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End-of-life notice: American Legal Ethics Library

As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.

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California Legal Ethics

1.9   Rule 1.9 Conflict of Interest: Former Client

1.9:100   Comparative Analysis of CA Rule

Primary California References: CRPC 3-310
Background References: ABA Model Rule 1.9, Other Jurisdictions
Commentary:

1.9:101      Model Rule Comparison

CRPC 3-310(E) forbids representation without the former client’s informed consent where the “member obtained confidential information material to the employment.” MR 1.8(b) (dealing with use of confidential information of a former client) and MR 1.8(a) (prohibiting an adverse representation against a former client in a substantially related matter) employ different language but have much the same effect. Disclosure of the conflict to the former client and the consent of the client must both be in writing under the California rule. See CRPC 3-310(B) and (E).

1.9:102      Model Code Comparison

Because there was no counterpart to CRPC 3-310(E) in the Model Code, the comparison between the Model Rule and the Model Code at pages 145 and 146 of the Annotated Model Rules, combined with the discussion of the Model Rules supra [see 1.9:101 Model Rule Comparison, supra] above, provides an apt description of the difference between the California rules on this topic and the Model Code:

There was no counterpart to [MR 1.9] in the Disciplinary Rules of the Model Code. Representation adverse to a former client was sometimes dealt with under the rubric of Canon 9 of the Model Code, which provided: “A lawyer should avoid even the appearance of impropriety.” Also applicable were EC 4-6 which stated that the “obligation of a lawyer to preserve the confidences and secrets of his client continues after the termination of his employment” and Canon 5 which stated that “[a] lawyer should exercise independent professional judgment on behalf of a client.

The provision for waiver by the former client in paragraphs (a) and (b) is similar to DR 5-105(C).

The exception in the last clause of paragraph (c)(1) permits a lawyer to use information relating to a former client that is in the “public domain,” a use that was also not prohibited by the Model Code, which protected only “confidences and secrets.” Since the scope of paragraphs (a) and (b) is much broader than “confidences and secrets,” it is necessary to define when a lawyer may make use of information about a client after the client-lawyer relationship has terminated.

1.9:200   Representation Adverse to Former Client--In General

Primary California References: CRPC 3-310, B&PC § 6068
Background References: ABA Model Rule 1.9(a), Other Jurisdictions
Commentary: ABA/BNA § 51:201, ALI-LGL § 213, Wolfram § 7.4

Case law in California dealing with former client conflicts reflects the same general approach that was codified in MR 1.9: A lawyer may not represent another person in the same or a substantially related matter adverse to a former client unless the former client gives informed consent. See CRPC 3-310(E), prohibiting a lawyer from “accept[ing] employment adverse to [a] former client” when the lawyer “has obtained confidential information material to the [subsequent] employment.” Former CRPC 4-101 (1975), with some variations in wording, contains a similar prohibition. The case law is cast in terms of the “substantial relationship” test. See H.F. Ahmanson & Co. v. Salomon Brothers, Inc. (2nd Dist. 1991) 229 Cal.App.3d 1445, 280 Cal.Rptr. 614 (a conclusive presumption arises that lawyer possesses confidential information adverse to the former client when the latter establishes a substantial relationship between the two matters; the “substantial relationship” test is analyzed in terms of three factors: factual similarity, legal similarity, and nature and extent of the lawyer’s involvement in the prior representation). See also Elan Transdermal Ltd. v. Cygnus Therapeutic Systems (N.D.Cal.1992) 809 F.Supp. 1383 (unnecessary for former client to establish that lawyer acquired material confidential information during the former representation if the two matters are substantially related and the current representation is adverse). See also Global Van Lines, Inc. v. Superior Court (4th Dist. 1983) 144 Cal.App.3d 483, 489, 192 Cal.Rptr. 609, 612 (matters handled by in-house counsel of 15 years tenure had substantial relationship with suit brought by such counsel when later in private practice).

CRPC 3-310(E) and its predecessor former CRPC 4-101 (1975) have been stated to implement the duty of the lawyer under B&PC § 6068(e) to “maintain inviolate the confidence, and at every peril to himself or herself preserve the secrets, of his or her client.” In the Matter of Charles Willie L. (2nd Dist. 1976) 63 Cal.App.3d 760, 132 Cal.Rptr. 840.

Generally speaking, a lawyer cannot unilaterally convert a present client into a “former client” in order to allow the lawyer to represent a new client against the former client. Truck Insurance Exchange v. Fireman’s Fund Insurance Company (1st Dist. 1992) 6 Cal.App.4th 1050, 8 Cal.Rptr.2d 228.

The representation by the former general counsel of a corporation of one of the contestants in a proxy fight was substantially related to the former general counsel’s representation of the corporation. Accordingly, such representation was prohibited by former CRPC 5. Goldstein v. Lees (2nd Dist. 1975) 46 Cal.App.3d 614, 120 Cal.Rptr. 253.

A twenty-seven year lapse between the former representation of a former client and the current representation of a current client did not preclude a finding of “substantial relationship” in a water rights dispute. River West, Inc. v. Nickel (5th Dist. 1987) 188 Cal.App.3d 1297, 234 Cal.Rptr. 33.

A law firm would not be disqualified under former CRPC 4-101 (1975) from representing its own senior partner in a lawsuit filed by FSLIC as receiver for an institution which the law firm had previously represented and of which the senior partner was previously a director. There was no reasonable expectation by the financial institution of secrecy vis-ą-vis the senior partner/director. Christensen v. United States Dist. Court for Cent. Dist. of Cal. (9th Cir. 1988) 844 F.2d 694. Where a lawyer had been representing a closely held corporation, the court found it “impossible to conceive of confidential information” which the lawyer could have received from the corporation that was different from information that he received from the controlling directors/shareholders. Accordingly, CRPC 3-310(E) did not preclude the lawyer from continuing to represent the directors/shareholders in a derivative action brought against them on behalf of the corporation. Forrest v. Baeza (1st Dist. 1997) 58 Cal.App.4th 65, 67 Cal.Rptr.2d 857. See also Cornish v. Superior Court (4th Dist. 1989) 209 Cal.App.3d 467, 257 Cal.Rptr. 383 (former CRPC 4-101 (1975)), where a contractor failed to establish that its communications made to surety’s counsel at the time that such counsel represented both surety and contractor were made in confidence with a reasonable expectation that communications would not be shared with surety. However, where county counsel represented a civil service commission which was statutorily a quasi-independent county agency, county counsel was disqualified under former CRPC 4-101 (1975) and former CRPC 5-102 (1975) from representing other governmental entities opposite the civil service commission. Civil Service Com. v. Superior Court (4th Dist. 1984) 163 Cal.App.3d 70, 209 Cal.Rptr. 159.

Even where the lawyers in a law firm who had been primarily responsible for the representation of a client had left the law firm, there was a rebuttable presumption that they had shared client confidences with lawyers remaining with the law firm. Because the law firm did not produce sufficient evidence to rebut the presumption of shared confidences, the law firm was disqualified from representing a new client opposite the former client in litigation substantially related to the prior representation. Elan Transdermal Ltd. v. Cygnus Therapeutic Systems (N.D. Cal. 1992) 809 F.Supp. 1383 (patent infringement action) (former CRPC 3-310(D) (1989), now CRPC 3-310(E)).

Because a trustee in bankruptcy for a debtor corporation exercises the power of management of the corporation, the trustee is entitled to require the disqualification of the corporation’s prior law firm from representing defendants in a lawsuit instituted by the trustee. However, where the bankruptcy debtor is an individual, the trustee is treated as a separate person and would not be entitled to disqualify the individual’s former law firm in such a situation. In re Jaeger (Bankr. C.D. Cal. 1997) 213 B.R. 578. In the Jaeger case, the court distinguished the Christensen case discussed above on the basis that the Christensen case dealt solely with former CRPC 4-101 (1975) and not with the duty of loyalty to a former client. The Jaeger court applied MR 1.9 as imposing both a duty of loyalty and a duty of confidentiality to a former client. It is unclear whether this would be a proper interpretation of CRPC 3-310(E), the California counterpart to MR 1.9.

CRPC 3-310(E) is not triggered when a lawyer sues a former client, because the lawyer is not representing a client adversely to the former client. In re Rindlisbacher (9th Cir. Bankr.) 225 B.R. 180, 183 n.4.

1.9:210      "Substantial Relationship" Test

As indicated above [see 1.9:200 Representation Contrary to Intent of Former Client In General, supra] the California courts have adopted a “substantial relationship” test with respect to the ability of a lawyer to undertake representation adverse to a former client. See H.F. Ahmanson & Co. v. Salomon Brothers, Inc. (2nd Dist. 1991) 229 Cal.App.3d 1445, 280 Cal.Rptr. 614; Global Van Lines, Inc. v. Superior Court (4th Dist. 1983) 144 Cal.App.3d 483, 192 Cal.Rptr. 609; Rosenfeld Construction Company, Inc. v. Superior Court (5th Dist. 1991) 235 Cal.App.3d 566, 286 Cal.Rptr. 609. As indicated in Ahmanson, the “substantial relationship” test is analyzed in terms of three factors: factual similarity, legal similarity and nature and extent of the lawyers involvement in the prior representation. If a substantial relationship is found, there is a conclusive presumption that the lawyer possesses confidential information adverse to the former client. The client need not prove the existence of confidential information. The present recollection of the lawyer is not the criterion on which the possession of confidential information is based. [See 1.9:200 Representation Contrary to Intent of Former Client In General, supra]. See also Civil Service Com. v. Superior Court (4th Dist. 1984) 163 Cal.App.3d 70, 79, 209 Cal.Rptr. 159, 165-166. In Ahmanson, a “substantial relationship” was not found.

In applying the “substantial relationship” test, “courts avoid becoming enmeshed in consideration of the number and importance of the confidences, the potential impact of their use in litigation, or the effect of disqualification upon the party.” River West, Inc. v. Nickel (5th Dist. 1987) 188 Cal.App.3d 1297, 1308, 234 Cal.Rptr. 33, 41. The River West court rejected the reasoning of the decisions in William H. Raley Co. v. Superior Court (4th Dist. 1983) 149 Cal.App.3d 1042, 197 Cal.Rptr. 232 and Elliott v. McFarland Unified School District (5th Dist. 1985) 165 Cal.App.3d 562, 211 Cal.Rptr. 802, to the extent that those cases should enlarge their inquiry by balancing the parties’ competing interests. In Elliott, the court had concluded that a lawyer who had initially represented two separate school districts as co-defendants in an action could continue to represent one school district with respect to cross-complaints between the school districts. The court held that (1) the objecting school district was deemed to have waived its right to disqualify the lawyer based on the presumption of a substantial relationship because it had signed a joint powers agreement and (2) there was no substantial evidence that the objecting school district had imparted confidential information to the lawyer.

Disqualification of a lawyer from representing a former client does not require proof of actual possession of confidential information. (Rosenfeld Construction Company, Inc. v. Superior Court (5th Dist. 1991) 235 Cal.App.3d 566, 575-77, 286 Cal.Rptr. 609; Western Continental Operating Co. v. Natural Gas Corp. of Calif. (1st Dist. 1989) 212 Cal.App.3d 752, 759, 261 Cal.Rptr. 100, 104; Global Van Lines, Inc. v. Superior Court (4th Dist. 1983) 144 Cal.App.3d 483, 489, 192 Cal.Rptr. 609, citing People ex rel. Deukmejian v. Brown (1981) 29 Cal.3d 150, 156, 172 Cal.Rptr. 478, 624 P.2d 1206; Woods v. Superior Court (5th Dist. 1983) 149 Cal.App.3d 931, 197 Cal.Rptr. 185; Trone v. Smith (9th Cir.1980) 621 F.2d 994, 999; Yorn v. Superior Court (1st Dist. 1979) 90 Cal.App.3d 669, 675, 153 Cal.Rptr. 295; In re Pacific Homes (Bankr. C.D. Cal. 1979) 1 Bankr. Rptr. 574, 581; Industrial Indem. Co. v. Great American Ins. Co. (2nd Dist. 1977) 73 Cal.App.3d 529, 535, 140 Cal.Rptr. 806.)

Applying the then DR, the Ninth Circuit found that there was a substantial relationship between a law firm’s prior representation of a client with regard to the proposed public offering of securities and the law firm’s later retention by a bankruptcy trustee to sue the former client for breach of fiduciary duty. Trone v. Smith (9th Cir. 1980) 621 F.2d 994. The resulting disqualification also applied to the ability of the law firm to represent the bankruptcy trustee in a suit against the other directors of the corporation because the interests of the other directors and the former client were inextricably intertwined.

Where a law firm has represented joint clients, it may be disqualified from subsequently representing one of the joint clients in a lawsuit against the other joint client if there is a “substantial relationship” between the two matters. The joint client exception rule would not apply if the client making the motion to disqualify had a reasonable expectation as to the confidentiality of its communications from the other joint client. Western Continental Operating Company v. Natural Gas Corporation of California (1st Dist. 1989) 212 Cal.App.3d 752, 261 Cal.Rptr. 100.

However, the “substantial relationship” test is not applicable in situations where there is no expectation by the former client that confidences would be kept from another client. Christensen v. United States Dist. Court for Cent. Dist. of Cal. (9th Cir. 1988) 844 F.2d 694 (where a law firm had previously represented corporation, it could later represent its own partner (who was a former director of the corporation) because the corporation had no grounds to believe that confidences would be kept from the partner in the law firm).

Where a litigant had twenty-minute conversation with a lawyer who referred her to someone else, the relationship with the lawyer was not substantial enough as to create a presumption that confidential information would have been passed to the lawyer. Hence, counsel for the litigant’s opposing party was not disqualified when such counsel became partners with the first lawyer. In re Marriage of Zimmerman (1st Dist. 1993) 16 Cal.App.4th 556, 20 Cal.Rptr.2d 132.

The fact that an associate in a law firm several years previously had prepared certain real estate documents with regard to a real estate project was not substantially related to a subsequent lawsuit in which the law firm was representing an opposing party to the real estate developer. In addition, the associate in the law firm had left the firm and taken the file with her before the present lawsuit was commenced. Kirk Corporation v. First American Title Company (3rd Dist. 1990) 220 Cal.App.3d 785, 270 Cal.Rptr. 24 (former CRPC 4-101) (1975).

In an action over the negligent testing of petroleum, a law firm’s representation of the plaintiff was found not to have a sufficiently substantial relationship to a prior matter in which the law firm had represented the defendant over a failure to follow instructions on the blending of petroleum products. Apex Oil Company, Inc. v. Wickland Oil Company (E.D. Cal. 1995) 1995 WL 293944.

In an action for child support brought by a wife against a husband, a lawyer’s prior representation of the husband with respect to certain business matters was not substantially related to the current action so as to disqualify the lawyer from representing the wife in the child support action. Johnson v. Superior Court (4th Dist. 1984) 159 Cal.App.3d 573, 205 Cal.Rptr. 605 (former CRPC 4-101 (1975)).

The representation of a bank in a lender liability lawsuit is substantially related to representing other parties against the bank in other lender liability suits. In addition, the “business thinking” of the bank regarding its lending practices is particularly important. In re California Canners and Growers (Bkrtcy.N.D.Cal. 1987) 74 B.R. 336.

In an action on behalf of minor children to appoint a receiver for an incarcerated parent’s property, a lawyer’s prior representation of the parent with regard to the drafting of a partnership agreement was not substantially related to the lawyer’s attempt through the receivership proceedings to preserve the partnership interest to assure a source for the parent to support his children. There was no evidence that any confidential information was gained or could have been gained by the lawyer when he prepared the partnership agreement which would bear upon the receivership and support action. The court noted that the lawyer had represented other parties in addition to the parent in the formation of the partnership. Quaglino v. Quaglino (2nd Dist. 1979) 88 Cal.App.3d 542, 549-550, 152 Cal.Rptr. 47, 51-52 (former CRPC 4-101 (1975)).

In some cases the substantial relationship with the matter is beyond question. For instance, the lawyer cannot assist the client in confirming a patent and then subsequently, acting on behalf of another client, state that he could show that the patent was procured by fraud. In re Boone (N.D. Cal. 1897) 83 F. 944.

Non-Attorney Employees

California applies a different standard to situations where non-attorney employees move from one firm to another. In a case of first impression, involving a paralegal who moved from one firm to another, the court in In re Complex Asbestos Litigation (1st Dist. 1991) 232 Cal.App.3d 572, 596, 283 Cal.Rptr. 732, 746-747 set forth the following standard:

Absent written consent, the proper rule and its application for disqualification based on nonlawyer employee conflicts of interest should be as follows. The party seeking disqualification must show that its present or past attorney’s former employee possesses confidential attorney-client information materially related to the proceedings before the court. [footnote omitted] The party should not be required to disclose the actual information contended to be confidential. However, the court should be provided with the nature of the information and its material relationship to the proceeding. [citations omitted] Once this showing has been made, a rebuttable presumption arises that the information has been used or disclosed in the current employment. . . . To rebut the presumption, the challenged attorney has the burden of showing that the practical effect of formal screening has been achieved.

Similarly, where a summer associate not yet admitted to the bar subsequently obtained employment as an attorney at the opposing law firm, the court applied a more relaxed test in considering whether disqualification of the entire second law firm was required. Instead of applying the automatic imputation rule applicable to lawyers [see 1.10:300 Removing Imputation by Screening, infra], the court applied a rebuttable presumption of shared confidences. Because the law firm could not rebut the presumption, it was disqualified. Actel Corporation v. QuickLogic Corporation (N.D. Cal. 1996), No. C 94-20054 JW, 1996 WL 297045.

1.9:220      Material Adversity of Interest

In Jacuzzi v. Jacuzzi Bros., Inc. (1st Dist. 1963) 218 Cal.App.2d 24, 32 Cal.Rptr. 188 the court held that a former lawyer for a corporation was not disqualified from representing minority stockholders in a derivative action unless there is some showing that in so doing the lawyer may be called upon to breach a professional confidence previously entrusted to him by a corporation.

1.9:230      Relevance of "Appearance of Impropriety" Standard [see also 1.7:230]

California had not adopted Canon 9 of the ABA Model Code concerning the appearance of professional impropriety. The “appearance of professional impropriety” standard was stated to be too imprecise to furnish a reliable judicial guideline and has not been the sole basis for disqualification in any California case. Gregori v. Bank of America (1st Dist. 1989) 207 Cal.App.3d 291, 305-306, 254 Cal.Rptr. 853, 862-863; In re Mortgage & Realty Trust (Bankr. C.D. Cal. 1996) 195 B.R. 740, 745, 757-758.

The law firm of a member of a city council may not represent tort plaintiffs in actions against the city, even with the informed consent of the city council. Nothing in CRPC would prohibit officials of the city from providing the consent required by former CRPC 4-101 (1975) or (former 5-102(B) (1975). However, although the city may waive the conflict of interest, the “appearance of impropriety” (ABA Model Code, Canon 9) would prohibit giving such consent. Notwithstanding the MR elimination of the “appearance of impropriety” standard, the standard should remain applicable to attorneys who are in public office. C.O.P.R.A.C. Op. 1981-63.

[See 1.10:103 Definition of “Firm” infra for discussion of Younger v. Superior Court].

1.9:300   Client of Lawyer's Former Firm

Primary California References: CRPC 3-310
Background References: ABA Model Rule 1.9(b), Other Jurisdictions
Commentary: ABA/BNA § 51:2001, ALI-LGL §§ 203, 204, 214, Wolfram § 7.6

The CRPC does not have a counterpart to MR 1.9(b). However, California may arrive at the same result through the imputation rules. While at the former firm, the confidential information of the lawyer’s colleagues will be automatically imputed to the lawyer. However, upon leaving the law firm, the lawyer will be deemed to have only that information about the client of the former firm which the migratory lawyer actually acquired. If there is such actual information, the lawyer would be disqualified under CRPC 3-310(E) unless the client gave its informed written consent. See Henriksen v. Great American Savings & Loan (1st Dist. 1992) 11 Cal.App.4th 109, 14 Cal.Rptr.2d 184.

1.9:310      Removing Imputed Conflict of Migratory Lawyer

With limited exceptions, California does not permit the removal of an imputed conflict by the use of screening devices. [See 1.10:300 Removing Imputation by Screening, infra].

1.9:320      Former Government Lawyer or Officer [see 1.11:200]

[See 1.11:200 Representation of Another Client by Former Government Lawyer, infra]

1.9:400   Use or Disclosure of Former Client's Confidences

Primary California References: CRPC 3-310
Background References: ABA Model Rule 1.9(c), Other Jurisdictions
Commentary: ABA/BNA § 55:501-55:2001, ALI-LGL § 213, Wolfram §§ 6.7 and 7.4

California does not have a counterpart to MR 1.9(c) in the CRPC. However, depending on the circumstances, CRPC 3-310(E) would prohibit the use of such information with respect to the representation of a different client. In addition, the common law duty of loyalty or fiduciary duty might restrict the use of the information to the disadvantage of the former client. Finally, the revelation to others of the information would be a breach of the attorney-client privilege.