The disqualification case of the week involves conflicts in the representation of small businesses and divorcing spouses (particularly in community-property states). As the California Court of Appeal intriguingly put the issue:
It’s a wonder we don’t see more of this kind of case. A spouse whose businesses have, over the years, been represented by a given attorney wants to have that same attorney represent him or her in divorce proceedings against a spouse who claims a community property interest in those businesses. Is the business attorney disqualified from representing what family lawyers call the “in-spouse”? Yes, at least where there is substantial evidence of a community interest in the businesses. A business attorney’s loyalty must be to the business, not its controlling spouse in a dissolution action.
Although the attorney disputed any connection to the “out-spouse” or any community interest in the formerly represented businesses, the court found that a substantial relationship existed between the former corporate representation and the current divorce matter. (Indeed, the court suspected that the attorney still represented at least some of the community businesses, in addition to the “in-spouse” in the divorce.) In explaining a portion of the overlap between the two matters, the court characterized the general behavior of in-spouses and their business attorneys as follows: “High-asset litigated divorces too often devolve into a contest of poor-mouthing. While business owners tend in the normal course of things to overstate their assets and optimistically project future income, all of a sudden in a divorce everything gets flipped over. To minimize their exposure to claims of community property division and spousal support, business owners suddenly develop a new found pessimism about their markets, assets, and future income. And the in-spouse’s usual business attorney can play a major role in the process of painting such a bleak picture.” After further pointing out that the attorney appeared to act consistently with this characterization and contrary to the long-term interests of the businesses (but potentially helpful to the in-spouse in the divorce), the appellate court affirmed the attorney’s disqualification.
The full opinion is available here: Chyczewski v. Chyczewski (Cal. Ct. App. July 30, 2015).
N.B. In unrelated but interesting news, Professor Ron Rotunda’s commentary on the Celgard disqualification decision (in which Jones Day was disqualified from a representation disruptive to its client’s, Apple’s, supply chain) is available here.