ZOEL HOLDING COMPANY, INC. v. VERDIN No. 1 CA-SA 13-0058.

ZOEL HOLDING COMPANY, INC.; MGA HEALTHCARE STAFFING, INC.; MGA HOME HEALTHCARE, L.L.C.; MGA HOME HEALTHCARE COLORADO, INC.; MGA EMPLOYEE SERVICES, INC., Petitioners, v. THE HONORABLE MARIA DEL MAR VERDIN, Judge of the SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of MARICOPA, Respondent Judge, RICHARD EDEN and JANE DOE EDEN; KRISTIC KIDD and JOHN DOE KIDD; JESSICA SONCRAINTE and JOHN DOE SONCRAINTE; GARRETT BRILL and JANE DOE BRILL; JUSTIN PACK and JANE DOE PACK; MICHAEL LOVELL and JANE DOE LOVELL; HOME HEALTH AGENCY — ARIZONA, INC., d/b/a TEAM SELECT HOME CARE, Real Parties in Interest.

Court of Appeals of Arizona, Division One, Department E.
Filed March 28, 2013.

Maricopa County Superior Court No. CV 2013-001150

DECISION ORDER

MARGARET H. DOWNIE, Presiding Judge.

Petitioners (referred to collectively as "Zoel") seek special action review of the superior court's order disqualifying their counsel. We accept jurisdiction because Zoel has no plain, speedy or adequate remedy by appeal. See Foulke v. Knuck, 162 Ariz. 517, 519, 784 P.2d 723, 725 (App. 1989) (accepting special action jurisdiction to consider denial of motion to disqualify counsel). However, we deny relief.

Team Select is a "direct competitor" of Zoel's, "engaging in the same business . . . by providing home healthcare services in Phoenix, Arizona and Colorado Springs, Colorado." In December 2009, Lewis & Roca ("L&R") began representing Team Select in a dispute with a different competitor involving a non-solicitation agreement and a former employee ("former matter"). L&R attorneys Wand and Samuels were primarily responsible for the former matter, which settled in February 2010.

In February 2013, L&R filed suit on behalf of Zoel against Team Select, its president, and certain employees who left Zoel to work for Team Select ("current matter"). Samuels is the lead L&R lawyer on the current matter. Zoel alleges Team Select hired its former employees, who took and used confidential and trade secret information in their new employment.

Team Select moved to disqualify L&R, claiming, inter alia, that a conflict of interest existed because the former and current matters are substantially related.1 See Ariz. R. Sup. Ct. 42, ER 1.9(a). L&R responded that although both cases involve alleged breaches of non-solicitation agreements, the two matters are neither the same nor substantially related.

The superior court heard oral argument and took the motion to disqualify under advisement. The court thereafter granted the motion, and L&R promptly sought special action relief.

We review a ruling on a motion to disqualify counsel for an abuse of discretion. Amparano v. ASARCO, Inc., 208 Ariz. 370, 376, ¶ 19, 93 P.3d 1086, 1092 (App. 2004) (citation omitted). The burden is on the party moving to disqualify "to show `sufficient reason'" for the disqualification. Id. at 377, ¶ 24, 93 P.3d at 1093. "[I]n the absence of any express findings and conclusions by the trial court, we will imply the necessary findings and conclusions, if supported by the record, to affirm the order." Id.

ER 1.9(a) reads:

A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.

The comment to ER 1.9 states that matters are "substantially related"

if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter. . . . In the case of an organizational client, general knowledge of the client's policies and practices ordinarily will not preclude a subsequent representation; on the other hand, knowledge of specific facts gained in a prior representation that is relevant to the matter in question ordinarily will preclude such a representation. A former client is not required to reveal the confidential information learned by the lawyer in order to establish a substantial risk that the lawyer has confidential information to use in the subsequent matter. A conclusion about the possession of such information may be based on the nature of the services the lawyer provided the former client and information that would in ordinary practice be learned by a lawyer providing such services.

ER 1.9, cmt. 3.

We cannot say the superior court "exceed[ed] the bounds of reason" in deeming the former and current matters substantially related, within the meaning of ER 1.9. See Associated Indem. Corp. v. Warner, 143 Ariz. 567, 571, 694 P.2d 1181, 1185 (1985) (in reviewing for abuse of discretion, "[t]he question is not whether the judges of this court would have made an original like ruling, but whether a judicial mind, in view of the law and circumstances, could have made the ruling without exceeding the bounds of reason").

In the former matter, a competitor accused Team Select of hiring an employee who was sharing information in violation of a non-compete agreement. In the current matter, Team Select is accused of similar conduct by a different competitor. Team Select has avowed that it disclosed to L&R "significant confidential information concerning Team Select's business structure, recruiting practices, hiring and firing practices, terms and conditions of employment of its employees, and other proprietary and confidential information regarding Team Select's operations that may be relevant to the claims [L&R] is now asserting against Team Select."2 In response, L&R argued below that Team Select "failed to provide any facts to support its assertion that a substantial risk exists that [L&R] will use confidential information obtained from the past representation against Team Select." But as the comment to ER 1.9 makes clear, former clients are "not required to reveal the confidential information learned by the lawyer in order to establish a substantial risk that the lawyer has confidential information to use in the subsequent matter." ER 1.9, cmt. 3.

Given the substantial similarity between the two matters, the time that elapsed between them, the avowals by Team Select as to the information disclosed, and the fact that the same L&R attorneys handled both matters, the superior court could reasonably conclude there was a substantial risk that "confidential factual information as would normally have been obtained in the prior representation would materially advance" Zoel's position in the current matter.3 ER 1.9, cmt. 3. We therefore accept special action jurisdiction but deny relief.

MAURICE PORTLEY, PHILIP HALL, Judge, concurring.

FootNotes


1. Team Select also argued L&R should be disqualified under an "appearance of impropriety" standard — a contention we need not resolve because disqualification under ER 1.9(a) was appropriate.
2. At oral argument in the superior court, Team Select explained how information reportedly disclosed to L&R "clearly would be of interest to an adversary who has an interest in vigorously prosecuting this claim."
3. "Confidential" information encompasses more than privileged information. ER 1.6, cmt. 3 (confidentiality "applies not only to matters communicated in confidence by the client but also to all information relating to the representation, whatever its source").

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