July 2020 Vol. 20, No. 2
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Editors: David Majchrzak and Edward McIntyre
This issue of Ethics Quarterly addresses some novel issues about lawyering itself: Is an inactive lawyer still “admitted to practice?” Can a suspended lawyer take advantage of statutory provisions that would allow a non-lawyer to represent a party at an arbitration? When does the attorney-client relationship end? Are Superior Court research lawyers bound, like the rest of us, to State Bar MCLE requirements? It also discusses whether a class action law firm is bound by the fee and cost bid it submits to be appointed and what fee, if any, a lawyer, who fails to keep any time records, might expect. We have also included two ABA Model Rule opinions and one California State Bar opinion. Given that California has adopted rules that more closely follow the ABA Model Rules, ABA opinions, while not binding, offer important guidance.
We welcome your comments and suggestions about recent decisions, authority, or issues we might address in future editions. For immediate questions, the Legal Ethics Committee maintains a hotline that SDCBA members can call at any hour (619) 231-0781 x4145. Just follow the instructions and a committee member will get back to you with the ethics authority you might consider.
In This Issue
Among the questions answered by rulings abstracted in this issue of Ethics Quarterly are:
20.2.1 Early v. Becerra (2020) 47 Cal. App. 5th 325 – Court of Appeal of California, Third Appellate District (April 2, 2020)
Is a lawyer who voluntarily elects to become an inactive member of the State Bar, and thus ineligible to practice law, still “admitted to practice?”
Yes. Attorney General Xavier Becerra was admitted to the State Bar in 1985. He changed his status to “inactive” in 1991 and served in the United States House of Representatives from 1993 until 2017. He changed his status from “inactive” to “active” on January 1, 2017 after Governor Brown appointed Becerra to complete the term of Kamala Harris. He then ran as a candidate for the office in November 2018. At that time, Eric Early challenged that Becerra was ineligible to be Attorney General because he had not been admitted to practice before the Supreme Court of California for at least five years before appointment or election, as Government Code section 12503 requires.
The Court of Appeal upheld the trial court’s denial of the petition for a writ of mandate to preclude Becerra from running for Attorney General. Although Becerra had been elected by the time of the court’s decision, it held the case was not moot because it posed an issue of broad public interest likely to recur.
The Court then rejected Early’s contention that “admitted to practice” can only mean actual ability to practice law. The words “active” or “actual” do not appear in the statute and the court is prohibited from inserting words that are not there in the guise of statutory interpretation. Further, the court distinguished “admitted to practice” from “inactive” or “active” State Bar membership. Only the Supreme Court can “admit” a person “as an attorney at law in all the courts of this state . . .” It can also disbar or suspend a lawyer. But a lawyer voluntarily electing to be an inactive member of the State Bar is not the same. Although an inactive lawyer is ineligible to practice law (Business and Professions Code, § 6126, subd. (a)), that lawyer still remains admitted to practice and a member of the bar. Thus, “admitted to practice” in California means being admitted as a lawyer, not the active or inactive status of an admitted lawyer.
20.2.2 In the Matter of Peter Miles Hoffman (2020) 2020 Calif. Op. LEXIS 7, Case No. 17-O-00833 (17-O-02657; 17-O-03006) – Review Department of the State Bar Court (April 8, 2020)
Does the Code of Civil Procedure provision that permits non-lawyers to
represent persons in certain arbitration proceedings exempt a suspended lawyer from
discipline for the unauthorized practice of law?
No. Hoffman had been suspended from the practice of law as a result of stipulated discipline in 2017 for earlier acts of unauthorized practice of law (UPL) when he engaged in almost identical conduct in three subsequent arbitrations. Hoffman argued that Code of Civil Procedure sections 1282.4, subdivision (h), which permits a person not licensed to practice law to represent a party in a collective bargaining arbitration, and 1297.351, which permits the same in international arbitrations, provided authorization for his conduct.
The Hearing Department rejected Hoffman’s argument and, because of prior discipline, recommended disbarment. The Review Department upheld both findings. First, citing Birbrower, Montalbano, Condon & Frank v. Superior Court (1998) 17 Cal.4th 119, 128-131, it found that Hoffman had unquestionably engaged in the practice of law in all three matters. He made legal demands on lawyers for opposing parties. And he briefed and advocated regarding a wide variety of legal issues, including judicial notice, discovery, admissibility of evidence, procedural questions, and the legal effect of contract terms. Hoffman never disputed his acts.
The Court then held that Hoffman could not have transformed himself into a person never licensed to practice law merely because the Legislature enacted laws permitting non-lawyers to represent persons in certain arbitration proceedings. Even if a non-lawyer may perform certain services, if a lawyer performs them, they are not transformed into non-legal activities (Crawford v. State Bar (1960) 54 Cal.2d 659, 668). Thus, the Code of Civil Procedure provisions on which Hoffman relied did not exempt him from complying with Business and Professions Code section 6216, which prohibits suspended lawyers from engaging in the practice of law. The Review Department also upheld the finding that Hoffman’s conduct constituted acts involving moral turpitude in violation of Business and Professions Code section 6106. Given his earlier discipline and applying the Standards for Attorney Sanctions for Professional Misconduct, the court recommended disbarment.
In an earlier discipline proceeding, Hoffman had entered into a stipulation of facts, conclusions of law and agreed discipline – a six-month actual suspension – for UPL. In that stipulation, he had agreed that he “was of the unreasonable belief that his representation did not constitute holding himself out as entitled to practice law, as Code of Civil Procedure section 1282.4, subdivision (h), allows non-attorneys to represent a party in such matters . . .” The Review Department held Hoffman was bound by that factual representation made both to the Hearing Department and the Supreme Court.
20.2.3 In the Matter of DEAN EDWARD SMART (2020) 2020 Calif. Op. LEXIS 8, Case No. 17-C-03687 – Review Department of the State Bar Court (April 10, 2020)
Do two felony convictions, one for assault with force likely to produce great bodily injury and the other for discharging a firearm with gross negligence, involve moral turpitude?
Yes. Smart, a California lawyer who moved to Texas, returned to California to try a case. An admitted alcoholic, he drank the equivalent of four bottles of wine between 5:30 p.m. and midnight, and got into a violent fight with a message service employee and her driver/security guard, during which he fired a gun. The bullet penetrated a neighbor’s garage door and lodged into a piece of wood.
Charged with six felonies and two enhancements, Smart pleaded guilty to two. The Review Department placed him on interim suspension and referred the case to the Hearing Department to determine whether the facts and circumstances of his convictions involved moral turpitude or other misconduct warranting discipline. The Hearing Department found moral turpitude and recommended disbarment. The Review Department agreed to both findings.
Although evidence was disputed, the Hearing Department judge was in the best position to determine credibility of witnesses. The Review Department found Smart’s conduct violent and excessive. Further, his discharge of the gun in a residential neighborhood to “teach [the message service employee and her driver/security guard] a lesson” lacked respect for the law. Hence, Smart’s conduct involved moral turpitude. The court took into account Smart’s effort to overcome his alcoholism, but concluded that he had not fully rehabilitated himself and must do so before he can be reinstated. It upheld the disbarment recommendation.
The standards were revised on July 1, 2019 to provide that summary disbarment is the sanction for a final felony conviction in which, inter alia, the facts and circumstances of the offense involved moral turpitude. Based on revisions to Business and Professions Code section 6102, subdivision (c), which is not retroactive, the Review Department applied the standard in effect at the time of Smart’s misconduct: disbarment “unless the most compelling mitigating circumstances clearly predominate.”
20.2.4 Nguyen v. Ford (2020) 49 Cal. App. 5th 1 – Court of Appeal of California, Sixth Appellate District (April 24, 2020)
Does an attorney-client relationship continue when a lawyer files a notice of withdrawal, but fails to obtain leave of court to withdraw?
No. The client hired the lawyer to represent her in an employment discrimination action in the United States District Court for the Northern District of California. After the District Court granted the employer’s motion for summary judgment, the client retained the same lawyer, who remained counsel of record in the District Court action, to pursue an appeal. When the client began challenging the fees and costs being charged, the lawyer filed a motion with the Ninth Circuit to withdraw. This was granted, but the lawyer did not move the District Court for similar relief.
In the context of analyzing the continuous representation tolling provision of the statute of limitations, the Court of Appeal for the Sixth Appellate District concluded that representation of the client ended in both matters when the lawyer filed a notice of withdrawal as counsel after obtaining leave from the Ninth Circuit. Outside of a client discharging a lawyer or formal withdrawal, courts must look at clients’ objectively reasonable expectations in light of the particular facts of the attorney-client relationship – and not any subjective beliefs. Here, where the lawyer had filed notice and there were no subsequent communications between the lawyer and the client, the facts supported a conclusion that the representation had ended.
20.2.5 Obbard v. State Bar of California (2020) 48 Cal. App. 5th 345 – Court of Appeal of California, First Appellate District, Division Five (April 28, 2020)
Is a Superior Court research attorney a state employee and, thus, exempt from State Bar MCLE requirements?
Yes. Obbard, a full-time research lawyer for the Alameda County Superior Court was successful in the trial court with his contention that he was a state employee, exempt from State Bar MCLE requirements. The State Bar argued that he was a superior court employee – not a state employee – because his paycheck came from the Superior Court, not the State Controller and was covered by a different collective bargaining agreement.
The Court of Appeal upheld the trial court, finding that full-time research lawyers are state employees, exempt from State Bar MCLE requirements. The court applied the common law test of an employment relationship: whether the State of California supervises and controls the work of Superior Court research lawyers. The presiding judge of each Superior Court is a state officer, who controls the hiring, firing, and supervision of Superior Court employees. The Superior Court is part of the state’s judicial branch and is administered by the state Judicial Council and funded through the state budget. Research lawyers’ salaries are part of the Superior Court’s operations costs for which the state is responsible. So, research attorneys are, indeed, state employees and thus exempt from State Bar MCLE. They are, however, subject to the judicial branch’s mandatory continuing education program (Cal. Rules of Court, rules 10.452, 10.474, 10.479).
20.2.6 Indirect Purchaser Class v. Erwin (In re Optical Disk Drive Prods. Antitrust Litig.) (2020) 959 F.3d 922 – United States Court of Appeals for the Ninth Circuit (May 15, 2020)
When a law firm submits a fee bid to be selected as interim class counsel, is it bound by that bid when it comes to an award of fees and costs?
Yes, and maybe. After DOJ revealed it was conducting a criminal price-fixing investigation of companies in the optical disk drive (ODD) industry, civil class actions followed. The district court instructed law firms jockeying to be class counsel to submit with their applications proposals for their fees and costs, which the court would take into account in making the appointment. Hagens-Berman submitted the successful bid, proposing a sliding-scale award for both fees and costs based on the percentage-of-recovery method.
Three separate settlements followed finally resulting in a total $180 million settlement, with interim fee awards on the first two settlements. For reasons unclear, the firm’s bid was unavailable to the court or objectors at the first two hearings and, unfound in the court’s file, the court ordered the firm to submit a memorandum of the bid’s terms for the third hearing.
First, the court of appeals recognized that the relationship between class counsel and class members turns adversarial at the fee-setting stage, such that district courts assume a fiduciary role that requires close scrutiny of class counsel’s requests for fees and expenses from a common fund.
With respect to costs and litigation expenses, the court held the firm to its bid; it rejected the firm’s argument that only taxable costs were included in the bid and that the firm could be reimbursed for its “litigation expenses” from the settlement fund. Rather, the firm had to bear all its costs and expenses because that was what its bid, fairly interpreted, said.
With respect to fees, however, even though the firm’s application sought greater fees than its bid would have allowed – it argued the case had become much more complex with unanticipated interim appellate activity – the trial court, on remand, could consider both the bid and other factors in determining the appropriate fee. In any event, where there is a significant discrepancy between the bid and the fee award, the district court must give detailed findings to explain the difference.
The opinion has extended discussion of Ninth Circuit criteria for class action fee awards, of interest to class action lawyers but less relevant to this publication.
20.2.7 Taylor v. County of Los Angeles (2020) 2020 Cal.App.LEXIS 513 – Court of Appeal of California, Second Appellate District, Division Eight (June 10, 2020)
What is the best evidence of lawyers' hourly work?
Contemporaneous time records. They are not indispensable, but they eclipse other proofs.
A lawyer represented the family and fiancée of a police shooting victim for one month before being replaced by successor counsel. The first lawyer never turned over case files despite his client’s request. Two years later, the lawyer sent one invoice to the family and one to the fiancée, that each contained a single entry for “legal research and investigation,” but stated in one instance the total time was 130 hours and, in the other, that it was 180 hours. After filing a lien and then fielding repeated requests for more detail from the client, the lawyer submitted a three-page invoice for 200 hours of work, without an attempt to reconcile the variances, and claimed he should receive $308,000 for his work.
The court adjudicated the lien, granting $17,325, and striking the rest. The lawyer appealed, claiming there was an abuse of discretion. The engagement agreement provided the fee would be calculated based on the greater of $475 per hour or a contingency fee, based on the ratio of time spent compared to other lawyers. The court noted that the invoices contradicted one another, the lawyer failed to explain his method for keeping the time records, the discrepancy in time was never explained, the time charged was curiously round in each invoice, and more than two years had elapsed between the services provided and the creation of the three-page timekeeping records.
While noting that lawyers may provide testimonial evidence regarding the number of hours they worked on a matter, the Court of Appeal noted that the trial court could have rejected the entirety of the fee request as “unworthy of belief” and characterized the decision to give the lawyer something rather than nothing “a discretionary act of grace.” And it noted that its decision to publish the matter was to underline that contemporaneous records are the best evidence of the amount of time lawyers work on a case.
This opinion does not directly address a legal ethics question. But it provides an important reminder associated with evidence regarding lawyers’ duties to charge reasonable fees and to provide accountings.
20.2.8 Masellis v. Law Office of Leslie F. Jensen (2020) 2020 Cal. App. LEXIS 564 – Court of Appeal of California, Fifth Appellate District (June 19, 2020)
Does a “legal certainty” causation requirement necessitate an evidentiary requirement greater than preponderance of the evidence?
No. Settle-and-sue cases are those where lawyers assist their clients in reaching an informal negotiated resolution and then are sued based on a theory that the lawyer’s malpractice led to an inadequate settlement. The standard for legal malpractice cases is that plaintiffs must prove the fact of damages to a legal certainty. And, in the context of settle-and-sue cases, this is accomplished by establishing that the settlement was outside the realm of reasonable conclusions, considering what would have actually been collected.
Notwithstanding this, the default evidentiary burden of proof for California civil cases is a preponderance of the evidence. Those decisions that discuss the legal certainty standard for causation do not change the burden of proof. Nor are there any statutes that change the burden. Accordingly, the Fifth Appellate District concluded that references to “legal certainty” mean the certainty established under the preponderance of the evidence standard.
This is another opinion that does not directly provide an ethics analysis. But it is included because it both addresses the law of lawyering and discusses resolution of an ambiguity that may pervade into several practice areas.
20.2.9 In the Matter of Bret Merrick Saxon (Review Dept 2020) 5 State Bar Ct. Rptr. _, Case No. 17-O-01259, Review Department (June 26, 2020)
Will the five-year limitations period for bringing a State Bar discipline action be tolled while the lawyer acts in a fiduciary relationship, even if it is other than a lawyer-client relationship?
Yes. The State Bar must bring discipline proceedings against a lawyer within five years of the alleged misconduct, subject to certain tolling exceptions. The State Bar had charged Saxon with moral turpitude – misappropriation based a Tennessee civil action Yarborough, a co-investor with Saxon in a movie, filed against Saxon in 2010 for fraud, resulting in a $2.25 million judgment in 2010. Yarborough then brought a sister-state enforcement action in California and in 2013 was successful in getting a judgment. Saxon filed for bankruptcy in 2013. The bankruptcy court determined the judgment was not dischargeable because of the fraud; and the bankruptcy action concluded in 2016. The State Bar charged Saxon in 2018.
One ground for tolling is “while civil, criminal, or administrative investigations or proceedings based on the same facts or circumstances as the violation are pending with any governmental agency, court, or tribunal.” The Review Department agreed with the Hearing Department judge that only the Tennessee civil action fit within this provision. The sister-state action was to enforce the judgment and thus derivative. Likewise, the bankruptcy finding of non-dischargeability was derivative.
The Review Department, however, found that Saxon was acting as a fiduciary by his agreement to hold funds “in trust” until the movie production was completed – in 2014 – and held that the provision that tolls the limitation period while a lawyer represents the complainant, or the complainant’s family or business is not limited to just an attorney-client relationship, but also includes other fiduciary relationships.
20.2.10 American Bar Association Standing Committee on Ethics and Professional Responsibility Formal Opinion 491
What obligations are there to avoid counseling or assisting in a crime or fraud in non-litigation settings?
Pursuant to the Model Rule 1.2(d), lawyers may not advise or assist clients in conduct the lawyers know is criminal or fraudulent. The knowing standard is one that may be inferred from the circumstances, including willful blindness or conscious avoidance of facts that would lead to a determination of whether the conduct is criminal or fraudulent.
So, where known facts lead to a high probability that the conduct is criminal or fraudulent, the duties of competency, diligence, and communication require lawyers to inquire before providing further services or advice. This ensures that the lawyer is in a position to provide the informed advice and assistance to which the client is entitled, that the representation will not result in professional misconduct, and that the representation will not involve counseling or assisting a crime or fraud. Where the lawyer conducts a reasonable inquiry, it is ordinarily proper to rely on information from a client where data gathered from other sources fails to resolve the issue. To the extent that lawyers are unable to obtain sufficient information from their clients in such circumstances, then they ordinarily have an obligation to decline the representation or to withdraw since a lawyer may not agree to an unreasonable limitation on the representation even if the client insists or offers consent.
20.2.11 American Bar Association Standing Committee on Ethics and Professional Responsibility Formal Opinion 492
What obligations are there to prospective clients to protect confidentiality?
Pursuant to the Model Rule 1.18, consultations with prospective clients preclude a lawyer or the lawyer’s firm from accepting a new client whose interests are materially adverse to the prospective client in a matter that is the same or substantially related to the subject of the consultation, regardless of whether an attorney-client relationship follows. A lawyer may not accept a new matter if the lawyer received information from the prospective client that could be significantly harmful in the new matter to the prospective client. Whether information rises to the “significantly harmful” standard is fact-based, determined by a variety of circumstances including the length of the consultation and the nature of the topics discussed.
Model Rule 1.18 is different than Model Rule 1.9, which addresses conflicts of interest involving former clients, because it imposes the requirement that the prospective client has communicated information that “could be significantly harmful” in the later matter. So, the mere fact that a prospective client consulted with a lawyer in a substantially related matter is not, by itself, enough to disqualify the lawyer from a later matter. Nor is it sufficient to conclude that a conflict exists merely because a prospective client volunteered information to a lawyer because the unilateral transmission of information to a lawyer does not create a Model Rule 1.18 duty. Nor will Model Rule 1.18 protect someone who contacts a lawyer with the intent to disqualify the lawyer from representing other parties in the matter (i.e., somebody for whom there is no real prospect to ever become a client).
But, where a lawyer learns information that could be significantly harmful in the new matter to the prospective client, the lawyer’s firm can accept the new matter if the lawyer is ethically screened from the new matter or the prospective client provides informed consent.
20.2.12 State Bar of California Standing Committee on Professional Responsibility and Conduct Opinion No. COPRAC 2020-202
May a lawyer provide advice and assistance to a client with respect to conduct permitted by California's cannabis laws, despite the fact that the client's conduct, although lawful under California law, might violate federal law?
Yes. A lawyer may ethically advise a client concerning compliance with California's cannabis laws and may assist the client in conduct permitted by those laws, despite the fact that the client's conduct may violate federal law. Such advice and assistance may include providing legal services and advice to the client that facilitate the operation of a business that is lawful under California law (e.g., incorporation of a business, tax advice, employment advice, contractual arrangements, and other actions necessary to the lawful operation of the business under California law). But this is contingent in the lawyer believing that the client is engaged in a good faith effort to comply with California law.
Notably, a lawyer may not advise a client to violate federal law or provide advice or assistance in violating state or federal law in a way that avoids detection or prosecution of such violations.
The lawyer must also inform the client of the conflict between state and federal law, including the potential for criminal liability and the penalties that could be associated with a violation of federal law.
And, the lawyer must also advise the client of other potential impacts on the lawyer-client relationship, including on the attorney-client privilege, that could result from the fact that the client’s conduct may be prohibited under federal law.
Please note that, due to the break in continuity of publications, the volume number of Ethics Quarterly now matches the calendar year of publication and does not reflect the number of years that Ethics Quarterly has been published.