by Members of the OCBA Professionalism and Ethics Committee
After scouring the ethics landscape for notable cases and ethics opinions that came down in 2019, the OCBA Professionalism and Ethics Committee offers a summary of the following ten opinions, including a scathing civility discussion by our own Fourth District, Division Three Court of Appeal.
In Jarvis v. Jarvis, 33 Cal. App. 5th 113 (2019), the court disqualified a lawyer representing a 50/50 general partnership engaged in litigation between partners who disagreed on how to proceed. James Jarvis sued Todd Jarvis and Jarvis Properties, a general partnership in which each held a 50% interest, seeking partition of real property. Todd hired attorney Roscoe to represent the partnership, signing the retainer agreement as a general partner. James moved to disqualify Roscoe, arguing that Roscoe favored Todd over him. Roscoe opposed disqualification, contending that his representation was not subject to direction by either partner. The court granted the disqualification motion, and the appellate court affirmed, based on the interests of justice.
The court indicated that an attorney representing an organization must treat the entity—here, the partnership—as the client. The decision endorsed State Bar Formal Op. 1994-177, which discusses a lawyer’s obligation when the partners disagree over how to instruct the lawyer in his representation of the partnership. The State Bar opinion states that, facing such a conflict of authority, the lawyer must take guidance from the partnership, pursuant to applicable statutes, the partnership agreement, and any other pertinent agreements between the partners. The partnership agreement in Jarvis, however, did not address how to handle a deadlock, leaving the lawyer “adrift in perilous waters.” The court held that a lawyer cannot take over decision-making for the client absent client authority, and, therefore, Roscoe’s assumption of the role of the client was “troubling.” Where 50/50 partners disagree, the lawyer must take no action and instead must wait for the partners to resolve their dispute. Absent such direction, the lawyer may withdraw. Because, as required under applicable partnership law, a majority of the partners had not authorized Roscoe’s engagement, the court disqualified Roscoe, leaving the trial court to determine how to move forward, noting that appointment of a provisional partner, receiver, or neutral, or leaving the partnership without counsel, might be appropriate.
In Antelope Valley Groundwater Cases v. L.A. Cty. Waterworks Dist. No. 40, 30 Cal. App. 5th 602 (2018), the court denied a motion to disqualify the law firm of Best Best & Krieger, LLP (BBK) in the Antelope Valley Groundwater Adjudication (AVGA) cases, a series of lawsuits dating back nearly twenty years. BBK began representing Los Angeles County Water District No. 40 (District 40) in 2004. Appellant Antelope Valley–East Kern Water Agency (AVEK) was not initially a named party, but had a long-term relationship with BBK as BBK had been its general counsel. In 2006, AVEK became a party in the AGVA cases, and retained separate attorneys to represent it. Ten years later, in 2016, AVEK decided to terminate BBK as its general counsel and demanded, for the first time, that BBK recuse itself from representing District 40 in the AVGA cases. When BBK declined, AVEK filed a motion to disqualify. AVEK argued that the absence of a written consent by AVEK to BBK’s representation of District 40 was dispositive, and that disqualification of BBK was mandatory. The court of appeal concluded that there was substantial evidence to support the trial court’s decision that AVEK effectively consented to BBK’s representation of District No. 40, and that AVEK’s inordinate delay estopped AVEK from seeking disqualification.
Accordingly, in disqualification motions involving concurrent representation, an implied consent through inaction or long delay may be found as a basis to deny the motion.
For more than a decade, AVEK did not manifest any objection to BBK’s simultaneous representation of District 40 in the litigation while acting as AVEK’s general counsel in unrelated matters. Although the claims between District 40 and AVEK were settled in 2015, AVEK and District 40 remained as parties in the litigation. AVEK argued that BBK had concurrently represented parties with potential or actual conflicting interests without its written consent, requiring automatic disqualification. District 40 raised equitable defenses to the motion, including the decade-long delay in raising the issue, and prejudice to District 40’s interests. The trial court found that there was no evidence that BBK received or used any confidential information of AVEK, and that by its long inaction that AVEK had impliedly consented to the conflicting representation. Under these unique circumstances, the absence of an informed consent in writing under former rule 3-310 was not dispositive. Substantial evidence existed to support the trial court’s decision and AVEK was estopped from changing its position. Thus, the denial of disqualification was affirmed.
O’Gara Coach Company, LLC v. Ra, 30 Cal. App. 5th 1115 (2019) addressed a disqualification motion with unusual facts. Before he became an attorney, Darren Richie was an executive at O’Gara Coach Company (the “Company”). In that role, Richie was the main contact person for the Company’s outside counsel on various legal matters, including an internal investigation of employee Joseph Ra.
After he left the Company, Richie was admitted to the California State Bar and formed Richie Litigation, P.C. At the time, the Company and Ra were involved in litigation against each other, and another attorney at Richie’s firm substituted in as Ra’s counsel. The Company moved to disqualify Richie and his firm because the lawsuit involved the same confidential information about Ra that the Company’s outside counsel had discussed with Richie when he worked for the Company. The trial court denied the motion because Richie had no attorney-client relationship with the Company.
The court of appeal reversed. Although it agreed with the trial court that Richie could not be disqualified under a theory of improper successive representations because he never had an attorney-client relationship with the company, the court of appeal held that the motion should have been granted under the Company’s alternate argument: that disqualification was required because a lawyer representing an adverse party who obtains confidential information protected by the attorney-client privilege has an obligation not to use that information, even if the lawyer obtained that information before becoming a lawyer.
The court of appeal also held that Richie’s firm, and not just Richie, must be disqualified under the rules for vicarious disqualification because he offered no evidence—such as a declaration he had screened himself from the rest of his firm working on this matter—to rebut the presumption that this confidential information was used against the Company.
In Martinez v. O’Hara, 32 Cal. App. 5th 853 (2019), our local court of appeal (Fourth District, Division Three) found that an attorney who disparaged a judicial officer in the notice of appeal and in appellate briefs engaged in misconduct on appeal and manifested gender bias, necessitating a report to the State Bar.
The appeal arose from an employment case. Plaintiff Martinez prevailed on his cause of action for sexual harassment, and a jury awarded him a little over $8,000. His wage claim was resolved before trial and the defendants prevailed on the remaining claims. Martinez then moved for attorneys’ fees under Government Code section 12965, subdivision (b) and Labor Code section 218.5, requesting over $145,000. The judge pro tem (a woman) denied the motion and, in the unpublished portion of the opinion, the court of appeal affirmed.
The published portion of the opinion recounts the manner in which Martinez’s lawyer, Benjamin Pavone, prosecuted the appeal. In the notice of appeal, Pavone wrote: “Plaintiff Fernando Martinez hereby appeals from the lower court’s disgraceful order . . . . The ruling’s succubustic adoption of the defense position, and resulting validation of the defendant’s pseudohermaphroditic misconduct, prompt one to entertain reverse peristalsis unto its four corners.” Id. at 857. In the appellate briefs, Pavone stated that the judicial officer “intentionally decided to let her master for this motion be not the law, but an adversarial agenda to rule against one party regardless of it.” Id. at 857-58.
In an opinion by Associate Justice Fybel, the court of appeal held: “The notice of appeal’s reference to the ruling of the female judicial officer, from which plaintiff appealed, as ‘succubustic’ constitutes . . . reportable misconduct.” Id. at 858. The opinion noted the characterization in the brief of “intentional” erroneous rulings likewise improper, and the court of appeal reported Pavone to the State Bar.
In City of San Diego v. Superior Court, 30 Cal. App. 5th 457 (2018), Plaintiff Dana Hoover, a police officer for the City of San Diego, filed a claim against the City alleging harassment and retaliation based upon complaints she had made about the police department. Hoover was represented by attorney Daniel Gilleon in that matter. Hoover later became a suspect in an internal affairs investigation to determine whether any police department employees had leaked confidential information to the media about an ongoing sexual assault investigation. Hoover was interviewed by two internal affairs officers, in the presence of the Deputy City Attorney, who also questioned Hoover on occasion.
During the interview, the internal affairs officers pressed Hoover to disclose certain communications she had with her attorney Gilleon, threatening Hoover with discipline if she did not respond. She complied, revealing her attorney-client communications. Hoover then filed a motion in her employment suit against the City seeking to disqualify the City Attorney’s office from the case. She argued that the City had wrongfully compelled disclosure of privileged communications, and that the Deputy City Attorney had wrongfully questioned her outside the presence of her attorney Gilleon in violation of former Rule 2-100. The trial court granted the motion to disqualify, and the City sought a writ of mandate.
The court of appeal granted the writ. The court agreed that a violation of the attorney-client privilege and former Rule 2-100 had both occurred. However, the court of appeal held that the drastic remedy of disqualification is appropriate only if there is “a genuine likelihood that the attorney’s . . . misconduct will affect the outcome of the proceedings before the court.” Here, the court reviewed the transcript of the internal affairs interview and concluded that the improper questions and answers did not relate to the employment claim and would have no impact on that claim. The court emphasized that disqualification is not the appropriate remedy for punishing attorney misconduct; punishment may be accomplished by the State Bar or through court-imposed sanctions against the offending attorney.
In Sprengel v. Zbylut, 40 Cal. App. 5th 1028 (2019), two individuals, Sprengel and Mohr, established a limited liability company (LLC) to market a guidebook that Sprengel had written about the side effects of chemotherapy. Both were 50% owners of the company, and while Mohr was designated “sole manager” of the company, the LLC’s operating agreement provided neither Sprengel nor Mohr had the unilateral authority to bind the LLC.
A management dispute arose between them. Mohr engaged a law firm (the Law Firm) to represent the LLC as to its ownership of the copyrights to and ability to market the guidebook that Sprengel had written. The dispute resulted in Sprengel’s filing an involuntary dissolution action, as well as a federal copyright infringement action. The district court found Sprengel owned the copyright to the guidebook, but that Sprengel had granted Mohr and the LLC an implied license to exploit those copyrights, which provided a complete defense to Sprengel’s infringement claims.
Thereafter, Sprengel filed a lawsuit against the attorney and the Law Firm Mohr had retained to represent the LLC. Sprengel sought damages for legal malpractice and related claims premised on the Law Firm’s implied attorney-client relationship with Sprengel in Sprengel’s individual capacity, which she argued arose from the Law Firm’s representation of the closely-held LLC.
The Law Firm moved for and obtained summary judgment and the court of appeal affirmed. On the issue of Sprengel’s standing to assert claims against the attorneys in her individual capacity, the court of appeal reasoned that while Sprengel could not seek reimbursement of funds paid by the LLC to the Law Firm (which could only be sought via derivative action), Sprengel could conceivably seek damages for the fees that the Law Firm allegedly caused her to incur in defending her copyrights.
However, the court of appeal held that Sprengel’s lack of an attorney-client relationship with the Law Firm was fatal to her claims. While an implied attorney-client relationship may be created as to a corporate entity’s shareholders or a partnership’s individual partners, Sprengel had presented no evidence to show such an implied relationship arose in her case. While the LLC was closely-held, that single factor was not determinative. Sprengel did not show she could have any reasonable expectation that the Law Firm would protect her individual interests. The Law Firm made clear from the outset its representation was adverse to Sprengel. Accordingly, no implied attorney-client relationship was created.
The California Supreme Court in Monster Energy Co. v. Schechter, 7 Cal. 5th 781 (2019) reversed the appellate court’s decision in Monster Energy Co. v. Schechter, 26 Cal. App. 5th 54 (2018). The court held that Monster Energy met its burden by showing its breach of contract claim had “minimal merit” sufficient to defeat an anti-SLAPP motion. Id. at 796. As a result of this ruling, Monster Energy may pursue its breach of contract claims against the lawyer and his firm for alleged failure to comply with confidentiality provisions within a settlement agreement specifically referencing the parties’ counsel. The lower court erred when it found that the “approved as to form and content” notation on the settlement agreement meant that counsel did not intend to be bound by its terms. Id. at 797. The court noted that the settlement contemplated that counsel would be subject to the agreement and rejected the argument that the lawyer was not a party to the contract solely on the basis that he approved it as to form and content. Id. at 796-97.
The court reasoned that the appropriate inquiry is whether the attorney intended to be bound by the terms, which requires an examination of the agreement as a whole, including substantive provisions referring to counsel. Id. at 795-96. Ultimately, that question is to be resolved by the trier of fact. Id.
An attorney’s signature on a document with a notation that it is approved as to form and content does not, as a matter of law, preclude a factual finding that the attorney intended to be bound by the substance of the document’s terms. Id.
The opinion also addresses the appropriate procedure for resolution of an anti-SLAPP motion, the essential elements of a contract, and the acceptance of confidential settlements in California’s legal system to promote settlement of actions.
No Contact Rule
Doe v. Superior Court, 36 Cal. App. 5th 199 (2019), discussed Rule of Professional Conduct 4.2, which prohibits communications with persons known to be represented by another lawyer or with employees of represented entities and others whose “act or omission . . . may be binding upon or imputed to the [represented] organization for the purposes of civil or criminal liability.” In this sexual harassment/assault case against a community college district, shortly before a deposition of one of the defendant’s employees, defense counsel advised plaintiff’s counsel that the witness was “entitled to representation” and that he was “in the process of securing conflict counsel” for her which could “take a couple of weeks.” The next day, plaintiff’s counsel advised defense counsel that he had become counsel for the witness.
Reversing the trial court, the court of appeals found there was insufficient evidence to show that plaintiff’s counsel had violated Rule 4.2 by contacting and being retained by the employee. There was no evidence that the employee witness in fact retained any attorney to represent her prior to plaintiff’s counsel’s contact or that she had actually taken any steps to secure representation. Merely that representation had been offered to her was insufficient. Second, the witness, who was a part-time student employee of the campus police department, was not the type of employee whose act or omission could be binding or imputed to the college district. She was an alleged victim of similar sexual misconduct herself, and even if her testimony would have been relevant to whether the college district was on notice of the misconduct, it did not place her in the category of an employee whose act or omission could be imputed to the defendant. The college district could only be liable for its own conduct in this type of case. In the last footnote of the opinion the court, however, noted in dicta that it did “not necessarily endorse the approach [by counsel] as it played out here.”
The anti-SLAPP statute, Code of Civil Procedure section 425.16, allows defendants who are sued for exercising protected rights to have meritless lawsuits dismissed at an early stage of the proceeding. In Rand Resources, LLC v. City of Carson, 6 Cal. 5th 610 (2019), Rand sued the City of Carson and Leonard Bloom for breach of contract, fraud, and intentional interference with contract in connection with the city’s efforts to obtain an NFL franchise. Defendants made a special motion to dismiss under the anti-SLAPP statute, arguing that the statements made by city officials and by Bloom were made “in connection with an issue under consideration or review” by a legislative body or were made “in connection with a public issue or an issue of public interest.”
The California Supreme Court held that, while obtaining an NFL franchise was clearly an issue of public interest, the statements made by city officials were not directly relevant to that issue. Rather, they related to who should negotiate with the NFL on the city’s behalf. Even as to those issues which did relate to a matter under consideration by the city council, such as who should represent the city in the matter, the challenged statements were made two years before the matter came before the council for review. The challenged statements made by Mr. Bloom, on the other hand, were made during council consideration of the contract, and therefore were amenable to an anti-SLAPP motion.
The essence of the court’s holding is that the statements must be directly relevant to the cause of action being challenged in the motion. If they are only tangential, the motion will fail. Accordingly, the California Supreme Court held that the causes of action arising from tangential communications not “in furtherance of” defendants’ rights of free speech did not meet the first prong of the anti-SLAPP analysis and were not subject to the anti-SLAPP statute.
Seeking Advice About Current Clients/Conflict of Interest
In California State Bar Formal Opinion No. 2019-197, the California Standing Committee on Professional Responsibility and Conduct (COPRAC) considered whether an attorney’s legal consultation concerning matters related to the lawyer’s representation of a current client, such as compliance with the lawyer’s ethical obligations or a possible error by the lawyer, creates an ethical conflict with the client and whether the analysis changes if the consultation is with in-house versus outside counsel. Where an attorney has questions about her ethical duties to a client, then she must take action to investigate, analyze the situation, and take any additional steps required by the California Rules of Professional Conduct, which may include consultation with an outside attorney or in-house counsel. With respect to consultation about a lawyer’s compliance with her ethical duties during the course of the representation, no conflict of interest arises; however, if the lawyer who has made a possible error through consultation with counsel learns that an error that may materially prejudice the client’s rights has been made, she indeed has an ethical conflict, and must consider whether she can continue to provide competent and diligent representation to the client or if she must withdraw. Also, the lawyer must inform the client of the circumstances and facts of the error and the resulting conflict of interest. And, if the lawyer determines that she can still ethically represent the client, then she must also advise the client to seek independent counsel as to whether the client should continue with the legal services engagement. If the client decides to continue with the engagement, then the lawyer must obtain the client’s informed, written consent before she continues to represent the client.
The opinion also discusses whether the attorney is required under the duties of communication or loyalty, as provided in Rules 1.4 and 1.7, respectively, to inform the client that she determined that there is an ethical conflict as a result of consultation with another attorney or in-house counsel. COPRAC concludes that the consultation only needs to be disclosed to the client if the facts cause such consultation to be a material development that must be disclosed under the Rule 1.4(a)(3). For an in-depth discussion of the opinion, see Suzanne Burke Spencer, Ethically Speaking: State Bar Weighs In on Whether Attorneys May Ethically Consult With In-House Counsel When Error Occurs, Orange County Lawyer (July 2019 Vol. 71 No. 7), at 60-63.