Med-Trans Corp. v. City of California

disqualification after MTC made significant new allegations in connection with a proposed fifth amended complaint. According to those allegations, City failed to disclose the fact that it would be difficult to obtain an ambulance service permit in Kem County, which fact was well known to City as a result of a prior meeting between Attorney Anton and a City official. City believed that said prior meeting constituted a preliminary consultation between Attorney Anton and a prospective client (City), and the trial court apparently agreed. Finding a substantial relationship existed between the subject matter of the prior meeting and the present lawsuit, the trial court granted the disqualification motion. In this appeal, MTC contends the trial court erred because there was no evidence of an attorney-client relationship between Attorney Anton and City, and in any event no confidential information was disclosed. We agree and thus reverse the trial court’s order disqualifying Attorney Anton and the law office of Thomas Anton & Associates.

FACTS AND PROCEEDINGS

According to MTC’s original complaint, on January 7, 2002, MTC entered into a contract with City in which MTC agreed to provide air ambulance services for a specified fee. A basic purpose of the contract was to facilitate continuous helicopter ambulance service for patients within the general region of City. Prior to entering into the agreement, false representations were allegedly made to MTC by City’s fire chief, Michael Antonucci (Chief Antonucci), regarding the estimated number of times that air ambulance services would be utilized per year (call volumes). MTC allegedly relied on these representations as to call volumes when it decided to enter into the contract with City. The complaint further alleged that City breached the contract by, among other things, failing to timely provide necessary licenses and permits required to operate the air ambulance services in Kem County^[1] and a failure to provide adequate infrastructure to dispatch calls. Under these facts, the original complaint included causes of action for fraud and breach of contract. Later, a fourth amended complaint provided greater specificity regarding the misrepresentations as to call volumes that were allegedly made by Chief Antonucci.

On September 14, 2005, during the course of discovery in this case, the deposition of Chief Antonucci was taken by Attorney Anton on behalf of MTC. At the deposition, Attorney Anton inquired at length about a November 2001 meeting that Attorney Anton had with Chief Antonucci. At the time of the earlier meeting with Chief Antonucci, Attorney Anton was representing a third party, Golden Empire Medical Transport (Golden Empire), in a federal lawsuit against Kern County for antitrust violations based on Kern County’s alleged failure to issue ambulance service permits to qualified applicants.^[2] In response to Attorney Anton’s deposition questions, Chief Antonucci stated his recollection that the November 2001 meeting included, among other things, discussions relating to the federal lawsuit against Kern County and City’s potential joinder therein.^[3]

On February 10, 2006, MTC sought leave to file a fifth amended complaint. The purpose of the amendment was to add a new cause of action entitled “Fraud in the Inducement—Intentional Misrepresentation re: Permit.” The proposed new cause of action was based, in part, on the premise that in a prior meeting with MTC’s representative, Attorney Anton, City had been informed of the difficulty of obtaining ambulance permits in Kern County. Specifically, the fifth amended complaint alleged, “Neither City nor [Chief] Antonucci relayed to MTC, during any point of the contract negotiations . . . that City and its representative, [Chief] Antonucci[,] before November 2001, met with representatives of the [Golden Empire] in the Federal Court case and discussed the pitfalls and hazards the City would face from the County of Kern ... if it pursued a permit to operate any ambulance or provide paramedic services to its citizens.”

After learning of the proposed amendment, City promptly interposed its motion to disqualify Attorney Anton. The disqualification motion was supported by the declaration of Chief Antonucci. The declaration explained that in November of 2001, Chief Antonucci was contacted by Attorney Anton regarding a federal lawsuit that Attorney Anton had brought on behalf of his then client, Golden Empire, against Kern County. The federal lawsuit had alleged, among other things, that Kern County was involved in anticompetitive practices by wrongly denying ambulance permits to otherwise qualified companies. Chief Antonucci also received a telephone call in November of 2001 from a representative of Golden Empire, Attorney Ritchie, informing him that Attorney Anton was very interested in meeting with him. A lunch

statements. According to MTC’s opposition, the fact that the meeting was actually in late January of 2002 proved that no confidential information could have been exchanged, since the agreement with MTC was already a matter of public record. MTC also stressed that there had been general publicity about Kern County’s policies regarding ambulance permits because of several newspaper articles.

Moreover, the declarations of Attorneys Anton and Ritchie in opposition to the motion stated that Attorney Anton was not seeking to be hired by City or to have City join his federal lawsuit, and that no advice was offered or confidential information disclosed. Rather, according to Attorney Anton, he was merely attempting to “obtain information ... for use in the [Golden Empire] litigation.” Furthermore, any opinions offered by Attorney Anton at the meeting were, according to Attorney Anton, “regarding [Golden Empire] and [Kern] County, particularly how [Kern] County was in violation of a host of laws.” He claimed that “[n]othing in [his] opinions related to the subject matter of the proposed Fifth Amended Complaint . . . .”

In its reply, City emphasized that Attorney Anton, throughout his questioning of Chief Antonucci at a 2004 deposition in this case, asked numerous questions about the November 2001 meeting and, from the nature of the questions asked, obviously believed at that time (several months prior to City’s disqualification motion) that the November date was correct. Also, Attorney Anton was convinced the meeting was in November of 2001 when he submitted his proposed fifth amended complaint in February of 2006. City argued this self-serving change of position significantly impacted on Attorney Anton’s credibility: “When it worked to his advantage, [Attorney] Anton relied on a November 2001 date to support a Fifth Amended Complaint based on fraudulent inducement against City. Now that he faces possible disqualification, [Attorney] Anton has urged a January date.” Additionally, City’s reply emphasized that prior to the face-to-face meeting, Chief Antonucci had “ ‘various phone conversations’ ” in November of 2001 with Attorneys Anton and Ritchie regarding the federal lawsuit. Thus, even assuming the face-to-face meeting occurred at a later date, the earlier phone calls would (according to City) warrant a finding of an attorney-client relationship in November of 2001.

The motion was heard on March 28, 2006. The trial court did not find the date of the meeting to be significant, and instead focused on the relationship between the prior conversations and the present lawsuit.^[4] The court observed, “[t]here’s an awful lot here that suggests there is a substantial relationship between the conversations between [Attorney] Anton and [Chief] Antonucci and the claims that are now being made by [MTC] against the City . . . with

representations are substantially related, the need to protect the first client’s confidential information requires that the attorney be disqualified from the second representation.” (SpeeDee Oil, supra, 20 Cal.4th at p. 1146.) The rationale for this rule has been explained as follows: “Where the potential conflict is one that arises from the successive representation of clients with potentially adverse interests, the courts have recognized that the chief fiduciary value jeopardized is that of client confidentiality. Thus, where a former client seeks to have a previous attorney disqualified from serving as counsel to a successive client in litigation adverse to the interests of the first client, the governing test requires that the client demonstrate a ‘substantial relationship’ between the subjects of the antecedent and current representations, [f] The ‘substantial relationship’ test mediates between two interests that are in tension in such a context—the freedom of the subsequent client to counsel of choice, on the one hand, and the interest of the former client in ensuring the permanent confidentiality of matters disclosed to the attorney in the course of the prior representation, on the other. Where the requisite substantial relationship between the subjects of the prior and the current representations can be demonstrated, access to confidential information by the attorney in the course of the first representation (relevant, by definition, to the second representation) is presumed and disqualification of the attorney’s representation of the second client is mandatory; indeed, the disqualification extends vicariously to the entire firm. [Citations.]” (Flatt v. Superior Court (1994) 9 Cal.4th 275 , 283-284 [ 36 Cal.Rptr.2d 537 , 885 P.2d 950 ],)^[5]

A modified version of the substantial relationship test has been applied in situations where the former attorney-client relationship was peripheral or attenuated, rather than direct and personal. (Faughn v. Perez, supra, 145 Cal.App.4th at p. 603; Ochoa v. Fordel, Inc. (2007) 146 Cal.App.4th 898 , 907-908 [ 53 Cal.Rptr.3d 277 ].) Generally, these situations arise “when an attorney switches law firms and the attorney’s new firm becomes involved in litigation against a client of the attorney’s former firm.” (Faughn v. Perez, supra, at p. 603, fn. 7.) Under the modified substantial relationship test, the presumption will not be applied in the absence of an adequate showing that

“the attorney was in a position vis-a-vis the client to likely have acquired confidential information material to the current representation.” (Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698 , 710 [ 3 Cal.Rptr.3d 877 ].) The court’s task in such cases is to determine whether “confidential information material to the current representation would normally have been imparted to the attorney during his tenure at the old firm.” (Adams v. Aerojet-General Corp. (2001) 86 Cal.App.4th 1324 , 1340 [ 104 Cal.Rptr.2d 116 ].)^[6]

Here, there is no question that Attorney Anton’s involvement in the prior meeting and conversations with Chief Antonucci was both direct and personal. He personally engaged in discussions relating to the federal lawsuit and, in the words of the proposed fifth amended complaint, to the “pitfalls and hazards the City would face from the County of Kem or other ambulance providers if it pursued a permit to operate any ambulance or provide paramedic services to its citizens.” There is also no question that the legal and factual issues are substantially related, for the reasons noted by the trial court, since the subject matter of the prior meeting and the current case concern to a significant extent the legal and other issues entailed in seeking such licenses from Kem County decision makers and City’s awareness thereof.

However, before we can determine whether the trial court correctly applied the substantial relationship test in the present case, further analysis is necessary because of the fact that the prior meeting was apparently in the nature of a preliminary consultation which did not result in professional employment of the attorney. We now turn to consideration of the legal issues that this fact raises.

III. When Initial Consultation Is Deemed Representation for Purposes of Conflict of Interest Analysis

In SpeeDee Oil, supra, 20 Cal.4th at pages 1147-1148, the Supreme Court addressed the question of when an attorney-client relationship “has reached a point where the attorney can be subject to disqualification for a conflict of interest.” The court began by explaining that fiduciary duties of the

lawyer to the client exist even in the earliest stages of the relationship: “as noted in Beery v. State Bar (1987) 43 Cal.3d 802 [ 239 Cal.Rptr. 121 , 739 P.2d 1289 ]: ‘ “The fiduciary relationship existing between lawyer and client extends to preliminary consultations by a prospective client with a view to retention of the lawyer, although actual employment does not result.” [Citation.] “When a party seeking legal advice consults an attorney at law and secures that advice, the relation of attorney and client is established prima facie.” [Citation.] “The absence of an agreement with respect to the fee to be charged does not prevent the relationship from arising.” [Citation.]’ [Citations.]” (SpeeDee Oil, supra, at pp. 1147-1148.)

The Supreme Court emphasized the “primary concern” is not on whether the lawyer is ultimately employed, but “whether and to what extent the attorney acquired confidential information. [Citation.]” (SpeeDee Oil, supra, 20 Cal.4th at p. 1148.) “That question is not necessarily answered by the amount of time involved. ‘Even the briefest conversation between a lawyer and a client can result in the disclosure of confidences.’ [Citation.]” (Ibid.) The court then stated the following rule to identify the point at which representation begins to exist for purposes of a conflict of interest analysis: “Consequently, a formal retainer agreement is not required before attorneys acquire fiduciary obligations of loyalty and confidentiality, which begin when attorney-client discussions proceed beyond initial or peripheral contacts. An attorney represents a client—for purposes of a conflict of interest analysis— when the attorney knowingly obtains material confidential information from the client and renders legal advice or services as a result. [Citations.]” (Ibid., italics added.)

SpeeDee Oil also approved of the approach used by the Court of Appeal in Zimmerman, a preliminary consultation case, because the court “properly focused” on whether the party seeking disqualification “established, directly or by reasonable inference,” that in the prior contact the attorney “acquired confidences related to the [current litigation].” (SpeeDee Oil, supra, 20 Cal.4th at pp. 1148-1149.) We note Zimmerman upheld the trial court’s denial of a disqualification motion in that case since there was a failure to demonstrate that a preliminary consultation with an attorney resulted in disclosure of confidential information or that it would be reasonable to infer such disclosure. (Zimmerman, supra, 16 Cal.App.4th at p. 565.)^[7]

We glean from SpeeDee Oil that for purposes of a conflict of interest analysis, where the former contact with the attorney was a preliminary conversation that did not result in professional employment or services, the party seeking disqualification must show, directly or by reasonable inference, that the attorney acquired confidential information in the conversation. (See SpeeDee Oil, supra, 20 Cal.4th at pp. 1148-1149.) In other words, in such cases the presumption that confidential information passed will not apply.^[8]

In the present case, the trial court focused exclusively on the relationship between the issues that were the subject of the prior meeting and the current litigation. It did not address the question of whether Attorney Anton acquired confidential information in the course of the prior meeting. We resolve that question at this time because there is only one reasonable conclusion that may be drawn from the record before us.

We conclude as a matter of law that City failed to establish that confidential information was imparted in the prior meeting. First, according to Chief Antonucci’s declaration, aside from a discussion of the federal lawsuit against Kern County relating to its alleged improper permit practices, the only relevant information shared at the meeting was City’s plan to hire MTC and apply for an ambulance permit. Whether or not this fact was generally known

at the time of the meeting, on the record before us there is no reason to infer that City’s objective to hire an ambulance company and seek a permit would be considered a confidential matter. Second, the circumstances of the meeting confirm a lack of confidentiality. This was not a case of a person who, in seeking to hire an attorney, shared confidences in the course of a consultation. Quite to the contrary, it was Attorney Anton who sought to meet with Chief Antonucci, and there is nothing in the record to suggest that City ever pursued Attorney Anton’s representation. Further, the ensuing discussion included the presence of a third party, Attorney Ritchie, whose interest (on behalf of Golden Empire) was obviously limited to the federal lawsuit. (See Evid. Code, § 952.) Although the purpose of the meeting was, according to Chief Antonucci, to solicit City’s involvement in the federal lawsuit, that solicitation was plainly unsuccessful. There is no evidence that City (or Chief Antonucci) ever considered Attorney Anton to be City’s lawyer or potential lawyer and, most importantly, it has not been demonstrated that any confidential matters were disclosed. To the extent Attorney Anton offered his opinions about City’s ambulance permit application, such unsolicited advice in the context of this limited meeting was obviously no more than his “initial impressions.” (See Zimmerman, supra, 16 Cal.App.4th at p. 564.)

Because City failed to establish that confidential information was imparted to Attorney Anton in the prior meeting with Chief Antonucci, we conclude that this initial discussion never went beyond the preliminary stages and no actual representation occurred for purposes of showing a conflict of interest. (See SpeeDee Oil, supra, 20 Cal.4th at p. 1148.)^[9] Consequently, the trial court erred in granting the motion to disqualify Attorney Anton.^[10]