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`Case 5:18-md-02834-BLF Document 748 Filed 05/17/22 Page 1 of 6
`
`MICHAEL A. SHERMAN (SBN 94783)
`
`masherman@stubbsalderton.com
`JEFFREY F. GERSH (SBN 87124)
`
`jgersh@stubbsalderton.com
`STUBBS ALDERTON & MARKILES, LLP
`
`15260 Ventura Blvd., 20th Floor
`Sherman Oaks, CA 91403
`
`Telephone:
`(818) 444-4500
`Facsimile:
`(818) 444-4520
`Attorneys for PERSONALWEB
`
`TECHNOLOGIES, LLC
`
`AMAZON.COM, INC. and AMAZON WEB
`SERVICE, INC.,
` Plaintiffs,
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN JOSE DIVISION
`CASE NO.: 5:18-md-02834-BLF
`IN RE PERSONAL WEB TECHNOLOGIES,
`LLC, ET., AL., PATENT LITIGATION
`Case No.: 5:18-cv-00767-BLF
`Case No.: 5:18-cv-05619-BLF
`STUBBS ALDERTON & MARKILES,
`LLP’S REPLY IN SUPPORT OF SECOND
`MOTION TO WITHDRAW AS COUNSEL
`FOR PERSONALWEB TECHNOLOGIES,
`LLC PURSUANT TO CALIFORNIA
`RULES OF PROFESSIONAL CONDUCT,
`RULE 1.16(a)(2)
`Hearing date: June 23, 2022
`Time: 9:00 a.m.
`Judge:
` Hon. Beth Labson Freeman
`
`v.
`PERSONALWEB TECHNOLOGIES, LLC, et
`al.,
`
` Defendants.
`PERSONALWEB TECHNOLOGIES, LLC, et
`al.,
`
`Plaintiffs,
`
`v.
`TWITCH INTERACTIVE, INC.,
`
`Defendant.
`
`REPLY ISO SECOND MOTION TO WITHDRAW
`AS COUNSEL FOR PERSONALWEB PURSUANT
`TO CA R.P.C. 1.16(A)(2)
`
`CASE NO: 5:18-MD-02834-BLF
`CASE NO: 5:18-CV-00767-BLF
`CASE NO: 5:18-CV-05619-BLF
`
`

`

`Case 5:18-md-02834-BLF Document 748 Filed 05/17/22 Page 2 of 6
`
`
`
`I.
`THIS RECEIVERSHIP DOES NOT “CALM” THE “ETHICAL WATERS”
`
`Amazon’s central point is that the receiver’s appointment means there is no conflict of interest
`
`between PersonalWeb and SAM. Amazon argues that because the receiver has exclusive control over
`
`PersonalWeb, SAM cannot take instruction or direction from PersonalWeb, and instead must take
`
`orders and instruction only from the receiver. (Dkt. 747, 11:2-17.) There are no facts or law supporting
`
`that position. Unlike a hypothetical bankruptcy trustee appointment — where the Chapter 11 trustee
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`by operation of law steps into the shoes of a debtor’s management and, as a matter of law, exercises
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`complete control over the debtor’s business — here, no such appointment has been made, and SAM
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`has no attorney-client relationship with the receiver. The order appointing receiver is artfully drawn
`
`
`(Dkt.691-3, ¶1) to empower the receiver to participate in this lawsuit/judgment collection proceedings
`only “as the Receiver deems necessary” (id.) with the default being if not “necessary” in the eyes of
`the receiver, then the status quo (i.e., PersonalWeb’s control) persists. A conflict of interest between
`an attorney and client does not simply vanish because a receiver has discretionary authority it has not
`exercised on behalf of the client.
`Amazon ignores that legally a receiver is not an agent of a party to the action. Code of Civil
`Procedure § 564, et seq.; California Rule of Court 3.1179 (“The receiver is the agent of the court and
`not of any party”.). “[A] receiver acts as a fiduciary on behalf of both parties as a representative and
`officer of the court.” Security Pacific National Bank v. Geernaert (1988) 199 Cal.App.3d 1425, 1432.
`Here, the parties stipulated to extend the briefing schedule for this Motion to allow the receiver the
`opportunity to advise the parties on the receiver’s management of PersonalWeb and this litigation.
`(Dkt. 740.) The receiver did not even respond, further confirming that SAM’s conflict with
`PersonalWeb is real and persists.
`II.
`THIS MOTION IS BASED ON CHANGED CIRCUMSTANCES
`That the receiver and his administration has proved to be such a “paper tiger” is a remarkable
`occurrence, and hardly a prospect that appeared on the radar one year ago. For Amazon to dismiss
`that as “posturing” on the part of SAM is not only overly cynical, but it is also devoid of any facts.
`SAM’s prior motion to withdraw was based, solely, on PersonalWeb’s termination of SAM, pursuant
`to California Rule of Court 1.16(a)(4) — which mandated SAM’s withdrawal if “the client discharges
`
`
`
`REPLY ISO SECOND MOTION TO WITHDRAW
`AS COUNSEL FOR PERSONALWEB PURSUANT
`TO CA R.P.C. 1.16(A)(2)
`
`
`
`CASE NO: 5:18-MD-02834-BLF
`CASE NO: 5:18-CV-00767-BLF
`CASE NO: 5:18-CV-05619-BLF
`
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`Case 5:18-md-02834-BLF Document 748 Filed 05/17/22 Page 3 of 6
`
`
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`the lawyer”. (Dkt. 688, at 4:2-5, 6:17-20.) However, SAM bases this Motion on changed
`
`circumstances and material new developments. In particular, SAM cannot continue to represent
`
`PersonalWeb in the post-judgment proceedings pursuant to California Rule of Professional Conduct
`
`1.16(a)(2) because SAM is necessarily at risk of violating Business and Professions Code § 6103
`
`(providing that causes for attorney disbarment/suspension include a violation of a court order requiring
`
`an attorney to do or forbear an act, or violation of duties as an attorney), California Rule of Professional
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`Conduct 1.1 (providing that “[a] lawyer shall not intentionally, recklessly, with gross negligence, or
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`repeatedly fail to perform legal services with competence”), and California Rule of Professional
`
`Conduct 1.7(b) (prohibiting representation without informed consent if there is a significant risk that
`
`
`the lawyer’s representation of the client will be materially limited by the attorney’s own interests.).
`Further, these material new developments necessarily arose after the prior motion was briefed
`in May 2021 and decided on June 25, 2021, i.e., in addition to the receivership issues already
`referenced, since this Court’s June 25, 2021 Order, PersonalWeb (1) has not permitted SAM to see to
`it that PersonalWeb fully complied with the Magistrate Judge’s/Court’s April 27 and July 20, 2021
`Orders compelling responses to post judgment discovery, and (2) despite threats of contempt against
`SAM, PersonalWeb has refused to cooperate with SAM to permit it to substantively respond to a
`January 28, 2022 email from Amazon’s counsel concerning PersonalWeb’s compliance with the
`discovery orders compelling document production. (Dkt. 728-3, ¶¶5-8; Dkt. 728-6, ¶¶5-8) And
`nothing that the receiver has done has in any way ameliorated or mitigated these issues.
`The “paper tiger” quality of this receivership is illustrated in communications with the receiver
`that occurred during the briefing on this Motion. On April 8, 2022, Michael Sherman (of SAM) sent
`an e-mail to the receiver’s counsel, inquiring about whether the receiver was instructing SAM to fully
`comply with the Court’s orders. (Dkt. 740.) Not having heard back from the receiver or the receiver’s
`counsel, on April 13, 2022, Amazon and SAM entered into a Joint Stipulation re SAM’s Motion to
`Withdraw (as Ordered by the Court on April 13, 2022), agreeing that Amazon may have additional
`time for the filing of any briefing “to allow Robb Evans further opportunity to respond to Mr.
`Sherman’s e-mail so that the Parties can brief the motion with a better understanding of Robb Evans’
`position on management of PersonalWeb and the PersonalWeb collateral, i.e., this litigation, and that
`
`
`
`REPLY ISO SECOND MOTION TO WITHDRAW
`AS COUNSEL FOR PERSONALWEB PURSUANT
`TO CA R.P.C. 1.16(A)(2)
`
`
`
`CASE NO: 5:18-MD-02834-BLF
`CASE NO: 5:18-CV-00767-BLF
`CASE NO: 5:18-CV-05619-BLF
`
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`Case 5:18-md-02834-BLF Document 748 Filed 05/17/22 Page 4 of 6
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`
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`may help the Parties and the Court with resolution of the motion.” (Id.) There has not been any
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`substantive response by the receiver, and there is no clarity on this issue, despite specific follow-up,
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`inquiry, and request for instructions directly to the receiver’s counsel, even after that April 13 email.
`
`III.
`SAM’S UNCONDITIONAL WITHDRAWAL WILL NOT PREJUDICE AMAZON
`
`The Court conditionally granted the prior motion, noting that SAM’s withdrawal would present
`
`undue prejudice to Amazon and would force PersonalWeb to address the issue of new representation.
`
`(Dkt. 694, at 3:5-25.) That normative expectation has not been realized and Amazon does not point to
`
`any “benefit” to it from SAM remaining as counsel of record. Since the Court’s June 25, 2021 Order,
`
`post judgment discovery inches along with some third party subpoenas,, the judgment remains
`
`
`uncollected, and the proceedings have not advanced in any meaningful manner — reason alone to
`grant withdrawal and order PersonalWeb to engage replacement counsel or face the consequences.
`Amazon cannot identify a cause-and-effect relationship as to how or why SAM being compelled to
`remain as counsel of record will advance its judgment collection efforts. Amazon provides no specifics
`as to how it would suffer prejudice if the Court orders SAM’s unconditional withdrawal. If the Court
`so orders, Amazon will not be powerless, as Amazon could bring in the receiver in some fashion to
`determine what action should be taken or to answer questions, or could seek relief and information
`from others, including through this Court’s OSC powers. Ironically, SAM has no power over the
`receiver, or relationship, and it is the receiver who can replace SAM at any time — yet the receiver
`has not done so, presumably because the receiver views the stalemate as somehow beneficial.
`
`Amazon also emphasizes that SAM’s conditional withdrawal is necessary to avoid prejudice
`because PersonalWeb cannot represent itself. That is misleading. Northern District Local Rule 3-9(b)
`provides that: “A corporation, unincorporated association, partnership or other such entity may appear
`only through a member of the bar of this Court.” Amazon presupposes that, by operation of Rule 3-
`9(b), SAM must represent PersonalWeb until PersonalWeb has new counsel. However, Local Rule 3-
`9(b) does not require that an entity (such as PersonalWeb) actually participate — perhaps this explains
`why Amazon failed to cite to the language of Local Rule 3-9(b). Indeed, as recognized in Thomas G.
`Ferruzzo, Inc. v. Superior Court (1980) 104 Cal.App.3d 501, 504:
`An attorney may be allowed to withdraw without offending the rule
`against corporate self-representation.
`
`
`
`
`REPLY ISO SECOND MOTION TO WITHDRAW
`AS COUNSEL FOR PERSONALWEB PURSUANT
`TO CA R.P.C. 1.16(A)(2)
`
`
`3
`
`
`CASE NO: 5:18-MD-02834-BLF
`CASE NO: 5:18-CV-00767-BLF
`CASE NO: 5:18-CV-05619-BLF
`
`

`

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`Case 5:18-md-02834-BLF Document 748 Filed 05/17/22 Page 5 of 6
`
`
`The effect of withdrawal is to leave the corporation without
`representation and without the ability to practice self-representation.
`For the uncooperative corporate client who has not been willing to
`bring in new counsel, granting of the withdrawal motion will put
`extreme pressure on it to obtain new counsel of record for should it
`fail to do so it risks forfeiture of its rights through non-
`representation.
`
`
`
`
`
`
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`
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`(See also Gamet v. Blanchard (2001) 91 Cal.App.4th 1276, 1284 (stating “The ban on corporate self-
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`representation does not prevent a court from granting a motion to withdraw as attorney of record, even
`
`if it leaves the corporation without representation. Such an order puts pressure on the corporation to
`
`
`obtain new counsel, or risk forfeiting important rights through nonrepresentation.”).) These state cases
`are directly applicable here because they are based on the same California state rule prohibiting
`corporations from representing themselves. The net effect of an order permitting SAM’s unconditional
`withdrawal would result either in new counsel/appearance, or PersonalWeb (and its principals)
`suffering the consequences. In that latter scenario, Amazon would have the same rights and remedies
`as any other judgment creditor seeking to enforce an order against the defaulting judgment debtor.
`IV. AMAZON IGNORES THAT SAM’S WITHDRAWAL IS MANDATORY
`Amazon presupposes that a “balancing test” is proper in circumstances involving mandatory
`withdrawal, and criticizes SAM for offering what it characterizes as “conclusory assertions”
`insufficient to determine a communications breakdown. Rule 1.16(a) is mandatory — it states that “a
`lawyer shall not represent a client or, where representation has commenced, shall withdraw from the
`representation…” if the “representation will result in violation of these rules or of the State Bar Act.”
`The fact that SAM cannot terminate the representation without Court approval does not negate the fact
`that the withdrawal is mandatory. Amazon’s Opposition does not even contain the term “mandatory”.
`Amazon simply ignores California Rule of Professional Conduct 1.16(a) — the portion of the rule
`governing mandatory withdrawal — as well as Business and Professions Code § 6103 and California
`Rules of Professional Conduct 1.1 and 1.7(b). Far from offering insufficient “conclusory” statements,
`SAM has complied with Business & Professions Code § 6068(e)(1) (stating that an attorney has the
`duty “[t]o maintain inviolate the confidence, and at every peril to himself or herself to preserve the
`
`
`
`
`REPLY ISO SECOND MOTION TO WITHDRAW
`AS COUNSEL FOR PERSONALWEB PURSUANT
`TO CA R.P.C. 1.16(A)(2)
`
`
`4
`
`
`CASE NO: 5:18-MD-02834-BLF
`CASE NO: 5:18-CV-00767-BLF
`CASE NO: 5:18-CV-05619-BLF
`
`

`

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`Case 5:18-md-02834-BLF Document 748 Filed 05/17/22 Page 6 of 6
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`
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`secrets, of his or her client”) and California Rule of Professional Conduct 1.6(a) (stating that an
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`attorney shall not reveal confidential information under Business & Professions Code § 6068(e)(1),
`
`unless the client gives informed consent or disclosure is necessary to prevent a criminal act that is
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`likely to result in death or substantial bodily harm). Moreover, the suggestion that SAM’s factual
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`showing has been conclusory conflicts with California State Bar Formal Opinion No. 2015-192,
`
`wherein the Standing Committee on Professional Responsibility and Conduct of the State Bar
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`concluded that additional background information in support of a motion to withdraw is limited and
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`confidential communications are not disclosable “either in open court or even in camera.” (Declaration
`
`of Michael Sherman, Exhibit K (italics in original).)
`
`
`
`Amazon also ignores the detailed Declaration/Report of distinguished ethics expert, Robert L.
`Kehr who showed why SAM’s withdrawal is mandatory pursuant to California Rule of Professional
`Conduct 1.16(a)(2) because SAM and its attorneys “cannot fulfill all of their duties to their client” and
`“necessarily are at risk of violating multiple professional obligations that could lead to significant
`professional discipline.” (Dkt. 728-1, p. 11, ¶54.) If any practicing attorney is qualified to opine on
`this issue, it ought to be Mr. Kehr, which likely explains why his weighty report is not even countered
`by Amazon. [If requested, Mr. Kehr could appear and testify at the upcoming hearing].
`V.
`CONCLUSION
`As set forth herein and in greater detail in the moving papers, SAM respectfully requests that
`the Court Order SAM to immediately and unconditionally withdraw as counsel for PersonalWeb.
`
`Respectfully submitted,
`
`Dated: May 17, 2022
`STUBBS, ALDERTON & MARKILES, LLP
`
`By: /s/ Michael A. Sherman__
`Michael A. Sherman
`Jeffrey F. Gersh
`
`Attorneys for PERSONALWEB
`TECHNOLOGIES, LLC
`
`
`
`
`
`
`REPLY ISO SECOND MOTION TO WITHDRAW
`AS COUNSEL FOR PERSONALWEB PURSUANT
`TO CA R.P.C. 1.16(A)(2)
`
`
`5
`
`
`CASE NO: 5:18-MD-02834-BLF
`CASE NO: 5:18-CV-00767-BLF
`CASE NO: 5:18-CV-05619-BLF
`
`