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December 5, 2006

Faughn v. Perez (2006) 145 Cal.App.4th 592

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The Fifth District holds that an attorney’s prior representation of a parent corporation and its affiliates in similar cases is not sufficient grounds for disqualification.

The Faughn family sued Bakersfield Memorial Hospital (Bakersfield) for medical malpractice involving birth injuries to their daughter.  Carl McMahan represented the Faughns and associated Marshall Silberberg into the case as trial counsel. 

Bakersfield is a California nonprofit corporation whose sole member is Catholic Healthcare West (CHW), a California nonprofit public benefit corporation.  CHW and its subsidiary corporations own approximately 40 hospitals and healthcare facilities.

Bakersfield moved to disqualify Silberberg because he had previously been retained by CHW to defend five separate birth injury cases on behalf of CHW and its affiliates.  In one case the claims manager learned that Silberberg had told the plaintiff’s counsel that CHW wanted to settle; the claims manager concluded this was based on Silberberg’s knowledge of information material to the evaluation and settlement of CHW cases in general.  Another claims manager stated the Silberberg exhibited an extensive knowledge of CHW’s policies and procedures concerning settlement and trial strategy.

Bakersfield asserted that Attorney Silberberg obtained confidential material information due to his past representation of CHW and its affiliated hospitals.  Silberberg countered that he had never represented Bakersfield or received confidential information about it.

The Court of Appeal Noted that Rule 3- 310(E) precludes an attorney from representing adverse interests in successive matters where the attorney has received confidential material information from a former client.

The former client can establish that the attorney has actual knowledge of material confidential information, but Bakersfield failed to prove this.

Disqualification is also warranted when an attorney is presumed to have acquired confidential information because of a substantial relationship between the prior representation and the current representation.  Representations are substantially related when information material to the evaluation, prosecution, settlement or accomplishment of the former representation is also material to the evaluation, prosecution, settlement or accomplishment of the current representation.

Bakersfield did establish that CHW paid its costs of defense and indemnity but the court concluded that this did not equate to control over the litigation by CHW.  The declarations did not support Bakersfield’s assertion that CHW directly controlled the litigation for all affiliated hospitals.  The inference from the declarations was that for some facilities individuals at those facilities had some control over the litigation.  No declaration asserted that the affiliates had no decision-making role and there was no information concerning who made decisions for Bakersfield.  There was no evidence that the persons who made decisions in the prior matters were also decision-makers in the current matter.

There was no substantial relationship based on CHW’s claims practices because the court would not infer from the evidence presented that CHW’s practices are uniformly applied throughout the hospital system or that they were being used in the present case.

Although the prior representations involved birth injuries and nursing negligence, there was no evidence that the training, practices, or procedures relevant to the prior cases was similar to the training, practices, or procedures relevant to the care given by Bakersfield.

A modified substantial relationship test is applied where an attorney was not directly involved in the prior representation.  Bakersfield asserted that Silberberg’s former law firm was retained in approximately 220 cases that involved the defense of CHW employees and member hospitals.  However, Bakersfield presented no evidence that Silberberg was in a position where it was reasonably likely he would have acquired confidential information material to his representation of plaintiffs.

Comment: Disqualification places a heavy burden on the party whose attorney is disqualified.  For this reason courts will require compelling evidence warranting disqualification before depriving a party of its right to counsel of its choice.

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