Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-04651/USCOURTS-cand-3_07-cv-04651-4/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

LARGO CONCRETE, INC., et al.,

Plaintiffs,

 v.

LIBERTY MUTUAL FIRE INSURANCE

COMPANY,

Defendant. /

No. C 07-04651 CRB

MEMORANDUM AND ORDER RE:

MOTION TO DISQUALIFY

This is an insurance bad faith lawsuit. Plaintiffs allege defendant Liberty Mutual Fire

Insurance Company (“Liberty” or “defendant”) mishandled their workers compensation

insurance contracts. For example, they allege that defendant failed to reasonably investigate

and defend claims and failed to deny questionable claims. Plaintiffs are represented by

Roxborough, Pomerance & Nye LLP of Woodlawn Hills, California.

Defendant Liberty moves to disqualify the Roxborough firm on the ground that one of

Roxborough’s associates performed legal work for Liberty on a workers compensation bad

faith action and on other insurance bad faith actions while the associate was employed at a

different firm. After carefully considering the papers filed by the parties, and having had the

opportunity for oral argument, defendant’s motion to disqualify is GRANTED. 

//

Case 3:07-cv-04651-CRB Document 77 Filed 01/02/08 Page 1 of 7
United States District Court

For the Northern District of California

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BACKGROUND

Craig S. Pynes has been employed as an associate at Roxborough since March 2004. 

Before joining Roxborough, Pynes practiced for eight or nine months at Kern & Wooley

LLP. Kern & Wooley was coverage counsel for the defendant in this action, Liberty Mutual

Fire Insurance Company and its affiliates.

According to Lisa Kraslik Hansen, a former Kern & Wooley attorney who supervised

Pynes at Kern & Wooley, Pynes “worked almost exclusively on matters for the Liberty

companies” on both litigated and non-litigated matters during the time he worked at Kern &

Wooley.

Among other cases, Pynes represented Liberty Mutual Insurance Company in Tony’s

Fine Foods, Inc. v. Liberty Mutual Ins. Co., in California state court. The plaintiff in Tony’s

Fine Foods made allegations nearly identical to those in this action; namely, that Liberty

mishandled the plaintiff’s workers compensation insurance contract. Hanson and another

then Kern & Wooley attorney, Melodee Yee, both attest in affidavits that on that matter

Pynes (1) reviewed Liberty Mutual companies’ workers’ compensation claim files, and (2)

conducted a privilege review and prepared a privilege log.

Pynes admits that he briefly worked on Tony’s Fine Foods and that he worked with

Michelle Yee on the case, but he denies that he had any contact with attorney Hansen about

the case. He describes his work on the matter as that of a paralegal: redacting personal

identifying information of the injured workers, such as their social security numbers and

telephone numbers. 

Defendant has produced an invoice from Kern & Wooley that reveals that Pynes

billed time on Tony’s Fine Foods on six different days for a total of 9.8 hours. Pynes’ tasks

are described as, among other things: “Fact Investigation/Development–Review underlying

file information for various WCAB claims against Tony’s Fine Foods for analysis for

document production” and “Continue analyzing claim and other underlying file materials for

production (and redaction and segregation of privileged information/documents).”

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All of Pynes’ other work for Liberty entities while employed at Kern & Wooley did

not involve workers compensation insurance. Such work included attending a mediation on

Liberty’s behalf, drafting discovery responses, and reviewing case files and also included

legal services on bad faith cases. 

DISCUSSION

Motions to disqualify counsel are decided under state law. Ultimately, however, the

decision to disqualify counsel for conflict of interest is within the trial court’s

discretion.

Under California law the starting point for deciding a motion to disqualify counsel is

the recognition of interests implicated by such a motion. Courts “must examine these

motions carefully to ensure that literalism does not deny the parties substantial

justice.” At base, “disqualification motion[s] may involve such considerations as a

client’s right to chosen counsel, an attorney’s interest in representing a client, [and]

the financial burden on a client to replace disqualified counsel.” Ultimately, however,

a court must maintain ethical standards of professional responsibility. 

Hitachi, Ltd. v. Tatung Co., 419 F.Supp. 1158, 1160-61 (N.D. Cal. 2006). The Court’s

“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 justice process.” 

People ex. rel. Dep.t of Corporations v. Speedee Oil Change Systems Inc., 20 Cal.4th 1135,

1145 (1999).

The California Rule of Professional Conduct at issue on this motion 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.

California Rules of Professional Conduct R. 3-310(E). 

Disqualification of an attorney from undertaking representation adverse to a

former client does not require proof that the attorney actually possesses

confidential information. Rather, in applying rule 3-310(E) [California] courts

have utilized the “substantial relationship” test: “When a substantial

relationship has been shown to exist between the former representation and the

current representation, and when it appears by virtue of the nature of the former

representation or the relationship of the attorney to his former client

confidential information material to the current dispute would normally have

been imparted to the attorney . . ., the attorney’s knowledge of confidential

information is presumed.”

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Adams v. Aerojet-General Corp., 86 Cal.App.4th 1324, 1331 (2001) (internal citations

omitted); see also Speedee Oil Change Systems Inc., 20 Cal.4th at 1146 (“Where an attorney

successively represents clients with adverse interests, and where the subjects of the two

representations are substantially related, the need to protect the first client’s confidential

information requires that the attorney be disqualified from the second representation.”). 

“This is the rule by necessity, for it is not within the power of the former client to prove what

is in the mind of the attorney. Nor should the attorney have to ‘engage in a subtle evaluation

of the extent to which he acquired relevant information in the first representation and of the

actual use of that knowledge and information in the subsequent representation.’” Global Van

Lines, Inc. v. Superior Court, 144 Cal.App.3d 483, 489 (1983).

“In determining whether there is a substantial relationship between the former and the

current representation, the Court looks to the ‘practical consequences of the attorney’s

representation of the former client’ and considers ‘whether confidential information material

to the current dispute would normally have been imparted to the attorney by virtue of the

nature of the former representation.’” I-Enterprise Co. LLC v. Draper Fisher Jurvetson

Management Co., 2005 LEXIS 45190 (N.D. Cal. April 4, 2005) (citations omitted). In so

doing, the Court inquires into the similarities between the two factual situations, the legal

questions posed, and the nature and extent of the attorney’s involvement with the cases,

including the attorney’s time spent on the earlier case, the type of work performed, and the

attorney’s possible exposure to strategy or policy. See Morrison Knudsen Corp. v. Hancock,

Rothert & Bunshoft, 69 Cal.App.4th 223, 234 (1999). 

A. Pynes has a conflict under the substantial relationship test

The substantial relationship test is satisfied here. First, Tony’s Fine Foods is factually

similar to the lawsuit before this Court: a lawsuit accusing Liberty of mismanaging its

workers compensation claims handling process. 

Second, according to the billing invoice, Pynes reviewed workers compensation

claims files for a privilege review and prepared a privilege log; indeed, he does not deny that

he did so. The Court finds that billing invoice is the best and most reliable evidence of the

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nature of the work Pynes performed. An attorney is possibly exposed to strategy or policy

along with confidential information when reviewing documents for privilege–that is, for

confidentiality-- and preparing a privilege log. 

Third, the information Pynes would have gleaned from reviewing claims files and

preparation of a privilege log is most likely material to this action which is nearly identical to

Tony’s Fine Foods–the only real difference is the name of the plaintiff. Thus, Pynes’

knowledge of confidential information is presumed. Adams, 86 Cal.App.4th at 1331.

Plaintiffs’ first response is that defendant has not satisfied the test because the

defendant in Tony’s Fine Foods was Liberty Mutual Insurance Company and the defendant

here is Liberty Mutual Fire Insurance Company--two separate entities. The evidence in the

record, however, demonstrates that both companies underwrite workers compensation

policies and the same Liberty employees adjust claims and service policies for both

companies. The two companies use the same claims handling guidelines and the same inhouse lawyers handle bad faith matters for both companies. Even Pynes testified at his

deposition that he treated all the Liberty entities as the same company. The different names

are a distinction without a difference in the context of this motion.

Next, plaintiffs argue that the Court should apply the “modified substantial

relationship” test. That test, however, only applies when the lawyer with the alleged conflict

never provided any legal services to the client in a substantially related matter or otherwise. 

In Adams, for example, the question presented was what test to apply when the lawyer with

the alleged conflict never personally performed any legal services for the client; instead, the

conflict arose from the lawyer’s former law firm’s representation of the client in a

substantially related matter. 86 Cal.App.4th at 1328. The court held that if the lawyer

himself had been personally involved with his former firm’s work for the client

disqualification would have been required. Id. at 1332. The lawyer, however, had not;

accordingly, the court held that 

where there is a substantial relationship between the current case and the

matters handled by the firm-switching attorney’s former firm, but the attorney

did not personally represent the former client who now seeks to remove him

from the case, the trial court should apply a modified version of the

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“substantial relationship” test . . . . The court’s task, under these circumstances,

is to determine whether confidential information to the current representation

would normally have been imparted to the attorney during his tenure at the old

firm. 

Id. at 1340. The court also placed the burden on the allegedly conflicted lawyer to show that

he had not been exposed to confidential information:

Finally, in light of the paramount importance of maintaining the inviolability of

client confidences, where a substantial relationship between the former firm’s

representation of the client and the current lawsuit has been shown (as is the

case here), the attorney whose disqualification is sought should carry the

burden of proving that he had no exposure to confidential information relevant

to the current action while he was a member of the former firm. That burden

requires an affirmative showing and is not satisfied by a cursory denial.

Id. at 1340-41.

In Ochoa v. Fordel, 146 Cal.App.4th 898 (2007), the case upon which plaintiffs rely,

the allegedly conflicted lawyer similarly did not bill for any legal services to the client

moving to disqualify; instead, his former firm represented the client (while the lawyer was

with the firm). The court held that the modified substantial relationship test articulated in

Adams applied and affirmed the trial court’s factual determination that the attorney had met

his burden of proving that he was not exposed to confidential information relevant to the

current action while he was a member of his former firm. Id. at 907-12.

Neither Adams nor Ochoa applies here. Liberty is not arguing that plaintiffs’ counsel

should be disqualified because Pynes worked at a firm that performed substantially related

legal services for Liberty; rather, it contends that Pynes performed such legal services. The

traditional substantial relationship test applies in such a situation and, as is explained above,

under that test Pynes has a conflict.

Finally, plaintiffs emphasize Pynes’ testimony that he did not review anything that

would be of use in this case. The whole point of the presumption, however, is that a court

does not inquire into the factual particularities of the information conveyed. Nor does a court

“‘engage in a balancing of equities’ between the former and current clients. The rights and

interests of the former client will prevail.” H. F. Ahmanson & Co. v. Salomon Brothers, Inc.

229 Cal.App.3d 1445, 1451 (1991). It is thus no surprise that plaintiffs have not cited a

single case in which the presumption and disqualification did not apply to a lawyer who

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reviewed and redacted documents for confidential information in a substantially related

matter.

B. Vicarious disqualification

Pynes has not worked on this matter for plaintiffs and the Roxborough firm has

erected an “ethical wall.” The question, then, is whether the Roxborough firm is nonetheless

vicariously disqualified. This Court held in Hitachi that California law rejects ethical walls.

419 F.Supp.2d at 1164. Plaintiffs do not cite any case decided since Hitachi that casts doubt

on this holding; to the contrary, since the Court’s opinion the California Supreme Court has

again rejected an ethical wall, albeit in the context of the San Francisco City Attorney. City

and County of San Francisco v. Cobra Solutions, 38 Cal.4th 839 (2006). Accordingly, as a

result of Pynes’ conflict, the Roxborough firm is disqualified from representing plaintiffs in

this matter.

CONCLUSION

For the reasons stated above, defendant’s motion to disqualify plaintiffs’ counsel is

GRANTED. The Court therefore need not address whether Pynes’ other bad faith work for

Liberty involved substantially related matters.

IT IS SO ORDERED.

Dated: December 31, 2007 

CHARLES R. BREYER

UNITED STATES DISTRICT JUDGE

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