December 21, 2015
Can You Sue Your Own Current Clients? Umm…No.
In Abedia v. Sheikhpour, the California Court of Appeal addressed, and resolved, an issue that may seem self-evident: an attorney cannot sue his or her own current clients, and a client cannot waive actual conflicts in that circumstance. In Abedia, in the underlying case, plaintiffs sued defendant alleging fraud related to an investment in a gas station near Disneyland. Defendant Sheikhpour substituted new counsel during the case: an attorney who was “Of Counsel” to his law firm. Sheikhpour and that law firm soon had a fee dispute, and Sheikhpour substituted into the underlying case in pro per. The law firm then sued Sheikhpour in a separate action for the alleged unpaid fees and obtained a judgment against him, apparently by default, for about $300,000. That law firm also sought to intervene in the underlying action to protect its fee claim against Sheikhpour. On this Motion to Intervene, the very same Of Counsel attorney who had previously represented Sheikhpour in the underlying action now represented the law firm against him in that action.
The court in the underlying action denied the Motion to Intervene, but the law firm sued Sheikhpour again, this time alleging a fraudulent conveyance of his house to a relative, allegedly to evade payment of the law firm’s judgment against him. Then, the very same Of Counsel attorney from that firm substituted back in to the underlying action seeking to represent Sheikhpour again in the underlying action, asserting that Sheikhpour had waived any conflicts related to this attorney’s representation. On its own Motion, the court in the underlying action disqualified the Of Counsel attorney, rejecting the purported client waiver. The Court of Appeal considered whether the court’s disqualification order was an abuse of discretion and concluded that it was not.The Court’s analysis began with the issue of whether an Of Counsel attorney is different counsel, for purposes of analyzing conflicts, than the law firm for which that attorney worked. The Court concluded that it was well settled that an Of Counsel attorney and the firm for which he works are the same firm for purposes of client conflicts. In this situation, then, “in effect, a law firm has sued its own client for accumulated fees in the very case in which it continues to try to represent the client.” The Court noted that such a conflict would so obviously be prohibited that it would not require analysis, except that here the client was purportedly willing to waive the conflict, and apparently had the advice of independent counsel regarding that waiver. No difference, said the Court: this actual conflict is not waivable, even with the benefit of independent counsel.
Significantly, the Court based its decision on the trial court’s inherent power to control attorneys in its courtroom under Code of Civil Procedure section 128(a)(5), not on the California Rules of Professional Conduct. As an aside, the Court also included sage advice for attorneys: “Normally, attorneys do not sue clients for fees until after the case is over, and only then if they are extremely sure of the quality of their work or extremely foolhardy.”