Urs Corp. v. Venture

party who appeals an order disqualifying an attorney statutorily entitled to an automatic stay; and (2) if so, does the automatic stay extend to all trial court proceedings? ( § 916, subd. (a).) We have chosen to focus solely on these two questions in this opinion and forego (for the time being) determining whether a discretionary stay of all trial court proceedings would be appropriate. (See § 923 ["reviewing court" has discretion "to make any order appropriate to preserve the status quo ... or otherwise in aid of its jurisdiction"].)

Given the narrow issues under consideration, supersedeas is the proper remedy and our review is de novo. ( Quiles v. Parent (2017) 10 Cal.App.5th 130 , 136, 215 Cal.Rptr.3d 858 ( Quiles ).) It is therefore unnecessary to describe the particular factual and procedural details that would be pertinent to discretionary relief under section 923, such as the merits of the disqualification motion and the specific harms to the parties of either granting or denying a discretionary stay. ( Quiles , at p. 136, 215 Cal.Rptr.3d 858 .)

A Step Back: Why are Attorney Disqualification Orders Appealable in the First Place?

Asking whether this appeal automatically stays proceedings in the trial court presupposes that attorney disqualification orders are appealable. Of course, orders granting or denying attorney disqualification motions are immediately appealable in California state courts. (E.g., Costello v. Buckley (2016) 245 Cal.App.4th 748 , 752, 199 Cal.Rptr.3d 891 ; Kennedy v. Eldridge (2011) 201 Cal.App.4th 1197 , 1203, 135 Cal.Rptr.3d 545 ; Machado v. Superior Court (2007) 148 Cal.App.4th 875 , 882, 55 Cal.Rptr.3d 902 ( Machado ).)

The basis for this rule is not obvious or inevitable. "A trial court's authority to disqualify an attorney derives from the power inherent in every court '[t]o control in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial

case and to restrain such counsel from disclosing certain confidential information pertaining thereto." ( Meehan , supra , 45 Cal.2d at p. 214, 288 P.2d 267 .) The Supreme Court denied a motion to dismiss the appeal on two grounds. ( Id . at pp. 215-218, 288 P.2d 267 .)

First, the order in Meehan was one refusing to grant an injunction. ( Meehan , supra , 45 Cal.2d at pp. 215-216, 288 P.2d 267 ; see § 904.1, subd. (a)(6) [current version of statute making orders granting or denying injunctions immediately appealable].) Meehan acknowledged that trial courts have the power to disqualify counsel under inherent section 128 powers, but explained "it is beyond question that [the moving party] specifically invoked the equity power of the court by his motion." ( Meehan , at p. 215, 288 P.2d 267 .) "Both the language of the motion and the order itself meet the test for an injunction laid down in ... section 525, where an injunction is defined as '... a writ or order requiring a person to refrain from a particular act.' " ( Meehan , at p. 215, 288 P.2d 267 .) Moreover, under established authority, the moving party could have filed a

In sum, the order disqualifying Pepper Hamilton is appealable, both because it is an order granting an injunction and an order granting a final collateral order. The premises accepted by our Supreme Court in making this rule are important to the remainder of our analysis.

The Text of the Relevant Statutes Suggest an Automatic Stay is Plausible.

We begin our analysis of the questions presented with an examination of the relevant statutes. (See Quiles , supra , 10 Cal.App.5th at pp. 139-140, 215 Cal.Rptr.3d 858 .)

therein" or "affected" by the attorney disqualification order.

"An appeal stays a mandatory but not a prohibitory injunction. This rule is clear, but whether a decree is one or the other may be difficult to determine in some situations since an order entirely negative or prohibitory in form may prove upon analysis to be mandatory and affirmative in essence and effect." ( Kettenhofen v. Superior Court , supra , 55 Cal.2d at p. 191, 10 Cal.Rptr. 356 , 358 P.2d 684 .) Courts are not "bound by the form of the [injunction] order but will look to its substance to determine its real nature." ( Feinberg v. One Doe Co. (1939) 14 Cal.2d 24 , 28, 92 P.2d 640 .) This inquiry "does not depend on semantic characterizations." ( Union Pacific R.R. Co. v. State Bd. of Equalization (1989) 49 Cal.3d 138 , 158, 260 Cal.Rptr. 565 , 776 P.2d 267 .)

Courts distinguish between mandatory and prohibitory injunctions to preserve the status quo pending appeals. ( Paramount Pictures Corp. v. Davis (1964) 228 Cal.App.2d 827 , 835, 39 Cal.Rptr. 791 .) "An order enjoining action by a party is prohibitory in nature if its effect is to leave the parties in the same position as they were prior to the entry of the judgment. On the other hand, it is mandatory in effect if its enforcement would be to change the position of the parties and compel them to act in accordance with the judgment rendered." ( Musicians Club of L. A. v. Superior Court (1958) 165 Cal.App.2d 67 , 71, 331 P.2d 720 .)

The challenged order in this case is generic. "The motion ... for an order disqualifying [Pepper Hamilton] from this litigation ... is granted." As noted above, however, the form of the order is not the true issue. It would have only served as a distraction had the court phrased its order in mandatory or prohibitive language. The legal issue presented is whether an order disqualifying an attorney from ongoing participation in civil litigation is a mandatory

anyone to affirmatively do anything. Pepper Hamilton must refrain from further participation in this litigation. Appellants must refrain from further reliance on Pepper Hamilton in this litigation. That is the full extent of the implied terms of the order. Secondly, even if the order is construed to require some affirmative conduct, the affirmative acts required "are merely incidental to [the order's] purpose of prohibiting [appellants and Pepper Hamilton] from continuing to engage in" unethical conduct. ( People ex rel. Brown v. iMergent, Inc. (2009) 170 Cal.App.4th 333 , 343, 87 Cal.Rptr.3d 844 [holding that preliminary injunction was prohibitory even though it ordered a party to stop engaging in "illegal conduct" that it had resumed before the filing of the motion but had previously agreed to cease in a settlement with government officials].) Respondent places the pertinent status quo not at the moment before the disqualification order was entered, but at the moment before this lawsuit was filed by appellants. According to respondent, that was " 'the last actual peaceable, uncontested status which preceded the pending controversy.' " ( United Railroads of San Francisco v. Superior Court (1916) 172 Cal. 80 , 87, 155 P. 463 ; id . at pp. 87-90, 155 P. 463 [injunction prohibiting unauthorized entries on property was not

in or affected by the appeal, we must consider the appeal and its possible outcomes in

note the automatic stay's scope in the disqualification context depends on the facts of the particular case.

The parties both raise practical objections to a rule automatically staying enforcement of the attorney disqualification order but not all trial court proceedings pending appeal. As discussed below, those practical objections can be dealt with flexibly in the context of motions or petitions for a discretionary stay of remaining proceedings.

Appellants' Request for a Discretionary Stay of All Proceedings.

Appellants also request, in the alternative, a discretionary stay of all trial court proceedings pending resolution of this appeal. (§ 923; Reed , supra , 92 Cal.App.4th at pp. 454-457, 111 Cal.Rptr.2d 842 .) Appellants claim there is merit to their appeal and that they will be irreparably harmed if they are required to litigate this case without Pepper Hamilton. Respondent opposes the discretionary stay, citing the lack of merit to the appeal, the delay in resolving the lawsuit inherent to a stay of all proceedings, and the purported lack of harm to appellants (who can simply choose between other law firms that already represent appellants).

In the interests of judicial economy, we decline at this time to rule on appellants' request for a discretionary stay. It is premature for this court to conduct a preliminary review of the merits of this appeal to see if there is a " 'substantial question' " (see Veyna v. Orange County Nursery, Inc. (2009) 170 Cal.App.4th 146 , 157, 87 Cal.Rptr.3d 658 ), as well as to weigh the harm to the respective parties of staying all proceedings. The irreparable harm calculus for both parties significantly changes in a world in which enforcement of the attorney disqualification order is automatically stayed.

The order disqualifying Pepper Hamilton cannot be enforced pending this appeal, eliminating appellants' primary argument for irreparable harm. But appellants may be leery of continuing to litigate the case with Pepper

on the particular exigencies of the litigation. For instance, it may be particularly important to depose certain witnesses immediately; a blunt stay of all proceedings by this court would foreclose the parties and trial court from considering such a carve out.

Should the parties not come to an agreement, they may file a noticed motion for a stay of trial court proceedings (in whole or in part) in the trial court. (See Veyna v. Orange County Nursery, Inc. , supra , 170 Cal.App.4th at p. 157, 87 Cal.Rptr.3d 658 .) Once in possession of a trial court ruling, a dissatisfied party may seek supersedeas or other extraordinary relief from this court.

DISPOSITION

Let a writ of supersedeas issue staying enforcement of the order disqualifying counsel for appellants, Pepper Hamilton. Pepper Hamilton may continue to represent appellants in this matter pending the resolution of this appeal. The petition for writ of supersedeas is denied to the extent it requests a discretionary stay of all trial court proceedings. The partial denial of the petition is without prejudice to further proceedings in the trial court or in this court as discussed in this opinion.

The temporary stay imposed by this court on August 10, 2017 is modified to stay only enforcement of the disqualification order. The temporary stay is dissolved with regard to its stay of all trial court proceedings. As modified,

Does an appeal of an order disqualifying counsel result in an automatic stay pursuant

stay of all trial court proceedings; or (2) if there is no automatic stay, this court should exercise its discretionary power to stay all trial court proceedings. Respondent filed an initial opposition to the petition.

On August 10, 2017, we issued a temporary stay of all trial court proceedings and invited further briefing by the parties. The parties responded and this matter is now set for determination.

DISCUSSION

Among other contentions, the petition presents two pure questions of law: (1) is a

proceeding before it, in every matter pertaining thereto.' " ( People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135 , 1145, 86 Cal.Rptr.2d 816 , 980 P.2d 371 , quoting § 128, subd. (a)(5).) Section 904.1 does not explicitly mention attorney disqualification orders or section 128 orders among its list of appealable orders. Federal courts do not allow an immediate appeal of attorney disqualification orders. (See Gregori v. Bank of America (1989) 207 Cal.App.3d 291 , 300, fn. 4, 254 Cal.Rptr. 853 .) California courts have expressed a preference for resolving attorney disqualification issues in writ proceedings, which "are determined more speedily than appeal." ( Reed v. Superior Court (2001) 92 Cal.App.4th 448 , 455, 111 Cal.Rptr.2d 842 ( Reed ).)

Our Supreme Court, however, long ago held that an order denying a disqualification motion was appealable. ( Meehan v. Hopps (1955) 45 Cal.2d 213 , 214-218, 288 P.2d 267 ( Meehan ).) Subsequent cases applied Meehan consistently to a variety of orders granting and denying disqualification motions. It is worth examining the question of why attorney disqualification orders are appealable because the answer to this question bears on whether an automatic stay is a consequence of such an appeal. ( Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450 , 455, 20 Cal.Rptr. 321 , 369 P.2d 937 ; Loshonkohl v. Kinder (2003) 109 Cal.App.4th 510 , 517, 135 Cal.Rptr.2d 114 ["As an intermediate appellate court we are bound by decisions of our Supreme Court and we must follow the reasoning found therein"].)

To be precise, Meehan was an appeal of an order denying a "motion to enjoin ... counsel from further participation in the

following an appeal of every order denying disqualification of an attorney would create the potential for abuse by short circuiting trial court proceedings. ( Id . at p. 456, 111 Cal.Rptr.2d 842 ; cf. § 425.16, subd. (i).)

Reed offered some comfort to losing parties appealing the denial of a disqualification motion-they can seek relief from the trial court or appellate court to stay proceedings "to maintain the status quo pending the appeal." (

Of course, the attorney disqualification order is also appealable as an injunction. The two holdings of Meehan , supra , 45 Cal.2d 213 , 288 P.2d 267 , are harmonized by characterizing attorney disqualification orders as collateral injunctive orders. This complicates matters, as an order granting an injunction is not susceptible to a facile application of the language of section 916.

Section 525 defines an injunction as "a writ or order requiring a person to refrain from a particular act." (Italics added.) Despite this restrictive definition, courts may compel parties to either: (1) "refrain from a particular act"-a prohibitory injunction-or; (2) perform an "affirmative act"-a mandatory injunction. ( Davenport v. Blue Cross of California (1997) 52 Cal.App.4th 435 , 446, 60 Cal.Rptr.2d 641 .) For instance, in an action to establish an easement, a preliminary injunction ordering a party to remove an existing fence that blocks the easement is a mandatory injunction; restraining the party from parking or storing vehicles along the easement is a prohibitory injunction. ( Kettenhofen v. Superior Court (1961) 55 Cal.2d 189 , 190-191, 10 Cal.Rptr. 356 , 358 P.2d 684 .)

mandatory; a party cannot unilaterally create a status quo for purposes of the prohibitory/mandatory dichotomy by its improper conduct].) "There is no magic in the phrase 'maintaining the status quo' which transforms an injunction essentially prohibitive into an injunction essentially mandatory." ( Id . at p. 87, 155 P. 463 .)

While acknowledging the difficulty of this issue, we conclude that appellants accurately identify the pertinent "status quo." An order disqualifying an attorney from continuing to represent a party in ongoing litigation is a mandatory injunction because it requires affirmative acts that upset the status quo at the time the disqualification motion was filed.

Recall the framework for granting disqualification of counsel. A lawyer's representation of a party in civil litigation is not inherently problematic or blameworthy. The baseline assumption in every civil action is that parties are free to choose an attorney to represent them and attorneys are free to choose whether to represent the party. (See William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042 , 1048, 197 Cal.Rptr. 232 [factors weighing against disqualification of attorneys include "party's right to counsel of choice, an attorney's interest in representing a client, the financial burden on a client of replacing disqualified counsel and any tactical abuse underlying a disqualification proceeding"].) This state of affairs is occasionally upset when, in the considered judgment of trial courts, the evidentiary record shows an ethical breach or other attorney misconduct that requires the disqualification of the attorney to ensure the fairness of judicial proceedings. ( Gregori v. Bank of America , supra , 207 Cal.App.3d at p. 309, 254 Cal.Rptr. 853 .) But severing the tie between client and attorney cannot be classified as routine or a return to the normal state of affairs.

Moreover, the consequence of staying enforcement of an order disqualifying an attorney is to avoid, in all likelihood, mooting the appeal. (See Varian , supra , 35 Cal.4th at p. 189, 25 Cal.Rptr.3d 298 , 106 P.3d 958 .) If the order is not stayed, appellants will need to move on without Pepper Hamilton and hire replacement counsel. Even if the disqualification order is ultimately reversed, appellants will have already suffered the financial burden of replacing counsel in the middle of a case. Appellants may even decide that the appeal

relation to the proceeding and its possible results." ( Varian , supra , 35 Cal.4th at p. 189, 25 Cal.Rptr.3d 298 , 106 P.3d 958 .) Trial court proceedings must be stayed if they would conflict with the appellate court's jurisdiction over the appeal. ( Id . at pp. 189-190, 25 Cal.Rptr.3d 298 , 106 P.3d 958 .)

Though decided in different contexts, the case law already discussed in this opinion convincingly demonstrates that an automatic stay of a disqualification order does not extend to all trial court proceedings in the typical case. In Meehan , our Supreme Court held that the attorney disqualification order before it was collateral to trial proceedings on the merits. ( Meehan , supra , 45 Cal.2d at pp. 216-217, 288 P.2d 267 .) "It requires no argument to demonstrate that the question of disqualification of counsel bears no relation to the main issue in the present case." ( Id . at p. 217, 288 P.2d 267 .) In Reed , the court applied Meehan 's holding: "Accepting the premise that the appeal only involves a collateral matter, then by definition the trial is not 'embraced [in] or affected [by]' the order appealed from, within the meaning of section 916, subdivision (a)." ( Reed , supra , 92 Cal.App.4th at p. 453, 111 Cal.Rptr.2d 842 .)

The disqualification order in this case is likewise collateral to the parties' dispute. Fundamentally, this is a lawsuit arising out of a construction project, not one concerning the lawyers' use of confidential documents. Proceedings directed toward resolving the construction dispute will not interfere with this court's determination of the attorney disqualification issue. ( Varian , supra , 35 Cal.4th at p. 190, 25 Cal.Rptr.3d 298 , 106 P.3d 958 .) Nor would possible outcomes of the trial court proceedings (e.g., provisional remedies, judgment for either side) be irreconcilable with either an affirmance or reversal of the attorney disqualification order. ( Id . at p. 190, 25 Cal.Rptr.3d 298 , 106 P.3d 958 .) And the resolution of this appeal will not avoid the need for further trial court proceedings. ( Ibid . ) Trial court proceedings to adjudicate the construction dispute will occur "regardless of the outcome of the appeal." ( Id . at p. 191, 25 Cal.Rptr.3d 298 , 106 P.3d 958 .) Thus, for much the same reason that the attorney disqualification order is appealable as a collateral order, ongoing litigation directed toward the resolution of the parties' respective pleadings is not automatically stayed by this appeal.

Although all trial court proceedings are not subject to the automatic stay, there are some potential issues embraced in or affected by the appeal from the disqualification order that could be subject to the automatic stay. (See § 916, subd. (a).) The trial court disqualified Pepper Hamilton based on its possession and potential use of certain privileged and/or confidential documents. Further trial court proceedings concerning the protected nature of the documents or their permissible use could affect our determination of the disqualification issue, and may be subject to the automatic stay. The parties, however, have not identified any such trial court proceedings, and we therefore lack the

Hamilton because an affirmance of the disqualification order will mean they need to switch counsel at a later point in the litigation. And Pepper Hamilton may be reluctant to appear in further proceedings pending this appeal without the express consent of respondent, given the fact that respondent is accusing Pepper Hamilton of unethical conduct.

Though they do not acknowledge it in their briefs here (which were premised on the argument that no stay should issue), respondent now appears to have an interest in staying some or all trial court proceedings. The basis of the disqualification motion was that allowing Pepper Hamilton to continue to participate in the litigation would be unfair and prejudicial to respondent. Respondent must now reevaluate and balance whether it is more important to proceed with some or all trial court proceedings, or to exclude Pepper Hamilton from any further involvement pending resolution of the appeal.

The best outcome in this case (and future similarly situated cases) will be for the parties to stipulate to the terms of a stay of trial court proceedings. Trial courts will undoubtedly be receptive if cooperation proves feasible. Parties in these cases may agree that all or some proceedings should be stayed pending appeal, depending

the temporary stay shall remain in place pending finality of this opinion. Respondent's request for judicial notice, filed on August 17, 2017, is denied.