Jessen v. Hartford Cas. Ins. Co.

• Decision Date: 25 August 2003
• Docket Number: No. F041425.,F041425.
• Parties: Claude JESSEN, Plaintiff and Respondent, v. HARTFORD CASUALTY INSURANCE COMPANY, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

3 Cal.Rptr.3d 877

111 Cal.App.4th 698

Claude JESSEN, Plaintiff and Respondent, v. HARTFORD CASUALTY INSURANCE COMPANY, Defendant and Appellant.

No. F041425.

Court of Appeal, Fifth District.

August 25, 2003.

Certified for Partial Publication.^*

Michelman & Robinson, LLP, Dean B. Herman, Encino, and Birgit A. Huber for Defendant and Appellant.

Wilkins, Drolshagen & Czeshinski, LLP and James H. Wilkins, Fresno, for Plaintiff and Respondent.

OPINION

DIBIASO, Acting P.J.

This appeal is taken from an order denying the motion of appellant Hartford Casualty Insurance Company (Hartford) to disqualify the law firm of Wilkins, Drolshagen & Czeshinski LLP (the Firm) from representing respondent Claude Jessen, doing business as Ethylene Filters.Com (Jessen), in this action against appellant. Respondent's counsel of record, James H. Wilkins, a partner in the Firm, was once an attorney with McCormick, Barstow, Sheppard, Wayte & Carruth (McCormick), where he had represented appellant in numerous matters.

The trial court found that prior orders denying motions by appellant to disqualify Wilkins and the Firm from representing the plaintiffs in two earlier federal court actions against appellant operated to collaterally estop appellant from disqualifying Wilkins and the Firm in this action. Because we find in the unpublished portion of this opinion that this ruling was erroneous, we will reverse and remand, with directions to the trial court to rehear the motion on its merits and to apply the correct legal standard—the "substantial relationship" test—which we address in the published portion of this opinion. (Flatt v. Superior Court (1994) 9 Cal.4th 275, 283-284, 36 Cal.Rptr.2d 537, 885 P.2d 950 (Flatt); H.F. Ahmanson & Co. v. Salomon Brothers, Inc. (1991) 229 Cal. App.3d 1445, 1453-1455, 280 Cal.Rptr. 614 (Ahmanson).)

I.

A.

Jessen is a named insured under a commercial general liability policy issued by Hartford. Jessen was sued in Fresno County Superior Court by Ethylene Control, Inc., for a variety of alleged business torts. Jessen tendered the defense of the action to Hartford, but Hartford denied coverage. Jessen then sued Hartford for breach of the insurance contract, breach of the implied covenant of good faith and fair dealing, and intentional infliction of emotional distress.

Hartford moved to disqualify Wilkins and the Firm on the ground that Wilkins had personally represented Hartford in "no less than twenty ... matters" while employed as an associate attorney with McCormick and thus his representation of Jessen in this action violated his duty of loyalty to Hartford. In its moving papers, Hartford presented evidence of the nature and extent of Wilkins's prior representation of Hartford when Wilkins was with McCormick. Wilkins, in opposition to the motion, provided the court with two orders of the United States District Court for the Eastern District of California, issued in separate actions against Hartford by plaintiffs who were represented by Wilkins. Hartford had made unsuccessful attempts in the actions to disqualify Wilkins and the Firm from representing the plaintiffs.

Relying upon the orders entered in the two federal actions, the trial court here denied Hartford's motion to disqualify Wilkins and the Firm. Applying the doctrine of collateral estoppel, the trial court found that "[t]he issue of Wilkins' disqualification from representing clients with adverse interests to that of his former client, [Hartford], has been litigated twice in the [United States District Court]. A determination has been made on the merits that no grounds for disqualification exist."

B.

Wilkins was an insurance coverage attorney with McCormick from 1984 to 1997. Between 1984 and approximately 1992,¹ Wilkins worked on no less than 17 matters for which McCormick was counsel for Hartford. According to Wilkins, much of his representation of Hartford involved rendering coverage opinions, which consisted of an analysis of the facts and circumstances relevant to a claim as documented in the specific claim file. Although this work may have included contacts with Hartford directly, any such communications were limited to the facts of the particular claim and did not include analysis, review or consideration of Hartford's claim handling procedures and practices. In addition to preparing and signing coverage opinions, Wilkins was counsel of record for Hartford in six insurance-related lawsuits—two bad faith actions, three declaratory relief/coverage actions and one declaratory relief/equitable subrogation action.

According to Hartford, in the course of providing it with representation in the various matters, Wilkins would have (1) personally determined, and advised Hartford about, whether Hartford had a duty to defend and whether the relevant policy provided coverage for the claim, (2) evaluated the existence of any defenses available to Hartford and whether Hartford was estopped from asserting or waiving any of its available defenses, (3) determined whether Hartford should reserve its rights and whether further investigation was required before a decision on the claim was made, (4) evaluated any settlement offers and whether to make a settlement offer, and (5) analyzed the provisions of the Hartford policies that addressed such topics as what constitutes an accident, a personal injury as opposed to an injury to property, an advertising injury, and an intentional act.

According to Wilkins, his representation of Hartford was "limited." He stated Hartford was not "a significant client" of McCormick's. Wilkins also said he never "learned of, obtained or otherwise became aware of confidential information during [his] prior representation of Hartford which could in any way be used adversely to Hartford in this proceeding." He denied undertaking any work in the development, implementation or application of any claims handling practices, strategies or procedures Hartford may have had or put in place during the relevant time frame. He stated that none of the matters for which he provided legal representation to Hartford required analysis or review of Hartford's claim handling practices or procedures, and that "while at [McCormick, he] was not involved in any discussions regarding Hartford's own internal policies, procedures, practices or customs."

II.

A.

A motion to disqualify counsel brings the client's right to the attorney of his or her choice into conflict with the need to maintain ethical standards of professional responsibility. (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145, 86 Cal.Rptr.2d 816, 980 P.2d 371 (SpeeDee Oil Change Systems); Metro Goldwyn-Mayer, Inc. v. Tracinda Corp. (1995) 36 Cal. App.4th 1832, 1838 43 Cal.Rptr.2d 327.) The paramount concern is the preservation of public trust in the scrupulous administration of justice and the integrity of the bar. (Comden v. Superior Court (1978) 20 Cal.3d 906, 915, 145 Cal.Rptr. 9, 576 P.2d 971; see also River West, Inc. v. Nickel (1987) 188 Cal.App.3d 1297, 1306, 234 Cal. Rptr. 33 (River West).) We review the trial court's decision under the familiar abuse of discretion standard. (SpeeDee Oil Change Systems, supra, 20 Cal.4th at pp. 1143-1144, 86 Cal.Rptr.2d 816, 980 P.2d 371.)

A trial court's authority to disqualify an attorney derives from the court's inherent power to "control in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial proceeding before it, in every matter pertaining thereto." (Code Civ. Proc., § 128, subd. (a)(5).) An attorney is required to avoid the representation of adverse interests and cannot, "without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the member has obtained confidential information material to the employment." (Rules Prof. Conduct, rule 3-310(E).)

For the most part, rule 3-310(E) has been invoked in two situations—where the attorney successively represents clients with potential or actual adverse interests and where the attorney simultaneously represents clients with potential or actual adverse interests. (See Flatt, supra, 9 Cal.4th at pp. 283-284, 36 Cal.Rptr.2d 537, 885 P.2d 950.) According to Flatt, when the facts involve successive representation, the "governing test requires that the client demonstrate a `substantial relationship' between the subjects of the antecedent and current representations" in order to obtain the disqualification of the target attorney. (Id. at p. 283, 36 Cal.Rptr.2d 537, 885 P.2d 950.)<sup>2</sup> When the facts involve simultaneous representation, the rule of disqualification, "in all but a few instances, ... is a per se or `automatic' one." (Flatt at p. 284, 36 Cal.Rptr.2d 537, 885 P.2d 950.)

The present situation involves "successive representation"; the trial court was therefore called upon to apply the "substantial relationship" test in ruling upon Hartford's motion.³

"The `substantial relationship' test mediates between two interests that are in tension in such a context—the freedom of the subsequent client to counsel of choice, on the one hand, and the interest of the former client in ensuring the permanent confidentiality of matters disclosed to the attorney in the course of the prior representation, on the other. Where the requisite substantial relationship between the subjects of the prior and the current representations can be demonstrated, access to confidential information by the attorney in the course of the first representation (relevant, by definition, to the second representation) is presumed and disqualification of the attorney's representation of the second client is mandatory; ...." (Flatt, supra, 9 Cal.4th at p. 283, 36 Cal.Rptr.2d 537, 885 P.2d 950.)⁴

This standard, with its conclusive presumption of knowledge of...