Vince Moreci was employed by Hydra Ventures, Inc. as a plumber, when he fell and injured himself at a construction project site, when he descended a scaffolding staircase with uneven stair risers. Scaffold Solutions constructed the temporary scaffolding stairs for the project where the injury occurred.

Moreci received $236,945.97 in workers’ compensation benefits that were paid by Starstone National Insurance Company.

Moreci, while represented by Boxer and Gerson, LLP, also filed a personal injury action against third party defendants, including Scaffold. Moreci eventually settled the tort case. As part of the settlement, Moreci agreed to assume the defense of Scaffold for claims by any parties, agencies, insurers (including but not limited to medical insurers and workers’ compensation insurers such as Starstone) arising from Moreci’s accident and pay any resulting judgment.

Prior to the dismissal of Moreci’s action, Starstone intervened, seeking reimbursement from the defendants for the amount of benefits it had paid to Moreci. Boxer Gerson became associated co-counsel for Scaffold, who then filed an answer to Starstone’s complaint in intervention.

Starstone moved to disqualify Scaffold’s attorneys on the ground they created a conflict of interest by representing Moreci in the underlying action against Scaffold, obtaining a settlement of that action, and then assuming the defense of Scaffold to Starstone’s claims in intervention.

The trial court held Starstone had no standing to seek the disqualification of counsel and denied the motion. Starstone appealed, asserting essentially the same arguments in support of standing it had raised below. The California Court of Appeal rejected its claims of error, and affirmed the motion denial in the unpublished case of Moreci v Scaffold Solutions Inc.

Starstone argued Moreci and Boxer Gerson “switch[ed] sides” in the same lawsuit by “alleg[ing] fault and liability against [Scaffold] to obtain settlement,” and then, once Starstone filed its complaint-in-intervention, aligned themselves with Scaffold to use “intimate . . . case knowledge and possibly privileged information” gained by counsel in an “attempt to defeat [Starstone’s] recovery claim (and thus keep settlement funds and achieve a double recovery specifically denounced by the Legislature) . . . .” Starstone asserted counsel’s “switching sides attempt has infected . . the litigation,” which Starstone claimed was sufficient to give it standing as a non-client, pursuant to a Federal District Court case, Colyer v. Smith (1999) 50 F.Supp.2d 966 (Colyer).

A trial court’s authority to disqualify an attorney derives from the power inherent in every court. However, a standing’ requirement is implicit in disqualification motions. A party moving to disqualify counsel must have a legally cognizable interest that would be harmed by the attorney’s conflict of interest. And courts have found an attorney-client relationship between the complaining party and the attorney sought to be disqualified is a prerequisite to seeking disqualification.

Other courts, however, have slightly broadened the scope of that general rule, holding that a non-client may bring a disqualification motion based on an attorney’s breach of a duty of confidentiality owed to the non-client. .) However, this minority view does not alter well-established standing requirements because “the non-client must meet stringent standing requirements, that is, harm arising from a legally cognizable interest which is concrete and particularized, not hypothetical.”

Starstone appears to propose another rule: “[S]tanding requires only that the moving party establish harm to the moving party by the continued participation of counsel . . . .”

A review of 1971 amendments to the labor code provisions regarding subrogation actions demonstrates that it does not necessarily follow from these principles that the legal interests of the employee and employer must be aligned, such that the employee is charged with a duty to safeguard the employer’s right to sue a third party.

Courts have refuted the notion that in the workers’ compensation context, an employee, relative to his or her employer, is akin to trustee, fiduciary, or legal representative or in privity – that is, “a person is so identified in interest with another that he represents the same legal right.”

The decision concluded that in touting “the sanctity of the employer-employee relationship,” Starstone overstates the nature of that relationship.