River West, Inc. v. Nickel

• Citation: 188 Cal.App.3d 1297,234 Cal.Rptr. 33
• Court: California Court of Appeals
• Decision Date: 27 January 1987
• Parties: , 55 USLW 2494 RIVER WEST, INC. et al., Plaintiffs and Appellants, v. George W. NICKEL, Jr., Defendant and Respondent. Civ. F005322.

Page 33

234 Cal.Rptr. 33

188 Cal.App.3d 1297, 55 USLW 2494

RIVER WEST, INC. et al., Plaintiffs and Appellants, v. George W. NICKEL, Jr., Defendant and Respondent.

Civ. F005322.

Court of Appeal, Fifth District, California.

Jan. 27, 1987.

Review Denied April 15, 1987.

Gibson, Dunn & Crutcher, John L. Endicott, & Joel A. Feuer, Selvin & Weiner and Paul P. Selvin, Los Angeles, for plaintiffs and appellants

Alschuler, Grossman & Pines, Melvyn B. Fliegel and Debra A. Stegura, Los Angeles, amicus curiae for plaintiffs and appellants.

Ball, Hunt, Hart, Brown and Baerwitz, Anthony Murray and Harman M. Hitt, Los Angeles, Kronick, Moskovitz, Tiedemann & Girard, and Lloyd Hinkelman, for defendant and respondent.

OPINION

WOOLPERT, Acting Presiding Justice.

Plaintiffs appeal from a pretrial order disqualifying their counsel for conflict of interest. Some 27 to 30 years before the motion for disqualification was made, one of plaintiffs' attorneys represented an individual who now appears as a defendant in the present action. In both the old and new matters the litigation concerned water rights along the Kern River in the central valley. An issue before the trial court on the motion to disqualify was whether the matters were "substantially related," a legal point of significance in attorney disqualification. The trial court found the matters to have the substantial relationship necessary for the disqualification of the attorneys. ¹

This litigation is a complex one with many parties; numerous attorneys have been involved to this point. At the time of the filing of the notice of motion to disqualify, plaintiffs' attorneys had already engaged in over 3,000 hours of litigation effort, costing their clients $387,000. Of particular significance to this appeal, the motion to disqualify was not made until 47 months after the moving party's answer was filed.

Although the trial court heard argument on whether the moving party unreasonably delayed seeking the disqualification and the effect of such delay, the court made no finding with respect to delay. Apparently the court decided once it found a substantial relationship existed, counsel should be disqualified.

On appeal, plaintiffs have abandoned any effort to challenge the substantial relationship finding. ² Instead, their argument is that prejudicial delay in making the disqualification motion is a proper consideration in ruling on such a motion. On these facts, plaintiffs contend the court abused its discretion when it disregarded the extraordinary delay and effectively ended not only their attorneys' further participation in the case, but also made worthless the enormous amount of effort so far expended.

We will examine the confusing state of the law on the role of delay in disqualification matters. Specifically, we must consider whether the public's interest in preserving attorney-client confidentiality and trust in the bar is so great that if there exist grounds for disqualification based on a conflict of interest, questions regarding unreasonable delay and resulting prejudice become irrelevant. Or, to rephrase the query, once grounds exist for disqualification due to the successive representation of clients with adverse interests, is the appearance of impropriety a substantial enough concern to overcome practical or realistic questions of unreasonable delay and resulting prejudice?

THE MOTION

On August 5, 1980, plaintiffs filed the present action seeking injunctive and other relief against 12 named defendants for interference with plaintiffs' water rights. On October 5, 1984, defendant George W. Nickel, Jr., moved to disqualify plaintiffs' counsel Greer and the law firm of Kuhs and Parker on grounds:

"(1) Greer [was] acting adversely to Nickel, his former client, with respect to the same matters at issue in his previous representation of Nickel; (2) Greer [was] acting adversely to Nickel despite his previous receipt of confidential communications from Nickel; (3) Greer's conduct [had] created the appearance of impropriety; and (4) Kuhs & Parker [had] shared Greer's information. Both Greer and Kuhs & Parker must be disqualified on the basis of Rule 4-101, Rules of Professional Conduct, and California case law." ³

Plaintiffs opposed the disqualification motion with the following arguments: (1) To the extent Greer represented Nickel approximately 30 years earlier, his employment did not involve matters which were "substantially related" to the issues in the present action; (2) Greer's representation of corporate entities, of which Nickel was a shareholder, employee, officer or director, did not amount to representation of Nickel as an individual; (3) Nickel, by his conduct, consented to Greer's representation of plaintiffs; and (4) Greer did not give any confidential information to cocounsel Kuhs and Parker.

Both sides offered extensive declarations and exhibits in support of their respective positions. Following a December 20, 1984, hearing on the motion, the lower court ruled:

"1. Issues exist in the litigation now pending before this court in which T Keister Greer (with the law firm of Kuhs and Parker) represents the plaintiffs against the defendant, George W. Nickel, Jr. and others, which are substantially related to issues involved in T. Keister Greer's prior representation of Defendant, George W. Nickel, Jr., as a client and a beneficiary of the Henry Miller Trust.

"2. Confidential information acquired by T. Keister Greer during his prior representation of George W. Nickel, Jr., has been shared with attorney James R. Parker Jr., in the litigation now pending before this Court.

"3. Grounds exist for disqualifying T. Keister Greer and Kuhs and Parker from representing the plaintiffs in this action.

"4. The motion of defendant, George W. Nickel Jr., to disqualify T. Keister Greer and Kuhs and Parker is granted."

Standard of Review

Nickel contends the lower court's disqualification order should not be reversed if it is supported by substantial evidence, citing Grove v. Grove Valve and Regulator Co. (1963) 213 Cal.App.2d 646, 653-654, 29 Cal.Rptr. 150, and Meehan v. Hopps (1956) 144 Cal.App.2d 284, 287, 301 P.2d 10. Both Grove and Meehan dealt with a conflict in the evidence supporting the court's determination. As the appellate court in Meehan pointed out, "it is for the trial court to evaluate the evidence." (Meehan v. Hopps, supra, at p. 287, 301 P.2d 10.)

Nevertheless, because of the importance of motions to disqualify counsel, appellate courts must carefully review the trial court's exercise of discretion. (See Elliott v. McFarland Unified School Dist. (1985) 165 Cal.App.3d 562, 567, 211 Cal.Rptr. 802; Chambers v. Superior Court (1981) 121 Cal.App.3d 893, 903, fn. 7, 175 Cal.Rptr. 575.)

"Substantially Related"

In this case, the trial court found "[i]ssues exist in the litigation ... which are substantially related to issues involved in T. Keister Greer's prior representation of Defendant, George W. Nickel, Jr., as a client and a beneficiary of the Henry Miller Trust."

The trial court's use of the words "substantially related" was a purposeful one. These words of art are a simple reference to the screening process used in identifying an impermissible conflict of interest in an attorney's representation of successive clients.

Under the "substantial relationship" test:

"[T]he former client need show no more than that the matters embraced within the pending suit wherein his former attorney appears on behalf of his adversary are substantially related to the matters or cause of action wherein the attorney previously represented him, the former client. The Court will assume that during the course of the former representation confidences were disclosed to the attorney bearing on the subject matter of the representation. It will not inquire into their nature and extent. Only in this manner can the lawyer's duty of absolute fidelity be enforced and the spirit of the rule relating to privileged communications be maintained." (T.C. & Theatre Corp. v. Warner Bros. Pictures (1953) 113 F.Supp. 265, 268-269.)

In People ex rel. Deukmejian v. Brown (1981) 29 Cal.3d 150, 172 Cal.Rptr. 478, 624 P.2d 1206, our state Supreme Court appeared to endorse the federal "substantial relationship" rule when it quoted a federal decision, State of Arkansas v. Dean Foods Products Co., Inc. (8th Cir.1979) 605 F.2d 380, 384, and noted:

"[I]t was held that the ' "attorney-client relationship raises an irrefutable presumption that confidences were disclosed." ' Disqualification of the Attorney General was upheld because of his prior representation of a litigant; whether he 'did in fact receive confidential information is irrelevant, the policy considerations of the Code precluding that inquiry.' ( Id., p. 386.) The same doctrine was enunciated in General Motors Corporation v. City of New York (2d Cir.1974) 501 F.2d 639, 648, and Emle Industries, Inc. v. Patentex, Inc. (2d Cir.1973) 478 F.2d 562, 571. Also see Kramer, Appearance of Impropriety (1981) 65 Minn.L.Rev. 243, 255." (People ex rel. Deukmejian v. Brown, supra, 29 Cal.3d at pp. 156-157, 172 Cal.Rptr. 478, 624 P.2d 1206.)

In addition, however, the state Supreme Court noted its own longstanding, strict position on successive representation of adverse interests by quoting Wutchumna Water Co. v. Bailey (1932) 216 Cal. 564, 573-574, 15 P.2d 505:

" '[A]n attorney is forbidden to do either of two things after severing his relationship with a former client. He may not do anything which will injuriously affect his former client in any [matter] in which he formerly represented him nor may he at any time use against his former client knowledge or information acquired by virtue of the previous relationship.' " (People ex rel. Deukmejian v. Brown, supra, 29 Cal.3d at p. 155, 172 Cal.Rptr. 478, 624 P.2d 1206.)

A California appellate court first expressly applied the federal "substantial relationship" test in Global Van Lines, Inc....