City & County of San Francisco v. Cobra Solutions, Inc.

135 P.3d 20, 43 Cal. Rptr. 3d 771, 38 Cal. 4th 839, 2006 Cal. Daily Op. Serv. 4709, 2006 Daily Journal DAR 6880, 2006 Cal. LEXIS 6517
CourtCalifornia Supreme Court
DecidedJune 5, 2006
DocketS126397
StatusPublished
Cited by108 cases

This text of 135 P.3d 20 (City & County of San Francisco v. Cobra Solutions, Inc.) is published on Counsel Stack Legal Research, covering California Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City & County of San Francisco v. Cobra Solutions, Inc., 135 P.3d 20, 43 Cal. Rptr. 3d 771, 38 Cal. 4th 839, 2006 Cal. Daily Op. Serv. 4709, 2006 Daily Journal DAR 6880, 2006 Cal. LEXIS 6517 (Cal. 2006).

Opinions

[843]*843Opinion

KENNARD, J.

A company seeking contracts for information technology services to a city retained a small private law firm. Two attorneys in the firm provided various services to the company, advising it about doing business with the city. Fifteen months later, one of those attorneys successfully won election as the city attorney. Before taking office, the new city attorney announced he would personally not participate in any case involving a client of his former law firm.

Fifteen months after the new city attorney was sworn in, his office named the company as a defendant in a complaint seeking damages for the city on allegations of fraud, statutory violations, and breach of contract. The company sought to disqualify the city attorney’s entire office, arguing that as its former attorney he had obtained confidential information about it that precluded him, and the public office he now headed, from representing the city against it in a matter substantially related to the city attorney’s former representation of the company. The trial court disqualified the city attorney and his office. The Court of Appeal upheld that ruling in a two-to-one decision. We affirm the Court of Appeal.

I. Background

The facts and dates recited here are drawn from declarations and exhibits submitted on the motion to disqualify and from a written contract between the City and County of San Francisco (hereafter City) and Cobra Solutions, Inc., and TeleCon Ltd., two California corporations. Cobra Solutions is in the business of providing “computer products, accessories and related professional services.” On October 1, 1998, the related entities of Cobra Solutions and TeleCon Ltd. entered into a contract with the City—the so-called City Store Contract—which qualified them to bid on contracts for technology goods and services provided to various City departments, including the department of building inspection.

In September 2000, Cobra Solutions retained the law firm of Kelly, Gill, Sherburne and Herrera, seeking advice on difficulties the company had encountered in performing a City contract with the department of building inspection (Department). According to James Brady, the president and chief executive officer of Cobra Solutions, the law firm continued to represent it “in all matters” until December 2001, and it also provided legal services for TeleCon “on several occasions.”

In September of 2001, then City Attorney Louise Renne began investigating contracts for computer services entered into by the Department. The investigation revealed irregularities in payments made to Marcus Armstrong, a Department employee.

[844]*844On December 11, 2001, Dennis Herrera, a named partner in Kelly, Gill, Sherburne and Herrera, was elected San Francisco City Attorney (City Attorney). Herrera was sworn into office on January 8, 2002, and he adopted a blanket policy of not participating in any matter involving his former law firm or any of its clients regardless of whether he had a conflict in any particular matter. When Herrera assumed office, the City Attorney’s investigation of Marcus Armstrong was already underway; results of that investigation led the City Attorney’s Office to file a civil complaint on February 10, 2003, naming various defendants, including Armstrong, and alleging causes of action arising from what was characterized as a kickback scheme by which Armstrong received payments from computer service providers for services they never performed.

On the same day the complaint was filed the City Attorney’s office issued a press release under the heading, “HERRERA NAMES TOP BUILDING DEPARTMENT OFFICIAL, TECHNOLOGY VENDORS IN MAJOR PUBLIC CORRUPTION SUIT.” In that press release, City Attorney Herrera denounced “Mr. Armstrong and his cronies” for betraying “a public trust,” and asserted that “[p]ublic corruption diminishes the confidence of our citizens in their government.” According to the press release, the lawsuit was the product of “a yearlong investigation by the City Attorney’s Public Integrity Task Force,” which Herrera created on taking office and which he described as a “vehicle for civil law enforcement enabling us to aggressively pursue those who would violate the public trust.”

Because the allegations in the City’s lawsuit implicated Armstrong in possible criminal misconduct, the City Attorney’s Office referred the matter to the United States Attorney for the Northern District of California. The federal prosecutor filed criminal charges against Armstrong, who later pleaded guilty to federal charges of mail fraud, wire fraud, and obstruction of justice.

In March 2003, the City’s investigators discovered that Armstrong had deposited more than $240,000 in checks from Cobra Solutions into the bank account of a fictitious business entity he created. When City Attorney Herrera learned that the investigation implicated his former client Cobra Solutions in the kickback scheme, he took measures to screen himself from the case to the extent that it could involve the former client. To maintain the ethical screen, attorneys working on the case were directed to report to Chief Assistant City Attorney Jesse Smith and not to discuss the case with Herrera. Those attorneys maintained locked files and computerized records that were inaccessible to Herrera.

On April 21, 2003, the City filed an amended complaint adding Cobra Solutions and TeleCon Ltd. as defendants. In addition to causes of action for [845]*845fraud, unfair competition, and false claims that the complaint alleged against all defendants, it also alleged causes of action against Cobra Solutions and TeleCon Ltd.1 for negligent misrepresentation and contractual claims arising from breach of the City Store contract.

Cobra moved to disqualify from the litigation its former counsel Herrera and the City Attorney’s Office he heads. In support of the motion, Cobra submitted a bill dated April 13, 2001, showing a charge of four-tenths of an hour attributable to Herrera’s “[rjeview of City Store contract document.” Cobra’s president asserted that he and his employees disclosed to Gill and to Herrera “confidential aspects of Cobra’s business” in the course of a representation that was “broad” enough to include “advocacy with City officials,” review of contracts, advice on corporate structure, and drafting of standard agreements, forms, and policies. After a hearing, the trial court granted Cobra’s disqualification motion, finding that City Attorney Herrera, while in private practice, had personally represented defendants, and that during that representation he had “obtained confidential information” regarding “matters related substantially to the issues raised against defendants in this litigation.” The trial court concluded that Herrera’s conflict must be imputed to the entire City Attorney’s Office because “the personally-conflicted counsel is the head” of that office, and “each of his deputies serves at his pleasure,” subjecting them “necessarily to his oversight and influence.” Accordingly, the tried court ordered the City to “retain outside independent counsel to litigate this matter.” The City Attorney appealed.

In a two-to-one decision, the Court of Appeal upheld the trial court’s ruling. It concluded that when “an attorney leaves private practice to become the head

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135 P.3d 20, 43 Cal. Rptr. 3d 771, 38 Cal. 4th 839, 2006 Cal. Daily Op. Serv. 4709, 2006 Daily Journal DAR 6880, 2006 Cal. LEXIS 6517, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-county-of-san-francisco-v-cobra-solutions-inc-cal-2006.