Jarvis v. Jarvis
Jarvis v. Jarvis
Opinion of the Court
Appellant Jarvis Properties is a limited partnership that owns a two-acre parcel of land. Its two general partners-appellant Todd Henry Jarvis and respondent James Alvin Jarvis (brothers)-each own a 50 percent interest in the partnership, which is less than the majority consent required *725to act on behalf of the partnership ( Corp. Code, § 15904.06, subd. (a) ). The general partners cannot agree on what to do about the two-acre parcel and their partnership agreement does not address the question of what occurs in the event of a decision-making deadlock. They have, therefore, turned to the courts.
James Jarvis filed an action for partition by sale, naming Todd Jarvis and Jarvis Properties as defendants.
We conclude the trial court did not err as a matter of law when it granted the motion to disqualify Roscoe in the circumstances of this case. Finding no abuse of discretion, we will affirm the order disqualifying Roscoe.
I. FACTS AND PROCEDURAL HISTORY
A. Description of Property at Issue and Litigation Involving the Property
The parties and the property at issue are well known to this court. After their father's death in 1996, Todd and James were the beneficiaries of certain family trusts. Litigation ensued in Monterey County, and the brothers entered into an agreement in 1998 as part of a court-supervised settlement of their dispute concerning the family trusts. In 2004, Todd and James amended the trust and named John McDonnell (a trust attorney) as the court-appointed trustee. The trust's primary assets consisted of real property in Salinas: the Jarvis Ranch (333.5 acres of farmland on the west side of Highway 101) and two parcels that are adjacent to one another (three acres in a residential area on the east side of Highway 101). One of the two smaller parcels is the subject of this appeal. The trust allowed either beneficiary to object to certain proposed actions by the trustee, followed by court authorization. Todd filed several such proceedings in Monterey County Superior Court. Between 2010 and 2018, the trust litigation resulted in the filing of three appeals and four writ petitions in this court.
*726This appeal arises out one of two partition actions that were filed in 2016 involving the two parcels on the east side of Highway 101. The first parcel, which is "just over [one] acre" in size, is located at 2357 North Main Street in Salinas in an area that is predominantly residential. According to James, this parcel "has an irregular shape which hampers its development prospects unless coupled with" the adjacent parcel. The first parcel is currently improved with three older houses, a garage, and a water tower, all of which "suffer from a great deal of deferred maintenance." The parties refer to this parcel as the "Improved Property," and we adopt that designation. Todd and James (individually and as trustee of two trusts) own the Improved Property as tenants in common.
The second parcel is located immediately adjacent to the Improved Property on North Main Street. The parties refer to this parcel as the "Adjacent Property," and we shall do the same. The Adjacent Property is two acres in size; it is vacant land and allegedly provides no income. James alleges it is "more rectangular in shape which helps to make the two properties as a whole far more developable." For ease of reference, we shall refer to the Improved Property and the Adjacent Property combined as the "Two Parcels."
The Two Parcels were once owned by James and Todd's parents, James A.P. Jarvis (Father) and Marjorie Todd Jarvis (Mother). In December 1986, Father, Mother, and James formed a limited partnership known as Jarvis Properties (hereafter sometimes "the Partnership"). Father was the general partner and Father, Mother, and James were the limited partners. The purpose of the limited partnership was to "engage in the investment in real property" and its primary asset was the Adjacent Property. Ownership of the Partnership changed over time. At all times relevant to this dispute, Todd and James each owned 50 percent of the general and limited partnership interests in Jarvis Properties.
Todd and James were also parties to three consolidated eminent domain actions in Monterey County Superior Court (case Nos. M98919, M98920, and M98921), which were filed by the California Department of Transportation to acquire portions of the Jarvis Ranch and the Two Parcels for improvements along Highway 101. During the pendency of those actions, the Jarvis Ranch was sold to a third party, who settled the eminent domain action as to Jarvis Ranch. The eminent domain actions as to the Two Parcels went to trial in April 2016. Todd has appealed the judgment rendered in that trial in case No. H043737, which is pending before this court. Thus, the Two Parcels have been the subject of *727the trust litigation, the eminent domain actions, and the partition actions.
B. Partition Actions
1. Complaints in First and Second Partition Actions
In May 2016, James filed a complaint in Jarvis v. Jarvis (Monterey County Superior Court case No. 12CV001295, hereafter "Case No. 1295") seeking partition of both the Improved Property and the Adjacent Property.
Todd filed a demurrer and a motion to strike the complaint in Case No. 1295. In September 2016, the trial court sustained the demurrer with leave to amend and granted the motion to strike, stating that James "may not seek partition of two parcels under different ownership under a single cause of action for partition and sale." While Todd's motions were pending, James filed a motion for appointment of a receiver over the Improved Property, which the court granted.
In September 2016, James filed a new complaint in the instant action entitled Jarvis v. Jarvis , Monterey County Superior Court case No. 16CV002928 (hereafter sometimes "Case No. 2928"), which contains a single cause of action for partition by sale of the Adjacent Property. It alleges that "there is no possibility that [James and Todd] would cooperate to develop" the Two Parcels, that the brothers are "unable and unwilling to collectively manage or develop the Adjacent Property," that its highest and best use is to be sold, and that its value can be maximized in a coordinated partition sale with the Improved Property. The named defendants are Todd and Jarvis Properties.
James, as general partner, signed a notice and acknowledgement of receipt in March 2017, accepting service of the new complaint on behalf of the Partnership. In a case a management conference statement, James told the court he planned to file a motion to consolidate the two partition actions. He also stated that Todd had selected attorney William P. Roscoe, III to represent the Partnership and complained of Todd's "unilateral appointment" of Roscoe.
2. James's Motion to Disqualify Roscoe
Shortly after James filed his case management conference statement, Roscoe *728filed a demurrer on behalf of the Partnership. While the demurrer was pending, James filed a motion to disqualify Roscoe from representing the Partnership and to dismiss the demurrer because Roscoe lacked authority from a majority of the general partners to represent the Partnership. James argued that "[p]ursuant to his standard practice, Todd ... has elected to seek to render this litigation as needlessly complex and wasteful as possible." He stated that Todd selected Roscoe to represent the Partnership over his express objection and that Roscoe had "taken the position that his representation of the partnership is to be directed solely by one general partner [Todd], and in direct contravention of the direction of the other equal general partner [James]." Citing Corporations Code section 15904.06, subdivision (a)
James suggested options for handling the deadlock between the partners if Jarvis Properties must participate in the action, which he broke down into two categories: (1) allowing the partners to litigate the partition action without participation by the Partnership, or (2) "appointing a tie-breaking actor ... to act on behalf of the Partnership." As for the first category, James suggested the parties could stipulate to an appearance by the Partnership in which it submits to the court's jurisdiction and agrees to be bound by the outcome of the litigation conducted by the brothers. James contended it was not necessary for the court to "make this determination at this time, and it may simply order Roscoe disqualified." He also argued that because Roscoe did not have the requisite authority to act on behalf of the Partnership, the demurrer was moot. He argued that if Todd has the power to unilaterally order the filing of a demurrer, then James has the authority to unilaterally order it withdrawn. Shortly after James filed the motion to disqualify Roscoe, Todd filed his demurrer to the complaint.
3. James's Opposition to the Demurrers
James filed opposition to both demurrers, which stated: "[N]ot only has [Todd] filed his own meritless demurrer-he has unilaterally (and in direct violation of the legal requirement that only a majority of general partners may direct partnership activities such as litigation) directed Roscoe to file another overlapping demurrer." James argued the demurrers were "without merit, and their duplicative procedural posture makes clear the true intent is merely the squandering of resources." James argued that the Partnership's demurrer was not properly before the court because Roscoe was not authorized to act on behalf of the Partnership. He argued that Code of Civil Procedure section 872.730 expressly permits "an action for partition of partnership property" and that both the statute and the partnership agreement permit partition of partnership property outside of an action to dissolve the Partnership.
*7294. The Partnership's Opposition to the Motion to Disqualify Roscoe
In opposition to the disqualification motion, Roscoe filed a declaration stating that (1) he was retained to represent only Jarvis Properties; (2) he did not represent Todd, who had his own attorney; (3) Todd had signed Roscoe's retainer agreement as a general partner of the Partnership; and (4) the retainer agreement provides that Roscoe represents Jarvis Properties only and will not represent any of its partners.
The Partnership's opposition began by repeating many of the arguments in the demurrers and discussing whether James had the authority under partnership law and the partition statutes to bring a partition action. The opposition argued that the partition action was not authorized by law and that the disqualification motion was an attempt to remove opposition to the partition action to facilitate an unauthorized sale of the property. The Partnership argued that "having sued the Partnership [James] may not, due to obvious conflicts of interest , participate in the defense in any way. While neither partner should participate [in] or direct the Partnership defense , there is no conflict if one partner sues the Partnership and one partner merely arranges for independent representation of the Partnership as Todd ... has done." (Italics added.) In response to James's suggestion that the Partnership did not need separate representation because Todd and James would adequately litigate all issues, the Partnership argued that neither Todd nor James "have any property interest whatever" in the Adjacent Property and therefore lacked standing to bring or defend the partition action. It also argued that since James did not have standing to bring the partition action, he lacked standing to move to disqualify Roscoe. The Partnership argued that it was sued by James and had every right to appear as a named party represented by counsel. It contended that by seeking to disqualify Roscoe, James sought to prevent "any representation or defense of the Partnership at all," and that the tie-breaking options proposed by James "are far outside the scope of this motion." The Partnership asserted that if the motion to disqualify was successful, James would be able to sell the property "in the absence of opposition of the owner thereof, which is the Partnership."
5. James's Reply in Support of the Disqualification Motion
In reply, James asserted that since Roscoe had argued that "neither partner should participate [in] or direct the Partnership defense," Roscoe's view was that "the goals, strategy, tactics, and costs of this litigation should be left entirely to [Roscoe], with no direction from any general or limited partner, or from any officer of the Partnership." James argued this was a violation of the Rules of Professional Conduct, former rule 3-600, which required an attorney "representing an organization" to "conform his or her representation to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement." James argued it was not for Roscoe to decide what is in the best interest of the Partnership, and that "is for a majority of the general partners to decide." James asserted that Todd retained Roscoe to represent the interests Todd wishes to pursue; that since the Partnership has no liquid assets, Roscoe was "presumably" being paid by Todd; and that to "the extent [Roscoe] expects to recoup his fees ... from Partnership assets," he was doing a disservice to the Partnership, the very entity he represents. James argued that Roscoe would "run up" costs without direction from someone on behalf of the *730Partnership or a court-ordered appointment, and that Roscoe was not acting in the best interest of the Partnership. James argued that Todd had demurred on the same grounds as the Partnership, and was sufficiently interested to "reasonably assure that all relevant facts and issues will be adequately presented."
6. Hearing and Orders on Motion to Disqualify and Demurrers
The motion to disqualify and the demurrers, were heard at the same time. The court's tentative ruling on the motion to disqualify was to grant the motion because "there is not a majority of partners in this two-partner business that agree on hiring an attorney for the partnership." The court noted that the partners were deadlocked and stated, "if these two parties never agree, there is never going to be any action taken on this property ... because of the history of this relationship." The court granted the motion to disqualify Roscoe and dismissed the Partnership's demurrer without prejudice. The court denied Todd's request for judicial notice and overruled Todd's demurrer to the complaint. Both Todd and the Partnership (sometimes jointly "Defendants") appeal the order on the disqualification motion.
II. DISCUSSION
A. The Partnership Has Waived Any Defects in Service and is Not in Default
We proceed by addressing two points raised by the opening brief. Todd and the Partnership complain repeatedly in their joint opening brief that James acted inappropriately by serving himself and then accepting service of the complaint on behalf of the Partnership. They also suggest that the trial court's order disqualifying Roscoe and dismissing the demurrer forces the Partnership to default. As we shall explain, neither point has any merit.
The Partnership did not file a motion to quash service of summons or otherwise challenge service of the complaint in the trial court. Jarvis Properties' demurrer was a first appearance by the Partnership, which waived any defects in service. ( Code Civ. Proc., §§ 1014 [defendant appears in an action by filing a demur] and 410.50, subd. (a) ["A general appearance by a party is equivalent to personal service of summons on such party"]; Fireman's Fund Ins. Co. v. Sparks Construction, Inc . (2004)
Defendants contend the trial court's order disqualifying Roscoe, "creates an absurd result where a fifty percent (50%) partner can sue his partnership and then force the partnership to default by vetoing its ability to hire [an attorney]." By filing a demurrer, the Partnership prevented the court from entering its default. ( Code Civ. Proc., § 585, subds. (a), (b) [authorizing clerk, upon application, to enter the defendant's default if "no answer, demurrer, [or other enumerated response] has been filed.") The court in Barragan v. Banco BCH (1986)
B. Standard of Review
"An order on a motion to disqualify counsel is directly appealable." ( Lynn v. George (2017)
"The abuse of discretion standard is not a unified standard; the deference it calls for varies according to the aspect of a trial court's ruling under review. The trial court's findings of fact are reviewed for substantial evidence, its conclusions of law are reviewed de novo, and its application of the law to the facts is reversible only if arbitrary and capricious." ( Haraguchi v. Superior Court (2008)
The parties acknowledge these authorities, but dispute whether there were disputed factual issues here. Defendants argue that there are no disputed questions of fact and that the parties disagree on what the law allows and that the issue is purely a legal question, which this court should review de novo. James contends the de novo standard is not the appropriate standard of review because there are disputed questions of fact regarding "who will direct Roscoe's unauthorized representation of the Partnership." Although presented as a factual dispute, this is really a legal question of who has the right to direct the Partnership's defense in the circumstances presented here. We shall review the question whether the court erred as a matter of law when it disqualified Roscoe de novo and the court's application of the legal rules to the facts for abuse of discretion.
*732C. General Principles Regarding Disqualification of Counsel
James's motion to disqualify Roscoe derives from the contention that Roscoe was without authority to act for the Partnership. Although this argument is not typical of the bases on which attorneys are removed by the trial court, we find the principles underlying disqualification useful in our analysis here. As we have noted, a "trial court's authority to disqualify an attorney derives from the power inherent in every court '[t]o control in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial proceeding before it, in every matter pertaining thereto.' [Citations.]" ( SpeeDee Oil , supra , 20 Cal.4th at p. 1145,
In general, "[c]onflicts of interest commonly arise in one of two factual contexts: (1) in cases of successive representation, where an attorney seeks to represent a client with interests that are potentially adverse to a former client of the attorney; and (2) in cases of simultaneous representation, where an attorney seeks to represent in a single action multiple parties with potentially adverse interests. The primary fiduciary value at stake in each of these contexts differs, and the applicable disqualification standards vary accordingly. In successive representation cases, 'the chief fiduciary value jeopardized is that of client confidentiality.' ( Flatt v. Superior Court (1994)
"The attorney's obligation to maintain client confidences-the duty central to successive representation conflicts-is confirmed by California statute. Business and Professions Code section 6068, subdivision (e) provides: 'It is the duty of an attorney to do all of the following:
*733[¶] ... [¶] (e)(1) To maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.' This obligation survives the termination of the attorney-client relationship ( SpeeDee Oil, supra , 20 Cal.4th at pp. 1144-1145,
D. Standing
Todd and the Partnership argue that James does not have standing to seek Roscoe's disqualification because James has never had an attorney-client relationship with Roscoe. They assert that Roscoe represents only the Partnership, and they rely on the rule from Responsible Citizens that " 'representation of a partnership does not, by itself, create an attorney-client relationship with the individual partners.' " ( Responsible Citizens , supra , 16 Cal.App.4th at p. 1731,
We review the question whether a party has standing to bring a disqualification motion de novo. ( Blue Water Sunset, LLC v. Markowitz (2011)
"Standing generally requires that the plaintiff be able to allege injury, that is, an invasion of a legally protected interest." ( Great Lakes Construction, Inc. v. Burman (2010)
In Dino , the court questioned "whether the issue is properly framed as one of standing," but agreed "that some sort of confidential or fiduciary relationship must have existed before a party is entitled to prevail on a motion to disqualify an attorney predicated on the actual or potential disclosure of confidential information ." ( Dino , supra , 145 Cal.App.4th at p. 353,
Applying the analytical framework from Dino here, we conclude that James was not required to have an attorney-client relationship with Roscoe to move to disqualify him. As we have noted, James's motion to disqualify was not based on simultaneous or successive representation, but rather on Roscoe's lack of authority to act on behalf of the Partnership in the first place. Whether James had an expectation of loyalty or confidentiality is not the issue here. Because this case is predicated on attorney Roscoe's alleged lack of authority to act on behalf of the Partnership, James was required to demonstrate that he had an interest in the question of whether Roscoe was properly authorized to represent the Partnership. We conclude that since a majority of the partners has not agreed to retain Roscoe ( § 15904.06, subd. (a) ), James, a general partner who owns 50 percent of the Partnership, has a sufficient interest to challenge Roscoe's authority to act in this case.
Johnson v. Superior Court (1995)
In summary, we conclude that because this is not a conflict of interest case, James was not required to have an attorney-client relationship with Roscoe to move to disqualify him. Since James moves to disqualify Roscoe based on a lack of authority for Roscoe to act on behalf of the Partnership, we conclude that because a majority of the partners have not agreed to retain Roscoe and James is a general partner with a 50 percent ownership interest in the Partnership and because Roscoe owed a duty to protect the Partnership's interests, which benefits all of the partners, James's interest was sufficient to challenge Roscoe's authority to represent the Partnership. For these reasons, we reject the Defendants' contention that James did not have "standing" to move to disqualify Roscoe. We thus consider the merits of the disqualification of Roscoe.
E. The Coldren Case
Defendants argue that the trial court's order disqualifying Roscoe as counsel for the Partnership should be reversed because James gave up the right to control the Partnership's defense when he sued it for partition. Relying on Coldren v. Hart, King & Coldren, Inc . (2015)
Coldren arose out of a dispute between two equal shareholders in a corporation. Robert Coldren owned 50 percent of the shares in Hart, King & Coldren, Inc. (HKC), a law firm. William Hart owned the other 50 percent interest in HKC. Both were officers and directors of the corporation. ( Coldren , supra , 239 Cal.App.4th at p. 241,
The court began "by setting forth the legal principles governing the disqualification of an attorney based on a conflict " of interest . ( Coldren , supra , 239 Cal.App.4th at p. 248,
Defendants' reliance on Coldren is misplaced. As we have noted, disqualification motions occur most commonly in the context of conflicts of interests between clients : when counsel's simultaneous representation of a current client is adverse to the interests of another current client or when counsel's successive representation of a current client is adverse to the interests of a former client and, by reason of the former representation, the attorney obtained confidential information material *737to the current representation. ( SpeeDee Oil , supra , 20 Cal.4th at pp. 1146-1147,
F. State Bar Opinion No. 1994-137, Partnership Agreements & the ULPA
Rules of ethics are one of the tools courts utilize when deciding whether disqualification is necessary to preserve the integrity of the of the judicial process. ( In re Complex Asbestos Litigation (1991)
The State Bar of California Standing Committee on Professional Responsibility and Conduct (the Committee) formal opinion No. 1994-137 (State Bar Opn. 1994-137) provides some guidance regarding an attorney's ethical considerations when undertaking the representation of a partnership. It addresses "a lawyer's ethical duties when in the course of representing a partnership the lawyer receives conflicting instructions from two of the partners in circumstances where it is unclear which partner's instruction the lawyer must follow." (State Bar Opn. 1994-137.)
The Committee notes that former Rule 3-600(A), which applies to partnerships, "states that in representing an organization, '... a member shall conform his or her representation to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement.' ... [¶] Accordingly, in representing a partnership a lawyer represents the partnership itself acting through the partner authorized to oversee *738the representation. Ordinarily, that means that the lawyer representing a partnership takes direction from its general partner, since limited partners cannot take part in the control of the partnership and retain the limited liability of a limited partner. [Citations.] However, in determining who oversees the representation in any given situation, a lawyer must conform to the requirements of the applicable statutes, the partnership agreement and any other pertinent agreements between the partners. [Citation.]" (State Bar Opn. 1994-137, citing Responsible Citizens , supra ,
Lack of clarity over who is authorized to oversee the engagement of the attorney for the partnership places the lawyer "in a position where he or she cannot follow one partner's instruction without violating the other partner's instruction. It is not a conflict of interest, because the lawyer has only one client, the partnership. It is, instead, a conflict of authority within the partnership over who oversees and instructs the partnership's lawyer." (State Bar Opn. 1994-137.) The Committee opines that a "lawyer in this situation is adrift in perilous waters. The lawyer's duty of loyalty requires the lawyer to act at a client's direction. A lawyer cannot act without the client's authorization. Nor can the lawyer take over the decision making for a client absent authority to do so. At the same time, a lawyer has a duty to competently represent the partnership as a client" and "cannot abdicate [that duty] in the face of a dispute among the partners." (State Bar Opn. 1994-137.) The Committee concludes that "a lawyer caught in this situation must first determine whether the partnership agreement or applicable law provide an answer as to who has the authority to instruct counsel. For example, if the partnership agreement states which partner has the authority to oversee the representation, the lawyer must conform the representation to those provisions and take instruction from that partner." (State Bar Opn. 1994-137.) This is consistent with section 15901.10, subdivision (a), which provides that subject to exceptions enumerated in subdivision (b), "the partnership agreement governs relations among the partners and between the partners and the partnership," and if the partnership agreement is silent, the ULPA governs such relations.
"While [former] rule 3-600 instructs a lawyer to take actions as appear to be in the best interests of the organization, a lawyer must recognize the limits of his or her function. A lawyer must be careful to maintain the role as a servant of the partnership and not assume the client's role in the lawyer-client relationship. Thus, the lawyer may render advice which he or she believes is in the best interests of the partnership. However, the lawyer cannot make decisions which are the partnership's to make. [¶] ... [W]here the lawyer cannot reasonably determine which partner's instruction the lawyer may follow, the lawyer cannot take any action for the partnership in connection with the matters in dispute, until the dispute is resolved. ... If the lawyer reasonably believes that he or she cannot effectively represent the partnership, the lawyer may withdraw." (State Bar Opn. 1994-137, footnote omitted.)
Although the Committee's opinion concludes by saying it is not binding on the courts, the opinion provides a helpful analytical framework. It suggests that in determining who has the authority to select counsel and direct the Partnership's defense, we look first to the terms of the partnership agreement.
In the absence of direction from the partnership agreement, the Committee's opinion directs us next to applicable partnership law. The motion to disqualify was based on section 15904.06, subdivision (a), which is part of the ULPA. It provides: "Each general partner has equal rights in the management and conduct of the limited partnership's activities. Except as expressly provided in this chapter, any matter relating to the activities of the limited partnership may be exclusively decided by the general partner or, if there is more than one general partner, by a majority of the general partners." We understand the term "majority" here to mean more than 50 percent. (See § 15901.02, subds. (s), (t), (v)(3).) Neither Todd nor James alone constitutes a majority of the general partners sufficient to decide matters relating to the Partnership, including the selection of counsel and the conduct of the litigation. Thus, neither the partnership agreement nor the applicable UPLA statutes resolve the issue of whether Roscoe's representation of the Partnership is authorized or lawful.
Defendants argue that the trial court's reliance on section 15904.06, subdivision (a) was misplaced. They argue that filing an action to "force the sale" of the Partnership's "sole property" falls under the "unanimous consent requirement" of section 15904.06, subdivision (b), which provides in relevant part: "[t]he consent of each partner is necessary to: [¶] ... [¶] (2) sell, lease, exchange, or otherwise dispose of all, or substantially all, of the limited partnership's property, ..., other than in the usual and regular course of the limited partnership's activities." In our view, Defendants' reliance on section 15904.06, subdivision (b) is misplaced. The issue presented by the motion to disqualify Roscoe is who has the authority to select and direct counsel on behalf of the Partnership, not who has the authority to sell or otherwise dispose of partnership property. Defendants have conflated the question of authority to sell the Adjacent Parcel-which they raised in their demurrers and which is not before us in this appeal-with the question of authority to select and direct counsel.
In their reply brief, Defendants also raise, for the first, time two arguments based on the statutory construction of section 15904.06, subdivision (a) and assert that under a different provision of the ULPA, Todd had the authority to unilaterally retain Roscoe. First, they argue that the majority rule in section 15904.06, subdivision (a) is qualified by the phrase "[e]xcept as expressly provided in this chapter" and that section 15904.02-a different statute in the same chapter-which they contend *740gives "each partner the power to act as an agent and bind the limited partnership in the ordinary course of business"-applies here. Second, they argue that by using the word "may" in the phrase "may be exclusively decided by ... a majority of the general partners" in section 15904.06, subdivision (a), the Legislature realized that there may be situations where less than a majority of general partners should be deciding the activities of the partnership, including when a partner sues the partnership. They do not cite any legal authority supporting these points and their description of section 15904.02 is cursory. Since these arguments were "neither timely nor fully made," and Defendants have not explained why they were not raised before, and James has not had an opportunity to respond, we will not address them further. ( Julian v. Hartford Underwriters Ins. Co . (2005)
G. Ethical Considerations
With no clear resolution from the partnership agreement or partnership law, we return to the Supreme Court's discussion of the values and interests at stake in a disqualification motion. The "paramount concern" in evaluating a motion to disqualify counsel "must be to preserve public trust in the scrupulous administration of justice and the integrity of the bar." ( SpeeDee Oil , supra , 20 Cal.4th at p. 1145,
As noted in State Bar Opinion 1994-137, an additional concern is whether Roscoe has stepped outside his role as counsel for the Partnership. An organizational client acts through its "duly authorized directors, officers, employees, members, shareholders of other constituents overseeing the particular engagement." (Rule 1.13(a); see also former rule 3-600 [organization acts "through its highest authorized officer, employee, body or constituent"].) "An organizational client can only act through individuals who are authorized to conduct its affairs" and it "is not within the lawyer's province to make decisions on behalf of the organization concerning policies and operations." (Comment to Rule 1.13, Standard Codes, p. 11.) Roscoe asserted below that "neither partner should participate [in] or direct the Partnership defense. ..." In contravention of the authorities cited above, by eschewing direction from either *741partner, Roscoe may have assumed the client's role in the attorney-client relationship. The fact that Roscoe took the position that he could represent the Partnership without direction from either partner is troubling in light of the relevant law under the ULPA and guidance provided by the State Bar.
We are persuaded that James has demonstrated a risk that Roscoe, who is being paid by Todd and directed by Todd, may advance Todd's interests; that his representation may not be in the best interests of the Partnership, and may unnecessarily deplete the Partnership's assets. Additionally, Roscoe has stated that he believes he can act on behalf of the Partnership without direction from either of the partners in contravention of Rule 1.13. These factors support our conclusion that the trial court did not err as a matter of law and acted within its discretion when it granted the motion to disqualify Roscoe as counsel for the Partnership.
H. Additional Values and Interests at Stake on Motion to Disqualify
Having determined that the factors discussed above support the trial court's decision to grant the motion to disqualify, we consider whether there are values and interests that militate against the trial court's decision to disqualify Roscoe. "A motion to disqualify a party's counsel may implicate several important interests. Consequently, judges must examine these motions carefully to ensure that literalism does not deny the parties substantial justice. [Citation.] Depending on the circumstances, a disqualification motion may involve such considerations as a client's right to chosen counsel, an attorney's interest in representing a client, the financial burden on a client to replace disqualified counsel, and the possibility that tactical abuse underlies the disqualification motion. [Citations.] Nevertheless, determining whether a conflict of interest requires disqualification involves more than just the interests of the parties." ( SpeeDee Oil , supra , 20 Cal.4th at pp. 1144-1145,
SpeeDee Oil recognized the "client's right to chosen counsel" as one of "several important interests" implicated in a motion to disqualify counsel. ( SpeeDee Oil , supra , 20 Cal.4th at p. 1145,
James responds that unlike Coldren, who resigned as a director of HKC and relinquished all authority to make corporate decisions to Hart, he (James) never relinquished his equal right to manage the Partnership. He asserts that if Coldren had not resigned, then the directors in that case would have been deadlocked, and Hart would not have been able to hire counsel unilaterally. He also suggests that Hart would have been able to seek relief under section 308, which authorizes the court to appoint a provisional director to break corporate deadlocks. We agree that Coldren is factually distinguishable on this basis. But Coldren was a conflicts of interest case and therefore did not discuss whether Hart had the authority to unilaterally consent to joint representation with HKC.
James also asserts that unlike Coldren, who sued HKC for damages, the partition action he filed seeks a remedy that is in the best interests of the Partnership and the partners. He argues that the "brothers ... have been embroiled in ongoing litigation for the past 16 years. They must disentangle from each other and disposing of these two properties is necessary to achieve that end." He argues they have an opportunity to maximize the value of the Two Parcels by selling them together and to convert the "unproductive" Adjacent Parcel "into more cash" than if it were sold alone. He asserts that it would be a breach of their fiduciary duties for the general partners not to sell the properties together. James argues Roscoe is acting "solely at the direction of Todd," and "simply pursuing Todd's agenda[,] which [James] believes to be injurious to the interests of the Partnership." We agree that this lawsuit is distinguishable from Coldren on this basis and that this distinction should be considered in evaluating this appeal. In addition, the motion to disqualify Roscoe appears to have been filed in best interests of the Partnership by seeking to avoid assertedly unnecessary and duplicative attorney fees.
In SpeeDee Oil , the Supreme Court also identified the financial burden on the client to replace disqualified counsel as an important interest implicated by a motion to disqualify. ( SpeeDee Oil , supra , 20 Cal.4th at pp. 1144-1145,
We also consider whether tactical abuse underlies the motion and examine whether the motion was misused to harass opposing counsel, to delay the litigation, or to intimidate an adversary into accepting settlement on terms that would not otherwise be acceptable. ( SpeeDee Oil , supra , 20 Cal.4th at p. 1145,
Having reviewed the important interests and factors that our Supreme Court described in SpeeDee Oil , we conclude that the trial court did not err when it granted the motion to disqualify attorney Roscoe. The most important of these factors are the "ethical considerations that affect the fundamental principles of our judicial process." ( SpeeDee Oil , supra , 20 Cal.4th at p. 1145,
I. Alternatives to Representation
We next address the question of alternatives to representation by Roscoe. Defendants argue that the alternatives to having Roscoe represent the Partnership that James suggested are improper, prejudicial, and inconsistent with the court's order on the demurrer in Case No. 1295. Those alternatives included stipulating to an appearance by the Partnership and allowing the brothers to litigate the matter, or appointing a tie-breaking provisional partner, neutral counsel, or a receiver. The court's order does not say which, if any, of these alternatives it selected.
The Corporations Code provides a mechanism for breaking corporate deadlocks. When a corporation "has an even number of directors who are equally divided and cannot agree" on the management of corporate affairs so that the corporation's "business can no longer be conducted to advantage" or there is "a danger that its property or business will be impaired *744or lost," section 308, subdivision (a), authorizes a court to appoint a "provisional director" to break the deadlock, regardless of the terms of the articles or the bylaws and whether or not an action for involuntary winding up or dissolution of the corporation is pending. An action for such appointment may be brought by any director or by the holders of not less than one third of the voting power in the corporation. (§ 308, subd. (a).) The provisional director "acts as a 'tiebreaker' when a deadlock exists ...." ( In re ANNRHON, Inc . (1993)
There are no comparable provisions in the ULPA that authorize a court to appoint a provisional general partner in the case of a deadlocked limited partnership. But section 15901.07, subdivision (a), which is part of the ULPA, says that "[u]nless displaced by particular provisions of [the ULPA], the principles of law and equity supplement [the ULPA]." The parties have not briefed the question whether the court had the authority in equity to appoint a provisional partner to break deadlocks pending resolution of the litigation.
James argues: "Todd is already a party to the action, and can voice his opposition in as full-throated a manner as he so chooses. As discussed below, the Partnership can also be represented should the trial court require it. However, that attorney cannot be hired and directed by either Jim or Todd alone as neither has the requisite power to do so. Before counsel could be hired, there would need to be a break in the deadlock on an entity level. The trial court, acting in equity, is in the best position to determine how that can best be achieved."
Based on their briefing below, we conclude there is substantial evidence that the brothers, who represent opposing views on the propriety of the partition action, can adequately articulate their positions and guide the trial court in determining what is in the best interests of this two-person partnership. There are no other general partners or limited partners whose interests might conflict with the brothers' interests in the Partnership. James's counsel stated at oral argument that James had no intention of taking the Partnership's default. And as we have noted, by filing a demurrer, the Partnership has prevented its default from being taken.
In the unique circumstances of this case, we conclude the trial court did not err as a matter of law, and therefore did not abuse its discretion when it granted the motion to disqualify attorney Roscoe. Since this is an equitable action for partition, and given the court's inherent power to "control in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial proceeding before it" ( Code Civ. Proc., § 128, subd. (a)(5) ), we leave it to the trial court to fashion the appropriate remedy. The trial court may decide that the brothers can adequately articulate the issues presented in this partition action and that the Partnership therefore does not require separate counsel. However, the court may wish to explore options for resolving deadlock at the entity level and consider the appointment of a receiver, neutral counsel, or other neutral to protect the interests of the partners and the Partnership. Again, that is for the trial court to decide in the exercise of its inherent and equitable powers.
III. DISPOSITION
The trial court's order on the motion to disqualify attorney Roscoe is affirmed.
WE CONCUR:
Elia, J.
Danner, J.
For ease of reference, we will refer to the brothers by their first names.
Todd has not appealed the order overruling his demurrer. "An order overruling a demurrer is not directly appealable, but may be reviewed on appeal from the final judgment. [Citation.]" (Casterson v. Superior Court (2002)
The three appeals arising out of the trust litigation (Monterey County Superior Court case No. P31598) are McDonnell v. Jarvis,
James holds his 50 percent interest in the Partnership in his individual capacity and as trustee of three trusts: (1) the 1987 James A.P. Jarvis Revocable Trust for the benefit of the Issue of James Alvin Jarvis; (2) the 1987 Marjorie Todd Jarvis Revocable Trust for the benefit of the Issue of James Alvin Jarvis; and (3) the 1986 Jarvis Irrevocable Trust. James, individually and as trustee of the three trusts, is the plaintiff in this partition action.
Todd's requests for judicial notice of the complaint filed in Case No. 1295 and the trial court's September 13, 2016 order sustaining the demurrer and granting the motion to strike in that case are granted. (Evid. Code, §§ 459, subd. (a) ; 452, subd. (d).)
All undesignated statutory references are to the Corporations Code.
Further rules citations are to the State Bar Rules of Professional Conduct. Under new rules that were adopted by the Board of Trustees of the State Bar in September 2018 and approved by the Supreme Court with revisions effective November 1, 2018, former Rule 3-310(C) has been renumbered Rule 1.7. (2 Standard California Codes 6-in-2 (2019 ed.) Rules of Professional Conduct, pp. i, vi, 6-7 (Standard Codes).)
Former Rule 3-600 has been amended and renumbered Rule 1.13, effective November 1, 2018. (Standard Codes, supra , p. vi.) Rule 1.13 provides: "A lawyer employed or retained by an organization shall conform his or her representation to the concept that the client is the organization itself, acting through its duly authorized directors , officers , employees , members, shareholders or other constituents overseeing the particular engagement." (Changes in the wording of the rule have been italicized.)
In support of his demurrer, Todd asked the trial court to judicially notice the partnership agreement and other documents related to the ownership of Jarvis Properties. The trial court properly denied the request for judicial notice in the context of Todd's demurrer. However, James attached a copy of the partnership agreement as an exhibit to the complaint in Case No. 1295, and we have granted Todd's request to judicially notice the complaint in that case.
We recognize that there is limited legal authority and guidance for counsel regarding the legal and ethical issues raised in this case. We accept Roscoe's representation at oral argument that he investigated the legal and ethical questions raised by his representation of the Partnership in good faith.
For example, in a petition filed in the trust litigation, the trustee told the court that although Todd had originally nominated him as trustee, Todd had become increasingly hostile toward the trustee, which dramatically increased the costs of trust administration. In his August 2015 petition to terminate the trust and distribute the trust proceeds, the trustee asked the court to allocate over $1 million of the cost of trust administration to Todd and alleged Todd's deliberate bad faith attempts to interfere with trust administration had caused fees and costs to skyrocket.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.