Possible violation of rules of professional conduct does not compel disqualification . . .
In reversal, Second District holds that trial court erred by granting husband’s motion to disqualify wife’s disso attorney because husband lacked standing to bring his motion and could not show he would be harmed by attorney’s continued representation, plus wife wished to continue being represented by that attorney
In re Marriage of Murchison
(March 17, 2016)
California Court of Appeal 2 Civil B264825 (Div 1) 245 Cal.App.4 th 847, 199 Cal.Rptr.3d 800, 2016 FA 1731, per Lui, J (Rothschild, PJ and Johnson, J, concurring). Los Angeles County: Tamzarian, J, reversed. For appellant: Robert Curtis, CFLS, (310) 288-1828. For respondent: pro per. CFLP §§A.65.2.7, A.115.22.5.
During Melissa and Michael Murchison’s divorce, the trial court awarded their family home to Melissa on the condition that she “ ‘immediately list the property for sale’ ” so that Michael’s community share of the mortgage debt could be extinguished. Melissa listed the property, but while it was in escrow, she missed some mortgage payments. The mortgage lender, Bank of America, then recorded a notice of default to begin foreclosure proceedings. At that point, Melissa and her attorney, Robert Curtis, agreed that Curtis, who had a FLARPL [family law attorney’s real property lien] on the house, would buy it. Their sale agreement provided that Melissa and Curtis were in an attorney-client relationship, Melissa was legally obligated to sell the house, the house was in danger of foreclosure, and Melissa lacked the ability to make past or future mortgage payments. The agreement also stated that Bank of America, Curtis, and the IRS had liens on the property (the IRS had two), and that Melissa would not have netted any cash from the current buyers after the liens and broker’s commissions were paid. Curtis agreed to take the house subject to existing liens from which he would hold Melissa harmless, and would pay her $20,000. In conclusion, the agreement stated that Melissa understood the terms of the agreement, which were fair, reasonable, and fully disclosed to her, and that she had been given the opportunity to review the agreement with independent counsel. Melissa did not actually consult independent counsel, but nevertheless, she signed the agreement transferring the family home to Curtis.
Acting on Michael’s request, the trial court then ordered Curtis joined in the disso “ ‘as a necessary party,’ ” and Michael planned to call him to testify as to whether the sale of the family home satisfied Melissa’s obligation to extinguish his community share of the debt. Michael then moved to disqualify Curtis, claiming that the attorney had been untruthful about the nature of the sale of the family home and that the transaction violated Cal Rules of Prof Conduct, rule 3-300, which precludes attorneys from entering into unfair business transactions with clients. Curtis opposed Michael’s motion and filed a peremptory challenge, claiming that the motion had prejudiced the trial court against him. The trial court ordered Curtis disqualified, but also transferred the case to be assigned to another judge in response to Curtis’s peremptory challenge.
Melissa appealed Curtis’s disqualification, and the Second District reversed.
Not a leg to stand on . . .
The justices explained that a litigant who files a disqualification motion must have standing to do so. That means, they continued, that the moving party must have or have had an attorney-client relationship, or some other confidential or fiduciary relationship with the attorney whose disqualification is sought. In addition, he or she must show that the attorney’s continued representation would impede a legally cognizable interest of the moving party. The panel acknowledged that they could find no case that specifically prohibited a litigant without such a relationship from seeking the attorney’s disqualification; however, in every case they had found, standing was based on the relationship between the attorney and the moving party. Here, the justices found, Michael failed to show that he had a sufficient relationship with Curtis to amount to standing, nor had he shown that Curtis’s continued representation of Melissa created a risk of harm to him. Given that Michael had no “ ‘personal stake’ ” in Curtis’s disqualification, the panel concluded that he lacked standing to bring his disqualification motion.
Maybe so, but . . .
The justices next noted that the trial court had relied on its independent inherent authority to disqualify Curtis. The lower court had been cognizant of Melissa’s right to the attorney of her choosing, but found that it needed to balance that factor against the need to maintain ethical standards of professional responsibility, to preserve the public’s trust in the judicial process, and to preserve the integrity of the Bar. The lower court apparently believed that it had personal knowledge of a violation of the Rules of Professional Conduct that required it to “ ‘take appropriate corrective action.’ ” The justices agreed with those principles in general, but emphasized that the court’s inherent authority should be used “only when the misconduct ‘will have a continuing effect on the judicial proceedings,’ ” (quoting Chronometrics, Inc. v. Sysgen, Inc . (1980) 110 Cal.App.3d 597) and not in a punitive manner. The justices here could find “no continuing effect” that Curtis’s alleged misconduct could have on future proceedings. Moreover, if there had been an ethical violation, it would not compel the trial court to order disqualification, especially since Melissa wanted Curtis to continue representing her. If the trial court was convinced that one had occurred, the panel advised, its proper course would be to refer that matter to the State Bar. Summing up, in light of Melissa’s wish to retain Curtis and the importance of respecting her right to counsel, along with a lack of authority requiring disqualification and Michael’s lack of standing, the justices held that the trial court erred by ordering Curtis disqualified and the reversed that order.
The issue of standing rarely comes up in family law cases, perhaps because community property laws usually provide the parties with the necessary cognizable interest or confidential/fiduciary relationship. However, that issue is decisive here.
Michael based his request for disqualification partly on Curtis’s alleged violation of Cal Rules of Prof Conduct, rule 3-300.That rule precludes an attorney from entering into a business transaction with a client; or knowingly acquiring an ownership, possessory, security, or other pecuniary interest adverse to the client unless he or she satisfies each of the following requirements: (1) the transaction or acquisition and its terms are fair and reasonable, fully disclosed, and transmitted to the client in writing in a manner that the client may reasonably be expected to understand; (2) the attorney advises the client in writing that he or she may seek the advice of independent counsel and gives the client a reasonable opportunity to seek that advice; and (3) the client consents in writing to terms of the transaction or acquisition. In this case, it appears that the transaction met all of the requirements. Note that the client is not required to seek independent counsel, nor is the attorney required to see that the client does so. Here, Melissa chose not to seek independent counsel, but Curtis gave her the required advisement. There may be instances, however, in which good practice requires that counsel give a more forceful advisement and hold off on the transaction for more than a reasonable time to consult other counsel. We’ve all had the client who is prone to forgetting the most routine of advisements, is a bit emotionally shaky or easily swayed, or is likely to change his or her mind after the fact and then claim to have been the victim of an overbearing attorney. In those cases, it’s a good idea to be sure your assets are covered if you decide to enter into a business transaction with the client.
In a footnote, the justices tell us that the trial court believed that disqualification could also be based on Cal Rules of Prof Conduct, rule 5-210. That rule precludes an attorney from acting as an advocate before a jury that will hear testimony from that attorney unless the testimony relates to an uncontested matter or to the nature and value of the legal services rendered in the case, or the client has given written informed consent to the attorney’s testimony. The panel pointed out that this rule could not apply here because it applies only when counsel testifies in a jury trial, not in a bench trial like this one. Moreover, it does not apply if the client consents to the testimony. The justices reasoned that the rule is intended to protect the client. Here, they concluded, Melissa consented to Curtis’s testimony and continued representation of her and her interests were aligned with her attorney’s with regard to the testimony he would give.