Maria Vista Estates v. Publisi

Filed 7/26/06 Maria Vista Estates v. Publisi CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

Plaintiff Maria Vista Estates (MVE) appeals from the order denying its motion to disqualify Smith and Tardiff, the law firm representing defendant Steven Puglisi. MVE sought to disqualify Robert Gundert, an attorney who later joined the Smith and Tardiff firm, and who had consulted with MVE before it sued Puglisi for breach of contract. We conclude that the trial court did not abuse its discretion. When MVE filed its motion, Gundert was no longer working for the firm and no confidential information had been disclosed to Smith and Tardiff. We affirm.

FACTS

In August of 2004, Erik Benham, an MVE partner, conferred with Gundert about a lawsuit MVE wanted to file. MVE was considering suing Puglisi, who had agreed to provide architectural services for MVE.

Gundert planned to leave his law practice and become a partner in the Smith and Tardiff law firm. Puglisi was a client of that firm. Attorney Neil Tardiff advised Gundert that there would be a conflict of interest if Gundert represented MVE and then became a partner.

In December of 2004, Gundert advised Benham that he could not represent MVE. In January, Gundert became a Smith and Tardiff partner.

On June 1, 2005, Puglisi advised Tardiff he had been served with a lawsuit. He was a defendant in a breach of contract and negligence action filed by MVE. On June 30, Gundert left the firm. On August 8, 2005, Smith and Tardiff formally appeared in this action on behalf of Puglisi by filing a petition to compel arbitration. On September 22, 2005, MVE filed a motion to disqualify the Smith and Tardiff firm because Gundert had been a partner there. In his declaration, Benham said he had discussed the "strengths and weaknesses" of MVE's case with Gundert. He gave Gundert a file from MVE's prior counsel on a related action involving MVE.

Puglisi opposed the motion. Tardiff, in his declaration, said "Gundert is no longer a member of the firm." Gundert "never discussed" the facts of the case with Tardiff or Bill Servey, the attorneys in the firm working on the case. On June 1, 2005, after learning that Puglisi had been served, Tardiff called the California State Bar ethics hotline. He said, "After informing the Ethics consultant of the facts, it was his opinion that a conflict could be avoided if I set up an 'ethical wall' according to the guidelines described in In re County of Los Angeles, 223 F.3d 990 (9th Cir. 2000). As an extra precaution, the Ethics consultant recommended that I keep the Puglisi file at my house."

Tardiff said he followed those recommendations and issued a memo on June 1, advising his staff 1) not to discuss the case with Gundert, 2) to follow procedures so Gundert would not have access to case documents, 3) the litigation file would remain at Tardiff's home, 4) documents to be filed would be given to Tardiff and removed from the office, 5) work prepared for the case would "not be placed on the network" to avoid the possibility that others might see it.

Gundert, in his declaration, said he "never discussed any aspect of this case with . . . Tardiff or anyone else from the Smith [and] Tardiff firm other than to discuss the preparation of this declaration." He "never reviewed" the files obtained from MVE's prior attorney. Servey, in his declaration, said he had not discussed the case with Gundert.

The trial court denied the motion. It found that an "ethical screen" was created between Gundert and the staff of Smith and Tardiff; Gundert "did not pass on confidential information" to anyone at Smith and Tardiff and the ethical screening was effective; Gundert "is no longer associated" with Smith and Tardiff, and "there is no danger" of passing on confidential information to that firm in the future. The court said Gundert could not represent Puglisi, but applying the doctrine of irrebutable presumption of imputed knowledge to disqualify Smith and Tardiff "no longer makes sense."

DISCUSSION

MVE contends the trial court erred by denying its motion to disqualify Smith and Tardiff. It claims there is an irrebutable presumption that Gundert's knowledge is imputed to the firm and consequently it is disqualified. We disagree.

The standard by which we review rulings on disqualification motions is abuse of discretion. (City of Santa Barbara v. Superior Court (2004) 122 Cal.App.4th 17, 22.) An attorney "should be disqualified for representing a party adverse to a former client where the attorney possesses confidential information that could be helpful to the new client and hurtful to the old." (Goldberg v. Warner/Chappell Music, Inc. (2005) 125 Cal.App.4th 752, 759 (Goldberg).) "The courts do not generally inquire into whether the attorney actually possesses confidential information. [Citation.]" (Ibid.) Instead, they decide if there is a substantial relationship between the current and former representations. If there is, it is presumed that the lawyer was in a position to receive confidential information and he or she is disqualified. (Ibid.)

The general rule is that the attorney's current law firm is also disqualified because his or her knowledge is imputed to the firm. (Goldberg, supra, 125 Cal.App.4th at p. 760.) This vicarious disqualification rule recognizes that attorneys who work together on a daily basis in the same office may inadvertently disclose or discover confidential information. (Id. at p. 762; City of Santa Barbara v. Superior Court, supra, 122 Cal.App.4th at p. 23.)

But here Gundert was not with Smith and Tardiff when MVE filed its disqualification motion. He had left the firm months earlier. "'. . . Once an attorney departs the firm . . . a blanket rule to prevent future breaches of confidentiality is not necessary . . . .' [Citation.]" (Goldberg, supra, 125 Cal.App.4th at p. 761.) The lawyer's presence, the source of the ethical dilemma, has been removed and the danger of his or her inadvertent future disclosure of secrets to the firm is gone. (Id. at p. 762.) "'. . . The court need no longer rely on the fiction of imputed knowledge to safeguard client confidentiality. Instead, the court may undertake a dispassionate assessment of whether and to what extent the attorney . . . was reasonably likely to have obtained confidential information . . . .' [Citation.]" (Id. at p. 761.) It may then make an assessment of whether the attorney "actually passed on confidential information." (Id. at p. 762.) If he or she did not, there is no basis for disqualification. (Ibid.)

Here the trial court found that Gundert had not disclosed confidential information to the firm and there was no danger of such disclosure in the future. Because Gundert left, "[w]e need not be concerned that he will inadvertently pass on confidential information to his colleagues in the future because he is no longer there 'in the lunch room . . . .'" (Goldberg, supra, 125 Cal.App.4th at p. 762.) The evidence supporting the trial court's findings is uncontradicted. No one at Smith and Tardiff had access to any information Gundert may have obtained from MVE. While at Smith and Tardiff, Gundert did not work on the case, and had no access to the firm's litigation file, documents or other information about the case. (Chambers v. Superior Court (1981) 121 Cal.App.3d 893, 903.)

Gundert did not represent MVE in litigation. He met with Benham, but ultimately decided not to take MVE's case. MVE claims that Gundert obtained files from its former lawyer containing "important confidential documents" and "attorney work product." But Gundert said he never reviewed those files and the trial court found Smith and Tardiff did not receive confidential information. Moreover, the court could reasonably infer Tardiff acted in good faith. He called the State Bar ethics hotline for guidance and followed its suggestions. He made sure that there was no discussion or disclosure of information about the case between his staff and Gundert. (City of Santa Barbara v. Superior Court, supra, 122 Cal.App.4th at p. 27; Chambers v. Superior Court, supra, 121 Cal.App.3d at p. 903.) Gundert left before Smith and Tardiff formally appeared in this action on August 8.

MVE contends the trial court erred by approving an ethical screen between Gundert and the firm. It notes that only in cases involving public sector attorneys have California courts utilized this procedure. (See, e.g., City of Santa Barbara v. Superior Court, supra, 122 Cal.App.4th at p. 27.) But in those cases, courts approved prospective ethical walls to prevent disclosure of confidential information. They adopted these measures to isolate attorneys with conflicts and allow the firm to continue litigation while those lawyers stayed in the office throughout the case. (Ibid.) Here Smith and Tardiff were not asking the court to approve such a procedure. It was unnecessary because Gundert was not with the firm. The court had to decide only whether Gundert had passed on confidential information. (Goldberg, supra, 125 Cal.App. 4th at p. 765.) By ruling that he did not, it made the required finding. (Ibid.) Its language about an ethical screen was dicta. We need not reach the issue of the validity of the ethical screen doctrine to decide this case.

Moreover, the trial court also properly considered Puglisi's interest. It noted that he had been a client of Smith and Tardiff for 15 years. "The vicarious disqualification of an entire firm can work harsh and unjust results" for the firm's clients. (In re County of Los Angeles, supra, 223 F.3d at p. 996.) "[T]o apply the remedy of disqualification 'when there is no realistic chance that confidences were disclosed would go far beyond the purpose' of the substantial relationship test." (H. F. Ahmanson & Co. v. Salomon Brothers, Inc. (1991) 229 Cal.App.3d 1445, 1455.) There was no abuse of discretion.

The order is affirmed. Costs awarded to respondent.

NOT TO BE PUBLISHED.

GILBERT, P.J.

We concur:

COFFEE, J.

PERREN, J.

Martin J. Tangeman, Judge

Superior Court County of San Luis Obispo

______________________________

Law Offices of Robert D. Reed, Robert D. Reed and Aaron B. Smith for Plaintiffs and Appellants.

Smith & Tardiff and Neil S. Tardiff for Defendant and Respondent.

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