Patrick KIRK et al., Plaintiffs and Respondents, v. The FIRST AMERICAN TITLE INSURANCE COMPANY et al., Defendants and Appellants.
When an attorney obtains confidential information from a client, that attorney is prohibited from accepting a representation adverse to the client in a matter to which the confidential information would be material. In this case, we are not concerned with the issue of disqualifying the attorney possessing the material client confidences from representing an adverse party; it is conceded that the attorney is disqualified from doing so. Instead, we are concerned with the issue of the vicarious disqualification of the attorney's entire law firm. We conclude that, under the circumstances of this case, automatic vicarious disqualification is not required, and that, instead, there is a rebuttable presumption that the attorney's knowledge of client confidences is imputed to the firm, which can be refuted by evidence that the law firm adequately screened the attorney from the others at the firm representing the adverse party. In addition, as the disqualified attorney has left the firm, the trial court's examination of the screen's adequacy should be on a retrospective, not prospective, basis.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Underlying Litigation
The instant attorney disqualification dispute arose in the context of four related class actions brought against First American Title Insurance Company and related First American entities (collectively, First American). Each class action is based on different allegations, although they each challenge business practices of First American as violative of, among other things, various consumer protection laws.1 One class action alleges that First American pays kickbacks to lenders for referring business to it. The second action alleges that First American imposes title-related or escrow-related fees in excess of the rates First American filed with the California Department of Insurance, and that customers were not given discounts to which they were entitled. The third action alleges specific fee overcharges (sub-escrow fee, wire transfer fee, messenger fees), kickbacks, and charging customers for one type of policy based on the pricing for a different type. The fourth action alleges charges for more expensive policies than those sought, and kickbacks. The first of these four actions was filed on February 25, 2005. In each case, the plaintiffs were represented by the Bernheim Law Firm and the Kick Law Firm (collectively, plaintiffs' counsel).2 Collectively, we refer to the cases as the related class actions.
First American was represented by Bryan Cave, LLP. Three attorneys at Bryan Cave, Joel D. Siegel, Charles Newman, and Jason Maschmann (the First American team), were primarily responsible for the defense of the related class actions. Newman was first retained as counsel for First American in 1997; he defended against the related class actions from their initial filing. Together, the First American team has defended First American in 80 class actions across the country, and has also been retained to give legal advice to First American. The attorneys on the First American team are very familiar with, and have good rapport with, First American's in-house counsel, officers, and management employees. They “are uniquely and extensively knowledgeable about First American's personnel, products, services, data systems, history and organization on a national basis, including ․ California.”
The related class action litigation is large, time-consuming, and expensive. A discovery referee was appointed and handled numerous disputes.3 The First American team defended hundreds of depositions and reviewed hundreds of thousands of pages of documents. By April 2009, First American had incurred over $5.5 million in attorney's fees in the related class actions and another $1 million in additional expenses. The related class actions are extremely complex and have been aggressively litigated.
3. Plaintiffs' Counsel Contact Gary Cohen
At one time, Gary Cohen had been Deputy Commissioner and General Counsel at the California Department of Insurance. In October 2007, he was chief counsel for Fireman's Fund Insurance Company. During that month, plaintiffs' counsel spoke by telephone with Cohen and solicited his services as a consultant in the related class actions, apparently due to his experience at the Department of Insurance.
After introductions by a mutual acquaintance, a 17-minute phone call took place between Cohen and plaintiffs' counsel. While it is clear that some portion of the conversation was devoted to Cohen's experience and qualifications, it is undisputed that plaintiffs' counsel, during this conversation, conveyed confidential information to Cohen material to the related class actions. Indeed, Attorney Bernheim specifically told Cohen that plaintiffs' counsel would be discussing confidential information. While the precise content of the information disclosed is not identified, plaintiffs' counsel conveyed attorney work product to Cohen, including plaintiffs' theories of the case, and their concerns regarding defense strategy and tactics. Plaintiffs' counsel also disclosed their estimates of the value of the cases.
Cohen expressed his interest in the related class actions, but indicated that he had to obtain permission from his employer before he could work with plaintiffs' counsel. A series of e-mails followed, the upshot of which was that Cohen declined the consultant position because it was possible that Fireman's Fund had provided Directors and Officers coverage to one or more of the First American entities.4 Cohen did not, however, cut off all communication with plaintiffs' counsel. Instead, when plaintiffs' counsel asked if, despite Cohen's inability to become plaintiffs' consultant, plaintiffs' counsel could “make contact with [Cohen] one more time regarding [his] thoughts,” Cohen responded that he would telephone plaintiffs' counsel later.5
Nothing further happened relevant to this matter for more than a year. Then, on December 8, 2008, the law firm of Sonnenschein Nath & Rosenthal LLP (Sonnenschein) issued a press release announcing that Cohen would join its San Francisco office as a partner in its insurance regulatory practice group on January 5, 2009.
Upon learning that Cohen would be leaving Fireman's Fund-and the possible conflict associated with that employment-plaintiffs' counsel again e-mailed Cohen and reasserted their interest in hiring him as an expert consultant. On January 12, 2009, after Cohen had moved to Sonnenschein, Cohen responded, stating that he would do a conflicts check and asking for one of the complaints to be sent to him by e-mail. The next day, plaintiffs' counsel sent to Cohen edited versions of the complaints (reducing them to what plaintiffs' counsel believed to be the main issues). Less than a half-hour later, Cohen responded, “It turns out that the firm does represent First American, so I'm afraid that I won't be able to be of any help. I haven't read the attachments to your email and will delete them without having read them.” There was no further contact between Cohen and plaintiffs' counsel.
4. The First American Team Moves to Sonnenschein
On February 2, 2009, the First American team moved from Bryan Cave to Sonnenschein. Siegel moved to Sonnenschein's Los Angeles office, while Newman and Maschmann moved to Sonnenschein's St. Louis office. None of the First American team moved to the San Francisco office, where Cohen was located. Nor does it appear that any of them were part of the insurance regulatory practice group, in which Cohen practiced.
On February 3, 2009, First American filed substitutions of counsel in the related class actions, reflecting that Sonnenschein was now handling its defense, although the three main attorneys representing First American did not change. On February 4, 2009, plaintiffs filed a case management statement in which they “objected” to the representation of First American by Sonnenschein, due to their prior confidential consultation with Cohen. Until that point, the First American team had been unaware of Cohen's prior contacts with plaintiffs' counsel. That day, Siegel contacted John Koski, a partner in Sonnenschein's Chicago office who serves as the firm's General Counsel and sits on the firm's Ethics Committee. Koski discussed the matter with Siegel and Newman, and “had a separate, private discussion” with Cohen. Thereafter, Koski established an ethical screen around Cohen. That night, Koski sent a memorandum to all attorneys, paralegals, and secretaries at Sonnenschein, setting forth “mandatory screening procedures” for the related class actions.
The screening memorandum recites that it was created to “formalize and memorialize the procedures necessary to assure that no confidences or secrets relating to the [related class actions] will be disclosed, even inadvertently, to [the First American team] or any other Sonnenschein lawyer who may be asked to work on the [related class actions].” The memorandum indicated that the failure to observe the procedures would subject the offender to discipline. The memorandum provided that: (1) Cohen could not work on the related class actions; (2) no attorney or paralegal who may work on the related class actions may discuss them with Cohen; (3) Cohen may not be given non-public documents pertaining to the related class actions; (4) Cohen shall not access any documents on Sonnenschein's computer network pertaining to the related class actions; and (5) no fees from any work related to the related class actions would be apportioned to Cohen.
5. Cohen Works on the Lyons Matter
The First American team also represents First American in another matter, referred to as the Lyons case, which is now pending in the Superior Court for the County of Contra Costa. (Lyons v. First American Title Ins. Co. (Super. Ct. Contra Costa County, No. C08-01850).) In the Lyons case, plaintiffs, who are African-American, claim racially discriminatory pricing policies in connection with the sale of lenders' refinancing title policies.6 The Lyons plaintiffs are not represented by plaintiffs' counsel in the related class actions.
In January 2009, before the First American team had moved from Bryan Cave to Sonnenschein, it obtained an order in the Lyons case staying the action and requiring the plaintiffs to exhaust their administrative remedies with the Department of Insurance. The Lyons plaintiffs thereafter wrote a letter to the Department of Insurance requesting the Department to decline jurisdiction and return the matter to the trial court. On March 5, 2009, Sonnenschein wrote a letter in opposition. The letter was written by the First American team, but Cohen had participated in its drafting. Cohen subsequently admitted billing a total of 3.35 hours to the Lyons matter; according to his declaration, his involvement “was limited to providing advice as to the best approach to correspond with the Department with respect to the Lyons' claims.”7
The issue of exhaustion of administrative remedies was also an issue in the related class actions. By the time the First American team moved to Sonnenschein, it had filed and fully briefed demurrers which raised the issue of exhaustion in two of the related class actions, although the court had not yet held a hearing on the demurrers. In April 2009, First American filed additional briefing on the demurrers, calling the trial court's attention to similar favorable rulings in other trial courts, including the trial court order requiring exhaustion it had obtained in the Lyons case. As we later discuss, Cohen's work on the Lyons matter, and the First American team's subsequent citation to a Lyons order in the related class actions, was the cause of substantial concern to the trial court.
6. The Disqualification Motion
On March 18, 2009, plaintiffs moved to disqualify Sonnenschein from further representation of the First American defendants, based on plaintiffs' counsel's prior confidential communications with Cohen. Sonnenschein opposed the motion, although it retained independent counsel to prepare the opposition in order to preserve its ethical wall. Much of the dispute centered on whether plaintiffs' counsel actually conveyed confidential information to Cohen; this is not an issue on appeal. As to whether the entire Sonnenschein firm should be vicariously disqualified, Sonnenschein relied on the ethical screening wall it had constructed. Both Cohen8 and Siegel9 submitted declarations indicating their compliance with the ethical screening wall. First American also submitted the declaration of its Senior Vice President and national litigation counsel, who testified to the key experience of the First American team and their irreplaceability. Specifically, he stated that it would cost First American millions of dollars to retain new counsel sufficiently prepared to defend the related class actions, “although it would be impossible for new counsel to attain the level of knowledge and proficiency of First American's current attorneys.”
7. Order Granting Disqualification
The trial court ultimately granted the motion for disqualification. In its order, the trial court indicated that, “[n]o one is to blame for this situation except perhaps the itinerant nature of attorneys that has developed over the last fifteen years.” The trial court found that plaintiffs' counsel disclosed confidential and privileged attorney work product information to Cohen during the initial 17-minute telephone call, a conclusion not challenged on appeal.
As to vicarious disqualification, the court reviewed applicable case law, and concluded that, when an attorney possesses disqualifying confidential client information, vicarious disqualification of the law firm is automatic, regardless of any ethical screening wall created.
The trial court further concluded, however, that even if California law permitted the use of ethical walls in this context, “there is evidence that the wall Sonnenschein erected has not been a complete success.” Specifically, the trial court was concerned about the work Cohen had performed on the Lyons matter. The trial court believed that Cohen's work on the Lyons matter constituted a breach of the ethical wall, and the fact that Cohen initially forgot about his work on the Lyons matter illustrates why California courts are leery of ethical walls. The trial court was careful to state that no party deliberately engaged in unethical behavior, but instead concluded that the ease with which one can accidentally reveal client confidences demonstrates that an ethical wall is insufficient.
Additionally, the trial court indicated that the balance of interests weighed in favor of disqualification. The court recognized “the substantial financial burden disqualification places on [First American], who will have to obtain new counsel and bring them up the learning curve on these very complex cases that have been litigated over a number of years.” However, the court found that two competing policy interests outweighed these concerns. Specifically, the court relied on the need for vigorous representation of parties by independent counsel unencumbered by conflicts of interest, and the preservation of public trust in the scrupulous administration of justice and the integrity of the bar.
First American and Sonnenschein10 filed timely notices of appeal.11 Pursuant to a stipulation of the parties, we issued a qualified stay of all trial court proceedings in the related class actions pending our resolution of the predicate question raised by the trial court's disqualification order. Due to the obvious need to quickly resolve the issue, we have, pursuant to the agreement of the parties, imposed an expedited briefing and oral argument schedule. In addition, we have permitted various law firms to file amicus curiae briefs on behalf of both First American and Sonnenschein, and plaintiffs.
ISSUES ON APPEAL
It is undisputed that Cohen possessed confidential client or attorney work product information from plaintiffs' counsel that is material to the related class actions. It is also undisputed that Cohen is disqualified from representing First American in the related class actions. The first issue presented by this appeal is whether Sonnenschein must be automatically vicariously disqualified from representing First American, or if it may avoid vicarious disqualification by the construction of a proper ethical wall. Concluding that vicarious disqualification is not automatic, but may be rebutted by a proper ethical wall, we reach the second issue, which is the standards by which a proper ethical wall is to be judged. A third issue is raised by a fact which came to light while this appeal was pending. Cohen left the Sonnenschein firm, effective January 15, 2010, to return to government service. We therefore must also consider the impact of this fact on the necessary analysis of the important issues raised in this appeal.
1. Standard of Review
“A trial court's authority to disqualify an attorney derives from the power inherent in every court ‘[t]o control in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial proceeding before it, in every matter pertaining thereto.’ [Citations.]” (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1145, 86 Cal.Rptr.2d 816, 980 P.2d 371 (SpeeDee Oil ).) “A motion to disqualify a party's counsel may implicate several important interests. Consequently, judges must examine these motions carefully to ensure that literalism does not deny the parties substantial justice. [Citation.] Depending on the circumstances, a disqualification motion may involve such considerations as a client's right to chosen counsel, an attorney's interest in representing a client, the financial burden on a client to replace disqualified counsel, and the possibility that tactical abuse underlies the disqualification motion.” (Id. at pp. 1144-1145, 86 Cal.Rptr.2d 816, 980 P.2d 371.) Disqualification motions involve “a conflict between the clients' right to counsel of their choice and the need to maintain ethical standards of professional responsibility. [Citation.] The paramount concern must be to preserve public trust in the scrupulous administration of justice and the integrity of the bar. The important right to counsel of one's choice must yield to ethical considerations that affect the fundamental principles of our judicial process.” (Id. at p. 1145, 86 Cal.Rptr.2d 816, 980 P.2d 371.)
“Generally, a trial court's decision on a disqualification motion is reviewed for abuse of discretion. [Citations.] If the trial court resolved disputed factual issues, the reviewing court should not substitute its judgment for the trial court's express or implied findings supported by substantial evidence. [Citations.] When substantial evidence supports the trial court's factual findings, the appellate court reviews the conclusions based on those findings for abuse of discretion. [Citation.] However, the trial court's discretion is limited by the applicable legal principles. [Citation.] Thus, where there are no material disputed factual issues, the appellate court reviews the trial court's determination as a question of law. [Citation.] In any event, a disqualification motion involves concerns that justify careful review of the trial court's exercise of discretion.” (SpeeDee Oil, supra, 20 Cal.4th at pp. 1143-1144, 86 Cal.Rptr.2d 816, 980 P.2d 371.)
2. Historical Development of the Law Regarding Vicarious Disqualification
Generally speaking, the Rules of Professional Conduct govern attorney discipline; they do not create standards for disqualification in the courts. (Hetos Investments, Ltd. v. Kurtin (2003) 110 Cal.App.4th 36, 47, 1 Cal.Rptr.3d 472.) Nonetheless, as will be seen in our discussion, courts analyzing questions of disqualification often look to the Rules of Professional Conduct for guidance.
California Rules of Professional Conduct, rule 3-310(E) provides, “A member shall not, without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the member has obtained confidential information material to the employment.”12 While the Model Rules of Professional Conduct promulgated by the American Bar Association (ABA) address the issue of vicarious disqualification (see ABA Model Rules Prof. Conduct, rule 1.10), the California Rules of Professional Conduct do not.13 Thus, in California, vicarious disqualification rules are the result of decisional law. (City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 847, 43 Cal.Rptr.3d 771, 135 P.3d 20.) It is useful for our analysis that we first discuss the development of California law in this area in some detail.14
a. Caselaw Initially Provides For a Case-By-Case Analysis
Our discussion begins with Chambers v. Superior Court (1981) 121 Cal.App.3d 893, 175 Cal.Rptr. 575. In Chambers, the Third District Court of Appeal was concerned not with the usual situation of a tainted attorney moving from one private law firm to another, but an attorney moving from government employment to private employment. It was not established that the tainted attorney actually possessed confidential client information, but only that he had had access to it. In considering whether the tainted attorney's conflict should be imputed to the rest of the firm, the court took guidance from the ABA rules regarding disqualification of former government employees. The ABA rules provided that the tainted attorney himself would not be disqualified unless he had “ ‘substantial responsibility’ “ for the matter while a public employee. (Id. at p. 898, 175 Cal.Rptr. 575.) A formal ethics opinion concluded that this limitation was imposed in order to “ ‘inhibit government recruitment as little as possible and to enhance the opportunity for all litigants to obtain competent counsel of their own choosing, particularly in specialized areas.’ “ (Ibid.) The ethics opinion went on to conclude, “ ‘An inflexible extension of disqualification throughout an entire firm would thwart those purposes. So long as the individual lawyer is held to be disqualified and is screened from any direct or indirect participation in the matter, the problem of his switching sides is not present; by contrast, an inflexible extension of disqualification throughout the firm often would result in real hardship to a client if complete withdrawal of representation was mandated, because substantial work may have been completed regarding specific litigation prior to the time the government employee joined the partnership, or the client may have relied in the past on representation by the firm.’ “ (Id. at p. 899, 175 Cal.Rptr. 575.) The ethics opinion specifically expressed concern that if vicarious disqualification were always the rule for former government employees, this would restrict a former government employee's options for future employment, and potentially harm the government's ability to attract talented attorneys. (Id. at p. 899, 175 Cal.Rptr. 575.) The Chambers court was persuaded by this analysis, and adopted the approach of not automatically requiring vicarious disqualification of a former government employee's new law firm. (Id. at pp. 902-903, 175 Cal.Rptr. 575.)
The next case relevant to our discussion is William H. Raley Co. v. Superior Court (1983) 149 Cal.App.3d 1042, 197 Cal.Rptr. 232. In that case, the plaintiff sued a defendant, the stock of which was entirely owned by a testamentary trust. The trustee of the trust was a bank, which discharged its responsibilities through a committee appointed by its board of directors. The tainted attorney was both a director of the bank and a member of the committee; it was undisputed that the tainted attorney could not represent the plaintiff. The issue was whether the tainted attorney's entire firm was vicariously disqualified from doing so. The court ultimately concluded that the tainted attorney's attempt at ethical walls (both at the firm and the bank) did not sufficiently outweigh the risk to the defendant's confidential information, and therefore mandated vicarious disqualification of the firm. (Id. at p. 1049, 197 Cal.Rptr. 232.)
Important for our analysis, however, is the fact that the court did not apply an absolute rule of vicarious disqualification. The court concluded that “[a]utomatic or mechanical application of the vicarious disqualification rule can be harsh and unfair to both a law firm and its client.” (Id. at p. 1049, 197 Cal.Rptr. 232.) Instead, the court reasoned that “[t]he better approach is to examine the circumstances of each case” in light of the applicable competing interests. (Id. at p. 1049, 197 Cal.Rptr. 232.) “The court must weigh the combined effect of a party's right to counsel of choice, an attorney's interest in representing a client, the financial burden on a client of replacing disqualified counsel and any tactical abuse underlying a disqualification proceeding against the fundamental principle that the fair resolution of disputes within our adversary system requires vigorous representation of parties by independent counsel unencumbered by conflicts of interest. [Citations.] In a case such as this the court also must consider in favor of disqualification the disruptive effect of repeated disqualification proceedings on the administrative process of the court [citation] and the financial burden of such proceedings on the moving party.” (Id. at p. 1048, 197 Cal.Rptr. 232.)
In 1984, the same court which had decided Chambers returned to the issue of vicarious disqualification in Dill v. Superior Court (1984) 158 Cal.App.3d 301, 205 Cal.Rptr. 671. The tainted attorney in that case had been personally involved with the representation of a plaintiff (taking depositions and appearing at a hearing), and subsequently left the firm and began working at the firm representing the defendant. The defendant's firm argued that the appellate court had rejected vicarious disqualification in Chambers. (Id. at p. 304, 205 Cal.Rptr. 671.) The court disagreed, and distinguished Chambers on three grounds: (1) the tainted attorney in Dill had actually performed legal work on behalf of his former client in the same matter; (2) vicarious disqualification of a former government employee's firm “is not imposed as strictly as it is in other instances”; and (3) any appearance of impropriety in Chambers by the firm's continued representation “was greatly outweighed by the benefits to the judicial process of representation by an attorney with relevant governmental experience.” (Id. at pp. 305-306, 205 Cal.Rptr. 671.) In this case, the court concluded that the tainted attorney's “personal involvement” on the former client's behalf in the identical litigation compelled vicarious disqualification of the firm. (Id. at p. 306, 205 Cal.Rptr. 671.) The Dill court, however, did not adopt an absolute rule of vicarious disqualification in all situations not involving former government attorneys. Instead, the court found compelling the fact that the tainted attorney was personally involved on the adverse party's behalf in the same litigation.
In Klein v. Superior Court (1988) 198 Cal.App.3d 894, 244 Cal.Rptr. 226, the Sixth Appellate District held that when a tainted attorney actually possesses confidential client information, and there has been no attempt to screen him from the litigation from which he is disqualified, vicarious disqualification of the firm is mandated. (Id. at pp. 913-914, 244 Cal.Rptr. 226.) The court observed that, with the exception of former government attorneys, no California case appeared to have permitted disqualification of a tainted attorney without disqualifying the entire firm. (Id. at pp. 912-913, 244 Cal.Rptr. 226.) Nonetheless, the court distilled from Chambers the rule that an ethical screen “can suffice, in a proper case. The test is whether the individual attorney had any responsibility over matters related to the instant action or had acquired confidential information regarding the action and whether the firm had taken sufficient protective measures to screen the attorney from participation.”15 (Id. at p. 909, 244 Cal.Rptr. 226.)
b. Henriksen Concludes That, in Certain Circumstances, Vicarious Disqualification is Mandatory
The next development came in 1992, in Henriksen v. Great American Savings & Loan, supra, 11 Cal.App.4th 109, 14 Cal.Rptr.2d 184 (Henriksen ). This case concerned a tainted attorney who had switched sides in the same case; the trial court disqualified the new firm, even though the firm had attempted to isolate the tainted attorney. In Henriksen, Division Four of the First Appellate District affirmed the firm's vicarious disqualification, setting forth an absolute rule that ethical walls are not sufficient, and vicarious disqualification is mandatory, when the tainted attorney: (1) is a nongovernmental attorney; (2) who formerly represented, and therefore possesses confidential information from, a party; and (3) who switches sides in the same case. (Id. at p. 115, 117, 14 Cal.Rptr.2d 184.) This rule is certainly in line with the holding in Dill, but appears to be the first time an absolute rule of vicarious disqualification was set forth in a California opinion.
c. The Supreme Court, in Dicta, Appears to Adopt and Extend Henriksen to All Cases of Vicarious Disqualification
In 1994, the Supreme Court addressed a problem relating to the duty of attorney loyalty. (Flatt v. Superior Court (1994) 9 Cal.4th 275, 36 Cal.Rptr.2d 537, 885 P.2d 950 (Flatt ).)16 In the course of its discussion, the Supreme Court distinguished the duty of loyalty, which was at issue in that case, from the duty of client confidentiality, which is at issue in cases of vicarious disqualification. To properly understand Flatt in context, however, it is necessary to briefly discuss the “substantial relationship” test. When it is alleged by a former client that its former attorney possesses material confidential information and is therefore disqualified from representing an adversary in another case, it is difficult for the former client to establish, as a factual matter, “what is in the mind of the attorney.” (Western Continental Operating Co. v. Natural Gas Corp. (1989) 212 Cal.App.3d 752, 759-760, 261 Cal.Rptr. 100.) The courts have therefore established a test, under which, if the former client can demonstrate a substantial relationship between the subjects of the former and the current representations, it is presumed that the attorney had access to confidential information in the first representation which is relevant to the second representation. (Flatt, supra, 9 Cal.4th at p. 283, 36 Cal.Rptr.2d 537, 885 P.2d 950.)
In discussing the substantial relationship test in Flatt, the Supreme Court stated that once the test is met, “disqualification of the attorney's representation of the second client is mandatory; indeed, the disqualification extends vicariously to the entire firm.” (Id. at p. 283, 36 Cal.Rptr.2d 537, 885 P.2d 950.) The Supreme Court cited Henriksen for the proposition that vicarious disqualification is compelled as a matter of law. (Ibid.) The Flatt case, however, was not concerned with whether a tainted attorney's law firm was subject to vicarious disqualification.
“[O]ur Supreme Court's decisions bind us, and its dicta command our serious respect. [Citations.] However, ‘language contained in a judicial opinion is “ ‘to be understood in the light of the facts and issue then before the court, and an opinion is not authority for a proposition not therein considered. [Citation.]’ “ [Citations.]' [Citation.] When questions about an opinion's import arise, the opinion ‘should receive a reasonable interpretation [citation] and an interpretation which reflects the circumstances under which it was rendered [citation]’ [citation], and its statements should be considered in context [citation].” (Dyer v. Superior Court (1997) 56 Cal.App.4th 61, 66, 65 Cal.Rptr.2d 85.)
In the context of Flatt, the Supreme Court's citation of Henriksen with approval and statement of a rule of automatic vicarious disqualification should not be read as a binding adoption of a rule of automatic vicarious disqualification in all circumstances, as the issue was not then before the Supreme Court. Indeed, as we will now discuss, the Supreme Court itself has subsequently indicated that the question of whether vicarious disqualification can be overcome by the creation of an ethical wall is still an open one. Prior to that indication, however, appellate courts rejected attempts to avoid vicarious disqualification with the creation of ethical screening walls simply by quoting the language of Flatt. (See, e.g., Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999) 69 Cal.App.4th 223, 238, 81 Cal.Rptr.2d 425.)
d. The Supreme Court Recognizes that Whether Vicarious Disqualification is Always Absolute is Still an Open Question
In 1999, the issue of vicarious disqualification was more directly presented to the Supreme Court in SpeeDee Oil, supra, 20 Cal.4th 1135, 86 Cal.Rptr.2d 816, 980 P.2d 371. In setting forth the issue presented by that case, the court stated, “When a conflict of interest requires an attorney's disqualification from a matter, the disqualification normally extends vicariously to the attorney's entire law firm. (See Flatt [, supra, 9 Cal.4th at p. 283].) This rule safeguards clients' legitimate expectations that their attorneys will protect client confidences. (Id. at pp. 283-284, 36 Cal.Rptr.2d 537, 885 P.2d 950.) Here, we decide whether the same rule should apply when a party unknowingly consults an attorney ‘of counsel’ to the law firm representing the party's adversary in the subject of the consultation.” (SpeeDee Oil, supra, 20 Cal.4th at p. 1139, 86 Cal.Rptr.2d 816, 980 P.2d 371.)
The Supreme Court reasoned, “For attorneys in the same firm to represent adverse parties in the same litigation is so patently improper that the rule of disqualification is a per se or ‘automatic’ one. (See Flatt, supra, 9 Cal.4th at p. 284, fn. 3, 36 Cal.Rptr.2d 537, 885 P.2d 950 and accompanying text.[17 ] )” (Ibid.) “When attorneys presumptively share access to privileged and confidential matters because they practice together in a firm, the disqualification of one attorney extends vicariously to the entire firm. (Flatt, supra, 9 Cal.4th at p. 283, 36 Cal.Rptr.2d 537, 885 P.2d 950.) The vicarious disqualification rule recognizes the everyday reality that attorneys, working together and practicing law in a professional association, share each other's, and their clients', confidential information.” (Id. at pp. 1153-1154, 86 Cal.Rptr.2d 816, 980 P.2d 371.) “Conflicting representations that would disqualify all of a law firm's attorneys are not more acceptable when an attorney of counsel to the firm creates the conflict. Clients, and the public, should expect confidentiality and loyalty from attorneys who effectively declare they practice law in a close, personal, and continuing association.[18 ] These legitimate expectations would be frustrated if a firm could represent one party in litigation while an attorney of counsel to the firm represented an adversary in the same case.” (SpeeDee Oil, supra, 20 Cal.4th at pp. 1139-1140, 86 Cal.Rptr.2d 816, 980 P.2d 371.)
After the Supreme Court concluded that the firm should be vicariously disqualified, the court went on to state, “In any event, we need not consider whether an attorney can rebut a presumption of shared confidences, and avoid disqualification, by establishing that the firm imposed effective screening procedures.” (SpeeDee Oil, supra, 20 Cal.4th at p. 1151, 86 Cal.Rptr.2d 816, 980 P.2d 371.) The Supreme Court found it unnecessary to reach this issue in SpeeDee Oil because the court concluded that the firm failed to demonstrate an effective screening process had been established. Nonetheless, the Supreme Court's language suggests that it believed that the question of whether an effective screening wall may rebut the presumption of vicarious disqualification was a question it had not yet resolved.
e. More Recent Opinions Are Not Consistent
In the years following the SpeeDee Oil opinion, courts have differed in their response to its language regarding the issue of ethical walls.19 Some courts have stated that the rule of vicarious disqualification applies in the absence of an effective ethical screen. (Farris v. Fireman's Fund Ins. Co. (2004) 119 Cal.App.4th 671, 689, fn. 17, 14 Cal.Rptr.3d 618; Adams v. Aerojet-General Corp. (2001) 86 Cal.App.4th 1324, 1333, 104 Cal.Rptr.2d 116.) Other courts, however, have continued to state that the rule of vicarious disqualification is absolute. (See, e.g., City of Santa Barbara v. Superior Court (2004) 122 Cal.App.4th 17, 24, 18 Cal.Rptr.3d 403; Frazier v. Superior Court (2002) 97 Cal.App.4th 23, 30, 118 Cal.Rptr.2d 129.)
The Supreme Court itself granted review in a case that raised the issue of whether, when a private attorney is personally disqualified from participation in a matter due to prior adverse representation not arising from public employment, the attorney's entire firm must be disqualified or if disqualification may be averted by appropriate screening techniques. (Panther v. Park, review granted Sept. 19, 2002, S110025.) Review was dismissed, however, on January 15, 2003, after the client dismissed the writ proceeding challenging the representation.
In 2006, the Supreme Court considered the issue of the vicarious disqualification of an entire City Attorney's office as the City Attorney himself was the tainted attorney. The court concluded that the City Attorney cannot be effectively screened from his entire office. (City and County of San Francisco v. Cobra Solutions, Inc. ., supra, 38 Cal.4th at pp. 853-854, 43 Cal.Rptr.3d 771, 135 P.3d 20.) In the course of its discussion, the court cited SpeeDee Oil for the proposition that a conflict is normally imputed to the tainted attorney's entire firm on the rationale that attorneys practicing together generally share each other's, and their clients', confidential information. (Id. at pp. 847-848, 86 Cal.Rptr.2d 816, 980 P.2d 371.) This language prompted a dissent by Justice Corrigan, joined by Chief Justice George, stating that the automatic disqualification rule “is being questioned even in the private practice context,” due to increases in attorney mobility and firm mergers. (Id. at p. 855, 86 Cal.Rptr.2d 816, 980 P.2d 371 (dis. opn. of Corrigan, J.).)
In 2008, we stated, “[c]urrently, in the context of private law firms, there is no definitive California authority authorizing ethical walls.” (Sharp v. Next Entertainment, Inc. (2008) 163 Cal.App.4th 410, 438, fn. 11, 78 Cal.Rptr.3d 37.) Most recently, we addressed the issue in Meza v. H. Muehlstein & Co. (2009) 176 Cal.App.4th 969, 98 Cal.Rptr.3d 422 (Meza ), a case involving a tainted attorney possessing confidential information who switched sides in the same lawsuit. Relying on Henriksen, Flatt, and the Supreme Court's rationale for vicarious disqualification in SpeeDee Oil, we concluded that “an ‘ethical wall’ between an attorney with confidential information and his or her firm will generally not preclude the disqualification of the firm. [Citation.] Instead, there is a presumption that each member of the firm has imputed knowledge of the confidential information.” (Id. at p. 979, 98 Cal.Rptr.3d 422.) Although we stated that an ethical wall will generally not preclude disqualification, we did not address in what circumstances an ethical wall may preclude disqualification, or whether the presumption can ever be rebutted.
3. Distillation of the Current State of the Law
In very brief summary, the history of the law of vicarious disqualification appears to be as follows: (1) appellate courts initially concluded vicarious disqualification was not automatic, but instead subject to a balancing test; (2) Henriksen concluded the burden of rebutting the presumption of imputed knowledge simply could not be established in the case of a tainted attorney who represented one party and switched sides in the same case; (3) the Supreme Court favorably cited Henriksen and appeared to state a rule of automatic vicarious disqualification any time material confidential information was presumed to be held by the tainted attorney (Flatt ); (4) the Supreme Court subsequently suggested that whether vicarious disqualification can be avoided by a proper ethical wall was still an open question (SpeeDee Oil ); and (5) the Supreme Court has never directly addressed the issue on the merits.
Given this history, we conclude that it is improper to rely on Flatt as creating an absolute rule of vicarious disqualification in California. Instead, we believe that neither Flatt nor SpeeDee Oil addressed the issue of whether vicarious disqualification is absolute, and the state of the law is that as initially expressed by the appellate courts: (1) a case-by-case analysis based on the circumstances present in, and policy interests implicated by, the case; (2) tempered by the Henriksen rule that vicarious disqualification should be automatic in cases of a tainted attorney possessing actual confidential information from a representation, who switches sides in the same case.20
We do not doubt that vicarious disqualification is the general rule, and that we should presume knowledge is imputed to all members of a tainted attorney's law firm. However, we conclude that, in the proper circumstances, the presumption is a rebuttable one, which can be refuted by evidence that ethical screening will effectively prevent the sharing of confidences in a particular case.
4. Other Considerations Support This Conclusion
While we believe our interpretation of the law follows from our analysis of its historical development, this much seems clear: the Supreme Court has not considered and definitively decided whether the presumption of imputed knowledge can be rebutted in a non-governmental attorney context with evidence of an ethical wall. We therefore consider three factors which lead us to conclude ethical walls should be recognized in California: (1) changing realities in the practice of law which undermine the rationale for an automatic rule of vicarious disqualification; (2) California's favorable experience with ethical walls in other circumstances; and (3) an understanding of policy considerations which supports the recognition of ethical walls in the proper cases.
a. Changing Realities are Undermining the Rationale for an Automatic Rule of Vicarious Disqualification
(1) Courts Are Recognizing the Changing Circumstances
As expressed by the Supreme Court, the vicarious disqualification rule is based on a recognition of “the everyday reality that attorneys, working together and practicing law in a professional association, share each other's, and their clients', confidential information.” (SpeeDee Oil, supra, 20 Cal.4th at pp. 1153-1154, 86 Cal.Rptr.2d 816, 980 P.2d 371 .) This “is not so much a conclusive presumption that confidential information has passed as a pragmatic recognition that the confidential information will work its way to the nontainted attorneys at some point.” (Goldberg v. Warner/Chappell Music, Inc. (2005) 125 Cal.App.4th 752, 765, 23 Cal.Rptr.3d 116.)
But several cases have questioned this paradigm as representing an outdated view of the practice of law. (City and County of San Francisco v. Cobra Solutions, Inc., supra, 38 Cal.4th at p. 855, 43 Cal.Rptr.3d 771, 135 P.3d 20 (dis. opn. of Corrigan, J.) [“The automatic disqualification rule arose in the context of private practice, at a time when it was relatively uncommon for attorneys to move from one firm to another. Thus, the rule's burdens were relatively light. Now, however, attorney mobility and firm mergers have increased exponentially. Accordingly, the automatic disqualification rule is being questioned even in the private practice context.”]; Adams v. Aerojet-General Corp., supra, 86 Cal.App.4th at p. 1336, 104 Cal.Rptr.2d 116 [“Large law firms ․ are becoming ever larger, opening branch offices nationwide or internationally, and merging with other large firms. Individual attorneys today can work for a law firm and not even know, let alone have contact with, members of the same firm working in a different department of the same firm across the hall or a different branch across the globe.”]; In re Complex Asbestos Litigation, supra, 232 Cal.App.3d at p. 586, 283 Cal.Rptr. 732 [“In the era of large, multioffice law firms and increased attention to the business aspects of the practice of law, we must consider the ability of attorneys ․ to change employment for personal reasons or from necessity.”]; In re County of Los Angeles, supra, 223 F.3d at p. 997 [“The changing realities of law practice call for a more functional approach to disqualification than in the past.”].) The instant case illustrates the changing landscape of legal practice-we are concerned with the tainted attorney working in a different geographical office and in a different practice group from the attorneys with responsibility for the litigation. These are not attorneys discussing their cases regularly, passing each other in the hallways, or at risk of accidentally sharing client confidences at lunch. In a situation where the “everyday reality” is no longer that all attorneys in the same law firm actually “work[ ] together,” there would seem to be no place for a rule of law based on the premise that they do.21
(2) Other Jurisdictions Are Also Recognizing and Adapting to the Changing Reality
Other states are very nearly split evenly as to whether to permit ethical screening of attorneys moving from one private law firm to another. Twelve states have adopted rules of professional conduct permitting such screening with no limitations based on the scope of the disqualified attorney's prior involvement in the representation. (Del. Rules Prof. Conduct, rule 1.10; Ill. Rules Prof. Conduct, rule 1.10; Ky.Supr. Ct. Rules, rule 3.130(1.10); Md. Rules Prof. Conduct, rule 1.10; Mich. Rules Prof. Conduct, rule 1.10; Mont. Rules Prof. Conduct, rule 1.10; N.C. Rules Prof. Conduct, rule 1.10; Or. Rules Prof. Conduct, rule 1.10; Pa. Rules Prof. Conduct, rule 1.10; R.I. Rules Prof. Conduct, rule 1.10; Utah Rules Prof. Conduct, rule 1.10; Wash. Rules Prof. Conduct, rule 1.10.) An additional twelve states have adopted rules permitting screening when the disqualified attorney was not substantially involved in the prior representation, or under other similar limitations on the attorney's prior involvement.22 (Ariz. Ethics Rules, rule 1.10; Colo. Rules Prof. Conduct, rule 1.10; Ind. Rules Prof. Conduct, rule 1.10; Mass. Rules Prof. Conduct, rule 1.10; Minn. Rules Prof. Conduct, rule 1.10; Nev. Rules Prof. Conduct, rule 1.10; N.J. Rules Prof. Conduct, rule 1.10; N.M. Rules Prof. Conduct, rule 16-110; N.D. Rules Prof. Conduct, rule 1.10; Ohio Rules Prof. Conduct, rule 1.10; Tenn. Rules Prof. Conduct, rule 1.10; Wis.Supr. Ct. Rules, rule 20:1.10.)
That nearly half of the states have chosen to permit some level of ethical screening in the non-governmental attorney context demonstrates a growing understanding that law is often practiced in firms in which effective screening is possible. In 2009, the ABA Model Rules of Professional Conduct were modified to permit screening of a tainted (non-former-governmental) attorney at a private law firm. ABA Model Rule 1.10 had, for many years, provided for the vicarious disqualification of a law firm when a lawyer in that firm would be prohibited from representing the client due to a conflicting former representation. In February 2009, however, the ABA modified Model Rule 1.10 to permit the law firm to accept the representation if the disqualified lawyer is timely and adequately screened. (ABA Model Rules Prof. Conduct, rule 1.10(a)(2).) This change was made after the ABA Standing Committee on Ethics and Professional Responsibility had inquired of states permitting screening and learned that their experience demonstrated “that properly established screens are effective to protect confidentiality.” (ABA Standing Committee on Ethics and Professional Responsibility, Recommendation 109 (February 16, 2009) p. 11.)
(3) The State Bar's Consideration and Ultimate Rejection of a New Ethical Rule Illustrates the Growing Recognition of the Changing Reality
In September 2009, the California Commission for the Revision of the Rules of Professional Conduct circulated for public comment a proposed Rule 1.10, which would govern discipline for imputed conflicts of interest (Former Proposed Rule 1.10). (Commission for the Revision of the Rules of Professional Conduct, State Bar of California, Proposed Amendments to the Rules of Professional Conduct of the State Bar of California (Discussion Draft, Sept. 2009) pp. 127-149.) Former Proposed Rule 1.10 was based on ABA Model Rule 1.10.23
Former Proposed Rule 1.10 provided for imputed conflicts of interest, without adopting the Model Rule's exception for screening. However, the introduction to the draft proposed rule indicated, “the Commission is equally divided on the issue of permitting screening in limited situations to facilitate the mobility of lawyers who were only peripherally involved in the matter. [Citation.] The Commission is interested in receiving input from the public and the profession on this issue and will specifically solicit public comment on whether California should sanction any kind of non-consensual ethical screening.” (Commission for the Revision of the Rules of Professional Conduct, State Bar of California, Proposed Amendments to the Rules of Professional Conduct of the State Bar of California (Discussion Draft, Sept. 2009) p. 129 .)
“After initial public comment distribution, the Commission recommended adoption of a modified version of Model Rule 1.10 that would have permitted, in limited circumstances [those in which the attorney had not ‘substantially participated’ in the prior representation], the screening of a lawyer who moves from one private firm to another. However, a minority of the Commission took the position that no rule which provides that an ethical wall could effectively rebut the presumption of shared confidences in context of a lawyer moving from one private firm to another should be adopted. The Board of Governors Committee on Regulation and Admissions considered the Commission's recommendation (including the view of the Commission minority) at its March 5, 2010 meeting and the Board Committee determined not to recommend that the Board [of Governors] adopt any part of the proposed rule, including that part of the rule which addressed the concept of imputation of one lawyer's prohibition to other members in the firm. As to the screening provision, the Board Committee observed that the concept of ethical walls, in the context of lateral attorney movement from one private law firm to another, was an unsettled issue in California. As to the provisions concerning imputation, the Board concluded that the concept of imputation is well-settled in California case law and that a Rule of Professional Conduct was not necessary. In accordance with the Board Committee's action, a California version of Model Rule 1.10 is not being recommended for adoption.” (State Bar Commission for the Revision of the Rules of Professional Conduct, Rules and Concepts that were Considered, but are Not Recommended for Adoption (March 2010) p. 11 [as of March 29, 2010].)
We agree with the Board of Governors that the issue of whether attorney screening can overcome vicarious disqualification in the context of an attorney moving between private law firms is not clearly settled in California law. We find it significant, however, that a majority of the Commission for the Revision of the Rules of Professional Conduct believed that screening should be ethically permissible in limited circumstances.
b. California's Experience in Other Contexts Suggests that Ethical Screening in Private Law Firms Can Be Effective
It is undisputed that the presumption of imputed knowledge is uniformly rebuttable and may be overcome by a proper ethical screen when the issue arises in the context of government and former government attorneys.24 (In re Charlisse C. (2008) 45 Cal.4th 145, 162, 84 Cal.Rptr.3d 597, 194 P.3d 330, Chambers v. Superior Court, supra, 121 Cal.App.3d at pp. 902-903, 175 Cal.Rptr. 575.) Yet if ethical screening can, in any given case, be considered effective to screen a former government attorney in a private law firm, it gives rise to the question why screening cannot be equally effective to screen a private attorney in the same private law firm. The effectiveness of the screening process depends on the policies implemented by the law firm, not on the former employment of the screened attorney.25
There is another context in which a rebuttable presumption of imputed knowledge-and therefore, the use of ethical screens-has been adopted, that of the tainted non-attorney employee. When a tainted non-attorney employee of a law firm, possessing confidential case information, moves to an opposing law firm, vicarious disqualification of the opposing law firm is not necessary if the employee is effectively screened. (In re Complex Asbestos Litigation, supra, 232 Cal.App.3d at pp. 579, 593, 596, 283 Cal.Rptr. 732.) The same rule applies to a non-retained expert, who is then employed by the opposing side.26 (Shadow Traffic Network v. Superior Court (1994) 24 Cal.App.4th 1067, 1084-1085, 29 Cal.Rptr.2d 693.) Indeed, a rebuttable presumption applies within an expert firm, allowing an expert firm to ethically screen an expert who interviewed with a plaintiff from an expert retained by the defendant in the same matter. (Western Digital Corp. v. Superior Court (1998) 60 Cal.App.4th 1471, 1485, 71 Cal.Rptr.2d 179.)
In all of these situations-government employees, former government employees, non-attorney employees, experts, and expert firms-the presumption of imputed knowledge is rebuttable, not conclusive. Moreover, the use of a rebuttable presumption is not justified as a “necessary evil” in order to advance important policy considerations. Instead, the rebuttable presumption is accepted because it is believed that, under the proper circumstances, ethical screening can work. There is no legitimate reason to believe that the same screening could not work in the context of private attorneys at a private firm. For example, in City of Santa Barbara v. Superior Court, supra, 122 Cal.App.4th at p. 27, 18 Cal.Rptr.3d 403, the court upheld an ethical wall in a government office, and stated, “Like all attorneys, [the tainted attorney] knows that her participation and use of confidential information against a former client would subject her to a host of problems including tort liability and state bar discipline. Such conduct would be a recipe for financial and professional suicide. We are confident that an attorney's oath and the severe consequences that would inexorably flow from a breach thereof, coupled with [an effective] ‘ethical wall,’ are sufficient to safeguard the former clients' confidences and preserve the integrity of the judicial process.” (Emphasis added.) We agree. These same considerations, and a proper ethical wall, can also be sufficient in the case of a tainted private attorney at a private firm.
c. Policy Considerations
Plaintiffs argue that there should be an irrebuttable presumption of imputed knowledge and automatic disqualification in order to “preserve public trust in the scrupulous administration of justice and the integrity of the bar.”27 (See SpeeDee Oil, supra, 20 Cal.4th at p. 1145, 86 Cal.Rptr.2d 816, 980 P.2d 371.) We agree that preservation of the public trust is a policy consideration of the highest order. However, it is just one of the many policy interests which must be balanced by a trial court considering a disqualification motion, and we are not prepared to say that this interest always outweighs the opposing party's right to counsel of its choice. We reiterate the policy considerations to be taken into consideration in a motion for disqualification: (1) a client's right to chosen counsel; (2) an attorney's interest in representing a client; (3) the financial burden on a client to replace disqualified counsel; (4) the possibility that tactical abuse underlies the disqualification motion;28 (5) the need to maintain ethical standards of professional responsibility; and (6) the preservation of public trust in the scrupulous administration of justice and the integrity of the bar. (SpeeDee Oil, supra, 20 Cal.4th at pp. 1144-1145, 86 Cal.Rptr.2d 816, 980 P.2d 371.)
In this regard, we find persuasive the following analysis of the ABA Standing Committee on Ethics and Professional Responsibility: “[F]raming the issue of imputation as a choice between client protection and lawyer mobility presents a false choice. Clients must be protected, and their confidence (as well as that of the public) in their lawyers' promise to keep their secrets must be preserved. The question is not whether but how that should be accomplished. No one contends that the lawyer himself may represent others against a former client on substantially related matters after moving to a new firm. [The Model Rules are] unequivocal on this subject. In addition, no one disputes that the confidentiality duty continues after termination of the client-lawyer relationship. If a lawyer breaches that duty, she is subject to discipline, whether she has changed firms or not. Screening is a mechanism to give effect to the duty of confidentiality, not a tool to undermine it.” (ABA Standing Committee on Ethics and Professional Responsibility, Recommendation 109 (February 16, 2009) pp. 10-11; italics in original.) The Standing Committee further noted, “Although much of the debate over lateral screening has been focused on the concerns of the clients of the lateral's former firm, there is a parallel set of interests: after a transferring lawyer has been hired, every imputed disqualification based on the unavailability of screening results in a client that loses its law firm of choice. The harm to all such clients is real, not theoretical. Often the disqualification of a firm, based upon an imputed conflict of a newly-hired lawyer, occurs after a manner is well under way and the affected client has spent substantial sums in fees. Typically, such clients have played no part in the circumstances that led to the imputed disqualification, yet they suffer the cost, disruption, and delay resulting from it. [¶]․ Thus, clients have interests on both sides of the screening question. Screening does not solve all such problems, but reduces them to situations where the interests of the former clients cannot adequately be addressed by the screening mechanism.” (Id. at pp. 11-12, 86 Cal.Rptr.2d 816, 980 P.2d 371.)
Courts have recognized the “interest in preserving the continuity of the lawyer-client relationship; otherwise, if such relationships were easily disrupted, complicated cases ․ would take even longer to resolve, the costs of litigation would be even higher, and unscrupulous attorneys would have an incentive to seize on strained facts and theories to pursue the tactical advantage of ousting their adversary's lawyers.” (UMG Recordings, Inc. v. MySpace, Inc., supra, 526 F.Supp.2d at p. 1065; see also In re Marriage of Zimmerman (1993) 16 Cal.App.4th 556, 565, 20 Cal.Rptr.2d 132 [concerned with depriving a party of his counsel at a late stage in the proceedings].)
In short, the general policy concern of “client protection” is not merely the interest in protecting client confidences which would weigh in favor of vicarious disqualification in all cases. It is, instead, a two-fold concern, which also implicates the interest in protecting a client who has established a longstanding relationship with counsel, and is at risk of losing that attorney by means of vicarious disqualification, through no fault of the client (or the client's attorney). A properly established ethical screen can satisfy both concerns-protecting client confidences from being used against the client by the tainted attorney's new firm, while still protecting the opposing client's longstanding attorney-client relationship.
In the days prior to large law firms, when there was limited firm-to-firm mobility, the latter concern was rarely implicated in cases involving vicarious disqualification. Now, however, with the proliferation of multi-office “mega-firms,” frequent firm mergers, and attorneys increasingly changing firms throughout their careers, clients are at greater risk of finding their longstanding attorney-client relationships challenged due solely to their counsel's changing affiliations.
We hasten to add that we are not here attempting to effect a balancing of the policy interests in this case-this will be a matter for the trial court on remand. We do conclude, however, that, in certain cases, the public trust in the scrupulous administration of justice is not advanced (and, in fact, may be undermined) by an order disqualifying a party's long-term counsel due to the presence of another attorney in a different office of the same firm, who possesses only a small amount of potentially relevant confidential information, and has been effectively screened.
5. The Elements of an Effective Screen
Once the moving party in a motion for disqualification has established that an attorney is tainted with confidential information, a rebuttable presumption arises that the attorney shared that information with the attorney's law firm.29 The burden then shifts to the challenged law firm to establish “that the practical effect of formal screening has been achieved. The showing must satisfy the trial court that the [tainted attorney] has not had and will not have any involvement with the litigation, or any communication with attorneys or [ ]employees concerning the litigation, that would support a reasonable inference that the information has been used or disclosed.”30 (In re Complex Asbestos Litigation, supra, 232 Cal.App.3d at p. 596, 283 Cal.Rptr. 732.)
The specific elements of an effective screen will vary from case to case, although two elements are necessary: First, the screen must be timely imposed; a firm must impose screening measures when the conflict first arises.31 It is not sufficient to wait until the trial court imposes screening measures as part of its order on the disqualification motion. (Klein v. Superior Court, supra, 198 Cal.App.3d at pp. 906, 913-914, 244 Cal.Rptr. 226; see also Hitachi, Ltd. v. Tatung Co. (N.D.Cal.2006) 419 F.Supp.2d 1158, 1165 [“The time to have moved the matter [to another office] would have been when the ethical conflict was discovered, not after losing a motion to disqualify.”].) Second, it is not sufficient to simply produce declarations stating that confidential information was not conveyed or that the disqualified attorney did not work on the case; an effective wall involves the imposition of preventive measures to guarantee that information will not be conveyed. (SpeeDee Oil, supra, 20 Cal.4th at pp. 1142, 1151-1152 & fn. 5, 86 Cal.Rptr.2d 816, 980 P.2d 371.) “To avoid inadvertent disclosures and establish an evidentiary record, a memorandum should be circulated warning the legal staff to isolate the [tainted] individual from communications on the matter and to prevent access to the relevant files.” (In re Complex Asbestos Litigation, supra, 232 Cal.App.3d at p. 594, 283 Cal.Rptr. 732.)
“The typical elements of an ethical wall are:  physical, geographic, and departmental separation of attorneys;  prohibitions against and sanctions for discussing confidential matters;  established rules and procedures preventing access to confidential information and files;  procedures preventing a disqualified attorney from sharing in the profits from the representation; and  continuing education in professional responsibility.” (Henriksen, supra, 11 Cal.App.4th at p. 116, fn. 6, 14 Cal.Rptr.2d 184.) We briefly discuss the first four of these elements.32 We stress, however, that the inquiry before a trial court considering the efficacy of any particular ethical wall is not to determine whether all of a prescribed list of elements (beyond timeliness and the imposition of prophylactic measures) have been established; it is, instead, a case-by-case inquiry focusing on whether the court is satisfied that the tainted attorney has not had and will not have any improper communication with others at the firm concerning the litigation.
The first factor-physical, geographic and departmental separation of attorneys-can also be described as “isolation.” Isolation of the tainted attorney is the best way to prevent the accidental disclosure of confidential information. The rule of vicarious disqualification is based on the “everyday reality that attorneys, working together and practicing law in a professional association, share each other's, and their clients', confidential information.” (SpeeDee Oil, supra, 20 Cal.4th at pp. 1153-1154, 86 Cal.Rptr.2d 816, 980 P.2d 371 .) Close proximity of attorneys “increases the actual risk of intentional or unintentional disclosure of [client] confidential information.” (Hitachi, Ltd. v. Tatung Co., supra, 419 F.Supp.2d at p. 1165.) In a small practice group, separating the tainted attorney from the case alone might not be sufficient; separation from the attorneys handling the case can prevent inadvertent disclosure.33 (Ibid.)
We turn to the second factor-prohibitions against the discussion of confidential information.34 Such a prohibition is the primary goal of any ethical wall. In all but the most unusual case, it would be necessary for the challenged law firm to establish express prohibitions against the discussion of confidential information as part of its ethical wall. The purpose of an ethical wall is prophylactic; it seeks to prevent the sharing of client confidences which is otherwise assumed when attorneys are practicing together. An express prohibition against discussing the information which must not be discussed is a basic first step toward establishing this goal.
The third factor-established rules and procedures preventing access to confidential information and files-focuses on additional ways to prevent the accidental disclosure of confidential information. Files may be stored in a separate location to which the tainted attorney has no access. (City of Santa Barbara v. Superior Court, supra, 122 Cal.App.4th at p. 21, 18 Cal.Rptr.3d 403.) Warnings can be posted on file room doors (UMG Recordings, Inc. v. MySpace, Inc., supra, 526 F.Supp.2d at p. 1052) or files may be protected by lock and key (see In re Charlisse C., supra, 45 Cal.4th at p. 155, 84 Cal.Rptr.3d 597, 194 P.3d 330). Electronic documents can be coded with restrictions on access. (UMG Recordings, Inc. v. MySpace, Inc., supra, 526 F.Supp.2d at p. 1052.) As with the other factors, we do not hold that any particular method of preventing access to confidential information and files is necessary-indeed, a trial court might conclude that a simple directive not to access the information is sufficient. The more steps a firm has taken to prevent any disclosure, however, the more likely it is that a court will find the ethical wall to be sufficient.
The fourth factor is the establishment of procedures preventing a disqualified attorney from sharing in the profits from the representation. ABA Model Rules for Professional Conduct, rule 1.10(a)(2)(i) specifically provides that vicarious disqualification is not necessary when the disqualified lawyer is timely screened from participation in the matter “and is apportioned no part of the fee therefrom[.]”35 Comment 8 to that rule provides that it “does not prohibit the screened lawyer from receiving a salary or partnership share established by prior independent agreement, but that lawyer may not receive compensation directly related to the matter in which the lawyer is disqualified.” The rationale is clear; if the disqualified attorney will not share in the profits of the representation, there is no financial incentive for the disqualified attorney to covertly assist the representation by improperly disclosing confidential information.
An additional element favorably acknowledged in caselaw is that the disqualified attorney has no supervisory powers over the attorneys involved in the litigation, and vice-versa. (City of Santa Barbara v. Superior Court, supra, 122 Cal.App.4th at p. 27, 18 Cal.Rptr.3d 403.) This is similar to the factor discussed above, that the tainted attorney receive no compensation from the matter. If the attorneys handling the matter are supervising the tainted attorney; the tainted attorney may feel an obligation to assist the supervising attorneys in their representation. Likewise, if the tainted attorney is supervising the attorneys involved in the litigation, there could be concerns that the tainted attorney sets policies that might bear on the subordinates' handling of the litigation. (City and County of San Francisco v. Cobra Solutions, Inc., supra, 38 Cal.4th at p. 850, fn. 2, 43 Cal.Rptr.3d 771, 135 P.3d 20.)
Although not discussed in the caselaw, we believe one additional factor, commonly noted in ethical rules governing imputed conflicts, should also be considered by trial courts in their analysis: notice to the former client.36 ABA Model Rules for Professional Conduct, rule 1.10(a)(2), provides that, when a disqualified attorney is timely screened, “written notice [must be] promptly given to any affected former client to enable the former client to ascertain compliance with the provisions of this Rule, which shall include a description of the screening procedures employed; a statement of the firm's and of the screened lawyer's compliance with these Rules; a statement that review may be available before a tribunal; and an agreement by the firm to respond promptly to any written inquiries or objections by the former client about the screening procedures[. Additionally,] certifications of compliance with these Rules and with the screening procedures are [to be] provided to the former client by the screened lawyer and by a partner of the firm, at reasonable intervals upon the former client's written request and upon termination of the screening procedures.” (See also Commission for the Revision of the Rules of Professional Conduct, State Bar of California, Proposed Amendments to the Rules of Professional Conduct of the State Bar of California (Discussion Draft, January 2010) p. 147 [where California's proposed rule would permit screening when an attorney has obtained confidences from a prospective client, such screening is permitted only when “written notice is promptly given to the prospective client to enable the prospective client to ascertain compliance with the provisions of this Rule”].)
The reasons for providing notice to the former client should be obvious. Notice increases the public perception of the integrity of the bar, by making the interested party aware of the potential threat to its confidential information and the measures taken to prevent the improper use or disclosure of such information. Moreover, notice establishes an enforcement mechanism, in that the interested party will be able to suggest measures to strengthen the wall, and to challenge any apparent breaches. However, the interested party's consent is not required.
We note that these are the “typical elements” of a wall. Each of these elements need not necessarily be present for an ethical wall to be sufficient to rebut the presumption of imputed knowledge. Any ethical wall must ultimately be judged by whether it is sufficient to meet its purpose: satisfying the trial court that the tainted attorney has not had and will not have any involvement with, or communication concerning, the litigation which would support a reasonable inference that confidential information was or will be disclosed.
6. The Trial Court Erred in Ruling Vicarious Disqualification was Automatic
In sum, we have concluded that, when a tainted attorney moves from one private law firm to another, the law gives rise to a rebuttable presumption of imputed knowledge to the law firm, which may be rebutted by evidence of effective ethical screening. However, if the tainted attorney was actually involved in the representation of the first client, and switches sides in the same case, no amount of screening will be sufficient, and the presumption of imputed knowledge is conclusive. (See Meza, supra, 176 Cal.App.4th at pp. 977-979, 98 Cal.Rptr.3d 422; Henriksen, supra, 11 Cal.App.4th at pp. 114-115, 14 Cal.Rptr.2d 184.)
When considering a motion to disqualify a law firm on the basis of imputed knowledge, in a case where the presumption is rebuttable, a trial court should consider, on a case-by-case basis, whether the ethical screening imposed by the firm is effective to prevent the transmission of confidential information from the tainted attorney. Moreover, the court should consider all of the policy interests implicated by the disqualification motion, in determining how to exercise its discretion. In this case, the trial court concluded that automatic vicarious disqualification was the rule; this was error.
However, the trial court also concluded that, even if ethical screening were permissible, the ethical screening wall in this case was breached and it was therefore ineffective. In reaching its conclusion that the wall was breached, however, the court relied on a factual determination that Cohen's work on the Lyons matter was used against plaintiffs in two of the related class actions. Substantial evidence does not support this conclusion. It is clear that Cohen performed work on the Lyons matter prior to the time the First American team cited to an order of the Lyons trial court in connection with its demurrers in the related class actions. However, the record before us establishes that the Lyons order to which the First American team cited had been obtained prior to the First American team's move to Sonnenschein. Thus, there is no evidence that Cohen's work on the Lyons matter was used by the First American team in the related class actions. As the trial court relied on its finding to the contrary in order to support its conclusion that the ethical wall was ineffective in this case, and that finding is not supported by the record, the court's conclusion that the ethical wall was ineffective cannot stand.
We do not here decide that Cohen's work on the Lyons matter was or was not disqualifying of Sonnenschein. Clearly, the safest approach would have been for Sonnenschein to screen Cohen completely from the First American team and all First American cases. However, the fact remains that the screening wall Sonnenschein built prohibited Cohen from working on the related class actions, and no evidence that we have found in the record before us indicates that he did. Under normal circumstances, we would stop here and remand for the trial court to consider whether the provisions of Sonnenschein's ethical wall were adequate to rebut the presumption of imputed knowledge. The circumstances, however, have changed.
7. Effect of Cohen's Departure From Sonnenschein
On First American's motion, we have taken additional evidence on appeal. (Code Civ. Proc., § 909.) That evidence indicates that Cohen is no longer employed by Sonnenschein. This changes the inquiry the trial court is to make on remand.
The purpose of a disqualification order is prophylactic, not punitive. (Gregori v. Bank of America, supra, 207 Cal.App.3d at pp. 308-309, 254 Cal.Rptr. 853.) That is, the issue is whether there is a genuine likelihood that allowing the attorney to remain on the case will affect the outcome of the proceedings before the court. (Ibid.) When considering vicarious disqualification of a firm based on the presence of a tainted attorney, the issue is whether there is a likelihood that other attorneys at the firm may receive and use the information possessed by the tainted attorney in the pending action.
However, once the tainted attorney has left the firm, vicarious disqualification is not necessary “where the evidence establishes that no one other than the departed attorney had any dealings with the client or obtained confidential information.” (Goldberg v. Warner/Chappell Music, Inc., supra, 125 Cal.App.4th at p. 755, 23 Cal.Rptr.3d 116.) Thus, the inquiry is no longer a prospective one, but a retrospective one. The trial court should not consider the risk of transmitting information from the tainted attorney to those involved in the challenged representation, but, instead, whether the tainted attorney actually conveyed confidential information.37 (Id. at p. 762, 23 Cal.Rptr.3d 116; cf. Adams v. Aerojet-General Corp., supra, 86 Cal.App.4th at p. 1335, 104 Cal.Rptr.2d 116.) As part of its inquiry, however, the trial court may consider the elements of the ethical wall constructed by Sonnenschein, as the strength of the wall may well be relevant to a determination of whether it is likely that confidential information was actually conveyed.
In this case, Cohen was present at the Sonnenschein firm for approximately one year. On remand, the trial court must determine whether Cohen's activities at the firm actually resulted in the improper transmission, directly or indirectly, of confidential information from Cohen to the First American team, or any other member of the Sonnenschein firm who may have worked on the related class actions. If (1) the Sonnenschein firm can overcome the rebuttable presumption that confidential information was transmitted, by offering sufficient evidence that confidential information was not, in fact, transmitted;38 and (2) the trial court, in the exercise of its discretion, concludes that the implicated policy considerations favor allowing Sonnenschein to remain as counsel, the trial court should deny the motion for disqualification. If, however, the trial court concludes that (1) Sonnenschein has not sufficiently rebutted the presumption that confidential information was transmitted, or (2) despite a finding that confidential information was not transmitted, the competing policy considerations nonetheless mandate disqualification of the entire firm under the circumstances, the trial court should grant the motion for disqualification. We express no opinion on the resolution of any of these questions, which are for the trial court to determine in the first instance.
The order of disqualification of the Sonnenschein firm is reversed. The matter is remanded to the trial court for further proceedings not inconsistent with the views expressed herein. Each party shall pay its own costs on appeal.
WE CONCUR: KLEIN, P.J., and KITCHING, J.