Commercial Litigation and Arbitration

Disqualification — May a Party Who Is Not a Current or Former Client Move to Disqualify on Conflict-of-Interest Grounds? Circuit Split

IMCO, LLC v. Ford, 2011 U.S. Dist. LEXIS 124535 (N.D. Cal. Oct. 27, 2011):

A complaining party who files a motion to disqualify an attorney must first have standing to do so. Blue Water Sunset, LLC v. Markowitz, 195 Cal. App. 4th 477, 486 (2011). The circuits are split on the issue of whether an attorney can be disqualified on the grounds of a conflict of interest by a party who is not a current or former client.

1. The Circuit Split.

The general rule adopted in the Fifth, Third, and Eighth Circuits is that an attorney cannot be disqualified unless a current or former client moves for disqualification. See In re Yarn Processing Patent Validity Litig., 530 F.2d 83, 88 (5th Cir. 1976) (stating the general rule that only a former client has standing to disqualify an attorney); In re Corn Derivatives Antitrust Litig., 748 F.2d 157, 161 (3d Cir. 1984) (adopting the general rule from Yarn Processing); O'Connor v. Jones, 946 F.2d 1395, 1400-01 (8th Cir. 1991) (a movant who is not a current or former client has not demonstrated "injury in fact").

Two circuits have adopted a minority view, finding non-clients to have standing to disqualify based on an ethical violation. In the First Circuit, courts look to the Model Code of Professional Responsibility, which requires that an attorney come forward if he has knowledge of an actual or potential disciplinary violation. Kevlik v. Goldstein, 724 F.2d 844, 847 (1st Cir. 1984). Similarly, in the Fourth Circuit, any member of the bar aware of the facts justifying a disqualification of counsel is obligated to call it to the attention of the court. United States v. Clarkson, 567 F.2d 270, 271 n.1 (4th Cir. 1977).

The issue has not directly been addressed in the Ninth Circuit. In Kasza v. Browner, the United States Court of Appeals for the Ninth Circuit quoted the general rule from Yarn Processing. 133 F.3d 1159, 1171 (9th Cir. 1998). In Kasza, however, the issue of standing was not pressed, and the court did not analyze the issue further beyond citing Yarn Processing. Ultimately, the court concluded that even assuming the movant had standing, there was no basis for disqualification.

2. California Law.

California law follows the general rule that a party lacks standing to disqualify an attorney unless that party has a present or past attorney-client relationship with that attorney. Great Lakes Const., Inc. v. Burman, 186 Cal. App. 4th 1347, 1356 (2010). This general rule has been expanded in certain circumstances, and courts have found standing to disqualify if there was a breach of the duty of confidentiality or other fiduciary duty. Dino v. Pelayo, 145 Cal. App. 4th 347, 352 (2006). No California court, however, has found standing to disqualify absent some sort of duty -- be it attorney-client, duty of confidentiality, or other fiduciary duty.

The majority of circuits, as well as California courts, demand some sort of attorney-client or fiduciary relationship before a party can move to disqualify an attorney.

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