Global Van Lines, Inc. v. Superior Court

• Decision Date: 29 June 1983
• Citation: 144 Cal.App.3d 483,192 Cal.Rptr. 609
• Parties: GLOBAL VAN LINES, INC., et al., Petitioners, v. The SUPERIOR COURT of the State of California In and For the COUNTY OF ORANGE, Respondent, V.I.P. MOVERS, INC., Real Party in Interest. Civ. 29583.
• Court: California Court of Appeals Court of Appeals

Page 609

192 Cal.Rptr. 609

144 Cal.App.3d 483

GLOBAL VAN LINES, INC., et al., Petitioners, v. The SUPERIOR COURT of the State of California In and For the COUNTY OF ORANGE, Respondent V.I.P. MOVERS, INC., Real Party in Interest.

Civ. 29583.

Court of Appeal, Fourth District, Division 2, California.

June 29, 1983.

As Modified July 15, 1983.

[144 Cal.App.3d 485] Meserve, Mumper & Hughes and L. Allan Songstad, Jr., Los Angeles, for petitioners.

Floyd L. Farano and Charles M. Farano, Fullerton, for real party in interest.

OPINION

KAUFMAN, Associate Justice.

Defendants and petitioners Global Van Lines, Inc. (Global) and U.C. Moving Services, Inc. (UC) petition for a writ of mandate to command the superior court to disqualify the law office of Floyd L. Farano ¹ from representing plaintiff and real party in interest V.I.P. Movers, Inc. (VIP), or any other party in Orange County Superior Court action No. 388011 entitled V.I.P. Movers, Inc. v. U.C. Moving Services, Inc.; Global Van Lines, Inc., et al.

FACTS AND STATEMENT OF THE CASE

On October 6, 1982, VIP sued Global and UC for breach of contract. The contract, incorporated into the complaint by reference, appointed VIP as Global's "Domestic agent" for Santa Clara County. In the contract, VIP agreed to "perform the duties set forth in the currently effective 'Schedule of Agents' Duties,' " while Global agreed that it would "not franchise, nor empower any other agent to operate or ... directly or indirectly, complete with" VIP in Santa Clara County.

The complaint alleges that Global breached the contract by interfering with VIP's customers and allowing other agents to solicit accounts and perform services in Santa Clara County. It is alleged that UC is a "conduit" through which Global is carrying on its business; that there is a unity of interest and ownership between Global and UC; that Global owns 90 percent of UC's stock; and that Global has told prospective VIP customers that UC has the right to solicit business in Santa Clara County. It is further alleged that even though UC is also Global's "agent." The complaint asks for $2 million in compensatory and $5 million in punitive damages, specific performance of the contract, an accounting, and an injunction commanding Global and UC to cease interfering with VIP's customers.

On November 2, 1982, Global moved to disqualify Floyd L. Farano and his office from acting as VIP's attorney in the action on the ground that Farano had confidential information of Global's affairs germane to issues in the action as a result of his being general counsel for Global for a period of 16 years, including the time at which Global acquired UC's stock and the time at which this dispute originated. The motion was supported by the declaration of Kenneth S. Ogden, Global's current general counsel. In his declaration Ogden averred that Farano was employed by Global as its general counsel from January 1, 1962, to April 1, 1977; that during that time Farano was the "chief legal officer of GLOBAL and was responsible for overseeing all legal matters on behalf of the corporation and its various subsidiaries and related companies"; and that "all questions of a legal nature came to the attention of the legal department which was then run by Mr. Farano." The declaration also recited that Farano "handled, to a major extent," Global's acquisition of UC's stock in 1976, and was "aware of GLOBAL'S policy concerning agency relations and was fully conversant with GLOBAL'S standard Agency Agreement."

In its opposition to the motion, VIP submitted Floyd Farano's declaration. In it Mr. Farano stated he was general counsel for Global from 1961 until February 15, 1977, and that during that time, he was "responsible to oversee all legal matters known to [him] or someone acting under [his] direction" but "[a]ll legal questions or questions of a legal nature did not come to [his] attention.... [M]any questions involving legal issues which existed during [his] employment ... did not come to [his] attention." The declaration further states that Farano had "no personal knowledge of the present dispute between V.I.P. and GLOBAL VAN LINES, et al, other than that obtained through communications with [his] client just prior to the institution of this litigation." It states "categorically" that Farano has no information or recollection "material to this case."

Mr. Farano also declared that "[t]o the best of [his] recollection [he] never had any conversation with anyone employed by GLOBAL or U.C., nor did [he] ever receive any interoffice memoranda or letters concerning the dispute." He stated that the agency agreement was the "standard agency agreement" which was "substantially the same" on the day he became general counsel as when he left Global's employment. He further declared the agency agreement with VIP was "not negotiated" by him, and that he had "no knowledge of what took place during the negotiations and to the best of [his] recollection did not communicate with anyone concerning the agreement." Indeed, "[t]o the best of [his] recollection [he does] not believe that the document was prepared by anyone in the legal department."

Mr. Farano admitted that he was "responsible for the preparation and did prepare the documents involved in the purchase of" UC stock but "the only documents which were prepared by [him] were those necessary to effect the stock purchase. [He has] no recollection of any communications with anyone that would be material to the issue of alter ego." He also stated that he has "become intimately familiar with the household goods moving industry" and counsel for Global had told him, in a telephone conversation, that Global's management wanted him removed from the case because he had " 'too much knowledge of the industry.' "

Eight days after Global filed its disqualification motion, VIP moved for a preliminary injunction, asking the court to restrain Global from diverting business in Santa Clara County from VIP. Accompanying the motion were two Global interoffice memos from 1975, each addressed to executives at both UC and VIP, indicating that there had been difficulties with the agency agreement with VIP. One of the memos specifically covered the topic of the "Territorial Responsibility and Area of UC Moving and VIP."

On December 9, the court ruled on the disqualification motion in a minute order, denying the motion "without prejudice to renew the motion if subsequent discovery (including interrogatories or deposition testimony of Floyd Farano) reveals that Mr. Farano obtained confidential information during his prior employment which would be adverse to the interests of his former clients, defendants herein, making disqualification appropriate." The petition for writ of mandate followed and we issued an alternative writ.

DISCUSSION

Global contends that Farano should be disqualified because he has accepted employment adverse to his former client. Under the facts of this case the contention is well taken.

The ethics of the legal profession in California prohibit a lawyer from accepting employment adverse to a former client "relating to a matter in reference to which he has obtained confidential information by reason of or in the course of his employment by such ... former client." ² Under this rule, the initial question is "whether the former representation is 'substantially related' to the current representation." (See Trone v. Smith (9th Cir.1980) 621 F.2d 994, 998, and authorities cited therein.) ³

In the present case, the uncontroverted evidence set forth by the affidavits and related pleadings in the trial court demonstrate in several respects a substantial relationship between Farano's former representation of Global and his current representation of VIP against Global. In the first place, the difficulties between Global and VIP concerning the agency agreement arose during Farano's tenure as Global's general counsel. The existence of the two Global interoffice memos from 1975 reveal that VIP had become dissatisfied with Global's handling of its agency agreement. A reasonable inference is that at some point before the memo was written VIP had complained in some way to Global about the situation. While Mr. Farano may not have any present recollection of such a complaint being brought to his attention, he was then the head of the legal office of Global to which such a potential legal problem would logically have been referred.

In the second place, the present litigation involves VIP's complaint that Global has violated its agency agreement with VIP by giving to UC, among others, business that should have, allegedly, gone to VIP. Thus, the Global-UC relationship is involved in the breach of the Global-VIP contract, and Mr. Farano was general counsel at the time of and was instrumental in the very inception of the Global-UC...