Peter Jarvis is a Partner and Trisha Thompson is an Associate in our Portland office.
In deciding a disqualification motion based on a conflict of interest resulting from a lateral hire, the U.S. District Court for the Eastern District of California recently adopted a screening-friendly approach in National Grange of the Order of Patrons v. California Guild, No. 2:16–201 WBS DB, 2017 WL 2021762 (E.D. Cal. May 12, 2017) and National Grange of the Order of Patrons v. California Guild, No. 2:14–676 WBS DB, 2017 WL 2021731 (E.D. Cal. May 12, 2017).1
Background
In National Grange, attorney Anthony Valenti laterally transitioned from the law firm Porter Scott, which represented the plaintiff in this case, to the Ellis Law Group, which represented the defendant in the case. While at Porter Scott, Valenti billed 26 hours to what the court found to be a substantially related action. As a result, the court concluded that Valenti himself was "tainted" and could not participate in the present litigation.
Porter Scott moved for the Ellis Law Group, as a whole, to be disqualified from representing the defendant in this action. In opposition, Ellis Law Group argued that the entire firm should not be disqualified because Valenti had been screened from participation in the matter. Porter Scott countered with proof that Valenti had been included on scheduling emails (an accident, according to the Ellis Law Group).
The Court's Opinion
The court reviewed the evidence and found that, although Ellis Law Group had "not been perfect in their efforts to isolate Valenti," there was proof that Valenti "has not actively participated in this case." The court decided against disqualification.
The court stated that it must apply California law when reviewing a motion to disqualify. It turned to Kirk v. First Am. Title Ins. Co., 183 Cal. App. 4th 776 (2d. Dist. 2010), as the most recent California appellate decision to address this kind of disqualification issue. The court construed Kirk to require a two-step process. First, the court must consider whether a particular laterally hired attorney is "tainted." If so, a rebuttable presumption arises that the tainted attorney has shared confidential information with others at the firm, and the court must determine if the tainted attorney's firm has rebutted that presumption. As already noted, the court found that Valenti was tainted but held that the screen rebutted the presumption of shared information. Therefore, the Kirk analysis did not require disqualification of the Ellis Law Group as a whole.
In so holding, the court stated that it was "guided in part by the Ninth Circuit's admonition" that courts should give consideration to a client's right to counsel of choice. The court also stated that the relevant issue was whether Valenti had, in fact, shared confidential information, and not the eight-lawyer size of the Ellis Law Group. As the court concluded, "Where, as here, the party whose counsel is at issue has offered extensive affidavit evidence indicating that its counsel has put in place ethical screening with respect to the attorney in question, and no evidence shows that the attorney has breached confidences, the need to maintain ethical standards of professional responsibility does not outweigh the party's right to choice of counsel."
Conclusion
It remains to be seen whether other U.S. District Courts in California – or, for that matter, California state courts – will follow National Grange. There can, however, be no doubt that to the extent that National Grange is followed, screening will be available in California as a defense to motions to disqualify based solely on prior work performed by laterally hired attorneys who have been timely and sufficiently screened.
Footnotes
1 This action began in 2014. Despite the court granting summary judgment to the plaintiff, further litigation – both in the same action and in at least one other – has continued. These two decisions provide the same analysis regarding the same firms and the same clients.
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