Khanna v. Walia

Background

Mandeep Dhoat, identified as a cross-complainant and counter-defendant, moved to disqualify Manatt, Phelps & Phillips, LLP from representing Harpreet Walia and Skiermont Derby LLP from representing WaveStrong, Inc. Dhoat based the motion on the firms’ roles in producing documents, including documents produced “on behalf of” WaveStrong. Walia and WaveStrong opposed the motion. Walia also requested costs for opposing it under Federal Rule of Civil Procedure 37, and WaveStrong filed evidentiary objections.

The disputed events began when a Manatt attorney contacted Dhoat’s counsel about document production. Dhoat’s counsel later met with a Skiermont attorney and then with Manatt attorneys. The parties disputed portions of those discussions. The record also showed that Skiermont used an electronic-discovery vendor to search WaveStrong employee email accounts but chose not to review some accounts, including Walia’s, because Walia used his WaveStrong email account to communicate with Manatt. Manatt instead reviewed and produced documents from those accounts.

Legal standard and analysis

The court explained that disqualification is a discretionary and generally disfavored remedy. California law governed the issue. As a general rule, a former client must seek disqualification based on a conflict of interest, but California recognizes limited exceptions. Applying Blue Water Sunset, LLC v. Markowitz, the court concluded that Dhoat could bring the motion because Dhoat and Walia were the only shareholders in WaveStrong.

The court clarified that “standing” in this context did not mean constitutional or statutory standing. Instead, it referred to whether Dhoat was entitled to prevail on a motion seeking disqualification. The court rejected reliance on an earlier federal decision’s Article III standing analysis and applied California authority.

The court nevertheless found that Dhoat did not prove the necessary attorney-client relationship. Before a lawyer can be disqualified for representing a party adversely to a current or former client, the party seeking disqualification must establish that the lawyer represented that party in a way that created an attorney-client relationship. The court found that Manatt had transmitted a document production and used the phrase “on behalf of WaveStrong,” but had reviewed and produced documents to which it already had access. Skiermont’s decision not to have its own attorneys review the same documents did not, by itself, make Manatt WaveStrong’s lawyer or create an attorney-client relationship.

The court characterized the issue raised by the document-review arrangement as a potential question under Federal Rule of Civil Procedure 34—whether WaveStrong produced all responsive documents within its possession, custody, or control—rather than as proof of improper legal representation. Dhoat cited no case holding that this type of discovery conduct created an attorney-client relationship. The court also stated that attorneys must comply with Rules 26 and 34 and their ethical obligations, and that WaveStrong’s attorneys should review WaveStrong’s documents, including emails on its servers, to ensure that all responsive documents are produced.

Rulings

The court DENIED Dhoat’s motion to disqualify counsel. It also DENIED Dhoat’s alternative request for production of all communications between Manatt and Skiermont related to the case. The court DENIED Walia’s request for costs under Rule 37 because Dhoat had moved to disqualify counsel rather than to compel discovery. To the extent Walia sought fees under Rule 11 on the ground that the motion was frivolous, the court found that he had not met his burden and had not followed Rule 11’s procedural requirements.

The court OVERRULED WaveStrong’s evidentiary objections because they were filed separately rather than within its brief or memorandum, as required by Civil Local Rule 7-3(a). The court agreed that new arguments and evidence raised for the first time on reply were waived, but stated that it did not consider those arguments or evidence in resolving the motion.

The court directed the parties to meet and confer before bringing any discovery-related motion based on the July 13 production. They must document who attended, how long the meeting lasted, and record the meet-and-confer for possible production to the court. The order disposed of Docket No. 156.