Kirk v. First American Title Insurance Company

183 Cal. App. 4th 776, 108 Cal. Rptr. 3d 620 (2010)

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Nature of the Case

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Facts

Four related class actions were brought against D. Each class action is based on different allegations, although they each challenge the business practices of D as violative of, among other things, various consumer protection laws. In each case, the plaintiffs were represented by The Bernheim Law Firm and The Kick Law Firm. D was represented by Bryan Cave LLP. Three attorneys at Bryan Cave, Joel D. Siegel, Charles Newman, and Jason Maschmann were primarily responsible for the defense of the related class actions. This team of lawyers has defended D in 80 class actions across the country and has also been retained to give legal advice to D. The attorneys on the team are very familiar with and have good rapport with, D’s in-house counsel, officers, and management employees. The related class action litigation is large, time-consuming, and expensive. A discovery referee was appointed and handled numerous disputes. The team defended multiple depositions and reviewed hundreds of thousands of pages of documents. By April 2009, D had incurred over $ 5.5 million in attorney’s fees in the related class actions and another $ 1 million in additional expenses. The related class actions are extremely complex and have been aggressively litigated. Gary Cohen had been deputy commissioner and general counsel at California’s Department of Insurance. In October 2007, he was chief counsel for Fireman’s Fund Insurance Company. Ps’ counsel spoke by telephone with Cohen and solicited his services as a consultant in the related class actions. It is undisputed that Ps’ counsel conveyed confidential information to Cohen material to the related class actions. Cohen was told that Ps’ counsel would be discussing confidential information. Ps’ counsel conveyed attorney work product to Cohen, including theories of the case, and their concerns regarding defense strategy and tactics. Ps’ counsel also disclosed their estimates of the value of the cases. Cohen declined the consultant position. On December 8, 2008, the law firm of Sonnenschein Nath & Rosenthal LLP (Sonnenschein) issued a press release announcing that Cohen would join its San Francisco office as a partner in its insurance regulatory practice group on January 5, 2009. Ps’ counsel again e-mailed Cohen and asked about hiring him as an expert consultant. Cohen stated that he would do a conflict check and asked for one of the complaints to be sent to him by e-mail. Ps sent edited versions of the complaints with just the main issues. )Cohen responded, “It turns out that the firm does represent First American, so I’m afraid that I won’t be able to be of any help. I haven’t read the attachments to your email and will delete them without having read them.” There was no further contact with Cohen. On February 2, 2009, D moved from Bryan Cave to Sonnenschein. Siegel moved to Sonnenschein’s Los Angeles office, while Newman and Maschmann moved to Sonnenschein’s St. Louis office. None of the team moved to the San Francisco office, where Cohen was located. Nor does it appear that any of them were part of the insurance regulatory practice group, in which Cohen practiced. D filed substitutions of counsel. Ps “objected” to the representation of D by Sonnenschein, due to their prior confidential consultation with Cohen. Prior to this time, the team had been unaware of Cohen’s contacts with Ps' counsel. An ethical screen was established around Cohen. A memorandum was sent to all attorneys, paralegals, and secretaries at Sonnenschein, setting forth “mandatory screening procedures” for the related class actions. The memorandum provided that (1) Cohen could not work on the related class actions; (2) no attorney or paralegal who may work on the related class actions may discuss them with Cohen; (3) Cohen may not be given nonpublic documents pertaining to the related class actions; (4) Cohen shall not access any documents on Sonnenschein’s computer network pertaining to the related class actions; and (5) no fees from any work related to the related class actions would be apportioned to Cohen. On March 18, 2009, Ps moved to disqualify Sonnenschein. Sonnenschein relied on the ethical screening wall it had constructed. D also submitted the declaration of its senior vice-president and national litigation counsel, who testified to the key experience of the team and their irreplaceability. D stated that it would cost millions of dollars to retain new counsel sufficiently prepared to defend the related class actions, “although it would be impossible for new counsel to attain the level of knowledge and proficiency of D’s current attorneys.” The trial court granted the motion for disqualification. The court concluded that when an attorney possesses disqualifying confidential client information, vicarious disqualification of the law firm is automatic, regardless of any ethical screening wall created. The trial court believed that Cohen’s work on the Lyons matter constituted a breach of the ethical wall, and the fact that Cohen initially forgot about his work on the Lyons matter illustrates why California courts are leery of ethical walls. The court relied on the need for vigorous representation of parties by independent counsel unencumbered by conflicts of interest, and the preservation of public trust in the scrupulous administration of justice and the integrity of the bar. D and Sonnenschein appealed.