Wednesday, March 21, 2007
Nonparty Had Standing to Seek Lawyer’s Disqualification—C.A.
By KENNETH OFGANG, Staff Writer
A nonparty has standing to file an attorney disqualification motion in order to protect the movant’s rights of confidentiality, at least when those rights have already been vindicated in an earlier case, the Third District Court of Appeal ruled yesterday.
The justices upheld a San Joaquin Superior Court judge’s order barring Edward Freidberg, a Sacramento lawyer, from representing Joe Machado in a suit against Machado’s former lawyer.
Freidberg’s disqualification was sought by Michael Atherton, who is both a former client and former business partner of Freidberg. Freidberg represented Atherton in a partnership dispute in the early 1990s; after that case was settled, the two men became partners in a company holding realty that was acquired during the suit, with Freidberg receiving one-third ownership as his fee.
The property was sold off, and the partnership was dissolved in 1997. In an unrelated matter, a joint venture called Woodward—controlled by Atherton—later sued Machado for breach of contract.
Machado hired Freidberg to represent him in that matter, and the attorney brought a cross-complaint against Woodward and Atherton alleging that Atherton conspired with Machado’s previous attorney to settle the case on terms favorable to Atherton in exchange for “a secret $520,000 ‘finder’s fee’ bribe.”
Atherton moved to disqualify Freidberg, based on their previous attorney-client and business relationships. Superior Court Judge K. Peter Saiers granted the motion, and the Court of Appeal denied writ relief in September 2005.
A short time later, Machado, represented by Freidberg, sued Machado’s former lawyer, Richard Calone of Stockton, based on the same alleged “bribe.”
Atherton was not named a defendant in this action, but was alleged to have taken part in the same conspiracy described in the cross-complaint in the Woodward action. He nonetheless moved to disqualify Freidberg on the same grounds as set forth in Saiers’ order, which he accused Frieberg and Machado of trying to circumvent.
Saiers agreed and disqualified Freidberg from representing Machado in the suit against Calone.
Justice Fred Morrison, writing for the Court of Appeal, agreed that Atherton had standing to move to disqualify Freidberg from the action against Calone. He also concluded that Freidberg was precluded from contesting disqualification in that matter because the issue was fully litigated in the Woodward suit.
While a nonparty seeking to bar his former lawyer from accepting adverse representation must generally bring “a collateral injunctive suit,” Morrison said, that rule will not be applied where the new action was filed to evade the prior disqualification order.
The justice elaborated:
“In addition to the suspicious timing, the normal procedure would have been to name Calone as a cross-defendant in Woodward; the only apparent advantage in filing a separate suit with overlapping liability allegations would be to evade the prior order.... Because Atherton is a named conspirator, and all Doe defendants are alleged to be the agents and alter egos of all others, Atherton only remains a nonparty at the whim of the pleader. Given the alter ego and conspiracy allegations, it would uphold the sheerest fiction to conclude Atherton lacks standing, or in Machado’s astonishing words, to say that he is ‘a stranger’ to the Calone suit.”
Turning to the merits, Morrison said the prior order is preclusive under the doctrine of collateral estoppel because it is final and was entered against Machado on the merits after the issue, which was identical to the issue raised in the new proceeding, was fully litigated.
The case is Machado v. Superior Court (Atherton), C052442.
Copyright 2007, Metropolitan News Company