## Facts

- Truck Insurance Exchange (Truck) defended Kaiser Cement and Kaiser Gypsum in extensive asbestos litigation and incurred over $17 million in defense costs.
- Truck and the Kaiser entities sued Fireman’s Fund Insurance Company (FFIC) and other insurers for contribution and indemnity for defense and related obligations.
- After Truck’s original counsel in the contribution action was disqualified, Truck sought to substitute the law firm Crosby, Heafey, Roach & May (Crosby).
- Crosby was representing Fireman’s Fund Credit Union (FFCU), an FFIC affiliate, in two wrongful-termination lawsuits.
- Crosby identified the conflict, sought FFIC’s consent, and offered to withdraw from the FFCU matters, transition new counsel, and waive fees; FFIC refused and demanded Crosby continue representing FFCU.
- Crosby accepted Truck’s representation, moved to withdraw from the FFCU matters, arranged substitute counsel for FFCU, transferred the files, and completed the transition.
- FFIC moved to disqualify Crosby from representing Truck, arguing the matter required automatic disqualification based on concurrent representation of adverse current clients.
- The trial court disqualified Crosby, treating the conflict as concurrent and applying the automatic-disqualification rule.

## Issues

1. Whether Crosby’s conflict should be analyzed under the automatic disqualification rule for concurrent adverse representation of current clients or under the former-client substantial-relationship test after Crosby withdrew from representing FFCU.
2. Whether the prior FFCU wrongful-termination representations were substantially related to the insurance contribution litigation such that disqualification was required.

## Decision

- The Court of Appeal reversed the disqualification order.
- The court held the automatic disqualification rule for concurrent clients did not control because Crosby had effectively ended the FFCU relationship, making FFCU (and relatedly FFIC for conflict purposes) a former client in this context.
- The court applied the substantial-relationship test and found the wrongful-termination matters were not substantially related to the insurance contribution litigation.
- Because no substantial relationship was shown, the court found no basis to presume Crosby possessed confidential information material to the contribution action.
- The case was remanded for further proceedings consistent with the reversal.

## Legal Principles

- Automatic disqualification generally applies when an attorney simultaneously represents adverse current clients, reflecting the duty of loyalty.
- When the prior representation has ended and the party is a former client, disqualification depends on whether the new matter is substantially related to the prior matter such that material confidential information would be presumed to have been obtained.
- Whether a client is “current” or “former” is determined by objective indicators of whether the representation has genuinely terminated (e.g., withdrawal, substitution of counsel, and file transfer), not solely by an adversary’s insistence that the firm continue.
- Disqualification is a drastic remedy that can impair a party’s choice of counsel and should not be imposed absent a conflict meeting the governing standard.

## Conclusion

The court held that, after Crosby’s good-faith withdrawal and completed transition from the affiliate’s employment matters, the conflict was governed by the former-client substantial-relationship test rather than automatic disqualification, and disqualification was improper because the matters were unrelated and no material confidential information was implicated.


Truck Ins. Exch. v. Fireman's Fund Ins. Co., 6 Cal. App. 4th 1050 (Ct. App. 1992)