## Facts

- David Welch Co. (Welch) operated as a licensed collection agency collecting delinquent employer contributions owed to multiple employee-benefit trust funds.
- Erskine & Tulley (E&T), a law corporation, and attorney Michael Carroll served as Welch’s outside counsel for several years in connection with this collection work.
- Welch presented evidence that it trained E&T in specialized trust-fund collection methods, provided access to confidential business information, and introduced E&T to the trust-fund trustees as Welch’s attorneys.
- The attorney–client relationship ended in December 1980.
- After termination, E&T began performing the same collection work directly for the same trust funds that had been Welch’s clients, effectively supplanting Welch.
- Welch alleged E&T and Carroll used confidential information and the trust gained from representation to divert Welch’s clients and business opportunities without informed consent.
- After a bench trial, the trial court found a breach of fiduciary duty and ordered disgorgement of $350,000, imposed as a constructive trust.
- The trial court had earlier ruled that alleged violations of the Rules of Professional Conduct, standing alone, do not create civil damages liability.

## Issues

1. Whether former counsel breached fiduciary duties by using information and access obtained during representation to take the former client’s business and customers without informed consent.
2. Whether professional-conduct rules may be used to define the content of fiduciary duty even though rule violations do not, by themselves, create civil liability.
3. Whether the claim was governed by the one-year attorney-malpractice limitations period or the four-year limitations period for fiduciary/equitable claims.
4. Whether a constructive trust and $350,000 disgorgement award were proper and supported by substantial evidence.
5. (Cross-appeal) Whether the trial court improperly limited Welch’s recovery to $350,000 and to the named defendants.

## Decision

- The Court of Appeal affirmed the judgment for Welch on the fiduciary-duty claim.
- The court held substantial evidence supported findings that E&T and Carroll used advantages and confidences obtained through the attorney–client relationship to appropriate Welch’s business.
- The court held the four-year statute of limitations for fiduciary/equitable claims applied, not the one-year attorney-malpractice statute.
- The court affirmed imposition of a constructive trust and the $350,000 disgorgement remedy as equitable relief for breach of fiduciary duty.
- The court rejected Welch’s cross-appeal and left intact the trial court’s limitation of recovery to $350,000 and to the specified defendants.

## Legal Principles

- The attorney–client relationship imposes fiduciary duties of utmost loyalty and good faith that can constrain an attorney’s conduct even after the representation ends.
- An attorney may not, without full disclosure and informed consent, use client confidences, specialized know-how, or access obtained during representation to capture the client’s business opportunities or customers.
- Rules of Professional Conduct do not themselves create a civil cause of action for damages, but they may inform the standard of care and help define the scope of an attorney’s fiduciary duties.
- A claim framed as breach of fiduciary duty may be governed by the four-year limitations period applicable to fiduciary/equitable claims rather than the one-year attorney-malpractice period.
- When a fiduciary profits from a breach of duty, equitable remedies may include a constructive trust and disgorgement of benefits attributable to the breach.

## Conclusion

The court held that former attorneys who used client confidences and relationship-derived access to take the client’s collection business breached fiduciary duty, warranting equitable disgorgement and a constructive trust, and that the claim was timely under the four-year limitations period; the trial court’s limits on recovery were affirmed.


David Welch Co. v. Erskine & Tulley, 203 Cal. App. 3d 884 (Cal. Ct. App. 1988)