MOORE, J. —
Petitioners California Self-Insurers' Security Fund (the Fund) and Nixon Peabody LLP (Nixon Peabody or the firm) seek a writ of mandate directing the trial court to vacate its order disqualifying Nixon Peabody from representing the Fund in the instant case. Petitioners argue the trial court mistakenly believed it was compelled by law to disqualify the firm; the court instead should have made further factual findings and exercised its discretion. Real parties in interest contend disqualification was mandatory and therefore no discretion needed to be exercised.
We conclude, for the reasons set forth below, that automatic disqualification was not required under these facts. We therefore grant the petition and direct the trial court to determine whether confidential information was transmitted to Nixon Peabody, or whether, in the court's discretion, other compelling reasons dictate the firm should be disqualified.
The Fund is a nonprofit organization charged by the state Legislature with continuing payment of workers' compensation claims when a self-insured entity is unable to do so. (Lab. Code, § 3740.) When the Fund steps in to provide such payments, it is required by law to seek reimbursement from the employer. (Lab. Code, § 3744, subd. (a).) The instant action is a collection effort by the Fund.
The law permits groups of employers to band together into self-insurance groups, and the Fund is also responsible for paying workers' compensation claims when such groups cannot. The Healthcare Industry Self-Insurance Program (the Program) is one such group. In 2013, the Department of Industrial Relations ordered the Fund to assume the Program's workers' compensation claims.
The Fund hired Nixon Peabody to represent it in order to seek reimbursement. In November 2013, the Fund filed a lawsuit naming 304 members of the Program as defendants, approximately 170 of which have since settled. The remaining defendants are real parties in interest in this proceeding.
Two real parties in interest are of particular note here. ActivCare Living and Mountainview Retirement, Ltd., et al. (the moving parties) are represented by Michelman & Robinson, LLP (M&R). According to a declaration filed by M&R Attorney Jeffrey D. Farrow, from approximately 2009 until February 1, 2017, Attorney Andrew Selesnick served as chair of the health care department at M&R, overseeing and managing a team of attorneys who represented clients in the health care industry. Since 2014, M&R served as attorneys for moving parties, as well as four other defendants in this matter. The representation of those parties was handled primarily by four attorneys at M&R, including Selesnick. According to Farrow, Selesnick was actively involved in the case, including participation in a confidential discussion pertaining to moving parties' liability and damages. After real parties in interest began working together on a common defense, in February 2014, Selesnick was copied on many e-mails containing communications about that defense.
On or about February 1, 2017, Selesnick left M&R and joined Nixon Peabody. Nixon Peabody was promptly advised of the potential conflict issue by M&R. On or about March 8, Selesnick "part[ed] ways" with Nixon Peabody.
Nixon Peabody hired Attorney Sean M. SeLegue to review this issue. According to SeLegue, Selesnick had represented four defendants as part of the team at M&R's Los Angeles office, while Farrow represented the moving parties from the Orange County office. The parties Selesnick was actively involved with, according to him, were among those who settled before Selesnick left M&R. Selesnick did not, consequently, believe he had confidential information regarding the moving parties. He also told SeLegue he had not been involved in the case to a "significant extent," as another attorney had taken the lead. Selesnick had been hired to work in Nixon Peabody's Los Angeles office, while the firm's team working on this matter worked in the San Francisco office. Every member of that team submitted a declaration stating that Selesnick had not shared confidential information with them, and the firm had put an "ethical wall" in place.
In reply, the moving parties noted that Selesnick himself had not submitted a declaration in opposition to the motion. They further argued that the ethical wall had not been put in place before Selesnick began working at the firm, but only after the moving parties and other real parties in interest objected to the conflict.
The trial court granted the motion, concluding that Selesnick had previously personally represented the two moving parties as well as four defendants who settled. It concluded that when an attorney switches sides, disqualification is mandatory; no amount of ethical screening can save the representation.
The Fund and Nixon Peabody filed the instant petition for a writ of mandate and a stay of trial court proceedings on May 19, 2017. We granted the stay and requested preliminary opposition. After receiving briefing, including joinders from additional real parties in interest and opposition briefs from several of them, we issued an order to show cause as to why relief should not be granted.
"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.]... 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 [86 Cal.Rptr.2d 816, 980 P.2d 371] (SpeeDee Oil).) In the instant case, it appears from the court's order that it believed disqualification was mandatory and automatic. Therefore, the court did not truly exercise its discretion. Our review is de novo to determine whether the court's determination was correct as a matter of law, or whether an exercise of discretion is necessary here.
"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
This also applies to a law firm where an attorney is currently working. "It is now firmly established that where the attorney is disqualified from representation due to an ethical conflict, the disqualification extends to the entire firm [citations] at least where an effective ethical screen has not been established [citation]." (Adams v. Aerojet-General Corp. (2001) 86 Cal.App.4th 1324, 1333 [104 Cal.Rptr.2d 116] (Adams); see Farris v. Fireman's Fund Ins. Co. (2004) 119 Cal.App.4th 671, 689, fn. 17 [14 Cal.Rptr.3d 618] (Farris).) "As a general rule in California, where an attorney is disqualified from representation, the entire law firm is vicariously disqualified as well. [Citations.] This is especially true where the attorney's disqualification is due to his prior representation of the opposing side during the same lawsuit." (Henriksen v. Great American Savings & Loan (1992) 11 Cal.App.4th 109, 114-115 [14 Cal.Rptr.2d 184], fn. omitted (Henriksen).)
Thus, there is no question that if Selesnick were seeking to represent the Fund, he could not do so. There is also no question that if Selesnick continued to work at Nixon Peabody, the entire firm would be disqualified. The question that is left to us is whether Nixon Peabody and all its attorneys are also prohibited from representing the Fund given all the relevant facts, including that Selesnick no longer works at Nixon Peabody, and was only there for a very brief period.
The moving and real parties in interest argue, and the trial court agreed, that disqualification in such a situation is automatic under the bright-line rule set forth in Henriksen. In that case, borrowers sued a lender for lender liability, and the lender filed a cross-complaint seeking foreclosure. The lender's initial law firm, Hoge, Fenton, Jones and Appel (Hoge) employed an associate named Peter Brock. (Henriksen, supra, 11 Cal.App.4th pp. 111-112.) Brock spent more than 200 hours on the case. Some other events ensued, but as relevant here, sometime later, Brock joined the borrrowers' law firm, Bartko, Welsh, Tarrant & Miller (Bartko). The lender moved to disqualify Bartko based on Brock's conflict. Bartko argued that it had put procedures in place to isolate Brock from the litigation, but ultimately, the
Petitioners contend disqualification is not automatic when the attorney in question has left the firm before the motion to disqualify is decided. They rely heavily on Kirk v. First American Title Ins. Co. (2010) 183 Cal.App.4th 776 [108 Cal.Rptr.3d 620] (Kirk). We analyze this case in depth not because petitioners cite it in their favor, but because it provides a lengthy analysis of the current state of California law on this issue.
That case involved a series of class action lawsuits against First American, a title insurer, and related entities. First American was represented by three attorneys at Bryan Cave LLP. (Kirk, supra, 183 Cal.App.4th at p. 785.) At one point during the case, the plaintiffs' counsel spoke to Gary Cohen, then chief counsel for Fireman's Fund Insurance Company, to discuss possible retention of Cohen's services as a consultant. It was undisputed that counsel conveyed confidential information to Cohen. Cohen was interested, but it came to light that Fireman's Fund had, possibly, provided insurance coverage to one or more of the defendants. (Id. at pp. 786-787.)
Approximately a year later, Cohen moved to a firm, Sonnenschein Nath & Rosenthal LLP (Sonnenschein). The plaintiffs contacted Cohen, who would no longer have a conflict due to his role at Fireman's Fund, about consulting on the case. Cohen said he would check conflicts at Sonnenschein and get back to them. Before he did so, the plaintiffs sent Cohen edited versions of the complaint, "reducing them to what plaintiffs' counsel believed to be the main issues." (Kirk, supra, 183 Cal.App.4th at pp. 786-787.) Shortly thereafter, Cohen replied: "`It turns out that the firm does represent First American, so I'm afraid that I won't be able to be of any help. I haven't read the attachments to your email and will delete them without having read them.' There was no further contact between Cohen and ... counsel." (Id. at p. 787.)
Shortly thereafter, the attorneys from Bryan Cave representing First American moved to disqualify Sonnenschein. The plaintiffs objected to Sonnenschein's representation, given Cohen's prior contact with counsel. Until that point,
The plaintiffs moved to disqualify Sonnenschein, and the trial court granted the motion. (Kirk, supra, 183 Cal.App.4th at pp. 789-791.) The trial court said nobody was to blame except the "`itinerant nature of attorneys.'" (Id. at p. 790.) The trial court found, however, that confidential information had been disclosed to Cohen during the initial phone call with the plaintiff's counsel. As relevant here, the court also "concluded that, when an attorney possesses disqualifying confidential client information, vicarious disqualification of the law firm is automatic, regardless of any ethical screening wall created." (Ibid.)
The Court of Appeal disagreed. Reviewing the history of vicarious qualification, the court noted that in Flatt, supra, 9 Cal.4th 275, "the Supreme Court distinguished the duty of loyalty, which was at issue in that case, from the duty of client confidentiality, which is at issue in cases of vicarious disqualification. To properly understand Flatt in context, however, it is necessary to briefly discuss the `substantial relationship' test. When it is alleged by a former client that its former attorney possesses material confidential information and is therefore disqualified from representing an adversary in another case, it is difficult for the former client to establish, as a factual matter, `what is in the mind of the attorney.' [Citation.] The courts have therefore established a test, under which, if the former client can demonstrate a substantial relationship between the subjects of the former and the current representations, it is presumed that the attorney had access to confidential information in the first representation which is relevant to the second representation." (Kirk, supra, 183 Cal.App.4th at p. 796.)
"In discussing the substantial relationship test in Flatt, the Supreme Court stated that once the test is met, `disqualification of the attorney's representation of the second client is mandatory; indeed, the disqualification extends vicariously to the entire firm.' [Citation.] The Supreme Court cited Henriksen for the proposition that vicarious disqualification is compelled as a matter of law. [Citation.] The Flatt case, however, was not concerned with whether a tainted attorney's law firm was subject to vicarious disqualification." (Kirk, supra, 183 Cal.App.4th at p. 797.)
"In the context of Flatt, the Supreme Court's citation of Henriksen with approval and statement of a rule of automatic vicarious disqualification
The court then noted that case law since SpeeDee had been mixed. Some courts had stated vicarious disqualification applies in the absence of a sufficient ethical screen. (Farris, supra, 119 Cal.App.4th at p. 689, fn. 17; Adams, supra, 86 Cal.App.4th at p. 1333.) Other courts had continued to state the rule of vicarious disqualification is absolute. (City of Santa Barbara v. Superior Court (2004) 122 Cal.App.4th 17, 23-24 [18 Cal.Rptr.3d 403];
After City and County of San Francisco v. Cobra Solutions, Inc., supra, 38 Cal.4th 839, Meza v. H. Muehlstein & Co., Inc. (2009) 176 Cal.App.4th 969 [98 Cal.Rptr.3d 422], had also discussed the issue. "Relying on Henriksen, Flatt, and the Supreme Court's rationale for vicarious disqualification in SpeeDee Oil, we concluded that `an "ethical wall" between an attorney with
The court continued: "In very brief summary, the history of the law of vicarious disqualification appears to be as follows: (1) appellate courts initially concluded vicarious disqualification was not automatic, but instead subject to a balancing test; (2) Henriksen concluded the burden of rebutting the presumption of imputed knowledge simply could not be satisfied in the case of a tainted attorney who represented one party and switched sides in the same case; (3) the Supreme Court favorably cited Henriksen and appeared to state a rule of automatic vicarious disqualification any time material confidential information was presumed to be held by the tainted attorney (Flatt); (4) the Supreme Court subsequently suggested that whether vicarious disqualification can be avoided by a proper ethical wall was still an open question (SpeeDee Oil); and (5) the Supreme Court has never directly addressed the issue on the merits.
"Given this history, we conclude that it is improper to rely on Flatt as creating an absolute rule of vicarious disqualification in California. Instead, we believe that neither Flatt nor SpeeDee Oil addressed the issue of whether vicarious disqualification is absolute, and the state of the law is that as initially expressed by the appellate courts: (1) a case-by-case analysis based on the circumstances present in, and policy interests implicated by, the case; (2) tempered by the Henriksen rule that vicarious disqualification should be automatic in cases of a tainted attorney possessing actual confidential information from a representation, who switches sides in the same case.
"We do not doubt that vicarious disqualification is the general rule, and that we should presume knowledge is imputed to all members of a tainted attorney's law firm. However, we conclude that, in the proper circumstances, the presumption is a rebuttable one, which can be refuted by evidence that ethical screening will effectively prevent the sharing of confidences in a particular case." (Kirk, supra, 183 Cal.App.4th at pp. 800-801, fn. omitted.)
Taking the unusual step of accepting additional evidence on appeal, the Kirk court also noted that Cohen, having been at Sonnenschein for approximately one year, had since departed. (Kirk, supra, 183 Cal.App.4th at pp. 815-816.) "[O]nce the tainted attorney has left the firm, vicarious disqualification is not necessary `where the evidence establishes that no one
The court ultimately reversed and remanded, directing the trial court to "determine whether Cohen's activities at the firm actually resulted in the improper transmission, directly or indirectly, of confidential information from Cohen to the First American team, or any other member of the Sonnenschein firm who may have worked on the related class actions. If (1) the Sonnenschein firm can overcome the rebuttable presumption that confidential information was transmitted, by offering sufficient evidence that confidential information was not, in fact, transmitted; and (2) the trial court, in the exercise of its discretion, concludes that the implicated policy considerations favor allowing Sonnenschein to remain as counsel, the trial court should deny the motion for disqualification. If, however, the trial court concludes that (1) Sonnenschein has not sufficiently rebutted the presumption that confidential information was transmitted, or (2) despite a finding that confidential information was not transmitted, the competing policy considerations nonetheless mandate disqualification of the entire firm under the circumstances, the trial court should grant the motion for disqualification. We express no opinion on the resolution of any of these questions, which are for the trial court to determine in the first instance." (Kirk, supra, 183 Cal.App.4th at p. 816, fn. omitted.)
Instead, we conclude the trial court must perform an analysis regarding whether confidential information was, indeed, transmitted from Selesnick to the attorneys working on the matter at Nixon Peabody. This is not an issue of loyalty — it is undisputed that none of Nixon Peabody's current attorneys representing the Fund owe a duty of loyalty to moving parties or the other real parties in interest. The question, then, is whether Selesnick's tenure at the
Our reasons for this are numerous. Of particular significance is that the facts in this case are significantly different from the typical "switching sides" scenario. In Henriksen and Dill, for example, the attorneys in question were still employed by their new firms at the time the court ruled on the disqualification motions, Selesnick was employed by Nixon Peabody for an incredibly brief period, approximately five weeks. He worked in a different office at the firm from the attorneys who were actively involved in the instant matter. The firm took steps to isolate Selesnick from the case, and there was evidence before the court that no confidential information was shared. Further, at this stage of the case, the Fund would be substantially prejudiced if it had to hire new counsel and bring them up to speed.
Further, the rationale behind automatic disqualification is substantially diminished when the attorney in question no longer works at the firm sought to be disqualified. Goldberg v. Warner/Chappell Music, Inc. (2005) 125 Cal.App.4th 752 [23 Cal.Rptr.3d 116], was an employment discrimination case. The plaintiff sought to disqualify defense counsel because the plaintiff had consulted with a partner at the firm six years earlier. That partner had left the firm before the litigation began. (Id. at pp. 754-755.) The trial court
The petition is granted. The order to show cause is discharged, and the stay is dissolved. Let a peremptory writ of mandate issue directing the superior court to vacate its order disqualifying the firm, and to consider all relevant facts and circumstances, as set forth in this opinion, in determining whether the motion to disqualify should be granted. Petitioners shall recover their costs.
O'Leary, P. J., and Ikola, J., concurred.