Opinion
NOT TO BE PUBLISHED
Solano County Super. Ct. No. FCS 024698
Retired Associate Justice of the Court of Appeal, First Appellate District, Division Five, assigned by the Chief Justice pursuant to art. VI, § 6 of the California Constitution.
A law firm filed a complaint on behalf of an insured alleging bad faith handling of an insurance claim. The insurer moved to disqualify the firm based on its current and prior representation of affiliated insurance companies. The court found the firm had a disqualifying conflict of interest, but denied the motion based on delay and prejudice to the plaintiff.
Background
On August 31, 2004, the law firm Michel & Fackler filed a complaint on behalf of Linda Demery against Hartford Underwriters Insurance Company (Hartford Underwriters). Demery alleged that Hartford Underwriters failed to conduct an adequate investigation and promptly pay her losses following a fire in her home. The complaint asserted causes of action for breach of a homeowners’ insurance contract, breach of the covenant of good faith and fair dealing, and race discrimination.
Trial was scheduled for April 10, 2006. On April 7, a mandatory settlement conference took place, which Dorothy Pawloski attended as the authorized representative of Hartford Underwriters. She had not been involved in the Demery litigation until that time. According to Andrew Pinkowski, a Hartford-affiliated attorney who supervised the Demery litigation, Pawloski recognized Demery’s counsel at the settlement conference as someone who had been retained by Hartford Fire Insurance Company in another matter. Hartford Underwriters immediately commenced an investigation into Michel & Fackler’s prior representations of Hartford-affiliated companies.
During the week of April 10, 2006, Hartford Underwriters informed the trial court that it was investigating possible grounds for the disqualification of Demery’s attorney and that it would likely move to disqualify the firm. The court postponed jury selection. Hartford Underwriters filed its disqualification motion on April 17, citing Michel & Fackler’s simultaneous and prior representations of affiliated Hartford entities. The court ruled that Michel & Fackler had a disqualifying conflict of interest based on its representations of corporations affiliated with Hartford Underwriters. Nevertheless, it denied the motion because of Hartford Underwriters’ delay in raising the issue, which resulted in prejudice to Demery.
On April 27, 2006, Hartford Underwriters filed a petition for writ of mandate seeking reversal of the court’s order. This court denied the petition because an order denying a disqualification motion is an appealable order. Hartford Underwriters then appealed the order and asked the trial court to stay the trial pending resolution of the appeal. A stay was issued on May 22.
Discussion
Hartford Underwriters maintains the court erred in denying its motion to disqualify based on delay and prejudice to Demery. In contrast, Demery argues that, even if the trial court erred in its delay ruling, the order should be affirmed because her attorney had no disqualifying conflict of interest. The parties disagree on the legal standards for evaluating conflicts of interest in the context of simultaneous or successive representations of corporate affiliates.
We first set forth the general legal standards governing disqualifying conflicts of interest. We then consider a split in the case law regarding when disqualification is required based on simultaneous or successive representation of corporate affiliates. We then set forth the standard of appellate review and consider the evidence Hartford Underwriters presented in support of its disqualification motion. Finally, we determine whether that evidence establishes a disqualifying conflict of interest, first based on simultaneous representation and second based on successive representation. Because we conclude there is no disqualifying conflict of interest, we do not address the trial court’s ruling on delay and prejudice to the respondent. We affirm the trial court order.
I. General Principles of Disqualifying Conflicts of Interest
Motions to disqualify present competing policy considerations. (Gregori v. Bank of America (1989) 207 Cal.App.3d 291, 300.) “On the one hand, a court must not hesitate to disqualify an attorney when it is satisfactorily established that he or she wrongfully acquired an unfair advantage that undermines the integrity of the judicial process and will have a continuing effect on the proceedings before the court. [Citations.] On the other hand, it must be kept in mind that disqualification usually imposes a substantial hardship on the disqualified attorney’s innocent client, who must bear the monetary and other costs of finding a replacement. . . . [¶] Additionally, . . . it is widely understood by judges that ‘attorneys now commonly use disqualification motions for purely strategic purposes . . . .’ [Citations.]” (Id. at pp. 300-301, fns. omitted.)
“The primary value at stake in cases of simultaneous or dual representation is the attorney’s duty—and the client’s legitimate expectation—of loyalty, rather than confidentiality.” (Flatt v. Superior Court (1994) 9 Cal.4th 275, 284 (Flatt), first italics added.) Accordingly, the test for disqualification due to simultaneous representation is stringent. (Ibid.) “Even though the simultaneous representations may have nothing in common, and there is no risk that confidences to which counsel is a party in the one case have any relation to the other matter, disqualification may nevertheless be required. Indeed, in all but a few instances, the rule of disqualification in simultaneous representation cases is a per se or ‘automatic’ one. [Citations.]” (Id. at pp. 284-285.)
“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, . . . the governing test requires that the client demonstrate a ‘substantial relationship’ between the subjects of the antecedent and current representations. [¶] . . . Where the requisite substantial relationship . . . can be demonstrated, access to confidential information by the attorney in the course of the first representation . . . is presumed and disqualification of the attorney’s representation of the second client is mandatory . . . . [Citations.]” (Flatt, supra, 9 Cal.4th at p. 283.) This conclusive presumption applies where the attorney’s relationship with the former client was direct and personal; if the relationship was attenuated, the nature of the relationship between the attorney and former client must be weighed equally with the nature of the relationship between the subject matters of the representation to determine whether a disqualifying conflict exists. (Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698, 709-710 (Jessen).)
II. Disqualifying Conflicts of Interest in the Corporate Affiliate Context
Where the potential conflict of interest arises from a representation that is adverse not to a current or former client, but to a corporate affiliate of a current or former client, courts must determine whether the relationship between the affiliates is such that it gives rise to a disqualifying conflict. The prevailing view is that the mere fact of corporate affiliation does not create such a conflict. Rather, each case must be decided on its facts.
Both the California State Bar and the American Bar Association have issued formal ethics opinions concluding that a lawyer who represents a corporate client is not by that fact alone barred from a representation that is adverse to a corporate affiliate of that client in an unrelated matter. (ABA/BNA Lawyers Manual on Professional Conduct, Formal Ethics Opn. 95-390 (Jan. 25, 1995) p. 1001:258 (ABA Formal Ethics Opn. 95-390); State Bar Com. on Prof. Responsibility, Formal Opn. No. 1989-113 (1989) (Opn. No. 1989-113) [limiting discussion to potential representation adverse to the parent of a current corporate client, a wholly owned subsidiary; applying Rules Prof. Conduct, rules 3-310(B), 3-600(D)].) However, both opinions recognize that a disqualifying conflict might arise in particular circumstances. While the ABA opinion describes the exceptions in broad terms, the California opinion identifies two specific exceptions. As relevant here, “[w]hen a corporation is the alter ego of another entity or has a sufficient unity of interests, they should be treated as the same entity for conflict purposes.” (Opn. No. 1989-113.)
“[A] lawyer may not accept such a representation without consent of the corporate client if the circumstances are such that the affiliate should also be considered a client of the lawyer; or if there is an understanding between the lawyer and the corporate client that the lawyer will avoid representations adverse to the client’s corporate affiliates; or if the lawyer’s obligations to either the corporate client or the new, adverse client, will materially limit the lawyer’s representation of the other client.” (ABA Formal Ethics Opn. 95-390 p. 1001:258, italics omitted.)
The second exception is: “if the attorney has obtained confidential information directly from the nonclient subsidiary under circumstances where the subsidiary could reasonably expect that the attorney had a duty to keep such information confidential, the attorney might be precluded from acting adversely to the subsidiary in matters related to the subject on which the attorney had obtained such confidential information.” (Opn. No. 1989-113.)
In 1997, the Fourth District adopted the reasoning of the California State Bar ethical opinion and narrowly construed its alter ego/unity of interest exception. (Brooklyn Navy Yard Cogeneration Partners v. Superior Court (1997) 60 Cal.App.4th 248 (Brooklyn Navy Yard).) “[W]e write to disabuse the respondent court of the notion a general ‘unity of interests’ between corporate entities is enough to transform a nonclient into a client. . . . [We] hold that only in those limited circumstances where one corporation is the alter ego of the other should parent and subsidiary corporations be treated as the same entity for conflict purposes.” (Id. at p. 253.) Demery claims this opinion sets forth the governing legal standard.
In 1999, another division of this district disagreed with Brooklyn Navy Yard. (Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999) 69 Cal.App.4th 223 (Morrison Knudsen).) The court noted that the ABA ethics opinion, which Brooklyn Navy Yard repeatedly cited with apparent approval, specifically held that it was “ ‘not necessary . . . for one corporation to be the alter ego of the other as a matter of law in order for both to be considered clients.’ [Citation.]” (Morrison Knudsen, at p. 244, italics added.) The Brooklyn Navy Yard court adopted the alter ego test as the sole standard in part because it believed a unity of interests test was too vague. (Brooklyn Navy Yard, supra, 60 Cal.App.4th at p. 258; Morrison Knudsen, at p. 249.) Morrison Knudsen disagrees with that rationale. “[W]hile we can empathize with the court’s desire for clarity in this difficult area, we have a number of problems with its proposed solution. The alter ego test is something less than the bright-line standard the court envisioned. It was not developed to deal with conflict issues and in our view it does not work very well in conflicts cases. It involves many considerations which are irrelevant in conflicts cases, and omits others which may be highly relevant.” (Morrison Knudsen at p. 249.) “Something different, and in general something less, than an alter ego finding may justify the treatment of corporate affiliates as one entity for conflict purposes.” (Id. at p. 252.) “[T]he principal focus should be on the practical consequences of the attorney’s relationship with the corporate family.” (Id. at p. 253.)
Similarly, the California State Bar opinion states that an exception applies when “a corporation is the alter ego of another entity or has a sufficient unity of interests.” (Opn. No. 1989-113, italics added.) It further states, “In determining whether there is a sufficient unity of interests to require an attorney to disregard separate corporate entities for conflict purposes, the attorney should evaluate the separateness of the entities involved, whether corporate formalities are observed, the extent to which each entity has distinct and independent managements and board of directors, and whether, for legal purposes, one entity could be considered the alter ego of the other.” (Opn. No. 1989-113, italics added.)
Demery unpersuasively argues that Morrison Knudsen expresses no disagreement with the holding of Brooklyn Navy Yard. In a preliminary comment, Morrison Knudsen states that it does not disagree with the result of Brooklyn Navy Yard on its facts. (Morrison Knudsen, supra, 69 Cal.App.4th at p. 249.) Agreement with the result does not negate the court’s express rejection of the decision’s holding.
Morrison Knudsen specifically cites the factors identified in the ABA ethical opinion as “helpful considerations” in determining whether a corporate affiliate should be considered a client. (Morrison Knudsen, supra, 69 Cal.App.4th at p. 252.) The ABA Formal Ethics Opinion states that “whole ownership may well entail not merely a shared legal department but a management so intertwined that all members of the corporate family effectively operate as a single entity; and in those circumstances, representing one member of the family may effectively mean representing all the others as well.” (ABA Formal Ethics Opn. 95-390 p. 1001:265.) The existence of an attorney-client relationship also turns on the nature of the lawyer’s dealings with the affiliate and on what information may have been disclosed to the lawyer, under what circumstances, and with what expectations. (Morrison Knudsen at p. 245.) Hartford Underwriters argues Morrison Knudsen sets forth the governing legal standard.
We are aware of one other California opinion that addresses conflicts of interest arising from representation of related companies, Faughn v. Perez (2006) 145 Cal.App.4th 592 (Faughn). That opinion does not enter into the aforementioned debate about whether to apply an alter ego or more pragmatic unity of interest test to corporate affiliates for purposes of evaluating conflicts of interest. However, the analysis in the opinion is consistent with Morrison Knudsen’s pragmatic, totality of the circumstances approach. Faughn carefully reviews the record produced in support of the disqualification motion to determine if, in a successive representation context, the moving party established circumstances supporting an inference that the attorney received confidential information in his prior representation that would be material to the allegedly adverse current representation. (Faughn at pp. 605-610.) The court does not apply alter ego legal standards.
As far as we can tell, no other California appellate court has addressed this issue. Several federal district courts, however, have ruled on disqualification motions in the corporate affiliate context while applying California law. (Michail v. Fluor Mining & Metals, Inc. (1986) 180 Cal.App.3d 284, 286 [federal court decisions applying California law have persuasive value]; Lam v. Ngo (2001) 91 Cal.App.4th 832, 841, fn. 5 [unpublished federal district court decisions may be cited and will be given weight the court deems they deserve].) None of these cases applies the strict alter ego test adopted by Brooklyn Navy Yard to determine whether corporate affiliates are clients for purposes of deciding a disqualification motion. (See Huston v. Imperial Credit Commercial Mortg. Inv. (C.D. Cal. 2001) 179 F.Supp.2d 1157, 1175.) Rather, they turn on the particular circumstances of the challenged attorney’s representation of the corporate client and relations with the affiliated companies. Teradyne, Inc. v. Hewlett-Packard Co. cites the parent company’s control and supervision of the subsidiary’s legal affairs and its direct role in retaining and supervising the work of the challenged law firm. (Teradyne, Inc. v. Hewlett-Packard Co. (N.D. Cal. 1991) 20 U.S.P.Q.2d 1143, ____ [< 1991 U.S. Dist. LEXIS 8363 at p. *12; see also id. at pp. *18-*19>] (Teradyne).) Baxter Diagnostics, Inc. v. AVL Scientific Corp. notes that the challenged attorneys had provided legal advice to a corporate predecessor of the opposing party on the very subject matter of the current litigation. (Baxter Diagnostics, Inc. v. AVL Scientific Corp. (C.D. Cal. 1992) 798 F.Supp. 612, 615-616 (Baxter Diagnostics).) Decaview Distribution Co., Inc. v. Decaview Asia Corp. cites the challenged attorneys’ possession of confidential financial information jointly owned by the parent and subsidiary. (Decaview Distribution Co., Inc. v. Decaview Asia Corp. (N.D. Cal. 2000) 2000 U.S. Dist. LEXIS 16534 [report and recommendation by magistrate judge] (Decaview).) Certain Underwriters at Lloyd’s London v. Argonaut points to the unusually significant financial impact that current litigation would have on the parent company, as well as the unified management, legal affairs and claims handling of the affiliated companies. (Certain Underwriters at Lloyd’s London v. Argonaut (N.D. Cal. 2003) 264 F.Supp.2d 914, 922-924 (Certain Underwriters).) In denying a motion for disqualification, O’Neill v. Globespan, Inc. cites the fact that the challenged attorneys had only limited, if any, exposure to the parent’s confidential information or litigation policies and strategies during their prior representation of a subsidiary and that the prior representation was not factually related to the current litigation. (O’Neill v. Globespan, Inc. (C.D. Cal. 2001) 2001 U.S. Dist. LEXIS 23113, *13-*17, *19-*23.)
Demery contends that Certain Underwriters is inconsistent with Morrison Knudsen. But Certain Underwriters distinguished Morrison Knudsen because the court there applied successive representation legal standards, whereas the issue in Certain Underwriters was simultaneous representation. (Certain Underwriters, supra, 264 F.Supp.2d at p. 922; Morrison Knudsen, supra, 69 Cal.App.4th at pp. 233-234.) Certain Underwriters did not disapprove of the legal analysis in Morrison Knudsen and did not apply a legal standard inconsistent with Morrison Knudsen. (Certain Underwriters, at pp. 920-923.)
In sum, the prevailing legal test for conflicts of interests in the corporate affiliate context is a totality of the circumstances test. As summarized in Ramada Franchise v. Hotel of Gainesville, the theme running through the cases that address this issue is that a court should take a “pragmatic approach” and “sift the facts and circumstances involved” in each case. (Ramada Franchise v. Hotel of Gainesville (N.D.Ga. 1997) 988 F.Supp. 1460, 1464 (Ramada), citing Teradyne and Baxter Diagnostics as well as cases that do not apply California law.) In successive representation cases, where the focus is on the duty to maintain client confidences, the court must assess whether the relationship with the client corporation may give the attorney “a significant practical advantage” in the case against the affiliate. (Morrison Knudsen, supra, 69 Cal.App.4th at p. 253; see Certain Underwriters, supra, 264 F.Supp.2d at p. 922.) In the context of simultaneous representation, the question is whether the adverse representation against the affiliate reasonably diminishes the “ ‘level of confidence and trust in counsel’ ” held by the corporate client. (Certain Underwriters at p. 922.)
We apply this practical totality-of-the-circumstances approach to the disqualification issue before us and join Morrison Knudsen in rejecting the strict alter ego test endorsed by Brooklyn Navy Yard.
III. Standard of Appellate Review
“Generally, a trial court’s decision on a disqualification motion is reviewed for abuse of discretion. [Citations.] If the trial court resolved factual issues, the reviewing court should not substitute its judgment for the trial court’s express or implied findings supported by substantial evidence. [Citations.] When substantial evidence supports the trial court’s factual findings, the appellate court reviews the conclusions based on those findings for abuse of discretion. [Citation.] However, the trial court’s discretion is limited by applicable legal principles. [Citation.] Thus, where there are no material disputed factual issues, the appellate court reviews the trial court’s determination as a question of law. [Citation.] In any event, a disqualification motion involves concerns that justify careful review of the trial court’s exercise of discretion.” (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143-1144 (SpeeDee).) The parties do not dispute the standard of review.
We conclude that many of the trial court’s findings are not supported by substantial evidence in the record. Consequently, we directly examine the record to determine the relevant facts. As there are no factual disputes in the parties’ declarations, we decide de novo whether application of the law to the facts in the record requires disqualification of Demery’s counsel.
IV. Evidence Submitted on Hartford Underwriters’ Disqualification Motion
A. The Hartford Entities’ Corporate Structure
The Hartford Financial Services Group (HFSG) is a holding company with no significant business operations of its own. HFSG receives dividends from its insurance companies and other subsidiaries as its principal source of cash flow. Harford Fire Insurance Company (Hartford Fire) and Pacific Insurance Company, Ltd. (Pacific) are wholly owned subsidiaries of HFSG. Hartford Underwriters and First State Management Group, Inc. (First State) are wholly owned subsidiaries of Hartford Fire. “The Hartford” is a brand name registered to Hartford Fire and the Hartford stag logo is one of the most recognized symbols in the financial services industry.
The members of the Boards of Directors of Hartford Underwriters and Pacific are identical, while Hartford Fire has all of the same board members as Hartford Underwriters and Pacific, with one additional member. Hartford Fire, Hartford Underwriters, First State and Pacific have the same corporate secretary and treasurer. Hartford Fire files consolidated annual financial statements that include the financial results of Hartford Fire, Hartford Underwriters, First State, and Pacific. Hartford Fire, Hartford Underwriters, and Pacific participate in an asset pooling arrangement that is managed by Hartford Investment Management Services, Inc.
Other Hartford-related insurance companies are mentioned in the record—including Twin City Fire Insurance Company (Twin City) and The Hartford Casualty Insurance Company (Hartford Casualty)—but their corporate relationships to the Hartford entities identified above is not explained.
There are more than 27,000 employees of the various subsidiaries of HFSG. “With the exception of a single foreign subsidiary, the individual employees of all of the HFSG subsidiaries, including Pacific, First State and Hartford Underwriters, are each employed by and paid by Hartford Fire.” The Hartford Fire human resources department oversees all personnel matters affecting the employees.
Michael Michel and Jeff Fackler of Michel & Fackler averred that they had no knowledge of the employment practices of Hartford Fire, Hartford Underwriters, or other Hartford entities, the membership of their boards of directors, the identity of their corporate officers, the consolidation of their financial statements, or the pooling of their assets.
B. Centralized Legal Department and Claims Handling
HFSG has a corporate law department that oversees litigation management and strategy for Hartford entities nationwide, including Hartford Fire, Hartford Underwriters, First State, and Pacific, which do not have separate dedicated in-house counsel. Michel averred that he knew nothing about the existence of the corporate law department or its operations despite his prior representation of Hartford entities.
Two attorneys from the HFSG corporate law department, Andrew Pinkowski and Kevin Majewski, had oversight responsibility for the Demery litigation. Pinkowski also had litigation management responsibility for cases involving Hartford Fire, Hartford Underwriters, First State, and Pacific. Majewski was the sole “property claim consultant” overseeing the management and strategy of property claims in litigation for Hartford entities nationwide. Neither Pinkowski nor Majewski ever worked with Michel & Fackler in any capacity.
Hartford entities appear to operate a number of claims processing centers, including the Western Personal Lines Claim Service Center (WPLCSC), the Indianapolis Personal Lines Claim Service Center, the Western Property Claim Center, and the Sacramento AOL Claim Center (or the AOL Commercial Claim Center in Sacramento). With minor exceptions mentioned below, the record does not disclose how these centers were formed, how they are staffed or supervised, or which Hartford entities they serve. At the hearing on the motion to disqualify, Hartford Underwriters’ counsel acknowledged she did not know how the claim centers fit into the Hartford corporate structure.
A Hartford Underwriters representative testified at a deposition that the WPLCSC was created in 1997 to consolidate the handling of personal lines claims within the Western states in a central Phoenix, Arizona office. Between 2001 and 2003, all California homeowner claims were assigned to the WPLCSC Phoenix office. Richard Blum, a Hartford Fire Claims Supervisor in the Auto Bodily Injury Department, averred that he worked out of “the Hartford Phoenix office” and supervised Bill Campbell, a claims handler who worked for WPLCSC. At least two of the matters handled by Campbell arose out of homeowner policies.
The record includes a letter from a Pacific claim specialist to Michel & Fackler regarding a Pacific claim that was being handled by First State. The letter is written on stationery for the AOL Commercial Claim Center in Sacramento.
Some Hartford entities shared facilities. As just noted, a Hartford Fire Claims Supervisor in the Auto Bodily Injury Department used the same Phoenix office as at least one claims handler for the WPLCSC. Michael Carlson, Regional Vice President of Claims Fields Operations for Hartford Fire, averred that “[o]ur facility houses four First State construction defect handlers over whom we have managerial oversight.” He executed his declaration in Sacramento.
C. Overview of Michel & Fackler’s Representation of Hartford Entities
As of April 2006, Michel & Fackler (or its predecessor, Michel Hartman & Fackler) had represented or was representing Hartford entities in 97 matters that generated more than $1.3 million in billings for the small firm in 10 years: 27 for First State, 39 for WPLCSC, 3 for the Indianapolis Personal Lines Claim Service Center, 5 for Western Property Claim Center, and 23 for Sacramento AOL Claim Center. It is undisputed that Michel & Fackler has never represented Hartford Underwriters. Michel & Fackler never disclosed to these entities that it was representing a client who was suing Hartford Underwriters, nor did it request waivers of any conflicts of interests.
Hartford Underwriters states in its opening brief that Michel & Fackler is a three-attorney law firm. Demery does not dispute this assertion. Letterhead stationery used in 2002 by Michel & Fackler’s predecessor, Michel, Hartman & Fackler, listed three attorneys and two of counsel.
Michel avers that most of the 97 matters were third party liability claims in which the firm represented the insured or the entity sued. Fackler similarly avers that the matters had nothing to do with first party property insurance but involved liability insurance claims that were made against individuals. Jonathan Heck of Michel & Fackler avers that all of his work with Michel & Fackler involved construction defect defense.
D. WPLCSC Matters
Michel & Fackler handled 39 personal lines coverage matters routed to WPLCSC. In 1999 and 2002, the firm provided Campbell, a WPLCSC claims handler, at least two coverage opinion letters on homeowner policies that applied California law. The subject matter of the other WPLCSC matters is not identified in the record. Demery’s claim was also handled by the WPLCSC.
Hartford Underwriters repeatedly states in its briefs that Michel & Fackler handled 42 cases for the WPLCSC. It appears to be combining the 39 matters handled for WPLCSC with the three handled for the Indianapolis Personal Lines Claim Service Center, possibly because both centers handle “personal lines” claims.
On appeal, Hartford Underwriters submits Demery’s proposed trial exhibits as evidence to support this and other factual representations. It states that the exhibits were lodged in the trial court at the time the court ruled on the disqualification motion. Demery argues the trial exhibits were not considered by the trial court with respect to the disqualification motion and thus should not be considered on appeal. We assume for purposes of argument the evidence is properly before us. As explained below, this and other evidence cited by Hartford Underwriters is insufficient to establish a disqualifying conflict of interest.
E. Other Claim Center Matters
The three Indianapolis Personal Lines Claim Service Center matters are not identified by subject matter anywhere in the record.
Michael Carlson, Hartford Fire Regional Vice President for Claims Fields Operations, who executed his declaration in Sacramento, avers that Michel & Fackler handled the following claims “for us”: 5 property claims routed to Western Property Claim Center, and 13 general liability and 8 auto liability claims routed to Sacramento AOL Claim Center. The subject matter of the other two Sacramento AOL Claim Center matters handled by Michel & Fackler is not identified in the record.
One of the property claim matters handled by the Western Property Claim Center was the Rye case, which is discussed further below. Dorothy Pawloski, a national general adjuster employed by “The Hartford” who was assigned to handle settlement in the Rye matter, also attended the settlement conference in Demery’s case as the authorized representative of Hartford Underwriters.
F. First State/Pacific Matters
Thomas P. Jordan, Vice President and Claim Manager for First State, avers that First State is the underwriting manager for Pacific and is responsible for handling claims made on policies it has underwritten. Since at least 1995, Michel & Fackler was on the list of panel counsel approved to represent First State and Pacific. The subject matter of most of the 27 First State matters handled by Michel & Fackler is not identified in the record. At the hearing on the motion to disqualify, Hartford Underwriters’ counsel said some of these cases were construction defect cases and the subject matter of the others was unknown.
At the time Michel & Fackler filed the Demery complaint, it was actively representing First State and Pacific in seven cases involving nine claims: JG Torres Concrete Construction, Kel-Aire, Gateway v. Danco (encompassing three claims), Acosta v. Greenbriar, Brea/Action Drywall, AI Lumber v. Harris, and 900 Green St. v. ZCON Builders. ZCON involved a general liability insurance policy issued by Pacific. Jordan retained Michel & Fackler as monitoring and coverage counsel for the underlying ZCON lawsuit, and after the lawsuit settled directed the firm to file an action for contribution. In the Gateway matter, Michel & Fackler defended Danco Waterproofing Company in a construction defect lawsuit, pursuant to a liability policy issued by Pacific. Matthew J. Scott, Vice President in the Complex Claims Group of Hartford Fire, supervised the Gateway matter. He avers that settlement details were still being worked out in the case as of April 2006 and Michel & Fackler “have been communicating about the settlement negotiations” with an employee in his department. The subject matter of the other 5 First State matters that were pending in August 2004 and the other 18 matters Michel & Fackler previously handled for First State is not identified in the record.
G. Michel & Fackler’s Awareness of Connections Among Hartford Entities
In its opening brief, Hartford Underwriters represents that all of the Hartford representatives that hired and worked with Michel & Fackler used e-mail addresses with the domain name “@thehartford.com” and used stationery bearing the “The Hartford” brand name and stag logo. As evidentiary support, Hartford Underwriters cites an e-mail to a WPLCSC claims handler showing an e-mail address with the domain name “@thehartford.com”; correspondence on the Demery case from WPLCSC claims representatives written on “The Hartford” letterhead with the stag logo; and a 2005 letter to Michel & Fackler from a Pacific claim specialist written on “The Hartford” letterhead with the stag logo, which includes the claim specialist’s e-mail address with the domain name “@thehartford.com.”
Likewise, all of the payments Demery received from Hartford Underwriters under her claim were on checks bearing the “The Hartford” brand name and stag logo.
Hartford Underwriters further represents that Michel & Fackler referred to all of its Hartford clients as “the Hartford” regardless of the name of the particular company involved. It cites the following evidence. A 2002 letter by Fackler is addressed to “Mr. Bill Campbell, The Hartford, WPLCSC” and refers to the insurer (Twin City) as “Hartford.” A coverage denial letter in the same matter refers to the insurer as “Twin City Fire Insurance Company (The Hartford)” and thereafter simply as “The Hartford.” During the deposition in the Demery case, a Michel & Fackler attorney referred to “the Hartford Phoenix operation.” However, a 2006 letter by Fackler about the ZCON case that was produced by Hartford Underwriters is addressed to “Thomas P. Jordan, Vice President, First State Management Group, Inc.”
V. The Trial Court’s Findings
The trial court ruled “under the unity of interests analysis that M&F [Michel & Fackler] has a conflict of interest in the representation of First State and Pacific at the same time it was/is counsel for Linda Demery in the instant matter. [¶] The Court finds significant the following:
1. Common management of claims, claims practices and processing among Hartford Fire, Hartford Underwriters, Pacific and First State.
2. Use of the same facility by the various Hartford Fire subsidiaries and Pacific (i.e., ‘WPLCSC’).
3. HFSG Corporate legal department services Hartford Fire, Hartford Underwriters, Pacific and First State.
4. Shared business practices in the use of the Hartford logo, the Hartford name and common e-mail addresses.
5. The understanding by M&F of the common interest between the Hartford and a related Hartford entity (i.e., Twin City Fire Insurance Company); also, the understanding of M&F that a Pacific Insurance matter handled by them was through the Hartford at the WPLCSC.”
Hartford Underwriters argues these findings are supported by substantial evidence in the record. At the same time, it asserts the material underlying facts are undisputed. We conclude the trial court’s findings are unsupported or only weakly supported by the record. The undisputed facts in the record do not establish that Michel & Fackler had a disqualifying conflict of interest.
There is no substantial evidence of “[u]se of the same facility by the various Hartford Fire subsidiaries and Pacific (i.e., ‘WPLCSC’).” The only evidence of shared use of physical facilities is (1) that Blum, Hartford Fire Claims Supervisor in the Auto Bodily Injury Department, “work[s] out of the Hartford Phoenix office” (emphasis added), which supports an inference that the Hartford entities have only one Phoenix office, where both Blum and WPLCSC staff worked; (2) that Blum supervised a WPLCSC claims handler, which supports the same inference; and (3) that Carlson, Hartford Fire Regional Vice President of Claims Fields Operations, used a Sacramento facility that also housed four First State construction defect handlers over whom his department had managerial oversight. This evidence supports a connection between Hartford Fire and the WPLCSC, and between Hartford Fire and First State (which in turn is related to Pacific), but not between Pacific and the WPLCSC (or First State and the WPLCSC). The record contains no evidence that the WPLCSC handled claims under Pacific insurance policies and some evidence in the record suggests it did not. The only WPLCSC matters identified by subject matter in the record are homeowner claims. The only First State or Pacific matters identified by subject matter are liability claims by construction companies. The name of WPLCSC (Western Personal Lines Claim Service Center) itself suggests that the center would not handle construction defect cases.
Nor is there any substantial evidence that Michel & Fackler had an “understanding . . . that a Pacific Insurance matter handled by them was through the Hartford at the WPLCSC.” The record includes a letter from Michel & Fackler to the WPLCSC regarding a claim that arose under a Twin City policy, which refers to Twin City as “The Hartford.” The record also includes a letter from Pacific to Michel & Fackler regarding a claim that arose under a Pacific policy, which is written on The Hartford stationery. That letter bears the address of the AOL Commercial Claim Center in Sacramento, not the WPLCSC. Neither of these letters links Pacific to the WPLCSC, which handled the Demery claim.
The court cites Michel & Fackler’s “understanding . . . of the common interest between the Hartford and a related Hartford entity (i.e., Twin City Fire Insurance Company).” However, it is unclear what the court means by “the Hartford” in this phrase. “The Hartford” is a brand name, not a corporation. The court presumably is referring to Michel & Fackler’s use of “the Hartford” as shorthand for Twin City in letters to an insured and to a WPLCSC claim handler. This evidence supports an inference that Michel & Fackler was aware that both Twin City and the WPLCSC were affiliated with Hartford insurance companies. The letter also refers to a proposed settlement agreement that would release both Twin City and “The Hartford.” The settlement agreement is not in the record, so the precise identity of the second released party cannot be determined. At best, the Twin City letters constitute weak evidence of a common interest among all Hartford entities and provides no foundation to define that common interest.
The court cites “[c]ommon management of claims, claims practices and processing” among Hartford Fire, Hartford Underwriters, First State, and Pacific. The only evidence of common claims practices and management is the existence of Hartford-affiliated claim service centers. The names of those service centers suggest that they are divided by region and by the subject matter of the claims they handle. Moreover, the titles of some of Hartford Underwriters’ declarants (Scott, Vice President in the Complex Claims Group of Hartford Fire; Blum, Claims Supervisor in the Auto Bodily Injury Department of Hartford Fire) suggest that claims handling in the Hartford universe is organized by subject matter. As noted above, as far as the evidence reveals, First State and Pacific matters involved construction defect defense and the WPLCSC that handled Demery’s claim services homeowner or other “personal lines” claims. There is no evidence that Hartford entities use the same claim practices on these different types of claims. Nor is there evidence that claims handling is centrally managed for all Hartford entities. Indeed, the title of another declarant (Jordan, Vice President and Claim Manager for First State) suggests that First State manages its own claims handling procedures at least to some extent. The fact that all 27,000 employees of Hartford entities nationwide are paid by Hartford Fire and subject to centralized personnel management by Hartford Fire does not lead us to conclude that the substance of their work for the various entities is the same or similar. Similarly, the fact that the corporate management of Hartford Fire, First State, and Pacific overlaps with that of Hartford Underwriters cannot support an inference about their claims handling policies.
By way of comparison, in Certain Underwriters, the evidence affirmatively showed that “a single claims staff” handled the claims of both affiliated companies, including the specific claims that were the subjects of the challenged dual representations. (Certain Underwriters, supra, 264 F.Supp.2d at p. 923.) In Morrison Knudsen, the evidence affirmatively showed that claims against the parent company and subsidiary were all handled by personnel of the parent company with whom the challenged attorney had regular contact. (Morrison Knudsen, supra, 69 Cal.App.4th at p. 247.) In Faughn, in contrast, the moving party unsuccessfully relied on inference to demonstrate central control of litigation and common practices among affiliates. (Faughn, supra, 145 Cal.App.4th at pp. 596, 605.) No affirmative evidence was presented that litigation and claims handling practices or operational practices were uniform among the subsidiaries. (Id. at pp. 607-609.) Specifically, “the record does not show any actual overlap between decision makers whom [the challenged attorney] dealt with in the past and the decision makers who will handle the present case.” (Id. at p. 607.) Faughn reversed the trial court’s grant of the disqualification motion because the moving party “relied too heavily on inferences about facts that were within its control and that could have been disclosed without compromising confidential information.” (Id. at p. 610.)
The present case is comparable to Faughn, supra, 145 Cal.App.4th 592. Hartford Underwriters presents no affirmative evidence of common claims handling procedures, but relies too heavily on inferences that presumably could be drawn from the fact of the Hartford entities’ corporate affiliations, the existence of claim service centers, the overlap in their boards of directors and officers, and possibly the fact that all Hartford employees are paid by Hartford Fire. As explained, the record does not contain proof of common claims handling practices throughout the Hartford corporate structure.
The trial court also cites the Hartford entities’ “[s]hared business practices in use of the Hartford logo, the Hartford name and common e-mail addresses.” The record contains spotty evidence of various entities’ use of “The Hartford” brand name, the stag logo and the @thehartford.com domain name, but no averment that this shared use is uniform throughout all Hartford entities. Nevertheless, we shall assume uniform use of the brand name, logo, and e-mail domain, which is not disputed by Michel & Fackler. We find these circumstances of marginal if any significance as such practices are not inconsistent with strict corporate separateness. (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1284, fn. 12 [alter ego case].) In Certain Underwriters, the similarity in the names of the corporate affiliates (Argonaut Insurance Company and Argonaut Northwest Insurance Company) did not even merit mention in the court’s analysis. (Certain Underwriters, supra, 264 F.Supp.2d at pp. 923-924; see also Alcan Int’l Ltd. v. S.A. Day Mfg. Co. (W.D.N.Y. 1996) 176 F.R.D. 75, 80-81 (Alcan) [Alcancorp (parent) and Alcan International Limited, Alcan Rolled Products, Alcan Aluminum Limited (subsidiaries)].) We do not believe a corporate client could have a reasonable expectation that its attorney would not take on a representation adverse to an affiliate simply because they use common brand names. The use of common brand names alone certainly would not give the attorney an unfair practical advantage in the adverse representation.
Finally, the court cites the fact that the “HFSG Corporate legal department services Hartford Fire, Hartford Underwriters, Pacific and First State.” Pinkowski and Majewski aver that HFSG has a corporate law department that services these and other Hartford entities, which do not have their own dedicated in-house counsel, and they each aver they managed litigation for various Hartford entities. However, neither describes the role of the legal department; the extent of its control over litigation, claims handling practices, and settlement strategies; or the extent of its contacts with outside counsel. Neither declarant aver that the legal department follows the same litigation strategies for all types of claims, regions of the country, or subsidiary insurers. Neither ever had contact with Michel & Fackler, which had handled 97 matters for Hartford entities in 10 years.
By way of comparison, in Morrison Knudsen the evidence affirmatively showed that the parent “control[led]” the legal affairs of the subsidiary and the same personnel managed litigation involving the parent and the subsidiary. (Morrison Knudsen, supra, 69 Cal.App.4th at pp. 246, 252.) In Certain Underwriters, the evidence affirmatively showed that legal affairs for the parent and subsidiary were managed by the same group of people. (Certain Underwriters, supra, 264 F.Supp.2d at p. 924.) In Teradyne, the evidence affirmatively showed that, as relevant to that case, legal matters for the corporate affiliates were handled centrally: outside counsel reported directly to and received instructions directly from the parent’s legal staff; all correspondence was directed to and from the parent corporation; and billing was sent to and from the parent. (Teradyne, supra, 20 U.S.P.Q.2d 1143, <1991 U.S. Dist. LEXIS 8363, at p. *11>.) In contrast, the moving party in Faughn failed to demonstrate that the parent company controlled all litigation of its member entities. (Faughn, supra, 145 Cal.App.4th at p. 605.) Like the moving party in Faughn, Hartford Underwriters again relies too heavily on inferences to demonstrate centralized control of litigation in the Hartford corporate structure. (See id. at p. 610.)
Having explained why the factual findings of the trial court are either unsupported or only weakly supported by the record, we now consider whether the actual evidence in the record establishes a disqualifying conflict of interest because of Michel & Fackler’s simultaneous representation of First State and Pacific, or its prior representation of various Hartford entities.
Hartford Underwriters explains gaps in the record by the limited time it had to prepare its disqualification motion. However, we cannot uphold factual findings on the ground that if the moving party had had more time it could have produced evidence supporting the findings. Hartford Underwriters could have pursued remedies in the trial court if it believed it had insufficient time to prepare an adequate evidentiary foundation for its motion.
VI. Simultaneous Representation of First State and Pacific
The mere fact of corporate affiliation does not disqualify an attorney from taking on a representation that is adverse to a corporate affiliate (Hartford Underwriters) of a current client (First State and Pacific). (Morrison Knudsen, supra, 69 Cal.App.4th at pp. 240-241 [discussing Opn. No. 1989-113]; ABA Formal Ethics Opn. 95-390 p. 1001:258.) The primary consideration in such cases is whether the representation adverse to the affiliate reasonably diminishes the current client’s level of confidence and trust in its attorney. (Certain Underwriters, supra, 264 F.Supp.2d at p. 922; see also Flatt, supra, 9 Cal.4th at p. 285.) Stated differently, the question is whether the circumstances of the representation are such that the corporate client has a reasonable expectation the affiliates will also be treated as clients. (ABA Formal Ethics Opn. 95-390 p. 1001:259.) The totality of the circumstances must be taken into account. (Ramada, supra, 988 F.Supp. at p. 1464.) Whether an attorney’s representation of a client is simultaneous with a representation adverse to that client’s affiliate is determined at the time the attorney accepts the adverse representation. (Rules Prof. Conduct, rule 3-310(C), (E); Truck Ins. Exchange v. Fireman’s Fund Ins. Co. (1992) 6 Cal.App.4th 1050, 1059.)
We take guidance from two cases in which courts have either denied or reversed the grant of a disqualification motion based on simultaneous representation of a corporate affiliate. In Brooklyn Navy Yard, the challenged law firm had represented various subsidiaries in matters related to doing business in the Russian Federation and one of those matters remained pending. (Brooklyn Navy Yard, supra, 60 Cal.App.4th at pp. 251-252.) The firm then appeared as defense counsel in a suit brought by the parent company regarding a construction project in New York City. (Id. at pp. 250-251.) The court reversed the trial court’s grant of the disqualification motion and remanded the case to the trial court for reconsideration. (Id. at p. 259.) Although the Brooklyn Navy Yard court applied the alter ego test, which was rejected in Morrison Knudsen, Morrison Knudsen had no disagreement with the result in Brooklyn Navy Yard. (Morrison Knudsen, supra, 69 Cal.App.4th at p. 249.) “A conclusory ‘unity of interests’ finding on the facts in Brooklyn Navy Yard could have constituted an abuse of discretion.” (Morrison Knudsen, at pp. 248-249.)
In another case, a federal court denied a disqualification motion where the law firm represented a parent company on immigration matters and simultaneously appeared as defense counsel in an unfair business practices suit brought by a subsidiary. (Alcan, supra, 176 F.R.D. at p. 80.) Applying federal law, the court held that “[w]here the adverse party is a ‘vicarious’ client, or the representation . . . is otherwise attenuated, a less stringent standard is applied” than per se disqualification. (Ibid.) The subsidiary was “at best a ‘vicarious’ client.” (Ibid.) The firm’s representation of the parent involved matters “entirely unrelated” to the unfair business practices suit and the firm did not obtain information relevant to the suit in its representation of the parent. (Id. at p. 81.)
Here, Michel & Fackler’s representation of First State and Pacific is likewise attenuated with respect to the Demery litigation, thus affecting our totality of the circumstances evaluation of the case. The First State and Pacific matters were construction defect cases; the Demery matter arises from a homeowner’s policy. There is no evidence the Hartford entities use common claim practices on all types of claims. There is no evidence Michel & Fackler deals with any corporate managers, claims handlers or attorneys on First State and Pacific matters that will also be involved in the Demery matter. There is no evidence that the outcome of the Demery litigation will have any significant or even measurable financial impact on First State or Pacific. Although Michel & Fackler’s representation of First State and Pacific generated more than a quarter million dollars in billings in 10 years and thus was significant for the small firm, there is no evidence that the firm was more than a minor player from the perspective of First State and Pacific. Speaking of all the Hartford entities, Hartford Underwriters’ attorney stated at the hearing on the disqualification motion that the 97 cases handled by Michel & Fackler were probably “a fraction of a fraction of a percent” of all the cases handled in that 10-year period. The fact that Michel & Fackler were on First State’s list of panel counsel does not establish that they handled a significant portion of the company’s business. Finally, there is no evidence Michel & Fackler acquired confidential information that would be material to the Demery litigation.
In Certain Underwriters, where the court found a conflict of interest based on simultaneous representation of corporate affiliates, the facts were stronger than they are in this case and the court nevertheless found the disqualification issue was a close question. (Certain Underwriters, supra, 264 F.Supp.2d at p. 924.) The court found a disqualifying conflict based on two factors: (1) the relatively direct financial relationship between the parent and subsidiary, and (2) their common management of legal affairs. (Ibid.) The financial relationship arose from a pooled reinsurance agreement, under which the companies shared financial risks on a strict percentage basis. (Id. at p. 923.) “Since [the parent and subsidiary] directly share profits and losses, it follows that both could be directly affected by an adverse or favorable judgment in the underlying [case].” (Ibid.) Here, Hartford Underwriters submitted evidence of an asset pooling arrangement involving Hartford Underwriters, First State, Pacific and other Hartford entities, but did not explain or demonstrate that the arrangement puts First State and Pacific at direct financial risk due to Demery’s lawsuit against Hartford Underwriters. As noted above, this case is also different from Certain Underwriters in that Hartford Underwriters has not demonstrated centralized control of litigation for all Hartford entities.
We conclude Hartford Underwriters has failed to establish that Michel & Fackler has a disqualifying conflict of interest based on its simultaneous representation of First State and Pacific.
VII. Prior Representation on WPLCSC and Rye Matters
In successive representation cases involving corporate affiliates, the primary consideration is whether the attorney’s former relationship with a client (various Hartford entities) provides “a significant practical advantage” in the case against the corporate affiliate (Hartford Underwriters). (Morrison Knudsen, supra, 69 Cal.App.4th at p. 253; see Certain Underwriters, supra, 264 F.Supp.2d at p. 922.) The totality of the circumstances must be taken into account. (Ramada, supra, 988 F.Supp. at p. 1464.) Hartford Underwriters acknowledges that the facts regarding Michel & Fackler’s prior representations of Hartford entities are undisputed. Thus, our standard of review is de novo. (SpeeDee, supra, 20 Cal.4th at p. 1144.)
Even where successive representation involves the same corporate client (rather than a corporate affiliate), the determination “whether an attorney should be disqualified . . . turns on two variables: (1) the relationship between the legal problem involved in the former representation and the legal problem involved in the current representation, and (2) the relationship between the attorney and the former client with respect to the legal problem involved in the former representation. . . . If the relationship between the attorney and the former client is shown to have been direct−that is, where the lawyer was personally involved in providing legal advice and services to the former client─then it must be presumed that confidential information has passed to the attorney . . . . [¶] . . . [¶] On the other hand, where the former attorney-client relationship is peripheral or attenuated instead of direct, then the presumption will not be applied in the absence of an adequate showing that the attorney was in a position vis-à-vis the client to likely have acquired confidential information material to the current representation.” (Jessen, supra, 111 Cal.App.4th at pp. 709-710; see also H. F. Ahmanson & Co. v. Salomon Brothers, Inc. (1991) 229 Cal.App.3d 1445, 1454.)
Arguing there is a substantial relationship between Michel & Fackler’s prior representation of Hartford entities and Demery’s case, Hartford Underwriters specifically discusses matters the firm handled for the WPLCSC and the Rye case. We will limit our discussion to these prior representations, first considering the nature of Michel & Fackler’s relationship with its Hartford clients and then the nature of the relationship between the subject matters of the prior and current representations.
A. Nature of Michel & Fackler’s Relationship with Clients on WPLCSC and Rye Matters
Hartford Underwriters has produced little evidence describing the nature of Michel & Fackler’s relationship with the WPLCSC. The letters on the Twin City matter demonstrate that the firm provided a coverage opinion and negotiated a settlement in consultation with claims handlers at the WPLCSC. The e-mail to WPLCSC claims handler Campbell also involved a coverage opinion. Although Michel & Fackler argues it never handled a bad faith case for the WPLCSC, coverage counsel necessarily consider and provide advice on bad faith issues. (Farris v. Fireman’s Fund Ins. Co. (2004) 119 Cal.App.4th 671, 684 (Farris).) The proportion of WPLCSC claims handled by Michel & Fackler is not quantified. Nothing in this record suggests that Michel & Fackler had contact with anyone other than WPLCSC claim handlers on these matters. Hartford Underwriters identified five WPLCSC claim handlers who were potential witnesses at the Demery trial. There is no evidence Michel & Fackler had dealings with these claims representatives in the course of its WPLCSC representations. For example, the list of WPLCSC matters handled by Michel & Fackler identifies the WPLCSC personnel assigned to each matter, where available, and none of those people are on the list of potential witnesses. Also, Michel avers that he never had any dealings with the witnesses. From this evidence, it cannot be inferred that Michel & Fackler was a key player in advising the WPLCSC on claims procedures or in handling homeowner policies, such that it obtained particularly revealing information about how the claim center handled similar claims.
Hartford Underwriters points out that Michel avers he never advised or had contact with four (Majewski, Pinkowski, Scott and Carlson) of the eight individuals who submitted declarations in support of the motion to disqualify, but not the other four (Jordan, Pawloski, Blum and Costello). Jordan and Pawloski had direct contact with Michel & Fackler in the ZCON and Rye matters. Neither was a WPLCSC matter. Neither Blum nor Costello aver they ever had any contact with Michel & Fackler.
Pawloski avers that during Michel’s representation in the Rye case he (1) explained to the insured “Hartford’s position” with respect to the claimed loss; (2) received and reviewed estimates from vendors; (3) communicated to the insured “Hartford’s position” regarding asbestos remediation; (4) communicated to the insured “Hartford’s position” regarding payment of the actual cash value for certain damaged items; (5) communicated to the insured about the appraisal process and explained that disputed issues would be resolved in this process; and (6) represented the insurer in a motion to compel appraisal and appoint an umpire. Michel regularly communicated with claims handlers on the matter, discussed emerging issues such as the actual cash value of damaged items, and consulted about how to respond to the insured’s concerns. These are ordinary interactions between an attorney and an insurer client.
A potential conflict arises from the fact that Pawloski, who worked on the Rye matter, also appeared on behalf of Hartford Underwriters in the Demery action. The record, however, does not demonstrate that Pawloski and Michel had any substantial contact on the Rye claims or that Pawloski played a substantial role in handling the claims. The Rye litigation became essentially inactive in late 2003. On February 26, 2004, Hartford Casualty learned that the insured was no longer asserting its bad faith claims. The claim notes for that date, which were authored by “D4P” (possibly Pawloski), read, “Our atty, Mike Michel is now in plaintiff’s work and no longer has the file. He will send his file to the Sacto office. If we need a new atty we will reassign.” A partial claim note in the record for October 21, 2004, states that the insured was in bankruptcy and the trustee was pursuing claims against the insured’s landlord. Pawloski avers that she was responsible for trying to reach a settlement of the Rye litigation, which ultimately was not possible due to the insured’s bankruptcy.
In sum, nothing in the record would lead us to conclude that settlement discussions got underway in Rye, that Pawloski performed any work on this case, or that she had substantial contact with Michel. In fact, there is no evidence she had any contact with Michel until the possible contact on February 26, 2006. According to Pinkowski’s declaration, Pawloski recognized Michel at the Demery settlement conference “because he had been retained by Hartford Fire Insurance Company in a matter in which she had personally been involved,” not because of his work on Rye. Pawloski herself does not even personally aver that she recognized Michel at the Demery settlement conference.
By way of comparison, in Farris, which is heavily relied on by Hartford Underwriters, the evidence showed that the challenged attorney discussed litigation and claims handling strategies and participated in confidential communications with top-level decision makers. (Farris, supra, 119 Cal.App.4th at p. 677.) He also trained the insurer’s employees in claims handling practices and procedures and had a hand in developing those practices and procedures. (Id. at pp. 677, 682, 684.) In Morrison Knudsen, where the court applied a successive representation standard, the attorney’s involvement in the prior representation was “substantial.” (Morrison Knudsen, supra, 69 Cal.App.4th at p. 235.) As monitoring counsel, he discussed litigation strategy with the company’s officers and defense counsel, conducted defense research, participated in settlement discussions and mediations, provided advice on the value of cases and the financial impacts of settlement alternatives, and was privy to the company’s financial condition. (Id. at pp. 235-236, 237.) He also had a close familiarity with key decision makers at the company. (Id. at pp. 236-237.)
Hartford Underwriters has failed to demonstrate that Michel & Fackler attorneys had a direct and personal relationship with key decision makers on the WPLCSC cases they handled, or on the Rye litigation.
B. Nature of Relationship Between Subject Matters of Demery Case and WPLCSC and Rye Matters
The determination of whether current and prior representations are substantially related is not limited to the precise legal and factual issues involved in the various cases. (Jessen, supra, 111 Cal.App.4th at p. 712.) In the prior representation, the attorney may have obtained confidential information about the former client or the former client’s affairs that might determine the former client’s course of action in the current representation, such as information about unrelated adverse ramifications to the former client were the case to go to trial, the former client’s internal operations or policies affecting litigation strategy, the identity of the key decision makers, and the financial impact of pending claims against the client. (Id. at pp. 712-713, citing Morrison Knudsen, supra, 69 Cal.App.4th at pp. 236-237.) “Thus, successive representations will be ‘substantially related’ when the evidence before the trial court supports a rational conclusion that information material to the evaluation, prosecution, settlement or accomplishment of the former representation given its factual and legal issues is also material to the evaluation, prosecution, settlement or accomplishment of the current representation given its factual and legal issues.” (Jessen, at p. 713.)
On the other hand, exposure to “general ‘playbook’ information” such as a former client’s general litigation or settlement strategy is not sufficient to disqualify an attorney from an adverse successive representation. (Farris, supra, 119 Cal.App.4th at p. 688, citing Wolfram, Former-Client Conflicts (1997) 10 Geo. J. Legal Ethics 677, and Rest. 3d, Law Governing Lawyers, § 132, com. d(iii) pp. 379-382.) “ ‘Only when such information will be directly in issue or of unusual value in the subsequent matter will it be independently relevant in assessing a substantial relationship.’ ” (Wolfram, Former-Client Conflicts, supra, 10 Geo. J. Legal Ethics at p. 724, quoting Rest. 1996 Draft No. 1, Law Governing Lawyers; see Rest. 3d, Law Governing Lawyers, § 132, com. (d)(iii) pp. 379-382 [citing cases discussing the irrelevance, for substantial-relationship purposes, of general information in the absence of a showing that the information is either unique or particularly valuable in the subsequent representation].)
Here, the current representation arises out of different facts from those underlying the WPLCSC matters handled by Michel & Fackler and the Rye case. Thus, there is no contention that Michel & Fackler obtained confidential information about how Demery’s specific claim was handled.
Regarding the WPLCSC matters, Hartford Underwriters suggests that Michel & Fackler obtained material confidential information because it considered coverage (and incidentally bad faith) legal issues in the factual context of property claims brought under homeowner policies. Presumably, in this context the firm might have gained insight into the Hartford entities’ interpretations of their policy language and claims handling and litigation strategies. However, this is general playbook information that is insufficient to disqualify the firm. Hartford Underwriters has not produced evidence supporting an inference that Michel & Fackler was in a position to obtain unusual or uniquely relevant information about the clients’ claims or litigation strategy that would give it a significant practical advantage in the Demery litigation. By way of comparison, in Morrison Knudsen, which applied a successive representation standard, the attorney was disqualified because he had obtained confidential information that was material to the current representation. (Morrison Knudsen, supra, 69 Cal.App.4th at pp. 234-235.) In Farris, the attorney was disqualified because of his “pervasive participation, and indeed his personal role in shaping, [the insurer’s] practices and procedures in handling California coverage claims, practices and procedures that . . . were likely to . . . [be] directly in issue in this case.” (Farris, supra, 119 Cal.App.4th at p. 688.) Hartford Underwriters argues the Farris attorney’s successive representation amounted to “exactly what [Michel & Fackler] seeks to do here.” However, it fails to establish that the nature of Michel & Fackler’s relationship to the Hartford entities it used to represent was comparable to the close and personal relationship between the Farris attorney and his former client.
In Jessen, where the challenged attorney’s prior representation of Hartford Casualty Insurance Company was more limited, the court of appeal did not determine whether the attorney should be disqualified from the current representation that was adverse to that insurer. The decision holds that the trial court erred in applying collateral estoppel to prior federal court decisions and the court remanded to the trial court for reconsideration under the legal standards set forth in the appellate opinion. (Jessen, supra, 111 Cal.App.4th at pp. 702-703.)
Regarding Rye, Hartford Underwriters emphasizes the similarity of the factual and legal issues to the present case, which was filed only six months after Michel & Fackler’s last handling of the Rye litigation. Like Rye, the Demery case involves allegations of bad faith handling of a claim for property damage that required asbestos abatement; the insurer allegedly acted in bad faith by failing to respond to the insured’s requests for reimbursement and by delaying reimbursement, which forced a demand for appraisal; and the bad faith handling of the claim caused physical distress. On the other hand, Rye did not arise under a homeowner policy, was not handled by the same claim center as the Demery case, and was not handled by the same personnel. Although Pawloski, who appeared in the Demery case, avers that she was responsible for settlement of the Rye case, the record suggests the matter never reached the stage of settlement negotiations and that Pawloski never had any substantial contact with Michel, if she performed any work at all on the matter. On the record provided by Hartford Underwriters, we cannot infer that Michel obtained confidential information material to the Demery matter in the course of his handling of Rye.
At bottom, Hartford Underwriters has not established grounds for disqualification of Michel & Fackler based on its prior representation of Hartford entities. Because we conclude there were no grounds to disqualify Michel & Fackler, we affirm the trial court order without addressing the court’s ruling on delay and prejudice.
Disposition
The order is affirmed.
We concur. SIMONS, ACTING P.J. NEEDHAM, J.