by Chloe S. Wolman, Esq. Davies Wegner, A Law Corporation, Los Angeles, CA
In a dissolution action, the Second (2nd) District Court of Appeal reversed the trial court’s holding, concluding that husband did not have standing to move for disqualification of wife’s attorney and, secondly, that the trial court did not have independent authority to disqualify that same attorney. In re Marriage of Murchison, (2016) 245 Cal. App. 4th 847.
During the course of divorce proceedings between Wife (“Melissa”) and Husband (“Michael”), Melissa was awarded the couple’s marital home on the condition that it be “immediately list[ed]…for sale” so that Michael’s share of the mortgage be extinguished.
After the property was listed for sale, however, Melissa failed to make complete and timely mortgage payments, causing the bank to record a notice of default while the property was in escrow with a buyer. The bank then commenced foreclosure proceedings. In order to avoid foreclosure, Melissa elected to sell the residence to her divorce attorney, Robert Curtis (“Curtis”), who already had a lien on the property as a result of a Family Law Attorney’s Real Property Lien (“FLARPL”). The sale between Melissa and Curtis was completed while the property was still in escrow with the other buyer.
In finalizing the sale, Melissa and Curtis both signed an agreement (the “Agreement”) which acknowledged, among other things, the Family Court order that Melissa sell the home; the home’s foreclosure status and the various liens upon the property. In addition to the bank lien and the FLARPL the home had two additional Internal Review Service (“IRS”) liens on the property. The Agreement noted that, even if Melissa had completed the sale to the buyer, she “would not have realized any net cash” as a result of the various liens. Curtis agreed to accept the home “as is,” subject to the liens and would thereafter hold Melissa harmless from those obligations. The Agreement also provided that Curtis would pay Melissa $20,000 and that Melissa agreed that the terms of the Agreement were fair, all terms had been fully disclosed to her, and that she understood the terms and had an opportunity to seek independent counsel.
The trial court, at Michael’s request, joined Curtis as a “necessary party” to the proceedings because Michael stated that he planned to call Curtis as a witness to testify as to whether Melissa had fulfilled her obligation to extinguish Michael’s debts on the home’s mortgage.
Michael then moved to disqualify Curtis, stating that the transfer of the home from Melissa to Curtis was not a “sale” as the Family Court had ordered. Michael argued that Curtis had “lied” to the Court about the home sale and further, that the sale violated professional rules of conduct which prevent attorneys from entering into unfair transactions with their clients.
Curtis opposed the motion and filed a challenge to disqualify the trial court judge, claiming that the motion to disqualify Curtis prejudiced the judge against him, and therefore, overseeing the case would be improper.
The Trial Court judge, however, disqualified Curtis. Melissa appealed the ruling. As there were no disputed facts, the appellate court reviewed the attorney disqualification issue “as a question of law.”
First, the appellate court determined that the trial court erred in disqualifying Curtis because Michael had no standing to bring a motion to disqualify in the first place. Citing to Great Lakes Construction, Inc. v. Burman (2010) 186 Cal.App.4th 1347, 1356, the Court said that “Generally, before the disqualification of an attorney is proper, the complaining party must have or must have had an attorney-client relationship with that attorney.”
While there was no case law explicitly preventing a nonclient from moving for disqualification, the only case which actually permitted a nonclient to move to disqualify noted that the “moving nonclient must establish a ‘personal stake’ … that is sufficient to satisfy the standing requirements of article III of the United States Constitution.” (Great Lakes, supra, 186 Cal.App.4th at p. 1357).
The appellate court concluded that Michael had no attorney-client relationship with Curtis and personal stake sufficient to permit him standing to disqualify Curtis.
The Appellate Court went on to question whether the trial Court itself had some independent authority to disqualify Curtis. While noting that a trial judge has inherent power to control the “furtherance of justice” and the judicial proceedings before it, along with the responsibility to take appropriate corrective action when it had personal knowledge of lawyer misconduct, in this instance, the trial court stepped beyond its authority in this instance.
Curtis’ actions would have no continuing effect on the divorce proceedings and therefore, there was no need to disqualify him. The Court quoted Oaks Management Corporation v. Superior Court (2006) 145 Cal.App.4th 453 for the proposition that “the purpose of a disqualification must be prophylactic, not punitive.” Moreover, no State Bar Rule of Professional Conduct mandated disqualification based on the facts of the present case. The trial court could have reported Curtis’ conduct to the State Bar, but ultimately, Melissa had a right to counsel of her choosing, and since she did not move to disqualify Curtis, the Court could not, in this instance, intervene.
Thus In re Marriage of Murchison clarifies issue of standing to disqualify a party’s attorney. A moving party should either have an established attorney-client relationship, or have with a “personal stake” in the issue under the US Constitution in order to have sufficient standing to bring a disqualification motion. Moreover, a trial court cannot “punish” an attorney with disqualification for behavior which does not represent an ongoing threat to the litigation at hand.
This article first appeared in the LOS ANGELES DAILY JOURNAL on August 18, 2016.