GIANNINI CHIN VALINOTI v. LEE (1995)

In A064229, the law firm of Giannini, Chin & Valinoti (“Giannini”) appeals from a summary judgment granted in favor of its former clients, respondents James Lee, Ben Lee, and Paula Lee (“Lees”), in Giannini's action for unpaid legal fees.   Summary judgment was granted upon the determination that the Lees had a complete defense to Giannini's complaint in that Giannini had violated the Rules of Professional Conduct by failing to disclose to the Lees a relationship with another party that Giannini was required to disclose under rule 3–310.   Giannini claims the relationship in question did not have to be disclosed, rule 3–310 is unconstitutionally vague and overbroad as applied to Giannini's conduct, and the trial court allowed an improper remedy.

In A064816, Giannini filed a petition for writ of mandate challenging the trial court's determination, in granting the Lees motion for summary adjudication, that the Lees were entitled to recover fees already paid to Giannini.   In addition to the arguments made on the appeal regarding the propriety of finding a violation of rule 3–310, Giannini argues the order requiring disgorgement of attorney's fees is without precedent and improperly equated an affirmative defense with a cause of action.

STATEMENT OF THE CASE AND FACTS

The Lees retained Giannini on or about August 31, 1990, to represent them in litigation against Fireman's Fund Insurance Company (Fireman's) and others.   The Lees had had a substantial judgment entered against them in a lawsuit by tenants of a hotel they owned ¹ and had filed a bad faith lawsuit against Hartford Accident and Indemnity Company, Fireman's and others after the insurers refused to pay the judgment (Lee v. Hartford, et al., San Francisco Superior Court No. 896615).   Hartford and Fireman's had settled with all but one of the complaining tenants and agreed to defend and indemnify the Lees as to the remaining tenant.   Shortly before the Lees retained Giannini, the insurers filed cross-complaints against the Lees in the Hartford case seeking reimbursement.   The Lees retained Giannini to represent them in the Hartford case and additionally in a subsequently filed related action by an excess insurer (Comstock v. Lee, San Francisco Superior Court No. 933559), as well as in “general business matters,” predominantly a dispute over insurance coverage for earthquake damage to buildings owned by the Lees.   According to the declaration of James Lee, Giannini advised the Lees that the attorney's fees and costs in the bad faith case would total $150,000 to $200,000, they would be able to recover the attorney's fees from the insurers, and the bad faith case was worth “ ‘millions.’ ”   In fact, according to Lee's declaration, over the course of two years Giannini charged the Lees almost $1,300,000 (more than $1,113,000 in the Hartford case, $43,777 in the Comstock case, and $116,640 for general business matters), of which the Lees paid more than $921,000 ($821,000 for Hartford ).   The Hartford case ultimately settled for $550,000, although James Lee's declaration indicates half that amount was obtained after Giannini withdrew from the case and the Lees paid additional fees to another attorney.

At the time the Lees retained Giannini in August 1990, Giannini was also representing Kenneth M. Economy in a lawsuit, Hemmerle v. Economy (Marin County Superior Court No. 132363).   Economy was insured by Fireman's and from early 1988 through at least some time in 1991 Giannini received payment for its representation of Economy from Fireman's.   According to the declaration of David Giannini, Economy retained Giannini to represent him in Hemmerle v. Economy in February 1988, at a time when Fireman's had declined to cover and pay the costs of the defense in Hemmerle;  in August of 1988 Fireman's accepted the Hemmerle claim on behalf of Economy;  in September of 1988 Fireman's agreed to pay Giannini for its representation of Economy pursuant to Civil Code section 2860 ² ;  in July of 1990 Fireman's issued a reservation of rights letter and agreed to retain Giannini as Cumis counsel for Economy pursuant to section 2860;  in response to this reservation of rights, Giannini demanded that Fireman's either retract the reservation (on the theory that it was estopped from denying coverage because it had previously represented to the insured that the claim was covered) or, because of the conflict of interest created between the insured and insurer, retain Giannini as independent counsel on behalf of Economy pursuant to section 2860.   Giannini's letter to Fireman's in July 1990 informed the insurer that as a result of the conflict of interest Giannini's only obligation was to Economy.

According to Giannini's declaration, when Giannini was retained by the Lees to handle their insurance coverage dispute with Fireman's, he informed Lee that the firm was representing another client in a similar dispute regarding a reservation of rights by Fireman's.   Giannini never obtained written consent from the Lees regarding the firm's representation of Economy.

At the end of December 1990, Fireman's retracted its reservation of rights on the Hemmerle matter, stating the letter reserving rights had been sent in error, and indicated panel counsel might be substituted in if the case could not be settled quickly.   In February 1991, Fireman's informed Giannini that staff counsel would be substituting into the Hemmerle case and directed Giannini to suspend discovery;  Giannini informed Fireman's that it would continue to represent Economy on the uninsured portions of the claim (exposure in excess of policy limits and punitive damages).   The law firm of Ropers, Majeski, Cohn, Bentley, Wagner & Kane then associated into the case with Giannini to act as counsel on the insured portions of the litigation.   At three junctures, in August 1988, July 1990 and February 1991, Giannini threatened Fireman's with bad faith litigation if it did not honor its obligations to Economy.

On August 31, 1992, Giannini filed a complaint against the Lees seeking recovery of unpaid legal fees in the Hartford and Comstock litigation and on general business matters, stating causes of action for recovery on theories of legal services rendered on open book account, breach of contract and quantum meruit.   The Lees filed an answer and a cross complaint alleging professional malpractice and breach of fiduciary duties.   With respect to breach of fiduciary duties, the Lees alleged various acts by Giannini, including negligence in advising the Lees as to the value of their cases and amount of fees and costs they would incur, spending inappropriate amounts of time on the Lees cases;  charging an unconscionable fee;  engaging in tactics to increase the Lees fees;  and purposely failing to disclose the firm's concurrent representation of Fireman's and/or insureds of Fireman's for whom Fireman's was providing a defense and withholding from the Lees the existence of an actual conflict of interest created by that representation.

On June 4, 1993, Giannini moved for summary adjudication on the issue of the alleged conflict of interest created by Giannini's representation of Economy.   On the same date, the Lees moved for summary judgment, or in the alternative summary adjudication, claiming Giannini was barred from recovery by its failure to obtain written informed consent to its simultaneous representation adverse to the Lees.   By order filed July 29, 1993, the court granted the Lees motion, finding:  “Defendants have a complete defense to plaintiff's complaint by showing that plaintiffs failed to disclose they had a relationship with Fireman's Fund Insurance Company, which relationship should have been disclosed pursuant to Rule of Professional Conduct 3–310.”   The court denied Giannini's motion for the same reason.

Giannini moved for reconsideration and for a new trial.   These motions were denied by orders filed on October 20 and 22, 1993.   An order granting summary judgment filed on November 16, 1993, relates the evidence considered by the court and concludes that the evidence in opposition to the motion did not raise a triable issue of fact as the “undisputed evidence established that plaintiff had a relationship with Fireman's Fund Insurance Company, and was being paid to represent an insured of Fireman's Fund, when defendants retained plaintiff, and plaintiff was required to disclose this relationship and to obtain the informed written consent of defendants pursuant to rule 3–310 of the Rules of Professional Conduct as it existed at the time.”   An order filed on the same date denied Giannini's motion for summary adjudication upon a finding that the undisputed evidence showed Giannini had breached its fiduciary duties to the Lees by this violation of rule 3–310.   The court's judgment pursuant to Code of Civil Procedure section 437c was filed on November 16, 1993.   Notices of entry of the court's orders and judgment were filed on November 18, 1993.

Giannini filed a notice of appeal from the judgment and the orders denying the motions for new trial and for reconsideration on December 15, 1993.

On December 13, 1993, the Lees filed a motion for summary adjudication seeking recovery of all fees they had already paid to Giannini.   Specifically, the Lees sought to establish two issues:  That they were entitled to recover from Giannini all attorney's fees they had already paid and that there was no defense to this claim for return of previously paid attorney's fees.   The Lees' motion was granted by order filed February 1, 1994, upon the court's finding that the evidence did not raise a triable issue of material fact as to these issues and summary adjudication should be granted “on the grounds that [Giannini] did not comply with rule 3–310 of the Rules of Professional Conduct and case law requires that [Giannini] not recover fees and therefore all fees must be repaid.”   Notice of entry of the order was filed on February 3, 1994.

On February 23, 1994, Giannini filed a petition for writ of mandate asking this court to review the trial court's order requiring disgorgement of attorney's fees already paid by the Lees.   The parties requested this court to consolidate the writ petition and appeal.   The motion to consolidate was denied by order filed March 11, 1994, and consideration of the writ petition was deferred pending review of the appeal.   By order of February 28, 1995, we ordered the parties to show cause why the petition for writ of mandate in A064816 should not be granted and ordered A064229 considered together with A064816.

DISCUSSION

 At the outset, we face an issue of appealability not addressed by the parties in their briefs.   Giannini's appeal is from the summary judgment on its complaint;  there has been no final disposition of the Lee's cross-complaint and indeed that cross-complaint remains pending in the trial court.   Under the one final judgment rule, “an appeal cannot be taken from a judgment that fails to complete the disposition of all the causes of action between the parties․”  (Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 743, 29 Cal.Rptr.2d 804, 872 P.2d 143.)   In cross-actions, an appeal generally will not be allowed until a judgment is entered that resolves all the issues between the cross-complaining parties.  (Nicholson v. Henderson (1944) 25 Cal.2d 375, 381, 153 P.2d 945;  Southern Pacific Land Co. v. Westlake Farms, Inc. (1987) 188 Cal.App.3d 807, 825–826, 233 Cal.Rptr. 794, see, Holt v. Booth (1991) 1 Cal.App.4th 1074, 1081, 2 Cal.Rptr.2d 727;  Eisenberg, Horvitz & Wiener, California Practice Guide:  Civil Appeals and Writs (TRG 1993) § 2:70, p. 2–31.)   The present appeal does not appear to fall within any of the recognized exceptions to the one final judgment rule:  It does not resolve all issues as to one party and cannot be “amended so as to convert it into a judgment encompassing actual determinations of all remaining issues” by the trial or appellate court (Morehart v. County of Santa Barbara, supra, 7 Cal.4th at p. 740, 29 Cal.Rptr.2d 804, 872 P.2d 143), and it does not meet the requirements of the collateral order doctrine.  (In re Marriage of Skelley (1976) 18 Cal.3d 365, 368, 134 Cal.Rptr. 197, 556 P.2d 297;  Sjoberg v. Hastorf (1948) 33 Cal.2d 116, 119, 199 P.2d 668;  Samuel v. Stevedoring Services (1994) 24 Cal.App.4th 414, 418, 29 Cal.Rptr.2d 420.) ³

 Rather than dismiss the appeal from the summary judgment, however, we have the power to treat the appeal as a petition for an extraordinary writ.  (Morehart v. County of Santa Barbara, supra, 7 Cal.4th at pp. 744–747, 29 Cal.Rptr.2d 804, 872 P.2d 143;  Olson v. Cory (1983) 35 Cal.3d 390, 400–401, 197 Cal.Rptr. 843, 673 P.2d 720.)   While this power should be exercised only in unusual circumstances, we have determined, in light of the inextricable link between the issues presented by the appeal and those before us on the petition for writ of mandate, that it is in the interests of justice and expeditious resolution of the controversy for us to do so.⁴  Accordingly, we treat the appeal as a petition for writ of mandate.

I.

This case presents questions concerning the scope of former rule 3–310(A) of the California Rules of Professional Conduct (“Rule”) and consequences of an attorney's violation of the rule.   At all times relevant to the present case, rule 3–310(A) provided:  “If a member has or had a relationship with another party interested in the representation, or has an interest in its subject matter, the member shall not accept or continue such representation without all affected clients' informed written consent.” ⁵  The trial court granted summary judgment to the Lees upon concluding that Giannini had violated this rule because it had a “relationship” with Fireman's and was being paid to represent an insured of Fireman's but did not obtain informed consent from the Lees.   The trial court made no findings regarding the nature of the relationship between Giannini and Fireman's.   Giannini maintains that the rule should not apply when the relationship between the attorney and other party are antagonistic, so that the relationship does not threaten to compromise the attorney's representation of the client.

Rule 3–310 is generally titled “Avoiding the Representation of Adverse Interests.”   Former rule 3–310(A), as quoted above, deals generally with an attorney's “relationship” with other parties interested in the representation and with the attorney's interest in its subject matter.   Other subdivisions of the rule addressed concurrent representation of clients with conflicting interests (rule 3–310(B);  aggregate settlement of multiple clients' claims (rule 3–310(C));  acceptance of employment adverse to a client after obtaining by reason of representation of the client confidential information material to the employment (rule 3–310(D));  and acceptance of compensation for representation of a client from one other than the client (rule 3–310 (Economy)).  Rule 3–310(F) defined “informed consent” as used in the rule to mean “full disclosure to the client of the circumstances and advice to the client of any actual or reasonably foreseeable adverse effects of those circumstances upon the representation.”   As a whole, rule 3–310 was thus concerned with attorneys' conflicts of interest created by relationships that are or may be adverse to each other.

Caselaw provides little guidance in interpreting the language of rule 3–310(A).   In Santa Clara County Counsel Attys. Assn. v. Woodside (1994) 7 Cal.4th 525, 546, 28 Cal.Rptr.2d 617, 869 P.2d 1142, however, the Supreme Court described the current version of rule 3–310 generally as “proscrib[ing] attorney conflicts of interest in various contexts,” including both “conflict in representation of current or former clients” and “conflicts between an attorney's own financial and personal interests and those of his or her client.”  Woodside held that attorneys employed by the County Counsel's office could maintain a suit against the County to enforce their statutory rights in a salary dispute.   In so holding, the court noted that the attorneys would not face temptation to compromise their representation of the County in order to further their own interests as the outcome of most of the matters in which the attorneys represented the County would not affect or be affected by the outcome of the attorneys' suit against the County.   While the court was not specifically construing former rule 3–310(A), its analysis of whether the rule applied clearly looked to the substance of the relationships at issue to determine whether they presented an actual or potential conflict.

Our Supreme Court recently reaffirmed its long-standing definition of an attorney's duty of loyalty to his or her client, originally stated in Anderson v. Eaton (1930) 211 Cal. 113, 293 P. 788:  “ ‘One of the principal obligations which bind an attorney is that of fidelity, the maintaining inviolate the confidence reposed in him by those who employ him, and at every peril to himself to preserve the secrets of his client.  [Citations.]  This obligation is a very high and stringent one.   It is also an attorney's duty to protect his client in every possible way, and it is a violation of that duty for him to assume a position adverse or antagonistic to his client without the latter's free and intelligent consent given after full knowledge of all the facts and circumstances.  [Citation.]  By virtue of this rule an attorney is precluded from assuming any relation which would prevent him from devoting his entire energies to his client's interests.   Nor does it matter that the intention and motives of the attorney are honest.   The rule is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to preclude the honest practitioner from putting himself in a position where he may be required to choose between conflicting duties, or be led to attempt to reconcile conflicting interests, rather than to enforce to their full extent the rights of the interest which he should alone represent.’ ”   (Flatt v. Superior Court (1994) 9 Cal.4th 275, 289, 36 Cal.Rptr.2d 537, 885 P.2d 950, quoting Anderson v. Eaton, supra, 211 Cal. at p. 116, 293 P. 788, emphasis in Flatt.)

If interpretation of former rule 3–310(A) is informed by the established definition of an attorney's duty of loyalty to a client, the rule would require informed consent not of any and every “relationship” an attorney might have with a party “interested in the representation,” but of relationships that could in some manner impinge upon the attorney's representation of the client by compromising the attorney's loyalty to the client.⁶  In the present case, Giannini contends it never had such a relationship with Fireman's:  According to Giannini, it was always in an antagonistic position to Fireman's, either officially as Cumis counsel for Economy or unofficially by virtue of its actions in threatening Fireman's with bad faith litigation if Fireman's did not honor its obligations to Economy.

San Diego Federal Credit Union v. Cumis Ins. Society, Inc., supra, 162 Cal.App.3d 358, 208 Cal.Rptr. 494, held that an insurance company must pay for independent counsel for its insured when there are divergent interests of the insured and the insurer brought about by the insurer's reservation of rights to deny coverage under an insurance policy.   The court explained, “In the usual tripartite relationship existing between insurer, insured and counsel, there is a single, common interest shared among them.   Dual representation by counsel is beneficial since the shared goal of minimizing or eliminating liability to a third party is the same.   A different situation is presented, however, when some or all of the allegations in the complaint do not fall within the scope of coverage under the policy.   In such a case, the standard practice of an insurer is to defend under a reservation of rights where the insurer promises to defend but states it may not indemnify the insured if liability is found.   In this situation, there may be little commonality of interest.   Opposing poles of interest are represented on the one hand in the insurer's desire to establish in the third party suit the insured's ‘liability rested on intentional conduct’ [citation], and thus no coverage under the policy, and on the other hand in the insured's desire to ‘obtain a ruling ․ such liability emanated from the nonintentional conduct within his insurance coverage’ [citation].   Although issues of coverage under the policy are not actually litigated in the third party suit, this does not detract from the force of these opposing interests as they operate on the attorney selected by the insurer, who has a dual agency status [citation.]”  (Id., at pp. 364–365, 208 Cal.Rptr. 494.)  Civil Code section 2860 codifies the Cumis rule and sets out the parties rights and obligations in this situation.

In the usual insurer-attorney-insured relationship, where the insurer has a duty to defend the insured, hires counsel to provide the defense and controls the prosecution of the defense, “[s]o long as the interests of the insurer and the insured coincide, they are both the clients of the defense attorney and the defense attorney's fiduciary duty runs to both the insurer and the insured.  (National Union Fire Ins. Co. v. Stites Prof. Law Corp. (1991) 235 Cal.App.3d 1718, 1727, 1 Cal.Rptr.2d 570.)  Cumis counsel, however, represents solely the insured, and the duties owed by the attorney to the insurer in this situation do not create an attorney client relationship between Cumis counsel and the insurer.  (Employers Ins. of Wausau v. Albert D. Seeno Const. (N.D.Cal.1988) 692 F.Supp. 1150, 1157–1158.)   It follows that if Giannini was acting as Cumis counsel (or otherwise in a manner adversarial to Fireman's) in the Economy litigation, it did not have a relationship with Fireman's in that litigation that could compromise its loyalty to Lee.

“ ‘The summary judgment procedure, inasmuch as it denies the right of the adverse party to a trial, is drastic and should be used with caution․  Summary judgment is properly granted only when the evidence in support of the moving party establishes that there is no issue of fact to be tried․  [¶] “ ‘The affidavits of the moving party are strictly construed and those of his opponent liberally construed, and doubts as to the propriety of summary judgment should be resolved against granting the motion.’ ”  [Citation.]  ․ [¶] The burden on the moving party, when as is typical that party is a defendant, becomes even heavier when the summary judgment motion is based on an affirmative defense.   Instead of merely supplying enough evidence to negate a single element of plaintiff's cause of action, the moving party must produce evidence which proves a ‘complete defense’ [citation].' ”  (Huynh v. Ingersoll–Rand (1993) 16 Cal.App.4th 825, 830, 20 Cal.Rptr.2d 296.)

 The evidence before the trial court on the motion for summary judgment showed that at the time Giannini was retained by the Lees, Giannini was being paid by Fireman's to represent Economy under a reservation of rights, with both Giannini and Fireman's viewing Giannini as Cumis counsel for Economy;  that Fireman's had previously accepted the defense in Economy's litigation without reservation of rights;  and that Fireman's subsequently retracted its reservation of rights.   Giannini introduced evidence that it maintained an adverse relationship to Fireman's even when the reservation of rights was not operative, threatening the insurer with bad faith litigation if it did not honor its obligations to Economy.   The Lees introduced evidence that Giannini viewed itself as acting to protect Fireman's interests as well as Economy's, and maintains that the dispute over coverage in Economy was never of the type that creates a need for Cumis counsel.⁷  There were thus disputed facts as to the nature of Giannini's relationship with Fireman's at various points in time during its representation of the Lees.   Whether and when Giannini was obligated to obtain the Lees' informed consent under rule 3–310(A) depends on whether and when Giannini was in a relationship with Fireman's that could have compromised its loyalty to and representation of the Lees.   Since triable issues of fact existed, summary judgment should not have been granted.⁸

While the conclusion that triable issues of fact existed as to whether Giannini violated rule 3–310(A) requires reversal of the summary judgment, we proceed to consider the propriety of the trial court's remedy for guidance in the event further proceedings result in a determination that the violation occurred.   Giannini takes issue with the trial court's conclusion that an attorney's violation of former rule 3–310(A) allows a client to completely avoid liability for attorney's fees, urging first that caselaw establishes attorneys' rights to at least quantum meruit recovery of compensation for services rendered and second that a violation of the Rules of Professional Conduct can not in and of itself carry this consequence.

Giannini relies upon cases allowing attorneys to recover reasonable payment for services rendered even where they were found to have violated fiduciary duties to their clients.  (E.g., Clark v. Millsap (1926) 197 Cal. 765, 242 P. 918 [fraudulent attempt by attorney to keep client's property, transferred to attorney to escape creditors, as fee;  recovery of agreed upon amount for fees, not objected to by client, allowed];  Magee v. Brenneman (1922) 188 Cal. 562, 206 P. 37 [note for attorney's fee voided because attorney failed to rebut presumption of unfairness in attorney transactions with client;  attorney allowed to keep amount he had been paid as reasonable value of services];  Ayres v. Lipschutz (1924) 68 Cal.App. 134, 228 P. 720 [attorney entitled to payment for reasonable value of services after discharge by client]; ⁹  Anderson v. Eaton, supra, 211 Cal. 113, 293 P. 788 [no recovery under contract held to be void because of attorney's conflict of interest;  issue of quantum meruit not decided because no evidence presented];  Rosenberg v. Lawrence (1938) 10 Cal.2d 590, 75 P.2d 1082 [assuming express contract void because of attorney misconduct in splitting fee with non-attorney;  quantum meruit allowed];  Calvert v. Stoner (1948) 33 Cal.2d 97, 199 P.2d 297 [quantum meruit allowed even if fee agreement void as violative of public policy];  Trafton v. Youngblood (1968) 69 Cal.2d 17, 69 Cal.Rptr. 568, 442 P.2d 648 [attorney improperly withdrew funds from client's settlement and sued for additional fees;  not entitled to quantum meruit because limited claims in trial court to account stated];  Denton v. Smith (1951) 101 Cal.App.2d 841, 226 P.2d 723 [fee agreement unenforceable but quantum meruit allowed];  Coons v. Kary (1968) 263 Cal.App.2d 650, 69 Cal.Rptr. 712 [fee contract void but quantum meruit allowed].)   For the most part, the attorney's misconduct in these cases had to do with the fee arrangements and the cases stand for the proposition that although a specific fee agreement is not enforceable, the attorney is still entitled to compensation for the reasonable value of services rendered.   The only one of Giannini's cases involving a conflict in representation was Anderson v. Eaton, supra, in which the court expressly did not determine whether quantum meruit would be appropriate.¹⁰

On the other hand, several cases involving conflict situations have determined that the offending attorney is entitled to no compensation.   In Jeffry v. Pounds (1977) 67 Cal.App.3d 6, 136 Cal.Rptr. 373, while one partner in a law firm was representing a client in a personal injury action, and without obtaining the client's consent, another partner agreed to represent the client's wife in a marital dissolution action.   After the client fired the law firm and the personal injury suit was settled by the client's new counsel, the law firm sought recovery for the reasonable value of their services in the personal injury case.   The court determined that the law firm had violated the stricture against dual representation, as disclosure and client consent is required before an attorney may accept employment adverse to a client even if the employment is unrelated to the existing representation.   (Jeffry v. Pounds, supra, 67 Cal.App.3d at pp. 10–11, 136 Cal.Rptr. 373.)   Jeffry concluded that the law firm was entitled to compensation only for services it rendered prior to its breach of professional conduct by accepting representation of the client's wife without the client's consent.  (Id., at p. 12, 136 Cal.Rptr. 373.)

In Goldstein v. Lees (1975) 46 Cal.App.3d 614, 120 Cal.Rptr. 253, the attorney who undertook to represent a client in a proxy fight with a corporation had previously been general counsel to the corporation.   The trial court awarded the attorney the reasonable value of his services and the court of appeal reversed, finding the attorney entitled to no fee.  “It is settled in California that an attorney may not recover for services rendered if those services are rendered in contradiction to the requirements of professional responsibility.   As the California Supreme Court explained in Clark v. Millsap, 197 Cal. 765, 785 [242 P. 918], ‘Fraud or unfairness on the part of the attorney will prevent him from recovering for services rendered;  as will ․ acts of impropriety inconsistent with the character of the profession, and incompatible with the faithful discharge of its duties.’  [Citations.]  Contracts to render such services even if not tainted with actual fraud have been held to be ‘clearly against public policy and void.’  (Anderson v. Eaton, 211 Cal. 113, 116 [293 P. 788].)”  (Goldstein v. Lees, supra, 46 Cal.App.3d at p. 618, 120 Cal.Rptr. 253.)

The principle that an attorney who engages in conflicting representation may not be entitled to a fee was reaffirmed in Asbestos Claims Facility v. Berry & Berry (1990) 219 Cal.App.3d 9, 267 Cal.Rptr. 896, albeit in dicta, as the issue had not been raised in the trial court and so was not properly raised on appeal.   The court explained, “ ‘An attorney's simultaneous representation of clients with differing interests poses the classic conflict situation.   A client is entitled to his attorney's unimpaired loyalty and the danger is that an attorney representing conflicting or potentially conflicting interests will be tempted to favor one client over the other.  [Citation.]’  [Citation.]   “ ‘[It does not] matter that the intention and motives of the attorney are honest.   The rule is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to preclude the honest practitioner from putting himself in a position where he may be required to choose between conflicting duties, or be led to an attempt to reconcile conflicting interests, rather than to enforce to their full extent the rights of the interest which he should alone represent.” ’  [Citation.]”  (219 Cal.App.3d at p. 26, 267 Cal.Rptr. 896.)   The court noted that one of the methods by which an issue of attorney conflict of interest may be raised is as a defense in the attorney's action to recover fees.  (Id., at pp. 26–27, 267 Cal.Rptr. 896.)

 Giannini's arguments notwithstanding, precedent thus establishes that where an attorney violates the mandate of professional responsibility that he or she undertake representation that poses an actual or potential conflict with a client's interest only with the clients' informed consent, the attorney is not entitled to a fee for his or her services.  (Jeffry v. Pounds, supra, 67 Cal.App.3d 6, 136 Cal.Rptr. 373;  Goldstein v. Lees, supra, 46 Cal.App.3d 614, 120 Cal.Rptr. 253;  Asbestos Claims Facility v. Berry & Berry, supra, 219 Cal.App.3d 9, 267 Cal.Rptr. 896;  see also, Day v. Rosenthal (1985) 170 Cal.App.3d 1125, 1162, 217 Cal.Rptr. 89 [no finding on reasonable value of attorney's services necessary because conflict of interest rendered services valueless];  Conservatorship of Chilton (1970) 8 Cal.App.3d 34, 43, 86 Cal.Rptr. 860 [in case of clear conflict of interest, no error for trial court to find no value in services rendered].) ¹¹

 Giannini argues, however, that by finding the Lees had a complete defense to Giannini's action for fees because Giannini violated rule 3–310(A), the trial court impermissibly used the Rules of Professional Conduct as a basis for civil liability.   Rule 1–100(A) provides in pertinent part:  “These rules are not intended to create new civil causes of action.   Nothing in these rules shall be deemed to create, augment, diminish, or eliminate any substantive legal duty of lawyers or the non-disciplinary consequences of violating such a duty.”   Violation of a rule of professional conduct cannot in and of itself establish an attorney's civil liability.   (Mirabito v. Liccardo (1992) 4 Cal.App.4th 41, 46, 5 Cal.Rptr.2d 571;  Noble v. Sears, Roebuck & Co. (1973) 33 Cal.App.3d 654, 658–659, 109 Cal.Rptr. 269.)   Rather, the rules, “together with statutes and general principles relating to other fiduciary relationships, all help define the duty component of the fiduciary duty which an attorney owes to his client.”   (Mirabito v. Liccardo, supra, 4 Cal.App.4th at p. 45, 5 Cal.Rptr.2d 571.)

The Lees' motion for summary judgment fits neatly within this framework, urging that Giannini's recovery of fees was barred by its simultaneous representation of adverse or conflicting interests without the Lees written informed consent and using former rule 3–310(A) to help define the attorney's duty not to engage in such conflicting representation.   The language of the court's orders, however, speaks only of the violation of former rule 3–310(A) and so lends some support to Giannini's contention.   As we have construed former rule 3–310(A), the rule comports with established law regarding attorneys' duties to obtain informed consent before engaging representing a client in the face of a potential conflict of interest.   In the context of the Lees arguments below, the court's orders can be read not as using violation of former rule 3–310(A) to create civil liability but as applying the rule to help demonstrate a conflict of interest situation.   Assuming the genuinely adverse relationship we have determined necessary to find a violation of former rule 3–310(A), the court's remedy—requiring an attorney who has failed to obtain informed consent before engaging in representation that poses a potential conflict of interest to forego fees for his or her services—does no more than has been done in other California cases.  (E.g., Jeffry v. Pounds, supra, 67 Cal.App.3d at pp. 10–12, 136 Cal.Rptr. 373 [violation of former rule 5–102, predecessor to rule 3–310, defeats attorney's entitlement to fees].)   It should be clear, however, that violation of a rule of professional conduct could not be used as a basis for civil liability that did not exist independently of the rule.¹²

II.

We turn to the additional question presented by the order granting the Lees' motion for summary adjudication:  Whether the trial court properly ordered that the Lees were entitled to recover all legal fees they had already paid Giannini.   The Lees take the position—accepted by the trial court—that disgorgement of previously paid fees necessarily follows from the determination that Giannini was not entitled to collect fees as yet unpaid by the Lees because of its violation of fiduciary duty and tenets of professional responsibility.   According to the Lees, application of the rule that an attorney who violates the proscription against representing a client in the face of an actual or potential conflict of interest without first obtaining informed consent is not entitled to a fee for his or her services cannot logically be made to depend on the happenstance of whether the client has already paid his or her fees.

Giannini, by contrast, urges that no California case has ordered disgorgement of fees already paid to an attorney based solely upon the attorney's violation of a Rule of Professional Conduct.   Giannini further takes the position that the Lees' argument improperly “equates the workings of an affirmative defense with the workings of a cause of action,” allowing the Lees to prevail upon a cause of action for breach of fiduciary duty upon proof of a violation of duty without establishing the requisite elements of causation and damages.

As to the first point, we have already determined that given our interpretation of former rule 3–310(A) and the allegations of the Lees' cross-complaint, the conduct that would serve to deprive Giannini of its legal fees is not simply violation of the rule but violation of a duty defined in caselaw not to engage in representation that poses a conflict of interest without first obtaining the client's informed consent.   While Giannini is correct that most of the cases the parties discuss involve denials of attorneys' claims for unpaid legal fees, there is not a complete absence of authority for ordering an attorney to disgorge a fee already paid.   In Priester v. Citizens Nat. etc. Bank, (1955) 131 Cal.App.2d 314, 280 P.2d 835, for example, the client successfully brought suit to rescind instruments by which an interest in real and personal property had been transferred to his attorney as the attorney's fee;  the court determined that the fee was excessive and unconscionable and the was client entitled to return of the property.  (See, Thornley v. Jones (1929) 96 Cal.App. 219, 274 P. 93 [client's estate entitled to recover property transferred to attorney as fee where attorney did not overcome presumption of fraud and unfair dealing in transactions between attorney and client].) ¹³

With regard to its second point, Giannini relies upon Unilogic, Inc. v. Burroughs Corp. (1992) 10 Cal.App.4th 612, 12 Cal.Rptr.2d 741.   In that case, after failure of a joint development project, Unilogic sued Burroughs for, among other things, tortious conversion of new technology developed by Unilogic;  Burroughs cross-complained against Unilogic for, among other things, misappropriation of trade secrets by retention and use of Burroughs' software after termination of the joint development project.   Against Unilogic's conversion claim Burroughs raised the defense of unclean hands, also based on Unilogic's retention of Burroughs' software.  (10 Cal.App.4th at pp. 616–618, 12 Cal.Rptr.2d 741.)   The appellate court found assertion of the defense of unclean hands in a conversion action was permissible (id., at pp. 621–623, 12 Cal.Rptr.2d 741) but upheld a nonsuit on Burroughs' misappropriation of trade secrets claim (based on the same underlying conduct as the affirmative defense) because Burroughs had not offered evidence of damages caused by Unilogic's retention of the software.  (Id., at pp. 625–628, 12 Cal.Rptr.2d 741.)

 While Giannini's point that establishing an affirmative defense does not necessarily establish all the elements of a cause of action based on the same underlying conduct is well taken, it does not follow that the trial court in the present case was without power to order disgorgement of fees upon a proper determination that a violation of fiduciary duty had occurred.   As has been discussed, precedent teaches that an attorney who has violated his or her duty not to engage in representation that poses a conflict of interest without the client's informed consent is not entitled to a fee for his or her services.  (Jeffry v. Pounds, supra, 67 Cal.App.3d 6, 136 Cal.Rptr. 373;  Goldstein v. Lees, supra, 46 Cal.App.3d 614, 120 Cal.Rptr. 253;  Asbestos Claims Facility v. Berry & Berry, supra, 219 Cal.App.3d 9, 267 Cal.Rptr. 896;  Day v. Rosenthal, supra, 170 Cal.App.3d at p. 1162, 217 Cal.Rptr. 89;  Conservatorship of Chilton, supra, 8 Cal.App.3d at p. 43, 86 Cal.Rptr. 860.)   We have concluded that triable issues of fact remain as to the question whether Giannini violated this duty.   If it is determined that the violation occurred, however, it is clear that the injury and damages are proven by the amount of attorney's fees paid for the problematic representation.   What remains to be determined, aside from the question of violation in the first instance, is what portion of the fees already paid by the Lees was due to the representation affected by that violation.

In light of the foregoing, the trial court's orders granting summary judgment and summary adjudication must be vacated.

In A064229, let a peremptory writ of mandate issue directing respondent court to vacate its order granting the Lees' motion for summary judgment and enter a new order denying summary judgment.

In A064816, let a peremptory writ of mandate issue directing respondent court to vacate its order granting in part the Lees' motion for summary adjudication and enter a new order denying the motion in full.

FOOTNOTES

1.   According to the declaration of David Giannini, the landlord tenant dispute resulted in a punitive damages award against the Lees of more than $4.5 million.

2.   Civil Code section 2860 is the codification of San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 208 Cal.Rptr. 494 (Cumis ).All statutory references are to the Civil Code unless otherwise specified.

3.   Under the collateral order doctrine, “[w]hen a court renders an interlocutory order collateral to the main issue, dispositive of the rights of the parties in relation to the collateral matter, and directing payment of money or performance of an act, direct appeal may be taken.”  (In re Marriage of Skelley, supra, 18 Cal.3d at p. 368, 134 Cal.Rptr. 197, 556 P.2d 297;  see, Sjoberg v. Hastorf, supra, 33 Cal.2d at p. 119, 199 P.2d 668.)   Putting aside the questions whether the matter in question here could properly be viewed as collateral, the summary judgment does not order the payment of money or performance of an act.  (Samuel v. Stevedoring Services, supra, 24 Cal.App.4th at p. 418, 29 Cal.Rptr.2d 420.)

4.   Conceding the point at oral argument respondents waived any objection to treatment of the appeal as a petition for writ of mandate.

5.   Rule 3–310 has since been amended.   The substance of the Rule at issue in the present case is now contained in rule 3–310(B):  “A member shall not accept or continue representation of a client without providing written disclosure to the client where:  [¶] (1) The member has a legal, business, financial, professional, or personal relationship with a party or witness in the same matter;  or [¶] (2) The member knows or reasonably should know that:  [¶] (a) the member previously had a legal, business, financial, professional, or personal relationship with a party or witness in the same matter;  and [¶] (b) the previous relationship would substantially affect the member's representation;  or [¶] (3) The member has or had a legal, business, financial, professional, or personal relationship with another person or entity the member knows or reasonably should know would be affected substantially by resolution of the matter;  or [¶] (4) The member has or had a legal, business, financial, or professional interest in the subject matter of the representation.”The current version of rule 3–310 thus elaborates the types of relationships to which the Rule is meant to apply but, unlike its predecessor, requires only disclosure to the client of the relationship and not informed consent.   Informed consent is now required under the current rule 3–310 (as it was under former rule 3–310(B)) where an attorney represents parties whose interests actually or potentially conflict.   (Rule 3–310(C).)

6.   This interpretation of former rule 3–310(A) is supported by reference to the amended rule currently in effect.   As set forth in footnote 3, supra, the new rule requires informed consent in actual or potential conflict situations, not in all cases where the attorney has a “relationship” with a party interested in the representation.  (Rule 3–310(C).)   The broader rule analogous to former rule 3–310(A) now applies when an attorney has a “legal, business, financial, professional, or personal relationship with a party or witness in the same matter” but requires only disclosure, not informed consent.  (Rule 3–310(B).)

7.   As explained in Blanchard v. State Farm Fire & Casualty Co. (1991) 2 Cal.App.4th 345, 350, 2 Cal.Rptr.2d 884, “not every reservation of rights creates a conflict of interest requiring appointment of independent counsel.   It depends upon the nature of the coverage issue, as it relates to the issues in the underlying case.   If the issue on which coverage turns is independent of the issues in the underlying case, Cumis counsel is not required.  (McGee v. Superior Court (1985) 176 Cal.App.3d 221, 227, 221 Cal.Rptr. 421 ․, Foremost Ins. Co. v. Wilks (1988) 206 Cal.App.3d 251, 261, 253 Cal.Rptr. 596 ․, Native Sun Investment Group v. Ticor Title Ins. Co. (1987) 189 Cal.App.3d 1265, 1277, 235 Cal.Rptr. 34 ․)  A conflict of interest does not arise unless the outcome of the coverage issue can be controlled by counsel first retained by the insurer for the defense of the underlying claim.  (Civ.Code, § 2860, subd. (b).)  The fact punitive damages are alleged does not itself create a conflict (Civ.Code, § 2860, subd. (b));  Foremost Ins. Co. v. Wilks, supra, nor does a conflict exist solely because the insured is sued for an amount in excess of insurance policy limits.  (Civ.Code, § 2860, subd. (b).)”In the present case, Fireman's informed Giannini it was reserving its rights because Economy's case came within the following exclusion under his insurance policy:“Coverage E[conomy]—Personal Liability and Coverage F[ireman's]—Medical Payments to Others do not apply to bodily injury or property damage:  [¶] [ ] Arising out of the ownership, maintenance, use, loading or unloading of a watercraft:  [¶] [ ][t]hat as a sailing vessel, with or without auxiliary power, 26 feet or more in length owned by or rented to any insured;  [¶] This exclusion does not apply while the watercraft is stored.”   Fireman's took the position that Economy's potential liability was not covered by his insurance policy because the watercraft in question was not stored.

8.   Given our interpretation of former rule 3–310(A), we need not address Giannini's contention that the rule as applied by the trial court is constitutionally overbroad and vague.Giannini urges that the Lees waived any complaint about Giannini's failure to obtain informed consent regarding its relationship with Fireman's by continuing to employ Giannini after Giannini disclosed to the Lees that it represented another client in a similar dispute involving a reservation of rights by Fireman's.  (In re Lee G. (1991) 1 Cal.App.4th 17, 34, 1 Cal.Rptr.2d 375 [client may expressly or impliedly consent to and waive complaints about adverse representation].)   The parties dispute when Giannini disclosed its relationship with Fireman's as well as whether what Giannini told the Lees was sufficient to apprise them of the nature of that relationship.   The question of waiver, however, does not appear to have been presented to the trial court and may not be raised for the first time on appeal.  (Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 874, 242 Cal.Rptr. 184;  Curcio v. Svanevik (1984) 155 Cal.App.3d 955, 960, 202 Cal.Rptr. 499.)

9.   Giannini describes Ayres v. Lipschutz, supra, 68 Cal.App. 134, 228 P. 720, as upholding a quantum meruit fee after determination that a contingent fee agreement in a divorce case was void as against public policy.   The trial court had found the fee agreement void and allowed the attorney to recover the amount owed under a prior oral agreement for a smaller fee in case of a default divorce.   The reviewing court did not agree that the contingent fee agreement was void but affirmed the judgment because the client had discharged the attorney and the amount the attorney was allowed to recover was reasonable compensation for the services rendered prior to discharge.  (68 Cal.App. at p. 138, 228 P. 720.)

10.   Giannini urges that Ramirez v. Sturdevant (1994) 21 Cal.App.4th 904, 26 Cal.Rptr.2d 554, supports the proposition that an attorney may recover fees despite a conflict of interest.   In Ramirez, the attorney negotiated attorney's fees as part of a settlement of the client's case.   The appellate court found that the dual nature of the settlement negotiations created a conflict of interest and remanded for the trial court to determine whether the client had been prejudiced or her rights reasonably protected.  (Id., at pp. 923, 926, 26 Cal.Rptr.2d 554.)   Although Giannini relies upon Ramirez because the court did not find the conflict meant the attorney was not entitled to any compensation, the case bears no similarity to the one before us.   In Ramirez, the conflict the court was concerned with was between the attorney's representation of the client and the attorney's own self interest, and the court expressly noted it was not finding the attorney had breached any duty owed to the client.  Ramirez presents no issue of an attorney simultaneously representing clients with adverse interests.Giannini additionally relies upon Kisling v. Shaw (1867) 33 Cal. 425, for the proposition that a client cannot recover fees from an attorney by proving fraud without also proving damage.   The clients in that case alleged that they had conveyed land to the attorney for inadequate consideration, induced to do so by fraud and undue influence.   The court held the attorney had the burden of proving the fairness of transactions with a client but found no fraud had been committed;  its discussion stressed that the client would have to prove injury to recover.  (33 Cal. at pp. 441, 443.)  Kisling does not deal with an attorney's representation of adverse interests or a client's entitlement to avoid payment of fees in case of such representation.

11.   Giannini argues that Goldstein, supra, and Jeffry, supra, “ignored long standing case law that forfeitures cannot be ordered by courts without express legislative authority.”  (See, Harbor Comm'rs v. Redwood Co. (1891) 88 Cal. 491, 26 P. 375 [harbor commission rule providing penalty for violation of commission rules and regulations invalid because only legislature has authority to impose penalties];  People ex rel. Brown v. Barenfeld (1962) 203 Cal.App.2d 166, 177, 21 Cal.Rptr. 501 [in action by state to recover rents paid and purchase price of property without relinquishing occupancy, complaint did not seek damages for fraud or undue influence but claimed right of forfeiture;  courts without power to create and enforce forfeiture without underlying legislative authorization].)   Giannini notes that neither the legislature nor the Supreme Court has declared fee forfeiture as a penalty for breach of the Rules of Professional Conduct.   As will be explained in the text, the remedy of loss of attorney's fees may be viewed as appropriate in the present case only if it is determined that Giannini violated its fiduciary obligation to the Lees by representing them without obtaining informed consent to a potential or actual conflict of interest;  we are not countenancing loss of fees as a consequence of a violation of the Rules of Professional Conduct in and of themselves.   Further, the rule that an attorney who engages in conflicting representation without obtaining informed consent is not entitled to compensation is not based on the premise that the attorney must pay a penalty so much as on the principle that “payment is not due for services not properly performed.”   (Schaefer v. Berinstein (1960) 180 Cal.App.2d 107, 135, 4 Cal.Rptr. 236 [attorney not entitled to compensation for services rendered in transaction found to be tainted with fraud but entitled to compensation for services unaffected by the fraud], overruled on other grounds in Jefferson v. J.E. French Co. (1960) 54 Cal.2d 717, 719, 7 Cal.Rptr. 899, 355 P.2d 643).

12.   The trial court's order denied Giannini all attorney's fees for its representation of the Lees, without examining either the changes in nature of Giannini's relationship with Fireman's during the course of Giannini's representation of the Lees or the fact that some of Giannini's work for the Lees was unrelated to any matter in which Fireman's had an interest.   While it is clear that Giannini would not be entitled to its fees for any time period during which it breached its duties to the Lees by failing to obtain their informed consent to an adverse relationship with Fireman's, there is no basis for a loss of fees for any time periods when no conflict existed.   Nor is it apparent why Giannini would not be entitled to its fees for representing the Lees in matters unrelated to Fireman's.  (Jeffry v. Pounds, supra, 67 Cal.App.3d at p. 12, 136 Cal.Rptr. 373;  Schaefer v. Berinstein, supra, 180 Cal.App.2d at p. 135, 4 Cal.Rptr. 236.)

13.   The Lees cite David Welch Co. v. Erskine & Tulley (1988) 203 Cal.App.3d 884, 250 Cal.Rptr. 339, as a case in which disgorgement of fees was ordered after an attorney was found to have breached the Rules of Professional Conduct by accepting employment adverse to a client or former client.   In that case, attorneys who had previously represented a collection agency with a specialized practice took over several of the agency's accounts without obtaining the agency's consent.   Finding a breach of fiduciary duty, the trial court imposed a constructive trust.   This remedy was upheld, the appellate court explaining that the plaintiff who had been deprived of business taken from it by the defendant's breach of fiduciary duty was entitled to be restored to the extent equity could fashion a remedy and the trial court “did not abuse its discretion in ordering the constructive trust and directing that defendants disgorge their gains.”  (203 Cal.App.3d at p. 894, 250 Cal.Rptr. 339.)   This case differs from the present in that it required the offending attorneys to give up profits earned from other parties through a violation of duty to the former client, not to disgorge fees paid by the client itself.

KLINE, Presiding Justice.

SMITH and PHELAN, JJ., concur.