The opinion of the court was delivered by: Robie , J.
Panich v. Ben's Truck & Equipment
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Defendant Ben's Truck & Equipment, Inc. (Ben's) moved to disqualify the law firm of Maire & Burgess from representing plaintiffs (Linda Panich; Henry Edelstein, as trustee of the Henry Edelstein 2002 Trust; and Victoria Pickering Edelstein) in this action because 20 years earlier Wayne Maire was involved in the representation of Ben Sale, the president and sole owner of Ben's, in another matter. Finding that confidential information had been presumptively and actually disclosed to Maire in connection with his firm's prior representation of Sale, the trial court granted the disqualification motion. On plaintiffs' appeal of that order, we find no abuse of discretion and therefore affirm the disqualification.
FACTUAL AND PROCEDURAL BACKGROUND
The Earlier Representation
Before 1982, one of the ways Sale made money was by providing workers and equipment to the California Department of Forestry and the United States Forest Service (the public agencies) to assist in fighting wild land and forest fires. At some point, Sale was charged in Tehama County with 54 felony counts of conspiracy to commit arson, apparently based on accusations that he had conspired to set some of the fires he made money supplying men and equipment to fight.
The case was originally tried in Modoc County, with attorney Greg Stout defending Sale. The trial ended with a jury hung 11 to 1 for conviction. A retrial took place in Mendocino County, with attorney Joe Gazzigli defending Sale. This time, Sale was acquitted on all counts.
Based on his review of the transcripts from the original trial, Gazzigli concluded Stout had committed malpractice in his defense of Sale, and Gazzigli recommended that Sale refuse to pay Stout the outstanding balance of approximately $150,000 in attorney fees Stout was claiming Sale owed. Gazzigli also recommended that Sale consider suing Stout for malpractice, to recover the costs of the second trial and damages for the business Sale lost when the public agencies "blacklisted" him as a contractor in 1982 as a result of the near conviction.
When Stout sued Sale for the unpaid fees around 1984, Gazzigli referred Sale to the law firm of Simpson & Maire to represent Sale in defending against the collection action and in prosecuting a cross-complaint against Stout for legal malpractice. At the time, Simpson & Maire apparently had three attorneys in total. In late 1984 or early 1985, Gazzigli took Sale to meet with both Robert Simpson and Wayne Maire to discuss their firm's potential representation of Sale. In Sale's own words, "[a]t that initial and lengthy meeting, . . . Gazzigli and [Sale] shared considerable confidential information about the nature and outcome of the two criminal cases, . . . [Sale's] alleged criminal activities as charged in those cases, [his] personal financial status and family history, [his] involvement/relationship with the two chief prosecution witnesses against [him], the contractual relationship, billing practices and gross and net income [he] generated from providing men and equipment to [the public agencies], and the nature and scope of [his] business entities and operations."
The firm decided to take Sale's case. Several months after the original meeting, Sale met again with both Simpson and Maire, at which time they recommended that he seek a mutual dismissal of the collection action and the malpractice cross-complaint. Sale did not agree and spoke with Gazzigli about the recommendation. Gazzigli told him a new attorney with experience in legal malpractice cases -- Lew Garbutt -- was joining the firm. Gazzigli arranged a meeting between Sale, Simpson, Maire, and Garbutt. As a result of that meeting, it was agreed Garbutt would undertake the defense of the collection action and the prosecution of the malpractice cross-complaint, with Gazzigli serving as a consultant.
According to Garbutt, he joined the Simpson & Maire firm in or around November 1985, at which time the firm changed its name to Simpson, Maire & Garbutt.*fn1 Shortly after he joined the firm, Simpson and Maire asked him to review Sale's case to determine whether it was worth pursuing. In the course of reviewing the case, Garbutt had lengthy meetings with Sale and Gazzigli, which involved "disclosure to [Garbutt] of an enormous amount of confidential data regarding the two criminal prosecutions and pertinent confidential information about . . . Sale's personal and business reputation, his business history, practices and philosophy, his educational background and health status, his ability to effectively participate in and understand the process of pursuing this type of action, as well as the willingness of . . . Sale, his wife, employees and others to commit to assist in the development of a case strategy and participate as needed throughout what could be a lengthy and stressful process."
The malpractice action, which was being pursued on a contingency fee basis, continued over three years during which Garbutt was a partner with the Simpson firm. During that time, both Simpson and Maire were kept well informed about the progress of the case. According to Garbutt, "[a]s . . . Sale's counsel, [he] learned what would clearly be deemed confidential information about [Sale] personally, his litigation history and experience, the nature and scope of his business interests, operations and practices, persons with whom he associated personally and in business, the nature of his finances and how he managed those finances, his philosophy about business dealings and how he viewed transaction documents or the absence of a need for same because of a handshake deal, his reputation for honesty, integrity and business savvy, his personality traits (strengths and weaknesses), and much, much more." In the course of updating Simpson and Maire on the progress of the case, Garbutt shared much of this confidential information with them.
Also during the progress of the case, Gazzigli shared with the firm "extensive confidential information . . . about the charges against . . . Sale, the two trials, the details of the defense strategy, information about . . . Sale's character, his financial status and ability to pay past and future legal fees, the nature and scope of his business operations and style of business practices, his reputation in the community for integrity and honesty . . . and multiple other specific facts and opinions about why and how to successfully defend the collection action and prosecute the legal malpractice case."
After three years, Garbutt left the Simpson firm, taking Sale with him as a client, but the firm was still involved in Sale's malpractice action because of the firm's investment in the action. Eventually, a court trial began in May 1990, but before the trial concluded the case was settled for the limits of Stout's malpractice insurance. From those proceeds, the Simpson firm recovered the costs the firm had paid as well as a substantial fee.
The Current Representation
Fast forward 20 years. In July 2010, plaintiffs commenced this action by filing a complaint against Ben's for breach of contract and declaratory relief and to quiet title. At the time the complaint was filed, plaintiffs were represented by attorney Robert Harding. The complaint arose out of a development agreement under which Ben's had agreed to construct improvements on land owned by plaintiffs for a 24-lot subdivision known as Whispering Woods, Phase 1. Plaintiffs alleged that Ben's had breached the development agreement by stopping work on the project and demanding that the ceiling price for its services, which was set in the development agreement, be increased. Plaintiffs also alleged that Ben's had breached the development agreement by overcharging for work performed on their property and by demanding payment for services that had, in fact, been performed on adjacent property belonging to Ben's instead of on plaintiffs' property. (Apparently a second phase of the Whispering Woods project was to be developed simultaneously on this adjacent property.)
In August 2010, Ben's (represented in part by Garbutt) filed a cross-complaint in the action, alleging that plaintiffs had breached the development agreement by preventing the corporation from completing the improvements on their property. Ben's also alleged that plaintiffs owed over $1 million for services the corporation had already provided.
In mid-October 2010, the law firm of Maire & Burgess substituted into the action as the attorneys for plaintiffs. In light of Maire's prior representation of Sale in the Stout matter, Garbutt immediately requested that Maire & Burgess provide a detailed written disclosure regarding the firm's compliance with rule 3-310 of the Rules of Professional Conduct, which addresses avoiding the representation of adverse interests. In response, Jody Burgess wrote that Maire & Burgess did "not have confidential information ...