DP Pham, LLC v. Cheadle, Summary

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Opinion published April 15, 2016

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Factual Background

 

In this action, Pham loaned $3 million dollars to Obarr (a.k.a Cheadle) secured by a lien on a mobile home park.  After Pham made the loans, Obarr contracted to sell the same mobile home park to Westminster.  However, after Westminster opened escrow, Obarr  also sold it to Pham for $8 million, retiring the prior loans.  Pham also opened escrow on the property.   Several individuals helped Obarr run his business.  There was Galla (bookkeeper), Kimes (his attorney), and Gauswitz (broker hired to sell the property.)

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Upon discovery of the double-dealing, Westminster sued Obarr and Pham.  At one point in the proceedings, Pham tried to submit Galla’s declaration, to which there were attached confidential communications between Obarr and Kimes.  Obarr objected the communications were privileged and requested disqualification.  Pham responded Obarr waived the privilege when he revealed the communications to third parties. 

 

Trial Court’s Order

 

The trial court denied Obarr’s motion for disqualification.  Attorney-client privilege did not protect the communications.  Although there was prima facie evidence the communication was privileged, an in camera review of them revealed the privilege did not apply.  Kimes’ statements suggsested he did not represent Obarr in connection with the property sale.  Obarr (Cheadle) timely appealed.

 

Decision on Appeal  

 

The court of appeal recounted attorney client privilege case law.  According to cases, its fundamental purpose was to safeguard the confidential relationship between clients and their attorneys so as to promote full and open discussion of the facts and tactics surrounding individual legal matters.   Moreover, the privilege was absolute and prevented disclosure regardless of the communications’ relevance or necessity.  Finally, the privilege protected the entire communication regardless if there was non-privileged matter contained within.

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As the party claiming the privilege, Obarr had the burden to establish the preliminary facts.  In this, case that the communication was made in the court of an attorney client relationship.  As the trial court itself noted, this initial burden was overcome.  It was then Pham’s burden to show either that was not the case or the privilege did not apply for some other reason.  Here however, the court went on to perform an in camera review. That was improper. “It is neither customary nor necessary to review the contents of the communication in order to determine whether the attorney-client privilege applies.” The trial court erred when it did so. Finally, while the privilege may be waived, Galla did not the hold the privilege entitling her to waive it.  The court of appeal reversed