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July 27, 2010

Great Lakes Construction, Inc. v. Burman (2010) 186 Cal.App.4th 1347

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The Second District holds that a party has no standing to seek disqualification of an opponent’s attorney absent a prior attorney-client or other confidential relationship with that attorney.   

Maartje Burman posted internet comments criticizing Great Lakes Construction, Inc. and Hampton Builders for their work on her home remodeling project.  They filed suit alleging libel, breach of contract, and common counts.  The Burmans filed a cross-complaint against Great Lakes and Hampton as well as their design professionals alleging breach of contract and design and construction defects.  The Burmans alleged that Hampton failed to pay its subcontractor, Kipers, who placed a lien on the project.  Kipers filed a cross-complaint against Hampton for breach of an oral contract and common counts.  Hampton filed a cross-complaint against Kipers asserting breach of a written contract that contained an express indemnity provision. The Burmans and Kipers were jointly represented by Bruce Graham.

Based on Kipers’ deposition testimony, Hampton’s attorney believed that Kipers had not been informed about the potential conflict arising from the dual representation.  Hampton and the design professionals moved to disqualify Graham based upon what they believed was an actual conflict in the joint representation.  The motion was granted.   

The Court of Appeal noted that disqualification motions involve a balance between the clients’ right to counsel of their choice and the need to maintain ethical standards of professional responsibility.  In concurrent or joint representation cases, the court is concerned with the attorney’s duty of loyalty.  Rules of Professional Conduct 3-310(C)(1) and (2) preclude dual representation of clients with potential or actual conflicts absent informed written consent.   

However, the Court of Appeal questioned the standing of an adversary to disqualify its opponent’s counsel.  Standing requires that the plaintiff be able to allege injury, that is, an invasion of a legally protected interest.  Thus, the party moving for disqualification must have a current or past attorney-client relationship with the attorney.  Absent a prior attorney-client relationship, the moving party must have an expectation of confidentiality based on a prior confidential or fiduciary relationship. 

A non-client does not have standing to disqualify opposing counsel to ensure the integrity of the process and the fair administration of justice.  The non-client must show a concrete, particularized, actual or imminent invasion of a legally protected interest.  This protects against the strategic exploitation of the rules of ethics and guards against improper use of disqualification as a litigation tactic. 

Hampton did not have any legally cognizable interest harmed by Graham’s joint representation of its adversaries.  Kipers’ indemnification obligation did not provide Hampton with a personal stake because only the Burmans and Kipers would be harmed by Graham’s divided loyalties, an issue between Graham and his clients. 

An ethical breach of the duty of loyalty by Graham to his clients did not affect a just determination of Hampton’s claims against either the Burmans or Kipers.   Even if Kipers is misaligned with the Burmans due to the indemnification provision, Hampton and Kipers is not a better alignment because they are actual adversaries in the litigation.  Graham’s dual representation does not affect Hampton Builder’s right to a legal determination on its claims against either party.  Hampton’s concern that the joint representation will leave Kipers unable to pay a judgment and render Hampton liable to the Burmans is speculative and not sufficient to give Hampton standing.  The designers had no argument to establish standing.   

The Court of Appeal found that the Burmans and Kipers were free to choose Graham to jointly represent them and to take appropriate steps if and when the joint representation no longer served them.   

Comment:  Courts are reluctant to disrupt attorney-client relationships at the behest of a non-client.  In addition, the court was likely influenced by the specter of numerous disqualification motions filed by adversaries as a litigation tactic.

 

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