Henriksen v. Great American Savings & Loan

• Decision Date: 25 November 1992
• Docket Number: No. A055607,A055607
• Citation: 11 Cal.App.4th 109,14 Cal.Rptr.2d 184
• Court: California Court of Appeals Court of Appeals
• Parties: Frederick M. HENRIKSEN et al., Plaintiffs and Appellants, v. GREAT AMERICAN SAVINGS AND LOAN et al., Defendants and Respondents.

Page 184

14 Cal.Rptr.2d 184

11 Cal.App.4th 109

Frederick M. HENRIKSEN et al., Plaintiffs and Appellants, v. GREAT AMERICAN SAVINGS AND LOAN et al., Defendants and Respondents.

No. A055607.

Court of Appeal, First District, Division 4, California.

Nov. 25, 1992.

Certified for Partial Publication ^*

Charles G. Miller, Michael D. Welch, C. Griffith Towle, Bartko, Welsh, Tarrant & Miller, San Francisco, for plaintiffs and appellants.

Ross A. Spector, Sherri L. Stieg, Spector & Stieg, San Francisco, for defendants and respondents.

POCHE, Associate Justice.

Appellants Frederick M. Henriksen and Ramon A. Zambrano appeal from an order disqualifying ¹ the law firm of Bartko Welsh, Tarrant & Miller from further representing them in the underlying litigation. At issue is whether a law firm may continue to represent a client where during the pendency of litigation it hires an associate who formerly represented the adverse party in the same proceeding. We follow Dill v. Superior Court (1984) 158 Cal.App.3d 301, 205 Cal.Rptr. 671, and hold that the associate's disqualification results in the vicarious disqualification of the entire law firm. This disqualification is compelled even if the law firm takes measures to insulate the new associate from any involvement in the current litigation.

I.

The underlying dispute concerns a construction loan made to appellants by respondents, Great American Savings and Loan, and its subsidiary, Mountain South Corporation, for a residential condominium project in San Francisco. Appellants commenced the suit in January of 1989. Two months later, respondents responded with a cross-complaint for judicial foreclosure.

Appellants were initially represented by the firm of Rubin, Egan & Webster, but in September of 1989 they substituted as their counsel the law firm of Bartko, Welsh, Tarrant & Miller ("Bartko").

From the inception of the suit until July of 1990 respondents were represented by the law firm of Hoge, Fenton, Jones and Appel ("Hoge"). One of the Hoge attorneys working on the defense case for the savings and loan defendants was Peter J. Brock. Brock represented respondents in all matters of the case including the preparation for a jury trial and in settlement hearings. According to Brock's declaration, he spent "in excess of 200 hours learning the case, attending and taking depositions, appearing in court, retaining and preparing expert witnesses, and doing any other work that needed to be done on the file."

In July of 1990 the savings and loan respondents were placed into receivership by the Resolution Trust Corporation ("RTC") and the Hoge firm was replaced as counsel by the firm of Tarkington, O'Connor & O'Neill. The Bartko firm continued to represent appellants.

In early June of 1991 Michael Welch of the Bartko firm notified opposing counsel that Peter Brock would be joining their firm as of June 24, 1991, and asked for a waiver of "any potential conflict with [their] continued representation of [appellants]." Responding that "an unquestionable conflict of interest [would] exist once Mr. Brock formally [joined the Bartko] firm", opposing counsel demanded that the Bartko firm "immediately withdraw as counsel" for appellants. The Bartko firm responded by requesting that respondents agree to an arrangement in which Brock "would be isolated from any discussions, work, contact, or involvement in any way" with the case. In the alternative, the firm requested respondents to make a formal motion to disqualify. ²

After Brock had joined the firm, respondents formally moved to disqualify the entire Bartko firm from representing appellants in the action. In opposition, appellants argued that it would "unfairly prejudice" their ability to try the "ready for trial" case and subject them to a "financial hardship in having to bring a replacement law firm up to speed." The Bartko firm alleged that it had and would continue to isolate Brock from any involvement in or discussion about the Henriksen litigation. Despite their attempts at building an ethical wall ³ around Brock, the trial court ruled that the entire Bartko firm was disqualified from further representing appellants in this action. This timely appeal followed.

II.

A. Disqualification of Bartko Firm.

Appellants contend that the trial court abused its discretion in disqualifying the entire Bartko firm from representing appellants in this action. We find no such abuse.

The trial court is vested with the power "[t]o control in furtherance of justice, the conduct of its ministerial officers." That power includes the disqualifying of an attorney. (Code Civ.Proc., § 128, subd. (d); Comden v. Superior Court (1978) 20 Cal.3d 906, 969, 145 Cal.Rptr. 9, 576 P.2d 971; Gregori v. Bank of America (1989) 207 Cal.App.3d 291, 299, 254 Cal.Rptr. 853.) Whether an attorney should be disqualified is a matter addressed to the sound discretion of the trial court. (Comden v. Superior Court, supra, 20 Cal.3d at p. 969, 145 Cal.Rptr. 9, 576 P.2d 971; Elliott v. McFarland Unified School Dist. (1985) 165 Cal.App.3d 562, 567, 211 Cal.Rptr. 802.) In exercising that discretion, the trial court is required to make a reasoned judgment which complies with the legal principles and policies applicable to the issue at hand. (Bullis v. Security Pac. Nat. Bank (1978) 21 Cal.3d 801, 815, 148 Cal.Rptr. 22, 582 P.2d 109.) Discretion will thus be deemed to have been abused if the trial court fails to exercise discretion where such exercise is required. (Truck Ins. Exchange v. Fireman's Fund Ins. Co., supra, 6 Cal.App.4th at p. 1055, 8 Cal.Rptr.2d 228.)

We start with the rules which would prohibit Brock from representing appellants. Under rule 3-310(D) of the California Rules of Professional Conduct, an attorney may not represent a new client whose interests are adverse to those of a former client on a matter in which the attorney has obtained confidential information. ⁴ The purpose of the rule is to protect the confidential relationship which exists between attorney and client, a relationship which continues after the formal relationship ends. (David Welch Co. v. Erskine & Tulley (1988) 203 Cal.App.3d 884, 891, 250 Cal.Rptr. 339.) The fiduciary nature of that relationship requires the application of strict standards. (Civil Service Com. v. Superior Court (1984) 163 Cal.App.3d 70, 79, 209 Cal.Rptr. 159.) For that reason, a former client may seek to disqualify a former attorney from representing an adverse party by showing that the former attorney possesses confidential information adverse to the former client. (H.F. Ahmanson & Co. v. Salomon Brothers, Inc. (1991) 229 Cal.App.3d 1445, 1452, 280 Cal.Rptr. 614.)

In order to seek disqualification, the former client need not establish that the attorney actually possesses confidential information. It is enough to show that there was a "substantial relationship" between the former and the current representation. If the former client establishes the existence of a substantial relationship between the two representations the court will conclusively presume that the attorney possesses confidential information adverse to the former client and order disqualification. (River West, Inc. v. Nickel (1987) 188 Cal.App.3d 1297, 1303; accord, Rosenfeld Construction Co. v. Superior Court (1991) 235 Cal.App.3d 566, 573-576, 286 Cal.Rptr. 609; H.F. Ahmanson & Co. v. Salomon Brothers, Inc., supra, 229 Cal.App.3d at p. 1452, 280 Cal.Rptr. 614; Global Van Lines, Inc. v. Superior Court (1983) 144 Cal.App.3d 483, 487-488, 192 Cal.Rptr. 609; see generally Note, Developments in the Law: Conflicts of Interests in the Legal Profession (1981) 94 Harv.L.Rev. 1244, 1315-1354.)

We need not dwell on the elements of the "substantial relationship" test for in this case there is no dispute that Brock in fact acquired confidential information during his former representation of respondents. Because Brock possesses such confidential information, rule 3-310(D) of the California Rules of Professional Conduct would prohibit him from switching sides and representing appellants in the same litigation. (Accord, Dill v. Superior Court, supra, 158 Cal.App.3d at pp. 301, 304, 205 Cal.Rptr. 671; to the same effect see Cal. Compendium on Professional Responsibility, State Bar Formal Opinion No. SD 1975-1, pp. II C-144-146.)

The question is whether Brock's disqualification taints the entire Bartko firm. It does.

The California Rules of Professional Conduct do not specifically address the question of vicarious disqualification, and for that reason the vicarious disqualification rules have essentially been shaped by judicial decisions. As a general rule in California, where an attorney is disqualified from representation, the entire law firm is vicariously disqualified as well. ⁵ (Klein v. Superior Court (1988) 198 Cal.App.3d 894, 909, 912-913, 244 Cal.Rptr. 226; William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042, 1048-1049, 197 Cal.Rptr. 232; Dill v. Superior Court, supra, 158 Cal.App.3d 301, 205 Cal.Rptr. 671; Global Van Lines, Inc. v. Superior Court, supra, 144 Cal.App.3d 483, 192 Cal.Rptr. 609.) This is especially true where the attorney's disqualification is due to his prior representation of the opposing side during the same lawsuit. On point and controlling is Dill v. Superior Court, supra, 158 Cal.App.3d 301, 205 Cal.Rptr. 671.

In Dill, an associate (Hale) of the firm representing the plaintiff joined the firm representing the defendant during the pendency of litigation. In the course of his employment with the plaintiff's firm Hale obtained confidential information concerning the dispute. After Hale switched sides, the plaintiff moved to disqualify both Hale and the entire firm from representing the defendants. The trial court granted the motion and the defendant appealed. In holding that Hale's employment vicariously disqualified his new firm from continuing representing the defendant, the Court of Appeal reasoned: "We are mindful...