Metropolitan News-Enterprise


Friday, September 21, 2001


Page 1


Appeal From Denial of Disqualification Doesn’t Stay Proceedings, Court of Appeal Rules


By a MetNews Staff Writer


An appeal from a pretrial order denying a motion to disqualify opposing counsel doesn’t automatically stay proceedings in the trial court, this district’s Court of Appeal ruled yesterday.

Div. Four granted a writ of mandate, overturning a stay of proceedings in an unfair competition suit. Retired Los Angeles Superior Court Judge Robert O’Brien, sitting on assignment in May of this year, erred in apparently concluding that a stay was mandatory rather than discretionary, Presiding Justice Charles S. Vogel wrote for the panel.

The writ was sought by Morton C. Reed and Elliot Kalt, former employees and now competitors of Case Financial, Inc. Case is a leader in the business of making loans to plaintiffs and law firms secured by litigation proceeds.

Case sued Reed and Kalt, claiming they were using Case’s trade secrets to obtain business and were soliciting Case’s employees and customers. Their conduct constituted misappropriation and unfair competition and violated contracts they had entered into with Case, the company alleged.

Case’s lawyers moved to disqualify Reed and Kalt’s attorney, Steven M. Rubinstein, claiming he had previously represented Case and obtained confidential information while doing so. Rubinstein responded that he had never represented Case, and that his discussions with the company regarding possible representation in unrelated matters didn’t preclude him from representing Reed and Kalt.

O’Brien ruled that there was never an attorney-client relationship between Case and Rubinstein. Case’s appeal from the denial of the disqualification motion is pending.

After O’Brien ruled on the motion, the defendants moved to compel discovery. O’Brien denied the motion, holding that the case was “to be stayed until the appeal of the Court’s ruling” denying the motion to disqualify counsel.

Vogel, writing for the Court of Appeal, said that while an order denying a motion to disqualify counsel is appealable, the order is collateral—so the appeal does not automatically stay proceedings in the trial court. If the trial judge denies the stay, the appellant can ask the Court of Appeal to do so, the presiding justice explained.

An automatic-stay rule would encourage “insubstantial or even frivolous” disqualification motions, Vogel said. That concern led the U.S. Supreme Court to rule that the denial of such a motion isn’t appealable unless the Court of Appeals chooses to allow a discretionary interlocutory appeal or grant a writ of mandamus, the presiding justice noted.

“To hold that an appeal from an order denying disqualification automatically stays the trial proceedings would encourage the use of such motions and appeals merely to delay the trial,” he wrote.

He went on to say:

“Appellate courts have the flexible capacity to grant or deny a request to stay the trial by writ of supersedeas, depending upon the strength of the preliminary showing of the alleged conflict of interest.  If the showing on the petition for a writ of supersedeas is unpersuasive, the trial can proceed because the moving party is not likely to prevail on the appeal of the disqualification issue.”

The case is Reed v. Superior Court, Case Financial, Inc. B151210.


Copyright 2001, Metropolitan News Company