City & County of S.F. v. Cobra Solutions

• Decision Date: 10 June 2004
• Docket Number: No. A103479.,A103479.
• Court: California Court of Appeals Court of Appeals
• Parties: CITY AND COUNTY OF SAN FRANCISCO et al., Plaintiffs and Appellants, v. COBRA SOLUTIONS, INC., et al., Defendants and Respondents.

14 Cal.Rptr.3d 400

119 Cal.App.4th 304

CITY AND COUNTY OF SAN FRANCISCO et al., Plaintiffs and Appellants, v. COBRA SOLUTIONS, INC., et al., Defendants and Respondents.

No. A103479.

Court of Appeal, First District, Division Fitfh.

June 10, 2004.

As Modified June 15, 2004.

Review Granted August 25, 2004.

Jesse C. Smith, Chief Assistant City Attorney, Therese M. Stewart, Chief Deputy City Attorney, Claire Sylvia and Ellen Forman, Deputy City Attorneys for Plaintiff and Appellant.

Bill Lockyer, Attorney General, Jacob Appelsmith, Senior Assistant Attorney General, Barbara J. Seidman and Kenneth L. Swenson, Deputy Attorneys General as Amici Curiae on behalf of Plaintiff and Appellant.

Ann Miller Ravel, County Counsel, Lizanne Reynolds, Deputy County Counsel, for County of Santa Clara, California State Association of Counties and League of California Cities as Amici Curiae on behalf of Plaintiff and Appellant.

Keker & Van Nest, LLP, Ethan A. Balogh, G. Whitney Leigh and Eumi K. Lee, San Francisco, for Defendant and Respondent.

GEMELLO, J.

Does the City Attorney's prior representation of the target of a public investigation in matters substantially related to that investigation require vicarious disqualification of the entire City Attorney's Office? We hold that it does. Public confidence in the administration of justice and the integrity of the bar requires that both the City Attorney and his office be disqualified.¹

We expressly limit our holding to cases in which the conflicted civil attorney is the head of a public law office. There are sound reasons why automatic disqualification might be inappropriate when the conflicted attorney is anyone else, and why imposition of an assiduously observed ethical screen might suffice to accommodate the weighty competing public and private concerns at stake. We are not called on here to decide, and we do not decide, whether automatic disqualification is required in such cases.

FACTUAL AND PROCEDURAL BACKGROUND

For purposes of this appeal, the material facts are undisputed. In September 2000, Dennis Herrera (Herrera), San Francisco's City Attorney, was still in private practice. Cobra Solutions, Inc. (Cobra) approached him and retained him and his firm to represent it in a range of business matters, including dealings with the City of San Francisco (City) and an ongoing dispute with the City's Department of Building Inspections.

In November 2001, Herrera was elected San Francisco City Attorney and shortly thereafter left private practice.

In September 2001, under Herrera's predecessor, Louise Renne, the San Francisco City Attorney's Office (City Attorney's Office) began an investigation of the City's technology contracting. The investigation turned up evidence that Marcus Armstrong, the head of the City's Department of Building Inspections, had authorized prepayments on a city contract with Government Computer Sales, Inc. (GCSI) in violation of City law, and that GCSI had failed to fulfill the contract. On February 10, 2003, the City sued GCSI, Armstrong, and others, alleging that GCSI paid Armstrong kickbacks through various fictitious business entities in order to have him select GCSI for the contract and authorize illegal prepayments.²

In March 2003, further investigation uncovered evidence of payments by Cobra, another City contractor, to Armstrong's fictitious business entities, and in April 2003 the City added Cobra as a defendant in the GCSI lawsuit.

One month later, Cobra moved to disqualify Herrera and the entire City Attorney's Office. It argued that Herrera had previously represented it in matters substantially related to the current lawsuit, and that consequently both Herrera and the City Attorney's Office were barred from representing the City against Cobra. The City Attorney's Office responded that it had instituted an ethical screen immediately upon discovering Cobra's alleged involvement in the kickback scheme.³ All responsibilities for decisions concerning the matter were passed from Herrera to his chief deputy, Jesse Smith, and Herrera had no further involvement in the case. It also argued that Herrera's prior representation of Cobra was not substantially related to the current litigation, and that disqualification was therefore unnecessary.

The trial court granted the motion to disqualify Herrera and the City Attorney's Office. Critically important to our analysis are the trial court findings that Herrera had personally represented Cobra, that he had obtained confidential information from Cobra, and that the subject of the prior representation was substantially related to the current lawsuit. The trial court held that as a matter of law disqualification of both Herrera and the City Attorney's Office was required. On appeal, we granted the Attorney General, County of Santa Clara, California State Association of Counties, and League of California Cities leave to appear as amici curiae to address the disqualification standards that should apply to private attorneys who join public law offices.

DISCUSSION

I. Standard of Review

An order disqualifying an attorney is immediately appealable. (State Water Resources Control Bd. v. Superior Court (2002) 97 Cal.App.4th 907, 913, 118 Cal.Rptr.2d 784.) The parties disagree over the applicable standard of review. Under the circumstances of this appeal, we review de novo the trial court's order disqualifying the City Attorney's Office.

In general, "a trial court's decision on a disqualification motion is reviewed for abuse of discretion." (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143, 86 Cal.Rptr.2d 816, 980 P.2d 371 (SpeeDee Oil).) This entails deferring to the trial court's factual findings whenever supported by substantial evidence. (Id. at pp. 1143-1144, 86 Cal.Rptr.2d 816, 980 P.2d 371.) Here, despite some initial protestations, the City Attorney's Office concedes that it is not challenging the trial court's factual findings, and concedes that they are supported by substantial evidence. Thus, we take those findings as a given and ask whether as a matter of law they support vicarious disqualification here. (Id. at p. 1144, 86 Cal.Rptr.2d 816, 980 P.2d 371; Cho v. Superior Court (1995) 39 Cal.App.4th 113, 119, 45 Cal.Rptr.2d 863.) In doing so, we are mindful of our Supreme Court's warning that "A motion to disqualify a party's counsel may implicate several important interests. Consequently, judges must examine these motions carefully to ensure that literalism does not deny the parties substantial justice." (SpeeDee Oil, at p. 1144, 86 Cal.Rptr.2d 816, 980 P.2d 371.)

II. Where the Head of a Public Law Office Has a Conflict Arising from an Earlier Private Representation, Vicarious Disqualification Is Required

A. The Duties of Loyalty and Confidentiality

Professional ethics demand that an attorney avoid conflicts of interest in which duties owed to different clients are in opposition. (Flatt v. Superior Court (1994) 9 Cal.4th 275, 282 & fn. 2, 36 Cal.Rptr.2d 537, 885 P.2d 950 (Flatt); Rules Prof. Conduct, rule 3-310(C).⁴) A conflict of interest may arise from an attorney's simultaneous or successive representation of clients with adverse interests. (Flatt, at pp. 283-284, 36 Cal.Rptr.2d 537, 885 P.2d 950.) These two situations implicate distinct ethical concerns and public policies. (Ibid.)

Concurrent representation of clients with adverse interests compromises an attorney's duty of loyalty. "Attorneys have a duty to maintain undivided loyalty to their clients to avoid undermining public confidence in the legal profession and the judicial process. [Citation.] The effective functioning of the fiduciary relationship between attorney and client depends on the client's trust and confidence in counsel. [Citation.]" (SpeeDee Oil, supra, 20 Cal.4th at p. 1146, 86 Cal.Rptr.2d 816, 980 P.2d 371.) In order to maintain undivided loyalty to clients and preserve public confidence in the legal profession, an attorney must not concurrently represent clients with adverse interests, whether or not the matters are related. (Id. at pp. 1146-1147, 86 Cal.Rptr.2d 816, 980 P.2d 371; Flatt, supra, 9 Cal.4th at p. 284, 36 Cal.Rptr.2d 537, 885 P.2d 950; Rule 3-310(C)(3).) "A client who learns that his or her lawyer is also representing a litigation adversary, even with respect to a matter wholly unrelated to the one for which counsel was retained, cannot long be expected to sustain the level of confidence and trust in counsel that is one of the foundations of the professional relationship." (Flatt, at p. 285, 36 Cal.Rptr.2d 537, 885 P.2d 950, emphasis omitted.) With few exceptions, a stringent per se disqualification rule applies to an attorney's simultaneous representation of adverse clients without the clients' consent. (SpeeDee Oil, at p. 1147, 86 Cal.Rptr.2d 816, 980 P.2d 371; Flatt, at pp. 285-286, fn. 4, 36 Cal.Rptr.2d 537, 885 P.2d 950; State Farm Mutual Automobile Ins. Co. v. Federal Ins. Co. (1999) 72 Cal.App.4th 1422, 1431-1432, 86 Cal.Rptr.2d 20.)

Successive representation of clients with adverse interests raises slightly different ethical concerns. With successive representation of adversaries, "the chief fiduciary value jeopardized is that of client confidentiality," not loyalty. (Flatt, supra, 9 Cal.4th at p. 283, 36 Cal.Rptr.2d 537, 885 P.2d 950; accord, SpeeDee Oil, supra, 20 Cal.4th at p. 1146, 86 Cal.Rptr.2d 816, 980 P.2d 371.) The former client's expectation of confidentiality must be preserved to ensure "`the right of every person to freely and fully confer and confide in one having knowledge of the law, and skilled in its practice, in order that the former may have adequate advice and a proper defense.' [Citation.]" (SpeeDee Oil, at p. 1146, 86 Cal.Rptr.2d 816, 980 P.2d 371, quoting Mitchell v. Superior Court (1984) 37 Cal.3d 591, 599, 208 Cal.Rptr. 886, 691 P.2d 642.) The attorney must maintain those confidences inviolate and preserve them...