Brown, Neri, Smith & Khan LLP Blog
Managing partner, Ethan Brown, first-chaired a 12 day trial in Los Angeles Superior Court before Judge Elizabeth Allen White, along with BNSK counsel Patricia Eberwine Tenenbaum, Sara Colón and Nona Yegazarian, where BNSK represented plaintiff, Interstate Restoration, in a breach of contract action against defendant, A Community of Friends (“ACOF”). Plaintiff alleged that ACOF failed to pay Interstate Restoration for remediation services provided on two of its properties in downtown Los Angeles. In its defense, ACOF argued that Interstate fraudulently induced ACOF into the contract and grossly overbilled for the work provided. The jury arrived at its verdict after 2.5 hours of deliberation, holding unanimously for plaintiff, Interstate Restoration, and awarding the full contract amount of $6,191,047.48.
In post-trial motions, the Court awarded prejudgment interest at a rate of 18 percent per annum, resulting in a judgment that will exceed $9.7 million.
DotConnectAfrica Trust (DCA), a client of our firm, won a victory in its ongoing efforts to bring greater internet access to the continent of Africa.
DCA is currently in a suit against the Internet Corporation for Assigned Names and Numbers (ICANN) for the fraudulent rejection of DCA’s application for the top-level domain name “.Africa”. In an effort to dismiss the case, ICANN moved for summary judgment, arguing DCA’s suit was barred by 1. a Covenant Not To Sue, and 2. Judicial Estoppel.
In its Motion, ICANN contended that DCA had completely waived its right to sue by signing a litigation waiver in ICANN and DCA’s original contract. Additionally, ICANN argued that DCA’s previous statements before an Independent Review Panel were so contradictory to its current positions that the suit should be barred by the doctrine of Judicial Estoppel.
Judge Howard L. Halm, however, ultimately agreed with DCA’s lawyers from BNSK. He ruled that, under California statutory law (Cal. Civ. Code § 1668), Covenants Not To Sue did not apply to lawsuits for fraud or willful injury. Therefore, six of DCA’s causes of action could not be barred by the Covenant, because they alleged fraud and/or willful injury. Additionally, Judge Halm did not apply Judicial Estoppel because 1. the evidence was unclear whether DCA had taken a contradictory position in the past, and 2. ICANN had not produced evidence indicating that, if DCA had changed its position, it had done so in bad faith.
With this victory, DCA can continue to vindicate its rights, in an effort to ensure that the significant benefits of information technology are available to the people of Africa.
DCA was represented by BNSK attorneys Ethan Brown, Sara Colón, and Rowennakete Barnes. ICANN was represented by international law firm, Jones Day.
The California Supreme Court’s refusal to hear an appeal regarding Gibson Dunn & Crutcher LLP’s recent disqualification from representing another large firm should serve as both a clarification of attorney-client privilege and a word of warning to law firms.
The Court rejected a petition to hear McDermott Will & Emery LLP v. Superior Court, 10 Cal. App. 5th 1083 (2017), a decision from the California Court of Appeals’ Fourth District. There, the appeals court affirmed the disqualification of Gibson Dunn from representing McDermott Will & Emery LLP in a malpractice suit. It also held that an email sent by a client to a third party prior to the litigation did not waive the attorney-client privilege protecting that email’s content.
Dick Hausman, the older head of a wealthy family, ran a company that was regularly represented by the law firm, McDermott Will & Emery. However, during an internal struggle for control of the family company, Hausman retained personal, third party counsel, and had a meeting with this new attorney to discuss his legal options. Shortly after, the attorney sent an email summarizing the meeting, and Hausman, who was 80 and suffered from Multiple Sclerosis, accidentally forwarded the message to his daughter-in-law. She, in turn, sent the message to multiple members of the family.
Two years later, McDermott Will & Emery was sued by the family over conflicts of interest and was represented by the law firm, Gibson Dunn & Crutcher. Gibson’s attorneys offered the email as evidence, and did not return the email when opposing counsel said it was inadvertently disclosed privileged material. In turn, opposing counsel filed motions seeking 1. Judicial determination that the email was privileged and had been inadvertently disclosed, and 2. Gibson Dunn be disqualified from representing McDermott in the matter at hand. The trial court granted both motions and the court of appeals affirmed. In its affirmance, the court of appeals ruled that the email was obviously privileged because it was from an attorney and summarized a meeting with a client. Furthermore, the court held that Hausman did not waive his privilege as to the email, because his forwarding was accidental. Furthermore, it also held that disqualification was the appropriate remedy because Gibson Dunn had reviewed and used the email already, which raised the likelihood the exposure could affect the outcome of the case.
Impact of Case
This case seemingly expands the strength of attorney-client privilege. Prior to this case, the State Fund rule, which requires that opposing firms not use materials which are obviously privileged, had mostly been applied to instances of disclosure by opposing counsel and during litigation. In contrast, this court found there was obvious privilege even though the disclosure was made by the client and years before the onset of litigation. Essentially, the court ruled that the email, on its face, should have indicated to Gibson Dunn that it should not be used, even though the client had directly sent it to a third party.
McDermott currently has requested the court to depublish the case, meaning that it could not be used as binding law in the future. In the meantime, California lawyers and clients need to be aware of the documents they use as evidence. If there is any indication that the information is privileged, regardless of when and by whom it was disclosed, it would be wise to not use that information until it is approved by opposing counsel or the judge.
Author: Jacob McIntosh
On June 20, 2016, the Hon. R. Gary Klausner ruled in favor of our client DotConnectAfrica Trust (DCA), affirming his April 12 order enjoining Defendant Internet Corporation for Assigned Names and Numbers (ICANN) from delegating the top-level internet domain .Africa.
On May 6, former Defendant ZA Central Registry filed a motion for reconsideration challenging the Court’s decision issuing the preliminary injunction. ICANN joined the motion shortly after. However, ZACR's motion to dismiss was pending prior to the motion for reconsideration. The Court granted ZACR’s motion to dismiss and refused to consider ZACR’s arguments for reconsideration as moot. Thus, the Court only addressed points raised by ICANN.
ICANN raised two main points: (1) an erroneous factual finding; and (2) plaintiff’s misrepresentation of facts regarding irreparable injury. ICANN further argued that a bond was required by DCA, should the preliminary injunction remain in place.
As to the first point, the Court acknowledged the erroneous finding of fact – as did both ICANN and DCA – but agreed with DCA that the error was harmless. The Court held “upon reconsideration of the facts and evidence, there still exists serious questions going to whether Plaintiff had acquired a sufficient number of endorsements to have passed the geographic names evaluation phrase in the first instance.” Relying on ICANN’s internal review process holding, Judge Klauser held that “both the actions and inactions of the [ICANN’s] Board with respect to the application of Plaintiff relating to the .AFRICA gTLD were inconsistent with the Articles of Incorporation and Bylaws of ICANN.” Judge Klaunser found it reasonable to infer that ICANN improperly rejected DCA’s application at the geographic names evaluation phrase and that the application should proceed to the delegation phrase. The error in ruling was “not determinative to its [the Court’s] ultimate conclusion” that there are serious questions going to DCA’s likelihood of success.
As to ICANN’s second point, the Court held that ICANN failed to raise the arguments in the first place. The argument failed for that reason alone. Regardless, the Court also held that DCA sufficiently demonstrated irreparable harm.
Finally, the Court refused to consider ICANN’s request for a bond. Holding that ICANN also failed to raise this point opposing when opposing the preliminary injunction, ICANN would not get a second bite at the apple.
The Court also noted that ZACR failed to respond to DCA’s argument that ZACR had sufficient time to oppose the preliminary injunction before it was issued and held that ZACR’s evidence of damages too speculative to require any bond.
A copy of the order can be found here.