## Facts

- Zador Corporation, owned by the Young family, purchased real property through C.K. Kwan, who acted as the family’s agent, initially took title, and then transferred title to Zador.
- A dispute arose over a contract term requiring Zador to convey a 15% interest in the property to a person or entity designated by a seller principal.
- A lawsuit was filed against Zador, Kwan, and others; Zador filed a cross-complaint against the sellers, alleging an inflated sale price and asset stripping.
- Zador retained the law firm Heller, Ehrman, White & McAuliffe (Heller) to defend it; Heller had long represented the Young family.
- Heller also undertook joint representation of Kwan and Zador in the same litigation after meeting with Kwan and Zador’s in-house counsel.
- Heller sent Kwan a written conflict waiver explaining potential future conflicts, that joint-client communications would not be confidential as between co-clients, and that Heller might later withdraw from one client while continuing for another.
- The waiver included Kwan’s advance consent to Heller’s continued representation of Zador and an agreement not to seek disqualification even if adversity later developed in the matter; Kwan reviewed and signed it.
- Heller later learned facts suggesting Kwan had received payments related to the transaction, creating potential adversity between Kwan and Zador; Heller advised Kwan to obtain independent counsel and stated it would continue for Zador only.
- Kwan obtained separate counsel and reaffirmed his consent to Heller’s continued representation of Zador.
- Zador later amended its cross-complaint to assert claims against Kwan; Kwan moved to disqualify Heller based on its prior representation of him in the same case and alleged access to confidential information.
- The trial court granted the motion, applying the substantial relationship test and presuming Heller possessed Kwan’s confidences.

## Issues

1. Whether a law firm must be disqualified from representing one former joint client against another in the same litigation when the former joint client gave informed, written advance consent to the firm’s continued representation notwithstanding future adversity.
2. Whether the substantial relationship presumption of shared confidences requires disqualification despite such an advance waiver and later reaffirmed consent.
3. Whether delay and apparent tactical use of a disqualification motion should affect the disqualification analysis where enforcing the waiver would avoid prejudice to the current client.

## Decision

- The Court of Appeal reversed the disqualification order and permitted Heller to continue representing Zador.
- The court held Kwan gave informed, explicit written consent to Heller’s continued representation of Zador even if adversity later developed, and reaffirmed that consent after the conflict became concrete.
- The court concluded the trial court misapplied the substantial relationship test by treating the presumption of confidences as dispositive despite the joint-client context and valid waiver.
- The court noted Kwan’s limited expectation of confidentiality against Zador as a former co-client and the late timing of the motion, which suggested tactical motivation and heightened prejudice to Zador from disqualification.

## Legal Principles

- Disqualification is not automatic where an actual or potential conflict has been adequately disclosed and the affected client gives informed consent.
- In joint representations, a client’s expectation that communications to counsel will be kept confidential from the other co-client is limited, particularly where the client is warned that information may be shared among co-clients.
- A clear, informed, written advance waiver may authorize counsel to continue representing one former joint client against another in the same matter, even if their interests later become adverse.
- The substantial relationship test and its presumption of access to confidences do not mechanically override a valid, informed advance consent given in a joint-client setting.
- Courts may consider delay, prejudice to the current client, and indications of tactical misuse when ruling on disqualification motions.

## Conclusion

The court enforced Kwan’s informed written advance waiver (and later reaffirmed consent) and reversed the disqualification of Zador’s counsel, holding that the joint-client context and valid consent permitted continued representation despite later adversity and a substantially related dispute.


Zador Corp. v. Kwan, 31 Cal. App. 4th 1285 (Cal. Ct. App. 1995)