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Great Lakes Construction, Inc. v. Burman

July 27, 2010

GREAT LAKES CONSTRUCTION, INC. ET AL., PLAINTIFF, CROSS-DEFENDANTS, CROSS-COMPLAINANTS AND RESPONDENTS,
v.
JIM BURMAN ET AL., DEFENDANTS, CROSS-COMPLAINANTS, CROSS-DEFENDANT AND APPELLANTS.
THE DRAFTSMAN PLANNING AND DESIGN ET AL., CROSS-DEFENDANTS AND RESPONDENTS.



APPEAL from an order of the Superior Court of Los Angeles County, Joseph R. Kalin, Judge. Reversed and remanded. (Los Angeles County Super. Ct. No. BC397732)

The opinion of the court was delivered by: Aldrich, J.

CERTIFIED FOR PUBLICATION

INTRODUCTION

Attorneys who jointly represent clients in the same action owe a duty of undivided loyalty to each of their clients and are subject to disqualification if an unwaivable conflict exists arising from the joint representation. We address whether a non-client may enforce this duty of loyalty and move to disqualify opposing counsel. In this case, the parties seeking disqualification were not present clients, former clients, or prospective clients, and they had no prior confidential relationship with opposing counsel. They moved to disqualify opposing counsel Graham & Associates, and Bruce N. Graham, a member of the firm (Graham), from jointly representing their adversaries, appellants Jim and Maartje Burman (the Burmans) and Ted Kipers. The moving parties acknowledge that their motion is not based upon California law, but rather on what they refer to as a minority view in Colyer v. Smith (C.D.Cal. 1999) 50 F.Supp.2d 966, permitting a non-client to move to disqualify opposing counsel. While the decision of a federal district court is not binding on this Court, we do not read Colyer's minority rule as dispensing with the standing requirements. Here, the non-client, moving parties have no legally cognizable interest in Graham's undivided loyalty to his clients. Therefore, the moving parties lacked standing to bring this motion to disqualify. We reverse the disqualification order.

FACTUAL AND PROCEDURAL BACKGROUND

This is a contractor-homeowner dispute that began on the Internet when homeowner Maartje Burman posted comments criticizing Great Lakes Construction, Inc. She later retracted her comments but redirected her Internet criticism to Hampton Builders, Inc., the contractor hired to remodel the Burmans' residence. The dispute moved from the Internet to the courts and expanded to several parties directly and indirectly involved in the Burmans' remodeling project.

1. Background Giving Rise To The Disqualification Motion

The Burmans hired The Draftsman Planning and Design, Mike Trifunovich, and Scott Christiansen to prepare drawings and engineering specifications for their remodeling project. Based upon these prepared plans, the Burmans hired Hampton Builders. Hampton Builders hired Kipers as a subcontractor. Kipers' subcontract contains an indemnification provision, which is the basis of the disqualifying motion.*fn1

a. The Complaint

Hampton Builders and Great Lakes filed suit against the Burmans, alleging libel in connection with Maartje Burman's Internet postings; breach of contract for the balance due under the contract; and on common counts to recover for Hampton Builders' services on the remodeling project.

b. The Burmans' And Kipers' Cross-Complaint

The Burmans filed a cross-complaint against Great Lakes, as the alter ego of Hampton Builders, Hampton Builders, Mike Ross, Faramarz Moshfegh, and Harvey Stern. The Burmans alleged that Hampton Builders failed to perform the terms of the contract, abandoned the project, and failed to pay Kipers who placed a lien on the project and stopped work. The Burmans further alleged that the project was plagued with numerous building code violations arising from the design and substandard workmanship. The Burmans asserted causes of action against Hampton Builders and Great Lakes for breach of contract, negligence, and fraud. They also sought to rescind the contract with Hampton Builders.

The Burmans asserted causes of action for breach of contract and negligence against The Draftsman Planning and Design, Alisha Spears, Mike Trifunovich, and Scott Christiansen, based upon the allegedly defective plans.

Kipers asserted causes of action in the cross-complaint against Hampton Builders for breach of an oral contract, and against both Hampton Builders and Great Lakes for common counts. He did not bring a contract cause of action.

c. Hampton Builders' Cross-Complaint

Hampton Builders then filed a cross-complaint against Kipers, alleging breach of contract, interference with contract, express contractual indemnity, equitable indemnity, and declaratory relief. Hampton Builders alleged that pursuant to the subcontract, Kipers agreed to supervise the project, obtain all permits, schedule and be present for inspections, and guarantee all subcontractor work, labor, and materials for a period of one year from the date of completion.

Hampton Builder's express contractual indemnity cause of action against Kipers is based upon the indemnification provision in the subcontract. The indemnification provision states: "Subcontractor shall indemnify and save harmless Contractor from and against any and all suits, claims, actions, losses, costs, penalties and damages, or whatsoever kind or nature, including attorneys' fees, ...


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