before the approaching trial date.   The costs to Jensen will undoubtedly be significant.   Furthermore, the problem might have been obviated altogether (or the impact of Berger's conduct seriously diminished) had opposing counsel responded to either of Berger's efforts in 1987 to resolve the issue.

Next, Berger has offered not to hold Hewlett–Packard responsible at trial for any statements Patti or Dykstra may have made.   Unlike the situation in Chronometrics, this minimizes the “continuing effect” Berger's earlier misconduct will have on the ongoing proceedings.   Finally, proposed Rule 2–100 of the California Rules of Professional Conduct (intended to succeed rule 7–103) prohibits ex parte communications with a corporate employee “if the subject of the communication is any act or omission of such person which may be binding on such entity or which may be a basis of a claim or defense involving that entity.”   Hewlett-Packard, though, has not provided this court with the pleadings in the case or with the summary judgment papers in particular, and it has otherwise failed to show it will defend Jensen's defamation lawsuit squarely on the basis of anything Dykstra did or failed to do.  (See Rossiter v. Benoit (1979) 88 Cal.App.3d 706, 712, 152 Cal.Rptr. 65.)   In short, Hewlett–Packard has demonstrated no significant prejudice as a consequence of Berger's conduct.   The trial court's decision not to issue a blanket disqualification order is supported by the facts and the law.

 Although Hewlett–Packard also asks this court to order the trial judge to exclude the testimony of Dykstra and Patti at trial, Mills concluded this remedy is not always appropriate.   In that case, the trial court had made an order prohibiting the disclosure of any information or documents counsel obtained from the corporation's director.   Disputes were ordered to be resolved by in camera hearings.   The Mills court reasoned “a blanket order suppressing ‘everything’ ․ is defective because it cannot be determined what was suppressed․ [¶] With a few exceptions not pertinent here, the exclusionary rule is simply not applicable to private information gathering.”  (Mills Land & Water Co. v. Golden West Refining Co., supra, 186 Cal.App.3d at p. 137, 230 Cal.Rptr. 461.)   The remedy Hewlett–Packard requests (total suppression) is overbroad because it would apply to all testimony Patti and Dykstra might provide, whether or not it was related to the offending communications.   Although the trial court undoubtedly has the power to preclude evidence altogether (Peat, Marwick, Mitchell & Co. v. Superior Court (1988) 200 Cal.App.3d 272, 286–287, 245 Cal.Rptr. 873), we believe the Mills' remedy is the correct one here:  “[Hewlett–Packard] is left to objecting [at trial] to specific items of evidence because they are privileged.”  (Mills Land & Water Co. v. Golden West Refining Co., supra, 186 Cal.App.3d at p. 138, 230 Cal.Rptr. 461, court's italics;  see also Bobele v. Superior Court, supra, 199 Cal.App.3d at p. 712, 245 Cal.Rptr. 144.)   Because the lower court denied this aspect of Hewlett–Packard's motion without prejudice to renewing it at trial, we do not disturb its order.¹

The petition is denied and the alternative writ is discharged.   Real parties shall recover their costs.

FOOTNOTES

1.   Hewlett–Packard also requested an order requiring Jensen to identify the contacts he and Berger had with Hewlett-Packard employees and to produce all documents pertaining to those contacts.   We do not address this question, though, because “the prerogative writ is not the favored method of reviewing discovery orders.   Ordinarily the aggrieved party must raise the issue on direct appeal from a final judgment.”  (Sav-On Drugs, Inc. v. Superior Court (1975) 15 Cal.3d 1, 5, 123 Cal.Rptr. 283, 538 P.2d 739)  Hewlett–Packard has not satisfactorily shown why the remedy of appeal is inadequate.   Furthermore, our alternative writ order only orders the superior court to respond to the disqualification motion.   Finally, Berger claimed this aspect of the motion was largely moot because he had identified the contacts and had produced most (if not all) the documents.   This is a factual issue which the trial court resolved against Hewlett–Packard.   Its decision is supported by Berger's declaration in opposition to Hewlett–Packard's disqualification motion and by his representations to the court at the hearing.   We consequently do not disturb it.  (Estate of Silverstein (1984) 159 Cal.App.3d 221, 226, 205 Cal.Rptr. 294.)

SCOVILLE, Presiding Justice.

CROSBY and MOORE, JJ., concur.