Filed 2/27/15

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

ACACIA PATENT ACQUISITION, LLC 

et al.,

 Petitioners,

v.

THE SUPERIOR COURT OF ORANGE 

COUNTY,

 Respondent;

CHITRANJAN N. REDDY,

 Real Party in Interest.

 G050226

 (Super. Ct. No. 30-2013-00633328)

 O P I N I O N 

Original proceedings; petition for a writ of mandate and/or prohibition to 

challenge an order of the Superior Court of Orange County, Frederick P. Aguirre, Judge. 

Petition granted, writ issued.

Corbett, Steelman & Specter, Richard B. Specter, Diane L. Ellis; Stradling 

Yocca Carlson & Rauth, Marc J. Schneider, and Douglas Q. Hahn for Petitioners.
2

AlvaradoSmith, Marc D. Alexander, William M. Hensley; Law Offices of 

Dawn Ceizler and Dawn Marie Ceizler for Real Party in Interest.

* * *

Petitioners seek the disqualification of the law firm of AlvaradoSmith, 

which: (1) previously represented another law firm in an attorney fee dispute; and (2) in 

this case, represents an expert seeking consulting fees arising out of the same underlying 

litigation as the attorney fee dispute. We issued a stay order and order to show cause. 

We now conclude AlvaradoSmith’s wide-ranging access to privileged information in the 

first representation and the substantial relationship between the two matters requires the 

disqualification of AlvaradoSmith. We therefore grant writ relief countermanding the

respondent court’s contrary order.

FACTS

Matter No. 1: Petitioner Shared Memory Graphics LLC (SM Graphics) 

hired the law firm of Floyd & Buss in May 2009 to pursue patent infringement litigation

against a list of leading electronics firms. Matter No. 1 commenced in July 2009 in 

Arkansas, but was subsequently transferred to the United States District Court for the 

Northern District of California. The SM Graphics retention agreement covered

“litigation activities with respect to” 14 patents. The record is unclear, however, as to 

whether all 14 of these patents were actually at issue in Matter No. 1, or if only two of the 

14 patents were the focus of Matter No. 1.

1

In March 2011, SM Graphics and related 

 

1

The petition defines the SM Graphics patents as United States Patent Nos. 

5,712,664 and 6,081,279, and indicates these two patents were asserted in Matter No. 1. 

The petition does not actually state, however, that the other 12 patents in the SM 
3

entities obtained a cash settlement (totaling approximately $45 million) from Samsung 

(one of the defendants in Matter No. 1) as part of a combined licensing and settlement 

agreement encompassing not only the patents at issue in Matter No. 1, but also numerous 

other patents owned by SM Graphics’ affiliates. Floyd & Buss acted as counsel for SM 

Graphics until at least May 2011, logging more than 8,000 billable hours. The record is 

silent as to what role, if any, Floyd & Buss actually played in the settlement negotiations 

with Samsung. 

Matter No. 2: Floyd & Buss hired AlvaradoSmith in 2012 to arbitrate its 

claim for attorney fees against SM Graphics. Floyd & Buss alleged that SM Graphics 

underestimated the importance of the patents at issue in Matter No. 1 to the $45 million 

settlement, thereby reducing the amount owed to Floyd & Buss pursuant to a contingency 

agreement. Floyd & Buss obtained a cash payment of $3,501,000 from SM Graphics to 

settle this dispute; the arbitration was dismissed on November 12, 2013. 

Matter No. 3 (the instant action): Plaintiff (and real party in interest to this 

proceeding) Chitranjan N. Reddy sued defendants (and petitioners in this proceeding) SM 

Graphics and Acacia Patent Acquisition, LLC (Acacia Patent). Reddy claims defendants 

are alter egos of each other with regard to the allegations at issue. Reddy’s allegations 

are similar to those made by Floyd & Buss in Matter No. 2. Reddy was retained in 

March 2009 by Acacia Patent to perform expert consulting work relating to United States

Patent Nos. 5,712,664 and 6,081,279, i.e., two of the patents owned by SM Graphics that 

were ultimately made the subject of the litigation in Matter No. 1.

2

The agreement

 

Graphics retention agreement were not included within the scope of Matter No. 1.

2

According to Reddy’s operative complaint, he was the inventor of these 

patents, which he sold to Acacia Patent. The agreement required Reddy to be available 

for consultation on all matters related to these patents, to provide expert analysis of any 

reports or opinions provided by others concerning the patents, and to provide testimony 

when necessary in any litigation concerning the patents. 
4

(styled a “Consulting Expert and Common Interest Agreement”) stated Reddy was 

entitled to 11 percent of the “Net Proceeds” of the “licensing, enforcement or sale” of the 

two patents. Reddy claims Acacia Patent and SM Graphics manipulated the settlement 

from Samsung to allocate an artificially low amount to the patents upon which Reddy 

provided his services. This resulted in a lower proposed payout to Reddy pursuant to his 

contingency agreement. Specifically, defendants allotted $1.5 million out of the $45 

million to SM Graphics, resulting in $93,289.59 being offered as payment to Reddy after 

the deduction of alleged expenses.

3

Reddy’s operative complaint includes causes of action for breach of 

contract, breach of the implied covenant of good faith and fair dealing, quantum meruit, 

an accounting, and violation of Business and Professions Code section 17200 et seq. 

Reddy asserts that defendants “acted with an intent to defraud Plaintiff when they entered 

into the contingency Consulting . . . Agreement. On information and belief, Defendants 

intended from the very beginning, but did not disclose to Plaintiff, that they would 

allocate the proceeds of any global settlement in a manner that favored Acacia [Patent’s]

and its other affiliates’ interests to the detriment of Plaintiff by allocating settlement 

funds to multiple . . . related entities to avoid payment of the full contingency fees due.” 

Matter No. 3 was filed in San Luis Obispo County by Attorney Dawn Ceizler, a sole 

practitioner. But attorneys from AlvaradoSmith associated in as cocounsel after venue 

was transferred to Orange County and their successful representation of Floyd & Buss in 

Matter No. 2 ended.

Acacia Patent and SM Graphics promptly moved to disqualify 

AlvaradoSmith in Matter No. 3, citing AlvaradoSmith’s access in Matter No. 2 to large 

quantities of confidential documents that would ordinarily be protected by the attorney-

 

3

Again, it is unclear whether Matter No. 1 concerned more than the two 

Reddy patents, and whether the $1.5 million allotted to SM Graphics is entirely 

attributable to the two Reddy patents. 
5

client privilege and/or work product doctrine. Supporting declarations amply 

demonstrated that AlvaradoSmith had access to thousands of privileged documents

produced during discovery in Matter No. 2. Indeed, defendants represent in their petition 

that “AlvaradoSmith obtained all of the [Floyd & Buss] files from” Matter No. 1. Work 

product prepared by Floyd & Buss in Matter No. 1 included a valuation of the claims 

against Samsung. Moreover, Reddy’s consulting agreement was drafted by Floyd & 

Buss, and privileged communications concerning Reddy’s consulting agreement were 

produced in discovery in Matter No. 2. A list of documents designated by Floyd & Buss 

for use at the arbitration included privileged communications and work product. 

Defendants’ moving papers, however, did not describe the precise contents of particular 

documents.

In opposing the motion, AlvaradoSmith Attorney Marc Alexander declared 

that AlvaradoSmith abided by three separate protective orders governing confidential 

documents to which it had access during the arbitration in Matter No. 2. At the 

conclusion of Matter No. 2, AlvaradoSmith returned or destroyed confidential documents 

in its possession. 

The court denied the motion, reasoning: (1) AlvaradoSmith’s 

representation of Reddy was “not adverse, in the traditional sense,” to its representation 

of Floyd & Buss; (2) no improper acquisition of confidential information occurred in 

Matter No. 2; (3) protective orders required the return of all confidential documents at the 

end of Matter No. 2; (4) there is no evidence suggesting AlvaradoSmith violated the 

protective orders; and (5) mere exposure to confidential documents is insufficient to 

disqualify counsel. The court commented at the hearing, “I just don’t see that the 

privileged information that they may have come into knowledge of, . . . they no longer 

retained the files, so to retain that in their memory intact, [it would be] pretty difficult, I 

would imagine.” 
6

DISCUSSION

“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.” (People ex rel. Dept. of 

Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143-1144.)

The court’s explicit factual findings are supported by substantial evidence 

and the court’s chain of legal reasoning is largely sound. But we conclude the court erred 

and AlvaradoSmith must be disqualified based on the unique circumstances inherent to 

the representation of attorneys against their former clients (such as occurred here in 

Matter No. 2) and the substantial relationship between Matters No. 2 and 3.

Successive Representation Conflicts Governed by “Substantially Related” Standard

“Preserving confidentiality of communications between attorney and client 

is fundamental to our legal system. The attorney-client privilege is a hallmark of AngloAmerican jurisprudence that furthers the public policy of insuring ‘“the right of every 

person to freely and fully confer and confide in one having knowledge of the law, and 

skilled in its practice, in order that the former may have adequate advice and a proper 

defense.” [Citation.]’ [Citation.] One of the basic duties of an attorney is ‘[t]o maintain 

inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of 

his or her client.’ [Citation.] To protect the confidentiality of the attorney-client 

relationship, the California Rules of Professional Conduct bar an attorney from accepting 

‘employment adverse to a client or former client where, by reason of the representation of 
7

the client or former client, the [attorney] has obtained confidential information material to 

the employment except with the informed written consent of the client or former client.’” 

(In re Complex Asbestos Litigation (1991) 232 Cal.App.3d 572, 586-587.)

“For these reasons, an attorney will be disqualified from representing a 

client against a former client when there is a substantial relationship between the two 

representations. [Citations.] When a substantial relationship exists, the courts presume 

the attorney possesses confidential information of the former client material to the present 

representation.” (In re Complex Asbestos Litigation, supra, 232 Cal.App.3d at p. 587.)

In assessing whether there is a “substantial relationship” between two 

matters, courts “should ‘focus on the similarities between the two factual situations, the 

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

cases.’” (H. F. Ahmanson & Co. v. Salomon Brothers, Inc. (1991) 229 Cal.App.3d 1445, 

1455.) “The current matter is substantially related to the earlier matter if: [¶] (1) the 

current matter involves the work the lawyer performed for the former client; or [¶] (2) 

there is a substantial risk that representation of the present client will involve the use of 

information acquired in the course of representing the former client, unless that 

information has become generally known.” (Rest.3d Law Governing Lawyers, § 132.) 

Despite Floyd & Buss’s duties to preserve the confidentiality of SM 

Graphics’ privileged information, Floyd & Buss was entitled to reveal such information 

to AlvaradoSmith in Matter No. 2 to the extent necessary to litigate the action. (Evid. 

Code, § 958 [“There is no privilege under this article as to a communication relevant to 

an issue of breach, by the lawyer or by the client, of a duty arising out of the lawyerclient relationship”]; Dietz v. Meisenheimer & Herron (2009) 177 Cal.App.4th 771, 786 

[“An attorney ‘can reveal confidences to defend against a malpractice claim or in a fee 

dispute’”].) But Floyd & Buss would not be entitled to represent a client in litigation 

against SM Graphics if such litigation were substantially related to Matter No. 1.
8

This is not a traditional successive representation case. The question is not 

whether Floyd & Buss can represent Reddy. Rather, the question is whether 

AlvaradoSmith should be disqualified from representing Reddy in Matter No. 3 based on 

its representation of Floyd & Buss in Matter No. 2. AlvaradoSmith never represented 

SM Graphics or Acacia Patent. The foregoing discussion does not mention any duty on 

the part of an attorney to maintain the confidences of a nonclient (let alone a litigation 

adversary), or any rationale for disqualifying attorneys from a matter based on their nonwrongful exposure to a litigation opponent’s privileged information. Viewed in general 

terms, these notions are seemingly opposed to basic principles of our adversarial system

of justice. (See, e.g., Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 

Cal.App.4th 294, 302-304 [disqualification not warranted based on exposure to opposing 

party’s privileged information by own client, who was an attorney suing her former 

employer for sex discrimination].)

 

Some Representations Create Duties of Confidentiality to Nonclients

There are exceptions, however, to the general rule that an attorney has no 

duty to preserve the confidences of nonclients. “A conflict of interest is involved if there 

is a substantial risk that the lawyer’s representation of the client would be materially and 

adversely affected by the . . . lawyer’s duties to another current client, a former client, or 

a third person.” (Rest.3d Law Governing Lawyers, § 121, italics added.) “A conflict of 

interest can . . . arise because of specific obligations, such as the obligation to hold 

information confidential, that the lawyer has assumed to a nonclient.” (Rest.3d Law 

Governing Lawyers, § 121, com. d, illus. 9, p. 253.) 

When do these obligations and duties to nonclients arise? Can conflicts 

based on duties to nonclients result in disqualification? Do courts apply the successive 

representation framework (i.e., the transfer of confidential information is presumed in a 
9

substantially related matter) in these special cases where lawyers have duties of 

confidentiality to nonclients? 

We begin our inquiry into these questions with an examination of two cases

highlighted by the parties. (See Kennedy v. Eldridge (2011) 201 Cal.App.4th 1197 

(Kennedy); Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999) 69 

Cal.App.4th 223 (Morrison)). Neither is precisely on point. But both feature the 

disqualification of counsel despite the lack of an adverse representation or attorney 

misconduct.

4

 And both cases endorsed the use of the successive representation 

framework in addressing disqualification motions brought by nonclients. Morrison and 

Kennedy show conflicts can arise in California (and disqualification motions can be 

granted) based on the conjunction of (1) implicit obligations a lawyer takes on to 

maintain the confidences of a nonclient received in the course of representing a client, 

and (2) the unfair advantage that might accrue were such a lawyer to pursue substantially 

related litigation against the nonclient.

Kennedy involved a custody dispute in which the paternal grandfather (an 

attorney) sought to represent the father (i.e., the attorney’s son). (Kennedy, supra, 201 

Cal.App.4th at p. 1200.) The trial court granted the mother’s motion to disqualify the 

paternal grandfather, even though neither he nor his wife (also an attorney) had ever 

represented the mother. (Id. at pp. 1201-1202.) The appellate court held that “an 

amalgamation of interrelated factors” supported the trial court’s exercise of discretion. 

 

4

We are not primarily concerned here with cases in which an attorney 

commits wrongdoing and is disqualified on that basis. (See, e.g., Clark v. Superior Court

(2011) 196 Cal.App.4th 37, 41 [lawyer disqualified for receipt and excessive review of 

opponents privileged documents in violation of ethical duties].) It is conceded for 

purposes of this proceeding that AlvaradoSmith did not do anything wrong in Matter No. 

2 with regard to its possession and handling of defendants’ privileged documents. 

Moreover, there is substantial evidence for the court’s finding that AlvaradoSmith 

complied with all protective orders, which compliance included the return or destruction 

of all confidential documents obtained in Matter No. 2.
10

(Id. at p. 1205.) The first factor was the potential misuse of the mother’s confidential 

information, which the paternal grandparents “may have acquired” during the course of 

representing the mother’s father in a divorce proceeding. (Id. at pp. 1205-1206.) The 

close relationship between the mother and her father caused the court to treat the two 

individuals as “a single unity for purposes of determining whether an ethical conflict 

exists.” (Id. at p. 1208.) Kennedy applied the “substantial relationship” test from 

successive representation doctrine, and concluded “[t]he trial court could reasonably find 

there was a significant danger that — as a result of its prior involvement in her father’s 

divorce case — the [paternal grandparents’] firm acquired relevant confidential 

information about [the mother] to which it otherwise would not have had access.” (Id. at 

p. 1207.) Kennedy noted that the “successive representation model” does not require 

proof of the receipt of confidential information because such transfer of confidences is 

presumed. (Id. at p. 1208.) Other factors supporting the court’s ruling included the 

possibility that the paternal grandfather would need to testify in the custody dispute (id. at 

p. 1209), as well as the “strong appearance of impropriety” caused by the “multiple and 

interconnected family entanglements” between the parties and proposed counsel. (Id. at 

p. 1211.)

Kennedy is not particularly apt as authority here because its holding was 

tethered to messy interfamilial squabbles and was not based solely on the receipt of 

confidential information. Kennedy is also a case in which the trial court disqualified 

counsel and the appellate court affirmed the disqualification under an abuse of discretion 

standard. Here, of course, we must decide whether the trial court had discretion to deny 

the motion for disqualification.

In Morrison, a law firm sought to represent a water district in litigation 

against a construction firm’s subsidiary. (Morrison, supra, 69 Cal.App.4th at pp. 226-

228.) The law firm was already working for the construction firm’s insurance 

underwriters; “[i]n its capacity as ‘monitoring counsel,’ [the law firm] received detailed 
11

confidential communications from [the construction firm’s] defense counsel concerning 

the progress of cases and [the construction firm’s] potential liability.” (Id. at p. 227.)

The construction firm and its subsidiary moved to disqualify the law firm from 

representing the water district by way of a motion for preliminary injunction. The trial 

court granted the motion based on the presumption that the law firm possessed 

confidential information, and the appellate court affirmed. (Id. at pp. 228-229, 253-254.) 

The construction firm had a “reasonable expectation” that its confidences, transferred to 

counsel for its insurer, would be maintained. (Id. at p. 233.) The law firm’s duty to 

maintain these confidences “stemmed from its client’s duty of good faith to an insured, 

and thus, ultimately, from [the law firm’s] loyalty to the underwriters, not [the 

construction firm].” (Id. at p. 234.)

5

 Morrison applied the “substantial relationship” test 

from successive representation cases to judge whether the particular confidences received 

required disqualification, and concluded substantial evidence supported the trial court’s 

disqualification decision. (Morrison, at p. 234.)

Morrison certainly can be analogized to the facts of this case, though 

(unlike here) one would not say disqualified counsel in Morrison was adverse to the 

nonclient in both matters. Had the trial court opted to disqualify AlvaradoSmith,

Morrison would provide powerful support for a conclusion that such an order was within 

the court’s discretion. (See Morrison, supra, 69 Cal.App.4th at p. 253 [“what may have 

been a difficult decision for the trial court is ultimately, by virtue of the limited scope of 

review, not a close one on appeal”].) Like Kennedy, however, the different procedural 

 

5

This point is consistent with commentary discussing one doctrinal source 

for a lawyer’s duties to a non-client: “A lawyer might have obligations to persons who 

were not the lawyer’s clients but about whom information was revealed to the lawyer 

under circumstances obligating the lawyer not to use or disclose the information. Those 

obligations arise under other law, particularly under the law of agency. For example, a 

lawyer might incur obligations of confidentiality as the subagent of a principal whom the 

lawyer’s client serves as an agent . . . .” (Rest. 3d Law Governing Lawyers, § 132, com. 

(g)(ii), p. 384.)
12

posture in Morrison means it cannot be taken as authority for the proposition that we 

must grant relief to Acacia Patent and SM Graphics. Neither of the California cases 

primarily relied on in the petition provides a clear answer to the question presented.

Consistent with these cases, and somewhat closer to the facts here, Burkes 

v. Hales (Wis. Ct.App. 1991) 478 N.W.2d 37 (Burkes) explores an attorney’s duties to 

the clients of the attorney’s law firm client. In Burkes, Burkes sued Hales and other 

members of the Wisconsin Investment Board for wrongful discharge from his position as 

executive director. (Id. at p. 38.) The Fox firm represented Burkes and the state Attorney 

General represented Hales. (Id. at p. 39.) While the litigation was pending, a contingent 

of lawyers at the Fox firm departed, taking Burkes’s file with them. (Ibid.) The 

remaining Fox firm partners hired attorney Hurley to represent them in a lawsuit 

concerning the Fox firm’s break up. (Ibid.) The Fox firm dispute settled, with the Fox 

firm retaining a financial interest in Burke’s action as part of the settlement. (Ibid.) “At 

about the same time, the attorney general . . . withdrew . . . and the governor appointed 

Hurley as special counsel to represent Hales.” (Ibid.) The trial court granted Burkes’s 

disqualification motion and the appellate court affirmed the court’s exercise of discretion. 

(Id. at pp. 39, 43.) 

Burkes first held that Hurley had an implied fiduciary duty to the Fox 

firm’s “clients whose files are part and parcel of the intrafirm litigation.” (Burkes, supra, 

478 N.W.2d at p. 41.) “We have no doubt that, as Burkes’s attorney, the Fox firm had a 

fiduciary duty to him. And we agree with the trial court that Hurley, once retained by the 

Fox firm, undertook a similar duty and became bound by the same proscriptions as the 

firm itself with regard to Burkes.” (Ibid., fn. omitted.) Burkes then held there was a 

substantial relationship between the two representations because one of Hurley’s tasks in 

the Fox firm litigation was to protect the Fox firm’s interest in the Burkes litigation. (Id. 

at p. 42.) The court rejected Hurley’s argument that he could “avoid disqualification by 

proving that no confidences were actually shared.” (Ibid.) “The test is whether the 
13

lawyer ‘could have obtained’ confidential information in the first representation that 

would have been relevant in the second; whether such information actually was obtained 

and, if so, whether it actually was used against the former client is irrelevant.” (Ibid.)

In sum, disqualifying conflicts with nonclients can arise as a result of an 

attorney-client relationship. If an attorney is deemed to have a duty of confidentiality to a 

nonclient arising out of such a past representation, courts apply the substantial 

relationship test from successive representation doctrine to determine whether to

disqualify counsel in a case against the nonclient.

Prior Representation of Attorney Parties against Their Own Clients

California case law does not discuss the precise issue before us — whether 

a law firm’s representation of a lawyer in a fee dispute results in a disqualifying conflict 

of interest when the law firm opposes the fee dispute defendant in another matter. This 

fact pattern includes elements of cases like Morrison and Burkes (i.e., the assumption of a 

client’s duties of confidentiality to a nonclient may provide grounds for disqualification

in a subsequent matter against the nonclient). But a wildcard is added to the mix: the 

supposed duty of confidentiality here would be owed to a party that was adverse to 

AlvaradoSmith’s clients in both the prior and subsequent litigation.

A limited universe of out-of-state cases has addressed the prospect of a duty 

of confidentiality to a litigation adversary arising by way of representing a law firm

against that adversary in a different action. Several courts have disqualified attorneys for 

simultaneously representing a nonclient’s litigation opponent and the nonclient’s former 

law firm in a malpractice action arising out of the same litigation. (Frye v. Ironstone 

Bank (Fla. Ct.App. 2011) 69 So.3d 1046; Adelman v. Adelman (Fla. Ct.App. 1990) 561 

So.2d 671; Greig v. Macy’s Northeast (N.J.Dist.Ct. 1998) 1 F.Supp.2d 397.) Of course, 

if the malpractice case is not substantially related to the other matter and there is no 

specific showing that pertinent privileged information was communicated, 
14

disqualification is not appropriate. (See Miccosukee Tribe of Indians v. Lehtinen (Fla. 

Ct.App. 2013) 114 So.3d 329 [declining to disqualify attorney in malpractice defense 

case based on speculation he could obtain confidential information to use in other 

unrelated matters against plaintiff].)

As to fee disputes, several federal courts have rejected the argument that an 

attorney fee dispute is substantially related, per se, to the litigation in which the fees arose

such that disqualification is required. In T.C. Theatre Corp. v. Warner Bros. Pictures

(S.D.N.Y. 1953) 113 F.Supp. 265, a variety of disqualification motions were brought by 

defendants in an antitrust case. The basis for the motions was that one of the plaintiff’s 

attorneys, Cooke, previously represented one of the defendants in a substantially related 

matter brought by the federal government. (Id. at pp. 266-271.) The district court 

granted the motion to disqualify Cooke. (Id. at p. 271.) Defendants also sought to 

disqualify another firm representing the plaintiff in the antitrust case because it 

represented Cooke in a fee collection action arising out of the prior substantially related 

government antitrust case. (Id. at pp. 271-272.) The court refused to disqualify the firm, 

observing that “Cooke’s right to recovery of additional fees . . . does not depend upon the 

disclosure of confidential communications, but, rather, upon the nature, extent and 

importance of the services performed by him. He could enumerate the various 

conferences with his client without detailing the matters which might have been 

discussed.” (Ibid.; id. at p. 272 [refusing to assume that Cooke “divulged confidences 

reposed in him by his former clients simply because he is now engaged in a law suit with 

them”].)

Lankler Siffert & Wohl, LLP v. Rossi (S.D.N.Y. 2003) 287 F.Supp.2d 398

was a fee collection action brought by a law firm and various expert witnesses against 

their former clients. The district court refused to disqualify the law firm from 

representing itself or the expert witnesses in the fee dispute. (Id. at pp. 403-407.) The 

Lankler court rejected the contention that the underlying criminal defense and the fee 
15

dispute were substantially related. (Id. at pp. 404-405.) And the Lankler court found 

insufficient evidence for the proposition that the law firm had been representing 

defendants in contesting the expert fee amounts with the experts or the defendants’

insurance company during the underlying litigation. (Id. at pp. 405-406; see also Gross 

Belsky Alonso LLP v. Edelson (N.D.Cal., May 27, 2009, No. C 08-4666 SBA) 2009 

U.S.Dist. Lexis 49260 [refusing to disqualify law firm from representing itself in fee 

collection action based on argument that matters were substantially related].)

We find these out-of-state authorities persuasive for the general principle of 

law that a disqualifying conflict can arise, with regard to an adverse non-client, by way of 

a law firm representing another law firm. However, consistent with these cases, it does 

not end the discussion to observe that AlvaradoSmith represented SM Graphics’s former 

attorneys in Matter No. 2 and now seeks to oppose SM Graphics and Acacia Patent in 

Matter No. 3. A lawyer representing a law firm in a fee dispute is not automatically 

disqualified from opposing the defendant client in future litigation, even in future 

litigation that has some factual nexus with the prior litigation. Rather, a court must 

examine (1) whether the first representation resulted in a broad disclosure of the nonclient’s privileged information (i.e., something beyond the attorney-client retainer 

agreement and the number of hours worked), and (2) whether a substantial relationship 

exists between the two matters. Not every attorney fee dispute results in the law firm 

plaintiff’s counsel receiving broad access to privileged information from the underlying 

dispute. Nor will every attorney fee dispute be substantially related to a subsequent 

action against the same non-client.

 

The Circumstances Require the Disqualification of AlvaradoSmith

We conclude disqualification is necessary under the circumstances of this 

case. The court erred because: (1) SM Graphics’ extensive privileged information 

pertaining to Matter No. 1 was made available to AlvaradoSmith in Matter No. 2; and (2) 
16

there is a substantial relationship between Matters No. 2 and No. 3. To the extent 

findings to the contrary should be implied in our review of the court’s order, such 

findings were an abuse of discretion because they are not supported by substantial 

evidence.

AlvaradoSmith had access to numerous privileged documents in Matter No. 

2 because the nature of the litigation in Matter No. 2 required it. Evidence submitted 

with defendants’ motion to disqualify established the extent of this exposure. Some of 

these documents pertained to Reddy’s consulting agreement and a valuation of the claims 

against Samsung. This is not a case in which a court could plausibly find that Floyd & 

Buss refrained from disclosing privileged documents in Matter No. 2 or disclosed only 

privileged documents narrowly pertaining to the number of hours worked in Matter 

No. 1.

6

 

6

Reddy contends Neal v. Health Net, Inc. (2002) 100 Cal.App.4th 831 

(Neal) supports his position. In Neal, an attorney filed a discrimination case on behalf of 

a former employee (Neal) of the defendant employer. (Neal, at p. 834.) Two months 

later, the same attorney agreed to represent another former employee (Brockett) of the 

same employer. (Id. at pp. 834-836.) Before her employment terminated, Brockett, a 

legal secretary, had access to employer’s legal files and had in fact opened the electronic 

Neal file, which included “attorney notes and memoranda.” (Ibid.) Brockett claimed in 

her declaration that she had accessed this file only to obtain the name of Neal’s attorney, 

and that she did not actually review documents pertinent to Neal’s case. (Id. at pp. 836-

837.) Employer filed a motion to disqualify the attorney in the Neal case based on the 

theory that he presumably had received confidential information from Brockett about the 

Neal case. (Id. at pp. 834-837.) The appellate court reversed the order of 

disqualification. (Id. at p. 850.) There is no “presumption of possession of confidential 

information” in these circumstances. (Id. at p. 841.) And there was no evidence 

submitted showing that “information, confidential or otherwise, concerning [Neal’s] case 

was given to [the attorney] by Ms. Brockett.” (Id. at p. 843.)

Referencing Neal in the present circumstances is inapt. The 

disqualification motion in Neal was dependent on the assumption that Neal’s lawyer 

wrongfully obtained privileged information about Neal’s case from his client, Brockett, 

an accusation denied in declarations filed by Neal’s attorney and Brockett. (Neal, supra, 

100 Cal.App.4th at pp. 836, 839, 843.) Moreover, as explained by Neal in its canvassing 

of California law, a lawyer’s “mere exposure” to confidential information by an ex-
17

As to substantial similarity, a few differences between Matter No. 2 (the 

Floyd & Buss arbitration) and Matter No. 3 (Reddy’s lawsuit) can be found. There are 

two separate contingency agreements at issue relating to two separate functions, that of 

attorney and that of expert consultant. Reddy’s work was clearly limited to two patents, 

while Floyd & Buss agreed to pursue litigation claims regarding 14 patents. Alter ego is 

pleaded in the instant action with regard to the relationship between Acacia Patent and 

SM Graphics but not in Matter No. 2. Defenses against an attorney fee collection action 

and a consultant’s fee collection action might differ.7

But these differences pale in comparison with the essential similarities 

between Matters No. 2 and No. 3. Both contingency agreements pertain to the potential 

recovery in Matter No. 1. Both Floyd & Buss and Reddy allege that SM Graphics (as 

well as its affiliate, Acacia Patent, in this case) manipulated the settlement in Matter No. 

1 to shortchange their recoveries. Relevant issues in both matters include defendants’ 

intent in structuring the contingency agreements (rather than paying hourly fees) and in 

dividing the proceeds of the Samsung settlement between various affiliates in petitioners’ 

corporate family. The similarity of the legal and factual issues in Matters No. 2 and No.

3 distinguishes the instant action from standard, hourly rate fee dispute cases, which 

 

employee client of a litigation adversary does not provide grounds for disqualification. 

(Id. at p. 843.) The instant case is fundamentally different. It is undisputed that 

AlvaradoSmith properly accessed SM Graphics’s privileged information in the course of 

litigating a prior matter, bringing this case within the framework of successive 

representation cases. There is no factual dispute here that AlvaradoSmith extensively 

reviewed SM Graphics’ privileged documents in the ordinary course of representing 

Floyd & Buss in Matter No. 2. This is not a case in which AlvaradoSmith might or might 

not have been exposed to SM Graphics’ confidential information in a private counseling 

session with its client. 

 

7

We decline to consider an issue only hinted at in the petition and elsewhere 

in the record, to wit, the potential illegality of Reddy’s contingency arrangement with 

Acacia Patent. This issue is not sufficiently briefed to address it on the merits.
18

might not be substantially related to the underlying action or to other fee disputes. Any 

privileged information Floyd & Buss received with regard to the valuation of the Reddy 

patents vis-à-vis Samsung, or even more general insights into the internal operations of 

SM Graphics and its affiliates, are relevant to this action in a way it would not be in a 

straight fee recovery based on the number of hours worked. The extra issues here (e.g., 

the alter ego component) do not undermine the similarity of the main question in both 

matters.

8

Under these circumstances, it is unnecessary for a party seeking 

disqualification to pinpoint precise privileged documents as the basis for a potential 

unfair advantage. Like successive representation cases, the better rule here is to presume 

the possession of material confidential information and disqualify counsel in a 

substantially related action. “The conclusive presumption of knowledge of confidential 

information has been justified as a rule of necessity, ‘for it is not within the power of the 

[party seeking disqualification] 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.”’ [Citations.] The conclusive 

presumption also avoids the ironic result of disclosing the former client’s confidences and 

secrets through an inquiry into the actual state of the lawyer’s knowledge and it makes 

clear the legal profession’s intent to preserve the public’s trust over its own self-interest.” 

(H. F. Ahmanson & Co. v. Saloman Brothers, Inc., supra, 229 Cal.App.3d at p. 1453.) 

 

8

We reject the notion that because Reddy may have been exposed to some of 

defendants’ privileged information in the course of his expert consulting work, there is no 

problem with allowing AlvaradoSmith to represent both Floyd & Buss and Reddy. It is 

unreasonable to infer from the record before us that Reddy would have access to

privileged documents on all topics, as opposed to information and documents necessary 

for his expert consulting work.
19

It was perfectly legitimate for Floyd & Buss, as well as AlvaradoSmith, to 

use every piece of information available in Matter No. 2, regardless of whether it was 

subject to the attorney-client privilege or work product protection. The same thing 

cannot be said about Matter No. 3. It is not viable to suppose AlvaradoSmith can honor 

its duty to maintain the confidences of Floyd & Buss’s client SM Graphics in the course 

of representing Reddy. Less restrictive alternatives to disqualification, such as protective 

orders, do not address the fundamental problem with AlvaradoSmith’s representation of 

Reddy. As stated in the petition, “[e]ven the strongest protective order cannot . . . make 

AlvaradoSmith forget what it has learned or ensure that AlvaradoSmith can remember 

and distinguish between what was privileged and what was not.” 9

We acknowledge the downside to this result. It is possible that the 

privileged information to which AlvaradoSmith had access in Matter No. 2 would not 

provide them with any advantage in this action. It is possible that the disqualification of 

AlvaradoSmith will serve only as a tactical victory for defendants. It is possible an 

injustice is being done to both Reddy and AlvaradoSmith by disqualifying Reddy’s 

chosen counsel. But we must subordinate these concerns to the more serious danger of a 

litigant’s privileged information, disclosed to its own attorney (Floyd & Buss) in an 

earlier matter (Matter No. 1), being used against it. (See People ex rel. Dept. of 

 

9

Reddy posits that any theoretical insights that might have been gained from 

privileged information in Matter No. 2 cannot be of any practical use to AlvaradoSmith 

in Matter No. 3, because the attorney-client privilege would prevent production of 

privileged documents or testimony concerning privileged communications. But, to 

illustrate why this argument is untrue, imagine a privileged, “smoking gun” email exists 

that would prove Reddy’s allegations. Imagine further that this document was reviewed 

by AlvaradoSmith in the course of Matter No. 2. Just knowing that there is merit to 

Reddy’s allegations would be extremely valuable in crafting litigation strategy and 

settlement negotiation positions, regardless of whether this particular email could be 

obtained in discovery or used as an exhibit at trial. Now, perhaps it is unrealistic to 

postulate a true “smoking gun” in the context of this case. Even so, the essential point 

holds true: there is litigation value to information, even if that information cannot be 

directly converted into admissible evidence.
20

Corporations v. SpeeDee Oil Change Systems, Inc., supra, 20 Cal.4th at p. 1145 [“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”].)

We conclude by noting “our analysis does not mean that there is or should 

be any broad duty owed by an attorney to an opposing party to maintain that party’s 

confidences in the absence of a prior attorney-client relationship. The imposition of such 

a duty would be antithetical to our adversary system and would interfere with the 

attorney’s relationship with his or her own clients. The courts have recognized 

repeatedly that attorneys owe no duty of care to adversaries in litigation or to those with 

whom their clients deal at arm’s length. [Citations.] Instead, we deal here with a 

prophylactic rule necessary to protect the confidentiality of the attorney-client 

relationship and the integrity of the judicial system . . . .” (In re Complex Asbestos 

Litigation, supra, 232 Cal.App.3d at p. 588.) In the limited realm of cases featuring 

attorneys as parties opposed to their former clients, lawyers representing the attorney 

party must avoid participation in substantially related matters, whereby their access to 

privileged information in the former action would potentially serve as an advantage in the 

latter. The court did not have discretion to deny the disqualification motion on this 

record.

DISPOSITION

Let a peremptory writ of mandate issue directing the court to vacate its 

order of April 14, 2014 and to enter a new and different order disqualifying 

AlvaradoSmith from its representation of plaintiff Reddy. The stay order is hereby lifted. 
21

The order to show cause is discharged. Petitioners SM Graphics and Acacia Patent shall 

recover costs incurred in this writ proceeding.

IKOLA, J.

WE CONCUR:

ARONSON, ACTING P. J.

THOMPSON, J.