Let’s say that a number of years ago, your company hired ABC Law Firm to prepare a form of agreement for you to use with your independent sales representatives.  ABC Law Firm sent you a retainer agreement, which provided that ABC Law Firm was representing your company in that matter.  To avoid the necessity of ongoing retainer agreements for additional work that you might ask ABC Law Firm to do, their retainer agreement also provided that they would represent your company in future legal matters that you requested and that they accepted.

Over the years, you called ABC Law Firm about specific clauses that individual sales representatives wanted to negotiate to the form agreement that ABC Law Firm had prepared.  For these additional services, ABC Law Firm billed you, and you paid the invoices.  But since then, you haven’t had the occasion to use them.

Today, you were served in a lawsuit brought by a vendor against your company.  You believe you have some good defenses to this lawsuit.  In fact, you’ve been aware of this dispute for some time, and the fact that the vendor finally filed a lawsuit is not a surprise to you.

What is a surprise to you is who is representing the vendor in the lawsuit against your company—ABC Law Firm.  You ask yourself: Isn’t ABC Law Firm our lawyer?  How can they represent the vendor against us?

That was the question in a recently-decided California appellate case, Banning Ranch Conservancy v. Superior Court, 193 Cal. App. 4th 903 (2011).  Based on the facts of that case, the Court determined that the law firm could not be disqualified from representing what was determined to be its former client.

In Banning Ranch, a city (“City”) had hired a law firm (“Law Firm”) to represent it in 2005.  The Law Firm’s retainer agreement provided that the agreement would govern not only the initial matter referred to the Law Firm, but any future work that the City might ask the Law Firm to undertake, and to which the Law Firm agreed.  

The Law Firm did work for the City, apparently fairly minimal, in 2005 and 2006.  Since that time, however, the Law Firm had done no work for the City, and the City had hired various other law firms to handle various matters.  The Law Firm was now proposing to represent a client adverse to the City in a totally unrelated lawsuit.

The City and its lawyers sought to disqualify the Law Firm from representing the other party to the lawsuit against the City.  The case really turned on the question of whether the City was the Law Firm’s current or former client.  If the City was the law Firm’s current client, disqualification was automatic.  If the City was the Law Firm’s former Client, disqualification was highly unlikely due to fact that the litigation and the prior legal representation were from a factual standpoint substantially unrelated matters.

In support of its position, the City argued that the 2005 retainer agreement had never been terminated, and that therefore the City was a current client of the Law Firm.  The trial court had agreed with this argument, and had disqualified the Law Firm.

On appeal, the Law Firm looked to the plain language of the 2005 retainer agreement, which expressly stated that new matters which the City wanted to refer to the Law Firm were subject to acceptance by the Law Firm, and that the Law Firm might not be able in all cases to accept new matters, depending on factors such as conflicts of interest and workload.

In reversing the order of the trial court, the Court of Appeal agreed with the Law Firm’s reading of the 2005 retainer agreement.  The Court found that retainer agreement to be a “framework” retainer agreement, which would allow the parties to agree to subsequent representations without the necessity of a new writing; but unlike a “true” retainer agreement (where a lawyer is paid a fee to make himself available to a client), the “framework” retainer agreement did not of itself create an ongoing current attorney-client relationship between the parties.  

The Court also did not find any extrinsic evidence that the City continued to be the Law Firm’s client.  

Finally, the Court did not view the 2005 retainer agreement as having had to have been terminated for the City to be the Law Firm’s former client.  

The result was that the Law Firm was free to represent its new client in the litigation with the City.