Dependent Counsel’s Motion to Withdraw

Introduction

A motion by dependent counsel to withdraw is one of the most efficient available procedures[1] by which a trial court may determine whether a liability insurer’s reservation of rights creates a disqualifying conflicts of interest.[2] Regardless of the procedure employed, this issue of law should “be determined without forcing the insured to litigate issues that may arise in the third party action.”[3] The legal test for identifying a disqualifying conflict is whether any issue in a liability action is related to an issue on which coverage turns.[4]

Dependent counsel’s motion to withdraw requires trial court permission on a noticed motion with safeguards so as not to prejudice the rights of the policyholder. The trial court has discretion to determine whether dependent counsel does or does not have a disqualifying conflict of interest and should require evidence of the nature of the conflict of interest without violating attorney-client confidentiality or evidentiary privileges to the detriment of the policyholder/client.

Court Permission Required

Code of Civil Procedure §284 provides: “The attorney in an action . . . may be changed at any time . . . as follows: 1. Upon the consent of both client and attorney . . .; 2. Upon the order of the court, upon the application of either client or attorney, after notice from one to the other.” “[A]ttorneys do not have an absolute right to withdraw from representation at any time with or without cause.”[5]

Required Contend of Motion to Withdraw

Rules of Court, Rule 3.1362 prescribes the procedure by which counsel may withdraw. A noticed motion on form MC-051 must be filed and a proposed order on form MC-053 must be lodged, both of which are to be served on the client and on all other parties. No memorandum of points and authorities is required. A declaration on form MC-052 is required. The declaration must not compromise client confidentiality.

No Prejudice to Client’s Rights

RPC, Rule 3-700 governs termination of a lawyer’s employment. In addition to seeking court permission to withdraw,[6] a lawyer “shall not withdraw from employment until the member has taken reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client.” The Rule enunciates no limits as to the type of prejudice which must be avoided on a motion to withdraw.

Withdrawal Is Authorized for Cumis Conflicts of Interest

Rule 3-700 makes withdrawal mandatory if the lawyer “knows or should know that continued employment will result in violation of these rules or of the State Bar Act” (emphasis added) and is permissive for the lawyer if “continued employment is likely to result in a violation of these rules or of the State Bar Act.” (Emphasis added.) “This rule imposes a duty to withdraw where there is a prospective violation of another Rule of Professional Conduct (e.g., rule against representing conflicting interests) or a provision of the State Bar Act.”[7] “Conflicts [of interest] come in all shapes and sizes. The following list, by no means exhaustive, illustrates circumstances giving rise to a conflict: . . . (5) there is a conflict between the interest of the insurer and the insured which in turn creates a conflict for counsel hired by the insurer to represent the insured. (San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal. App. 3d 358, 364.)”[8] Insurer-policyholder conflicts are governed by the Cumis rule.[9]

The Trial Court Has Discretion

“The determination whether to grant or deny a motion to withdraw as counsel lies within the sound discretion of the trial court.”[10] In the exercise of such discretion, “the trial court has the power to control in furtherance of justice, the conduct of its ministerial officers. It is vested with the solemn duty to maintain professionalism and ethics in the matters that are brought before it.”[11] “The trial court need not ‘accept a sweeping claim of conflict and “rubber stamp” counsel’s request to withdraw.’ . . . [Instead,] the court [has a] duty of inquiry or the attorney’s obligation to provide information about the conflict. . . . The trial court still has a duty to explore the conflict, and counsel has a corresponding duty to respond, and to describe the general nature, as fully as possible but within the confines of privilege.”[12] The trial court may hold an in camera hearing to protect confidential information at which the client must be given an opportunity to be heard.[13]

Client’s In Pro Per Status

On a motion to withdraw, it is quite likely that the policyholder will be unrepresented, since if newly retained counsel would usually simply sign a substitution of attorney form. When the insurer has been funding conflicted dependent counsel and declines to provide unconflicted counsel, it is quite likely that the abandoned policyholder will be without counsel. If this occurs, the trial court should be sensitive the need of a unsophisticated, lay client. “Trial judges must acknowledge that in propria persona litigants often do not have an attorney’s level of knowledge about the legal system and are more prone to misunderstanding the court’s requirements. When all parties are represented, the judge can depend on the adversary system to keep everyone on the straight and narrow. When one party is represented and the other is not, the lawyer, in his or her own client’s interests, does not wish to educate the in propria persona litigant. The judge should monitor to ensure the in propria persona litigant is not inadvertently misled, either by the represented party or by the court. While attorneys and judges commonly speak (and often write) in legal shorthand, when an in propria persona litigant is involved, special care should be used to make sure that verbal instructions given in court and written notices are clear and understandable by a layperson. This is the essence of equal and fair treatment, and it is not only important to serve the ends of justice, but to maintain public confidence in the judicial system.”[14]

Adequacy of Court Order

While a proposed order on form MC-053 must be lodged with the motion, the trial court must take care that the final order satisfies the requirements of Code of Civil Procedure §284, Rules of Court, Rule 3.1362, Rules of Professional Conduct, Rule 3-700 A failure to enter an adequate order may invalidate later proceedings in the action.[15]

When the appropriateness of withdrawal of dependent counsel turns on whether a disqualifying Cumis conflict exists, the trial court should take evidence regarding the nature of the conflict (perhaps in camera), evaluate whether the insurer’s reservation of rights raises any issue which is related to any issue of fact or law raised in the liability lawsuit, and issue a clearly worded order stating that dependent counsel does or does not have a disqualifying conflict. The court of appeal has specified the content of proper judicial analysis. “The trial court can obtain and review the evidentiary claims and supporting affidavits and exhibits in order to make its decision. In doing so it should determine: (1) what is the exact nature of the claims asserted in the underlying action, (2) what defenses to coverage are asserted by the insurers, and to what extent, if at all, are they logically related to the liability issues raised in the underlying action, (3) what factual questions have to be resolved in order to sustain or defeat such defenses, (4) what is the likely nature of the available evidence, [and] (5) to what extent, if at all, will [the policyholder] suffer prejudice by . . . the evidence which tends to support or defeat its claim of coverage or the defenses raised by the insurers.” [16]


[1] Other more time consuming and expensive procedural options include: 1) A separate coverage lawsuit for declaratory relief (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 306 (Montrose)); 2) a motion to stay or dismiss a pending coverage lawsuit (Ibid. (“If the trial court determines that the facts on which the insurer relies are disputed and may be litigated in the liability action, the court should deny summary judgment and stay or dismiss the declaratory relief action.” See also, Haskel, Inc. v. Superior Court (1995) 33 Cal.App.4th 963 (Haskel);) and 3) a motion by the policyholder to disqualify conflicted dependent counsel. (Fracasse v. Brent (1972) 6 Cal.3d 784, 790 (“It has long been recognized in this state that the client’s power to discharge an attorney, with or without cause, is absolute.”)

[3] Montrose, supra, 6 Cal.4th at 305.

[4] “The paradigm case requiring independent counsel is one in which the way counsel retained by the insurance company defends the action will affect an underlying coverage dispute between the insurer and the insured.” (Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1395.)

[5] Cal. Practice Guide: Professional Responsibility (The Rutter Group 2014) ¶10:21 (Rutter).

[6] Code Civ. Proc. § 284.

[7] Rutter, supra, ¶10:28.

[8] Manfredi & Levine v. Superior Court (Barles) (1998) 66 Cal.App.4th 1128, 1134-1135 (Manfredi) (citations, quotation marks and ellipses omitted.)

[9] “We conclude the Canons of Ethics impose upon lawyers hired by the insurer an obligation to explain to the insured and the insurer the full implications of joint representation in situations where the insurer has reserved its rights to deny coverage. If the insured does not give an informed consent to continued representation, counsel must cease to represent both.” (San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 375); See, Article: Cumis Rule.

[10] Manfredi, supra, 66 Cal.App at 1133.

[11] Id. at 1132. (Emphasis added. Citations, quotation marks and ellipses omitted.)

[12] Id. at 1133.

[13] Id. at 1136.

[14] Gamet v. Blanchard (2001) 91 Cal.App.4th 1276, 1284.

[15] Urethane Foam Experts, Inc. v. Latimer (1995) 31 Cal.App.4th 763, 766-767.

[16] Haskel,supra, 33 Cal.App.4th at 980.

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