Friday, September 8, 2006
Ex Parte Communication With Unrepresented Employee Of Party Not Grounds for Disqualification —C.A.
By a MetNews Staff Writer
An attorney may not be disqualified for having ex parte communications with a management-level employee of a party unless the attorney has actual knowledge the employee is represented by counsel, the Sixth District Court of Appeal ruled yesterday in an unpublished opinion.
The court affirmed the order of Santa Clara Superior Court Judge Kevin McKenney denying Cisco Systems, Inc.’s motion to disqualify Mosaic Systems, Inc.’s attorneys Russo & Hale in a breach of contract and misappropriation of trade secrets case brought by Mosaic.
Andreas Bechtolsheim was a vice president of Cisco and the general manager of its Gigabit Switching Business Unit. He was also an investor and on the board of directors of Mosaic.
In 2000 Bechtolsheim initiated business dealings between the two companies and encouraged Mosaic to work on a custom memory chip for Cisco, the record showed. The companies signed a non-disclosure agreement and worked together to develop the chip.
In 2003 the relationship between the companies ended when Cisco agreed to purchase the chips from one of Mosaic’s competitors, and refused to consider
further proposals from Mosaic. Later that year, Mosaic’s attorney Jack Russo and his partner Michael Risch met with Bechtolsheim and discussed Mosaic’s potential claims against Cisco.
After Mosaic filed suit in 2004, Cisco moved to disqualify Russo and Hale, arguing that the meeting with Bechtolsheim violated a rule of professional conduct prohibiting an attorney from having ex parte communications with a party the attorney knows is represented, without that party’s attorney’s consent.
In response, Russo and Risch filed declarations stating, among other things, that neither knew that Bechtolsheim was represented by an attorney when they met with him.
After McKenney denied the motion, Cisco appealed, saying the issues were whether there is an exception to the rule for ex parte contact with someone who is both an employee of the opposing party and a director of the client, and whether a violation of the rule can result in disqualification without proof that confidential information was obtained.
Cisco argued that the issues were purely legal ones, and therefore McKenney’s ruling was entitled to no deference.
But Justice Richard J. McAdams, writing for the Court of Appeal, said:
“Notwithstanding Cisco’s insistence to the contrary, it is clear that the trial court resolved some factual disputes in deciding the disqualification motion – whether implicitly or explicitly. The record reflects several factual disagreements, including whether Mosaic’s attorneys knew that Bechtolsheim was represented and whether they gained information or insight by speaking with him.”
McAdams also found that other issues were involved, saying:
“During the two hearings that the court conducted on the disqualification motion, it made clear that various factors entered into its consideration and determination, not just Bechtolsheim’s status as Mosaic’s director.”
McAdams found that the Cisco failed to show that Russo & Hale “had actual knowledge” that Bechtolsheim was represented by an attorney when they met, a prerequisite for a violation of the rule.
“We affirm the trial court’s implied factual finding that Russo & Hale lacked actual knowledge that Bechtolsheim was represented, whether by Cisco’s legal department or otherwise.”
The justice concluded:
“Applying the settled legal requirement of actual knowledge of representation to the court’s implied factual finding that such knowledge was lacking here, we conclude that Cisco failed to carry its burden of establishing a violation of . . . [the rule].”
McAdams said that, in light of the foregoing, the court didn’t need to consider the fact that Bechtolsheim was also on the board of Mosaic or whether Cisco needed to show prejudice resulting from the communication.
Justices Nathan D. Mihara and Wendy Clark Duffy concurred in the opinion.
The case is Mosaic Systems, Inc. v. Cisco Systems, Inc., H028714.
Copyright 2006, Metropolitan News Company