Havasu Lakeshore Investments, LLC v. Fleming
217 Cal. App. 4th 770
Cal. Ct. App.2013Background
- LLC formed in 2004 to develop a mobilehome park; managing member is Peloquin's partnership, Peloquin individually not an LLC member.
- Fleming Sr. and Fleming Jr. are LLC members; each owns ~9.26% and Jr. sued Peloquin in 2011 for breach, fraud, and misrepresentation; cross-complaint filed August 2011 against Fleming Sr. and Jr.
- HKC represented all cross-complainants; Fleming Sr. moved February 2012 to disqualify HKC based on duty of confidentiality (rule 3-310(E)).
- Motion argued HKC had confidential information from Fleming Sr.; the court granted disqualification June 2012 on grounds of loyalty under rule 3-310(C) and Gong, finding potential conflict.
- Court concluded no actual conflict existed between Peloquin/LLC and the non-member Peloquin; determined HKC could ethically jointly represent cross-complainants against the Flemings; reversed the disqualification.
- Disposition: order reversed; cross-complainants entitled to costs on appeal; opinion certified for publication.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether there was an actual or potential conflict justifying disqualification | Havasu argues no actual/conflicting interests between LLC and Peloquin | Fleming Jr. contends there is a potential conflict due to opposing litigation positions | No actual or reasonably foreseeable conflict; joint representation permissible |
| Whether corporate/conglomerate representation permits concurrent representation of organization and constituents when no adverse interests exist | Havasu supports joint representation under 3-600(E) with consent | Fleming argues risk of conflicts undermines loyalty; disqualification necessary | Absent actual conflict, joint representation permitted under rule 3-310 and 3-600(E) |
| Scope of Gong and applicable standards for potential conflicts in corporate/group representations | Gong framed conflict in derivative/majority shareholder contexts; not applicable here | Gong cautions against dual representation when interests may diverge | Gong does not compel disqualification absent actual or reasonably likely conflict; standard met here |
Key Cases Cited
- Gong v. RFG Oil, Inc., 166 Cal.App.4th 209 (2008) (disqualification principles in joint representation; potential conflicts not automatic)
- City and County of San Francisco v. Cobra Solutions, Inc., 38 Cal.4th 839 (2006) (abuse-of-discretion standard for disqualification decisions and conflict principles)
- Oaks Management Corp. v. Superior Court, 145 Cal.App.4th 453 (2006) (conflicts of interest and duty of loyalty/confidentiality; framework for disqualification)
- Great Lakes Construction, Inc. v. Burman, 186 Cal.App.4th 1347 (2010) (standing to challenge joint representation and implications of conflict)
- Carroll v. Superior Court, 101 Cal.App.4th 1423 (2002) (definition of potential conflict; reasonable likelihood of actual conflict)
- In re Celine R., 31 Cal.4th 45 (2003) (supreme court on interpretation of potential conflict in dependency context)