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Los Angeles Lawyer

The Magazine of the Los Angeles County Bar Association


March 2012     Vol. 35, No. 1


 

MCLE Article: 2011 Ethics Roundup

Amid dark courtrooms and continuing budget cuts, legal ethics issues continue to arise

By John W. Amberg and Jon L. Rewinski

John W. Amberg is a partner in the Los Angeles office of Bryan Cave LLP, and Jon L. Rewinski is a partner in the Los Angeles office of Locke Lord LLP. Both are former chairs and current members of the Los Angeles County Bar Association's Professional Responsibility and Ethics Committee. Amberg is also a former chair and Rewinski is a former member of the California State Bar's Committee on Professional Responsibility and Conduct.


 
By reading this article and answering the accompanying test questions, you can earn one MCLE legal ethics credit. To apply for credit, please follow the instructions on the test.
 

Justice was delayed for many in 2011. California's budget woes continued to take their toll as the state's trial courts saw their budgets reduced last year by $350 million, leading to layoffs and dark courtrooms and resurrecting memories of the era when cases were dismissed if not brought to trial within five years.1 The reductions were described by Governor Jerry Brown as "debilitating."2 More cuts are expected in 2012 as the Los Angeles courts face a $161 million budget gap.3 These severe cuts, however, did nothing to reduce the number of developments in legal ethics in 2011.

Budget problems also did not prevent the state from acting decisively to shut down lawyers preying on desperate homeowners hurt by predatory lending and the collapse of the real estate market. Attorney General Kamala Harris and the State Bar charged Philip Kramer, Mitchell J. Stein, and their law firms and associates with fraudulently inducing borrowers to join lawsuits that had no chance of success. The lawyers' practices were placed in receivership and their assets frozen.4 Meanwhile, the State Bar's backlog of disciplinary cases, which stood at more than 1,500 in July, was substantially reduced by year end, due to additional staffing and a willingness to settle cases on more lenient terms, according to defense attorneys.5 Jayne Kim took over as chief trial counsel after the unexpected resignation of James E. Towery and the firing of four senior managers.6

While the State Bar treated lawyers with some leniency, a private company sought a significant punitive award from an attorney. After a former Toyota lawyer provided thousands of company documents to the plaintiffs in rollover suits, contending that the documents showed the auto manufacturer had conspired to destroy evidence, Toyota brought an arbitration claim against the lawyer for breach of his confidentiality agreement. Without ruling on the underlying contentions, the arbitrator awarded Toyota $2.6 million, including punitive damages.7 A former Morrison & Foerster attorney was sentenced to jail for a scheme to bilk the San Francisco Unified School District and the law firm's insurer by billing for phony services for his autistic son.8 Central District Judge James Otero, reflecting concern over the severity of the punishment in comparison to the crime, rejected a plea deal that would have sent Los Angeles attorney Pierce O'Donnell to jail for six months for violating campaign finance laws again, and the government responded by insisting on taking the case to trial, putting O'Donnell's law license in jeopardy.9

The Atlanta law firm King & Spalding drew national attention when, after criticism by corporate clients and employees, it backed out of its engagement by the U.S. House of Representatives to defend the constitutionality of the Defense of Marriage Act (DOMA), which denies federal benefits to same-sex couples. The firm denied it had abandoned a client and blamed partner Paul Clement, a former U.S. Solicitor General, for signing the retainer agreement without management approval, prompting Clement to bolt the firm.10 The contract with the Republican House would have prohibited all the lawyers and employees of the law firm, not just those working on the case, from advocating against DOMA, in violation of the law of several states, including California, that prohibit employers from regulating their employees' political activities.11

Conflict of Interest and Disqualification

Rule of Professional Conduct 3-310(C) ordinarily prohibits a lawyer from representing clients with conflicting interests unless both clients provide informed written consent, but the conflict may be waivable, and what looks like a conflict may be no conflict at all. In consolidated class actions, Kullar v. Foot Locker Retail, Inc., lawyers for parties objecting to the proposed class action settlement in that case also represented the plaintiffs in two overlapping putative class actions who sought to participate in the settlement.12 Foot Locker moved to disqualify the plaintiffs' lawyers based on a conflict of interest, but the First District declined to do so. It noted that since no class had been certified yet, an attorney-client relationship did not exist between the lawyers and members of the putative class. Also, it held that there was no conflict because preventing the settlement might be in the best interests of class members who would be likely to obtain a better recovery by pursuing the litigation. Though the putative class members favoring the settlement were adverse to the objectors, their common interest in the outcome of the litigation was unaffected by that disagreement.13

Appellate courts issued writs of mandate to reverse orders disqualifying counsel in two cases. In Banning Ranch Conservancy v. Superior Court,14 the Fourth District held that an open-ended retainer agreement did not create a current attorney-client relationship. Banning Ranch Conservancy sued the City of Newport Beach, challenging the city's plan to build a four-lane highway through its coastal property. The city moved to disqualify the plaintiff's lawyers, arguing it was a current client of the firm based on a 2005 retainer agreement under which the lawyers had agreed to provide legal services "as requested" by the city. The firm had performed 1.2 hours of work and sent its final invoice five years before. Since then, the city had hired 10 different law firms. The appellate court held that the retainer agreement called for representation on a matter-by-matter basis and did not mean the firm currently represented the city. There was no need to terminate the agreement because it was not "self-effectuating," and was distinguishable from a "classic retainer agreement" in which clients pay a fee and the lawyers commit themselves to future legal representation.15

In In Re Shared Memory Graphics, LLC,16 the Federal Circuit Court of Appeals vacated Northern District Judge Maxine M. Chesney's order granting Nintendo Company of America's motion to disqualify the law firm representing Shared Memory Graphics in its patent infringement suit against Nintendo. Nintendo contended that one of the opposing firm's partners, a former in-house lawyer for Applied Micro Devices, had received confidential information in a prior suit pursuant to a joint defense agreement. The Federal Circuit rejected the argument since the joint defense agreement expressly recited that "nothing in this Agreement...shall be used to disqualify the respective counsel of such party in any future litigation," which it construed as an enforceable advance waiver of conflicts.17

Usually, only clients have standing to disqualify counsel based on a conflict of interest, but there are some exceptions. In a custody dispute over an infant, the mother obtained an order disqualifying the paternal grandfather from representing his son, the father of the child, though she was never the lawyer's client. In Kennedy v. Eldridge,18 the Third District held that a nonclient has standing to disqualify if continued representation threatens cognizable injury or would undermine the integrity of the judicial process.19 In a loosely reasoned opinion, the appellate court found that a substantial relationship existed between the current custody dispute and an earlier custody fight involving the mother as a young girl, in which the firm had represented the mother's father. It held that the father and daughter should be treated as "a single entity for purposes of determining whether an ethical conflict exists" and upheld disqualification, based on a presumption that the firm had obtained confidential information in the prior representation that could be used to gain an unfair advantage over the mother in the current dispute.20 Additionally, the court applied ABA Model Rule of Professional Conduct 3.7, which prohibits advocates from also being witnesses, though the ABA Model Rules do not apply in California and this state's counterpart, Rule of Professional Conduct 5-210, applies only to jury trials. Finally, it justified the result based on the "appearance of impropriety," although this standard has never been adopted in California.21

Central District Judge Josephine Staton Tucker disqualified attorney Mark Holmes after he sued his own clients in O.A. Ventures LLC v. Stoffal.22 Represented by attorney Holmes, plaintiff O. A. Ventures (OVAL), the owner of a motorboat, sued the defendants for engine damage. When one of the defendants cross-claimed against OVAL's manager Marciniak, Holmes answered the cross-complaint for Marciniak and filed cross-claims by Marciniak against OVAL and by OVAL against Marciniak for "intentional acts, gross negligence, recklessness and negligence." Holmes then announced a settlement of the cross-action between his two clients and moved to dismiss the defendant's cross-complaint. He argued that any conflict of interest had been resolved by his clients' settlement. Holding that the defendant had standing to disqualify because Holmes's ethical breach was designed to obstruct his claim, and that the court had inherent authority to order disqualification given Holmes's "manifest and glaring" ethical breach, Judge Tucker ruled that the conflict was so patently improper that it could not be waived by the clients or permitted by the court.23

Duty to a Former Client

In Oasis West Realty LLC v. Goldman,24 the California Supreme Court addressed the duty that a lawyer owes to a former client. Nearly 80 years ago, the court held in Watchumna Water Company v. Bailey that a lawyer owes a former client a continuing duty of confidentiality and a more limited duty of loyalty. An attorney may not do anything that will injure the former client "in any matter in which he formerly represented" the client.25 However, the limits of the duty of loyalty when the lawyer is acting on his or her own behalf remained undefined.

Kenneth Goldman and his law firm Reed Smith were retained by developer Oasis West Realty to help obtain approval for a hotel and condominium project in Beverly Hills. After two years, Goldman and the firm resigned the engagement. Two years later, Goldman publicly supported a public referendum to overturn the city council's approval of the project, and the developer sued its former lawyer for breach of fiduciary duty, professional negligence, and breach of contract. Goldman filed a motion to strike under the anti-SLAPP statute, Code of Civil Procedure Section 425.16, on the ground that his activities were in furtherance of his constitutional rights of petition and free speech. The court of appeal found Goldman had not disclosed any of his former client's confidential information and was acting as an individual citizen, not as a lawyer for a new client with a conflicting interest. The court concluded that the plaintiff failed to demonstrate a probability of prevailing on its claims.26

The supreme court reversed, evidently offended by the specter of a lawyer fouling his nest. It ruled that Oasis had presented a prima facie case that Goldman used confidential client information when he opposed the project he had previously supported. Though there was no direct evidence that Goldman had relied on confidential information, the court held it was reasonable to infer he did so.27 It noted that a lawyer's duty not to misuse a former client's confidential information does not depend on whether the lawyer is serving a new client or his own interests, though in this case the interests were not mercenary.28 The lawyer's freedom of expression is limited by his duty not to misuse confidential information, and since the court concluded that a prima facie case existed that Goldman did use confidential information to the detriment of his former client, the First Amendment would not protect "such duplicity."29 The court's reasoning is troubling because it suggests that almost any position taken contrary to a former client may be presumed to be an improper use of confidential information, undermining the purpose of the anti-SLAPP statute, though the court disclaimed any intent to announce "a broad categorical bar" on attorney free speech.30 The opinion is also disappointing because by conveniently focusing on the lawyer's presumed breach of the duty of confidentiality, it missed an opportunity to define the duty of loyalty to a former client in the novel circumstance in which there is no new client.

Finally, the court stated that it could be inferred that Goldman's opposition to the project had developed during the representation. It explained that Goldman was obligated by Rule 3-310(B) to disclose to Oasis any personal interest that could substantially affect his professional judgment "but never did so."31 However, though Rule 3-310(B)(4) requires disclosure of a lawyer's legal, business, financial, or professional interests, it does not mention "personal interest," and as professionals, lawyers have never been obliged to share the personal views of their clients. Professor James Fischer of Southwestern Law School blogged: "[T]he implications of the Supreme Court's disclosure holding are potentially staggering. Does Rule 3-310(B) now require a lawyer to disclose that the lawyer does not share the client's objectives of the representation?"32

Confidentiality

It is an ethics violation for a lawyer to use without permission another person's confidential information or to disclose a former client's secrets, as a couple of 2011 appellate cases illustrate.

In 2007, in Rico v. Mitsubishi Motors Corporation,33 the supreme court explained the ethical duty that a lawyer owes when the lawyer comes into possession of apparently privileged materials belonging to opposing counsel. Adopting a standard first articulated in State Compensation Insurance Fund

v. WPS, Inc.,34 the court stated: "When a lawyer who receives materials that obviously appear to be subject to an attorney-client privilege or otherwise clearly appear to be confidential and privileged and where it is reasonably apparent that the materials were provided or made available through inadvertence, the lawyer receiving such materials should refrain from examining the materials any more than is essential to ascertain if the materials are privileged, and shall immediately notify the sender that he or she possesses material that appears to be privileged."35 The penalty for violating this ethical rule may be disqualification. But Rico left some practical questions unanswered, including how much a lawyer could or should read "to ascertain if the materials are privileged."

In 2011, the Fourth District looked at this issue in Clark v. Superior Court.36 Its analysis essentially suggests that once a lawyer sees the label "Attorney-Client Privileged," "Prepared at Request of Counsel," or "Highly Confidential" on a document belonging to an opponent, the lawyer should stop reading, put the document aside, and call opposing counsel. By reading and using the document's content, the lawyer risks disqualification.

Prior to his termination, the plaintiff in Clark had been the chief administrative officer of defendant VeriSign, Inc., a provider of Internet infrastructure services, and had signed a nondisclosure agreement prohibiting him from removing or using VeriSign's confidential and privileged information following the termination of his employment. Shortly after his termination, Clark sued for wrongful termination, breach of contract, and securities fraud. During pretrial skirmishing, defense counsel suspected that Clark's lawyer possessed confidential VeriSign materials, including an e-mail message that a VeriSign senior vice president had transmitted to VeriSign's general counsel. (This message was called the "Bond memo.") Defense counsel's suspicions were confirmed when the plaintiff's lawyer produced during discovery copies of several VeriSign documents marked "Attorney-Client Privileged," "Prepared at Request of Counsel," and "Highly Confidential." Claiming that many of the disputed documents were not privileged, the plaintiff's lawyer nevertheless sequestered them and met and conferred with defense counsel, but he disregarded the defense counsel's demand that the disputed documents be returned.

After the plaintiff conceded in his deposition that he used the Bond memo as the basis for his securities fraud claim, defense counsel moved to disqualify the plaintiff's lawyer. The trial court granted the motion. The Fourth District affirmed, rejecting the plaintiff's argument that the trial court erred in disqualifying the plaintiff's lawyer without conducting an in camera review of the disputed documents to determine whether they were in fact privileged. Pursuant to Evidence Code Section 915 and Costco Wholesale Corporation v. Superior Court,37 a court cannot order an in camera inspection of documents claimed to be privileged. The court must ascertain the "dominant purpose of the relationship" between the communicators. If the dominant purpose is an attorney-client relationship, the court said, the communication is protected by the privilege. The court criticized Clark's lawyer for reviewing the content of the disputed documents and for using the Bond memo to craft the securities fraud claim. No doubt, the criticism was appropriate. One wonders, however, whether the court's approach would adequately address a situation in which a lawyer claims a communication is not privileged because of the crime-fraud exception.

In Fremont Reorganizing Corporation v. Faigin,38 the Second District criticized a lawyer for improperly disclosing his former client's confidential information. For many years, Alan I. Faigin served as an in-house counsel, and for a time as the general counsel, of Fremont General Corporation. In this capacity, he also provided legal services to several of Fremont's subsidiaries, including Fremont Reorganizing Corporation and another subsidiary that became insolvent. The relationship between Faigin and his employer soured, and Fremont ultimately fired him. The very next day, Faigin informed the insurance commissioner, the liquidator of the insolvent subsidiary, that two Fremont entities were planning to auction certain artwork belonging to the subsidiary in liquidation, a disclosure that resulted in litigation by the insurance commissioner against those Fremont entities. The Fremont entities ultimately resolved the insurance commissioner's litigation by handing over the proceeds of the art auction plus $5 million. In the meantime, Faigin sued Fremont for wrongful termination. Fremont cross-claimed, claiming that Faigin's disclosure to the insurance commissioner constituted a breach of his legal, ethical, and fiduciary duties.

Faigin moved to strike the cross-complaint pursuant to the anti-SLAPP statute, Code of Civil Procedure Section 425.16. Although the trial court granted the motion, the Second District reversed. It concluded that Fremont demonstrated a reasonable probability of prevailing on its claims against Faigin for breaching his legal, ethical, and fiduciary duties. In response to Fremont's claims, Faigin could not rely on the litigation privilege. "[T]o allow litigation attorneys to breach their professional duties owed to their own clients with impunity from civil liability would undermine the attorney-client relationship and would not further the policies of affording free access to the courts and encouraging open channels of communication and zealous advocacy."39

Attorney-Client Privilege

E-mail messages exchanged between a plaintiff and her attorney on her employer's computer were not privileged communications, the Third District held in Holmes v. Petrovich Development Company LLC,40 a sexual harassment and wrongful termination case. Attorney-client privileged communications are defined by Evidence Code Section 952 as communications made in confidence.41 The plaintiff sent the messages to her lawyer discussing her potential claims against the company via her employer's computer, despite having been warned that the computer was for company business only, that the company would monitor and inspect messages, and that employees had no right of privacy in their messages. Consequently, the court held, the e-mail messages were akin to consulting her lawyer in her employer's conference room, in a loud voice, with the door open. The court rejected the plaintiff's argument that she believed her e-mail would be private because she utilized a private password to use the company computer and deleted the messages after they were sent, finding that her belief was unreasonable. The fact that the company did not enforce its computer monitoring policy was akin to the unreasonable belief that she could exceed the posted speed limit on a lonely public roadway simply because it is rarely patrolled.42

In Fireman's Fund Insurance Company v. Superior Court (Front Gate Plaza LLC),43 the Second District held that communications among the lawyers in a law firm may be protected as privileged communications even though the client is not a party to the conversation, and that an attorney's mental impressions, conclusions, opinions, and legal theories are entitled to absolute work product protection, whether or not they are reduced to written form. After Front Gate Plaza sued Fireman's Fund for bad faith in handling a claim, a whistle-blower provided accounting records from Front Gate to the insurer's lawyers that allegedly showed the insured had submitted fraudulent claims. The superior court adopted the discovery referee's recommendation that the Fireman's Fund lawyers be ordered to answer deposition questions regarding their handling of the whistle-blower's information, and they petitioned the court of appeal for a writ of mandate on the grounds that such information was privileged and work product. The appellate court granted the writ, holding that the attorney-client privilege is not limited to communications directly between the client and the lawyer because Evidence Code Section 952 contemplates disclosure to those "reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted." The court said this surely included other lawyers in the law firm representing the client.44 The opinion also considered the history and meaning of Code of Civil Procedure Section 2018.030, which codifies the work product doctrine in California. Noting a dichotomy between the absolute privilege granted to writings that reflect an attorney's opinion work product in subdivision (a), and the qualified privileged for all other work product in subdivision (b), Justice Croskey concluded that the statute was intended to provide absolute protection to written opinion work product and qualified protection to written nonopinion work product, "with the implicit understanding that unwritten opinion work product is already entitled to absolute protection."45 He wrote: "Is it patently absurd to provide a greater protection for written opinion work product than unwritten opinion work product? In our view, the answer to that question is yes."46

Engagement Letters

Can a lawyer enforce a client's promise to prosecute a claim to trial or settlement as part of an agreement to switch from an hourly fee to a contingent fee? No, according to the Second District's decision in Lemmer v. Charney.47 A clause in a retainer agreement prohibiting a client from settling a lawsuit without the lawyer's consent is void as against public policy. "[T]he law does not recognize a tort cause of action for damages for the client's decision to abandon [a claim], because that would equally constrain defendant to keep his lawsuit alive just for his attorney's profit, despite his own fears and desire to abandon the case."48

Once a lawyer and client form a relationship, the lawyer owes the client various fiduciary duties. When a lawyer leaves one law firm to join another, does the lawyer have a fiduciary duty to explain the differences between the new firm's and the old firm's engagement letters? No, at least if the client is a sophisticated businessperson, according to the First District's decision in Desert Outdoor Advertising v. Superior Court.49 After a lawyer switched law firms, his clients, a corporation and one of its employees, signed an engagement letter with the new firm so the lawyer could continue to handle pending litigation. Unlike the engagement letter with the lawyer's first firm, the new engagement letter included a mandatory arbitration clause for any future disputes. The president of the corporate client signed the new engagement letter without reading it and then balked at the new firm's attempt to send the clients' malpractice claim into arbitration. The president offered numerous excuses for not reading the engagement letter, including a lawyer's fiduciary duty to disclose significant developments. The courts disagreed. "A cardinal rule of contract law is that a party's failure to read a contract, or to carefully read a contract, before signing it is no defense to the contract's enforcement."50 Under the circumstances, where sophisticated clients were sent the new fee agreement, urged to read it, encouraged to seek the advice of their own counsel before executing it, and offered the opportunity to retain other counsel if they were dissatisfied with the terms, the lawyer did not have a fiduciary duty to explain the arbitration clause that was clearly set forth in the new engagement letter.

Malpractice

As in prior years, 2011 saw its share of published opinions in legal malpractice actions. In one of those cases, Cassel v. Superior Court,51 the law firm successfully invoked an evidentiary privilege in response to its former client's malpractice claims. In two other cases, Callahan v. Gibson, Dunn & Crutcher LLP52 and Smith v. Cimmet,53 the defendant lawyers had less success derailing malpractice claims asserted against them.

In Cassel v. Superior Court, a former client alleged that his lawyers at Wasserman Comden pressured him into settling a dispute during mediation on unfavorable terms because, according to the former client, the firm had an undisclosed conflict of interest. Based on the mediation privilege codified in Evidence Code Section 1119, the trial court granted Wasserman Comden's motion in limine to exclude any evidence concerning communications related to the mediation, including private discussions between Wasserman Comden and its former client. On a writ, the court of appeals reversed. The supreme court reversed. The court's opinion, written by Justice Marvin R. Baxter, relied on a literal reading of the statute. Section 1119 provides that, absent certain statutory exceptions, things said or written "for the purpose of" and "pursuant to" a mediation are inadmissible in "any civil action" unless the confidentiality of the particular communication is expressly waived by all mediation "participants." The statute does not exclude private communications between a lawyer and his or her client for purposes of a later malpractice action. As Justice Baxter noted, it is not the court's "responsibility or our province" to express a view about whether the statutory language, thus applied, ideally balances the competing concerns or represents the soundest public policy.54 In his concurring opinion, Justice Ming W. Chin expressed concern about the breadth of the court's holding: "This holding will effectively shield an attorney's actions during mediation, including advising the client, from a malpractice action even if those actions are incompetent or even deceptive. Attorneys participating in mediation will not be held accountable for any incompetent or fraudulent actions during that mediation unless the actions are so extreme as to engender a criminal prosecution against the attorney."55 His point is well taken. Unless the legislature revises the statute, it is difficult to imagine how a client could assert a malpractice claim against a lawyer based on misconduct at a mediation.

Because Code of Civil Procedure Section 340.6(a) tolls a legal malpractice claim until the client sustains "actual injury," a malpractice claim can lie dormant for many years, as illustrated by the Second District Court of Appeal's 2011 opinion in Callahan v. Gibson, Dunn & Crutcher LLP.56 Two brothers retained Gibson Dunn in 1988 to advise them on restructuring their real estate trust and succession planning. Gibson Dunn recommended that the business be converted into a limited partnership and drafted the partnership agreement. Once the agreement was signed, the engagement ended. About 15 years later, one brother died and the other became incapacitated. This confluence of events exposed a drafting problem in the partnership agreement's succession and termination provisions, which led to litigation to dissolve the partnership. When did the clients suffer actual injury? Not when Gibson Dunn drafted the partnership agreement in 1988. At that point, there was only a potential for harm. Not when the clients paid the fees for Gibson Dunn's services, also in 1988, even though, arguably, the fees exceeded the value of the services because of the drafting error. The clients, and their successors, suffered actual injury when the surviving brother became incapacitated, thereby triggering the dissolution provision of the partnership, or when the clients incurred legal fees in the litigation to dissolve the partnership.

Another 2011 appellate decision, Smith v. Cimmet,57 illustrates how a client's changing backstory can complicate life for lawyers. The backstory in Smith involved a wealthy individual who died at age 91. He was survived by his wife and two children from an earlier marriage. A prior will provided generously for the wife and made the two children the residual beneficiaries. A later will left decedent's entire estate to his wife. At the time of the decedent's death, two lawyers (Jerry Cimmet and Matthew Pavone) were prosecuting civil claims against the business partner of the decedent for mismanaging investments. After the decedent's death, the lawyers took their instructions from the wife, who was the designated personal representative of the decedent's estate. Unfortunately, the lawyers' claim against the decedent's business partner was unsuccessful.

Matters became more complicated for the lawyers when the decedent's children prevailed in separate probate litigation in Oregon against the wife, invalidated the second will, and made one of the children the estate's new personal representative. No doubt, given the acrimony between the children and the wife, the new representative was not favorably inclined toward the legal services that the lawyers had provided to the estate. In fact, he sued the lawyers for malpractice, claiming that they dissipated estate assets by inappropriately pursuing litigation against the decedent's business partner. The lawyers tried to defeat the claims by arguing that they never had an attorney-client relationship with the successor representative. Although the trial court accepted that argument, the First District disagreed and reversed judgment for the lawyers, who had an attorney-client relationship with the estate. The new personal representative inherited the powers concerning the estate from the prior personal representative. Those powers included standing to pursue a malpractice action against the estate's lawyers.

Contact with a Represented Party

The Ninth Circuit affirmed the conviction of former Orange County Sheriff Michael Carona for witness tampering, rejecting his appeal based on the ground that prosecutors had violated Rule of Professional Conduct 2-100, which prohibits a lawyer from direct or indirect communication with a represented party. Though prosecutors knew Carona was represented by counsel, they arranged for a cooperating witness to show the defendant fake grand jury subpoenas and to secretly record their conversation, during which Carona coached the witness to lie. The district court ruled the meeting violated Rule 2-100 but allowed the incriminating tape to be played to the jury. On appeal, Carona argued the tape should have been suppressed and the lead prosecutor disqualified. The Ninth Circuit held there was no violation of Rule 2-100 because the witness was not the alter ego of the prosecutor, and the meeting did not resemble an interrogation, though these are not the standards for an ethical violation. Stating that deception and trickery are acceptable government tactics, the appeals court held it would be antithetical to the administration of justice and a perversion of the rule against ex parte contacts to permit Carona to immunize himself "simply by letting it be known he has retained counsel."58 While Rule 2-100 governs attorney conduct, the disciplinary rule does not create a statutory or constitutional right not to be contacted by opposing counsel, and the court held that discipline could adequately deter future violations, though the State Bar took no action against the prosecutors in this case.59

Two ethics opinions showed similar flexibility in applying the "no contact" rule. In Formal Opinion No. 2011-181, the State Bar's Committee on Professional Responsibility and Conduct (COPRAC) advised that although the consent of the other lawyer is required under Rule 2-100, such consent can be implied. The lawyer's implied consent can be inferred from the circumstances, including whether the other attorney is present during the communication, the lawyer facilitated the communication, the relationship is transactional or adversarial, or the parties have a common interest. Consent to contact with a represented party should not be inferred if the communication would interfere with the attorney-client relationship or if the lawyer expressly withholds consent or instructs the other lawyer not to communicate with his client.60 In Formal Opinion 11-461, the ABA Standing Committee on Ethics and Professional Responsibility construed the "no-contact" rule under ABA Model Rule 4.2, the counterpart to Rule 2-100, and concluded that although a lawyer may not use an intermediary to communicate with a represented person, he may take the initiative by suggesting that his client communicate directly with the other party, and may even assist his client regarding the substance of the communication. However, the lawyer cannot overreach by helping the client obtain confidential information, admissions against interest, or an enforceable obligation from the represented party.61

Getting Paid

As in years past, 2011 provided several important lessons to lawyers interested in getting paid.

First, a failure to comply with ethics rules that go to the heart of a lawyer's fiduciary duty may preclude a lawyer from collecting a fee. Thus, in Fair v. Bakhtiari,62 a lawyer and his existing client formed three highly successful real estate investment businesses. The lawyer neglected to obtain the client's written consent and to advise the client in writing of his right to seek the advice of an independent lawyer, as required by Rule 3-300. Although the businesses thrived, the relationship soured, and the parties fell into litigation. Because he had failed to comply with Rule 3-300, the lawyer was unable to enforce agreements concerning profit distributions. He was also unable to pursue a quantum meruit claim to recover the fair value of his legal services. "[V]iolation of a rule that constitutes a serious breach of fiduciary duty, such as a conflict of interest that goes to the heart of the attorney-client relationship, warrants denial of quantum meruit recovery."63

Second, when a lawyer's lien for fees is at issue, the lawyer is an indispensable party. Thus, a court may not dispose of the attorney lien without giving the attorney an opportunity to be heard.64

Third, greed may be bad for business. In In re Bluetooth Headset Product Liability Litigation, the Ninth Circuit reversed an order by the district court awarding class counsel $800,000 in legal fees when the settlement fund for the class was only $100,000.65 "[T]he disparity between the value of the class recovery and class counsel's compensation raises at least an inference of unfairness, and...the current record d[id] not adequately dispel the possibility that class counsel bargained away a benefit to the class in exchange for their own interests."66

Fourth, generally law firm and attorney litigants who represent themselves in litigation cannot recover fees for their own legal services.67 As the U.S. Supreme Court has noted, "The adage that 'a lawyer who represents himself has a fool for a client' is the product of years of experience by seasoned litigators."68 Lawyer-litigants, however, are entitled to compensation for other lawyers they retain to represent them in the litigation. Hence, the Second District's 2011 decision in Carpenter & Zukerman v. Cohen69 holds that the trial court properly struck a cost bill that included attorneys' fees for an associate of the prevailing law firm-litigant. On the other hand, the Fourth District's 2011 decision in Dzwonkowski v. Spinella70 held that the trial court properly granted a sole practitioner's (Dzwonkowski's) motion for attorney's fees as the prevailing party in a fee dispute with a former client (Spinella) over services provided in a probate matter because the fees were incurred by another sole practitioner retained by Dzwonkowski. The fact that the second sole practitioner was also of counsel to Dzwonkowski, and from time to time provided legal services on a contract basis to Dzwonkowski's clients, including Spinella in the underlying probate matter, did not preclude the fee award.

Rules Revision

In October 2011, the California Supreme Court issued an order, requested by the State Bar, withdrawing the previous submission of proposed Rules of Professional Conduct, so that the State Bar could submit all 67 of the proposed new rules in a single comprehensive petition.71 The resubmission of the proposed Rules is expected during the first six months of 2012.

 

Endnotes

1 Trial courts anticipate tougher times in 2012, L.A. Daily J., Dec. 27, 2011 [hereinafter Trial courts anticipate tougher times].
2 Governor Edmund G. Brown Jr., An Open Letter to the People of California (Dec. 5, 2011).
3 Trial courts anticipate tougher times, supra note 1.
4 People v. The Law Offices of Kramer and Kaslow, Los Angeles Sup. Ct., LC 094571; Prosecutors sue firms over bank lawsuits, L.A. Daily J., Aug. 19, 2011.
5 Defense attorneys say clients benefitted from bar's efforts to reduce backlog, L.A. Daily J., Jan. 6, 2012.
6 Chief Trial Counsel James Towery resigns, Cal. Bar J., July 2011; State Bar's Dunn Fires Four Managers in Discipline Unit, The Recorder, July 6, 2011; State Bar near zero on discipline backlog, L.A. Daily J., Dec. 27, 2011.
7 Toyota Wins Case Arguing Ex-Employee Broke Pledge, New York Times, Jan. 6, 2011.
8 Former MoFo attorney sentenced in fake billing scheme, L.A. Daily J., Nov. 16, 2011.
9 Fighting to keep his law license, Nat'l L. J., Nov. 29, 2011.
10 At Unease, ABA J., July 2011.
11 See Chris Geidner, The DOMA Gag Rule? Contract with King & Spalding bars all employees of the international law firm from advocating for repeal of DOMA, Metro Weekly, Apr. 20, 2011; Lab. Code §1101.
12 Kullar v. Foot Locker Retail, Inc., 191 Cal. App. 4th 1201 (2011).
13 Id. at 1205-07.
14 Banning Ranch Conservancy v. Superior Court, 193 Cal. App. 4th 903 (2011).
15 Id. at 916-17.
16 In re Shared Memory Graphics, 659 F. 3d 1336 (Fed. Cir. 2011).
17 Id. at 1341.
18 Kennedy v. Eldridge, 201 Cal. App. 4th 1197 (2011).
19 Id. at 1205.
20 Id. at 1207-08.
21 Id. at 1210.
22 O.A. Ventures LLC v. Stoffal, U.S. Dist. Ct., No. 10cv01624 (C.D. Cal. Oct. 20, 2011); Judge disqualifies attorney for conflict, L.A. Daily J., Oct. 27, 2011.
23 O.A. Ventures, No. 10cv01624 at 9.
24 Oasis West Realty LLC v. Goldman, 51 Cal. 4th 811 (2011).
25 Watchumna Water Co. v. Bailey, 216 Cal. 564, 573-74 (1932).
26 Oasis West Realty LLC, 182 Cal. App. 4th 688 (2010), opinion depublished and review granted, 110 Cal. Rptr. 3d 612 (2010).
27 Oasis West, 51 Cal. 4th at 822.
28 Id. at 822-23.
29 Id. at 824-25.
30 Id. at 825.
31 Id. at 822.
32 James Fischer on Oasis West Realty, "May a lawyer publicly oppose a former client's project?" Legal Ethics Forum, June 13, 2011.
33 Rico v. Mitsubishi Motors Corp., 42 Cal. 4th 807 (2007).
34 State Comp. Ins. Fund v. WPS, Inc., 70 Cal. App. 4th 644 (1999).
35 Rico, 42 Cal. 4th at 817 (quoting State Comp. Ins. Fund, 70 Cal. App. 4th at 656-57).
36 Clark v. Superior Court, 196 Cal. App. 4th 37 (2011).
37 Costco Wholesale Corp. v. Superior Court, 47 Cal. 4th 725, 731-32 (2009).
38 Fremont Reorganizing Corp. v. Faigin, 198 Cal. App. 4th 1153 (2011).
39 Id. at 1173-74.
40 Holmes v. Petrovich Dev. Co. LLC, 191 Cal. App. 4th 1047 (2011).
41 Evid. Code §952 states, in pertinent part: "'[C]onfidential communication between lawyer and client' means information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons."
42 Holmes, 191 Cal. App. 4th at 1069-71.
43 Fireman's Fund Ins. Co. v. Superior Court (Front Gate Plaza LLC), 196 Cal. App. 4th 1263 (2011).
44 Id. at 1274.
45 Id. at 1278.
46 Id. at 1281.
47 Lemmer v. Charney, 195 Cal. App. 4th 99 (2011).
48 Id. at 105.
49 Desert Outdoor Adver. v. Superior Court, 196 Cal. App. 4th 866 (2011).
50 Id. at 872.
51 Cassel v. Superior Court, 51 Cal. 4th 113 (2011).
52 Callahan v. Gibson, Dunn & Crutcher LLP, 194 Cal. App. 4th 557 (2011).
53 Smith v. Cimmet, 199 Cal. App. 4th 1381 (2011).
54 Cassel, 51 Cal. 4th at 136.
55 Id. at 138.
56 Callahan, 194 Cal. App. 4th 557.
57 Smith, 199 Cal. App. 4th 1381.
58 U.S. v. Carona, 630 F. 3d 917 (9th Cir. 2011).
59 Id. at 923.
60 State Bar of California Standing Committee on Professional Responsibility and Conduct, Formal Op. No. 2011-181.
61 ABA's Standing Committee on Ethics & Professional Responsibility, ABA Formal Op. No. 11-461.
62 Fair v. Bakhtiari, 195 Cal. App. 4th 1135 (2011).
63 Id. at 1161 (internal citations omitted).
64 In re Ramirez, 198 Cal. App. 4th 336 (2011).
65 In re Bluetooth Headset Prod. Liab. Litig., 654 F. 3d 935 (2011).
66 Id.
67 See Trope v. Katz, 11 Cal. 4th 274 (1995).
68 Kay v. Ehrler, 499 U.S. 432, 438 (1991).
69 Carpenter & Zukerman v. Cohen, 195 Cal. App. 4th 373 (2011).
70 Dzwonkowski v. Spinella, 200 Cal. App. 4th 930 (2011).
71 See http://ethics.calbar.ca.gov/Committees/RulesCommission/
ProposedRulesofProfessionalConduct.aspx


 

 


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