January 2022 Ethically Speaking - 2021 Year in Review

by Members of the OCBA Professionalism & Ethics Committee

Summarized in this article are key cases published this year involving the law of lawyering and attorneys’ ethical obligations. The issues covered vary from attorney’s fees awards to lawyer civility—an issue rarely addressed in a published opinion. The cases answer questions such as whether the identity of a litigation consultant is protected attorney work product (and the dangers of using a Listerv forum to discuss case details), the proper test that should apply to determine whether attorney-client privilege protects “dual purpose” communications, whether an attorney’s fee paid by an insurer must be deducted from prevailing party fee awards, the extent to which an entity attorney owes duties to its constituents, the sufficiency of proof of causation in a legal malpractice claim, whether attorney incivility can be considered when awarding attorney fees, and whether a lawyer may be held in contempt for intemperate legal briefing.

Three new ethics opinions also joined the ranks this year. These address attorneys’ duties when dealing with their own or a colleague’s impairment, duties owed to prospective clients under our relatively new Rule of Professional Conduct 1.18, and the proper elements of an ethical screen when permitted under the rules.

Litigation Consultants and Attorney Work Product
In Curtis v. Superior Court, 62 Cal. App. 5th 453 (2021), the court of appeal held that the identity of a litigation consultant is not always protected by the attorney work product doctrine.

In the underlying action, attorney Curtis represented an employer in an age discrimination case. Curtis retained “Doe 1,” a plaintiff’s side employment attorney, as a consultant. Doe 1 belonged to the California Employment Lawyers Association (CELA), an organization that assists attorneys who represent employees. Doe 1 had access to an email “Listserv” that members use to exchange ideas and strategies. Use of the Listserv was subject to a confidentiality agreement. After plaintiff in the underlying action prevailed, his attorney posted a Listserv message that provided “a colorful account of the strategies and factors” he believed had resulted in the favorable verdict. Id. at 460. Doe 1 forwarded this message to Curtis, who then used it as an exhibit in opposing a post-trial attorney fee motion.

CELA then sued Doe 1, alleging he violated the Listserv confidentiality agreement when he forwarded the message to Curtis. CELA deposed Curtis, who refused to disclose the identity of Doe 1. In opposing a motion to compel, Curtis argued that Doe 1’s identity was entitled to absolute work product protection. Curtis alternatively argued that even if Doe 1’s identity were entitled to only qualified protection, a balancing test weighed against disclosure because attorneys in general (and Doe 1 in particular) would be discouraged from working with attorneys for fear that later identification would harm their reputation and business.

The trial court granted the motion to compel and the court of appeal denied a writ petition to overturn the ruling. The court held that Doe 1’s identity was not entitled to “absolute” work product protection because “the identity of Doe 1 does not reflect Curtis’s ‘impressions, conclusions, opinions, or legal research or theories.’” Curtis, 62 Cal. App. 5th at 473. And the court found that Curtis was not entitled to a qualified privilege because CELA showed it had no other means to prove its case; thus, the balance of factors compelled disclosure. Id. at 474-75.

Dual Purpose Communications and Privilege
In re Grand Jury, 13 F.4th 710 (9th Cir. 2021) held that the “primary purpose” test applies to determine whether “dual purpose” communications are protected by the attorney-client privilege.

Dual purpose communications may occur where an attorney provides both legal advice and business advice to a client. Before In re Grand Jury, district courts in the circuit had applied two different tests in determining whether a dual purpose communication was protected by the attorney-client privilege: a “primary purpose” test and a “because of” test. Under the primary purpose test, courts examine whether the primary purpose of a communication is to give legal advice. The “because of” test, which typically applies for work product, does not consider whether litigation was a primary or secondary motive behind the creation of a document. It instead considers the totality of the circumstances and affords protection when a document was created because of anticipated litigation, and would not have been created in a substantially similar form but for the prospect of that litigation. It is a broader test than the “primary purpose” test because it looks at causal connection, and not a “primary” reason.

The Ninth Circuit held that the primary purpose test should apply. Unlike work product, the attorney-client privilege is not necessarily tied to the adversarial process, and is “not so much concerned with the fairness of litigation as it is with providing a sanctuary for candid communication about any legal matter, not just impending litigation.” To apply the broader “because of” test might harm the adversarial system if parties could seek to withhold key documents by claiming that they were created “because of” litigation concerns. The court also noted that companies could add lawyers to every business decision in order to try to cloak them in privilege.

The court also observed that the D.C. Circuit in In re Kellogg, 756 F.3d 754 (D.C. Cir. 2014) noted that a communication might have more than one “primary purpose,” as “trying to find the one primary purpose for a communication motivated by two sometimes overlapping purposes (one legal and one business, for example) can be an inherently impossible task.” The court expressly did not decide whether “a primary purpose” test should apply, and merely held that the district court had not erred in finding that the predominate purpose of the disputed communications was not to obtain legal advice.

Prevailing Party Fee Awards and Insurance
In Sonoma Land Trust v. Thompson, 63 Cal. App. 5th 978 (2021), the California Court of Appeal addressed whether an attorney’s fees award to a prevailing party must deduct fees paid by insurance. The underlying case involved nearly five years of litigation. The plaintiff (the Trust) alleged that the defendants (the Thompsons) had violated a conservation easement on their property. The Trust’s insurer paid the first $500,000 in attorneys’ fees incurred by the Trust, for which the Trust’s attorneys worked at a reduced billing rate. Once the insurance was exhausted, the Trust’s attorneys worked on a fully contingent basis. After a nineteen-day bench trial, the trial court issued a judgment in favor of the Trust and awarded $2,961,264.29 in attorneys’ fees and costs to the Trust, as the prevailing party. On appeal, the Thompsons argued that the trial court should have deducted the $500,000 paid by insurance.

The court of appeal disagreed, holding that the trial court was not required to reduce the fee award “simply because the Trust had the foresight to purchase insurance.” Id. at 984. As the court explained, fee awards generally are based on the fair market value of the services provided, not on the actual cost to the party. To calculate a fee award, a trial court must first determine the lodestar, i.e., the number of hours reasonably expended, multiplied by the reasonable hourly rate. Various factors may then be applied to determine a fee that matches the fair market value for the legal services provided.

In this case, the trial court calculated a lodestar of $2,032,695.10 and added a fee enhancement of $813,078.04. The enhancement was based upon the contingent risk assumed by the Trust’s counsel, their skill, the novelty and difficulty of the case, and the excellent results obtained. The court noted that California courts routinely award fees to parties who do not have a personal obligation to pay for legal work performed on their behalf, such as when a labor union pays such fees. The court also noted that the Trust would not receive a double recovery because the policy obligated the Trust to reimburse the insurer from any fee award.

Ethical Duties Owed by an Attorney for a Closely Held Corporation
Capra v. Capra, 58 Cal. App. 5th 1072 (2020) involves a dispute among trust beneficiaries of the Capra Family Trust, established by legendary Hollywood film director Frank Capra and his wife Lucille. The case addresses the duties of a lawyer representing an entity and to whom those ethical duties are owed. It has a good review of the case law pertaining to disqualification based upon breach of the duties of loyalty and confidentiality. Notably, the Capra court disagrees with the often-cited holding in Woods v. Superior Court, 149 Cal. App. 3d 931 (1983), on conflicts and disqualification in the representation of a closely held corporation:

We respectfully disagree with Woods’s statement that the attorney, as counsel for the closely held family corporation, “necessarily” represented both husband’s and wife’s interests if that statement is taken out of its context. Even in a closely held corporation, the company’s attorney owes a duty of loyalty to the corporation, not the shareholders.

Capra, 58 Cal. App. 5th at 1096-97. Woods involved the representation of a family-owned corporation jointly controlled by husband and wife, followed by the attorney’s representation of husband against wife in marital dissolution proceedings. In Capra, the defendants’ attorney had previously represented Frank Capra Productions (FCP) and had an attorney-client relationship with one of the other shareholders. While plaintiffs were also shareholders, they brought their action individually, and not derivatively on behalf of FCP. The trial court denied the plaintiffs’ motion to disqualify defendants’ counsel, Barling, finding there was no evidence that the attorney had previously represented these shareholder parties, nor any evidence of a concurrent representation conflict. Plaintiffs contended on appeal that the lawyer owed duties arising from the prior corporate representation to them in their capacity as shareholders. However, FCP was not a party to this action, and plaintiffs could not individually seek disqualification on its behalf. Moreover, the control of FCP was not in dispute in this action and therefore the prior representation of FCP was not substantially related to the dispute among the family members in this case. There was no evidence that Barling had previously represented the Capra Family Trust, FCP, or plaintiffs on matters related to the subject of the Capra action. The court of appeal found there was no abuse of discretion by the trial court in finding no concurrent representation.

Proof of Causation in a Legal Malpractice Claim
In a case from our appellate district and division, O’Shea v. Lindenberg, 64 Cal. App. 5th 228 (2021), a former client brought a legal malpractice action against an attorney who represented him in a child support action. The client alleged that the attorney’s negligence resulted in an excessive award of child support to his ex-wife. Among other things, the client alleged that the attorney had negligently failed to advise him to retain a forensic expert to testify as to issues relating to his income and expenses which were the basis of the child support award.

At the malpractice trial, the jury found that the attorney had breached her duty to the former client, but was unable to agree on whether the attorney’s breach of duty was a substantial factor in causing the client’s damages. Accordingly, the trial court declared a mistrial and granted a directed verdict in favor of the attorney based on a lack of evidence of causation. In doing so, the trial court noted that there was “no indication of what the different result would have been” had the attorney met the standard of care. The client appealed.

The court of appeal affirmed. The court noted that a legal malpractice plaintiff is required to establish that, but for the attorney’s negligence, he or she would have obtained a more favorable outcome in the underlying action. Yet, at trial, the client’s malpractice expert was unable to testify to a reasonable degree of legal certainty that the retention of a forensic expert “would have” resulted in a different outcome in the underlying child support trial. Moreover, such expert testimony was critical because it involved a matter outside the common experience of jurors. While a forensic expert might have been able to explain certain financial matters, the court of appeal concluded “it is mere speculation to conclude that such testimony was the deciding factor in how the custody case turned out for [the former client].” Id. at 240.

Lawyer Incivility as a Basis for Fee Reduction
Karton v. ARI Design & Construction, Inc., 61 Cal. App. 5th 734 (2021) addresses an issue rarely discussed in reported decisions in California: the potential consequences of lawyer incivility. David Karton and his wife owned a house. Mr. Karton is a lawyer. They contracted with ARI Design and Construction (ARI) to do major work on their house. After several months of work, Karton told ARI to stop, and to refund the unearned portion of the money he had paid. This lawsuit followed. The court of appeal decided a number of issues, some in Karton’s favor and some against him. But the court indicated that the main issue was whether a lawyer’s incivility and personal embroilment in the litigation can be considered by the trial judge to reduce the attorney’s requested fees.

The litigation got personal for Karton, and he became very aggressive and inflammatory in his briefing and argument. The trial judge cut his fee request from almost $300,000 requested to $90,000. On appeal, Karton challenged the reduction in his fees.

The court rejected several arguments made by Karton, finding that personal involvement and incivility by a lawyer is grounds for reducing the requested fees. “Trial judges deciding motions for attorney fees properly may consider whether the attorney seeking the fee has become personally embroiled and has, therefore, over-litigated the case. Similarly, judges permissibly may consider whether an attorney’s incivility in litigation has affected the litigation costs.” Id. at 738.

Contempt Based on Pleadings
In another decision from our appellate district and division, In re Mahoney, 65 Cal. App. 5th 376 (2021), Paul M. Mahoney, an attorney with fifty-two years of experience, represented Salsbury Engineer, Inc. before the California Court of Appeal in a case arising from a real estate dispute in Orange County. After losing the appeal, Mahoney filed a Petition for Rehearing which “cited not a single statute or opinion and made no attempt to explain, distinguish, or otherwise reply to the cases and statutes relied upon by the trial court and [the court of appeal].” Id. at 377-78. “‘[R]ather than attempt to convince the court its reasoning was faulty, [Mahoney] indulged in an unprofessional rant that impugned the integrity of the court.’” Id. at 378 (quoting prior order). Specifically, the Petition asserted that “‘the opinion in this case . . . makes you wonder whether or not we have a fair and/or equitable legal system or whether the system is mirrored by . . . the actions of people like Tom Girardi.’” Id. The Petition also insinuated that Salsbury may have lost the case because the opposing party had contracts with the Irvine Company which “‘wields a lot of legal and political clout in Orange County.’” Id. Further, the Petition accused the court of appeal of “a judicialsl[e]ight of hand with no factual basis,” and asserted the court of appeal did not follow the law, ignored the facts, and “indiscriminately screwed Salsbury.” Id. at 378-79.

The court of appeal held that these statements, particularly the insinuation that the courts were motivated by the political clout of an adversary, “would serve as a perfect exemplar in any law school class in which the instructor was attempting to illustrate the phrase ‘impugn[] the integrity of the court.’” Id. at 379. Ultimately, the court found Mahoney guilty of contempt for this statement and the statement that the court’s conduct was similar to that attributed to attorney Thomas Girardi. The court fined him $1,000 for each violation, the maximum fine permissible by statute. The contempt statute also authorizes punishment by a maximum of five days in jail, but the court chose to impose no jail time.

Duties With Respect to Lawyer Impairments
State Bar of California Formal Opinion 2021-206 addresses lawyers’ ethical duties when dealing with impairments to their or a colleague’s ability to perform legal services. The opinion concludes that lawyers with mental impairments that affect their ability to practice law are not excused from complying with the California Rules of Professional Responsibility (Rules) and State Bar Act (Act). Mental impairments can: (1) result from stress, lack of sleep, alcoholism, substance abuse, traumatic life events, or a disease or illness such as mental illness, depression, anxiety, or dementia; (2) be temporary or permanent; and (3) range in severity. Impairment itself does not raise ethical issues; however, it does when it impedes a lawyer’s ability to provide competent legal services to clients with diligence or to discharge their ethical and fiduciary duties to clients. When this occurs, if the impaired lawyer will or is likely to violate the Rules or Act, then such lawyer must withdraw from representing the client. Other lawyers in the firm may represent the client if the impaired lawyer’s conflict does not present a significant risk of materially limiting their representation. However, other lawyers may have a disqualifying conflict if, for example, they have an interest in avoiding malpractice liability related to the impaired lawyer’s misconduct or prefer to hide such misconduct due to professional or personal relationships. Additionally, other lawyers in the firm may have obligations to take remedial actions depending on, among other things, the nature of the client matter, urgency of the situation, severity of the lawyer’s unethical conduct, harm or potential harm to the client, size of the firm, and available resources, as well as the position of the other lawyers within the firm. First, subordinate lawyers may not follow an impaired lawyer’s instructions and must notify one or more supervisory or managerial lawyers and ensure remedial measures are adopted. If there is no such lawyer or remedial measures are not taken, then the subordinate lawyer may have a duty to inform the client of the situation. Second, a supervising or managing lawyer with knowledge must take remedial action to avoid or mitigate the consequences of the impaired lawyer’s conduct by investigating, evaluating, and taking control of the situation. Failure to do so may subject the supervising or managing lawyer to a disciplinary proceeding.

Duties to Prospective Clients
In State Bar of California Formal Opinion No. 2021-205, the Committee on Professional Responsibility and Conduct addresses the scope of duties owed to prospective clients under California Rule of Professional Conduct rule 1.18 (a), which provides that, irrespective of whether a lawyer/client relationship later ensues, lawyers owe a duty of confidentiality to a person deemed a prospective client under the rule in the same way that lawyers owe a duty of confidentiality to current or former clients under rules 1.6 and 1.9. This duty prohibits a lawyer without the prospective client’s informed written consent from using or disclosing confidential information obtained during the consultation even when the information would be material to the representation of an existing client of the lawyer or lawyer’s firm. This is because the duty of confidentiality to the prospective client outweighs the duty to existing or former clients.

Additionally, a lawyer who receives confidential information from a prospective client is prohibited from accepting representation materially adverse to the prospective client in the same or a substantially related matter absent informed written consent. Of course, such prohibition is imputed to the other members of a lawyer’s law firm unless the lawyer taking the new consultation takes reasonable measures to obtain only the information reasonably necessary to determine whether representation would be appropriate under the circumstances and promptly takes other measures (inclusive of screening) as required by rule 1.18 (d)(2). These measures include, but are not limited to, limiting questioning of the client to determine whether representation is ethically proper and economically acceptable. This may include information regarding the client’s position, reputation or financial condition, merits of a claim, and likely range of recoveries.

Of course, the prohibition against accepting representation materially adverse to a prospective client can be waived with the informed written consent of both the prospective client and any affected client of the firm. Interestingly, the opinion also concludes that with adequate disclosure of the foreseeable adverse consequences to the prospective client, a prospective client may give advanced informed written consent to a lawyer or law firm later acting adversely to the prospective client in the same or a substantially related matter.

Ethical Screens
The first-ever issued ethics opinion of the California Lawyers Association Ethics Committee (CLAEC), Formal Opinion No. 2021-1, addresses ethical screens, which are now expressly permitted under the California Rules of Professional Conduct in limited situations to resolve certain conflicts of interest. Where an effective ethical screen is permitted and implemented, conflicts are not necessarily imputed to an entire firm.

Various Rules of Professional Conduct address the use of ethical screens. Rules 1.11 and 1.12 provide for the use of ethical screens to avoid imputation of conflicts concerning former clients (without the need for client consent) in the context of former government officials or employees or former neutrals. Rule 1.10 addresses the use of ethical screens in the private firm context. Rule 1.18(b) concerns conflicts created by acquisition of confidential information from a prospective client. Such conflicts are not imputed to a lawyer’s firm if the lawyer is subject to an appropriate ethical screen.

As the opinion explains, assessing the effectiveness of a screen is case-specific, but certain elements are mandatory. The first mandatory element is timeliness. A screen must be instituted as soon as reasonably possible following discovery of the conflict. If a prohibited individual provided material information to people working on the affected representation before a screen was implemented, it would necessarily be untimely. The second mandatory element is that no fee sharing directly related to the matter at issue is permitted with any prohibited lawyer. However, a prohibited lawyer may still receive a bonus based on general firm profitability. The third mandatory element is notice to affected clients. The notice should be sufficient to make parties aware of the potential threat and the measures taken.

Other elements are not expressly required by the California Rules of Professional Conduct, but are practically necessary. These include prohibitions on communications across the screen; limitation of a prohibited person’s access to the screened matter; and in appropriate cases, limiting general access to the prohibited documents and information. Other elements may be required in certain situations. These include physical and/or operational separation of particular personnel to safeguard against inadvertent disclosure; providing training on ethical screens to firm personnel; creating policies for negative internal consequences for communications across the screen; and monitoring/auditing of screens at appropriate intervals.

While ethical screens may not eliminate all risk of discipline based on conflicts of interest, timely erection of a proper screen may be an effective means to avoid firm-wide imputation of conflicts.