O’Hara & Duris, PLC vs Sally Savitz
Case No: 18CV02006
Hearing Date: Fri Apr 05, 2019 9:30

Nature of Proceedings: Motion Compel Deposition Testimony; Disqualify Counsel

TENTATIVE RULING: Plaintiff’s motion to disqualify Harris Personal Injury Lawyers, Inc., Ryan Harris, and Alise M. Fonseca, and any and all attorneys employed by or associated with the Harris firm, from serving as counsel for defendant is granted. Defendant’s motion to compel deposition testimony is moot and ordered off calendar given the ruling on the disqualification motion.

BACKGROUND:

This is an action to recover the reasonable value of attorney services. In 2015, plaintiff O’Hara & Duris, PLC entered into a written fee agreement with defendant Sally Savitz to represent defendant as the personal representative of the estate of Claudia Cranston in a wrongful death action after Ms. Cranston was killed as the result of an automobile versus pedestrian accident. The agreement contained a provision that called for the payment of a reasonable fee to plaintiff in the event defendant terminated the agreement. Defendant later terminated the representation and hired the law firm of Harris Personal Injury Lawyers, Inc. in the wrongful death action, which then settled. On April 19, 2018, plaintiff filed its complaint against defendant for breach of contract, common count/quantum meruit, and breach of the covenant of good faith and fair dealing. Plaintiff seeks the reasonable value of the services it provided to defendant in the wrongful death matter.

There are two motions scheduled for hearing. In the first motion, plaintiff requests an order disqualifying and barring Harris Personal Injury Lawyers, Inc., Ryan Harris, and Alise M. Fonseca (collectively, “Harris”) from representing defendant in this action. In the second motion, defendant requests an order compelling deposition testimony from Maureen J. Duris and J. Patrick O’Hara.

ANALYSIS:

1. Motion to Disqualify Counsel for Defendant

In general, an attorney may not represent a client in a matter where the attorney has a conflict of interest with a party adverse to the client. California Rules of Professional Conduct, Rule 1.7, subdivision (b), provides:

“A lawyer shall not, without informed written consent from each affected client . . . represent a client if there is a significant risk the lawyer’s representation of the client will be materially limited by the lawyer’s responsibilities to or relationships with another client, a former client or a third person, or by the lawyer’s own interests.”

In addition, Rule 1.15, subdivision (a), of the California Rules of Professional Conduct provides:

“All funds received or held by a lawyer or law firm for the benefit of a client, or other person to whom the lawyer owes a contractual, statutory, or other legal duty, including advances for fees, costs and expenses, shall be deposited in one or more identifiable bank accounts labeled ‘Trust Account’ or words of similar import . . . .”

Thus, a disqualifying conflict may be found where an attorney owes a fiduciary or statutory duty to an opposing party, “regardless of whether a lawyer-client relationship existed.” DCH Health Services, Inc. v. Waite (2002) 95 Cal.App.4th 829, 832. Here, plaintiff filed a lien for fees in the underlying wrongful death case after its representation of defendant was terminated. (Duris Dec., ¶5.) By virtue of plaintiff’s lien, Harris was obligated to hold the settlement funds in trust and then pay the lien out of defendant’s recovery. “Attorney’s fees payable to the legal counsel for the injured [claimant] are a lien on the injured’s award; thus, they come out of the injured’s recovery.” Baca v. State Bar of California (1990) 52 Cal.3d 294, 299, quoting Reich, Adell, Crost & Perry v. Workers’ Compensation Appeals Board (1979) 99 Cal.App.3d 225, 229. Harris’s own fee agreement with defendant confirms that it owed a fiduciary duty to plaintiff sufficient to confer standing on plaintiff to bring the current motion. Paragraph “P” of the fee agreement reads:

“Prior Attorney Lien. [Harris] agrees to absorb the prior attorney lien amount asserted by O’Hara and Duris Law within [Harris’s] contingent legal fee.”

(Fonseca Dec., ¶5, Ex. 1.)

Because Harris agreed to “absorb” the prior lien amount, plaintiff is effectively a third-party beneficiary of the fee agreement between Harris and defendant. “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” Civ. Code §1559. Although Harris argues that its only duty to plaintiff is to hold the settlement funds in trust until the fee issue is resolved, Harris must also refrain from acting contrary to plaintiff’s interest. In representing defendant, however, Harris will undoubtedly seek to minimize the fees owed to plaintiff in order to maximize its own fees.

The case of Virtanen v. O’Connell (2006) 140 Cal.App.4th 688 is analogous to the present case. In Virtanen, the seller of shares of stock sued the buyer’s attorney, who had agreed to act as the escrow holder for both parties. The attorney later closed the transaction and transferred the stock shares to the buyer, notwithstanding the seller’s rescission of the sales agreement. The attorney disputed whether he owed any duty to the seller, but the court disagreed, stating:

“[I]t is hard to imagine how one can seriously dispute that an escrow holder owes a fiduciary duty to the parties to the escrow, including the party who has deposited property into the escrow. . . . Although [attorney] owed [seller] no professional duty, his acceptance of [seller’s stock certificates gave] rise to a duty of care. The wellspring of this duty is the fiduciary role of an escrow holder. [Citation.] The fiduciary obligations of an escrow holder, and an attorney acting as an escrow holder, are well settled.”

Id., at 755-756.

In this case, as in Virtanen, Harris clearly owes a fiduciary duty to plaintiff as lienholder in the underlying case. Its continued representation of defendant creates an obvious conflict of interest since it has a financial interest in the fee dispute. Harris has submitted a declaration from defendant purporting to waive the conflict of interest (Fonseca Dec., ¶10, Ex. 2), but defendant cannot provide informed consent to a conflict of interest between plaintiff and Harris.

Disqualification is proper for the additional reason that members of the Harris firm are likely to be witnesses in this case. California Rules of Professional Conduct, Rule 3.7, prohibits an attorney from acting as both an advocate and a witness in an action. The rule states:

“(a) A lawyer shall not act as an advocate in a trial in which the lawyer is likely to be a witness unless:

“(1) the lawyer’s testimony relates to an uncontested issue or matter;

“(2) the lawyer’s testimony relates to the nature and value of legal services rendered in the case; or

“(3) the lawyer has obtained informed written consentfrom the client. . . .”

None of the exceptions apply. As set forth in its reply, plaintiff has already served subpoenas for the depositions of Ryan Harris and Alise M. Fonseca, both members of the Harris firm. (O’Hara Dec., ¶C.1.) Mr. Harris and Ms. Fonseca were apparently instrumental in the decision to terminate plaintiff. They were also involved in the ongoing representation of defendant in the wrongful death case.

Based on the foregoing, the court will grant plaintiff’s motion to disqualify Harris Personal Injury Lawyers, Inc., Ryan Harris, and Alise M. Fonseca, and any and all attorneys employed by or associated with the Harris firm, from serving as counsel for defendant in this matter.

2. Motion to Compel Deposition Testimony of Members of Plaintiff Firm

The motion to compel deposition testimony was filed by Harris on behalf of defendant. Given the above ruling, the motion to compel is moot and ordered off calendar.