ETHICS QUARTERLY

A Service of the San Diego County Bar Association’s
Legal Ethics Committee

April 2004 Vol. 1, No. 1

INTRODUCTION This is the first issue of “Ethics Quarterly,” a service of the San Diego County Bar Association’s Legal Ethics Committee for the benefit of SDCBA members. Each issue will cover the published opinions in California courts addressing the Rules of Professional Conduct and related issues. Following the case summaries will be a Commentary authored by a member of the Committee focusing on an issue raised by at least two of the abstracted cases. The Bar’s Legal Ethics Committee also staffs the SDCBA Ethics Hotline and prepares “Ethics in Brief” for the Bar Report and articles for San Diego Lawyer magazine. We also provide CLE Ethics Seminars to the Bar periodically and to individual practice sections by request. Comments or inquiries about Ethics Quarterly or about the Committee’s other services should be directed to Committee Chair Dan Eaton at eaton@scmv.com.
CASE NOTES
	Rule 2-100: Ex parte contact with represented party
Case:	Snider v. Superior Court (4^th DCA 2003) 113 Cal.App.4th 1187
Issue:	Whether an attorney representing a former corporate employee was properly disqualified for contacting two current employees whose statements could be imputed to the corporation, either because of their position or involvement in the subject of the dispute.
Holding:	Disqualification was improper because contacted employees were not “represented parties” for purposes of the rule. Even if they were, disqualification was improper because there was no showing of actual knowledge that the employees were represented parties.
Note:	Court offers practical guidance for both sides to avoid a potential rule 2-100 issue: “Ethical violations and unnecessary litigation over such ex parte contacts would largely be obviated by prudent actions taken by counsel and organizations in applying rule 2-100.” Id., p. 1194.
	Rule 3-300: Attorney business transactions with client
Case:	BGJ Associates, LLC v. Wilson (2d DCA 2003) 113 Cal.App.4^th 1217
Issue:	Could attorney enforce “oral joint venture agreement” against client who sought to void it?
Holding:	No. Client was entitled to void agreement where attorney failed to transmit the transaction and its terms to client in writing and failed to secure client’s written consent to terms of transaction, both in violation of rule 3-300. Client’s consultation with another attorney about terms of the agreement did not relieve transacting attorney of his obligations under rule 3-300.
	Former Canon 9 of ABA Model Code : Attorneys should avoid even appearance of professional impropriety
Case:	Addam v. Superior Court (4^th DCA 2004) __ Cal.App.4^th ___, 10 Cal.Rptr.3d 39
Issue:	In a dissolution proceeding, did a sibling relationship between husband’s lawyer and wife’s former gynecologist require “recusal” of husband’s attorney on the ground that there was an appearance of impropriety?
Holding:	No. Unlike judicial disqualifications under Canon 2 of the California Code of Judicial Ethics, mere appearance of impropriety does not justify a lawyer’s disqualification. “[A]bsent evidence of communications invading either the physician-patient or the lawyer-client privileges, the mere sibling relationship between [the husband’s lawyer and the wife’s former gynecologist] is an insufficient basis for denying husband the important right to be represented by a lawyer of his choice.”
Note:	“California has not adopted Canon 9, either in the Rules of Professional Conduct of the State Bar of California or in the Business and Professions Code. Indeed, reference to the ABA Code was in 1975 deleted from the California Rules of Professional Conduct. Nevertheless, the ABA Code still serves to guide California courts (citations) which adverted to Canon 9 or the appearance of impropriety standard in a variety of contexts (collecting cases).” Gregori v. Bank of America (1989) 207 Cal.App.3d 291, 305 (citations omitted.) Gregori is cited in Addam for the proposition that “there is no California case in which an attorney has been disqualified solely on this basis.” Gregori at 306 (emphasis in the original). In 1983, the ABA replaced the Model Code in which Canon 9 was found with the Model Rules.
	Evid. Code § 950 et seq.; Cal. Code Civ. Proc. § 2018: Attorney-Client Privilege, Attorney Work Product
Case:	McKesson HBOC, Inc. v. Superior Court (1^st DCA 2004)115 Cal.App.4^th 1229
Issue:	Does target of government securities investigation that shares privileged audit and interview memoranda with government waive the attorney-client privilege and protection of work product for purposes of discovery by plaintiff in civil action?
Holding:	Yes, both protections are waived. “A defendant facing multiple plaintiffs should [not] be able to disclose privileged materials to one plaintiff without waiving the attorney-client privilege as to the other plaintiffs.” Id., p. 1238. As for work product, defendant “did not need to disclose the audit report and interview memoranda to prepare its case for trial, and [defendant’s] adversaries are not taking undue advantage of [defense counsel’s] efforts because the documents would have remained protected had not [defendant] disclosed them to third parties.” Id., p. 1241.
Note:	The SEC and the Securities Industry Association filed amicus briefs on the work product issue only, unsuccessfully urging the Court to adopt a “selective waiver” theory “under which a client could disclose a privileged or protected communication to the government, while continuing to assert it against other parties.” Id., p. 1240. The Court noted the California Legislature’s “expressed desire to control evidentiary protections and privileges.” Id., p. 1241.

	Rule 2-200: No fee splitting among law firms without client’s written consent after full disclosure of terms
Case:	Huskinson & Brown, LLP v. Wolf (2004) 32 Cal.4^th 453
Issue:	Is law firm entitled to share of fee based on reasonable value of its services from other firm that represented client where fee splitting arrangement did not comply with rule 2-200?
Holding:	Yes (unanimous). “The question arises whether a quantum meruit award for services rendered in reliance on a fee-sharing agreement that lacks written client consent constitutes a division of fees within the rule’s contemplation. We think not. True, a quantum meruit award as such would serve to compensate for legal services that have been performed pursuant to an agreement rendered unenforceable under rule 2-200. But when based on the reasonable value of those services, such an award involves no apportionment of the fees that the client paid or has agreed to pay and therefore is not a fee division subject to rule 2-200’s client disclosure and consent requirements.” Id., p. 459.
Note:	Court explained that its holding did not require client to pay any more in fees or undermine purpose of rule 2-200, which “is to safeguard the right of clients to know how their legal fees will be determined and the extent of, and the basis for, their attorneys’ sharing of the fees.” Id., p. 459. Court distinguished cases where violations of other Rules of Professional Conduct resulted in holdings that no quantum meruit recovery was available. “Those cases . . . involved violations of a rule that proscribed the very conduct for which compensation was sought, i.e., the rule prohibiting attorney from engaging in conflicting representation or accepting professional employment adverse to the interests of a client or former client without the written consent of both parties.” Id., p. 463.
	Cal. Code Civ. Proc. § 2018: Duty to advise opposing counsel of receipt of work product document
Case:	Rico v. Mitsubishi Motors Corp. (4^th DCA 2004) 116 Cal.App.4^th 51
Issue:	Was disqualification of plaintiff’s counsel and experts proper where counsel received work product summary of conference between defense counsel and experts assessing strengths and weaknesses of technical evidence, used such notes to impeach defense experts at deposition, and sent the notes to his associates and his own experts?
Holding:	Yes. Plaintiff’s counsel should not have examined defense counsel’s inadvertently produced “plainly privileged” summary “any more than was necessary to determine that it was privileged, and should have notified [defense counsel] immediately to avoid any potential prejudice.” The Court applied the judicially crafted rule of ethics announced in State Comp. Ins. Fund v. WPS, Inc. (1999) 70 Cal.App.4^th 644 in the context of inadvertent production of attorney-client privileged notes. Rico limited to its facts Aerojet-General Corp. v. Transport Indemnity Insurance (1993) 18 Cal.App.4^th 996, which suggested that an attorney is duty bound to use inadvertently produced confidential information, noting that Aerojet “essentially involved nonprivileged information, namely, a witness’ identity, which was never used to the other party’s detriment.” Disqualification of plaintiff’s counsel and experts was not an abuse of discretion because plaintiff’s counsel “not only failed to conduct himself as required under the State Fund case, but also acted unethically in making full use of the confidential document,” causing the defendant “irreversible” damage.
Note:	While finding the document was work product, the Court of Appeal rejected the trial court’s finding that the document was also protected by the attorney-client privilege. “An attorney-client privilege does not attach to a communication that has no connection to the client. A conference between attorneys and experts, who are simply stating their own opinions, is not protected by the attorney-client privilege.” This was so even though it was a client representative writing the notes, with the attorney specifically instructing him what to note and the attorney later editing the summary. The note taker “was not providing nor receiving information” on the client’s behalf. “The exchange was simply between an attorney and an individual acting as the attorney’s paralegal.” In response to plaintiff’s counsel claim that the discrepancies between the notes and the expert’s testimony revealed that the experts were lying, the Court noted its “intention [was] not to reward wrongdoing. . . . [But u]nlike with the attorney-client privilege, there is no crime-fraud exception to the attorney work product rule. The absolute attorney work product privilege is just that, absolute.”

Disclaimer: Counsel should read the full text of the cases discussed before relying on the necessarily limited discussion of them here. Counsel also should be mindful that some of the Court of Appeal cases addressed may be subject to depublication or review by the California Supreme Court. All cases should therefore be checked to confirm they are citable.

COMMENTARY: The Illusion of Irreconcilability

Daniel E. Eaton[1]

The cases abstracted in this inaugural issue of “Ethics Quarterly” highlight important issues, including fairness toward opposing counsel, the consequences of incomplete adherence to the Rules of Professional Conduct, and the degree to which the ABA Model Rules influence the duties of California attorneys. Several of the cases underscore the importance of the client’s right to counsel of her choice in considering disqualification, but address that concept in very different, seemingly irreconcilable ways. The apparent irreconcilability of two of these cases is an illusion cast by courts balancing the competing interests underlying the Rules of Professional Responsibility to shifting sets of facts.

In Snider v. Superior Court (2003) 113 Cal.App.4^th 1187, Division One of the Fourth District Court of Appeal held that an attorney cannot be disqualified for ex parte contact with a witness affiliated with an opposing entity unless the attorney actually knows the witness is represented by counsel. There is no “duty to inquire of” an organization’s counsel before making contact with a witness employed, or formerly employed, by that organization. Id., p. 1215. In overturning the trial court’s order of disqualification, the Court of Appeal emphasized the importance of a client’s right to counsel of her choice.

In Rico v. Mitsubishi Motors Corporation (2004) 116 Cal.App.4^th 51, by contrast, Division Two of the Fourth District Court of Appeal affirmed disqualification of plaintiff’s counsel and experts who received his opposing counsel’s work product notes and used them to impeach defense experts. In so ruling, this Court also acknowledged the importance of a client’s choice of counsel. Plaintiff’s counsel contended that the notes were not work product because they appeared to reflect only a dialogue between defense counsel and his experts. Nonetheless, the Court of Appeal agreed with the trial court that the document was “plainly privileged.” Id. p. __. Plaintiff’s counsel “should have known that he was not entitled to the document that he had in his possession. [¶] A brief look and a simple phone call could have resolved the matter.” Id. __. The Rico Court, too, acknowledged the importance of preserving a client’s right to counsel – especially where the client himself did not engaged in wrongdoing. Id. __. But “[t]he important right to counsel of one’s choice must yield to ethical considerations that affect fundamental principles of our judicial process.” Id., p. __ (citation and internal quotation marks omitted.)

The two cases appear to give opposing answers to two apparently similar questions: Why is a phone call to opposing counsel necessary where there is doubt about whether inadvertently produced documents are privileged, but not where there is doubt that a party-affiliated witness is represented by counsel? It may come down to the degree to which an attorney can prevent the unwanted intrusion from opposing counsel in these different contexts. The organization’s counsel can take deliberate steps to protect himself from unwanted ex parte intrusion, such as informing all organization employees not to speak to an attorney outside of the presence of the organization’s counsel and asking employees to refuse to do so if approached. Snider, 113 Cal.App.4^th at 1194 and 1212. Moreover, to require investigating counsel automatically to pre-clear with the organization’s counsel all ex parte contacts with witnesses affiliated with the organization would at a minimum substantially increase the cost of pre-litigation investigation. Id., p. 1201, discussing legislative history of rule-2100.

By contrast, there is almost by definition nothing counsel can do to prevent inadvertent disclosure of privileged documents, beyond being vigilant to keep it from happening. The person best able to mitigate the effect of a privileged document unknowingly produced is the recipient rather than the sender. Where counsel receives such a document by mistake, even if the privileged nature of the document is unclear, it does not inhibit her trial preparation to require her to call opposing counsel to confirm that its production was intended.

Ultimately, the duties these rulings impose are compatible. Counsel must read no more of a document than necessary to determine whether it is privileged before stopping, on the one hand, and must ask no more questions, either of himself or of the witness, to determine whether a witness is represented by counsel, on the other hand. Counsel exceed the limited license of these rulings at peril of disqualification. These holdings prevent opposing counsel from compromising either genuine attorney work product or a genuine attorney-client relationship, thus upholding essential components of the adversary system, and reinforcing the ability of a client’s chosen counsel to protect the client’s interests.

You are receiving this e-mail because of your past interactions with the San Diego County Bar Association, or because we believe you may be interested in this information. If you received this message in error, we apologize. The SDCBA uses electronic communications sparingly to keep the legal community informed about issues and events of interest. If you wish to be excluded from future e-mails (remembering that this will limit our ability to keep you up-to-date), please send a message to jkeck@sdcba.org. You will receive one additional e-mail confirming your removal from our e-mail list.

---

[1] Daniel E. Eaton is a shareholder in the firm of Seltzer Caplan McMahon Vitek and is Chairman of the SDCBA Legal Ethics Committee. The views expressed are his alone and are not necessarily those of the SDCBA or Seltzer Caplan McMahon Vitek.