June 2019 - New Rule 8.4.1 Prohibits Discrimination, Harassment, and Retaliation: Has the State Bar Stepped Outside Its Bailiwick?

by Mary A. Dannelley

The “#MeToo Movement” had a sweeping impact on new legislation adopted by the California legislature in 2018 and also left its footprint on the new Rules of Professional Conduct that went into effect on November 1, 2018. The California Supreme Court approved new Rule 8.4.1 entitled “Prohibited Discrimination, Harassment and Retaliation,” which made significant changes to former Rule 2-400 of the Rules of Professional Conduct, after healthy public debate and a tie-breaking vote by the Chair of the Board of Trustees of the State Bar. Rule 8.4.1 was approved by the Board of Trustees of the State Bar and ultimately the California Supreme Court amidst controversy primarily because it confers upon the Office of Chief Trial Counsel of the State Bar of California (OCTC) original jurisdiction to investigate and prosecute claims of harassment, discrimination, and retaliation, and to make recommendations to the California Supreme Court regarding disciplinary orders that ultimately become final adjudications.

Former Rule 2-400, upon which new Rule 8.4.1 expanded, required a prior final adjudication of discrimination by a tribunal of competent jurisdiction before any disciplinary investigation or proceeding could be initiated by the State Bar against a member. However, Rule 8.4.1 was adopted without any similar requirement after significant public comment and debate about the wisdom of conferring jurisdiction on the State Bar to investigate and prosecute claims over which the Department of Fair Employment and Housing (DFEH) has jurisdiction and which are the subject of a robust statutory scheme and body of case law governing administrative and civil actions. While the policy goals behind the adoption of Rule 8.4.1 are noble, the new rule leaves many questions unanswered about the potentially far-reaching implications of vesting the State Bar and OCTC with the power to prosecute claims that are the subject of a well-developed area of substantive and procedural law in which employment lawyers and an administrative agency with specific expertise in employment law may be better equipped to investigate, prosecute, defend, and adjudicate claims.

Rule 8.4.1 Incorporated Changes to Former Rule 2-400 That Survived Significant Debate by a Narrow Margin

Former Rule 2-400 Precluded State Bar Action Absent a Prior Adjudication

Former Rule 2-400 prohibited a member of the State Bar of California from engaging in unlawful discrimination “in the management or operation of a law practice,” either (1) in the hiring, promoting, discharging, or otherwise determining the conditions of employment of any person; or (2) accepting or terminating representation of any client. Rule 2-400, however, included a safeguard that ensured any attorney accused of unlawful discrimination would be afforded the right to avail himself or herself of all of the procedural and substantive safeguards built into a well-developed legal framework for administering and adjudicating discrimination claims in order to ensure a fair opportunity to mount a defense to a claim, assert affirmative defenses, take discovery, engage in dispositive motions, and ultimately receive a fair outcome. Specifically, former Rule 2-400(c) included a clause requiring an adjudication on the merits by a tribunal of competent jurisdiction as a prerequisite to the initiation of any State Bar investigation or proceeding.

Rule 8.4.1 Confers Original Jurisdiction on the State Bar to Investigate and Prosecute Claims of Discrimination, Harassment, and Retaliation

Rule 8.4.1, as approved by the California Supreme Court and adopted effective November 1, 2018, includes significant changes to the former Rule 2-400 prohibiting discrimination:

  • Rule 8.4.1 did away with language limiting the prohibitions on discriminatory conduct to the “management or operation of a law practice,” and effectively expanded the prohibition on discriminatory conduct to encompass conduct by any lawyer who engages in discriminatory, harassing, or retaliatory conduct.
  • Rule 8.4.1 expanded the types of prohibited conduct to expressly include harassment and retaliation.
  • Rule 8.4.1 did away with the requirement of a prior adjudication on the merits by a court or other tribunal of competent jurisdiction. In fact, Rule 8.4.1 was approved after debate over a proposed modification to the new rule that would have continued the requirement of a prior adjudication by a tribunal of competent jurisdiction prior to initiation of a State Bar disciplinary investigation or proceeding. More specifically, the Rules Revision Commission considered public comments to the initial version of the proposed rule. On March 9, 2017, the Board of Trustees considered, but did not adopt, a revision to the final version of the proposed rule that would have maintained original jurisdiction over complaints of discrimination and harassment with the existing administrative and judicial bodies—i.e., providing for a determination on the merits by a court or other tribunal of competent jurisdiction as a prerequisite to any State Bar action for violation of the Rule. The vote of the Board of Trustees ended in a tie vote, and the Chair of the Board of Trustees of the State Bar cast the deciding vote to reject the proposed modification and approve Rule 8.4.1 in its final form proposed by the Rules Revision Commission. See Cal. Rules of Prof’l Conduct r. 8.4.1, Executive Summary (2018).

Rule 8.4.1 Imposes an Ethical Obligation on All Attorneys to Advocate for Corrective Action if They Have Knowledge of Discriminatory Conduct

Rules 5.1 and 5.3 require managing and supervisory attorneys to make reasonable efforts to ensure that the conduct of subordinate attorneys and non-lawyers act in compliance with the Rules of Professional Conduct. Cal. Rules of Prof’l Conduct r. 5.1 & 5.3. Managing and supervisory attorneys are responsible for a violation of the Rules of Professional Conduct by a lawyer or non-lawyer if: (a) the lawyer with managerial authority over a firm fails to ensure appropriate measures are in place to give reasonable assurance that the firm’s lawyers comply with the Rules of Professional Conduct; (b) a managerial or supervising attorney directs or ratifies the conduct; or (c) the lawyer knows of the misconduct at a time when consequences can be avoided and fails to take reasonable remedial action. Id. at r. 5.1(a)-(c) & 5.3(a)-(c). Thus, under Rules 5.1 and 5.3, managing partners and supervising attorneys have an ethical obligation to take reasonable steps to prevent discrimination and harassment in violation of Rule 8.4.1 and to take appropriate remedial action if they become aware of misconduct under Rule 8.4.1.

Rule 8.4.1, however, goes one step further than simply imposing an obligation on managing and supervising attorneys to make sure the workplace is free from harassment and discrimination. Rule 8.4.1 provides that no lawyer may “knowingly permit” discrimination or harassment of an employee, applicant, unpaid intern or volunteer, or a person providing services pursuant to a contract. Cal. Rules of Prof’l Conduct r. 8.4.1(b). “Knowingly permit” means “to fail to advocate corrective action where the lawyer knows of a discriminatory policy or practice that results in unlawful discrimination or harassment.” Id. at r. 8.4.1(c)(2). The Comments to Rule 8.4.1 make clear that Rule 8.4.1 mandates that any lawyer, not just managing or supervising lawyers, has an affirmative ethical obligation to advocate for corrective action. See Id. at r. 8.4.1, cmt. 5 (stating that “[f]or example, a law firm non-management and non-supervisorial lawyer who becomes aware that the law firm is engaging in a discriminatory hiring practice may advocate corrective action by bringing that discriminatory practice to the attention of a law firm management lawyer who would have responsibility under rule 5.1 or 5.3 to take reasonable remedial action upon becoming aware of a violation of this rule”). This means exactly what it says: even a first-year associate who just passed the State Bar exam now risks violating the ethical rules and could be subject to disciplinary action if he or she does not report discrimination or harassment to law firm management.

Attorneys Accused of Harassment or Discrimination and Their Accusers Potentially Face Dual Tracks Before Separate Tribunals

California’s Fair Employ­ment and Housing Act (FEHA), California Govern­ment Code sections 12900 et seq., vests authority for investigating complaints of discrimination and harassment with the DFEH and also authorizes the DFEH either to prosecute a civil action itself or to issue a right-to-sue notice authorizing a private civil action by an aggrieved employee. FEHA sets forth mandatory prerequisites to filing a civil action and specific limitations periods within which an aggrieved individual must satisfy those prerequisites. Specifically, under FEHA, an administrative Complaint of Discrimination must be filed with the DFEH within one year of the last alleged unlawful act. Cal. Gov. Code § 12960(d). The DFEH may either investigate and file a civil action within specific time periods, or an individual can request that the DFEH issue an immediate right-to-sue notice and proceed with a civil action. Cal. Gov. Code § 12965; 2 CCR § 1005. The limitations period to commence a civil litigation is one year from the date the DFEH issues the right-to-sue notice. Cal. Gov. Code § 12965(b). Exhaustion of the statutory administrative procedures within the time periods set forth in the FEHA is a mandatory prerequisite to filing a civil action, and the failure to exhaust the administrative procedures is a jurisdictional—i.e., fatal—defect to any claim. Okoli v. Lockheed Tech. Operations Co., 36 Cal. App. 4th 1607, 1613 (1995).

The FEHA does not provide for any tolling of these mandatory pre-filing limitations periods in the event the State Bar also receives a complaint and initiates its own investigation and disciplinary proceeding. Rule 8.4.1 appears to contemplate some form of coordination with the agencies vested with primary authority for investigating, administering, and prosecuting complaints of discrimination by incorporating self-reporting obligations, but the level of coordination is neither mandatory nor specified. Specifically, a lawyer who is the subject of a State Bar investigation must notify the State Bar in the event of a concurrent criminal, civil, or administrative action premised on the same conduct. Cal. Rules of Prof’l Conduct r. 8.4.1(d). Likewise, upon being issued a notice of disciplinary charge under Rule 8.4.1, a lawyer is required to notify the DFEH and United States Equal Employment Opportunity Commission. Id. r. 8.4.1(e). Comment 6 to Rule 8.4.1 contemplates that the State Bar may consider abating an investigation or disciplinary proceeding pending the outcome of an action before another tribunal. Id. at cmt. 6. However, as set forth above, Rule 8.4.1 confers original jurisdiction on the State Bar to initiate an investigation and disciplinary proceeding for violation of the rule, and the decision to abate the investigation or proceeding is not mandatory.

A Disciplinary Proceeding Could Have Final and Binding Effect on the Outcome of an Independent Civil Action, Raising the Question Whether Rule 8.4.1 Adequately Ensures a Fair Adjudication on the Merits

In the event the State Bar declined to abate its own action pending the outcome of an administrative or civil action under the FEHA, both the accused lawyer and the accuser face the prospect of litigating the same complaint and underlying conduct on a dual track before separate tribunals. The State Bar disciplinary proceeding foreseeably could become the forum where an employment claim is decided on its merits in the first instance, ultimately leading to a binding final adjudication by the California Supreme Court potentially with res judicata and collateral estoppel effect in a subsequently decided civil action. See In re Rose, 22 Cal. 4th 430, 444-45, 448 (2000) (holding that (a) the California Supreme Court has exclusive original jurisdiction to discipline attorneys, and the sole means of obtaining review of a State Bar Court disciplinary recommendation is by petition for review, which may be summarily denied; and (b) the summary denial of a petition for review of the State Bar Court disciplinary recommendation is a final determination on the merits for purposes of res judicata). The extent to which a disciplinary determination will be admissible and binding in a subsequent or concurrent civil action is unclear. Thus, the State Bar Court may become the first line of defense for an attorney accused of discrimination and harassment, which prompted both the public and members of the Rules Revision Commission to question the wisdom of vesting the State Bar with original jurisdiction over charges of discrimination and harassment.

The adoption of Rule 8.4.1 and the elimination of the requirement of an adjudication on the merits in a tribunal of competent jurisdiction prior to the initiation of any State Bar proceeding raises significant issues regarding whether the fate of the accused attorney or his or her accuser will be unfairly decided in the State Bar Court. First, the State Bar Court and the OCTC and practitioners who regularly practice before the State Bar Court likely do not have specialized knowledge of employment law and may not have the expertise to prosecute and defend harassment and employment complaints, which means that employment complaints may be decided on the merits without competent or adequate representation. Alternatively, State Bar practitioners may be left with no choice but to bring in separate employment counsel to assist with the representation. Second, experienced employment lawyers are well-versed in a unique and well-developed burden-shifting framework that has been established by case law to decide dispositive motions and, ultimately, claims that proceed to trial. Likewise, there is a well-developed body of affirmative defenses available in a civil action. The extent to which these procedural and substantive safeguards that are an integral part of the strategy in defending against a civil action will guide the State Bar Court in rendering decisions on the merits remains to be seen. Third, the State Bar Court may not afford the same discovery rights as available in a civil action and, as set forth above, the decision of the Supreme Court whether to grant review is the beginning and the end of appellate review. These significant issues are among a few of the concerns that arose prior to the approval of Rule 8.4.1 in its current form. Whether they prove to be legitimate remains to be seen as the actual implementation of Rule 8.4.1 unfolds.

The bottom line is that attorneys from the lowest levels to the highest levels in law firms now face expanded ethical obligations not only to act appropriately in the workplace, but also to report, prevent, and remedy unlawful discrimination and harassment by attorneys and non-attorneys alike. The uncertainty surrounding the implications of vesting the State Bar with original jurisdiction over complaints related to conduct in violation of Rule 8.4.1 should prompt law firms and legal professionals to raise the bar with respect to educating all members of a firm regarding their legal and ethical obligations and implementing more robust reporting, investigation and corrective action procedures.

Mary A. Dannelley is a sole practitioner in Newport Beach, who practices in the areas of commercial and employment litigation. Ms. Dannelley also provides employment counseling to employers and conducts independent workplace investigations. She is a member of the OCBA Professionalism and Ethics Committee. Ms. Dannelley can be reached at mary@dannelleylaw.com.