An attorney who served on the board of directors and then as Executive Director of a residential school for children with autism is not disqualified from representing a family claiming mistreatment of their child more than 5 years after the lawyer left the school.  A federal District Court in California has ruled that there is no “substantial relationship” between his role with the school and the issues of the current litigation.  (McElroy v. Pacific Autism Center for Education, N. D. CA, No. 14-CV-04118, 5/13/15.)

David Tollner, a practicing attorney, joined the board of directors of the Pacific Autism Center for Education (“PACE”) in 1996. In his role as a director, Tollner’s duties included “attending board meetings, approving financial decisions, and ensuring that the organization remained viable,” the Court reported.  The parties agreed that he had not served as an attorney for the School during his service on the board.

IN 2002, he deactivated his law license and became Executive Director of the School, a position he held until 2005.  In 2006, he reactivated his law license and began to develop a private practice in special education and rights of children with special needs.

George and Gia McElroy placed their son, who was then 12 years old, at PACE in 2010.  They claimed he was in good physical and emotional health at the time, but began a “downward spiral” shortly thereafter.  They claimed that he was mistreated and abused while in the care of the School and filed suit in 2014.  Tollner became co-counsel for the plaintiffs in the same year.  PACE moved to disqualify him because of his prior role at the School.

The Court looked first at Rule 3-310 of the California Rules of Professional Conduct that bars an attorney from representing successive clients without informed written consent where “by reason of the representation of the client or former client, the [lawyer] has obtained confidential information material to” the engagement.  Based on the agreement that Tollner never acted in any legal capacity for PACE, the Court held that the Rule did not apply and could not be used as a basis for disqualification.  The Court said the Rule applied “only in the context of attorney-client relationships.”

PACE nevertheless argued that he should be disqualified based on his prior fiduciary relationship with the School.  It cited a 1983 state appellate court case that disqualified an attorney for representing “conflicting interests.”  The decision was based on former Rule 5-102, which had been interpreted to include interests that arise from an attorney’s relationship with a non-client.  But that Rule was eliminated when the state Supreme Court adopted the revised Rules of Professional Conduct. The federal Court noted that the California Supreme Court had not ruled on the viability of the concept of disqualification arising from relationships with persons other than clients and that other courts were split on the question.  The federal Court ruled, however, that even if the old Rule were still viable, the School had not shown that Tollner’s prior non-attorney relationship created a conflict of interest.

The 1983 case, it said, involved concurrent relationships, not successive relationships as in the present case.  “Moreover, while Mr. Tollner may have had a duty of loyalty to PACE while serving as its Executive Director, at best he only owes a duty to keep the confidences he acquired during his tenure, which ended in 2005,” it wrote.  The fiduciary duties of a director or trustee terminate when the director or trustee ends his or her tour of duty, it said.  State cases applying the old Rule have applied a “substantial relationship” test similar to the test under Rule 3-310, the

Court said.  Applying that test, it found no substantial relationship between Tollner’s role through 2005 and the current case.

The School argued that the lawsuit was really an attack on PACE’s management policies and was therefore related to Tollner’s prior role, that he acquired information about PACE’s operations and financial information, and that he had signed a confidentiality statement.

The Court responded that the case was limited to conduct five years after Tollner left PACE and that he was not responsible for any policy decisions relevant to the case.  It saw no reason his knowledge of financial information and operational practices more than 10 years old could be relevant and found the School’s arguments “unpersuasive.”  And it said the confidentiality statement dealt primarily with student medical and financial records.  It said the School had not shown how any knowledge of the “inner-workings of PACE” from years ago could affect the case.

The Court concluded that Tollner’s prior employment “bears no factual or legal relationship to the present dispute” and declined to disqualify him from the case.  It noted that “the business of the court is to dispose of litigation and not to oversee the ethics of those that practice before it unless the behavior taints the trial.”  It did not pass on whether, or to what extent, Tollner continues to owe any fiduciary duties to PACE, but held that the School had “failed to meet their burden to show entitlement to the drastic remedy of disqualification.”

YOU NEED TO KNOW

The Court blithely accepted the agreement that the attorney had no attorney-client relationship while serving on the board of the school.  While it may happen, we have always taken the position that an attorney on the board should assume that there is an attorney-client relationship because the attorney will be asked for legal advice (or at least what other board members consider legal advice) and the attorney will give it.  (Failure to respond with the lawyer’s knowledge about a legal issue may be a breach of fiduciary duty as a director.)  But the Court seems to have reached the proper result, because even if the lawyer were representing a new client against a former client, there was no showing that the attorney had acquired any confidential information material to the engagement.