Judge: Theodore R. Howard, Case: 21-1228385, Date: 2022-09-15 Tentative Ruling
The motion of defendant-in-intervention for an order to disqualify attorney Gary A. Perotin and his law corporation as counsel of record for the plaintiff in this action is DENIED.
Defendant-in-intervention contends that Perotin was formerly its corporate attorney between November 1999 and January 2011 and obtained confidential information about it. Perotin contends that he was never the attorney for the defendant-in-intervention, although he was a member of the board of directors.
Whether an attorney should be disqualified is a matter that is addressed to the sound discretion of the trial court. National Grange of Order of Patrons of Husbandry v. California Guild (2019) 38 Cal.App.5th 706, 713. In exercising that discretion, the trial court is required to make a reasoned judgment which complies with the legal principles and policies applicable to the issue at hand. Ibid.
An attorney may not represent a new client whose interests are adverse to those of a former client on a matter in which the attorney had obtained confidential information. National Grange of Order of Patrons of Husbandry v. California Guild, supra, 38 Cal.App.5th at p. 714. The purpose of this rule is to protect the confidential relationship that exists between attorney and client, a relationship which continues after the formal relationship ends. Ibid. Because the fiduciary nature of that relationship requires the application of strict standards, a former client may seek to disqualify a former attorney from representing an adverse party by showing that the former attorney possesses confidential information adverse to the former client. Ibid.
To obtain disqualification, the former client need not establish that the attorney actually possesses confidential information. National Grange of Order of Patrons of Husbandry v. California Guild, supra, 38 Cal.App.5th at p. 714. It is enough to show that there was a ‘substantial relationship’ between the subjects of the former and the current representation. Ibid. If the former client establishes the existence of a substantial relationship between the two representations, then the court will conclusively presume that the attorney possesses confidential information adverse to the former client and order disqualification. Ibid. If, however, the attorney represented the adverse party in a different case, then a case-by-case analysis based on the circumstances present in, and policy interests implicated by, the case is appropriate. Ibid.
California courts have recognized two different versions of the substantial relationship test, depending on whether the attorney's representation of the former client was “direct and personal” or “peripheral and attenuated.” Fiduciary Trust International of California v. Superior Court (2013) 218 Cal.App.4th 465, 479. If the representation was “direct,” i.e., the lawyer was personally involved in providing legal advice and services to the former client, the only question is whether there is a substantial relationship between the subject of the prior representation and the subject of the current representation. Ibid. If the answer is yes, “access to confidential information by the attorney in the course of the first representation (relevant, by definition, to the second representation) is presumed and disqualification of the attorney's representation of the second client is mandatory.” Ibid. If the attorney-client relationship was peripheral or attenuated, rather than direct and personal, the court will not presume the attorney received confidential information absent a showing that the attorney was in a position with respect to the client that he or she acquired confidential information material to the current representation. Ibid.
In this case, moving defendant-in-intervention has submitted evidence showing that Mr. Perotin represented it and its predecessor-in-interest and members of their board of directors from 1999 through 2011, including the formation of the defendant-in-intervention and the transition of the entity from the predecessor-in-interest (Melodyland). See Exhibit 3, which moving party describes as “[l]etters and emails relating to Melodyland Christian Center and Healing Word International prepared between 1999 and 2011.” Although Perotin filed the complaint on behalf of plaintiff “Healing Word International” and is designated as that organization’s agent for service of process according to moving party’s Exhibit 1, defendant-in-intervention contends that it – and not plaintiff – is the “true” Healing Word International.
The complaint in the instant action concerns funds held in a trust account by defendant Cheadle, who, according to moving defendant-in-intervention was the attorney for the defendant-in-intervention who replaced Mr. Perotin, from the sale of real property. Although the complaint does not allege when the sale of the real property occurred, Mr. Cheadle attests in his declaration that it occurred in 2017. (See declaration of Mr. Cheadle at 7:7-8.)
While Mr. Perotin disputes his representation of the defendant-in-intervention, it does appear that he was personally involved in providing it legal advice and services at least during its formation and up through 2011. The question then becomes whether there is a substantial relationship between the subject of the prior representation and the subject of the current representation. Although both plaintiff and the defendant-in-intervention claim to be the “true” Healing Word International, the subject of the dispute is the proceeds of the sale and who is entitled to them. There is no substantial relationship between Perotin’s representation of defendant-in-interest and the sale or its proceeds, which means that disqualification is not warranted.