ETHICS QUARTERLY

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

September 2006 Vol. 3, No. 3

INTRODUCTION

This edition of Ethics Quarterly covers cases from June 16, 2006 through September 15, 2006. Committee members Dan Eaton, Steve Oetting, Peggy Onstott, and associate member Amy Ljungdahl prepared this edition. Dan Eaton served as the Coordinating Contributor and prepared the Commentary.

On October 26, 2006 from 6:00 p.m. – 8:00 p.m. at the Bar Center, the Committee will present a program on “The Ethics of Negotiation.” On January 25, 2007 from 5:30 p.m. – 9:00 p.m. at the Bar Center, the Committee will present its annual CLE procrastinators’ program. The January program is entitled “Risky Business”: An Interactive Program in Professionalism, Exploring Actual Episodes of Ethical Dilemmas. Further information on the October and January programs will soon be available at the SDCBA web site at www.sdcba.org.

The Committee congratulates Committee member Brian Forbes, a partner with the firm of DLA Piper, on his recent appointment to the statewide Committee On Professional Rules and Conduct (COPRAC).

Comments or inquiries about the Ethics Quarterly should be directed to Committee Co-Chairs Heather Rosing (hrosing@klinedinstlaw.com) or Wendy Patrick Mazzarella (wendy.patrick@sdcda.org)

CASE NOTES
3.3.1	Attorney-Client Privilege
Case:	Williams v. Superior Court (2006) 45 Cal.Rptr.3d 452
Issue:	Is counsel representing the custodian of police office personnel records entitled to review privileged material contained in a declaration filed by the attorney representing a criminal defendant in connection with a motion seeking police personnel records?
Holding:	No. In a Pitchess motion, through which a criminal defendant seeks the personnel records of officers involved in the case, counsel for the custodian of those records, such as the City Attorney, is not entitled to review a declaration filed by criminal defense counsel that contains privileged or work product information. The Court rejected the City Attorney’s argument that such access was necessary to protect the officers’ right to protect the privacy of their personnel records under California law. “True, the custodian of records here is not the ultimate adversary in the underlying criminal case. However, in a Pitchess proceeding, the custodian of records is the immediate adversary. The protection afforded a criminal defendant’s claim of privilege should not turn on the status of his or her immediate adversary. [¶] And the attorney who represents the custodian of records will likely be the criminal defendant’s adversary if he defeats the criminal prosecution and subsequently files a civil rights action against the police and the city or county that employs them. . . .” (Id. at 461.) The Court of Appeal concluded that the criminal defendant’s constitutional rights were better protected by ex parte in camera review of the declaration and other supporting evidence. (Ibid.) By contrast, the threat to the rights of the custodian of records or the police officers involved is “nugatory.” (Id. at 461-462.)
3.3.2	Attorney-Client Privilege
Case:	Genentech, Inc. v. Insmed Incorporated, __ F.R.D. __, 2006 WL 1828728 (N.D. Cal.)
Issue:	In a patent infringement action in which the alleged infringer asserted as a defense the failure of the plaintiff-patentee to disclose prior art, did the deposition testimony of the patentee’s inventor denying knowledge of prior art and denying recollection of documents given to the patentee’s attorney impliedly waive the attorney-client privilege over communications between the inventor and the attorney?
Holding:	No. Such testimony did not place communications between the inventor and the attorney at issue. The Magistrate Judge erred in ordering production of one of the allegedly privileged documents after in camera review. The inventor’s testimony did not refer to any attorney-client communication. The inventor did no more than deny the intent to infringe, which is not enough to constitute waiver of the attorney-client privilege.
Note:	The District Court held that it was error for the Magistrate Judge to order in camera review of the documents to determine whether the privilege had been waived. A party seeking otherwise privileged documents based on the crime-fraud exception must establish a prima facie case that the privileged material was used to further a crime or fraud. By contrast, the assertion of waiver requires only a showing that a privileged communication was placed at issue; “a threshold showing that the privileged communications were in furtherance of inequitable conduct is not required. Thus, in camera review to determine waiver of the privilege would not serve any purpose; examination of the privileged material in camera for its evidentiary value in establishing inequitable conduct would not yield any useful information regarding whether the privilege had been waived in the first place.”
3.3.3	Rule 3-310: Avoiding Representation of Adverse Interests
Case:	Rhaburn v. Superior Court (2006) 45 Cal.Rptr.3d 464
Issue:	Is a public defender automatically disqualified for conflict-of-interest where the office previously represented a prosecution witness, even where: (1) defense of witness occurred a decade before trial of current action; (2) trial counsel in current action joined public defender’s office years after office defended witness; (3) witness’s case was trivial and disposed of without trial; and (4) defendant wishes to continue with current counsel?
Holding:	No. Instead of automatically disqualifying the public defender’s office where the office previously has represented a prosecution witness, “the trial court should evaluate the totality of the circumstances in determining whether there is a reasonable possibility that the individual attorney representing defendant either has obtained confidential information about the witness collected by his or her office, or may inadvertently acquire such information through file review, office conversation, or otherwise. In making this determination, important factors will include: 1) the length of time that has elapsed since the witness was represented by the public defender’s office; 2) the nature and notoriety (vel non) of the witness’ case; 3) whether the current attorney was a member of the public defender’s office at the time of the witness’ case, and whether the attorney responsible for the witness’ case remains with the office; 4) the nature and extent of any measures or procedures established by the public defender’s office to ensure that information acquired by one deputy in a previous case is made available to the current attorney.” (Id. at 475, emphasis in the original.)
Note:	The Court stressed that in a case that does not involve “direct and personal” representation of the witness, “the courts should normally be prepared to accept the representation of counsel, as an officer of the court, that he or she has not in fact come into possession of any confidential information acquired from the witness and will not seek to do so.” (Ibid.) In rejecting a “rigid rule of disqualification,” the Court of Appeal observed that recent civil cases have taken a “pragmatic view and declined to order disqualification of a firm if the challenged attorney is unlikely in fact to have acquired confidential information from the former client.” (Id. at 470.) The Court discussed Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698 as distinguishing between attorneys whose involvement with the client was “direct and personal” and those whose involvement was only “peripheral or attenuated.” The Court noted that, although Jessen did not provide specific examples, “it appears that a line might well be drawn between a partner who actively confers with the client, and a low-level associate doing ‘drudge work’ on the case.” (Id. at 471, note 12.)
3.3.4	Prosecutorial Recusal: Penal Code §1424
Case:	People v. Vasquez (2006) 39 Cal.4th 47
Issue:	Must the Los Angeles County district attorney’s entire office (“LACDA”) be recused under Penal Code section 1424 from prosecuting two murder defendants where one of the defendants is the child of two employees of the office and where the assigned deputy district attorney admits that concerns about the appearance of favoritism led office to reject a defense proposal for bench rather than jury trial?
Holding:	Yes. The California Supreme Court unanimously concluded that the Deputy DA’s “admission of an extrinsic influence over the prosecutor’s discretionary decisionmaking showed both the conflict’s existence – i.e., that because of the family relationship there was a reasonable possibility that the DA’s office may not exercise its discretionary function in an evenhanded manner – and that its severity required the LACDA be disqualified, i.e., that the conflict was so grave as to render it unlikely that defendant will receive fair treatment during all portions of the criminal proceedings.” (Id. at 55, internal quotation marks and citations omitted.)
Notes:	The Supreme Court nonetheless affirmed the convictions, 5-2, holding that the trial court’s error did not deprive the defendants of their constitutional right to due process and did not constitute structural error. “District attorneys, as people, inevitably hold individual personal values and allegiances and feel varying emotions relating to their work. As public officeholders, they may also have political ambitions or apprehensions. But that a public prosecutor might feel unusually strongly about a particular prosecution for personal or political reasons does not inevitably indicate an actual conflict of interest, much less a constitutional bar to prosecution.” (Id. at 63.) The trial court’s error was harmless; there was no showing that a bench trial would have resulted in acquittal. Resolving a question of first impression, the majority held that where a defendant fails to establish a violation of due process, and does not seek writ review of an order denying a motion to recuse, the defendant must show actual prejudice from denial of the motion. Justice Moreno, joined by Chief Justice George, dissented from the majority’s conclusion that the violation of section 1424 under the facts of this case did not violate the defendants’ due process rights and voted to reverse the convictions. The dissenters considered it especially significant that the District Attorney had unsuccessfully tendered the prosecution to the Attorney General in light of the potential conflict. “Thus, the individual prosecutor’s discretion in this case was guided by institutional concerns about showing favoritism to [the defendant] rather than concerns personal to her.” (Id. at 76.)
3.3.5	Rule 5-100: Threatening Criminal Prosecution
Case:	Flatley v. Mauro (2006) 39 Cal.4th 299
Issue:	Is a lawyer-defendant’s conduct in threatening to accuse a public personality of various crimes, including rape, unless he complies with a “pre-litigation demand” to settle the case protected under the anti-SLAPP statute (Code Civ. Pro. § 425.16)?
Holding:	No. The lawyer’s conduct constituted criminal extortion as a matter of law. Attorneys are not exempt from principles of extortion in their professional conduct. Indeed, the Court explained, Rule 5-100 prohibits threats of criminal charges to obtain an advantage in a civil suit. (Id. at 327.) In a series of communications, the lawyer threatened to accuse entertainer Michael Flatley with rape, as well as with other unspecified criminal activity unrelated to any harm allegedly suffered by the lawyer’s client. “That the threats were half-couched in legalese does not disguise their essential character as extortion.” (Id. at 330.) Because such blackmail was not protected speech, the anti-SLAPP statute could not be used to dismiss a lawsuit brought by Flatley alleging extortion and other claims.
Notes:	The Court noted that the defendant was an Illinois lawyer which has a rule equivalent to California Rule of Professional Conduct 5-100. (Id. at 327, note 14.) In reaching its holding, the Court concluded that some forms of illegal litigation-related activity that are privileged under the litigation privilege (Civ. Code § 425.16) are not necessarily protected under the anti-SLAPP statute.
3.3.6	Attorney Work Product
Case:	Fru-Con Construction Corp. v. Sacramento Municipal Utility District (Fru-Con I) (E.D. Cal. 2006) 2006 WL 20509999
Issue:	May documents prepared in preparation for administrative proceedings fall within the federal work-product doctrine (Fed. R. Civ. P. 26(b)(3))?
Holding:	Yes. The question is whether the administrative proceedings involve “litigation.” “The determining factor” in deciding whether an administrative proceeding involves litigation “is whether the parties have a right to cross-examine witnesses and therefore introduce evidence. If so, the proceedings are adversarial in nature.” (Id. at *4.) Here, a permit before the California Energy Commission was adjudicatory in nature because it involved intervenors opposed to the permit, and hearings involving cross-examination, evidentiary rulings and findings of fact. Accordingly, various documents prepared in anticipation of the permit process were found to be covered by the work product doctrine.
3.3.7	Attorney-Client Privilege
Case:	Fru-Con Construction Corp. v. Sacramento Municipal Utility District (Fru-Con II) (E.D. Cal. 2006) 2006 WL 2255538
Issue:	Do e-mails addressed to several persons, including an in-house lawyer, fall within the California attorney-client privilege where the author does not indicate he is seeking legal advice?
Holding:	No. The court examined 20 different documents that were claimed to be privileged, finding that many of them were only copied to counsel and did not seek advice: The attorney-client privilege recognized by California law “cannot be read as permitting a privilege to apply to the ‘abundance of caution’ copying of a lawyer on every business document that the author would otherwise not care to see made public at a later time. . . . The dominant purpose of transmission to the attorney must be the rendition of confidential facts, beliefs, questions, etc. upon which the client will be seeking advice.” (Id. at *1.) The Court added: “[T]he dissemination of information to the lawyer must indicate that the lawyer is being addressed so that advice can be formulated or action taken, not simply for FYI reasons – or worse yet, simply because the lawyer must be added in order to make a non-privileged document assertedly privileged.” (Id. at *2.)
3.3.8	Rule 3-310: Avoiding the Representation of Adverse Interests
Case:	In re Tevis (9th Cir. BAP 2006) __ B.R. __, 2006 WL 2285737
Issue:	Did the law firm representing a Chapter 7 trustee establish its right to fees and expenses as a disinterested person under the Bankruptcy Code by summarily denying debtors’ claim that they disclosed confidential information to the firm in seeking representation in pre-petition, substantially related litigation?
Holding:	No. The evidence was in dispute and the matter had to be remanded to the trial court to determine whether the nature of the debtors’ contact with the firm’s office manager, although it ultimately did not result in the debtors retaining the firm, was such that the firm normally would have received confidential information. An affirmative answer under California Rule of Professional Conduct 3-310(E) and cases applying it, which under the Local Rules for the Eastern District govern the dispute, would have disqualified the firm from representing the trustee. Consequently, under Bankruptcy Code §§327(a) and 328(c), the firm would be unable to meet its burden to show its disinterestedness in the estate and its right to be compensated. Because there was inadequate evidence in the trial court about the nature of the pre-petition contacts between the debtors and the firm, the award of fees and expenses was reversed and remanded.
Note:	The Court noted that the disqualification of a firm on conflict of interest grounds is not limited to situations where a prospective client discloses confidential information to an attorney. A prospective client’s communication with a nonlawyer employee of a law firm can also warrant disqualification where confidential information is disclosed. Here, a debtor submitted a declaration that she had explained the situation for which she and her husband were seeking the firm’s help and “fully explained our cases” to someone at the firm.
3.3.9	Attorney Discipline, Appropriate Degree of
Case:	In re Thomson 2006 WL 2370242 (State Bar Ct.)
Issue:	Is disbarment the appropriate discipline for an attorney who has committed multiple prior offenses and, facing discipline for the fifth time, committed misconduct that included disobeying an injunction, failing to report judicial sanctions, engaging in the unauthorized practice of law, and failing to comply with probation where there are no mitigating circumstances?
Holding:	Yes. Standard 1.7(b) of the State Bar Rules of Procedure states that disbarment is the appropriate sanction absent compelling mitigating circumstances. The attorney had four prior instances of discipline, had been on probation continuously since 1994, yet had remained undeterred. All four prior actions involved in varying degrees failing to follow court orders, failing to appear, failing to timely pay sanctions, engaging in unauthorized practice of law while suspended, failing to pay Bar dues, failing to adhere to conditions of probation. In addition, the attorney had failed to disclose contempt findings with sanctions in his probation reports to the State Bar, demonstrating bad faith, dishonesty, and concealment. The attorney had consistently simply ignored court orders and sanctions. The review department did not apply Standard 1.7(b) in a rigid and routine fashion; consideration was given to the totality of all of the disciplinary matters; the likelihood of recurrence; protecting the public, courts and the legal profession; the maintenance of high professional standards by attorneys; and the preservation of confidence in the legal profession.
Note:	The hearing judge originally proposed an actual suspension of four years. The attorney requested review, arguing that the actual discipline should be reduced to two months at most. The State Bar did not request review but, in opposing the attorney’s request for review, sought disbarment in light of disciplinary cases decided after trial in the matter.
3.3.10	Attorney Discipline, Appropriate Degree of
Case:	In re Van Sickle 2006 WL 2465633 (State Bar Ct.)
Issue:	Notwithstanding State Bar Standard 2.7 requiring a six month actual suspension for charging an unconscionable fee, is a three month actual suspension for two counts of charging unconscionable fees to a single client the appropriate discipline where the attorney had been practicing only two years when the misconduct occurred?
Holding:	Yes. In deciding the level of discipline, the State Bar Court acknowledged that “great weight” should be given to the State Bar Standards. (Citing In re Silverton (2005) 36 Cal.4th 81, 89-92.) The State Bar Court, however, observed that the California Supreme Court has flexibly applied a similar standard with a mandatory minimum actual suspension. The State Bar Court found that the fee violations were the result of the attorney’s erroneous conclusion that his client had agreed to pay his contingency fee in addition to the fee she was obligated to pay her prior counsel. Moreover, the attorney “was relatively new to the practice when he accepted” the client and the charging of an unconscionable fee “was in large measure due to his inexperience rather than to any intent to injure his client or acquire an advantage.” The absence of intent to harm the client did not insulate the attorney from culpability but was appropriately considered in setting the appropriate degree of discipline.
Note:	In 2005, a hearing judge had recommended a six month actual suspension, which the State Bar Court had modified to 30 days actual suspension. The State Bar sought review of this case in the Supreme Court and this remand. The 2005 opinion has been vacated as to discussion and recommendation of degree of discipline and depublished; the remainder of discussion and findings of the 2005 case are consolidated with this case. The 2005 case was abstracted in Ethics Quarterly, 2.1.4
3.3.11	C.C.P. §473(b): Relief for Mistake, Inadvertence, Surprise, or Excusable Neglect
Case:	Vandermoon v. Sanwong (2006) 142 Cal.App.4th 315, 47 Cal.Rptr.3d 772
Issue:	Are defendants entitled to set aside a judgment under CCP §473 when a trial was conducted in their absence because their attorney failed to inform them of the trial date?
Holding:	No. “[T]he mandatory provision of section 473(b) does not apply to a judgment entered after an uncontested trial in a defendant’s absence because such a judgment is neither a ‘default,’ a ‘default judgment,’ nor a ‘dismissal’ within the meaning of section 473(b).” (Id., 47 Cal.Rptr.3d at 773.) The Court of Appeal (Third District) rejected a contrary holding of the Second District Court of Appeal in In re Marriage of Hock & Gordon-Hock (2000) 80 Cal.App.4th 1438 that had held that a trial in the absence of a defendant and her attorney was the procedural equivalent of a default for purposes of the mandatory relief provision. Quoting its previous ruling in English v. IKON Business Solutions, Inc. (2001) 94 Cal.App.4th 130, the Court labeled Hock and similar rulings from the Second District Court of Appeal “ultimately misguided quests to salvage cases lost by inept attorneys [that] have applied the mandatory provision far beyond the limited confines the Legislature intended.” (Id. at 776.)

IMPORTANT UPDATE: The Ninth Circuit Court of Appeals has amended and superseded on denial of rehearing its opinion in U.S. v. Elliot (9th Cir. 2006) __ F.3d __, 2006 WL 2466890 to add two new paragraphs. The original opinion, published at 444 F.3d 1187, was abstracted at Ethics Quarterly 3.2.7. There was no change in the judgment. The Court held that a defense attorney’s former representation of a defense witness with respect to a package of cocaine that was the basis of charges against the attorney’s current client constituted a conflict of interest sufficient to justify a mistrial under the manifest necessity doctrine.

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: Why Aren’t Dispute-Related Communications Between Corporate Employees On Which In-House Counsel Are CC’d Privileged?

Daniel E. Eaton [1]

In Fru-Con Construction Corporation v. Sacramento Municipal Utility (E.D.Cal. 2006) 2006 WL 2255538 (Fru-Con II), a federal Magistrate Judge ordered the production of communications between employees of the defendant Sacramento Municipal Utility concerning the utility’s dispute with plaintiff Fru-Con Construction on which the utility’s counsel had been copied. The Court, purportedly applying California’s attorney-client privilege, ruled that copying the attorney on the communication did not bring it within the attorney-client privilege. Indeed, according to the Court, the privilege does not apply at all to such cc’d communications unless “the dominant purpose of transmission to the attorney” is “the rendition of confidential facts, beliefs, questions, etc. upon which the client will be seeking advice.” (Id. at *1.) This ruling, an unpublished federal ruling though it is, would represent a dangerous narrowing of California’s robust attorney-client privilege – especially with respect to communications with in-house counsel – were it to be adopted by California courts.

The Court rested its holding on the observation that privileges generally are narrowly construed under California law. (Id. at *1.) The Court also appeared to rely on the principle that “[d]ocuments that are not originally protected [by the attorney-client privilege] do not become so merely by being provided to or transmitted by an attorney.” (Laguna Beach County Water District v. Superior Court (2004) 124 Cal.App.4th 1453, 1458), though it did not specifically invoke that principle. (But see Solin v. O’Melveny & Myers, LLP (2001) 89 Cal.App.4th 451, 461, holding that the privilege covers transmission by or to an attorney even of public documents “since discovery of the transmission of specific public documents might very well reveal the transmitter’s intended strategy.”) These two principles do not support the broad incursion that the Fru-Con II Court sanctioned into the attorney-client privilege, a privilege itself protected by strong public policy considerations.

The Court relied for its holding primarily on In re Gabapentin Patent Litigation (D.NJ 2003) 214 FRD 178. That Court, applying New Jersey privilege law, held that routine business documents are not privileged simply by being forwarded to in-house counsel. Gabapentin addressed the problem of an overly broad application of the attorney-client privilege in patent litigation. Even that court, however, excluded from the attorney-client privilege only those documents “created for routine business purposes . . . unrelated to legal issues or advice. . . .” (Id. at 186.) That is not equivalent to excluding from the privilege communications copied to counsel when litigation is imminently threatened or ongoing.

The Fru-Con II Court concluded its statement of California attorney-client privilege law by declaring: “Unless it can be said that the dominant purpose of transmitting information to an attorney is the seeking of legal advice, the attorney-client privilege is nonexistent.” (Id. at *2.) The Court cited the decision of Division One of the Fourth District Court of Appeal in Scripps Health v. Superior Court (2003) 109 Cal.App.4th 529, 533 as its only authority for that proposition. A close analysis of Scripps Health, however, shows that, at minimum, it sharply limits the proposition for which it was cited.

In Scripps Health, the Court of Appeal reversed a trial court order requiring production of a hospital’s occurrence reports to wrongful death plaintiffs, the heirs of a deceased patient. The Court of Appeal rejected as “unsound” the trial court’s conclusion that the reports were discoverable because they primarily involved “observational information” as opposed to “opinion information.” (Id. at 535-536.) The Court of Appeal explained that “this distinction is not contained in statutes articulating the attorney-client privilege nor cases interpreting the scope of the privilege. It may be that the factual aspect of the reports will be revealed during some other aspect of discovery, but this does not make the occurrence reports discoverable.” (Ibid., citations omitted.)

California law defines “confidential information” as “information transmitted between a client and his . . . lawyer in the course of that relationship and in confidence.” (Evid. Code §952.) There is no requirement that the information be transmitted by the client for attorney response or input, or any exception in the statute for information that is not sent expressly for that purpose.

In that regard, the Fru-Con II Court failed to appreciate the myriad reasons corporate employees may copy their in-house counsel on communications with each other about issues related to pending or threatened litigation. For example, the corporate employees may want to ensure in-house counsel is kept in the information loop as facts are uncovered and about the employees’ evolving interpretation and understanding of that information. Or, by copying counsel, the corporate employees may want to give the in-house counsel the opportunity to provide legal guidance about dispute-related communications.

Those facts in such communications that are not confidential will be disclosed in discovery, a point the Scripps Health Court made. In addition, the party asserting the privilege has the burden of establishing its application under the terms of the statute. Those are adequate protections against the manipulation and game-playing with which the Fru-Con II Court seemed to be concerned. (See Fru-Con II at **3-6, analyzing application of privilege on document-by-document basis.) In the guise of narrowly interpreting the statutory privilege, the Fru-Con II Court conceived an exception that the text of the statute will not bear and an exception that threatens the very candor and completeness of communications with counsel the attorney-client privilege is designed to promote.

The announced rule may be a threat to the protection of the attorney-client privilege even though it is so simple for a well-advised client to avoid with complete integrity by adding to any communication on which the attorney is copied: “Counsel, I would welcome any thoughts you may have on this matter.” (See Id. at *5, holding privilege did apply to e-mails being sent between employees that were sent to counsel “for input.”) The client’s request for input if counsel feels it is warranted is probably the unstated postscript anyway of a majority, maybe a substantial majority, of communications on which in-house counsel is copied when litigation is threatened or pending.

The rule announced in Fru-Con II could deter a corporate employee from openly sharing his or her internal communications and observations with in-house counsel, the very thing the privilege was designed to encourage, out of concern that the communication will be disclosed to litigation adversar