In California Self-Insurer’s Security Fund et al. v. The Superior Court of Orange County (1/26/2018 – No. G054981), the Fourth Appellate District considered whether vicarious disqualification of a law firm is mandatory or discretionary where an attorney with a conflict joins a firm and the firm enacts an ethical screen to prevent transmission of confidential information between the new attorney and the rest of the firm.
This case arose from an effort by the California Self-Insurer’s Security Fund (the “Fund”) to be reimbursed for workers’ compensation benefits advanced on behalf of the Healthcare Industry Self-Insurance Program (the “Program”). The Fund hired Nixon Peabody LLP (“Nixon Peabody”) to represent it in connection with this matter. In November 2013, represented by members of Nixon Peabody’s San Francisco office, the Fund filed a lawsuit naming 304 members of the Program as defendants. Approximately 170 defendants have since settled.
Two of the non-settling defendants (“Moving Parties”), were represented by Michelman & Robinson, LLP (“M&R”). From approximately 2009 until February 1, 2017, attorney Andrew Selesnick served as Chair of M&R’s Health Care Department at the firm’s Los Angeles office, managing a team of attorneys who represented clients in the healthcare industry. Commencing in 2014, a team of four attorneys at M&R, including Selesnick, represented the Moving Parties and four other defendants, the latter of whom have since settled. Selesnick was actively involved, including participating in a confidential discussion pertaining to Moving Parties’ liability and damages and receiving many e-mails containing communications about the common defense of the remaining 170 defendants.
On or about February 1, 2017, Selesnick left M&R and joined Nixon Peabody’s Los Angeles office. Nixon Peabody was promptly advised of the potential conflict issue by M&R. Approximately five weeks later, on or about March 8, 2017, Selesnick left Nixon Peabody.
On March 15, 2017, the Moving Parties filed a Motion to Disqualify Nixon Peabody, arguing its disqualification was required for two reasons. First, Selesnick had done prior work for the Moving Parties in the same action, and as a result, Nixon Peabody and all its attorneys had a conflict of interest as a matter of law. Second, Selesnick had received confidential information about the Moving Parties while at M&R. Numerous other defendants filed joinders to this motion.
In response, Nixon Peabody argued disqualification was not required because Selesnick had already left Nixon Peabody (after only five weeks), Nixon Peabody’s ethical wall had prevented current Nixon Peabody attorneys from receiving confidential information from Selesnick, and the Fund would be prejudiced if Nixon Peabody were disqualified.
In granting the disqualification motion, the trial court concluded that disqualification was mandatory because Selesnick had previously personally represented the two Moving Parties as well as four other defendants who had settled, and that when an attorney “switches sides” no amount of ethical screening can save the representation.
On appeal, the Fund and Nixon Peabody argued that vicarious disqualification was discretionary and could be avoided by demonstrating the disqualified attorney left the firm before the Motion to Disqualify was decided and no confidential information had been transmitted. In response, the Moving Parties argued that disqualification was required by the bright-line rule set forth in Henriksen v. Great American Savings & Loan (1992) 11 Cal.App.4th 109 (“Henriksen”), which held that “where an attorney is disqualified from representation, the entire law firm is vicariously disqualified as well,” especially where “the attorney’s disqualification is due to his prior representation of the opposing side during the same lawsuit.”
In evaluating this argument, the Fourth Appellate District conducted an extensive discussion of Kirk v. First American Title Ins. Co. (2010) 183 Cal.App.4th 776 (“Kirk”), which reviewed California’s history of the law of vicarious disqualification. In doing so, the court agreed with the Kirk Court’s analysis that the California Supreme Court had not addressed whether vicarious disqualification is absolute and that the proper test was “a case-by-case analysis based on the circumstances presented in, and policy interests implicated by, the case . . . tempered by the Henriksen rule that vicarious disqualification should be automatic in cases of a tainted attorney possessing actual confidential information from a representation, who switches sides in the same case.” In endorsing this test, the court emphasized that courts should have discretion to avoid the unnecessary harshness created by a bright-line rule that may not be necessary or appropriate. As a result, the court remanded the matter with instructions for the trial court to determine whether Selesnick transmitted confidential information to the attorneys working on the matter during his short tenure at Nixon Peabody.
This case is significant for two reasons. First, it clarifies the standard for law firms’ vicarious disqualifications due to a newly hired attorney’s confidential knowledge. Second, it emphasizes the importance for large law firms of maintaining accurate and current conflicts databases and to enact effective ethical screening after conflicts have been identified. Although not addressed in the opinion, making full disclosures and seeking appropriate waivers of conflicts where the “tainted attorney” moving to the adversary firm will have no role in the former case at his or her new firm and can be effectively screened from any involvement or cross-pollination with the subject litigation, should be considered although where confidential information has already been shared with the “tainted attorney,” such an approach is not likely to succeed.
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