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November 25, 2003

A.I. Credit Corp. v. Aguilar & Sebastinelli (2003) 113 Cal.App.4th 1072

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The First District holds that an attorney disqualified for violating conflict of interest ethical rules is not entitled to fees. 

Aguilar & Sebastinelli represented Richard W. Peterson for several years as his general business and claims counsel.  In 1993, the attorney client relationship deteriorated and Aguilar sued Peterson twice for attorney fees.

In 1995 AICCI won a judgment against Peterson and retained Aguilar to collect on the judgment.  Aguilar commenced collection proceedings and Peterson moved to disqualify the firm on grounds that it possessed confidential information.  The court found that Aguilar had a disqualifying conflict of interest and granted Peterson’s motion.  AICCI retained alternate counsel and settled with Peterson.  Aguilar then sought payment of its attorney fees from AICCI.

AICCI filed suit seeking a declaration that it did not owe Aguilar attorney fees because the firm was disqualified for violating an ethical obligation.  The trial court granted summary judgment in favor of AICCI.

The First District agreed, following the general rule that an attorney disqualified for violating an ethical obligation is not entitled to fees.  Even if AICCI was aware of the conflict and purposefully retained Aguilar because it sought an advantage in its dispute with Peterson, Aguilar could not collect a fee.  Courts will not enforce engagement agreements that violate ethical rules.

Comment: A.I. Credit continues the strand of cases that prohibit attorneys from any fee recovery when the ethical violation harms the present or former client or renders the proceeding unfair.

 

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