Jarvis v. Jarvis

Filed 3/19/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
JAMES ALVIN JARVIS, Individually and H044930
as Trustee, etc., (Monterey County
Super. Ct. No. 16CV002928)
Plaintiff and Respondent,
v.
TODD HENRY JARVIS et al.,
Defendants and Appellants.
Appellant Jarvis Properties is a limited partnership that owns a two-acre parcel of
land. Its two general partners—appellant Todd Henry Jarvis and respondent James Alvin
Jarvis (brothers)—each own a 50 percent interest in the partnership, which is less than the
majority consent required to act on behalf of the partnership (Corp. Code, § 15904.06,
subd. (a)). The general partners cannot agree on what to do about the two-acre parcel and
their partnership agreement does not address the question of what occurs in the event of a
decision-making deadlock. They have, therefore, turned to the courts.
James Jarvis filed an action for partition by sale, naming Todd Jarvis and Jarvis
Properties as defendants.1 Todd hired a lawyer to represent him in the partition action; he
also hired a separate lawyer, William Roscoe, III, to represent the partnership. Both
Todd and the partnership filed demurrers. James objected to having Roscoe represent the
partnership and filed a motion to disqualify Roscoe on the ground that Roscoe was not
authorized to act by the requisite majority of the general partners. James was concerned
that Roscoe—who took the position that he was not subject to the direction of either
1
For ease of reference, we will refer to the brothers by their first names.
partner and was being paid by Todd—was not acting in the best interests of the
partnership and would run up unnecessary litigation costs and deplete the partnership’s
limited assets, to the detriment of the partnership. The trial court granted the motion to
disqualify Roscoe, dismissed the partnership’s demurrer, and overruled Todd’s demurrer.
Both Todd and the partnership appeal the order disqualifying Roscoe and dismissing the
partnership’s demurrer.2
We conclude the trial court did not err as a matter of law when it granted the
motion to disqualify Roscoe in the circumstances of this case. Finding no abuse of
discretion, we will affirm the order disqualifying Roscoe.
I. FACTS AND PROCEDURAL HISTORY
A. Description of Property at Issue and Litigation Involving the Property
The parties and the property at issue are well known to this court. After their
father’s death in 1996, Todd and James were the beneficiaries of certain family trusts.
Litigation ensued in Monterey County, and the brothers entered into an agreement in
1998 as part of a court-supervised settlement of their dispute concerning the family trusts.
In 2004, Todd and James amended the trust and named John McDonnell (a trust attorney)
as the court-appointed trustee. The trust’s primary assets consisted of real property in
Salinas: the Jarvis Ranch (333.5 acres of farmland on the west side of Highway 101) and
two parcels that are adjacent to one another (three acres in a residential area on the east
side of Highway 101). One of the two smaller parcels is the subject of this appeal. The
trust allowed either beneficiary to object to certain proposed actions by the trustee,
followed by court authorization. Todd filed several such proceedings in Monterey
County Superior Court. Between 2010 and 2018, the trust litigation resulted in the filing
Todd has not appealed the order overruling his demurrer. “An order overruling a
2
demurrer is not directly appealable, but may be reviewed on appeal from the final
judgment. [Citation.]” (Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 182.)
2
of three appeals and four writ petitions in this court.3 The trust litigation was resolved by
confidential settlement in late 2018.
This appeal arises out one of two partition actions that were filed in 2016
involving the two parcels on the east side of Highway 101. The first parcel, which is
“just over [one] acre” in size, is located at 2357 North Main Street in Salinas in an area
that is predominantly residential. According to James, this parcel “has an irregular shape
which hampers its development prospects unless coupled with” the adjacent parcel. The
first parcel is currently improved with three older houses, a garage, and a water tower, all
of which “suffer from a great deal of deferred maintenance.” The parties refer to this
parcel as the “Improved Property,” and we adopt that designation. Todd and James
(individually and as trustee of two trusts) own the Improved Property as tenants in
common.
The second parcel is located immediately adjacent to the Improved Property on
North Main Street. The parties refer to this parcel as the “Adjacent Property,” and we
shall do the same. The Adjacent Property is two acres in size; it is vacant land and
allegedly provides no income. James alleges it is “more rectangular in shape which helps
to make the two properties as a whole far more developable.” For ease of reference, we
shall refer to the Improved Property and the Adjacent Property combined as the “Two
Parcels.”
3
The three appeals arising out of the trust litigation (Monterey County Superior
Court case No. P31598) are McDonnell v. Jarvis (Feb. 24, 2012, H035553) [nonpub.
opn.]; McDonnell v. Jarvis (Oct. 23, 2013, H036490) [nonpub. opn.]; and McDonnell v.
Jarvis (June 30, 2014, H037704) [nonpub. opn.]. On our own motion, we take judicial
notice of this court’s opinions in the prior appeals. (Evid. Code, § 452, subd. (d)(1).)
Our summary of the factual and procedural background includes some information that
we have taken from those opinions. The writ petitions arising out of the trust litigation
are case numbers H037406, H043655, H043728, and H045993. Todd was the petitioner
in each case, and in each case, the petition was denied.
3
The Two Parcels were once owned by James and Todd’s parents, James A.P.
Jarvis (Father) and Marjorie Todd Jarvis (Mother). In December 1986, Father, Mother,
and James formed a limited partnership known as Jarvis Properties (hereafter sometimes
“the Partnership”). Father was the general partner and Father, Mother, and James were
the limited partners. The purpose of the limited partnership was to “engage in the
investment in real property” and its primary asset was the Adjacent Property. Ownership
of the Partnership changed over time. At all times relevant to this dispute, Todd and
James each owned 50 percent of the general and limited partnership interests in Jarvis
Properties.4 The Partnership owns the Adjacent Property. During much of the trust
litigation, the Two Parcels were “wholly controlled” by the trustee, McDonnell. In
September 2015, the trustee relinquished control of the Two Parcels to Todd and James.
Todd and James were also parties to three consolidated eminent domain actions in
Monterey County Superior Court (case Nos. M98919, M98920, and M98921), which
were filed by the California Department of Transportation to acquire portions of the
Jarvis Ranch and the Two Parcels for improvements along Highway 101. During the
pendency of those actions, the Jarvis Ranch was sold to a third party, who settled the
eminent domain action as to Jarvis Ranch. The eminent domain actions as to the Two
Parcels went to trial in April 2016. Todd has appealed the judgment rendered in that trial
in case No. H043737, which is pending before this court. Thus, the Two Parcels have
been the subject of the trust litigation, the eminent domain actions, and the partition
actions.
4
James holds his 50 percent interest in the Partnership in his individual capacity
and as trustee of three trusts: (1) the 1987 James A.P. Jarvis Revocable Trust for the
benefit of the Issue of James Alvin Jarvis; (2) the 1987 Marjorie Todd Jarvis Revocable
Trust for the benefit of the Issue of James Alvin Jarvis; and (3) the 1986 Jarvis
Irrevocable Trust. James, individually and as trustee of the three trusts, is the plaintiff in
this partition action.
4
B. Partition Actions
1. Complaints in First and Second Partition Actions
In May 2016, James filed a complaint in Jarvis v. Jarvis (Monterey County
Superior Court case No. 12CV001295, hereafter “Case No. 1295”) seeking partition of
both the Improved Property and the Adjacent Property.5 The complaint contained causes
of action for partition by sale, an accounting, and appointment of a receiver. James
alleged that since McDonnell relinquished control of the Two Parcels in September 2015,
the brothers “have not been able to agree on how to care for or dispose of” the properties.
James suggested hiring a professional property manager, which Todd rejected. James
alleged Todd (1) took control of the Two Parcels and collected rent on the Improved
Property; (2) has not provided an accounting or information regarding the payment of
rents or the condition of the properties; and (3) has not consulted with James about the
Two Parcels, even though James is a co-owner of the Improved Property and the
Partnership. The complaint alleged that the jury awarded the Partnership $163,162 in the
eminent domain action and that James is concerned that Todd will “usurp those funds for
his own uses.” Aside from the proceeds of the eminent domain action and owning the
Adjacent Property, the Partnership “has no other business function, and does not owe any
creditors any money.”
Todd filed a demurrer and a motion to strike the complaint in Case No. 1295. In
September 2016, the trial court sustained the demurrer with leave to amend and granted
the motion to strike, stating that James “may not seek partition of two parcels under
different ownership under a single cause of action for partition and sale.” While Todd’s
motions were pending, James filed a motion for appointment of a receiver over the
Improved Property, which the court granted.
5
Todd’s requests for judicial notice of the complaint filed in Case No. 1295 and
the trial court’s September 13, 2016 order sustaining the demurrer and granting the
motion to strike in that case are granted. (Evid. Code, §§ 459, subd. (a); 452, subd. (d).)
5
In September 2016, James filed a new complaint in the instant action entitled
Jarvis v. Jarvis, Monterey County Superior Court case No. 16CV002928 (hereafter
sometimes “Case No. 2928”), which contains a single cause of action for partition by sale
of the Adjacent Property. It alleges that “there is no possibility that [James and Todd]
would cooperate to develop” the Two Parcels, that the brothers are “unable and unwilling
to collectively manage or develop the Adjacent Property,” that its highest and best use is
to be sold, and that its value can be maximized in a coordinated partition sale with the
Improved Property. The named defendants are Todd and Jarvis Properties.
James, as general partner, signed a notice and acknowledgement of receipt in
March 2017, accepting service of the new complaint on behalf of the Partnership. In a
case a management conference statement, James told the court he planned to file a
motion to consolidate the two partition actions. He also stated that Todd had selected
attorney William P. Roscoe, III to represent the Partnership and complained of Todd’s
“unilateral appointment” of Roscoe.
2. James’s Motion to Disqualify Roscoe
Shortly after James filed his case management conference statement, Roscoe filed
a demurrer on behalf of the Partnership. While the demurrer was pending, James filed a
motion to disqualify Roscoe from representing the Partnership and to dismiss the
demurrer because Roscoe lacked authority from a majority of the general partners to
represent the Partnership. James argued that “[p]ursuant to his standard practice,
Todd . . . has elected to seek to render this litigation as needlessly complex and wasteful
as possible.” He stated that Todd selected Roscoe to represent the Partnership over his
express objection and that Roscoe had “taken the position that his representation of the
partnership is to be directed solely by one general partner [Todd], and in direct
contravention of the direction of the other equal general partner [James].” Citing
6
Corporations Code section 15904.06, subdivision (a)6, James argued that since there is
more than one general partner, Roscoe needed the authority of a majority of the general
partners to act and since Roscoe was only authorized by one general partner, he was not
authorized to act on behalf of the Partnership or to file a demurrer. James argued that
Todd planned to demur on the same grounds; that Todd could articulate his arguments
regarding partition directly without the need for Roscoe to represent the Partnership; that
although the Partnership is a separate entity, it has no position independent of the general
partners.
James suggested options for handling the deadlock between the partners if Jarvis
Properties must participate in the action, which he broke down into two categories:
(1) allowing the partners to litigate the partition action without participation by the
Partnership, or (2) “appointing a tie-breaking actor . . . to act on behalf of the
Partnership.” As for the first category, James suggested the parties could stipulate to an
appearance by the Partnership in which it submits to the court’s jurisdiction and agrees to
be bound by the outcome of the litigation conducted by the brothers. James contended it
was not necessary for the court to “make this determination at this time, and it may
simply order Roscoe disqualified.” He also argued that because Roscoe did not have the
requisite authority to act on behalf of the Partnership, the demurrer was moot. He argued
that if Todd has the power to unilaterally order the filing of a demurrer, then James has
the authority to unilaterally order it withdrawn. Shortly after James filed the motion to
disqualify Roscoe, Todd filed his demurrer to the complaint.
3. James’s Opposition to the Demurrers
James filed opposition to both demurrers, which stated: “[N]ot only has [Todd]
filed his own meritless demurrer—he has unilaterally (and in direct violation of the legal
requirement that only a majority of general partners may direct partnership activities such
6
All undesignated statutory references are to the Corporations Code.
7
as litigation) directed Roscoe to file another overlapping demurrer.” James argued the
demurrers were “without merit, and their duplicative procedural posture makes clear the
true intent is merely the squandering of resources.” James argued that the Partnership’s
demurrer was not properly before the court because Roscoe was not authorized to act on
behalf of the Partnership. He argued that Code of Civil Procedure section 872.730
expressly permits “an action for partition of partnership property” and that both the
statute and the partnership agreement permit partition of partnership property outside of
an action to dissolve the Partnership.
4. The Partnership’s Opposition to the Motion to Disqualify Roscoe
In opposition to the disqualification motion, Roscoe filed a declaration stating that
(1) he was retained to represent only Jarvis Properties; (2) he did not represent Todd, who
had his own attorney; (3) Todd had signed Roscoe’s retainer agreement as a general
partner of the Partnership; and (4) the retainer agreement provides that Roscoe represents
Jarvis Properties only and will not represent any of its partners.
The Partnership’s opposition began by repeating many of the arguments in the
demurrers and discussing whether James had the authority under partnership law and the
partition statutes to bring a partition action. The opposition argued that the partition
action was not authorized by law and that the disqualification motion was an attempt to
remove opposition to the partition action to facilitate an unauthorized sale of the property.
The Partnership argued that “having sued the Partnership [James] may not, due to
obvious conflicts of interest, participate in the defense in any way. While neither partner
should participate [in] or direct the Partnership defense, there is no conflict if one
partner sues the Partnership and one partner merely arranges for independent
representation of the Partnership as Todd . . . has done.” (Italics added.) In response to
James’s suggestion that the Partnership did not need separate representation because
Todd and James would adequately litigate all issues, the Partnership argued that neither
8
Todd nor James “have any property interest whatever” in the Adjacent Property and
therefore lacked standing to bring or defend the partition action. It also argued that since
James did not have standing to bring the partition action, he lacked standing to move to
disqualify Roscoe. The Partnership argued that it was sued by James and had every right
to appear as a named party represented by counsel. It contended that by seeking to
disqualify Roscoe, James sought to prevent “any representation or defense of the
Partnership at all,” and that the tie-breaking options proposed by James “are far outside
the scope of this motion.” The Partnership asserted that if the motion to disqualify was
successful, James would be able to sell the property “in the absence of opposition of the
owner thereof, which is the Partnership.”
5. James’s Reply in Support of the Disqualification Motion
In reply, James asserted that since Roscoe had argued that “neither partner should
participate [in] or direct the Partnership defense,” Roscoe’s view was that “the goals,
strategy, tactics, and costs of this litigation should be left entirely to [Roscoe], with no
direction from any general or limited partner, or from any officer of the Partnership.”
James argued this was a violation of the Rules of Professional Conduct, former rule 3-
600, which required an attorney “representing an organization” to “conform his or her
representation to the concept that the client is the organization itself, acting through its
highest authorized officer, employee, body, or constituent overseeing the particular
engagement.” James argued it was not for Roscoe to decide what is in the best interest of
the Partnership, and that “is for a majority of the general partners to decide.” James
asserted that Todd retained Roscoe to represent the interests Todd wishes to pursue; that
since the Partnership has no liquid assets, Roscoe was “presumably” being paid by Todd;
and that to “the extent [Roscoe] expects to recoup his fees . . . from Partnership assets,”
he was doing a disservice to the Partnership, the very entity he represents. James argued
that Roscoe would “run up” costs without direction from someone on behalf of the
9
Partnership or a court-ordered appointment, and that Roscoe was not acting in the best
interest of the Partnership. James argued that Todd had demurred on the same grounds as
the Partnership, and was sufficiently interested to “reasonably assure that all relevant
facts and issues will be adequately presented.”
6. Hearing and Orders on Motion to Disqualify and Demurrers
The motion to disqualify and the demurrers, were heard at the same time. The
court’s tentative ruling on the motion to disqualify was to grant the motion because “there
is not a majority of partners in this two-partner business that agree on hiring an attorney
for the partnership.” The court noted that the partners were deadlocked and stated, “if
these two parties never agree, there is never going to be any action taken on this
property . . . because of the history of this relationship.” The court granted the motion to
disqualify Roscoe and dismissed the Partnership’s demurrer without prejudice. The court
denied Todd’s request for judicial notice and overruled Todd’s demurrer to the
complaint. Both Todd and the Partnership (sometimes jointly “Defendants”) appeal the
order on the disqualification motion.
II. DISCUSSION
A. The Partnership Has Waived Any Defects in Service and is Not in Default
We proceed by addressing two points raised by the opening brief. Todd and the
Partnership complain repeatedly in their joint opening brief that James acted
inappropriately by serving himself and then accepting service of the complaint on behalf
of the Partnership. They also suggest that the trial court’s order disqualifying Roscoe and
dismissing the demurrer forces the Partnership to default. As we shall explain, neither
point has any merit.
The Partnership did not file a motion to quash service of summons or otherwise
challenge service of the complaint in the trial court. Jarvis Properties’ demurrer was a
first appearance by the Partnership, which waived any defects in service. (Code Civ.
10
Proc., §§ 1014 [defendant appears in an action by filing a demur] and 410.50, subd. (a)
[“A general appearance by a party is equivalent to personal service of summons on such
party”]; Fireman’s Fund Ins. Co. v. Sparks Construction, Inc. (2004) 114 Cal.App.4th
1135, 1145 [a general appearance operates as a consent to service, curing any defects in
service].) Since the Partnership waived any defects in service by filing a demurrer,
Defendants cannot complain that service was improper on appeal.
Defendants contend the trial court’s order disqualifying Roscoe, “creates an
absurd result where a fifty percent (50%) partner can sue his partnership and then force
the partnership to default by vetoing its ability to hire [an attorney].” By filing a
demurrer, the Partnership prevented the court from entering its default. (Code Civ. Proc.,
§ 585, subds. (a), (b) [authorizing clerk, upon application, to enter the defendant’s default
if “no answer, demurrer, [or other enumerated response] has been filed.”) The court in
Barragan v. Banco BCH (1986) 188 Cal.App.3d 283, 298 (Barragan), held that if a
demurrer has been filed, but goes off calendar and is no longer operative and hence moot,
the clerk may enter the defendant’s default. One treatise questions the result in Barragan
and notes that no other appellate court has endorsed its “ ‘moribund demurrer’ analysis.”
(Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (Rutter Group 2018)
¶¶ 5:38 to 5:40, P. 5-12.) In this case, the trial court, upon disqualifying Roscoe,
dismissed the demurrer. It did not find that the Partnership was in default. Under the
plain language of section 585, subdivisions (a) and (b), what prevents entry of default is
the filing of the demurrer. Since the Partnership filed a demurrer, it is not in default, and
the filing of the demurrer prevents its default from being taken.
B. Standard of Review
“An order on a motion to disqualify counsel is directly appealable.” (Lynn v.
George (2017) 15 Cal.App.5th 630, 633, fn. 1, citing Derivi Construction & Architecture,
Inc. v. Wong (2004) 118 Cal.App.4th 1268, 1272.) “ ‘A trial court’s authority to
11
disqualify an attorney derives from the power inherent in every court “[t]o control in
furtherance of justice, the conduct of its ministerial officers, and of all other persons in
any manner connected with a judicial proceeding before it, in every matter pertaining
thereto.” [Citations.]’ (People ex rel. Dept. of Corporations v. SpeeDee Oil Change
Systems, Inc. (1999) 20 Cal.4th 1135, 1145 . . . (SpeeDee Oil).) ‘Generally, a trial court’s
decision on a disqualification motion is reviewed for abuse of discretion. [Citations.]’ ”
(In re Charlisse C. (2008) 45 Cal.4th 145, 159 (Charlisse C.).)
“The abuse of discretion standard is not a unified standard; the deference it calls
for varies according to the aspect of a trial court’s ruling under review. The trial court’s
findings of fact are reviewed for substantial evidence, its conclusions of law are reviewed
de novo, and its application of the law to the facts is reversible only if arbitrary and
capricious.” (Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711-712.) “As to
disputed factual issues, a reviewing court’s role is simply to determine whether
substantial evidence supports the trial court’s findings of fact; ‘the reviewing court should
not substitute its judgment for . . . express or implied [factual] findings [that are]
supported by substantial evidence. [Citations.]’ [Citation.] As to the trial court’s
conclusions of law, however, review is de novo; a disposition that rests on an error of law
constitutes an abuse of discretion. [Citations.]” (Charlisse C., supra, 45 Cal.4th at p. 159
[trial court that applied the wrong legal standard in ordering counsel’s disqualification
abused its discretion].) “The importance of the policy concerns underlying a
disqualification order mandates ‘careful review of the trial court’s exercise of discretion.’
[Citation.]” (Dino v. Pelayo (2006) 145 Cal.App.4th 347, 351-352 (Dino), citing
SpeeDee Oil, supra, 20 Cal.4th at p. 1144.)
The parties acknowledge these authorities, but dispute whether there were
disputed factual issues here. Defendants argue that there are no disputed questions of fact
and that the parties disagree on what the law allows and that the issue is purely a legal
question, which this court should review de novo. James contends the de novo standard
12
is not the appropriate standard of review because there are disputed questions of fact
regarding “who will direct Roscoe’s unauthorized representation of the Partnership.”
Although presented as a factual dispute, this is really a legal question of who has the right
to direct the Partnership’s defense in the circumstances presented here. We shall review
the question whether the court erred as a matter of law when it disqualified Roscoe de
novo and the court’s application of the legal rules to the facts for abuse of discretion.
C. General Principles Regarding Disqualification of Counsel
James’s motion to disqualify Roscoe derives from the contention that Roscoe was
without authority to act for the Partnership. Although this argument is not typical of the
bases on which attorneys are removed by the trial court, we find the principles underlying
disqualification useful in our analysis here. As we have noted, a “trial court’s authority
to disqualify an attorney derives from the power inherent in every court ‘[t]o control in
furtherance of justice, the conduct of its ministerial officers, and of all other persons in
any manner connected with a judicial proceeding before it, in every matter pertaining
thereto.’ [Citations.]” (SpeeDee Oil, supra, 20 Cal.4th at p. 1145, quoting Code Civ.
Proc., § 128, subd. (a)(5).) “The power is frequently exercised on a showing that
disqualification is required under professional standards governing avoidance of conflicts
of interest or potential adverse use of confidential information. [Citations.] Violation of
a disciplinary rule may justify disqualification. ([Citation.]; cf. Gregori v. Bank of
America (1989) 207 Cal.App.3d 291, 303 . . . [(Gregori)] [suggesting disqualification is
not necessarily warranted for violation of a specific disciplinary rule].)” (Responsible
Citizens v. Superior Court (1993) 16 Cal.App.4th 1717, 1723-1724 (Responsible
Citizens).)
In general, “[c]onflicts of interest commonly arise in one of two factual contexts:
(1) in cases of successive representation, where an attorney seeks to represent a client
with interests that are potentially adverse to a former client of the attorney; and (2) in
13
cases of simultaneous representation, where an attorney seeks to represent in a single
action multiple parties with potentially adverse interests. The primary fiduciary value at
stake in each of these contexts differs, and the applicable disqualification standards vary
accordingly. In successive representation cases, ‘the chief fiduciary value jeopardized is
that of client confidentiality.’ (Flatt v. Superior Court (1994) 9 Cal.4th 275, 283 . . .
(Flatt).) Therefore, the disqualification standards [our Supreme Court has] developed for
such cases focus on the former client’s interest ‘in ensuring the permanent confidentiality
of matters disclosed to the attorney in the course of the prior representation.’ (Ibid.) In
simultaneous representation cases, ‘[t]he primary value at stake . . . is the attorney’s
duty—and the client’s legitimate expectation—of loyalty, rather than confidentiality.’
(Id. at p. 284.) Because a conflict involving an attorney’s duty of loyalty is ‘most
egregious’ kind of conflict, the disqualification standards [the Supreme Court has]
developed for simultaneous representation cases are ‘more stringent’ than those that
apply in successive representation cases; ‘[w]ith few exceptions, disqualification [in a
case of simultaneous representation] follows automatically, regardless of whether the
simultaneous representations have anything in common or present any risk that
confidences obtained in one matter would be used in the other. [Citation.]’ (SpeeDee
Oil, supra, 20 Cal.4th at p. 1147.)” (Charlisse C., supra, 45 Cal.4th at pp. 159-160.)
“The attorney’s obligation to maintain client confidences—the duty central to
successive representation conflicts—is confirmed by California statute. Business and
Professions Code section 6068, subdivision (e) provides: ‘It is the duty of an attorney to
do all of the following: [¶] … [¶] (e)(1) To maintain inviolate the confidence, and at
every peril to himself or herself to preserve the secrets, of his or her client.’ This
obligation survives the termination of the attorney-client relationship (SpeeDee Oil,
supra, 20 Cal.4th at pp. 1144-1145). The attorney’s duty of loyalty to his or her client—
the duty central to concurrent representation conflicts—is specified in the California State
14
Bar Rules of Professional Conduct. (Rules Prof. Conduct, [former] rule 3-310(C) & (E);
[citation].)” (M’Guinness v. Johnson (2015) 243 Cal.App.4th 602, 614-615.)
D. Standing
Todd and the Partnership argue that James does not have standing to seek
Roscoe’s disqualification because James has never had an attorney-client relationship
with Roscoe. They assert that Roscoe represents only the Partnership, and they rely on
the rule from Responsible Citizens that “ ‘representation of a partnership does not, by
itself, create an attorney-client relationship with the individual partners.’ ” (Responsible
Citizens, supra, 16 Cal.App.4th at p. 1731.) Indeed, no one contends that Roscoe directly
represents or has ever represented either of the partners. James argues that Defendants
mistakenly rely on standing rules for disqualification based on conflicts of interest and
that those rules do not apply here since he sought Roscoe’s disqualification based on a
lack of authority to act on behalf of the Partnership, not a conflict of interest. James
argues that he “has an inherent right to seek Roscoe’s disqualification because Roscoe’s
purported representation of the Partnership was not authorized by the general partners”
and that he (James) arguably “had a duty as a general partner to move to disqualify
Roscoe.”
We review the question whether a party has standing to bring a disqualification
motion de novo. (Blue Water Sunset, LLC v. Markowitz (2011) 192 Cal.App.4th 477,
485 (Blue Water).)
“Standing generally requires that the plaintiff be able to allege injury, that is, an
invasion of a legally protected interest.” (Great Lakes Construction, Inc. v. Burman
(2010) 186 Cal.App.4th 1347, 1356.) Cases have held that “[a] ‘standing’ requirement is
implicit in disqualification motions” (ibid.) or that a “complaining party who files a
motion to disqualify is required to have standing” (Blue Water, supra, 192 Cal.App.4th at
p. 485). To demonstrate standing to disqualify counsel, “[s]ome cases hold that the
complaining party must prove a present or past attorney-client relationship with the
15
attorney who is the target of the motion. ([Dino, supra, 145 Cal.App.4th 347, 352 . . .];
Earl Scheib, Inc. v. Superior Court (1967) 253 Cal.App.2d 703, 707 . . . [a generally
recognized exception to disqualification is where the relationship of attorney and client
was never in fact created between the attorney and the complaining party]; Cornish v.
Superior Court (1989) 209 Cal.App.3d 467, 478 . . . [‘ “Before an attorney may be
disqualified from representing a party in litigation because his representation of that party
is adverse to the interest of a current or former client, it must first be established that the
party seeking the attorney’s disqualification was or is ‘represented’ by the attorney in a
manner giving rise to an attorney-client relationship.” ’].)” (Blue Water, at p. 485.)
“Other courts permit disqualification on a different basis, holding that standing is
established so long as the lawyer owed a duty of confidentiality to the complaining party
and breached it. (DCH Health Services Corp. v. Waite (2002) 95 Cal.App.4th 829, 832
. . . [‘Standing arises from a breach of the duty of confidentiality owed to the complaining
party, regardless of whether a lawyer-client relationship existed.’].)” (Blue Water, at
p. 485.)
In Dino, the court questioned “whether the issue is properly framed as one of
standing,” but agreed “that some sort of confidential or fiduciary relationship must have
existed before a party is entitled to prevail on a motion to disqualify an attorney
predicated on the actual or potential disclosure of confidential information.” (Dino,
supra, 145 Cal.App.4th at p. 353, italics added.) Although the parties and the trial court
in Dino had framed their analysis in terms of whether the appellants had standing to
move to disqualify, the appellate court preferred to frame the analysis in terms of whether
the appellants “were entitled to prevail on a motion seeking [the attorney’s]
disqualification.” (Id. at p. 353, fn. 2.) The court explained, “Generally, standing refers
to an aggrieved party’s right to bring an action in the first instance, rather than an existing
party’s right to bring a motion seeking some sort of relief from the trial court.
([Citations]; see also Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 439–
16
440 & fn. 3 . . . [‘a party who has standing to bring an action has standing to seek
available provisional relief in that action’]; Apartment Assn. of Los Angeles County, Inc.
v. City of Los Angeles (2006) 136 Cal.App.4th 119, 128 . . . [‘Standing goes to the
existence of a cause of action [citations]’].)” (Dino, at p. 353, fn. 2.)
Applying the analytical framework from Dino here, we conclude that James was
not required to have an attorney-client relationship with Roscoe to move to disqualify
him. As we have noted, James’s motion to disqualify was not based on simultaneous or
successive representation, but rather on Roscoe’s lack of authority to act on behalf of the
Partnership in the first place. Whether James had an expectation of loyalty or
confidentiality is not the issue here. Because this case is predicated on attorney Roscoe’s
alleged lack of authority to act on behalf of the Partnership, James was required to
demonstrate that he had an interest in the question of whether Roscoe was properly
authorized to represent the Partnership. We conclude that since a majority of the partners
has not agreed to retain Roscoe (§ 15904.06, subd. (a)), James, a general partner who
owns 50 percent of the Partnership, has a sufficient interest to challenge Roscoe’s
authority to act in this case.
Johnson v. Superior Court (1995) 38 Cal.App.4th 463 (Johnson), which is not an
attorney disqualification case, supports our conclusion. In Johnson, the limited partners
of a limited partnership sued the general partner and the attorney who represented the
partnership for fraud. The trial court granted the attorney summary adjudication on the
issue of duty. The appellate court granted the limited partners’ petition for writ of
mandate and directed the trial court to vacate the order. The court acknowledged the rule
from Responsible Citizens that “mere representation of a partnership does not per se
constitute representation of the individual partners” and reviewed the factors enumerated
in that case to determine whether the attorney had formed an attorney-client relationship
with the limited partners. (Id. at pp. 476-478.) The limited partners alleged that in the
course of representing the partnership, the attorney performed services that benefitted the
17
general partner to the detriment of the partnership, which violated the attorney’s duty of
care and loyalty to the partnership. (Id. at p. 478.) The court noted that the partnership
would have had a cause of action against the attorney and that if the general partner failed
to bring the action, then the limited partners could have brought a derivative action under
former section 15702 or a direct action in equity. (Ibid.) The court held that the
undertaking by the attorney to represent the partnership, “imposed upon him an
obligation of loyalty to the partnership and to all partners in terms of their entitlement to
benefits from the partnership. Whether this constituted [him] an attorney, literally, for
the individual limited partners, is of no great moment. He had a duty to the partnership to
look out for all the partners’ interests, and if this could not be accomplished because of
conflicts of interest among them he had a duty to terminate the representation (or obtain
appropriate waivers of the conflict).” (Id. at p. 479, footnote omitted.) Thus, if Roscoe’s
duty to act in the best interest of the Partnership is designed to protect the interests of all
the partners, then James has an interest in disqualifying Roscoe if he believed his actions
would deplete partnership assets, or Roscoe would act to place Todd’s interests ahead of
the Partnership’s.
In summary, we conclude that because this is not a conflict of interest case, James
was not required to have an attorney-client relationship with Roscoe to move to
disqualify him. Since James moves to disqualify Roscoe based on a lack of authority for
Roscoe to act on behalf of the Partnership, we conclude that because a majority of the
partners have not agreed to retain Roscoe and James is a general partner with a 50 percent
ownership interest in the Partnership and because Roscoe owed a duty to protect the
Partnership’s interests, which benefits all of the partners, James’s interest was sufficient
to challenge Roscoe’s authority to represent the Partnership. For these reasons, we reject
the Defendants’ contention that James did not have “standing” to move to disqualify
Roscoe. We thus consider the merits of the disqualification of Roscoe.
18
E. The Coldren Case
Defendants argue that the trial court’s order disqualifying Roscoe as counsel for
the Partnership should be reversed because James gave up the right to control the
Partnership’s defense when he sued it for partition. Relying on Coldren v. Hart, King &
Coldren, Inc. (2015) 239 Cal.App.4th 237 (Coldren), Defendants contend that Coldren is
“strikingly similar to the matter at bar” and “addressed the core issue presented” here.
Defendants rely on the court’s statement in the introduction that a plaintiff cannot “ ‘sue
his company and then, because he is a 50 percent shareholder, have a say in its defense’ ”
(id. at p. 241).
Coldren arose out of a dispute between two equal shareholders in a corporation.
Robert Coldren owned 50 percent of the shares in Hart, King & Coldren, Inc. (HKC), a
law firm. William Hart owned the other 50 percent interest in HKC. Both were officers
and directors of the corporation. (Coldren, supra, 239 Cal.App.4th at p. 241.) After
Coldren announced his intent to retire, the two shareholders and the corporation entered
into a written agreement governing the terms of his departure. As part of that agreement,
Coldren resigned from his position as an officer and director of the corporation. (Id. at
pp. 241-242.) One year later, Coldren sued Hart and HKC for involuntary dissolution,
breach of the shareholder agreement and the departure agreement, and other claims,
seeking $8 million in damages. Hart and HKC filed a cross-complaint that alleged,
among other things, that in spite of promises not to compete and to transition Coldren’s
clients to HKC, Coldren was stealing clients and opening a practice in direct competition
with HKC. (Id. at pp. 242-243.) Hart and HKC were jointly represented by the law firm
Grant Genovese (GG). Coldren brought a motion to disqualify GG on the ground that it
was improper for Hart to direct HKC to sue Coldren. The trial court granted the motion,
finding an actual conflict of interest in GG’s representation of both Hart and the
corporation. The trial court ordered the shareholders to select neutral counsel for HKC
and stated that if they did not select neutral counsel, the court would appoint counsel.
19
(Id. at pp. 243-244.) Hart and HKC appealed, arguing in part that there was no
disqualifying conflict between Hart and HKC. The appellate court agreed and reversed
the order disqualifying GG. (Id. at pp. 241, 245, 252.)
The court began “by setting forth the legal principles governing the
disqualification of an attorney based on a conflict” of interest. (Coldren, supra,
239 Cal.App.4th at p. 248, italics added.) This included: (1) case law; (2) former rule 3-
310(C) of the State Bar Rules of Professional Conduct,7 which requires the attorney who
represents more than one client to obtain the informed written consent of each client
when the clients’ interests potentially or actually conflict; (3) former rule 3-600,8 which
governed how an organization gives informed consent for dual representation; and
(4) formal opinion No. 1999-153 of the State Bar of California Committee on
Professional Responsibility and Conduct, which interpreted these rules in circumstances
similar to those presented in Coldren. (Coldren, at pp. 248-250.) The Coldren court
concluded that Hart and HKC did not “ ‘have opposing interests in the lawsuit which
[GG] would have a duty to advance simultaneously for each’ ” and noted that neither
Coldren nor the trial court had identified any such interests. (Id. at p. 250.) Thus, there
was no conflict of interest that precluded GG from representing both Hart and the
corporation. (Ibid.)
7
Further rules citations are to the State Bar Rules of Professional Conduct. Under
new rules that were adopted by the Board of Trustees of the State Bar in September 2018
and approved by the Supreme Court with revisions effective November 1, 2018, former
Rule 3-310(C) has been renumbered Rule 1.7. (2 Standard California Codes 6-in-2 (2019
ed.) Rules of Professional Conduct, pp. i, vi, 6-7 (Standard Codes).)
8
Former Rule 3-600 has been amended and renumbered Rule 1.13, effective
November 1, 2018. (Standard Codes, supra, p. vi.) Rule 1.13 provides: “A lawyer
employed or retained by an organization shall conform his or her representation to the
concept that the client is the organization itself, acting through its duly authorized
directors, officers, employees, members, shareholders or other constituents overseeing
the particular engagement.” (Changes in the wording of the rule have been italicized.)
20
Defendants’ reliance on Coldren is misplaced. As we have noted, disqualification
motions occur most commonly in the context of conflicts of interests between clients:
when counsel’s simultaneous representation of a current client is adverse to the interests
of another current client or when counsel’s successive representation of a current client
is adverse to the interests of a former client and, by reason of the former representation,
the attorney obtained confidential information material to the current representation.
(SpeeDee Oil, supra, 20 Cal.4th at pp. 1146-1147; Responsible Citizens, supra,
16 Cal.App.4th at pp. 1723-1725.) Neither of those concerns are implicated here. Unlike
Coldren, this is not a conflict of interest case. Roscoe has only one client: the
Partnership. He does not simultaneously represent the Partnership and James (or Todd).
In addition, there was no allegation that he formerly represented James, which could have
resulted in the potential adverse use of confidential information. Since this case does not
involve the dual representation of the Partnership and a partner, Coldren’s holding as to
who may consent to such representation does not apply. The issue here is Roscoe’s lack
of authority ab initio to act for the Partnership, and how to resolve a conflict of authority
within the Partnership that renders the attorney incapable of acting on the matter in
dispute. Neither James nor Defendants cite any cases or other legal authority involving a
motion for disqualification based on counsel’s lack of authority to act for an entity client
or a conflict of authority within a partnership or other entity client. As our independent
research has not discovered any cases discussing this question, we turn to other sources to
determine whether the trial court abused its discretion when it ordered Roscoe
disqualified.
F. State Bar Opinion No. 1994-137, Partnership Agreements & the ULPA
Rules of ethics are one of the tools courts utilize when deciding whether
disqualification is necessary to preserve the integrity of the of the judicial process. (In re
Complex Asbestos Litigation (1991) 232 Cal.App.3d 572, 586.) Under the State Bar
Rules of Professional Conduct, an attorney who represents a partnership must treat the
21
partnership itself as the client and need not undertake representation of the partners
individually. (Rule 1.13(a); former rule 3-600(A); Responsible Citizens, supra,
16 Cal.App.4th at pp. 1729-1730.) This flows from the rule established in the Uniform
Limited Partnership Act of 2008 (§§ 15900 et seq., hereafter ULPA), that a “limited
partnership is an entity distinct from its partners.” (§ 15901.04, subd. (a).) “A limited
partnership has the powers to do all things necessary or convenient to carry on its
activities, including the power to sue, be sued, and defend in its own name and to
maintain an action against a partner for harm caused to the limited partnership by a
breach of the partnership agreement or violation of a duty to the partnership.”
(§ 15901.05.)
The State Bar of California Standing Committee on Professional Responsibility
and Conduct (the Committee) formal opinion No. 1994-137 (State Bar Opn. 1994-137)
provides some guidance regarding an attorney’s ethical considerations when undertaking
the representation of a partnership. It addresses “a lawyer’s ethical duties when in the
course of representing a partnership the lawyer receives conflicting instructions from two
of the partners in circumstances where it is unclear which partner’s instruction the lawyer
must follow.” (State Bar Opn. 1994-137.)
The Committee notes that former Rule 3-600(A), which applies to partnerships,
“states that in representing an organization, ‘. . . a member shall conform his or her
representation to the concept that the client is the organization itself, acting through its
highest authorized officer, employee, body, or constituent overseeing the particular
engagement.’ . . . [¶] Accordingly, in representing a partnership a lawyer represents the
partnership itself acting through the partner authorized to oversee the representation.
Ordinarily, that means that the lawyer representing a partnership takes direction from its
general partner, since limited partners cannot take part in the control of the partnership
and retain the limited liability of a limited partner. [Citations.] However, in determining
who oversees the representation in any given situation, a lawyer must conform to the
22
requirements of the applicable statutes, the partnership agreement and any other pertinent
agreements between the partners. [Citation.]” (State Bar Opn. 1994-137, citing
Responsible Citizens, supra, 16 Cal.App.4th 1717, footnotes omitted.)
Lack of clarity over who is authorized to oversee the engagement of the attorney
for the partnership places the lawyer “in a position where he or she cannot follow one
partner’s instruction without violating the other partner’s instruction. It is not a conflict
of interest, because the lawyer has only one client, the partnership. It is, instead, a
conflict of authority within the partnership over who oversees and instructs the
partnership’s lawyer.” (State Bar Opn. 1994-137.) The Committee opines that a “lawyer
in this situation is adrift in perilous waters. The lawyer’s duty of loyalty requires the
lawyer to act at a client’s direction. A lawyer cannot act without the client’s
authorization. Nor can the lawyer take over the decision making for a client absent
authority to do so. At the same time, a lawyer has a duty to competently represent the
partnership as a client” and “cannot abdicate [that duty] in the face of a dispute among
the partners.” (State Bar Opn. 1994-137.) The Committee concludes that “a lawyer
caught in this situation must first determine whether the partnership agreement or
applicable law provide an answer as to who has the authority to instruct counsel. For
example, if the partnership agreement states which partner has the authority to oversee
the representation, the lawyer must conform the representation to those provisions and
take instruction from that partner.” (State Bar Opn. 1994-137.) This is consistent with
section 15901.10, subdivision (a), which provides that subject to exceptions enumerated
in subdivision (b), “the partnership agreement governs relations among the partners and
between the partners and the partnership,” and if the partnership agreement is silent, the
ULPA governs such relations.
“While [former] rule 3-600 instructs a lawyer to take actions as appear to be in the
best interests of the organization, a lawyer must recognize the limits of his or her
function. A lawyer must be careful to maintain the role as a servant of the partnership
23
and not assume the client’s role in the lawyer-client relationship. Thus, the lawyer may
render advice which he or she believes is in the best interests of the partnership.
However, the lawyer cannot make decisions which are the partnership’s to make. [¶] . . .
[W]here the lawyer cannot reasonably determine which partner’s instruction the lawyer
may follow, the lawyer cannot take any action for the partnership in connection with the
matters in dispute, until the dispute is resolved. . . . If the lawyer reasonably believes that
he or she cannot effectively represent the partnership, the lawyer may withdraw.” (State
Bar Opn. 1994-137, footnote omitted.)
Although the Committee’s opinion concludes by saying it is not binding on the
courts, the opinion provides a helpful analytical framework. It suggests that in
determining who has the authority to select counsel and direct the Partnership’s defense,
we look first to the terms of the partnership agreement.9 Here, the Partnership agreement
is silent on this point. It does not delegate the selection of counsel or decision-making
regarding litigation to either of the general partners. It does not say what happens when
the general partners are deadlocked. When the Partnership was formed, there was only
one general partner—who had the right to make decisions for the Partnership—and three
limited partners. With that structure, no one envisioned deadlock. There is no evidence
the partnership agreement was amended to address the possibility of deadlock after the
brothers each acquired a 50 percent ownership interest in the Partnership.
In the absence of direction from the partnership agreement, the Committee’s
opinion directs us next to applicable partnership law. The motion to disqualify was based
on section 15904.06, subdivision (a), which is part of the ULPA. It provides: “Each
9
In support of his demurrer, Todd asked the trial court to judicially notice the
partnership agreement and other documents related to the ownership of Jarvis Properties.
The trial court properly denied the request for judicial notice in the context of Todd’s
demurrer. However, James attached a copy of the partnership agreement as an exhibit to
the complaint in Case No. 1295, and we have granted Todd’s request to judicially notice
the complaint in that case.
24
general partner has equal rights in the management and conduct of the limited
partnership’s activities. Except as expressly provided in this chapter, any matter relating
to the activities of the limited partnership may be exclusively decided by the general
partner or, if there is more than one general partner, by a majority of the general
partners.” We understand the term “majority” here to mean more than 50 percent. (See
§ 15901.02, subds. (s), (t), (v)(3).) Neither Todd nor James alone constitutes a majority
of the general partners sufficient to decide matters relating to the Partnership, including
the selection of counsel and the conduct of the litigation. Thus, neither the partnership
agreement nor the applicable UPLA statutes resolve the issue of whether Roscoe’s
representation of the Partnership is authorized or lawful.
Defendants argue that the trial court’s reliance on section 15904.06, subdivision
(a) was misplaced. They argue that filing an action to “force the sale” of the
Partnership’s “sole property” falls under the “unanimous consent requirement” of section
15904.06, subdivision (b), which provides in relevant part: “[t]he consent of each partner
is necessary to: [¶] . . . [¶] (2) sell, lease, exchange, or otherwise dispose of all, or
substantially all, of the limited partnership’s property, . . . , other than in the usual and
regular course of the limited partnership’s activities.” In our view, Defendants’ reliance
on section 15904.06, subdivision (b) is misplaced. The issue presented by the motion to
disqualify Roscoe is who has the authority to select and direct counsel on behalf of the
Partnership, not who has the authority to sell or otherwise dispose of partnership
property. Defendants have conflated the question of authority to sell the Adjacent
Parcel—which they raised in their demurrers and which is not before us in this appeal—
with the question of authority to select and direct counsel.
In their reply brief, Defendants also raise, for the first, time two arguments based
on the statutory construction of section 15904.06, subdivision (a) and assert that under a
different provision of the ULPA, Todd had the authority to unilaterally retain Roscoe.
First, they argue that the majority rule in section 15904.06, subdivision (a) is qualified by
25
the phrase “[e]xcept as expressly provided in this chapter” and that section 15904.02—a
different statute in the same chapter—which they contend gives “each partner the power
to act as an agent and bind the limited partnership in the ordinary course of business”—
applies here. Second, they argue that by using the word “may” in the phrase “may be
exclusively decided by . . . a majority of the general partners” in section 15904.06,
subdivision (a), the Legislature realized that there may be situations where less than a
majority of general partners should be deciding the activities of the partnership, including
when a partner sues the partnership. They do not cite any legal authority supporting these
points and their description of section 15904.02 is cursory. Since these arguments were
“neither timely nor fully made,” and Defendants have not explained why they were not
raised before, and James has not had an opportunity to respond, we will not address them
further. (Julian v. Harford Underwriters Ins. Co. (2005) 35 Cal.4th 747, 761, fn. 4
[points raised for the first time in a reply brief will not be considered, unless good reason
is shown for failing to present them before]; Tellez v. Rich Voss Trucking, Inc. (2015) 240
Cal.App.4th 1052, 1066 [obvious considerations of fairness demand that the appellant
present all points in the opening brief; withholding a point until the reply deprives the
respondent of an opportunity to answer it].)
G. Ethical Considerations
With no clear resolution from the partnership agreement or partnership law, we
return to the Supreme Court’s discussion of the values and interests at stake in a
disqualification motion. The “paramount concern” in evaluating a motion to disqualify
counsel “must be to preserve public trust in the scrupulous administration of justice and
the integrity of the bar.” (SpeeDee Oil, supra, 20 Cal.4th at p. 1145.) The primary
fiduciary values at stake in conflict of interest cases are the client’s right to
confidentiality and the attorney’s duty of loyalty. (Charlisse C., supra, 45 Cal.4th at
pp. 159-160.) While we have noted this is not a conflict of interest case, in our view
26
James has raised legitimate points regarding Roscoe’s duty of loyalty, not as between
multiple clients, but as to his representation of the Partnership. Since Todd selected
Roscoe, is paying Roscoe, and is directing the litigation, there is the appearance that
Roscoe may advance Todd’s interests over James’s interests, which may not necessarily
be in the best interests of the Partnership. Despite Roscoe’s declaration that he represents
the Partnership, and not Todd, James also raises legitimate concerns that Roscoe will not
act in the Partnership’s best interests by running up unnecessary litigation costs that will
deplete the Partnership’s assets and adversely impact James’s ownership interest in the
Partnership.
As noted in State Bar Opinion 1994-137, an additional concern is whether Roscoe
has stepped outside his role as counsel for the Partnership. An organizational client acts
through its “duly authorized directors, officers, employees, members, shareholders of
other constituents overseeing the particular engagement.” (Rule 1.13(a); see also former
rule 3-600 [organization acts “through its highest authorized officer, employee, body or
constituent”].) “An organizational client can only act through individuals who are
authorized to conduct its affairs” and it “is not within the lawyer’s province to make
decisions on behalf of the organization concerning policies and operations.” (Comment
to Rule 1.13, Standard Codes, p. 11.) Roscoe asserted below that “neither partner should
participate [in] or direct the Partnership defense. . . .” In contravention of the authorities
cited above, by eschewing direction from either partner, Roscoe may have assumed the
client’s role in the attorney-client relationship. The fact that Roscoe took the position
that he could represent the Partnership without direction from either partner is troubling
in light of the relevant law under the ULPA and guidance provided by the State Bar.10
10
We recognize that there is limited legal authority and guidance for counsel
regarding the legal and ethical issues raised in this case. We accept Roscoe’s
representation at oral argument that he investigated the legal and ethical questions raised
by his representation of the Partnership in good faith.
27
We note also that although James has filed a direct action for partition of partnership
property, some of his concerns in the disqualification motion are derivative in nature:
protecting the Partnership’s assets from being squandered on unnecessary litigation and
insuring that partnership counsel acts in the best interests of the Partnership.
We are persuaded that James has demonstrated a risk that Roscoe, who is being
paid by Todd and directed by Todd, may advance Todd’s interests; that his representation
may not be in the best interests of the Partnership, and may unnecessarily deplete the
Partnership’s assets. Additionally, Roscoe has stated that he believes he can act on behalf
of the Partnership without direction from either of the partners in contravention of Rule
1.13. These factors support our conclusion that the trial court did not err as a matter of
law and acted within its discretion when it granted the motion to disqualify Roscoe as
counsel for the Partnership.
H. Additional Values and Interests at Stake on Motion to Disqualify
Having determined that the factors discussed above support the trial court’s
decision to grant the motion to disqualify, we consider whether there are values and
interests that militate against the trial court’s decision to disqualify Roscoe. “A motion to
disqualify a party’s counsel may implicate several important interests. Consequently,
judges must examine these motions carefully to ensure that literalism does not deny the
parties substantial justice. [Citation.] Depending on the circumstances, a disqualification
motion may involve such considerations as a client’s right to chosen counsel, an
attorney’s interest in representing a client, the financial burden on a client to replace
disqualified counsel, and the possibility that tactical abuse underlies the disqualification
motion. [Citations.] Nevertheless, determining whether a conflict of interest requires
disqualification involves more than just the interests of the parties.” (SpeeDee Oil, supra,
20 Cal.4th at pp. 1144-1145.) “Ultimately, disqualification motions involve a conflict
between the clients’ right to counsel of their choice and the need to maintain ethical
standards of professional responsibility. [Citation.] The paramount concern must be to
28
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. [Citations.]” (SpeeDee Oil,
at p. 1145.)
SpeeDee Oil recognized the “client’s right to chosen counsel” as one of “several
important interests” implicated in a motion to disqualify counsel. (SpeeDee Oil, supra,20 Cal.4th at p. 1145.) Defendants argue that under former Rule 3-600, Coldren, and
State Bar Opinion 1999-153 (which the court relied in Coldren), James is not an
appropriate person to consent to Roscoe’s representation of the Partnership. They argue
that under Coldren, James cannot sue the Partnership and then have a say in its defense or
who its lawyer should be. By analogy to Coldren, they argue that if James is not the
appropriate constituent of the Partnership to consent to the joint representation of Todd
and the Partnership, then James is also not an appropriate constituent to consent to
Roscoe representing the Partnership.
James responds that unlike Coldren, who resigned as a director of HKC and
relinquished all authority to make corporate decisions to Hart, he (James) never
relinquished his equal right to manage the Partnership. He asserts that if Coldren had not
resigned, then the directors in that case would have been deadlocked, and Hart would not
have been able to hire counsel unilaterally. He also suggests that Hart would have been
able to seek relief under section 308, which authorizes the court to appoint a provisional
director to break corporate deadlocks. We agree that Coldren is factually distinguishable
on this basis. But Coldren was a conflicts of interest case and therefore did not discuss
whether Hart had the authority to unilaterally consent to joint representation with HKC.
James also asserts that unlike Coldren, who sued HKC for damages, the partition
action he filed seeks a remedy that is in the best interests of the Partnership and the
partners. He argues that the “brothers . . . have been embroiled in ongoing litigation for
the past 16 years. They must disentangle from each other and disposing of these two
29
properties is necessary to achieve that end.” He argues they have an opportunity to
maximize the value of the Two Parcels by selling them together and to convert the
“unproductive” Adjacent Parcel “into more cash” than if it were sold alone. He asserts
that it would be a breach of their fiduciary duties for the general partners not to sell the
properties together. James argues Roscoe is acting “solely at the direction of Todd,” and
“simply pursuing Todd’s agenda[,] which [James] believes to be injurious to the interests
of the Partnership.” We agree that this lawsuit is distinguishable from Coldren on this
basis and that this distinction should be considered in evaluating this appeal. In addition,
the motion to disqualify Roscoe appears to have been filed in best interests of the
Partnership by seeking to avoid assertedly unnecessary and duplicative attorney fees.
In SpeeDee Oil, the Supreme Court also identified the financial burden on the
client to replace disqualified counsel as an important interest implicated by a motion to
disqualify. (SpeeDee Oil, supra, 20 Cal.4th at pp. 1144-1145.) James filed the motion
immediately after the Partnership made its first appearance. Roscoe’s work consists
primarily of filing papers in support of the demurrer and in opposition to the motion to
disqualify him, appearing at the hearing on the demurrer and the motion, and contributing
to the joint briefs filed on appeal by Todd and the Partnership, and appearing at oral
argument. Since Roscoe was disqualified at the earliest stage of the litigation, the cost of
replacing him will be lower than if the motion to disqualify had been made at a later
stage. Todd and the Partnership do not complain of the cost of replacing Roscoe. And
although he is concerned about costs, James does not complain of the cost of replacing
Roscoe. His concern is that not replacing Roscoe will cause the cost of the litigation to
skyrocket. This is based on the fact that Todd retained Roscoe, is paying Roscoe, and
may be directing Roscoe’s handling of the litigation. Based on Todd’s actions in the trust
30
litigation, there may be grounds for such a concern.11 Moreover, based on his counsel’s
comments at oral argument, it appears undisputed that Jarvis Properties will have to
reimburse Todd for any payments he makes to Roscoe (§ 15904.06, subd. (c)), which
potentially depletes the Partnership’s assets and decreases its value to both Todd and
James. In our view, James’s interest, as a general partner, in controlling the Partnership’s
litigation costs is an important interest in the circumstances of this case, analogous to the
financial burden of the client identified in SpeeDee Oil.
We also consider whether tactical abuse underlies the motion and examine
whether the motion was misused to harass opposing counsel, to delay the litigation, or to
intimidate an adversary into accepting settlement on terms that would not otherwise be
acceptable. (SpeeDee Oil, supra, 20 Cal.4th at p. 1145; Gregori, supra, 207 Cal.App.3d
at p. 301.) The record suggests the motion to disqualify was filed to prevent unnecessary
expenditure of the Partnership’s assets on litigation. Nothing here suggests James
intended to delay the litigation. Indeed, he filed the motion at the first available
opportunity. James alleges that after the partners were unable to agree on how to manage
the Two Parcels, he filed the partition action as the most efficient way of getting the Two
Parcels sold together to maximize their value. Nothing here supports the conclusion that
the motion to disqualify was filed for an improper purpose.
Having reviewed the important interests and factors that our Supreme Court
described in SpeeDee Oil, we conclude that the trial court did not err when it granted the
motion to disqualify attorney Roscoe. The most important of these factors are the
11
For example, in a petition filed in the trust litigation, the trustee told the court
that although Todd had originally nominated him as trustee, Todd had become
increasingly hostile toward the trustee, which dramatically increased the costs of trust
administration. In his August 2015 petition to terminate the trust and distribute the trust
proceeds, the trustee asked the court to allocate over $1 million of the cost of trust
administration to Todd and alleged Todd’s deliberate bad faith attempts to interfere with
trust administration had caused fees and costs to skyrocket.
31
“ethical considerations that affect the fundamental principles of our judicial process.”
(SpeeDee Oil, supra, 20 Cal.4th at p. 1145.) The trial court’s order reflects an
appropriate sensitivity to the ethical challenges posed by Roscoe’s representation of the
Partnership, and its issuance was well within the court’s discretion.
I. Alternatives to Representation
We next address the question of alternatives to representation by Roscoe.
Defendants argue that the alternatives to having Roscoe represent the Partnership that
James suggested are improper, prejudicial, and inconsistent with the court’s order on the
demurrer in Case No. 1295. Those alternatives included stipulating to an appearance by
the Partnership and allowing the brothers to litigate the matter, or appointing a tie-
breaking provisional partner, neutral counsel, or a receiver. The court’s order does not
say which, if any, of these alternatives it selected.
The Corporations Code provides a mechanism for breaking corporate deadlocks.
When a corporation “has an even number of directors who are equally divided and
cannot agree” on the management of corporate affairs so that the corporation’s “business
can no longer be conducted to advantage” or there is “a danger that its property or
business will be impaired or lost,” section 308, subdivision (a), authorizes a court to
appoint a “provisional director” to break the deadlock, regardless of the terms of the
articles or the bylaws and whether or not an action for involuntary winding up or
dissolution of the corporation is pending. An action for such appointment may be
brought by any director or by the holders of not less than one third of the voting power in
the corporation. (§ 308, subd. (a).) The provisional director “acts as a ‘tiebreaker’ when
a deadlock exists . . . .” (In re ANNRHON, Inc. (1993) 17 Cal.App.4th 742, 751.)
There are no comparable provisions in the ULPA that authorize a court to appoint
a provisional general partner in the case of a deadlocked limited partnership. But
section 15901.07, subdivision (a), which is part of the ULPA, says that “[u]nless
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displaced by particular provisions of [the ULPA], the principles of law and equity
supplement [the ULPA].” The parties have not briefed the question whether the court
had the authority in equity to appoint a provisional partner to break deadlocks pending
resolution of the litigation.
James argues: “Todd is already a party to the action, and can voice his opposition
in as full-throated a manner as he so chooses. As discussed below, the Partnership can
also be represented should the trial court require it. However, that attorney cannot be
hired and directed by either Jim or Todd alone as neither has the requisite power to do so.
Before counsel could be hired, there would need to be a break in the deadlock on an
entity level. The trial court, acting in equity, is in the best position to determine how that
can best be achieved.”
Based on their briefing below, we conclude there is substantial evidence that the
brothers, who represent opposing views on the propriety of the partition action, can
adequately articulate their positions and guide the trial court in determining what is in the
best interests of this two-person partnership. There are no other general partners or
limited partners whose interests might conflict with the brothers’ interests in the
Partnership. James’s counsel stated at oral argument that James had no intention of
taking the Partnership’s default. And as we have noted, by filing a demurrer, the
Partnership has prevented its default from being taken.
In the unique circumstances of this case, we conclude the trial court did not err as
a matter of law, and therefore did not abuse its discretion when it granted the motion to
disqualify attorney Roscoe. Since this is an equitable action for partition, and given the
court’s inherent power to “control in furtherance of justice, the conduct of its ministerial
officers, and of all other persons in any manner connected with a judicial proceeding
before it” (Code Civ. Proc., § 128, subd. (a)(5)), we leave it to the trial court to fashion
the appropriate remedy. The trial court may decide that the brothers can adequately
articulate the issues presented in this partition action and that the Partnership therefore
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does not require separate counsel. However, the court may wish to explore options for
resolving deadlock at the entity level and consider the appointment of a receiver, neutral
counsel, or other neutral to protect the interests of the partners and the Partnership.
Again, that is for the trial court to decide in the exercise of its inherent and equitable
powers.
III. DISPOSITION
The trial court’s order on the motion to disqualify attorney Roscoe is affirmed.
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_______________________________
Greenwood, P.J.
WE CONCUR:
_____________________________________
Elia, J.
______________________________________
Danner, J.
Jarvis et al. v. Jarvis et al.
No. H044930
Trial Court: Monterey County Superior Court
Superior Court No.: 16CV002928
Trial Judges: The Honorable Susan J. Matcham
Attorneys for Plaintiff and Respondent, Fenton & Keller, PC
JAMES ALVIN JARVIS, Individually and John E. Kesecker
as Trustee, etc.: Angus J. Cannon
Dennis G. McCarthy
Attorneys for Defendant and Appellant, Parker Law Group
TODD HENRY JARVIS: Port J. Parker
Jeffrey S. Einsohn
Attorney for Defendant and Appellant, William P. Roscoe, III
JARVIS PROPERTIES, L.P.:
Jarvis et al. v. Jarvis et al.
H044930