Court Opinion

ID: 2783006
Source: CourtListenerOpinion
Date Created: 2015-02-27 21:02:49.78891+00
Date Added: 2024-06-11T11:02:41.678582
License: Public Domain

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,
                                                        G050226
        v.
                                                        (Super. Ct. No. 30-2013-00633328)
THE SUPERIOR COURT OF ORANGE
COUNTY,                                                 OPINION

    Respondent;

CHITRANJAN N. REDDY,

    Real Party in Interest.

                  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.
              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
                                           1
14 patents were the focus of Matter No. 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

                                               2
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
                                                                     2
were ultimately made the subject of the litigation in Matter No. 1. 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.

                                              3
(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
                                     3
the deduction of alleged expenses.
              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.

                                               4
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.”

                                                5
                                       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 Anglo-
American 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

                                              6
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 lawyer-
client 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.

                                               7
              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 non-
wrongful 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

                                               8
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
            4
misconduct. 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.

                                             9
(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

                                             10
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
                                     5
construction firm].” (Id. at p. 234.) 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.)

                                              11
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

                                             12
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,

                                              13
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

                                              14
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 non-
client’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)

                                             15
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
         6
No. 1.

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-

                                            16
              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
                                                         7
and a consultant’s fee collection action might differ.
              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.

                                             17
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
           8
matters.
               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.

                                              18
              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
                                                                   9
and distinguish between what was privileged and what was not.”
              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.

                                             19
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.

                                             20
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.

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