On 11/16/2016 PATIENTS CORP filed a Contract - Business lawsuit against MICHELLE DENISE ZEMBA AND DOES 1-20. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are BERNIE C. LAFORTEZA, THERESA M. TRABER and MICHAEL J. CONVEY. The case status is Pending - Other Pending.
Pending - Other Pending
Stanley Mosk Courthouse
Los Angeles, California
BERNIE C. LAFORTEZA
THERESA M. TRABER
MICHAEL J. CONVEY
FOOTHILL WELLNESS CENTER
PATIENTS CORP. DBA FOOTHILL WELLNESS CENTER
ZEMBA MICHELLE DENISE
SAADATMANDI MOHAMMAD REZA AKA MOE PHILLIP COMMAR AKA MOE COMMERS
ZASYPKIN MAKSIM AKA MAX ZASYPKIN
MICHELLE DENISE ZEMBA AN INDIVIDUAL ON HER OWN BEHALF AND DERIVATIVELY ON BEHALF OF PATIENTS CORP. A CALIFORNIA NON-PROFIT MUTUAL BENEFIT CORPORATION
PATIENTS CORP. A CALIFORNIA NON-PROFIT MUTUAL BENEFIT CORPORATION
WELCH DAVID R.
ANGWIN EDWARD E.
11/19/2019: Notice - NOTICE NOTICE OF ORDER OF CASE REASSIGNMENT
3/11/2020: Minute Order - MINUTE ORDER (NON-JURY TRIAL)
3/13/2020: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (CONFERENCE RE: TELEPHONE (SCHEDULING)) OF 03/13/2020
4/20/2020: Reply - REPLY REPLY BRIEF IN SUPPORT OF MOTION
6/8/2021: Brief - BRIEF -JOINT STATEMENT OF PARTIES REGARDING TRIAL LOGISTICS
6/29/2021: Exhibit List
6/29/2021: Declaration - DECLARATION OF STEVEN J. SHAPERO IN RESPONSE TO VITIELLO DECLARATION IN SUPPORT OF 1. PROPOSED STIPULATION OF FACTS 2. REMOTE TESTIMONY 3. TRIAL SCHEDULING
7/9/2021: Declaration - DECLARATION OF PLAINTIFFS' EXPERT WITNESS STEVEN K. LUBELL, ESQ. RE MEDICAL CONDITION AND PREFERENCE FOR REMOTE TESTIMONY IN
2/21/2017: Legacy Document - LEGACY DOCUMENT TYPE: Miscellaneous
3/20/2017: Case Management Statement
1/16/2018: Legacy Document - LEGACY DOCUMENT TYPE: Proof of Service
2/13/2018: Motion to Be Relieved as Counsel
3/12/2018: Proof of Service by Mail - Proof of Service by Mail Aluya I. Imoisili, Esq.
11/29/2018: Opposition - Opposition to Ex Parte Application to Compel Depositions
12/26/2018: Notice of Case Reassignment and Order for Plaintiff to Give Notice
12/31/2018: Request for Judicial Notice
4/29/2019: Brief - BRIEF SUPPLEMENTAL BRIEF IN SUPPORT OF MSJ
Hearing02/07/2022 at 10:00 AM in Department 47 at 111 North Hill Street, Los Angeles, CA 90012; Non-Jury TrialRead MoreRead Less
Hearing01/25/2022 at 08:30 AM in Department 47 at 111 North Hill Street, Los Angeles, CA 90012; Final Status ConferenceRead MoreRead Less
Hearing10/29/2021 at 08:30 AM in Department 47 at 111 North Hill Street, Los Angeles, CA 90012; Status ConferenceRead MoreRead Less
Docketat 10:00 AM in Department 47, Theresa M. Traber, Presiding; Non-Jury Trial - Not Held - Advanced and Continued - by CourtRead MoreRead Less
Docketat 10:00 AM in Department 47, Theresa M. Traber, Presiding; Final Status Conference - Not Held - Rescheduled by CourtRead MoreRead Less
Docketat 09:00 AM in Department 47, Theresa M. Traber, Presiding; Final Status Conference - Held - ContinuedRead MoreRead Less
DocketOrder Appointing Court Approved Reporter as Official Reporter Pro Tempore; Filed by Patients Corp. (Plaintiff)Read MoreRead Less
DocketMinute Order ( (Final Status Conference)); Filed by ClerkRead MoreRead Less
DocketDeclaration (DECLARATION OF GIANDOMINIC VITIELLO RE: STATUS OF COMPLIANCE WITH COURTS MINUTE ORDER DATED JULY 14, 2021); Filed by Patients Corp. (Plaintiff)Read MoreRead Less
Docketat 08:30 AM in Department 47, Theresa M. Traber, Presiding; Non-Appearance Case Review (Receipt of Joint Statement Re Live Testimony and Proposed Stipulated Statement of Facts) - Not Held - Advanced and VacatedRead MoreRead Less
DocketOppositionRead MoreRead Less
DocketMiscellaneous; Filed by DefendantRead MoreRead Less
DocketDemurrer; Filed by Michelle Denise Zemba (Defendant)Read MoreRead Less
DocketDeclaration; Filed by Patients Corp. (Plaintiff); Foothill Wellness Center (Legacy Party)Read MoreRead Less
DocketProof of Service by Mail; Filed by Patients Corp. (Plaintiff); Foothill Wellness Center (Legacy Party)Read MoreRead Less
DocketProof of Service of Summons and Complaint; Filed by Patients Corp. (Plaintiff); Foothill Wellness Center (Legacy Party)Read MoreRead Less
DocketCivil Case Cover Sheet; Filed by Patients Corp. (Plaintiff); Foothill Wellness Center (Legacy Party)Read MoreRead Less
DocketNotice of Case Management Conference; Filed by ClerkRead MoreRead Less
DocketSummons; Filed by Patients Corp. (Plaintiff); Foothill Wellness Center (Legacy Party)Read MoreRead Less
DocketComplaint; Filed by Patients Corp. (Plaintiff); Foothill Wellness Center (Legacy Party)Read MoreRead Less
Case Number: LC104878 Hearing Date: June 24, 2020 Dept: U
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES - NORTHWEST DISTRICT
PATIENTS CORP, d/b/a FOOTHILL WELLNESS CENTER, a California corporation,
MICHELLE DENISE ZEMBA, an individual, and DOES 1 – 20, inclusive,
MICHELLE DENISE ZEMBA, an individual, on her own behalf and derivatively on behalf of PATIENTS CORP., a California non-profit mutual benefit corporation,
DAVID WRIGHT, an individual, RICHARD LEE, an individual, SARKIS ALAMIAN, an individual, PATIENT CORPS., a California non-profit mutual benefit corporation, and DOES 1 – 100, inclusive,
) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
CASE NO: LC104878
[TENTATIVE] ORDER RE: APPLICABILITY OF ATTORNEY-CLIENT PRIVILEGE AND POTENTIAL WAIVER
June 24, 2020
This case proceeded to trial on March 11, 2020, but came to a halt on March 12, 2020 when Plaintiff and Cross-Defendant Patients Corp. d/b/a FOOTHILL WELLNESS CENTER (“Patients Corp.”) asserted its attorney-client privilege during the testimony of Cross-Defendant David Wright (“Wright”). A telephone conference was held with the parties’ counsel on March 13, 2020. The Court issued a minute order framing the dispute and briefing as a motion by Defendant and Cross-Complainant Michelle Zemba (“Zemba”) challenging Patients Corp.’s assertion of the attorney-client privilege, setting a briefing schedule, laying out four issues to be addressed in the parties’ briefing.
Having reviewed the parties’ briefs on the issues identified during the telephone conference and the relevant portions of testimony highlighted by the parties, the Court rules as follows.
Issue One – Disclosure of Confidential Attorney-Client Communications
The first issue identified by the Court is “whether any of the evidence and/or arguments advanced thus far in the trial, without objections raised by Patient Corp., constitute disclosures of confidential attorney-client communications and, if so, the nature and scope of any waiver of the attorney-client privilege that was effectuated by these disclosures.” (March 13, 2020 Minute Order, p. 1.) As explained below, the Court finds that there has been no waiver of privileged communications at trial or even in disclosures that occurred before trial.
There can be no waiver of the privilege unless there is a finding first that there are confidential communications that are entitled to protection under the attorney-client privilege. Evidence Code section 954 shields from disclosure any “confidential communication between client and lawyer.” A “confidential communication” is defined as “information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted, and includes a legal opinion formed and the advice given by the lawyer in the course of that relationship.” (Evid. Code, § 952.)
The California Supreme Court has recognized the statutory emphasis on the requirement that protected communications be made in the course of the attorney-client relationship. (Los Angeles County Board of Supervisors v. Superior Court (2016) 2 Cal. 5th 282, 294.) As a result, the Supreme Court declared that the privilege does not apply to all confidential communications between attorney and client, explaining that “the heartland of the privilege protects those communications that bear some relationship to the attorney’s provision of legal consultation.” (Ibid.) The attorney-client privilege is not applicable, for example, “when the attorney acts merely as a negotiator for the client or is providing business advice” because “the relationship between the parties is not one of attorney-client.” (Costco Wholesale Corp. v. Superior Court (2009) 47 Cal. 4th 725, 735.)
The party asserting the privilege has the burden of establishing that it protects certain communications from disclosure. After a party establishes that the attorney-client privilege applies to a communication, “the burden shifts to the party opposing the privilege to demonstrate that the privilege did not apply, that an exception existed, or that there was an express or implied waiver.” (Tritek Telecom, Inc. v. Superior Court (2009) 169 Cal. App. 4th 1385, 1390.)
The parties address three possible actions or subject matters as to which the attorney-client privilege and a potential waiver could apply: (1) the creation of new or revised corporate minutes in 2010 or 2011, apparently by Attorney James Morris; (2) the preparation and submission of the January 28, 2011 Notice of Intent that Patients Corp. filed with the City of Los Angeles; and (3) a series of purported loans and other transactions occurring in or after 2013 with respect to the ownership of Patients Corp. The Court analyzes each in turn.
With regard to the creation of Patient Corp.’s corporate minutes, the parties appear to agree that there were no confidential communications between James Morris and Patients Corp. -- through Wright or otherwise -- that qualify for protection under the attorney-client privilege. In their submissions, Patients Corp. and Wright contend that there could be no waiver of Patients Corp.’s privilege based on Wright’s testimony about the revisions of corporate minutes and the production of the Morris file showing his firm’s work on these tasks because these disclosures do not involve any confidential attorney-client communications. Patients Corp. and Wright demonstrate that the dominant purpose of their communications with Morris was not to provide legal services, but rather to draft corporate minute templates and to serve as its agent for service of process. Both functions could have been handled by a non-attorney, and the evidence shows that the minute revisions were likely drafted, not by Morris, but by his paralegals. In his brief, Wright highlights the declaration provided by Morris stating that none of his Patients Corp. file is covered by the attorney-client privilege because he performed only “clerical tasks” for Patients Corp. Zemba apparently agrees (Reply Brief, p. 3), as does the Court.
Based on the evidence submitted and the arguments of the parties, the Court finds Patients Corp’s attorney-client privilege does not cloak its communications with the Morris firm about revising corporate minutes. Accordingly, any disclosure cannot be deemed a waiver of the privilege in any sense.
The Court next turns to the question of whether Patients Corp. has waived any attorney-client privilege with respect to its preparation of the January 28, 2011 Notice of Intent and the Wright Declaration submitted as part of the Notice of Intent. The parties apparently agree that any communications between Wright or others acting on behalf of Patients Corp. and an attorney about drafting and submitting the Notice of Intent and/or the supporting declarations would qualify as confidential communications seeking legal advice and would be subject to the attorney-client privilege if the crime-fraud exception does not apply (which will be addressed separately below). The question then is whether any attorney-client privilege as to the preparation of the Notice of Intent and its supporting documents has been waived. The Court finds that no waiver has occurred.
Under Evidence Code section 912, “the right of any person to claim a privilege provided by Section 954 (lawyer-client privilege), . . . is waived with respect to a communication protected by the privilege if any holder of the privilege, without coercion, has disclosed a significant part of the communication or has consented to disclosure made by anyone. Consent to disclosure is manifested by any statement or other conduct of the holder of the privilege indicating consent to the disclosure, including failure to claim the privilege in any proceeding in which the holder has legal standing and the opportunity to claim the privilege.” (Cal. Evid. Code § 912.)
As an alternative to the express waiver contemplated by Evidence Code section 912, the California Supreme Court has recognized that a party can effectuate an implied waiver of its attorney-client privilege where the party “put the otherwise privileged communication directly at issue and that disclosure is essential for a fair adjudication of the action.” (Southern California Gas Co. v. Public Utilities Com. (1990) 50 Cal. 3d 31, 40; Mitchell v. Superior Court (1984) 37 Cal. 3d 591, 609.) An implied waiver will be found only where the party raises a claim or defense that affirmatively relies on an attorney-client communication. Courts have rejected implied waiver arguments where information from an attorney is only one of several indirect forms of probative evidence to be offered (Mitchell, at p. 606) or where it is the party’s state of mind that was at issue, not specifically its attorney’s advice or state of mind (Aetna Casualty & Surety v. Superior Court (1984) 153 Cal. App. 3d 467.)
In this case, Zemba argues that Patient Corp. waived its attorney-client privilege as to a lawyer’s involvement in preparing the Notice of Intent based on Wright’s testimony that some attorney assisted him in preparing the supporting declaration he submitted to the City of Los Angeles, that he does not recall what attorney provided this assistance, and his inconclusive testimony about the time periods when he used the services of James Morris, Katchko Vitiello (Katchko) and Rabinowitz & Associates (Rabinowitz) to perform legal work for Patients Corp. Zemba also grounds her waiver argument on Wright’s deposition testimony that he signed and filed the false declaration under penalty of perjury in support of Patients Corp.’s Notice of Intent because he believed he needed to do so “in order to stay in business,” but claimed he did not remember whether he had received this conclusion based on consultation with any attorney. (Transcript, pgs. 75-78.) Zemba also asserts that the Court should find an implied waiver based on fairness considerations apparently because of Zemba’s involvement in Patients Corp. and in the filing of its Notice of Intent.
The Court finds that Zemba has failed to demonstrate any waiver of the attorney-client privilege. Zemba’s proof of a waiver amounts to Wright’s acknowledgment that he had legal assistance in preparing a false declaration in support of the Notice of Intent and his conclusion that he had to do so to stay in business based on advice from “Sam” and unidentified others, along with Zemba’s attacks on Wright’s credibility and speculation about who the unnamed attorney(s) might be. The identity of the attorney involved in a confidential communication is generally not confidential. To the contrary, it is often a required predicate fact for establishing the right to assert the attorney-client privilege. (E.g. Catalina Island Yacht Club v. Superior Court (2015) 242 Cal. App. 4th 1116, 1130 [“a privilege log typically should provide the identity and capacity of all individuals who authored, sent, or received each allegedly privileged [communication]”].)
Further, even if the facts here demonstrated that the attorney who assisted Wright advised him that he needed to sign it to stay in business, this fact alone would not amount to a waiver of all communications between Wright and the unidentified attorney about the declaration or the Notice of Intent process. As the California Supreme Court held in Southern California Gas Co. v. Public Utilities Com. (1990) 50 Cal. 3d 31, a client’s disclosure of the fact of an attorney-client communication on a particular issue and the attorney’s conclusion on the issue did not constitute a waiver of the privilege cloaking the attorney-client discussions that led to that conclusion. (Id. at pp. 48-49.) The Supreme Court explained that the narrow disclosure of the conclusion or decision reached during an attorney-client communication did not waive the privilege because it did not reveal a “significant part of the communication” within the meaning of Evidence Code section 912(a). (Id.)
Nor can the Court conclude that Patients Corp. has effectuated any implied waiver based on its conduct in this case. Patients Corp. has not raised a claim or defense that affirmatively relies on any attorney-client communications, nor has it placed its attorney’s advice or state of mind at issue in this case. (Southern California Gas Co. v. Public Utilities Com., supra, 50 Cal. 3d at p. 40; Aetna Casualty & Surety v. Superior Court, supra, 153 Cal. App. 3d 467.) The fairness factor on which Zemba relies only takes center stage where a party has injected its attorney-client communications into the case but then blocked the other side from inquiring into the details. That situation is not present here.
Accordingly, the Court finds that, to the extent that Patients Corp. could assert an attorney-client relationship as to any communications it had with an attorney who assisted in preparing the Wright declaration that supported it Notice of Intent, there has been no waiver of that privilege. Further, because Zemba’s waiver argument as to subsequent loan and ownership transactions relies on a finding that Patient Corp. waived its privilege as to the Notice of Intent declaration, the Court cannot find that Patients Corp. has waived its attorney-client privilege with respect to any communications about those transactions.
Issue Two – Scope of Waiver of Attorney-Client Privilege
The second issue identified in the Court’s minute order is: “to the extent that David Wright is permitted to offer evidence and/or argument regarding communications he had on behalf of Patients Corp. with the company’s attorneys, including James Morris, with regard to the preparation and filing of and reasons for having two versions of 2010 corporate minutes for Patient Corp., what is the nature and scope of any waiver of the attorney-client privilege that would be effectuated by such disclosures.” (March 13, 2020 Minute Order, p. 1.) Having found no waiver of the attorney-client privilege, the Court finds that this issue is moot.
Issue Three – Wright’s Rights or Relief
The third issue identified in the Court’s minute order is: “if Patients Corp. refuses to waive its attorney-client privilege with respect to the disclosure of evidence described in the second category [regarding the differing versions of the 2010 corporate minutes], what rights does Mr. Wright have, if any, to offer evidence and argument he believes to be essential to his defense or to seek any alternative relief that may be available.” (March 13, 2020 Minute Order, p. 1.) Having found no attorney-client privilege regarding the preparation of these minutes (and no assertion of any such privilege by Patients Corp.), the Court finds that this issue is moot.
Issue Four – Whether the Crime-Fraud Exception Applies
The fourth issue identified in the Court’s minute order is: “if Patients Corp. received advice and/or assistance from an attorney in preparing the Notice of Intent or any other document that conveyed knowingly false representations to the City of Los Angeles, what communications between Patients Corp., including Mr. Wright, and the company’s attorneys, if any, would be protected from disclosure by the attorney-client privilege and, specifically, would some or all of those communications be excluded from protection by the crime-fraud exception to the privilege.” (March 13, 2020 Minute Order, pp. 1-2.)
Zemba argues the crime-fraud exception bars any attorney-client privilege Patients Corp. could claim in preparing the Notice of Intent because Wright has admitted that he knowingly defrauded the City in order to maintain his business and that he had legal assistance in preparing the declaration he submitted in support of the Notice of Intent. Zemba maintains that Wright’s failure to recall which lawyer assisted him in preparing the false notice is a weak, unpersuasive defense. Zemba asserts Patients Corp.’s fraud on the City extends beyond the false notice to include fraudulent amendments to the corporation’s articles, false stock certificates, and false loan and sale agreements, all prepared by Katcho. As such, Zemba reasons that the attorney-client privilege protects no communications between Patients Corp. and its attorneys regarding the transfers of the company’s ownership because each transfer was conducted fraudulently.
Patients Corp. argues the crime-fraud exception does not apply because Wright’s admission of committing perjury in connection with the Notice of Intent does not satisfy Zemba’s burdent because there is no evidence that any attorney prepared the Notice of Intent. Patients Corp. asserts that Wright’s failure to recall the name of a specific attorney who assisted in drafting his supporting declaration saps Zemba’s crime-fraud argument of any force.
Wright agrees that the crime fraud exception does not apply because he does not recall the name of the attorney who assisted him in preparing the false declaration. Without an identifiable attorney, it is argued, Zemba cannot show that legal services were used to commit fraud so the crime-fraud exception does not apply. Wright also argues Zemba has no evidence that any attorney was involved in preparing the Notice of Intent itself.
Under California law, there is a crime-fraud exception to the attorney-client privilege. (National Football League Props., Inc. v. Superior Court (1998) 65 Cal.App.4th 100, 108.) Evidence Code section 956 provides an exception to the attorney-client privilege “if the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit a crime or a fraud.” (Cal. Evid.Code § 956.) Under section 956, “the lawyer does not have to be aware of the fraud for the crime-fraud exception to apply. Instead, the application of [Evid. C.] § 956 turns on the client's intent.” (State Farm Fire & Cas. Co. v. Superior Court (1997) 54 Cal.App.4th 625, 645.)
The party asserting the exception “must make a prima facie showing that the communication at issue furthered a crime or fraud.” (State Farm Fire & Cas. Co., supra, p. 643.) “Mere assertion of fraud is insufficient; there must be a showing the fraud has some foundation in fact.” (BP Alaska Exploration, Inc. v. Superior Court (1988) 199 Cal.App.3d 1240, 1262.) Since the crime-fraud exception applies where “an attorney's services are sought to enable a party to plan to commit a fraud, the proponent of the exception need only ... prove a false representation of material fact, knowledge of its falsity, intent to deceive and the right to rely [on the representation].” (Id., at p. 1263.) The proponent of the exception must also demonstrate that the services of an attorney were used to further the crime or fraud and that there is a reasonable relationship between the crime or fraud and the attorney-client relationship. ((State Farm Fire & Cas. Co., supra, p. 645.)
The Court finds that Zemba has made a prima facie showing of fraud by Patients Corp. based on Wright’s admissions that he signed and submitted a false declaration to the City of Los Angeles for the express purpose of staying in the cannabis business despite his understanding that Patients Corp. would not qualify for licensing if the true facts were included in the Notice of Intent. Wright’s own statements concede that he made false representations of material fact, with knowledge of their falsity and an intent to deceive the City of Los Angeles, which had a right to rely on Wright’s sworn affidavit and attached corporate documents and other exhibits.
Zemba also satisfied her burden of showing that an attorney’s services were used to further the fraud. Wright testified that he could not remember if an attorney assisted in preparing the Notice of Intent but stated that he had legal assistance in drafting his declaration that provided the factual foundation for the Notice of Intent. (Transcript, pp. 147-148.) The fact that he cannot remember which attorney aided him in drafting the fraudulent declaration does not undermine the showing that Patients Corp. secured legal assistance in preparing a false declaration that was used to further its fraud upon the City of Los Angeles. As the Court of Appeal noted in State Farm Fire & Cas. Co., supra, “it is the intent of the client upon which attention must be focused and not that of the lawyers.” (Ibid, at p. 645 [citation omitted].)
To say that the legal assistance provided bears a reasonable relationship to the fraud would be an understatement, since Wright’s false declaration and the fraudulent documents attached to it were a centerpiece of Patients Corp’s fraudulent scheme.
The Court finds, therefore, that Zemba has demonstrated that the crime-fraud exception applies to vitiate Patients Corp.’s attorney-client privilege with respect to any communications with any attorney who assisted in the preparation of the Wright declaration. Further, because there is a “reasonable relationship” between the fraudulent declaration and the Notice of Intent of which it was a part, the Court finds that the crime-fraud exception applies to any communications between Patients Corp. and any attorney who gave advice or provided other legal assistance in preparing or submitting the Notice of Intent itself.
The Court does not agree with Zemba, based on this record, that the exception should extend to the series of loan transactions and conveyances from 2013 and thereafter. While Zemba may be able to prove that these actions and events were part of an ongoing fraudulent scheme that undermines any attorney-client privilege, her accusations about the “highly suspect” or “bogus” character of these transactions do not amount to an evidentiary showing that they were fraudulent individually or as part of an overall deceitful course of conduct. (BP Alaska Exploration, Inc., supra, 199 Cal.App.3d at p. 1262 [mere assertion of fraud is insufficient to invoke crime-fraud exception].)
Accordingly, the Court finds that any attorney-client communications regarding the preparation and submission of Patients Corp’s January 2011 Notice of Intent, including the Wright declaration and other supporting documentations, are not protected by privilege because such legal assistance was “sought or obtained to enable or aid [Patients Corp.] to commit or plan to commit . . . a fraud” within the meaning of Evidence Code § 956.
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