William H. Raley Co. v. Superior Court
Decision Date | 16 December 1983 |
Citation | 149 Cal.App.3d 1042,197 Cal.Rptr. 232 |
Court | California Court of Appeals Court of Appeals |
Parties | WILLIAM H. RALEY CO., INC., Petitioner, v. SUPERIOR COURT of IMPERIAL COUNTY, Respondent, Rupert Gilbert CARROLL, Real Party in Interest. Civ. 31014. |
Plourd, Blume, Scoville, Strickland & Breeze and John W. Breeze, El Centro, for petitioner.
Gray, Cary, Ames & Frye, Jay W. Jeffcoat and Robert M. Rauh, El Centro, for real party in interest.
On the petition of defendant William H. Raley Co., Inc., a California corporation (Raley), we issued an alternative writ to determine whether the trial court abused its discretion in denying Raley's motion to disqualify the law firm of Gray, Cary, Ames & Frye (Gray, Cary) as attorneys for plaintiff Rupert Gilbert Carroll. For the reasons set forth below, we issue the writ of mandate and order disqualification.
The facts of the underlying dispute are easily outlined; the involvement of Gray, Cary is more complex.
In February 1973 Carroll leased his rock and gravel pit in Imperial County to Raley for 10 years. Several months before the lease expired Carroll filed suit against Raley for breaches of the lease agreement. In February 1983 Carroll changed his counsel to Gray, Cary, who filed a first amended complaint. Raley answered and unsuccessfully moved to disqualify Gray, Cary as Carroll's attorneys. The following facts were established at the disqualification hearing.
The La Jolla Bank & Trust Company (Bank) as trustee of the William H. Raley Testamentary Trust (Trust) owns 100 percent of the Raley common stock. The Bank discharges its responsibilities as trustee through its Trust Investment Committee (Committee) appointed by its board of directors. Where the Bank as trustee owns 100 percent of a closely held company such as Raley, the Committee is responsible for the company's operation and appoints its board of directors. Settlement authority in lawsuits involving wholly owned companies rests with either the Committee or the Bank's board of directors.
Gray, Cary is a law firm of about 100 lawyers based in San Diego, California. The firm maintains two San Diego offices (downtown and La Jolla) and a small Imperial County office in El Centro. Gray, Cary's San Diego offices represent the Bank in a variety of corporate matters. The firm does not represent the Bank as trustee or otherwise in any trust matters, and has never represented Raley or anyone associated with it. Karl ZoBell, a Gray, Cary senior partner in its La Jolla office, is a director of the Bank and a member of the Committee. ZoBell does not hold these positions as an attorney for either the Bank or the Committee. David A. Blume represents the Bank as trustee of the Trust and also represents Raley in Carroll's lawsuit. Gray, Cary's El Centro office represents Carroll.
Before agreeing to represent Carroll in February 1983, Gray, Cary completed its normal conflict check procedures, including a computer-assisted search of all parties and related persons. As a result of that search Gray, Cary/El Centro conferred with two Gray, Cary/San Diego partners responsible for representing the Bank in its corporate affairs. No conflict was perceived, although this conclusion apparently was reached without awareness of ZoBell's positions with the Bank and the Committee. Several weeks after Gray, Cary undertook Carroll's representation Blume told the Bank he believed a conflict existed by virtue of ZoBell's positions. The Bank relayed this assertion to ZoBell who immediately took steps to isolate himself from all matters involving Raley and the Trust at both Gray, Cary and the Bank. Those steps included a March 8, 1983 letter to a Bank officer and fellow Committee member in which ZoBell stated he had learned of the alleged conflict only six days earlier and
Blume raised the conflict issue out of concern over ZoBell's possible knowledge of confidential information about Raley pertinent to Carroll's lawsuit. For example, from June through December 1982 Carroll had five or six contacts with James T. Slingsby, a Bank officer and chairman of the Committee. Carroll told Slingsby he thought Raley "was not living up to its original lease." Carroll also expressed interest in either purchasing Raley and/or its equipment or in leasing his land to other purchasers of Raley. In the latter event, Carroll wished to be advised of any sale of Raley's equipment. On March 2, 1983 counsel for Raley and Carroll met in Gray, Cary's El Centro office. Blume suggested that, in light of Carroll's earlier interest in buying Raley or its assets, perhaps a settlement could be reached in which Carroll would purchase Raley's assets at a discount in exchange for dismissal of Carroll's lawsuit. Carroll made a purchase offer which Raley rejected by selling its assets to another buyer. In a May 1983 declaration Slingsby stated the "Committee has made recommendations as sole shareholder concerning the sale of [Raley] and/or its assets."
The case remained at the pleading stage when Raley's disqualification motion was heard and denied in May 1983. This writ proceeding followed. (Chambers v. Superior Court (1981) 121 Cal.App.3d 893, 896-897, 175 Cal.Rptr. 575; Cooke v. Superior Court (1978) 83 Cal.App.3d 582, 586, 147 Cal.Rptr. 915.)
Before we may reach the disqualification issue in this case (see post ), we must first determine whether a conflict of interest exists between Gray, Cary's representation of Carroll and ZoBell's relationship with Raley and the Trust through his positions with the Bank and the Committee. We pursue this inquiry without regard to the steps taken by ZoBell to isolate himself from Raley and Trust matters, as those steps are legally relevant only to the disqualification issue.
Rule 5-102(B) of the Rules of Professional Conduct of the State Bar of California 1 provides: "A member of the State Bar shall not represent conflicting interests, except with the written consent of all parties concerned." Professional responsibilities do not turn on whether a member of the State Bar acts as a lawyer. (Libarian v. State Bar (1943) 21 Cal.2d 862, 865, 136 P.2d 321; accord, Baron v. City of Los Angeles (1970) 2 Cal.3d 535, 542, 86 Cal.Rptr. 673, 469 P.2d 353.) Thus the scope of rule 5-102(B) includes conflicts of interest arising other than in the course of legal representation. 2 (Vapnek, California Compendium on Professional Responsibility, supra, State Bar Formal Opinion No. 1981-63, p. II A-177.)
Both of the situations described in the State Bar's opinion for a conflict of interest under rule 5-102(B) exist in this case. ZoBell, acting for the Bank as trustee, has fiduciary duties to the Trust beneficiaries to manage Raley with reasonable skill, prudence and diligence. (7 Witkin, Summary of Cal. Law (8th ed. 1974) Trusts, §§ 57, 59, pp. 5419-5421.) Indeed, ZoBell's positions with the Bank and the Committee require him to make every reasonable effort to maximize Raley assets. (Id., at §§ 59, p. 5421, 62, subd. (1), p. 5423.) In the litigation below, ZoBell's duties on behalf of the Bank will require him to focus on the weaknesses of Carroll's lawsuit while, at the same time, ZoBell's law firm advocates the merits of Carroll's action. Gray, Cary's success on behalf of Carroll will result in a reduction of Trust assets (i.e., Raley assets) held by the Bank; and, of course, the converse also will be true. In effect, ZoBell's fiduciary relationship with Raley and the Trust through his positions with the Bank and the Committee, on the one hand, and his partnership status with Gray, Cary, on the other hand, places Gray, Cary on both sides of Carroll's lawsuit. The conflict of interest problems created by ZoBell's dual status are exacerbated by his ongoing accessibility to confidential information about Raley which may be pertinent to Carroll's lawsuit. Furthermore, even if ZoBell has not already participated in decisions directly affecting the action, there is a continuing risk to Raley that he may do so. Under these circumstances, a conflict of interest clearly exists between Gray, Cary's representation of Carroll and ZoBell's relationship with Raley and the Trust.
Trial courts in civil cases have the power to order disqualification of counsel when necessary for the furtherance of justice. (Code Civ.Proc., § 128(a), subd. 5; Klemm v. Superior Court (1977) 75 Cal.App.3d 893, 901, fn. 4, 142 Cal.Rptr. 509.) Exercise of that power requires a cautious balancing of competing interests. The court must weigh the combined effect of a party's...
To continue reading
Request your trial-
Kapelus v. State Bar
...improper for the attorney to agree to represent a party who wishes to sue the nonclient (see, e.g., William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042, 1047, 197 Cal.Rptr. 232), in this case we believe that petitioner correctly maintains that there was no impropriety, either ......
-
Employers Ins. of Wausau v. Albert D. Seeno Const.
...165 Cal.App.3d 562, 567, 211 Cal.Rptr. 802 (1985), a case approving a balancing test announced in William H. Raley Co. v. Superior Court, 149 Cal.App.3d 1042, 197 Cal.Rptr. 232 (1983), might be viewed as of more aid to defendant, at least by way of dicta. However, Elliott actually seems to ......
-
Concat Lp v. Unilever, Plc
...20 Cal.3d 906, 145 Cal.Rptr. 9, 576 P.2d 971 (1978); Metro-Goldwyn-Mayer, 43 Cal.Rptr.2d at 335; William H. Raley Co. v. Superior Court, 149 Cal.App.3d 1042, 197 Cal.Rptr. 232 (1983); Jeffry v. Pounds, 67 Cal.App.3d 6, 136 Cal.Rptr. 373 In light of the much stricter standard applying to con......
-
Gregori v. Bank of America
...P.2d 1164; Chronometrics, Inc. v. Sysgen, Inc. (1980) 110 Cal.App.3d 597, 608, 168 Cal.Rptr. 196; William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042, 1048, 197 Cal.Rptr. 232; Mills Land & Water Co. v. Golden West Refining Co. (1986) 186 Cal.App.3d 116, 126, 230 Cal.Rptr. 461.......
-
Mcle Article: the Rules of Professional Conduct Do Apply to In-house Lawyers
...Cornish v. Sup. Ct. (CapitalBond & Ins. Co.), 209 Cal. App. 3d 467, 475-77 (1989).16. See William H. Raley v. Sup. Ct. (Carroll), 149 Cal. App. 3d 1042, 1049-50 (1983).17. Blackmon v. Hale, 1 Cal. 3d 548, 558 (1970). See also Cal. Bar Form. Op. 1981-64 (1981) (stating that attorneys of a pr......