CITY AND COUNTY OF SAN FRANCISCO et al., Plaintiffs and Appellants, v. COBRA SOLUTIONS, INC., et al., Defendants and Respondents.
No. S126397
Supreme Court of California
June 5, 2006.
38 Cal.4th 839 | 43 Cal.Rptr.3d 771 | 135 P.3d 20
COUNSEL
Dennis J. Herrera, City Attorney, Jesse C. Smith, Chief Assistant City Attorney, Therese M. Stewart, Chief Deputy City Attorney, Claire Sylvia and Ellen Forman, Deputy City Attorneys, for Plaintiffs and Appellants.
Bill Lockyer, Attorney General, Jacob Appelsmith, Assistant Attorney General, Barbara J. Seidman and Kenneth L. Swenson, Deputy Attorneys General, as Amici Curiae on behalf of Plaintiffs and Appellants.
Ann Miller Ravel, County Counsel (Santa Clara) and Lizanne Reynolds, Deputy County Counsel, for County of Santa Clara, California State Association of Counties and League of California Cities as Amici Curiae on behalf of Plaintiffs and Appellants.
Steven M. Woodside, County Counsel (Sonoma) for California State Association of Counties and League of California Cities as Amici Curiae on behalf of Plaintiffs and Appellants.
Akin Gump Strauss Hauer & Feld, Rex S. Heinke, Edward P. Lazarus and Seth M. M. Stodder for Children‘s Law Center of Los Angeles as Amicus Curiae on behalf of Plaintiffs and Appellants.
Keker & Van Nest, Gonzalez & Leigh, Ethan A. Balogh, G. Whitney Leigh, Nima Nami, Bryan W. Vereschagin, Rita A. Hao, Juan Enrique Pearce and Eumi K. Lee for Defendants and Respondents.
David C. Coleman, Public Defender (Contra Costa) and Ron Boyer, Deputy Public Defender, for California Public Defenders Association as Amici Curiae.
OPINION
KENNARD, J.—A company seeking contracts for information technology services to a city retained a small private law firm. Two attorneys in the firm provided various services to the company, advising it about doing business with the city. Fifteen months later, one of those attorneys successfully won election as the city attorney. Before taking office, the new city attorney announced he would personally not participate in any case involving a client of his former law firm.
Fifteen months after the new city attorney was sworn in, his office named the company as a defendant in a complaint seeking damages for the city on allegations of fraud, statutory violations, and breach of contract. The company sought to disqualify the city attorney‘s entire office, arguing that as its former attorney he had obtained confidential information about it that precluded him, and the public office he now headed, from representing the city against it in a matter substantially related to the city attorney‘s former representation of the company. The trial court disqualified the city attorney and his office. The Court of Appeal upheld that ruling in a two-to-one decision. We affirm the Court of Appeal.
I. BACKGROUND
The facts and dates recited here are drawn from declarations and exhibits submitted on the motion to disqualify and from a written contract between the City and County of San Francisco (hereafter City) and Cobra Solutions, Inc., and TeleCon Ltd., two California corporations. Cobra Solutions is in the business of providing “computer products, accessories and related professional services.” On October 1, 1998, the related entities of Cobra Solutions and TeleCon Ltd. entered into a contract with the City—the so-called City Store Contract—which qualified them to bid on contracts for technology goods and services provided to various City departments, including the department of building inspection.
In September 2000, Cobra Solutions retained the law firm of Kelly, Gill, Sherburne and Herrera, seeking advice on difficulties the company had encountered in performing a City contract with the department of building inspection (Department). According to James Brady, the president and chief executive officer of Cobra Solutions, the law firm continued to represent it “in all matters” until December 2001, and it also provided legal services for TeleCon “on several occasions.”
In September of 2001, then City Attorney Louise Renne began investigating contracts for computer services entered into by the Department. The investigation revealed irregularities in payments made to Marcus Armstrong, a Department employee.
On the same day the complaint was filed the City Attorney‘s office issued a press release under the heading, “HERRERA NAMES TOP BUILDING DEPARTMENT OFFICIAL, TECHNOLOGY VENDORS IN MAJOR PUBLIC CORRUPTION SUIT.” In that press release, City Attorney Herrera denounced “Mr. Armstrong and his cronies” for betraying “a public trust,” and asserted that “[p]ublic corruption diminishes the confidence of our citizens in their government.” According to the press release, the lawsuit was the product of “a yearlong investigation by the City Attorney‘s Public Integrity Task Force,” which Herrera created on taking office and which he described as a “vehicle for civil law enforcement enabling us to aggressively pursue those who would violate the public trust.”
Because the allegations in the City‘s lawsuit implicated Armstrong in possible criminal misconduct, the City Attorney‘s Office referred the matter to the United States Attorney for the Northern District of California. The federal prosecutor filed criminal charges against Armstrong, who later pleaded guilty to federal charges of mail fraud, wire fraud, and obstruction of justice.
In March 2003, the City‘s investigators discovered that Armstrong had deposited more than $240,000 in checks from Cobra Solutions into the bank account of a fictitious business entity he created. When City Attorney Herrera learned that the investigation implicated his former client Cobra Solutions in the kickback scheme, he took measures to screen himself from the case to the extent that it could involve the former client. To maintain the ethical screen, attorneys working on the case were directed to report to Chief Assistant City Attorney Jesse Smith and not to discuss the case with Herrera. Those attorneys maintained locked files and computerized records that were inaccessible to Herrera.
On April 21, 2003, the City filed an amended complaint adding Cobra Solutions and TeleCon Ltd. as defendants. In addition to causes of action for
Cobra moved to disqualify from the litigation its former counsel Herrera and the City Attorney‘s Office he heads. In support of the motion, Cobra submitted a bill dated April 13, 2001, showing a charge of four-tenths of an hour attributable to Herrera‘s “[r]eview of City Store contract document.” Cobra‘s president asserted that he and his employees disclosed to Gill and to Herrera “confidential aspects of Cobra‘s business” in the course of a representation that was “broad” enough to include “advocacy with City officials,” review of contracts, advice on corporate structure, and drafting of standard agreements, forms, and policies. After a hearing, the trial court granted Cobra‘s disqualification motion, finding that City Attorney Herrera, while in private practice, had personally represented defendants, and that during that representation he had “obtained confidential information” regarding “matters related substantially to the issues raised against defendants in this litigation.” The trial court concluded that Herrera‘s conflict must be imputed to the entire City Attorney‘s Office because “the personally-conflicted counsel is the head” of that office, and “each of his deputies serves at his pleasure,” subjecting them “necessarily to his oversight and influence.” Accordingly, the trial court ordered the City to “retain outside independent counsel to litigate this matter.” The City Attorney appealed.
In a two-to-one decision, the Court of Appeal upheld the trial court‘s ruling. It concluded that when “an attorney leaves private practice to become the head of a public law office” the “vicarious disqualification of the entire public law office generally is required in all matters substantially related to the head of the office‘s earlier private representations.” The dissenting justice saw no need to recuse the entire government law office as long as the personally conflicted City Attorney had been shielded by an “effective ethical screen.” The majority rejected that view, but it acknowledged the existence of “sound reasons” against automatically imputing the conflict of one attorney to an entire government law office. Because it was unnecessary to reach the issue, the majority expressly refrained from deciding whether an ethical screen might suffice to avoid office-wide disqualification when a conflicted attorney comes from private practice into a government law office to assume a subordinate post, but it held that when, as here, the conflicted attorney
II. RELEVANT LAW
The authority of a trial court “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.‘” (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145 (SpeeDee), quoting
When disqualification is sought because of an attorney‘s successive representation of clients with adverse interests, the trial court must balance the current client‘s right to the counsel of its choosing against the former client‘s right to ensure that its confidential information will not be divulged or used by its former counsel.
Two ethical duties are entwined in any attorney-client relationship. First is the attorney‘s duty of confidentiality, which fosters full and open communication between client and counsel, based on the client‘s understanding that the attorney is statutorily obligated (
The interplay of the duties of confidentiality and loyalty affects the conflict of interest rules that govern attorneys. An attorney who seeks to simultaneously represent clients with directly adverse interests in the same litigation will be automatically disqualified. (Flatt, supra, 9 Cal.4th at p. 284, fn. 3.) Moreover, an attorney may not switch sides during pending litigation representing first one side and then the other. (City of Santa Barbara v. Superior Court (2004) 122 Cal.App.4th 17, 23.) That is true because the duty to preserve client confidences (
Although the rules governing the ethical duties that an attorney owes to clients are set out in the California Rules of Professional Conduct, those rules do not address when an attorney‘s personal conflict will be imputed to the attorney‘s law firm resulting in its vicarious disqualification. Vicarious disqualification rules are a product of decisional law. (Henriksen v. Great American Savings & Loan (1992) 11 Cal.App.4th 109, 114.) Normally, an attorney‘s conflict is imputed to the law firm as a whole
III. ANALYSIS
The trial court found, and it is undisputed here, that City Attorney Herrera had a conflict based on his having previously represented, in private practice, the Cobra defendants “during which representation he obtained confidential information” from them “in matters related substantially to the issues raised against [them] in this litigation.” The trial court further found that each of the City Attorney‘s deputies “serves at [the] pleasure” of the City Attorney and thus “is subject necessarily to his oversight and influence.”
“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.]” (SpeeDee, supra, 20 Cal.4th at pp. 1143-1144.) Here there is no factual dispute, and we review independently the Court of Appeal‘s legal conclusion that the City Attorney‘s personal conflict is properly imputed to the Office of the City Attorney and requires its disqualification.
The City contends that the vicarious disqualification of its entire city attorney‘s office is neither compelled nor justified by prior court decisions involving government law offices. It relies on People v. Christian (1996) 41 Cal.App.4th 986 (Christian). There the Court of Appeal held there was no actual conflict when two attorneys, both supervised by the Contra Costa County Public Defender, in a joint trial represented two criminal codefendants who had potentially conflicting interests. (Id. at p. 1001.) The public defender oversaw two independent government law offices—the public defender‘s office and an alternate defender‘s office. (Id. at
In an analogous case, Castro v. Los Angeles County Bd. of Supervisors (1991) 232 Cal.App.3d 1432 (Castro), a single executive director headed a nonprofit corporation with three separate public law units providing service to parents and children in dependency proceedings. The Court of Appeal in Castro concluded that there would be no conflict if attorneys from each unit were to simultaneously represent clients from a single family whose interests were divergent. (Id. at pp. 1439, 1441-1444.) In Castro the autonomy of each law unit was ensured because the chief attorney in each unit initiated hiring, firing, and salary changes for that unit‘s attorneys. (Id. at p. 1438.) In both Castro and Christian, supra, 41 Cal.App.4th 986, the separate law units under a single governmental umbrella operated as separate law firms independent of parallel units also sheltered under that umbrella. Both Castro and Christian addressed conflicts arising from simultaneous representation, unlike the successive representation conflict before us. But both cases were decided in the wake of the Court of Appeal‘s decision in Younger v. Superior Court (1978) 77 Cal.App.3d 892 (Younger).
Younger was a successive representation case in which the Court of Appeal upheld the disqualification of the entire Los Angeles County District Attorney‘s Office in the prosecution of a criminal defendant. (Younger, supra, 77 Cal.App.3d at pp. 896–897Id. at pp. 894-895.) When Cochran assumed his new post, the district attorney‘s office adopted procedures designed to screen
Notwithstanding the ethical screen erected between Cochran and the prosecution of defendants formerly represented by his law firm, the Court of Appeal upheld the vicarious disqualification of the entire Los Angeles County District Attorney‘s Office. It noted that Cochran‘s “presence” in a job “near the top” of the office‘s hierarchy “could possibly affect” the office‘s prosecution of his firm‘s former clients. (Younger, supra, 77 Cal.App.3d at p. 897Ibid.) In addition, Cochran‘s role in the appraisal and promotion of deputies necessarily required him to evaluate the performance of deputies prosecuting his firm‘s former clients. The Court of Appeal explained: “A deputy handling one or more of such cases would not in all probability forget Cochran‘s former professional association” with the defense of those cases. (Ibid.) Even absent any impropriety, the Court of Appeal cautioned, public perception of the prosecutor‘s integrity and impartiality would be at risk unless the entire office was disqualified. (Ibid.)
The disqualification standard that the Court of Appeal applied in Younger no longer controls criminal prosecutions because the Legislature in 1980 enacted
