Opinion
A148439
07-18-2018
LERNER & VEIT, PC, Plaintiff and Respondent, v. STEPHEN POWER et al., Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Solano County Super. Ct. No. FCS046248)
An attorney, Russell F. Rowen, and his law firm, Thompson, Welch, Soroko & Gilbert, LLP (TWSG), represented Glenn Lerner (Lerner) in litigation arising out of a dispute regarding a family trust (the trust action). Later, the law firm of which Lerner was the sole principal, Lerner & Veit, A Professional Corporation (L&V) brought this action against defendant Stephen Power (Power), seeking unpaid legal fees arising out of a matter unrelated to the trust litigation. The trial court granted L&V's motion to disqualify Rowen and TWSG from representing Power in this action on the basis of their prior representation of Lerner in the trust action. We conclude L&V lacked standing to move to disqualify Rowen and TWSG and that disqualification was unwarranted, and, accordingly, reverse the order.
After briefing was complete, L&V moved to dismiss this appeal on the ground that the parties had settled the underlying action, and that the settlement rendered the appeal moot. However, Rowen and TWSG were not parties to that settlement, and have standing to appeal from the trial court's disqualification order. (AI Credit Corp. v. Aguilar & Sebastinelli (2003) 113 Cal.App.4th 1072, 1077 ["Disqualified attorneys themselves have standing to challenge orders disqualifying them"].) Further, the trial court's order may subject them to collateral consequences, including forfeiture or disgorgement of attorneys' fees and potential exposure to State Bar discipline. (See, e.g., Goldstein v. Lees (1975) 46 Cal.App.3d 614, 618 ["It is settled in California that an attorney may not recover for services rendered if those services are rendered in contradiction to the requirements of professional responsibility"]; see also Cal Pak Delivery, Inc. v. United Parcel Service, Inc. (1997) 52 Cal.App.4th 1, 15-16 ["a court may prevent counsel's recovery of fees from the client where the attorney has violated ethical rules; whether through fraud, acts incompatible with the faithful discharge of duties or wrongful abandonment of the client"]; Bus. & Prof. Code § 6077 [willful breach of Rules of Professional Conduct is grounds for discipline].) Because the settlement therefore does not render it impossible for this court to grant appellant " 'any effectual relief' " (Eye Dog Foundation v. State Board of Guide Dogs for the Blind (1967) 67 Cal.2d 536, 541), we deny the motion to dismiss the appeal as moot.
I. BACKGROUND
A. The Trust Action
Lerner's two stepdaughters, Carin Salter and Jennifer Segal, brought an action against him in 2007 to establish their rights in connection with a trust (the Trust) executed by Lerner and his late wife, Elsa Lerner (Elsa). Salter and Segal sought an order requiring Lerner to provide them with information regarding the trust, its subtrusts, and his acts and transactions with respect to them; and a declaration as to which of two instruments was operative—an "Agreement Regarding Settlor's Rights and Duties" (the "Agreement," which provided that the surviving spouse would not revoke or amend the terms of a subtrust controlling distribution of certain assets upon the survivor's death), or an "Amendment" to the Agreement, made shortly before Elsa's death (which provided that the rights and obligations specified in the Agreement were "not to be considered contractual or legally binding"). They alleged, inter alia, that Lerner was an attorney and the owner/principal of L&V, and that the trust, its two amendments, the Agreement, and the Amendment to the Agreement were drafted and prepared by Lerner in collaboration with his law partner Henry Veit and other attorney employees of L&V.
Salter and Segal later petitioned to have Lerner removed as trustee or to have his powers suspended, alleging he had breached his fiduciary duties and distributed assets from the trust for his own benefit, to the detriment of Salter and Segal, who were beneficiaries of the trust. The petition alleged, inter alia, that Lerner, Veit, and other employees of L&V drafted the Trust; that no conflict waiver for Elsa was sought or obtained; that Lerner discouraged Elsa from obtaining independent representation; that Elsa signed the Amendment, as well as an amendment to the Trust, while she was suffering from terminal cancer and heavily medicated; and that these instruments were drafted by Lerner, Veit, employees of L&V, and associated counsel retained by Lerner and L&V.
The trust action was settled in March 2015.
B. The Current Action
L&V brought this action against defendant Stephen Power ("Power") in November 2015. It alleged that Lerner, on behalf of L&V, entered into an oral agreement with Power in which Power agreed to pay L&V all legal fees it incurred in representing Patricia Power ("Patricia") in her effort to collect unpaid spousal support from the trust of her former husband, Mark Power (the spousal support action). Joseph Zellmer, an "Authorized Agent" and "Independent Contractor" entered into a written fee agreement with Patricia on behalf of L&V. In reliance upon Power's oral agreement, L&V provided legal services to Patricia Power through Lerner and independent contractors, including Zellmer. The complaint alleged Power breached the agreement by refusing to pay some of the legal fees, amounting to more than $84,000.
Power demurred on the ground that Zellmer, not L&V, represented Patricia in the spousal support action. In support of the demurrer, he submitted pleadings Zellmer had filed on Patricia's behalf, which included billing records from the "Zellmer Law Group," and an attorney fee award based on those records. He was represented by Rowen and TWSG, the attorneys who had represented Lerner in the trust action.
C. Motion to Disqualify Counsel
L&V moved to disqualify Rowen and TWSG in March 2016, based on their prior representation of Lerner in the trust action.
In support of the motion, L&V submitted a declaration of Lerner, in which he stated that in the trust action, Salter and Segal claimed he tricked Elsa into signing estate planning documents and breached fiduciary duties, and that they tried to inquire not only into his financial dealings from 2005 through 2015 but also into all aspects of his character. They questioned his credibility in connection with his financial dealings and his honesty with respect to the estate planning documents.
Lerner averred that Rowen represented him in the trust action from 2007 until 2015. When Rowen began the representation, he was an employee at L&V. He left L&V in 2010 to work for TWSG, but continued to represent Lerner until the trust action concluded in 2015. During that time, Lerner and Rowen worked together "closely and constantly." He continued: "I confided in Rowen as to every aspect of the Trust Litigation. He was my former employee, and long-time attorney, who I trusted completely. Rowen evaluated my estate planning documents and nearly all of my financial activities, as well as the reasons behind the financial decisions I made from 2007 through 2015. Rowen also evaluated the strengths and weaknesses of my credibility as a witness and litigant, based on information I told him in confidence as my attorney, so that he could defend me from the false attacks on my credibility being made by Ms. Salter and Ms. Segal. [¶] . . . Mr. Rowen also spent many hours preparing me for my deposition in the Trust Lawsuit. I revealed to Mr. Rowen information about myself, again in confidence, so he could assess my strengths and weaknesses as a deponent. Mr. Rowen hired a consultant to prepare me to be deposed. Further, a partner in Mr. Rowen's firm . . . acted as 'opposing counsel' in a practice mock deposition of mine. Mr. Rowen witnessed all of this deposition preparation, giving him further access to confidential information about me as a deponent." Lerner stated that Rowen knew that he settled the trust action because he wanted to end the pain of litigating against his former loved ones and spend the later years of his life without the burden of litigation, and that Rowen became "intimately aware of [his] litigation and settlement strategy."
According to Lerner, his relationship with Rowen deteriorated after the trust litigation ended, when he disputed the amount of TWSG's bill for legal fees. Lerner believed this dispute gave rise to Rowen's "personal animus" toward him, which led him to represent Power in the current action.
Lerner set forth his version of the background of the current action. Power had been a longtime friend and business partner of Lerner's. Their relationship became strained when Lerner began to inquire into suspicious actions Power was taking as property manager of their jointly held business, I80 Properties, LLC (the LLC), and it "completely fell apart" when Power aligned with Salter and Segal and hired Rowen to "take many actions against [Lerner]" related to the LLC, including refusing to authorize any distributions from the LLC. The members of the LLC were Lerner, Salter, Segal, Power, Power's wife, and Power's son.
Lerner averred he was the sole remaining shareholder and only professional employee of L&V. At Power's request, he agreed to represent Patricia in her spousal support action, as long as Power paid his legal fees and costs. Power "performed pursuant to this contract" on two occasions, but after the disputes about the LLC arose, he began denying the existence of the agreement and refused to pay the fees.
Lerner stated he did not consent to Rowen's representation of Power in this lawsuit and that Rowen had personal knowledge of how L&V structured its relationship with independent contractors.
Zellmer also submitted a declaration in support of L&V's motion to disqualify Rowen and TWSG. He declared that Lerner had retained him to assist Rowen in connection with the trust action, and that during the course of that representation, he and Rowen had both learned "substantial confidential information" regarding Lerner's financial dealings, the reasons behind nearly all of his financial transactions, his character and behavior, his strengths and weaknesses as a deponent and a witness, and his litigation and settlement strategies.
In opposition to the motion, Rowen provided a declaration stating that he never discussed with Lerner any overall "litigation or settlement strategy," and he never discussed or received information regarding any of the legal or factual issues in the current case. When Rowen worked for L&V, he was an employee and was not privy to how L&V then structured its relationships with independent contractors; outside of discovery taken in the current case, he stated, he had no knowledge of how L&V structured its independent contractor relationship in the spousal support litigation. Rowen had represented Power in connection with other matters since at least 1996. He also stated that when he noticed the deposition for L&V's "Person Most Knowledgeable" in the current litigation, L&V produced Zellmer.
The trial court granted the motion to disqualify Rowen and TWSG. In doing so, it adopted its tentative decision, which stated: "The court finds that plaintiff Lerner & Veit has standing to bring this motion in that Lerner is the former client of Rowen and the sole principal of Lerner & Veit, the plaintiff in this action. . . . [¶] The court also finds that there is a 'substantial relationship' between the trust litigation in which Rowen represented Lerner and the present litigation in which Rowen represents defendant Power against Lerner's law firm, Lerner & Veit. Both actions involve questions regarding Lerner's character and credibility and his conduct in handling financial matters. The trust litigation proceeded for eight years, resulting in Lerner's payment of approximately $800,000.00 in legal fees to Rowen. The evidence submitted indicates that during the course of the litigation, Rowen gained confidential information about Lerner's financial activities and business dealings, including those of his law firm, Lerner & Veit. (Declaration of Lerner, Declaration of Zellmer). Such information is material to the 'evaluation, prosecution, settlement, or accomplishment' of the present case. Therefore, the two cases have a 'substantial relationship' to each other. [Citation.] Based on this substantial relationship, there is a conclusive presumption that confidential information was imparted to Rowen in his former representation of Lerner, which defendant did not rebut."
II. DISCUSSION
Power, TWSG, and Rowen contend the trial court abused its discretion in granting the disqualification motion. "Generally, a trial court's decision on a disqualification motion is reviewed for abuse of discretion. [Citations.] If the trial court resolved disputed factual issues, the reviewing court should not substitute its judgment for the trial court's express or implied findings supported by substantial evidence. [Citations.] When substantial evidence supports the trial court's factual findings, the appellate court reviews the conclusions based on those findings for abuse of discretion. [Citation.] However, the trial court's discretion is limited by the applicable legal principles. [Citation.] Thus, where there are no material disputed factual issues, the appellate court reviews the trial court's determination as a question of law. [Citation.] In any event, a disqualification motion involves concerns that justify careful review of the trial court's exercise of discretion. [Citation.]" (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143-1144 (SpeeDee).) "A motion to disqualify a party's counsel may implicate several important interests. Consequently, judges must examine these motions carefully to ensure that literalism does not deny the parties substantial justice. [Citation.] Depending on the circumstances, a disqualification motion may involve such considerations as a client's right to chosen counsel, an attorney's interest in representing a client, the financial burden on a client to replace disqualified counsel, and the possibility that tactical abuse underlies the disqualification motion." (Id. at pp. 1144-1145.)
Here, the trial court abused its discretion in granting the motion to disqualify TWSG and Rowen, for two reasons: (1) L&V, which was never TWSG's client, lacked standing to move to disqualify it; and (2) there was no substantial relationship between the trust litigation in which TWSG had represented Lerner in his individual capacity and the fee collection action by L&V against Power.
A. L&V Did Not Have Standing To Move To Disqualify TWSG Or Rowen.
As a threshold matter, L&V did not have standing to move to disqualify TWSG or Rowen because the undisputed facts show it was never their client. The limitation on successive representation stems from rule 3-310(E) of the California Rules of Professional Conduct, which prohibits attorneys from accepting, without the client's written consent, "employment adverse to the client or former client where, by reason of the representation of the client or former client, the [attorney] has obtained confidential information material to the employment." (Rule 3-310(E), italics added.) It follows that "[a]n attorney-client relationship must have existed before disqualification is proper." (Strasbourger Pearson Tuclin Wolff Inc. v. Wiz Technology, Inc. (1999) 69 Cal.App.4th 1399, 1404; accord, Civil Service Comm'n v. Superior Court (1984) 163 Cal.App.3d 70, 76-77 ["Before an attorney may be disqualified from representing a party in litigation because his representation of that party is adverse to the interest of a current or former client, it must first be established that the party seeking the attorney's disqualification was or is 'represented' by the attorney in a manner giving rise to an attorney-client relationship"]; see also, e.g., Kraus v. Davis (1970) 6 Cal.App.3d 484, 490-491 [disqualification denied because no attorney-client relationship found].)
This fundamental prerequisite to a disqualification motion is often expressed in terms of "standing." " 'Standing generally requires that the plaintiff be able to allege injury, that is, an invasion of a legally protected interest. [Citation.] A "standing" requirement is implicit in disqualification motions.' [Citation.] 'Generally, before the disqualification of an attorney is proper, the complaining party must have or must have had an attorney-client relationship with that attorney.' [Citation.] ' "The burden is on the party seeking disqualification to establish the attorney-client relationship." ' [Citation.]" (Coldren v. Hart, King & Coldren, Inc. (2015) 239 Cal.App.4th 237, 245 (Coldren); accord, Shen v. Miller (2012) 212 Cal.App.4th 48, 56-57 [disqualification properly denied because moving party failed to meet his burden of proving an attorney-client relationship].)
Here, it is undisputed that L&V had no attorney-client relationship with TWSG. TWSG and Rowen previously represented Lerner in his individual capacity as trustee of a family trust. They did not represent L&V, Lerner's law firm, which was not a party to the trust litigation. L&V's contention that the distinction between an individual shareholder of a professional corporation and the corporation itself is "a distinction without a difference" or "a mere technicality" is meritless. To the contrary, the distinction is a fundamental one that often can be determinative of the existence and scope of an attorney-client relationship, as it is here. Rule 3-600(A) of the California Rules of Professional Conduct provides that where a lawyer represents an organization or entity, such as a corporation or partnership, "the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement." An attorney representing an organization does not automatically have an attorney-client relationship with the organization's individual constituents, such as officers, directors, shareholders, or employees. "[T]here is a distinction between a corporate counsel's representation of corporate officers and managers in their representative capacities and the representation of those persons in their individual capacities." (Koo v. Rubio's Restaurants, Inc. (2003) 109 Cal.App.4th 719, 732-733; see Coldren v. Hart, King & Coldren, Inc., supra, 239 Cal.App.4th at p. 241 [law firm's counsel's duty of loyalty runs to the firm, not its shareholders]; Meehan v. Hopps (1956) 144 Cal.App.2d 284, 290 [an attorney for a corporation represents corporation, stockholders and its officers in their representative capacity, but does not represent the officers personally, and is not disqualified from representing the corporation in an action brought against it by one of its officers].)
We deny appellants' request to take judicial notice of an excerpt of Lerner's deposition as unnecessary to our decision.
Thus, that Lerner is a shareholder or even the sole remaining shareholder of the L&V law firm does not give L&V, which is a separate legal entity, standing to object to TSWG's representation of Power. Coldren, Inc., supra, 239 Cal.App.4th 237, involved the converse factual situation, but the principle is identical. There, a retiring 50% shareholder in a law firm brought an action against the law firm and the remaining shareholder for dissolution, breach of contract, and related causes of action, and the firm and its remaining shareholder filed a cross-complaint against him. The trial court granted a motion by Coldren, the retiring partner, to disqualify the defendants' counsel on the ground that "a conflict existed because Coldren is a 50% percent shareholder of [the law firm]." (239 Cal.App.4th at p. 241.) The Court of Appeal reversed, holding that Coldren lacked standing to disqualify defendants' counsel because "it is undisputed that Coldren never had an attorney-client relationship with [counsel]." (Id. at p. 245; see also Shen v. Miller, supra, 212 Cal.App.4th at pp. 57-58 [attorney's representation of shareholder in derivative action on behalf of corporation did not give rise to attorney-client relationship with corporation or entitle 50% shareholder to move to disqualify attorney].)
L&V asserts that a number of cases have recognized exceptions to the attorney-client relationship rule, and are "controlling" here. Far from it. Neither of the cases L&V relies upon presents remotely comparable facts or supports the trial court's ruling. In William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042 (Raley), the court held a conflict of interest disqualified a law firm from representing plaintiff in an action for breaches of a lease agreement, when a bank as trustee held 100 percent of the stock of the defendant company, and a senior partner in the law firm was a director of the bank and on the trust committee, which directed the defendant company. The court observed that the senior partner's duties on behalf of the bank would require him to focus on the weaknesses of plaintiff's lawsuit while, at the same time, his law firm would advocate the merits of that action. (Id. at p. 1047.) Further, the partner's "fiduciary relationship with [the defendant] and the [t]rust through his positions with the [b]ank and the [trust] [c]ommittee, on the one hand, and his partnership status with [the law firm], on the other hand, places [the law firm] on both sides of [plaintiff's] lawsuit." (Ibid.) Under the circumstances, the court held that a conflict of interest clearly existed under former rule 5-102(B) of the Rules of Professional Conduct between the law firm's representation of plaintiff and the partner's relationship with the defendant and the trust. (Ibid.)
Raley is inapposite. After that case was published, "important changes were made to the Rules of Professional Conduct." (Oaks Management Corp. v. Superior Court (2006) 145 Cal.App.4th 453, 465.) In particular, former rule 5-102 became part of current rule 3-310. (Ibid.) "Unlike former rule 5-102, rule 3-310 controls conflicts of interest and disqualification motions only in the context of attorney-client relationships." (Ibid.) Finally, "although courts have cited Raley after the abrogation of former rule 5-102 [citation], it is also distinguishable on its facts, which are more compelling than those here." (Ibid.) Because the attorney's positions with the bank in that case "placed his firm on both sides of the lawsuit," and because his relationship with the nonclient company created an expectation that he owed it a duty of fidelity, "the situation in Raley was 'akin to that of simultaneous representation, where a law firm was in effect on both sides of a lawsuit. In simultaneous representation cases the paramount consideration is the duty of loyalty.' " (Id. at p. 466.)
Here, there is no direct conflict like the one in Raley, nor does the case present anything akin to a simultaneous representation. No TWSG attorney sits, or ever sat, on the board of directors of L&V, and L&V is not "asked to confront" the same law firm "in both the courtroom and the board room." (Ibid.) Nor is there any "ongoing accessibility to confidential information" about Lerner which may be pertinent to the collection action. (Cf. Raley, 149 Cal.App.3d at p. 1048.)
Although Rowen had been an employee of L&V, he was not a shareholder, and in any case, he was no longer associated with the firm when the current litigation commenced.
Similarly, in Woods v. Superior Court (1983) 149 Cal.App.3d 931, the second case on which L&V relies, husband's counsel of record in a dissolution action for years had represented the interests of a family business that was a primary focus of dispute in the dissolution. The court reasoned that "in representing an ongoing family corporation, [counsel] in a very real sense continues to represent the wife." (Id. at p. 935.) It concluded that "the fact that [counsel] continues to represent wife's interest in a family business which will be the focus of the marital dissolution is sufficient to disqualify [him] from representing husband," even in the absence of a showing that he has in fact obtained confidential information. (Id. at p. 936.) Thus, just as in Raley, the case was more closely analogous to a simultaneous representation situation, where disqualification is generally automatic, than a successive representation case. In short, the court held, "absent consent or waiver, the attorney of a family-owned business, corporate or otherwise, should not represent one owner against the other in a dissolution action." (Id. at p. 937.) Again, that unique situation bears no relationship to that presented here, and does not support L&V's position.
Finally, L&V's position that we should ignore the distinction between an individual lawyer and his or her law firm in this context makes no practical sense. Essentially, L&V would have us hold that any time counsel represents a client who happens to be a lawyer in his or her individual capacity, counsel is thereafter forever disqualified from representing adversaries of his or her former client's law firm—even where the former client's firm itself initiates the later litigation, and even where, as here, that litigation is entirely unrelated to the subject matter of the former representation. No case authority supports that extraordinary proposition, and it is inconsistent with the authority and principles discussed above.
On the undisputed facts before us, therefore, we conclude the trial court erred in finding L&V had standing to seek to disqualify Rowen and TWSG.
B. There Was No Substantial Relationship Between The Two Cases.
Even if L&V had standing to move to disqualify Rowen and TWSG, the trial court erred as a matter of law in concluding that there was a substantial relationship between the trust litigation in which they formerly represented Lerner and the fee litigation against Power. "A trial court's authority to disqualify an attorney derives from the power inherent in every court '[t]o 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 manner pertaining thereto.' [Citations.] Ultimately, disqualification motions involve a conflict between the clients' right to counsel of their choice and the need to maintain ethical standards of professional responsibility. [Citation.]" (SpeeDee, supra, 20 Cal.4th at p. 1145.) "To protect the confidentiality of the attorney-client relationship, the State Bar Rules of Professional Conduct, rule 3-310 (rule 3-310) prohibits attorneys from accepting, without the client's written consent, 'employment adverse to the client or former client where, by reason of the representation of the client or former client, the [attorney] has obtained confidential information material to the employment.' (Rule 3-310(E); [citations].) Where an attorney successively represents clients with adverse interests, and where the subjects of the two representations are substantially related, the need to protect the first client's confidential information requires that the attorney be disqualified from the second representation. [Citation.]" (Id. at p. 1146.)
Thus, an attorney is "subject to disqualification based upon its prior representation under the following circumstances: 'If there is a substantial relationship between the subject of the current representation and the subject of the former representation, the attorney's access to privileged and confidential information in the former representation is presumed and disqualification of the attorney from the current representation is mandatory in order to preserve the former client's confidences.' [Citation.]" (Banning Ranch Conservancy v. Superior Court (2011) 193 Cal.App.4th 903, 918 (Banning Ranch). However, "[t]he subject of a current representation is substantially related to the subject of a prior representation only if the issues are sufficiently similar to support a reasonable inference that the attorney in the course of the prior representation was likely to have obtained confidential information material to the current representation. [Citations.]" (Fremont Indemnity Co. v. Fremont General Corp. (2006) 143 Cal.App.4th 50, 67 (Fremont).) When an attorney's contact with the client in the first representation was direct, as it was here, the court evaluates "the factual and legal similarities of the two representations." (Farris v. Fireman's Fund Ins. Co. (2004) 119 Cal.App.4th 671, 679 (Farris).)
The court in Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698 (Jessen) provided a detailed discussion of the "substantial relationship" test in the context of successive representations. The court stated that, where an attorney was personally involved in providing legal advice and services to the former client, "disqualification will depend upon the strength of the similarities between the legal problem involved in the former representation and the legal problem involved in the current representation." (Id. at p. 709.) A substantial relationship exists when "the 'subjects' of the prior and the current representations are linked in some rational manner." (Id. at p. 711, citing Flatt v. Superior Court (1994) 9 Cal.4th 275, 283; see City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 847 ["the attorney is presumed to possess confidential information if the subject of the prior representation put the attorney in a position in which confidences material to the current representation would normally have been imparted to counsel"].) The word "subjects," for these purposes, is not limited to the precise legal and factual issues involved in the representations; rather, it includes "information material to the evaluation, prosecution, settlement or accomplishment of the litigation or transaction given its specific legal and factual issues. Thus, successive representations will be 'substantially related' when the evidence before the trial court supports a rational conclusion that information material to the evaluation, prosecution, settlement or accomplishment of the former representation given its factual and legal issues is also material to the evaluation, prosecution, settlement or accomplishment of the current representation given its factual and legal issues." (Jessen, 111 Cal.App.4th at p. 713.)
The rule of Jessen was applied in Fremont, which rejected the contention that Jessen stood for the proposition that "an attorney's direct and personal relationship with a former client can establish a 'substantial relationship' so as to justify disqualification even if there is no similarity between the issues involved in the current representation and those involved in the former representation." (Fremont, supra, 143 Cal.App.4th at p. 67.) The court concluded: "[Jessen] did not dispense with the requirement that the issues involved in the current and prior representations must be sufficiently similar to support a reasonable inference that the attorney obtained confidential information material to the current representation." (Id. at p. 68.) Rather, " '[t]o create a conflict requiring disqualification, Jessen mandates that the information acquired during the first representation be "material" to the second; that is, it must be found to be directly at issue in, or have some critical importance to, the second representation. [Citations.]' " (Id. at p. 69.)
Here, the trust action against Lerner is not related to L&V's current collection action against Power. They arise from entirely different transactions and share no common claims or legal theories. L&V contends, however, and the trial court concluded, that the "substantial relationship" test is met because Lerner's credibility as a witness constitutes a common issue in the two cases. L&V also argues that Rowen and TWSG actually gained confidential information about Lerner and L&V's financial dealings, business structure, financial decisions from 2007 through 2015, and credibility with regard to the drafting of legal agreements, and that this information was material to the "evaluation, prosecution, settlement or accomplishment" of the present case. (Jessen, supra, 111 Cal.App.4th at p. 713; see Faughn v. Perez (2006) 145 Cal.App.4th 592, 603 [disqualification may be established through actual knowledge of material confidential information or through presumption of confidential information based on substantial relationship of successive matters].) In the circumstances before us, we find this contention unpersuasive.
"Merely knowing of a former client's general business practices or litigation philosophy is an insufficient basis for disqualification based upon prior representation." (Banning Ranch, supra, 193 Cal.App.4th at p. 918.) Where there is no factual or legal connection between the subject matters of successive representations, courts that have found disqualification proper have relied on factors such as the similarity of the types of cases involved. Thus, in Farris, the appellate court concluded an attorney must be disqualified where he had done substantial work on coverage matters for an insurer in the past; had provided ongoing legal advice on coverage issues to key decision makers; had provided general guidance to those decision makers concerning claims handling and policy interpretation questions; had developed direct, personal relationships with key decision makers; and had had the opportunity to observe and guide how the insurer handled particular claims and made coverage decisions internally, including how it decided whether to accept or deny coverage and whether to settle or litigate a coverage dispute. (Farris, supra, 119 Cal.App.4th at p. 682.) In the circumstances, he could not properly represent a client against the insurer in an action alleging breach of contract and bad faith. (Id. at pp. 676, 684-685.) Similarly, in Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999) 69 Cal.App.4th 223, 235-237 (Morrison Knudsen), there was evidence that a law firm had represented a client in cases involving similar factual situations and legal issues, and the law firm's involvement was substantial. Counsel had also " 'been privy to confidential information concerning similar matters which would be useful to [the second client] in its claim against [the first client], including the identity of all the key decision makers in the Company, the litigation philosophy of [the first client], the legal and organization structure of [the first client, its divisions and subsidiaries], and the financial impact of pending and existing claims against [them].' " (Id. at p. 236.)
In Fremont, on the other hand, the issues in the successive representations "[arose] from circumstances and involve[ed] issues totally unrelated" to each other. (Fremont, supra, 143 Cal.App.4th at p. 69.) The appellate court concluded that because the issues were "totally unrelated," there was no showing that the law firm at issue had obtained confidential information material to the later actions. In particular, the party seeking disqualification had not shown that purported information concerning " 'the party's litigation philosophy and practices' is material to any issue in these actions." (Ibid.) The court therefore reversed an order disqualifying counsel. (Id. at p. 70; see, e.g., Faughn v. Perez, supra, 145 Cal.App.4th at pp. 604-611 [reversing disqualification where hospital defendant failed to show that attorney's prior representation of parent corporation was substantially related to his representation of plaintiffs in medical malpractice action].)
Even where the legal issues in the successive representations are similar, disqualification is not always warranted. The court in Khani v. Ford Motor Co. (2013) 215 Cal.App.4th 916 (Khani) considered such a situation. The plaintiff there sued Ford Motor Company (Ford) under the Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq., California's "lemon law") for defects in a vehicle. (Id. at p. 919.) The plaintiff's counsel had previously represented Ford in lemon law cases. Ford moved to disqualify him on the ground he was privy to confidential information about the defense of such cases, prelitigation strategies, tactics, and case handling procedures. (Ibid.) The trial court granted the disqualification motion, and the appellate court reversed. (Id. at pp. 919, 923.) The court noted that under Farris and Jessen, an attorney's knowledge of information about a client's " ' "overall structure and practices" would not of itself require disqualification unless it were found to be "material"—i.e., directly in issue or of critical importance—in the second representation. [Citation.] The same is true about information such as the first client's "litigation philosophy" or "key decision makers." ' [Citation.] The substantial relationship test requires comparison not only of the legal issues involved in successive representations, but also of evidence bearing on the materiality of the information the attorney received during the earlier representation." (Id. at p. 921.) Although the attorney had represented Ford in lemon law cases, there was no evidence that any confidential information about the defense would be at issue in the currently case; the attorney did not have any confidential information about the allegedly defective vehicle at issue, and there was no showing that Ford had any "policies, practices, or procedures generally applicable to the evaluation, settlement or litigation of California Lemon Law cases at the time [the attorney] represented Ford, or that any such policies, practices, or procedures continued in existence unchanged . . . . Nor does [the evidence] show that the same decision makers that were involved in cases [the attorney] handled for Ford are involved in this case." (Id. at p. 922.)
Here, in contrast to Farris or Morrison Knudsen, there is no connection between the factual background or legal issues raised by the trust action and the current action. There is no evidence that any business practices with which Rowen and TWSG became familiar when representing Lerner individually in the trust action are relevant to the questions before the court in the current action—whether L&V provided legal services to Patricia and whether Power agreed to pay those fees—or that the attorneys gained any specific insight into how L&V was likely to handle a fee dispute. Likewise, there was no showing that Rowen and TWSG actually acquired confidential information that was "material" to the fee collection action. (Cf. Pound v. DeMera DeMera Cameron (2005) 135 Cal.App.4th 70, 78.)
Lerner stated in his declaration: "Mr. Rowen[] has personal knowledge of how L&V structures its relationships with independent contractors. L&V worked with independent contractors during Mr. Rowen's employment with L&V." In response, Rowen declared, "[O]utside of discovery taken in this case, I have absolutely no knowledge concerning how L&V actually structured its contractor relationships in the spousal support litigation involving the Mark Power Trust." Notably, Lerner did not say that any knowledge Rowen had of L&V's relationships with contractors generally was either confidential information or that it was gained as a result of his attorney-client relationship with Lerner during the entirely unrelated trust action.
L&V asserts that Rowen and TWSG have confidential knowledge of the reason Lerner agreed to settle the trust action, namely, his desire not to spend his later years embroiled in litigation. The fact that L&V has stated this openly in its pleadings suggests that the information is not confidential.
Nor are we persuaded by L&V's contention that Lerner's credibility as a witness constitutes a "common issue." L&V relies on Metro-Goldwyn-Mayer, Inc. v. Tracinda Corp. (1995) 36 Cal.App.4th 1832, 1845, but that case is inapposite. The law firm at issue there represented former shareholders and directors of MGM, defendants in one of two consolidated lawsuits; MGM was the plaintiff in the action with which it was consolidated. (Id. at pp. 1836-1837.) Each of the two actions challenged the same merger, and the firm had represented MGM in the merger and subsequent bankruptcy proceedings. (Ibid.) The appellate court concluded that, based on the law firm's employment as chief corporate counsel for MGM generally, and its representation in the transaction giving rise to the lawsuits, its appearance on behalf of the former shareholders and directors was adverse to MGM, and it must be disqualified. (Id. at p. 1845.) In the course of reaching this conclusion, the court noted that during the consolidated trial, the firm would be required to try to support the credibility of one of the former directors against the interests of MGM, the firm's former corporate client. (Ibid.) We do not read this, however, to mean that whenever the credibility of a witness is at stake, disqualification is necessary. Rather, the court's analysis in Metro-Goldwyn-Mayer was closely tied to the unusual facts of the case, in which the law firm to be disqualified had participated in the very transaction that was at issue in the case to be tried. No such facts are present here.
In the absence of a substantial relationship between the trust action and the current action, we conclude disqualification was not warranted.
III. DISPOSITION
The order disqualifying Rowen and TWSG is reversed.
/s/_________
Schulman, J. We concur: /s/_________
Streeter, Acting P.J. /s/_________
Reardon, J.
Judge of the Superior Court of California, City and County of San Francisco, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. --------