by the OCBA Professionalism and Ethics Committee Members

Continuing its annual tradition, the Professionalism and Ethics Committee rings in the new year by reviewing for OCBA members some of the most interesting cases and ethics opinions from the past year, covering attorney-client privilege, legal malpractice, malicious prosecution, conflicts of interest, and more.

Several cases addressed the application of the attorney-client privilege. In Integrated Global Concepts, Inc. v. j2 Global, Inc., No. 5:12-cv-03434-RMW, 2014 U.S. Dist. Lexis 37027 (N.D. Cal. Mar. 20, 2014), the plaintiff moved to compel production of documents in the possession of the former general counsel for defendant j2 Global. Defendant asserted the privilege because the former general counsel maintained the documents in order to provide ongoing legal advice to j2 Global pursuant to a post-employment agreement. The court held this was sufficient to meet defendant’s burden to establish privilege, stating that “communications in the course of the attorney-client relationship are presumed confidential for privilege purposes.” Id. at *3.

The court rejected plaintiff’s argument that defendant waived the privilege because its former general counsel stored the disputed documents at the worksite of his new employer because the documents were on a password-protected hard drive and in electronic archives, and there was no evidence of access by his new employer. Citing Evidence Code section 917(b), the court explained that communications do not lose their privileged character merely because they are communicated by electronic means or because persons involved in delivering, facilitating, or storing the electronic communications may have access to them. Finally, the former general counsel had no ability to waive defendant’s privilege, as only “the client, not the attorney, holds the attorney-client privilege.” Id.

In Radware, Ltd. v. A10 Networks, Inc., No. C-13-02021-RMW, 2014 U.S. Dist. LEXIS 2769 (N.D. Cal. 2014), Radware filed suit against its competitor, A10, then moved to disqualify A10’s counsel, Irell & Manella, who previously had represented Radware in another matter. In support of its motion, Radware submitted in camera numerous communications between itself and Irell attorneys during the former attorney-client relationship. A10 argued that Radware had waived the privilege, and that A10 itself, Irell, and its co-counsel Latham & Watkins could review the communications. Radware argued that only the specific Irell attorneys who had previously represented Radware should review those communications.

Under the “fairness principle,” an implied waiver of privilege may occur when a party places its communications at issue through some affirmative act. The court found an implied waiver because Radware had submitted its communications to the court, but the waiver was only as broad as necessary to allow A10 to defend its choice of counsel. The entire Irell firm, but no others, could review the communications in view of conflicts-of-interest principles presuming that the entire Irell firm was already exposed to the disputed communications. The court refused to allow A10 and Latham to review the communications, which would force Radware to choose between disclosing privileged communications to a competitor and allowing its former counsel to litigate against it. The court also rejected Radware’s proposal to limit disclosure to only the specific Irell attorneys who previously represented Radware because those attorneys might not be able to defend A10’s position competently. Finally, the court gave Radware the opportunity to preserve the privilege entirely by withdrawing its motion to disqualify.

In Seahaus La Jolla Owners Ass’n v. Superior Court, 224 Cal. App. 4th 754 (2014), the court addressed whether, in a construction defect action involving common areas, the attorney-client privilege extends to communications disclosed between a homeowner association’s counsel and individual non-party homeowners during litigation updates conducted in open area meetings. Under the common interest doctrine (Cal. Evid. Code §§ 912(d) and 952), the court held that the confidentiality of the communications was maintained at the meetings and that the communications were reasonably necessary to the association’s attorney’s representation. For the doctrine to attach, “the two parties [must] have in common an interest in securing legal advice related to the same matter” and “the communications [must] be made to advance their shared interest ... .” Id. at 774. The court found that the individual homeowners and the association shared a common interest because of the association’s legal duty to inform all homeowners of the litigation and the homeowners’ shared interest in curing any defects. The court further found that the meetings provided a platform for the association to consider the homeowners’ interests related to the common areas and thus were conducted to accomplish the purpose for which counsel had been consulted. The court rejected the argument that the privilege was destroyed because the meetings were conducted in public areas and attendance was not restricted—indeed, even some homeowners with conflicting loyalties attended. The court ultimately found that, under the circumstances, reasonable precautions were taken to preserve the confidentiality of the meetings.

Several significant ethics opinions issued this year provide important guidance on some common scenarios. Bar Association of San Francisco’s Ethics Opinion 2014-1 addresses how a lawyer may respond when her former client publishes a negative online review accusing the lawyer of incompetence. The opinion concludes that a lawyer may respond, provided she does not reveal any client confidences or make any adverse statements about the client. The lawyer’s duty of confidentiality to the client survives the termination of the lawyer-client relationship and, thus, the lawyer may not reveal client secrets. Client “secrets” include information gained by the lawyer during the professional relationship, even if not otherwise protected by the attorney-client privilege. Thus, otherwise “public” information may qualify as a client secret. In addition, a response by the lawyer that portrays the client in a negative light may breach the duty of loyalty. Finally, the Opinion cautions that the “self-defense” exception in Evidence Code section 958 does not permit disclosure of client secrets in the absence of pending litigation between lawyer and client.

To provide ethical guidance to lawyers hiring ghostwriters and to the ghostwriters themselves, the Orange County Bar Association published Formal Opinion 2014-1 analyzing whether a lawyer ethically may engage in ghostwriting for another lawyer on behalf of a client in two typical hypothetical ghostwriting scenarios. In the first hypothetical, California Counsel of Record (“Counsel of Record”) hires a lawyer (“Out-of-State Lawyer”) not licensed to practice in California, not authorized temporarily to practice in California, and not a member of Counsel of Record’s law firm to draft pleadings and documents for a case pending in California state court. Id. at 1. Counsel of Record is licensed to practice law in California, is a member of a law firm, and reviews and signs all ghostwritten documents. Id. The second hypothetical involves the hiring of a lawyer (“Contract Lawyer”) who is not a member of the law firm, but who is licensed to practice in California. Id. Under neither hypothetical is the contract attorney’s involvement disclosed to the court, and in the second hypothetical the client also is not aware of the Contract Lawyer’s involvement. Id.

The lawyer’s ethical duties include the duty of candor to the court under California Business & Professions Code section 6068(d) and Rule 5-200 of the California Rules of Professional Conduct; certification obligations under Federal Rule of Civil Procedure, Rule 11; the duty of honesty under California Business and Professions Code section 6106; the duties of competence and supervision pursuant to Rule 3-110, the prohibition on unauthorized practice of law under California Business and Professions Code section 6125, which applies to non-lawyers and out-of-state lawyers; and the duty to keep the client informed under Rule 3-500. Id. at 2-6.

The Opinion concludes there is nothing inherently unethical about a client or lawyer’s hiring another lawyer—often a contract lawyer—to ghostwrite a document to be submitted to court without identifying the contract lawyer or disclosing his involvement. However, if the client or lawyer seeks recovery of attorneys’ fees, the contract lawyer’s role must be disclosed to the court. Also, where the contract lawyer’s involvement constitutes a “significant development,” disclosure to the client is required. Both lawyers must comply with their ethical obligations, including their duty of competence. Finally, to the extent the contract lawyer is not admitted to practice in California, both lawyers must avoid the unauthorized practice of law. Id. at 8.

The court addressed arbitrator disclosure in Mt. Holyoke Homes, LP v. Jeffer Mangels Butler & Mitchell, LLP, 219 Cal. App. 4th 1299 (2013), where a client real estate developer sued its law firm for legal malpractice for allegedly failing to object to the jurisdiction of the planning commission. The legal services agreement between the law firm and the developer client provided for arbitration of all disputes. The parties selected retired Judge, the Hon. Eli Chernow, as the arbitrator, and he made timely written disclosures regarding defendant law firm’s prior representation of a party before him, the fact he had known one of the attorneys for many years, and that he had conducted an arbitration and mediation involving one of the plaintiffs over five years ago.

The arbitrator found in favor of the law firm, awarding unpaid legal fees, fees incurred in the arbitration, and costs totaling over $450,000. After confirmation of the award, plaintiff discovered the arbitrator had listed one of the law firm’s partners as a reference on the National Academy of Distinguished Neutrals webpage. In a motion to set aside the award, the trial court held there was an insufficient relationship between the arbitrator and partner, and no appearance of impropriety. The court of appeal reversed, stressing that prejudice need not be shown, and that although the relationship could have been discovered by research, such action was not required. Under the reasonable person test, one might entertain doubt as to the impartiality of an arbitrator who listed one of the lawyers as a reference.

In Jay v. Mahaffey, 218 Cal. App. 4th 1522 (2013), the court considered whether following a supervisor’s instructions insulates a lawyer from a malicious prosecution claim. Certain limited partners alleged malicious prosecution against the owners of property and their attorneys, who the limited partners contended improperly joined them in a suit against the limited partnership for breach of lease. In response to the malicious prosecution action, the property owner and the attorneys filed an anti-SLAPP motion under California Civil Procedure Code section 425.16. The trial court denied the anti-SLAPP motion, and defendants appealed.

Affirming, the court of appeal first determined that plaintiff’s cause of action for malicious prosecution arose out of defendants’ constitutional right of petition, and, therefore, the defendants met the threshold requirement that the challenged claim arose out of constitutionally protected activity. Id. at 1538-39. The court then addressed whether the plaintiffs had demonstrated a probability of prevailing on their malicious prosecution claim.

To prevail on a malicious prosecution claim, the plaintiffs had to demonstrate that: (a) the prior action was commenced by or at the direction of the defendant and pursued to a legal termination favorable to the plaintiff; (b) the action was brought without probable cause; and (c) the action was initiated with malice. Id. at 1539. Regarding malice, the court rejected the associate attorney’s asserted defense that she was merely following the instructions of the lead attorney. The court recognized that the “clear imbalance of power between an often younger associate and an older partner or supervisor” could put the associate in the difficult position of questioning a more experienced attorney’s choices. But the court held that the “fact that she was following a superior’s instructions is not a valid defense to malicious prosecution.” Id. at 1546.

Yanez v. Plummer, 221 Cal. App. 4th 180 (2013) addressed conflicts of interest in the context of joint representation of a company and its employee. In-house counsel for Union Pacific represented employee Henry Yanez as a witness during the defense of a personal injury action brought by another company employee. During Yanez’s deposition, the plaintiff’s lawyer elicited testimony contradicting Yanez’s prior witness statement. The in-house attorney followed up by asking Yanez deposition questions highlighting inconsistencies between his current testimony and his prior witness statement. Later, the company fired Yanez for dishonesty because of the discrepancies.

Yanez sued the company for wrongful discharge and joined the in-house attorney as a defendant, claiming the in-house attorney told him before the deposition that, even though he was the company attorney, he was also Yanez’s attorney for the deposition, would “protect him,” and his job would not be affected as long as he told the truth. The trial court granted summary judgment, finding the in-house attorney’s conduct did not cause the wrongful discharge. The court of appeals reversed, pointing out that the attorney had failed to inform Yanez of the conflicts of interest between him and his employer and to obtain informed written consent of both clients. The attorney’s actions during the deposition in calling attention to the inconsistency in statements created a material question of fact regarding whether the attorney played a substantial role in uncovering the alleged deception leading to Yanez’s termination. The court therefore allowed Yanez to go forward against the attorney on theories of malpractice, breach of fiduciary duty, and fraud.

In an important legal malpractice case for lawyers who handle multi-party litigation, Prakashpalan v. Engstrom Lipscomb & Lack, 223 Cal. App. 4th 1105 (2014) addressed the statute of limitations and an attorney’s duty to account for settlement proceeds under Rule 4-100 of the California Rules of Professional Conduct. Plaintiffs who had participated in a settlement of multi-plaintiff litigation handled by the defendant law firm in 1997 claimed they were informed only of information regarding their distributive share, but not the amounts received or paid to other clients of the firm. Fourteen years later, in 2012, plaintiffs learned from other settlement participants that they had been instructed not to discuss their settlement funds with anyone and, after some math analysis, alleged there were $22 million in unaccounted funds.

While affirming the trial court’s decision that legal malpractice and breach of fiduciary duty claims were time barred by Civil Procedure Code section 340.6, the court applied a longer three-year statute of limitations to the claim of failure to account, under Probate Code section 16460. The court also found that the delayed discovery rule applies so that the statute will not begin to run until an accounting has been rendered or the client has received sufficient information to be placed on notice to take action. In an extensive discussion of the duty to account, the court held that a lawyer representing multiple plaintiffs in an aggregate settlement is subject to Rules 3-310(D) and 4-100 of the California Rules of Professional Conduct, and must not only have the informed written consent of each client, but must also provide sufficient information to enable the clients to determine that the settlement proceeds have been properly distributed. The court held plaintiffs had not received sufficient information to place them on inquiry notice, and their statute of limitations under Probate Code section 16460 did not commence until they learned those facts.

Finally, two closely watched 2014 California Supreme Court decisions addressed admission of lawyers to the practice of law. In In re Glass, 58 Cal. 4th 500 (2014), the court denied the admission of Stephen Glass, finding that he had fabricated more than forty articles as a journalist, then tried to avoid detection. Glass also deceived the New York State Bar in 2002 regarding the number of fabricated articles by referencing only twenty, and continued his dishonesty up to and including the California State Bar’s evidentiary hearing regarding his admission. The court held that Glass lacked the moral character required for admission and that, despite twelve years of therapy, Glass had not demonstrated rehabilitation and current fitness.

In In re Garcia, 58 Cal. 4th 440 (2014), the court addressed the admission of an undocumented immigrant to the State Bar, finding that, because the legislature enacted Business and Professions Code section 6064(b), effective January 1, 2014, authorizing the admission of undocumented immigrants to the practice of law in California, Garcia’s request for admission fell within an exception to 8 U.S.C. section 1621, the federal statute otherwise prohibiting undocumented immigrants from obtaining professional licenses. Examining public policy, the court determined that an undocumented immigrant’s presence in the United States in violation of federal law was not a sufficient basis for precluding admission. The court addressed the argument that an undocumented immigrant would violate the law upon taking the oath to uphold the law under Business and Professions Code section 6068 by finding that “every intentional violation of the law is not, ipso facto, grounds for excluding an individual from membership in the legal profession,” and that mere presence in the United States without lawful authorization does not alone demonstrate moral turpitude. Finally, because Garcia demonstrated good moral character, there was no barrier to his admission. Id. at 460.

The OCBA’s Professionalism & Ethics Committee looks forward to bringing you this column again in 2016, and wishes you an ethical new year.