Truck Insurance Exchange v. Fireman's Fund Insurance
92 Cal. Daily Op. Serv. 4358, 6 Cal.App.4th 1050, 8 Cal. Rptr. 2d 228 (1992)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A law firm that knowingly undertakes adverse concurrent representation may not avoid automatic disqualification by unilaterally withdrawing from the representation of the less favored client before a motion for disqualification is heard. This maneuver does not convert the conflict from a concurrent representation issue, governed by a strict duty of loyalty, into a former representation issue, which would be subject to a 'substantial relationship' test.
Facts:
- In February 1990, Kaiser Cement Corporation and Kaiser Gypsum Company, Inc. (Kaiser), along with Truck Insurance Exchange (Truck), initiated a lawsuit seeking contribution from Fireman’s Fund Insurance Company (FFIC) and other insurers for defending and indemnifying Kaiser against third-party asbestos-related bodily injury lawsuits.
- At the time the lawsuit was initiated, Truck was represented by the law firm of Ropers, Majeski, Kohn, Bentley, Wagner & Kane (Ropers).
- For several months, the law firm of Crosby, Heafey, Roach & May (Crosby) had been defending Fireman’s Fund Credit Union, an entity related to FFIC, in two wrongful termination lawsuits.
- After Ropers was disqualified, Truck contacted Crosby, asking the firm to represent it in the insurance coverage case against FFIC.
- Crosby ran a computerized conflicts check, discovered its existing representation of Fireman’s Fund Credit Union (which made FFIC Crosby’s client), and informed FFIC of Truck's desire for representation by Crosby.
- Crosby offered FFIC an alternative: to withdraw from the two wrongful termination cases, assist in the transition to new counsel, and waive any fees for past services to eliminate the conflict.
- FFIC objected to Crosby concurrently representing Truck against it, explicitly denied consent, and stated its desire to have Crosby continue as its attorney in the wrongful termination cases.
- Despite FFIC's objection and denial of consent, Crosby accepted representation of Truck in the insurance coverage case against FFIC.
Procedural Posture:
- In February 1990, Kaiser Cement Corporation, Kaiser Gypsum Company, Inc., and Truck Insurance Exchange (Truck) commenced a lawsuit in a trial court against Fireman’s Fund Insurance Company (FFIC) and other insurers, seeking contribution.
- On January 11, 1991, the trial court granted FFIC’s motion to disqualify Truck's original law firm, Ropers, Majeski, Kohn, Bentley, Wagner & Kane (Ropers).
- On February 19, 1991, Crosby, Heafey, Roach & May (Crosby) filed a motion to withdraw as counsel for Fireman’s Fund Credit Union in the two wrongful termination cases.
- Also on February 19, 1991, FFIC filed a motion in the trial court to disqualify Crosby from representing Truck against FFIC in the insurance coverage case.
- On March 7, Crosby notified the trial court that substitute counsel had been retained and files transferred in the wrongful termination cases.
- On March 14, 1991, the trial court held a hearing on FFIC’s motion to disqualify Crosby.
- The trial court issued a tentative ruling, later reaffirmed, granting FFIC’s motion to disqualify Crosby, finding that Crosby was already representing FFIC when it undertook to represent Truck, and that a per se rule of disqualification applied.
- Truck appealed the trial court's order disqualifying Crosby to the California Court of Appeal.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a law firm that knowingly undertakes adverse concurrent representation avoid automatic disqualification by unilaterally converting an existing client into a former client prior to the hearing on a motion for disqualification?
Opinions:
Majority - REARDON, J.
No, a law firm that knowingly undertakes adverse concurrent representation does not avoid automatic disqualification by unilaterally converting an existing client into a former client prior to the hearing on a motion for disqualification. The court affirmed the trial court's order disqualifying Crosby, holding that Rule 3-310(B) of the Rules of Professional Conduct of the State Bar clearly prohibits an attorney from concurrently representing clients whose interests conflict without their informed written consent. Crosby violated this rule by undertaking representation of Truck against FFIC while still representing FFIC (through its affiliate Fireman’s Fund Credit Union) and without FFIC's consent. The court emphasized that the principle precluding representation adverse to a current client is based on the need to assure the attorney’s undivided loyalty and commitment, not primarily on the concern for confidential information, which is the focus of conflicts involving former clients. The court reasoned that allowing a law firm to convert a present client into a 'former client' by unilaterally withdrawing after a conflict arises would incentivize unethical behavior and allow firms to drop less profitable clients for more lucrative, conflicting representations. This tactic, often referred to as a 'hot potato' strategy, undermines public confidence in the legal profession. The court explicitly rejected the argument that an exception should be made for large law firms or 'inadvertent' conflicts, noting that Crosby's actions were deliberate in creating the conflict.
Analysis:
This case establishes a firm precedent against law firms manipulating their client relationships to avoid disqualification when a conflict of interest arises. By reaffirming the 'per se' rule for concurrent representation and rejecting the 'hot potato' tactic, the court reinforces the paramount duty of loyalty owed to current clients. This decision provides clear guidance that knowingly creating a conflict by representing a new client against an existing one, and then attempting to cure it by withdrawing from the existing client, will not be tolerated. It underscores the judiciary's commitment to protecting the integrity of the attorney-client relationship and maintaining public confidence in the legal profession.
