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July 2012 Vol. 9, No. 2 |
9.2.6 |
Rule 3-310: Avoiding Representation of Adverse Interests; Rule 5-210: Advocate-Witness Rule; Appearance of Impropriety |
Case: |
Legacy Villas at La Quinta Homeowners Assoc. v. Centex Homes (C.D.Cal. 2012) 2012 WL 1536036 |
Issue: |
Was disqualification of plaintiff’s counsel warranted in an action by a condominium homeowners association against a developer for breach of fiduciary duty where plaintiff’s counsel advised the HOA board when it was controlled by employees of the developer before the board was turned over to the homeowners? |
Holding: |
Yes. The Court disqualified plaintiff’s counsel for three reasons. First, the Court found that plaintiff’s counsel created an implied attorney-client relationship with the developer when the developer controlled the HOA board. While the board was controlled by the developer, “[b]oard members could have reasonably believed that [plaintiff’s counsel] provided legal advice to them in their capacities as [developer] employees when [plaintiff’s counsel] gave advice on management decisions, assisted in collecting delinquent accounts, and counseled them on ‘developer turnover’ of the Board.” (Id. at *6.) Having found that plaintiff’s counsel formerly impliedly represented the developer, the Court found that the former representation and the current representation of the HOA board were substantially related. Plaintiff’s counsel advised the developer-controlled board on decisions directly related to the developer’s fiduciary duties in managing the property which were the subject of this action. (Id. at *7.) Third, the Court concluded that the prohibition on the appearance of impropriety under Canon 9 of the ABA Model Code of Professional Responsibility constituted an additional, independent basis to disqualify plaintiff’s counsel because the current action challenged the very management decisions on which plaintiff’s counsel advised the HOA board when it was controlled by developer employees. (Id. at *8.) |
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