Good News for Ethical Walls and Screens
LACBA Update, November 2000
By Ira Spiro, LACBA Professional Responsibility and Ethics Committee. Spiro practices business and real estate law with Grebow, Yee & Spiro of Century City. He is also a member of the ethics committee of the State Bar of California and a member of the Administrative Office of the Courts’ working group drafting ethics standards for court-affiliated mediators. The views expressed are his own.
THE SCENARIO: A law firm seeks to represent Party A in a new legal matter. A lawyer in the law firm previously represented Party B, an opposing party in the new matter. The previous matter is substantially factually related to the new matter. Through her previous representation of Party B, the lawyer acquired confidential information about Party B that is substantially factually related to the new matter.
According to years of California precedent, the entire law firm is irrefutably presumed to have acquired confidential information from Party B that is material to the new matter, and therefore, the entire law firm is disqualified from representation adverse to Party B in the new matter. Rosenfeld Construction Co. v. Superior Court (1991) 235 Cal.App.3d 566; H.F. Ahmanson & Co. v. Salomon Bros. (1991) 229 Cal.App.3d 1445; Western Continental v. Natural Gas Corp. (1989) 212 Cal.App.3d 752; Klein v. Superior Court (1988) 198 Cal.App.3d 894; River West, Inc. v. Nickel (1987) 188 Cal.App.3d 1297; Elliott v. McFarland Unified School Dist. (1985) 165 Cal.App.3d 562; Woods v. Superior Ct. (1983) 149 Cal.App.3d 931; Global Van Lines, Inc. v. Superior Ct. (1983) 144 Cal.App.3d 483.
Can the law firm screen the lawyer from the new matter and thereby avoid disqualification of the firm from representation in the new matter?
Although no California appellate court has adopted the screening concept (except for former governmental lawyers), recently screening was approved by the federal courts in California. In re County of Los Angeles (Forsyth) (Aug. 31, 2000) 2000 WL 1228839 was a decision of the Court of Appeals for the Ninth Circuit by Judge Kozinski. It was an alleged police brutality case against the Los Angeles County Sheriff’s Department. Counsel for plaintiff was Yagman & Yagman & Reichmann. Reichmann, a partner, had been a U.S. Magistrate Judge who presided over settlement proceedings in other cases alleging brutality by the same Sheriff’s Department. The firm screened Reichmann from the Forsyth case. However, the court assumed that the previous Sheriff’s Department cases were substantially related to the present case, and thus presumed that Reichmann learned confidential information about the Department that was relevant to the present case.
The opinion discussed the recent California Supreme Court case of People ex rel Dept of Corps. v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, saying: "The supreme court nevertheless held that it ‘need not consider whether an attorney can rebut the presumption of shared confidences, and avoid disqualification, by...screening’ ...because the firm had failed to set up an effective screen. ...We read SpeeDee Oil as sending a signal that the California Supreme Court may well adopt a more flexible approach to vicarious disqualification." The Court held that the firm was not disqualified because it effectively screened Reichmann from the case.
Another recent federal case in California, San Gabriel Basin Water Quality Authority v. Aerojet-General Corporation, 105 F.Supp.2d 1095 (CD Cal, 2000) also held that screening would save a law firm from disqualification despite the presence in the firm of a lawyer who had confidential information about an adverse party. That case, however, might have limited application because of the "Cumis" Civil Code §2860 setting in which it arose.
Whether the Ninth Circuit is correct in reading a pro-screening signal from the California Supreme Court remains to be decided by the California courts. However, if a law firm wishes to take on a case in this context, the screening procedures should be adopted at the onset. The Yagman firm’s procedures are discussed in the second paragraph of Forsyth.