Grove v. Grove Valve & Regulator Co.

• Decision Date: 07 March 1963
• Citation: 29 Cal.Rptr. 150,213 Cal.App.2d 646
• Court: California Court of Appeals Court of Appeals
• Parties: Marvin H. GROVE, an Individual, Plaintiff and Appellant, v. GROVE VALVE AND REGULATOR COMPANY, and Walworth Company, a corp., Defendants and Respondents. Civ. 20474.

Page 150

29 Cal.Rptr. 150

213 Cal.App.2d 646

Marvin H. GROVE, an Individual, Plaintiff and Appellant, v. GROVE VALVE AND REGULATOR COMPANY, and Walworth Company, a corp., Defendants and Respondents.

Civ. 20474.

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

March 7, 1963.

Rehearing Denied March 21, 1963.

Hearing Denied May 1, 1963.

Fitzgerald, Abbott & Beardsley, Oakland, for appellant.

McCutchen, Doyle, Brown & Enersen, Morris M. Doyle, John N. Hauser, Francis M. Small, Jr., San Francisco, for respondents.

AGEE, Justice.

This is an appeal from an order restraining and enjoining Flehr and Swain, a law firm, and Paul D. Flehr, one of its members, from appearing or acting herein as attorneys for appellant in this action and from disclosing any confidential and privileged information acquired during the period from October, 1956, to August 1, 1960, when Flehr and his firm served as the attorneys for respondents. The order is collateral to the merits of the case and this opinion is confined to the propriety of said order.

Appellant, Marvin H. Grove, served as president of respondent Grove Company from October 16, 1956, through December 31, 1957. As of January 1, 1958, until his resignation in August, 1960, he was the president and a director of Grove Company, and also a director and member of the executive committee of respondent Walworth Company.

This action was commenced by appellant on October 31, 1960, and seeks injunctive relief and damages on account of the manufacture and sale by respondent Grove Company of two products, referred to as 'G-5,' a gate valve, and 'Valv-Pak,' an assembly of gate valves used in oil well installations. Grove Company is a wholly owned subsidiary of Walworth.

The original and first amended complaints both were before the trial court when the order was made. The gist of appellant's allegations is that, while he was employed by respondents, he made certain inventions which have been incorporated in the G-5 and Valv-Pak products; that he is entitled to ownership of these inventions; that respondents should be enjoined from the use of said inventions in the manufacturing of said products; and that he is entitled to damages on account of the sales of such products by respondents.

The appellant's pleadings disclose that appellant is claiming that respondents made certain admissions that the inventions were appellant's property; that appellant made the inventions in reliance on alleged promises by respondents that they would be appellant's property; and that the inventions were of a kind and nature that were to be appellant's rather than respondents' property under the terms of an employment contract between appellant and respondents.

Thus, appellant's pleadings raise questions concerning the origin and development of G-5 and Valv-Pak, the source and nature of the inventions incorporated in the products, and the course of dealings between appellant and his employers, the respondents herein.

Among the attorneys appearing for appellant on both the original and first amended complaints were said Paul D. Flehr and his firm. The order appealed from is supported by six affidavits, a summary of which follows.

(1) The affidavit of John W. Collins, now the president of respondent Grove Company, states that his company is engaged in the business of designing, developing, inventing, manufacturing, and selling valves, regulators and related products; that since at least 1953 and up to August 1, 1960, Flehr and his law firm continuously served as the patent attorneys for respondent Grove Company, devoted substantial time to this representation, were paid substantial fees therefor, had access to company files, data and records, performed services for the company relating to the G-5 and Valv-Pak products, including the filing of patent applications covering features of those products, and had access to company data and information concerning the products; for the years 1957, 1958, 1959 and up to August 1, 1960, Grove Company paid Flehr and his firm, for legal services, the sums of $21,624.57, $26,323.79, $30,393.01, and $26,627.18, respectively.

(2) The affidavit of Austin Bryant, Vice President--Engineering, of respondent Grove Company, describes the development of the G-5 and Valv-Pak products, which commenced in 1958, relates the facts as to some of the services performed by Flehr as the company's patent attorney in connection with the two products, and gives in detail Flehr's access to company files, data and information relating to G-5 and Valv-Pak, and other new products under development.

(3) The affidavit of William A. Simon, Jr., general counsel for respondents, states that Flehr and his law firm, in addition to representing Grove Company, also served as patent attorneys for Walworth during a considerable part of the time period involved in the present suit.

(4) The supplemental affidavit of John W. Collins, which refers to statements rendered to Grove Company by Flehr and his firm during the period January, 1958, through October, 1960, states that many of the items therein contained were for legal services relating to the G-5 and Valv-Pak products; that, for example, the statement of May 1, 1959, contains five separate charges, totaling $1,475, for legal services relating to early versions of these two products; that from April 1, 1959, through August, 1960, said law firm made specific charges to the Grove Company totaling in excess of $5,500 for legal services relating to various versions and features of said products; that, in addition to the services reflected in said statements, Grove Company paid Flehr $14,300 for the year 1958, $15,000 for the year 1959, and $8,750 for the year 1960; that many charges were paid by Grove Company to said law firm during the period from 1958 through 1960 for legal services relating to the G-5 and Valv-Pak products but which were not specifically identified in the statements as such.

(5) The second supplemental affidavit of John W. Collins states that Grove Company never consented or agreed that Flehr might represent the appellant personally in any matters conflicting with Flehr's representation of respondent Grove Company and that Flehr never requested any such consent or agreement.

(6) The affidavit of W. Frederick Spence, president and chairman of the board of directors of respondent Walworth, states that from 1956 to August 1, 1960, Flehr and his law firm continuously were employed as the only patent attorneys for respondent Grove Company; that he neither understood nor was he advised that Flehr was or might be acting in a manner conflicting with his continuing representation of respondents; that Flehr never raised the question of a conflict, never sought the consent or agreement of respondents that he be permitted to represent appellant in any manner, and respondents never consented or agreed that Flehr be permitted to represent appellant in any respect; that Flehr acted as patent attorney for respondents in numerous matters; that on May 31, 1959, Flehr laid down a comprehensive patent policy for respondents under which all company patent applications had to be cleared with Flehr as the company attorney; that when Flehr consulted with Grove Company employees as to G-5 and Valv-Pak, had access to company files, plans and data, and prepared patent applications covering the features of these products, he was acting as company attorney; that Flehr never said he was acting in any other capacity.

Flehr executed an original affidavit and three supplemental affidavits in opposition to the motion for the order. His position, as indicated therein, will be discussed hereafter. There were no other affidavits offered in opposition.

The general rule applicable to the issue presented on this appeal is well stated in Wutchumna Water Co. v. Bailey (1932), 216 Cal. 564, at page 573, 15 P.2d 505, at page 509: "The fact that an attorney has once acted in a professional capacity for a person does not preclude him from thereafter accepting a retainer to act adversely to his former client in a matter which has no reference to his previous employment, nor is he precluded from acting for another in the same general matter where his employment is not adverse to his former client. The test of inconsistency is not whether the attorney has ever appeared for the party against whom he now proposes to appear, but it is whether his accepting the new retainer will require him, in forwarding the interests of his new client, to do anything which will injuriously affect his former client in any matter in which he formerly represented him, and also whether he will be called upon, in his new relation, to use against his former client any knowledge or information acquired through their former connection." (Emphasis ours.)

This rule is codified in the statutes of this state (Bus. & Prof.Code, § 6068, subd. (e) and § 6076). It has been cited as determinative (see Galbraith v. State Bar (1933), 218 Cal. 329, 333, 23 P.2d 291; Sheffield v. State Bar (1943), 22 Cal.2d 627, 630-631, 140 P.2d 376), and it is one of the basic rules of ethics which are generally considered to be consistent with professional responsibility in the practice of law (Drinker, Legal Ethics, Columbia University Press, 1953, p. 131 et seq.).

It is stated in Galbraith, supra, at pages 332-333, 23 P.2d at page 292, that: 'A reasonable construction of this rule suggests that the subsequent representation of another against a former client is forbidden not merely when the attorney will be called upon to use confidential information obtained in the course of the former employment, but in every case when, by reason of such subsequent employment, he may be called upon to use such confidential information.'

Where the rule above stated is in danger of being violated, or has been violated, the courts recognize various ways by which the issue can be raised and the situation...