Jeffrey Kane Reich

1 UNITED STATES BANKRUPTCY COURT 2 EASTERN DISTRICT OF CALIFORNIA 3 FRESNO DIVISION [4] 5 In re ) Case No. 25-10499-B-7 ) 6 JEFFREY REICH, ) Docket Control No. MEZ-1 ) 7 ) Debtor. ) 8 ) ) [10] 11 MEMORANDUM RULING ON MOTION TO DISQUALIFY COUNSEL FOR PAMELA REICH [12] ————————————————————————————— [13] 14 Megan Zavieh, ZAVIEH LAW, for JEFFREY REICH, Debtor; Peter B. Bunting, PETER BUNTING, ATTORNEY AT LAW, for JEFFREY REICH, 15 Debtor. 16 Shane Reich, THE LAW OFFICES OF SHANE REICH, for Pamela Reich, Creditor. [17] Anthony D. Johnson, FORES MACKO JOHNSTON & CHARTRAND, for Irma 18 Edmonds, Chapter 7 Trustee. 19 Irma Edmonds, Chapter 7 Trustee. 20 ————————————————————————————— 21 RENÉ LASTRETO II, Bankruptcy Judge: [22] 23 This matter comes before the court on the motion of debtor 24 Jeffrey Reich (“Jeffrey”) seeking an order disqualifying Shane 25 Reich (“Shane”) from representing Pamela Reich (“Pamela”) or any 26 other third party in Jeffrey’s bankruptcy proceedings (“the 27 Bankruptcy Case”), including but not limited to the adversary [28] proceeding brought by Pamela against Jeffrey in Reich v. Reich, 1 Case No. 25-1022 (“the Adversary”), that is currently pending 2 before this court. Doc. #65 et seq. [3] 4 INTRODUCTION 5 The following facts gleaned from the record are undisputed. 6 Jeffrey is a Chapter 7 debtor in the main case and the Defendant 7 in the Adversary. Pamela is Jeffrey’s estranged wife with whom 8 Jeffrey is undergoing extremely protracted divorce proceedings 9 lasting about ten years so far. The dissolution proceedings are 10 pending in the Fresno County Superior Court. Pamela is also one 11 of Jeffrey’s creditors and is the Plaintiff in the Adversary. 12 Shane is the son of Jeffrey and Pamela. Shane, a practicing 13 attorney, is representing Pamela in both the Bankruptcy Case and 14 the Adversary. Shane was previously employed by Jeffrey in a 15 professional capacity at Jeffrey’s law firm (“the Firm”) for 16 approximately twenty years. The Firm is also a marital asset and 17 an integral part of both the divorce proceedings and the 18 concomitant community property disputes which lie at the heart of 19 the Adversary. 20 Pamela opposed this motion. On July 29, 2025, the court 21 entered a prehearing disposition exercising its authority to 22 resolve this motion on the pleadings without need for oral 23 argument. Doc. #154. 24 Unless the assigned judge determines that the resolution of the motion does not require oral 25 argument, he or she may hear appropriate and reasonable oral argument. Alternatively, the motion may be 26 submitted upon the record and briefs on file if the parties stipulate thereto, or the judge so orders, 27 subject to the power of the judge to reopen the matter for further briefs, oral argument or both. [28] 1 LBR 9014-1(h). The court directed that all pleadings be 2 closed as of July 28, 2025. Doc. #154. The court has reviewed the 3 declarations, exhibits, and arguments and is now prepared to 4 rule. This motion will be GRANTED. [5] 6 JURISDICTION 7 This court has jurisdiction of this matter by reference from 8 the District Court under 28 U.S.C. § 157 (a). The District Court 9 has jurisdiction under 20 U.S.C. § 1334 (b). This is a matter the 10 Bankruptcy Court may hear and finally determine. 28 U.S.C. § 157 11 (b)(2) (A) and (O) [12] 13 DISCUSSION 14 1. Procedural History. 15 The filings in this case are extensive and include the 16 following: 17 a. Jeffrey’s Motion to Disqualify Shane as Pamela’s 18 counsel (“the Motion”). Doc. #65. 19 b. The Declaration of Sona Vartanian (“Sona”) in support 20 of the Motion. Doc. #66. The relationship between Sona 21 and the other parties is somewhat nebulous beyond Sona 22 being one of Jeffrey’s current employees, but she is 23 apparently an important figure in Jeffrey and Pamela’s 24 divorce proceedings and thus, by extension, this 25 Adversary, as will be discussed further below. 26 c. A Memorandum of Points and Authorities in support of 27 the Motion. Doc. #68. [28] 1 d. Jeffrey’s first declaration (“Jeffrey’s First 2 Declaration”). Doc. #69. 3 e. Shane’s initial opposition to the motion. Doc. #97. 4 Shane’s first declaration (“Shane’s First 5 Declaration”). Doc. #98. 6 f. Jeffrey’s Reply Brief filed on June 17, 2025. Doc. 7 #102. This reply solely addressed Shane’s First 8 Declaration and was filed prior to the court’s June 24 9 order. 10 g. Declaration of Kelly McNeil in support of the Motion. 11 Doc. #103. McNeil is Jeffrey’s long-time CPA, and he 12 attested that Shane handled “most of the financial 13 duties of the firm” and was McNeil’s primary contact 14 regarding the firm’s payroll and tax matters. 15 h. Jeffrey’s second declaration (“Jeffrey’s Second 16 Declaration”) in support of the Motion filed on June 17 17, 2025, filed in response to Shane’s First 18 Declaration. Doc. #104. Jeffrey avers in this 19 declaration that many of Shane’s statements are false 20 or inaccurate. 21 i. The court’s civil minutes and order dated June 24, 22 2025. Doc. #118. In the minutes, the court noted that 23 the original notice of motion inaccurately stated that 24 the motion was to be heard on less than 28 days’ notice 25 and a written response was not necessary. In fact, 26 more than 28 days’ notice was given. A written response 27 was therefore necessary under the local rules. But the 28 notice was confusing and ambiguous. Shane filed Shane’s 1 First Declaration “in Support of Opposition” to the 2 Motion, and Shane required additional time to more 3 fully brief the matter given the ambiguity of the 4 notice of motion. On June 24, 2025, the original 5 hearing date, the court entered an order continuing the 6 hearing to July 29, 2025, and directed Shane to file 7 any supplementary briefs or other relevant 8 documentation by July 15, 2025, with Jeffrey to file a 9 reply, if any, by July 22, 2025. Doc. #118. 10 j. Shane’s Supplemental Opposition to the Motion filed on 11 July 15, 2025. Doc. #144. 12 k. Pamela’s Declaration filed on July 15, 2025. Doc. #145. 13 This brief declaration only addresses Pamela’s limited 14 funds and claims that it would be a hardship on her if 15 Shane were disqualified and she were now forced to find 16 another attorney. 17 l. Shane’s Supplemental Declaration (“Shane’s Second 18 Declaration”) in opposition to the Motion filed on July 19 15, 2025. Doc. #146. This declaration is mainly a 20 denial of allegations made regarding his past legal 21 representations of Sona and Jeffrey. 22 m. Jeffrey’s Supplemental Reply Brief filed on July 21, 23 2025. Doc. #148. 24 n. Declaration of Michael L. Farley (“the Farley 25 Declaration”), filed on July 21, 2025. 26 2. The Relevant Contested Facts. 27 To expand on the facts outlined above, Jeffrey moves to 28 disqualify Shane as Pamela’s attorney on the grounds that Shane, 1 in addition to being Jeffrey’s son, was also his employee at 2 Jeffrey’s law firm from 2002 until sometime in 2021, and, in that 3 capacity, he was also Jeffrey’s counsel in matters pertaining to 4 Jeffrey’s financial affairs. Doc. #65. Jeffrey further alleges 5 that Shane possesses confidential information related to 6 Jeffrey’s financial affairs obtained both as Jeffrey’s counsel 7 and as his employee. Id. The Motion asserts that Shane has both 8 attorney-client duties and fiduciary duties owed to Jeffrey which 9 preclude him from acting as Pamela’s counsel in these matters. [10] Id. 11 Jeffrey alleges that, at the time his separation from Pamela 12 commenced in 2013, he asked Shane to act as Jeffrey’s bookkeeper 13 as well as continuing as an attorney at Jeffrey’s firm. Doc. #69. 14 Jeffrey alleges that, at some point during this period, Shane 15 assisted Pamela in misappropriating between $300,000.00 and 16 $500,000.00 from Jeffrey. Id. Jeffrey also alleges that Shane 17 personally represented Jeffrey in a lawsuit (ZB N.A. a national 18 banking association dba California Bank & Trust v. Jeffrey K. 19 Reich, Los Angeles Case No. KC0683171, or “the ZB N.A. Case”), a 20 foreclosure and collection action against Jeffrey. Id. While 21 working on behalf of Jeffrey in the ZB N.A. Case, Jeffrey 22 alleges, Shane gained complete knowledge of Jeffrey’s financial 23 affairs at a time when his dissolution proceedings with Pamela 24 were ongoing. Id. 25 During those dissolution proceedings, and allegedly while 26 still representing Jeffrey, Shane became involved with his 27 parents’ divorce, taking a position favoring Pamela. Id. Shane 28 has not made a formal appearance in the dissolution proceeding. 1 Pamela is represented by other counsel. Jeffrey also claims 2 that, based on his knowledge of Shane’s writing style gleaned 3 from their years working together, Jeffrey believes that Shane 4 wrote or helped to write certain legal documents raising 5 accusations against Jeffrey and Sona in the pending dissolution 6 proceeding. Id. Jeffrey and Sona have some sort of personal 7 relationship, though the parties disagree on its nature. Id. In 8 state court filings, Pamela asserted through counsel that Sona 9 was Jeffrey’s girlfriend, which Jeffrey has denied. Id. 10 Jeffrey concedes that he, at the time the Motion was filed, 11 was “housesitting” for Sona, but Shane and Pamela have alleged 12 that Jeffrey provided the money which Sona used to purchase that 13 property. Id. Jeffrey argues that it is impossible for Shane to 14 represent his mother in this bankruptcy case without making use 15 of confidential information about Jeffrey’s finances obtained 16 both through his employment at Jeffrey’s firm and in his personal 17 representation of Jeffrey in the ZB N.A. Case, which was a 18 foreclosure action in which Jeffrey’s finances and his 19 entitlement to certain exemptions were at issue. Id. 20 Jeffrey’s First Declaration is accompanied by exhibits 21 (improperly attached to the declaration, though the court has 22 chosen to overlook that procedural error) which include filings 23 made by Shane on behalf of Jeffrey in the ZB N.A. Case involving 24 Jeffrey’s financial affairs and his claimed exemptions of certain 25 property from attachment efforts by ZB N.A. Id. Jeffrey claims 26 that this bankruptcy case involves the condition of his finances 27 and his business approach. Id. Jeffrey also claims he shared 28 everything about his finances with Shane at that time. Id. 1 Jeffrey states that it is “impossible” for Shane to represent 2 Pamela in this bankruptcy without using confidential information 3 about Jeffrey acquired while Shane worked for Jeffrey and 4 represented Jeffrey in numerous matters. Id. 5 Sona’s declaration is brief. Doc. #67. She claims that she 6 has been employed by Jeffrey for 10 years, that Shane and Jeffrey 7 represented her in several cases (one of which resulted in a 8 nearly $1.9 million judgment for her), and that Shane knows that 9 Sona is the owner of the home which Jeffrey his housesitting and 10 which she, not Jeffrey, paid for. Id. 11 In Shane’s First Declaration, he claims that he “assisted” 12 with bookkeeping at the community property law firm for a time 13 but was “never solely responsible for that function.” Doc. #98. 14 Shane denies handling all Jeffrey’s financial paperwork, but he 15 concedes he handed at least “some of it.” Id. Shane claims that 16 Jeffrey agreed that he could share some of Jeffrey’s financial 17 information with Pamela because Pamela had a continuing interest 18 in the community property law firm. Id. Shane claims that he 19 represented both Jeffrey and Pamela in the ZB N.A. Case because 20 it was an attempt to foreclose on community property. Id. Shane 21 denies misappropriating funds. Id. Rather, Shane declares, it was 22 Jeffrey who concealed various aspects of his finances. Id. Shane 23 is a creditor to Jeffrey over debts owed to him prior to the 24 petition. Id. Shane describes his representation of Sona as 25 “limited” and claims it did not expose him to any confidential 26 information that would merit disqualification. Id. Shane denies 27 knowing the source of the funds Sona used to purchase a residence 28 in which Jeffrey presently “housesits.” Id. Shane states: “not 1 all of the information or even a substantial part of the 2 information relating to my father was derived from my very 3 limited representation of him.” Id. 4 The Declaration of Kelly McNeil is brief. Doc. #103. McNeil, 5 Jeffrey’s CPA for about 40 years, claims that from 2013 through 6 much of 2016, Shane appeared to handle all the bookkeeping, 7 payroll, and tax deposits for the community property firm, and he 8 worked with McNeil on payroll and tax matters. Id. The rest of 9 McNeil’s Declaration consists of hearsay statements and claims 10 that he does not recall any evidence supporting some of Shane’s 11 assertions about Jeffrey’s finances and Shane’s own role in the 12 community property firm. Id. He also states he does not recall 13 Shane complaining about Jeffrey preventing Shane’s access to 14 financial information. Id. 15 Jeffrey’s Second Declaration adds little. Doc. #104. He 16 claims that Shane was the only person doing bookkeeping for him 17 during the relevant time period, and he denies that he or anyone 18 else at the firm interfered with Shane’s access to confidential 19 financial information. Id. He further denies authorizing Shane to 20 share his financial information with Pamela after the marital 21 separation. Id. He alleges that he stopped Shane’s access to 22 financial information upon coming to believe that Shane had 23 misappropriated money from Jeffrey on behalf of his mother and 24 himself. Id. He claims that in the ZB N.A. Case, Shane was only 25 representing him and not Pamela. Id. 26 Jeffrey also claims that Shane was heavily involved in the 27 firm’s representation of Sona, which is relevant to this case 28 because Pamela seeks, inter alia, stay relief to pursue a lawsuit 1 against both Sona and Jeffrey to determine the true ownership of 2 the home which Sona purportedly owns and where Jeffrey is 3 “housesitting.” Id. 4 Shane’s Third Declaration consists mainly of denials of 5 assertions in Jeffrey’s Second Declaration. Doc. #146. Shane 6 claims that he had only “limited interactions” with McNeil, that 7 he has not represented Jeffrey in any matter substantially 8 related to the instant bankruptcy, that he regularly complained 9 to Jeffrey about being denied access to Jeffrey’s financial 10 records, and that he has not represented Jeffrey or Sona on any 11 matter “substantially related” to Jeffrey’s bankruptcy. Id. He 12 denies the existence of any prior representations or access to 13 confidential information that would justify disqualification. Id. 14 Shane also claims that Sona has waived any privilege because she 15 is currently suing Shane and others in an unrelated lawsuit. 16 Finally, the Declaration of Michael L. Farley (“the Farley 17 Declaration”) was filed on July 21, 2025. Doc. #149. Farley 18 declares that he is an attorney representing Sona in a state case 19 entitled Sona Vartanian v. Laura M. Boyd, Shane Reich, and Pamela 20 Reich, Fresno Case No. 25CECG02564. Id. Attached to the Farley 21 Declaration are email exchanges between Farley and attorney Ryan 22 McGrath, who apparently represents Pamela (and possibly others) 23 in that case. Id. The Farley Declaration was presumably offered 24 to show that Pamela already has counsel other than Shane 25 representing her which obviates her complaints about being unable 26 to afford representation. 27 /// 28 /// 1 3. Legal Analysis. 2 In the court’s view, there are three separate aspects of 3 Shane’s prior professional relationship with Jeffrey that are 4 implicated by his current representation of Pamela: (A) Shane’s 5 prior work as Jeffrey’s attorney, (B) Shane’s prior bookkeeping 6 work on behalf of Jeffrey, and (C) Shane’s relationship with 7 Jeffrey outside of either the attorney client or bookkeeping 8 relationship. The court will address each point in turn. 9 Federal courts apply state law to decide motions to 10 disqualify. In re County of Los Angeles, 223 F. 3d 990 ,995 (9th 11 Cir. 2000). In this District, Bankruptcy Courts follow District 12 Court Rule 180(e) which as relevant here says: “. . .the State 13 Bar Act, the Rules of Professional Conduct of the State Bar of 14 California, and court decisions applicable thereto, which are 15 hereby adopted as standards of professional conduct in this 16 Court.” See LBR 1001-1(c). 17 A. Disqualification based on prior representation. 18 The Court of Appeal of California has spoken about the 19 standard of conduct for attorneys which, upon breach, may be 20 grounds for disqualification: 21 It has long been established in civil cases that the court has the power, on motion of a party, to 22 disqualify an opposing attorney from participating in a trial when, for example, the attorney improperly seeks 23 to proceed against a former client. The power to disqualify an attorney is simply one aspect of the 24 trial court's broad authority "[t]o control in furtherance of justice, the conduct of its ministerial 25 officers . . . ." 26 The prohibition against representation of a new client whose interests are adverse to those of a former client 27 is grounded in both the California State Bar Rules of Professional Conduct and governing case law. 1 Rule 328 1 informed written consent of the client or former client, accept employment adverse to the client or 2 former client where, by reason of the representation of the client or former client, the member has obtained 3 confidential information material to the employment."1 4 More broadly, our Supreme Court has explained "an attorney is forbidden to do either of two things after 5 severing his relationship with a former client. He may not do anything which will injuriously affect his 6 former client in any matter in which he formerly represented him nor may he at any time use against his 7 former client knowledge or information acquired by virtue of the previous relationship." The prohibition 8 is in the disjunctive. An attorney "may not use information or 'do anything which will injuriously 9 affect his [or her] former client.' " 10 A lawyer who accepts employment in violation of these rules is subject to disqualification upon motion of the 11 former client. 12 "[D]etermining whether a conflict of interest requires disqualification involves more than just the interests 13 of the parties. [P] . . . The paramount concern must be to preserve public trust in the scrupulous 14 administration of justice and the integrity of the bar. The important right to counsel of one's choice must 15 yield to ethical considerations that affect the fundamental principles of our judicial process. [17] City Nat'l Bank v. Adams, 96 Cal. App. 4th 315, 323-24 , 117 Cal. 18 Rptr. 2d 125, 131-33 (2002) (internal citations omitted). The [19] Adams court went on to discuss the “substantial relationship” 20 test and its development by California courts, including the [21] California Supreme Court. Adams, 96 Cal. App. 4th at 324 -329 [22] (citing Flatt v. Superior Court (1994) 9 Cal. 4th 275 , 36 Cal. 23 Rptr. 2d 537 (adopting the substantial relationship test). 24 As the California Supreme Court articulated the test in [25] Flatt: 26 /// [27] 1 Rule 3-310(E) has been superseded by Rule 1.9 of the California Rules of Professional Conduct which closely tracks the former Rule 3-10(E) and, in the [28] 1 The "substantial relationship" test mediates between two interests that are in tension in such a context-- 2 the freedom of the subsequent client to counsel of choice, on the one hand, and the interest of the former 3 client in ensuring the permanent confidentiality of matters disclosed to the attorney in the course of the 4 prior representation, on the other. Where the requisite substantial relationship between the subjects of the 5 prior and the current representations can be demonstrated, access to confidential information by the 6 attorney in the course of the first representation (relevant, by definition, to the second representation) 7 is presumed and disqualification of the attorney's representation of the second client is mandatory; 8 indeed, the disqualification extends vicariously to the entire firm. [10] Flatt, 9 Cal. 4th at 283-84 . 11 As noted above, when considering a motion to disqualify an 12 attorney, the court’s “paramount concern” is preserving trust in 13 both scrupulous administration of justice and the integrity of 14 the bar, considerations that trump a litigant’s right to their [15] preferred counsel. See People ex rel. Dep't of Corps. v. SpeeDee [16] Oil Change Sys., Inc., 20 Cal. 4th 1135, 1145 , 86 Cal. Rptr. 2d 17 816, 824, 980 P.2d 371, 378 (1999). [18] In Adams, the court of appeal analyzed the case law 19 involving successive representation of clients, which led to 20 “three conclusions that guide resolution” of the case before it. [21] Adams, 96 Cal. App. 4th at 327 . First, the court looked to 22 whether the nature of the representation was such that [23] confidences could have been exchanged between the lawyer and the [24] client. Id. If so, the court concluded that there was a 25 presumption that such confidences were exchanged, and [26] disqualification was required. Id. Second, there was an exception 27 to the conclusive presumption where the lawyer could show that 28 there was no opportunity for confidential information to be 1 divulged. Id. Finally, that limited exception was not available 2 where “the lawyer’s former and current employment are on opposite 3 sides of the very same matter, or the current matter involves 4 work the lawyer performed for the former client.” Id. at 328 . 5 In the case sub judice, while there are significant factual 6 disagreements between the parties as to the scope of Shane’s work 7 on behalf of Jeffrey, it seems clear to the court that Shane 8 represented Jeffrey in some capacity in the ZB N.A. Case, a 9 foreclosure action in which Jeffrey’s entitlement to certain 10 exemptions was at issue. That, in the court’s view, represents a 11 fundamental issue in Jeffrey’s bankruptcy case and consequently 12 the Adversary. Furthermore, Shane was employed for approximately 13 20 years at Jeffrey’s firm, which Shane concedes is a community 14 asset and property of the estate. Also, during that time, Shane 15 worked in some capacity as Jeffrey’s bookkeeper, a role which 16 necessarily gave him insight into confidential information about 17 the firm’s financial status. 18 The court concludes that, at a minimum, confidential 19 information could have been exchanged between Jeffrey and Shane 20 about matters that are relevant to the Adversary and this 21 bankruptcy case. Thus, the first Adams conclusion is applicable, 22 and there is a presumption that confidential information was 23 exchanged for purposes of deciding the disqualification motion. 24 Shane has not presented sufficient evidence to persuade the 25 court that there was no possibility of such confidential 26 information being exchanged. Thus, the second Adams conclusion is 27 not applicable, and Shane cannot avail himself of the exception 28 to the presumption. 1 Finally, even if Shane had presented enough evidence to 2 invoke the exception, it is unavailable because the matters 3 currently before the court (which involve determining the scope 4 of Jeffrey’s bankruptcy estate and his applicable exemptions) are 5 core bankruptcy matters that involve, to at least some degree, 6 work that Shane performed for Jeffrey. 7 The substantial relationship test resolves itself in 8 Jeffrey’s favor, and while it may be a hardship to Pamela to be 9 required to hire a new lawyer at this stage, that has no bearing 10 on Shane’s professional responsibility as Jeffrey’s former lawyer 11 and employee. Accordingly, disqualification is appropriate. 12 B. Disqualification based on Shane’s bookkeeping work. 13 Alternatively, the court finds that disqualification would 14 also be appropriate because of Shane’s activities as Jeffrey’s 15 bookkeeper from 2013 through 2016. While Shane and Jeffrey 16 disagree on the scope of Shane’s role as bookkeeper, the court 17 finds the McNeil Declaration to be persuasive enough to tip the 18 balance. 19 McNeil declared that, based on his own observations from his 20 work as Jeffrey’s CPA, it appeared that Shane was handling most, 21 if not all, of Jeffrey’s bookkeeping. Doc. #103. McNeil also 22 stated that Shane appeared to be handling most of the financial 23 duties of the firm and was McNeil’s primary contact regarding tax 24 matters. Id. While the disagreements about the facts between 25 Jeffrey and Shane are attributable to the acrimonious divorce 26 proceedings which have split the Reich family into warring 27 factions, McNeil is neither a member of the family nor a direct 28 employee of Jeffrey and/or the firm. He is a third party who is 1 bound by his own ethical obligations as a practicing CPA with 44 2 years of experience. Though he worked as Jeffrey’s CPA for about 3 roughly 40 of those years, he was an independent business owner, 4 and Shane has not alleged that McNeil was lying about his 5 observations, merely that they were incorrect. The court 6 disagrees and finds McNeil persuasive to the extent of accepting 7 his testimony that, in his observation, Shane was the primary 8 bookkeeper for Jeffrey during the period 2013-2016. 9 C. Disqualification based on Shane’s relationship with Jeffrey outside of the lawyer/client relationship. [10] 1. The court has inherent power to disqualify counsel. [11] This court possesses an inherent power to disqualify [12] attorneys appearing before it. United States v. Prevezon Holding [13] Ltd., 839 F.3d 227, 241 (2d Cir. 2016)(“The authority of Federal [14] Courts to disqualify attorneys derives from their inherent power [15] to preserve the integrity of the adversary process.”); Crenshaw [16] v. MONY Life Ins. Co., 318 F.Supp. 2d 1015, 1020 (S.D. Cal. [17] 2004)(“The disqualification of counsel because of unethical [18] violation is a discretionary exercise of the trial court’s [19] inherent powers.”); Visa U.S.A., Inc. v. First Data Corp., 241 20 F.Supp. 2d 1100, 1103 (N.D. Cal. 2003) (“The right to disqualify [21] counsel is within the discretion of the trial court as an [22] exercise of its inherent powers.”). [23] Although grounds for disqualification may be rooted in state [24] law, the authority to impose a sanction of disqualification [25] arises from the Federal Courts’ “inherent powers to manage their [26] own proceedings and to control the conduct of those who appear [27] before them,” and the Ninth Circuit has reversed a judgment [28] 1 entered after trial when a “District Court abdicated its duty” to 2 address potential issues of unethical representation. Erickson 3 v. Newmar Corp., 87 F.3d 298, 303 (9th Cir. 1996). 4 “Generally, only the former or current client will have such 5 a stake in a conflict-of-interest dispute.” Colyer v. Smith, 50 6 F.Supp. 2d 966 (C.D. Cal. 1999) but, where the ethical breach is 7 “manifest and glaring” and so “infects the litigation in which 8 disqualification is sought that it impacts the moving party’s 9 interest in a just and lawful determination of [his or] her 10 claims,” a non-client might meet the standing requirements to 11 bring a motion to disqualify based upon a third party conflict of 12 interest or other ethical violation. Id. at 971 . Thus, 13 independent of any violation of the Rules of Professional 14 Conduct, the inherent authority of the court based upon the facts 15 and circumstances of the case requires a review of the basis for 16 disqualification. 17 There are several examples of cases where in the absence of 18 a lawyer/client relationship, the facts and circumstances of a 19 prior relationship between counsel and an adverse party is a 20 basis for disqualification of counsel in the later dispute. In 21 re Mortgage & Realty Trust, 195 B.R. 740, 751-54 (Bankr. C.D. 22 Cal. 1996 ) (attorney and his firm disqualified from representing 23 company being sued by debtor because attorney was a trustee of a 24 trust which owned debtor and attorney owed fiduciary duties as 25 trustee rather than counsel); Wm. H. Raley Co. v. Superior Ct., 26 149 Cal. App. 3rd 1042 (1983)(holding conflict of interest 27 arising from attorney’s relationship with a non-client may arise 28 /// 1 when the relationship creates the expectation that the attorney 2 owes a duty of fidelity). 3 A fiduciary duty may also arise where the attorney has 4 acquired confidential information in the course of such 5 relationship which will be or may appear to the person to be 6 useful in the attorney’s representation in an action on behalf of 7 a client. See Compendium of Professional Responsibility (State 8 Bar Formal Opinion #1981-63 p. 3.); Kennedy v. Eldridge, 201 9 Cal. App. 4th 1197 (2011)(holding disqualification may be 10 considered where there exists a genuine likelihood that the 11 status or misconduct of the attorney in question will affect the 12 outcome of the proceedings before the court). 13 Generally, a party seeking to bring a motion to disqualify 14 outside of the attorney/client relationship must show “some sort 15 of confidential or fiduciary relationship ... existed before a 16 party is entitled to prevail.” Jarvis v. Jarvis, 33 Cal. App. 17 5th 113, 132 (2019) quoting Dino v. Pelayo, 145 Cal. App. 347 , 18 353, (2006). These cases establish that a broad view of a 19 potential conflict must be taken when a previous relationship 20 between counsel and the adverse party rises to a level of 21 fiduciary or quasi-fiduciary. 22 Based upon the facts here, Shane had that type of 23 relationship with Jeffrey during the period of Shane’s employment 24 with Jeffrey’s firm. In resolving motions to disqualify, courts 25 may resolve factual disputes and make findings based on evidence. 26 See, Visa U.S.A., Inc., 241 F.Supp. 2d at 1104. 27 /// 28 /// 1 2. Shane was in a confidential fiduciary or quasifiduciary relationship with Jeffrey. [2] 3 Under California law, a confidential relationship is not [4] created simply by the receipt of confidential information. Dino, [5] 145 Cal.App. 4th at 356-57 (quoting Richelle L. v. Roman Catholic [6] Archbishop, 106 Cal.App 4th 257, 272 fn. 6 (2003)). Instead, its 7 creation generally hinges on an unequal relationship between 8 parties in which one surrenders to the other some degree of 9 control because of the trust and confidence which he reposes in [10] the other. Id. When a confidential relationship is found to 11 exist, the one to whom confidence was reposed may be held to a 12 higher standard of disclosure and fairness than in an arm’s [13] length relationship. Id. See also, Kennedy, 21 Cal.App. 4th at 14 1204-05 (collecting cases). 15 Though neither Jeffrey nor Shane claim that Shane was a 16 “partner” with Jeffrey while working at the firm, there is no 17 dispute that Shane was employed by the firm and, thus, that Shane 18 was an employee and therefore an agent of Jeffrey while employed 19 by Jeffrey. An agent has a fiduciary duty to act loyally for the 20 principal’s benefit in all matters connected with the agency [21] relationship. Restatement (Third) Agency, § 801. The agent also 22 has a duty not to use or communicate confidential information of 23 the principal for the agent’s own purposes or those of a third [24] party. Id. at § 805. Termination of the relationship does not 25 change the duty: 26 An agent’s duties concerning confidential information do not end when the agency relationship terminates. 27 An agent is not free to use or disclose a principal’s confidential information whether the agent retains a 28 physical record of them or retains them in the agent’s 1 memory. If information is otherwise…confidential, the means by which an agent appropriates for later use or 2 disclosure should be irrelevant. Feats of human memory, however commendable and intriguing in many 3 respects, should not be privilege as instruments of disloyal conduct. Id. Comment C. (emphasis in 4 original) 5 Thus, independent of a lawyer/client relationship, Shane was an 6 agent and therefore had and has a duty of loyalty and 7 nondisclosure. 8 In addition, it cannot be ignored that Shane is Jeffrey’s 9 son and is a lawyer. Shane worked for Jeffrey for nearly twenty 10 years. Jeffrey testified that Shane was his closest confidante. 11 Given such close personal family relationships, there was bound 12 to be confidential information passed between Jeffrey and Shane. 13 As a lawyer in Jeffrey’s firm and Jeffrey’s son, Jeffrey 14 surrendered some degree of control over much information. Its [15] potential use is the concern as opposed to actual use. See [16] Raley, 149 Cal. App. 3rd 1042 (1983) and Kennedy, 201 Cal. App. 17 4th 1197 (2011), both discussed supra. 18 Shane does not dispute that he was Jeffrey’s counsel in the 19 matters Jeffrey lists. He also does not dispute that he was Sona 20 Vartanian’s counsel in certain matters. Jeffrey testified he 21 relied on Shane in legal matters. Doc. #104. Shane also admits 22 he received information about his father primarily from outside 23 the attorney/client relationship. Doc. #98. 24 Shane had the opportunity to learn of Jeffrey’s approach to 25 litigation, strategies for maintaining a legal position, 26 inclinations concerning the pending dissolution with Pamela, 27 steps and techniques Jeffrey used in dealing with family 28 disputes. All these issues are enough to find that the 1 confidences Jeffrey may have imparted upon Shane relate to this 2 bankruptcy case and Pamela’s efforts to protect her rights in 3 this case. This is a basis for disqualification. See, Trone v. 4 Smith, 621 F.2d 994, 1001 (9th Cir. 1980). 5 Though “speculative” contentions of a conflict are 6 insufficient to disqualify counsel, DCH Health Services Corp. v. 7 Waite, 95 Cal.App. 4th 829, 833 (2002), it is well established 8 that the disqualification remedy is necessarily “prophylactic.” 9 Hetos Investments, Ltd. v. Kurtin, 110 Cal.App. 4th 36 , 48 10 (2003). Absolute “certainty” of a conflict is never a 11 prerequisite to disqualification. Comden v. Superior Court, 20 12 Cal. 3d. 906, 913 (1978). An affirmative showing of existing 13 injury from the misuse of privileged information is not required. 14 McDermott Will & Emery LLP v. Superior Court, 10 Cal.App. 5th 15 1083, 1120 (2017). The risk of use confidential information is 16 generally sufficient to warrant disqualification. O’Gara Coach 17 Co., LLC v. Ra, 30 Cal. App. 5th 1115, 1126 (2019). 18 And here, the risk of the use of confidential information in 19 connection with Shane’s representation of Pamela becomes evident 20 with a review of some of Shane’s filings in this bankruptcy case. 21 Shane filed an adversary proceeding against Jeffrey contesting 22 dischargeability of alleged debts owed Pamela (AP #25-1022). The 23 allegations include wrongful concealment of assets and disposing 24 of assets that were part of the law practice that employed Shane. 25 Pamela also alleges that Jeffrey violated fiduciary duties by 26 failing to account or report aspects of the community property 27 law firm when requested. 28 /// 1 Shane also filed a motion for relief from stay or 2 alternatively for abstention on behalf of Pamela Reich (DC #SR3 2). The motion, among other things, seeks relief to permit a 4 trial on community property division and litigate claims of 5 breach of fiduciary duties and damage claims against the estate 6 and permit litigation of breach of fiduciary claims against Sona 7 Vartanian, who worked at the Reich law firm contemporaneously 8 with Shane. Shane has filed an objection to Jeffrey’s claim of 9 exemptions and Pamela’s motion to claim exemptions. Among other 10 things, the objection raises the issue that Jeffrey allegedly 11 claimed exemptions in property he does not own at the expense of 12 Pamela who resides in a home in Clovis which should be the 13 subject of Jeffrey’s exemption claim. (DC #SR-3). Pamela’s 14 motion makes similar claims. 15 The exemption objection also raises the same alleged breach 16 of fiduciary duties. Just these alone demonstrate that it is 17 impossible to separate Shane’s knowledge concerning these issues 18 from his twenty-year employment relationship with Jeffrey. This 19 “amalgamation of interrelated factors” supports disqualification 20 of attorney Shane Reich. Kennedy, 201 Cal. App. 4th 1197 . 21 3. Shane’s counter arguments do not detract from the reality of his and Jeffrey’s relationship. [22] 23 First, Shane argues that his previous representation of 24 Jeffrey is not substantially related to issues in this bankruptcy 25 case. Further, the matters in which he represented Jeffrey were 26 minor and are temporally distant. 27 The court is unpersuaded. First, previous representation by 28 Shane is not relevant to the inherent power of the court to 1 review the disqualification issue. Shane also ignores the 2 confidential information imparted that is unrelated to the 3 specific matters described in the declarations. Shane admitted 4 that information about his father mostly came from sources other 5 than his representation of Jeffrey. Finally, the relationship is 6 not temporally distant. Shane separated from his father’s firm 7 in 2021, only four years ago. 8 Second, Shane argues that Jeffrey delayed in bringing this 9 disqualification motion and it was simply a tactical maneuver to 10 avoid making payments to his separated spouse. 11 This ignores the facts. There was insignificant delay in 12 Jeffrey in bringing this motion in the bankruptcy case. The 13 bankruptcy case was filed February 21, 2025. Pamela Reich’s 14 first appearance was on April 8, 2025. This motion was filed 15 less than two months later. Shane claims that Jeffrey knew that 16 he was assisting Pamela in the dissolution proceeding long before 17 the bankruptcy was filed. This is not relevant, though, because 18 Shane has apparently made no formal appearance in the dissolution 19 proceeding in the Superior Court. 20 Relatedly, lack of payment to the spouse is a State Court 21 issue, and the court will make no ruling concerning that issue as 22 part of on this motion. 23 Third, Shane contends that any communication between he and 24 Jeffrey is not privileged anyway because Sona Vartanian has filed 25 suit against Shane and others and Jeffrey raised the issue of 26 Shane’s alleged embezzlement of monies from the law firm. 27 Jeffrey has testified that he is not pursuing that 28 embezzlement claim. Doc. #148. Therefore, that is not a basis 1 for a waiver. Also, Shane admits that an attorney/client 2 relationship existed between he and Jeffrey and separately 3 between he and Sona Vartanian. Shane has never denied that 4 Jeffrey reposed trust and confidence in Shane. 5 Shane cites Dubrow v. Rindlisbacher (In re Rindlisbacher), [6] 225 B.R. 180 (BAP 9th Cir., 1998). There, attorney Dubrow 7 represented the debtor in debtor’s dissolution action. While 8 testifying in that action, the debtor misrepresented that he had 9 not received rental income from a house the debtor and his ex10 spouse owned. Attorney Dubrow asked the debtor during a recess, 11 and debtor said that he had received rental income. 12 After his client filed bankruptcy, Dubrow filed an objection 13 to discharge under 11 U.S.C. § 727 . The debtor filed a motion 14 for summary judgment arguing that Dubrow disclosed confidential 15 information in bringing the adversary proceeding. The Bankruptcy 16 Court granted the motion, and Dubrow appealed. The Bankruptcy 17 Appellate Panel affirmed. 18 The Appellate Panel held that the debtor seeking a discharge 19 was not a breach of a duty to pay his counsel. Further, the 20 debtor had no claim against his attorney that his attorney needed 21 to defend. So, the exception to the attorney/client privilege 22 was inapplicable. Rindlisbacher, 225 B.R. at 183 . As there was 23 no waiver in Rindlisbacher, it is of no assistance to Shane here. 24 Further, any scope of an attorney/client privilege waiver is 25 narrowly defined and the information required to be disclosed 26 must fit strictly within the confines of that waiver. Sony 27 Cmptr. Ent. Am., Inc. v. Great American Ins. Co., 229 F.3d 632 , 28 635 (N.D. Cal. 2005). Hence, any waiver would have to be 1 narrowly construed and would not assist Shane with respect to the 2 court’s inherent authority. 3 Finally, Shane argues that most of the information he 4 obtained was outside of the attorney/client relationship and was 5 only of general business practices or litigation philosophy not 6 protected or relevant. Shane cites Banning Ranch Conservancy v. 7 Superior Court, 193 Cal. App. 4th 903, 918 (2011). 8 The case is not persuasive. In Banning, the Court of Appeal 9 issued a peremptory writ reversing a trial court order 10 disqualifying Banning’s counsel. There, the law firm represented 11 the City of Newport Beach in matters many years before and 12 unrelated to the current litigation. The issue there was 13 continuing validity of retainer agreements between the firm and 14 the city. There was no evidence of a relationship or anything 15 close to an ongoing confidential relationship despite the 16 retainer agreements. The agreements all reserved the right for 17 the law firm to decline representation. 18 There is no such separation here. Shane was in a 19 confidential relationship with Jeffrey and had received 20 confidential communications. Based on the record, Shane received 21 a wide amount of information about Jeffrey and his affairs. 22 Given the relationship between Jeffrey and Shane, the information 23 was confidential. 24 Though not a counter argument, Shane also raises the issue 25 of Pamela’s prejudice should Shane be disqualified. The court is 26 mindful of that. A disqualification motion involves a conflict 27 between a client’s right to counsel of her choice, on the one 28 hand and the need to maintain ethical standards of professional 1 responsibility, on the other. Although disqualification 2 necessarily impinges on the litigant’s right to counsel of his or 3 her choice, the decision on a disqualification motion involves 4 more than just the interest of the parties. When ruling on a 5 disqualification motion, the paramount concern must be to 6 preserve public trust in the scrupulous administration of justice 7 and the integrity of the bar. The important right to counsel of 8 one’s choice must yield to ethical considerations that affect the 9 fundamental principles of our judicial process. McDermott Will & 10 Emery LLP, 10 Cal. App. 5th at 1119 (citations omitted). [11] 12 CONCLUSION 13 For the forgoing reasons Shane Reich is disqualified from 14 representing the interest of Pamela Reich in this bankruptcy 15 case. Jeffrey has also asked that Shane be disqualified from 16 representing any other third party in this bankruptcy case. In 17 the interest of judicial economy, the court agrees that further 18 examination of the disqualification of Shane Reich in this 19 bankruptcy case would be wasteful of both the parties’ and 20 judicial resources. Jeffrey has not provided any credible 21 suggestion that Shane would be representing a third party in this 22 bankruptcy case. The court declines to enter that order now. 23 However, the court reminds both Jeffrey and Shane as well as all 24 counsel of their duties under Fed. R. Banky. Proc. 9011. This 25 /// 26 /// 27 /// 28 /// 1 court has set forth why Shane’s involvement in this bankruptcy is 2 subject to vigorous scrutiny. A separate order shall issue. [3] 4 | Dated: Sep 11, 2025 By the Court a“ 6 Cra □ ené Lastreto II, Judge 7 United States Bankruptcy Court [28] 1 Instructions to Clerk of Court Service List - Not Part of Order/Judgment [2] 3 The Clerk of Court is instructed to send the Order/Judgment or other court generated document transmitted herewith to the 4 parties below. The Clerk of Court will send the Order via the BNC or, if checked , via the U.S. mail. [5] 6 Jeffrey Kane Reich 11520 N. Via Campagna Dr. 7 Fresno, CA 93730 8 Irma Edmonds 2501 West Shaw Avenue, Ste. 124 9 Fresno, CA 93711 10 Anthony D. Johnston 1600 G Street, Ste. 103 11 Modesto, CA 95354 12 Megan Zavieh 12460 Crabapple Road 13 Ste 202-272 Alpharetta, GA 30004 [14] Peter B. Bunting 15 2304 W. Shaw Ave. Ste. 103 Fresno, CA 93711 [16] Shane Reich 17 P.O. Box 1381 Clovis, CA 93613