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Petitioner retained the law firm Shute, Mihaly & Weinberger (Shute) to challenge the City of Newport Beach’s (City) plan to a build a highway on its land. The City responded with a motion to disqualify the law firm, arguing that it was a current client of Shute thus creating a conflict of interest. The trial court granted the City’s motion. On appeal in the Fourth District Court of Appeal, the Court disagreed and found for the Petitioner. The Court explained that a motion to disqualify can be filed only if there is a substantial relationship between the party of current representation and the party of former representation. Knowledge of a former client’s general business practices is not sufficient enough to disqualify; former representation of a party alone does not prohibit future representation of an opposing party. The Court explained that according to California law, there must be a continuity of representation, which is shown with evidence of an ongoing mutual relationship and events that further the relationship. In this case, the Court found no such evidence. The Court ruled that the fee agreements entered into several years ago were not “classic” retainer agreements, which would have committed Shute to any future legal representation no matter the circumstances. The Court held that the fee agreements only constituted a “framework” retainer agreement. Any future relationship between the two must be requested by the City and confirmed by Shute. Absent these actions and based on extrinsic evidence, the city is not currently a client of Shute. The Court also held that the firm’s previous representation of the City had no substantial relationship to the matter at hand.

Key Point:

Retainer agreements with clearly defined terms are critical to ensure both clients and law firms understand the roles and responsibilities with respect to one another.

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