James Estakhrian v. Mark Obenstine, 19-55459

Background

Plaintiffs (class members in an earlier state-court condominium dispute) alleged Obenstine, their former attorney, had an undisclosed conflict that produced an undervalued settlement and caused him to receive about $12 million in attorney’s fees.
After a bench trial the district court ordered Obenstine to disgorge $12 million as restitution to the class.
Named plaintiffs included James Estakhrian (did not recover full deposit/retainer) and Abdi Naziri (testified he and class members lost money); Naziri was added as a class representative post-discovery.
Obenstine appealed, contesting subject-matter jurisdiction/standing, class certification, the district court’s grant of leave to amend, and the disgorgement remedy (amount and offsets).
The district court found Obenstine’s fees directly diluted class recovery and applied California professional-conduct and restitution law to order disgorgement.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standing / subject-matter jurisdiction	At least one named plaintiff (Naziri) had standing; Estakhrian also showed loss	Obenstine: lack of Article III injury because Estakhrian testified he suffered no negative financial impact	Court: Jurisdiction proper—Naziri had standing; Estakhrian also showed loss; $12M fees diluted class recovery
Class certification	Class properly certified under Rule and California law; forum contacts sufficient	Obenstine: many class members non‑California residents and some contacts occurred in Nevada, so CA law/contacts inadequate	Court: No abuse of discretion—forum could adjudicate absent members, Obenstine’s CA work and CA professional rules justified certification
Leave to amend / addition of Naziri	Amendment was within scope of existing claims; no additional discovery required	Obenstine: Naziri introduced new facts (different tower, didn’t retain defendants) and amendment was prejudicial	Court: Granting leave was not an abuse—claims already encompassed both towers and no new discovery was required
Disgorgement / remedy amount and offsets	Plaintiffs sought disgorgement of unjust enrichment (what was taken) under CA law	Obenstine: disgorgement excessive; should consider net profits after costs/taxes; offset by co‑defendants’ settlements	Court: Disgorgement affirmed—California restitution measures the wrongdoer’s enrichment; Liu (net‑profit issue) inapplicable; settlements allocated to other damages not to disgorgement

Key Cases Cited

Bates v. United Parcel Serv., Inc., 511 F.3d 974 (9th Cir. 2007) (en banc) (in a class action, standing satisfied if at least one named plaintiff meets requirements)
Stock W., Inc. v. Confederated Tribes of Colville Rsrv., 873 F.2d 1221 (9th Cir. 1989) (standard of review for subject-matter jurisdiction determinations)
Ruiz Torres v. Mercer Canyons Inc., 835 F.3d 1125 (9th Cir. 2016) (standard of review for class certification)
Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) (forum state may adjudicate absent class members’ claims)
Wright v. Schock, 742 F.2d 541 (9th Cir. 1984) (considering summary judgment before certification can be reasonable)
Schwarzschild v. Tse, 69 F.3d 293 (9th Cir. 1995) (moving for summary judgment before certification may waive objection to timing)
Raynor Bros. v. Am. Cyanimid Co., 695 F.2d 382 (9th Cir. 1982) (review standard for leave to amend)
SEC v. Platforms Wireless Int’l Corp., 617 F.3d 1072 (9th Cir. 2010) (standard of review for disgorgement orders)
County of San Bernardino v. Walsh, 158 Cal. App. 4th 533 (Cal. Ct. App. 2007) (under California law restitution focuses on wrongdoer’s enrichment)
Clark v. Superior Court (Nat’l W. Life Ins. Co.), 50 Cal. 4th 605 (Cal. 2010) (restitution measured by what was taken from the plaintiff under California law)
Liu v. SEC, 140 S. Ct. 1936 (2020) (Supreme Court decision addressing scope of disgorgement and net-profits issue)