April 2021 Vol. 21, No. 1
Editors: David Majchrzak and Edward McIntyre
The first quarter of 2021 focused heavily on litigation with some compelling reminders. Business and Professions Code section 6103.7 became effective January 1, 2018; it makes reporting or threatening to report immigration status of a witness or party, or family member, to federal or state authority because the person has exercised a right related to employment or hiring of residential real property, a ground for disbarment or suspension. We report a discipline case, In re Rubin, that the State Bar prosecuted through trial and appeal without delay multiple violations of section 6103.7. It may suggest the seriousness which the State Bar attaches to this kind of misconduct.
We also report discipline that appears to have resulted from ignorance, not malice. In In re Rothstein, the lawyer believed, even after research, that the scope of section 6068, subdivision (e), was limited only to information he received directly from his clients — rather than all information he learned in relation to the representation, from whatever source, even though the information may have been publicly available — and marred a 34-year career.
In a check on Rambo litigation, a court held, “Civility is an ethical component of professionalism.” As a consequence, incivility can be taken into account to reduce attorney fees. And when a lawyer and client enter into a valid fee agreement, the fee agreement, unless unconscionable, will prevail, even if the amount of the fee would not be reasonable using the prevailing standards in the community under the lodestar method — another argument for complying with section 6148 and obtaining a written fee agreement.
We have also added four opinions, three from the American Bar Association and one from the San Diego County Bar Association Legal Ethics Committee, all of which give guidance on aspects of our practice.
As always, 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:
21.1.1 In re Rothstein (Review Dept. 2021) Case No. 19-O-30283 — State Bar Court of California, Review Department (January 4, 2021)
After 34 years as a lawyer without any discipline, will one conflicted representation based on a misinterpretation of the scope of confidentiality result in State Bar discipline?
Yes. Larry Rothstein represented the Teitelbaums in an action, but only the second of two, in which the successful plaintiff in a first action — who had accused Steven Teitelbaum of accepting $1 million diamond consignment, pawning it and keeping the proceeds — accused the Teitelbaums of engaging in a sham divorce and making fraudulent property transfers to avoid collection on the judgment from the first action. During a settlement conference, the presiding judge heard Teitelbaum threaten to kill her, Rothstein, and then himself, and alerted security. Titelbaum was arrested outside the courtroom. Rothstein moved to have the judge disqualified. Then the Teitelbaums dismissed him as their lawyer and subsequently sued him for malpractice and extortion; that case settled.
Shortly after the malpractice settlement, another client engaged Rothstein to sue the Teitelbaums for fraud, having conducted her own extensive research on the two actions against them, including talking to other alleged victims. She told Rothstein she would provide him with copies of documents from court archives to support her case.
Because he had previously represented the Teitelbaums, Rothstein researched former rule 3-310(E) and Business and Professions Code section 6068, subdivision (e), before agreeing to assist the new client. He concluded he could represent her against the Teitelbaums because her matter was not related to his prior representation of them, and that “confidential information” meant information he obtained directly from communications with his former clients. He believed information that was publicly available or obtained from other parties was not confidential within the meaning of section 6068, subdivision (e). He explained to his potential client he could not reveal any of the Teitelbaums’ confidential information he learned from his prior representation of them and the potential client agreed.
Rothstein accepted the representation, but did not notify the Teitelbaums or obtain a conflict waiver from them. His new client provided information based on her own research, although Rothstein was aware of information and details about the Teitelbaums because of his prior representation of them. In addition, he sent three letters to the FBI — one on his client’s letterhead and two on his own — concerning the Teitelbaums’ financial fraud.
Rothstein sued the Teitelbaums on behalf of his new client; the court granted a motion to disqualify him because the two actions were “substantially related.” The Teitelbaums sued and, on summary judgment, the court found Rothstein breached his fiduciary duties to the Teitelbaums and violated section 6068, subdivision (e). That case settled.
The State Bar Court found Rothstein culpable of violating section 6068, subdivision (a), for breaching his fiduciary duty of loyalty to the Teitelbaums by revealing confidential information to the FBI; and violating section 6068, subdivision (e), his duty of confidentiality and former rule 3-300(E) — because of his mistaken belief that he could use information his new client gave him about his former clients if it was not given to him by his former clients or was publicly available. Given substantial mitigating evidence, the court imposed a public reproval with other conditions.
21.1.2 In re Li (Review Dept. 2021) Case No. 15-O-13353 —
State Bar Court of California,Review Department (January 12, 2021)
Should a lawyer be disbarred for repeatedly filing frivolous actions and failing to pay sanctions?
Yes. In his first 20 years of practice, James Li was disciplined three times. His most recent time involved 10 charges of misconduct involving the following course of conduct.
Li’s client granted Li an interest in real property to secure payment of fees in a partition action. Li’s client lost, leaving Li able to recover only $300 of his $170,000 bill from the property. Li attempted to assign $140,000 of his rights to his sister and then moved to vacate the judgment. Li lost on both the motion and the appeal that followed. But then Li refused to reconvey the deeds of trust, requiring the plaintiffs to file a motion for the clerk’s reconveyance. Li lost.
When the property was sold, Li then recorded a lis pendens, but used his middle name, rather than his last name to avoid the requirements of Code of Civil Procedure section 405.21, which requires court approval before a lis pendens is filed in propia persona. He then filed three more motions to set aside the order reconveying the deeds of trust, which had been issued more than two years earlier. Li lost. Li then recorded a second lis pendens, which the court ordered expunged, along with the other lis pendens. The court issued four orders for sanctions totaling more than $18,000 against Li. Li self-reported these to the State Bar, but did not pay them or seek relief from paying them. Li appealed the denial of another motion to vacate, this time relating to the judgment reconveying the deeds, and lost. After, upon motion of the opposing parties, the court issued an order deeming Li a vexatious litigant.
The Review Department concluded that Li engaged in multiple violations of his ethical obligations. These included failing to maintain only legal or just actions and engaging in moral turpitude due to his “serious, habitual abuse of the judicial system.” Li filed dozens of frivolous actions and oppositions, all related to reversing the superior court’s reconveyance order, repeatedly raising the same issues even after they had been decided. Additionally, Li violated his obligation to seek to employ only those means that are consistent with the truth by using a fictitious name as an attempt to avoid statutory procedural requirements for filing a lis pendens in propia persona and then failed to obey the various court orders issuing monetary sanctions against him. The Court determined that disbarment was appropriate to protect the public.
21.1.3 In re Robinson (Review Dept. 2021) Case Nos. 15-O-15368; 16-O-12978; 17-O-01203; 17-O-07288; 18-O-11996 — State Bar Court of California, Review Department (January 22, 2021)
Will misappropriation of client funds, misrepresentation, and failure to perform competently in multiple client matters result in disbarment?
Yes. The State Bar charged Robinson with 58 counts of misconduct involving 17 clients. After a 10-day trial, the hearing judge found him culpable on 46 counts and recommended disbarment. The Review Department agreed, focusing primarily on large-scale misappropriations, misrepresentations, and several failures to perform competently or timely to return files and provide refunds. He still owed more than $222,000 in restitution.
Given the number and seriousness of the culpability findings, and prior discipline, the Revie Department upheld the disbarment recommendation.
21.1.4 In re Clevenger (Review Dept. 2021) Case Nos. 16-J-17320 (17-J-00289) — State Bar Court of California, Review Department (March 3, 2021)
Will ethical misconduct in another jurisdiction subject a lawyer to discipline in California?
Yes. Final discipline orders from other jurisdictions are conclusive evidence that a California lawyer is culpable of professional misconduct in California (Bus & Prof. Code, § 6049.1, subd. (a)), subject to two exceptions: (1) the lawyer must show as a matter of law that his professional misconduct in the other jurisdiction does not warrant discipline in California; or (2) the disciplinary proceeding in the other jurisdiction failed to provide fundamental constitutional protections. (Id., subd. (b)(2)-(3).).
Clevenger was disciplined in Texas for violation of the Texas Rule 3.02, which provides a lawyer shall not take a position that unreasonably increases the costs or other burdens of a case or unreasonably delays its resolution, when he filed one case in one district court and then filed an identical case in another district court without disposing of the first case. The State Bar Court determined he was subject to discipline in California for violation of Business and Professions Code section 6068, subdivision (c), which requires lawyers to counsel or maintain actions only as appear to be legal or just. The Texas order was conclusive evidence that both were prohibited, improper actions that simply burdened the judicial process.
Clevenger was also disciplined in the District of Columbia for litigation misconduct resulting in an actual 120-day suspension and an irrevocable resignation from the bar of the United States District Court for the District of Columbia. This discipline order was also conclusive evidence of a violation of former Rules of Professional Conduct, rule 3-200(A) (prohibiting pursuing litigation without probable cause to harass or injure), and Business and Professions Code section 6068, subd. (c). The Review Department rejected Clevenger’s argument that the D.C. discipline process lacked constitutional guarantees and found it afforded him due process. The Review Department recommended a six-month actual suspension with other discipline conditions.
21.1.5 In re Rubin (Review Dept. 2021) Case Nos. 17-O-01810; SBC-19-O-30352 — State Bar Court of California, Review Department (March 4, 2021)
Can a lawyer’s threat to have a plaintiff who is suing the lawyer’s client in a wage and hour case deported as an undocumented person, with other misconduct, be sufficient to get a lawyer disbarred?
Yes. Both in a letter to a plaintiff’s lawyer and in phone calls, a lawyer made threats about having the plaintiff in a wage and hour case against his client deported. And he had engaged in similar conduct in at least one other case. In addition, when a judge imposed sanctions on Rubin for opposing a video deposition of the plaintiff — as opposed to in-person at his office — he did not obey the sanctions order or report it to the State Bar.
Business and Professions Code section 6103.7 makes is ground for suspensions, disbarment, or other discipline to threaten to report the immigration status of a witness or party to a federal or state agency. Rubin was found to have done so on multiple occasions. Moreover, the Review Department held that section 6103.7 is a bright-line rule; only willful breach is required to be subject to discipline, not knowledge of the rule nor intent to violate it.
In addition, Rubin was found culpable of misappropriation of client funds and related trust account violations. Because this was Rubin’s third disciplinary proceeding and because of the seriousness of the misconduct for which he was found culpable, the Court recommended disbarment.
21.1.6 Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734 — Court of Appeal of California, Second Appellate District, Division Eight (March 9, 2021)
Can a lawyer’s incivility affect his fee award?
Yes. The Court of Appeal held that a trial court, in awarding attorney fees, may consider whether a lawyer’s incivility in litigation has affected the litigation costs. As the court observed, excellent lawyers deserve higher fees and excellent lawyers are civil. “Civility is an ethical component of professionalism,” desirable in litigation not only because “it is ethically required for its own sake,” but also because it is socially advantageous; it lowers the costs of dispute resolution. [Id. at p. 747.]
The trial court awarded $90,000 in fees on a $292,140 judgment in a home construction case against an unlicensed contractor. The successful homeowner’s lawyer sought $271,530 in fees, $52,021 in discovery sanctions, and $203,646 for proving matters at trial denied in discovery. Instead, the court found 200 hours at $450 an hour reasonable, finding the hours the lawyer said he put in “excessive;” he had over-litigated the case that involved a $23,000 dispute with a contractor; he was personally involved because it was his own home; and his incivility was a factor in the fee award. All of this was sufficient to reduce a $300,000 fee request to $90,000.
21.1.7 Pech v. Morgan (2021) 61 Cal.App.5th 841 — Court of Appeal of California, Second Appellate District, Division Three (March 11, 2021)
Should courts employ a lodestar methodology to determine the reasonableness of fees where a fee agreement complies with statutory requirements and is not unconscionable?
No. A lawyer and client entered into written engagement agreements for two matters and had an implied-in-fact contract that applied to two follow-up matters. The clients failed to pay the amounts owed pursuant to the terms of the written contracts. The trial court found the fee agreements in this case were valid under section 6148 and the rates specified in the agreements were not unconscionable. But the clients argued that the fees were higher than what a lodestar based on a reasonable fee would be.
Although Business and Professions Code section 6148 makes clear that, in the absence of a valid fee agreement, an attorney may recover only a “reasonable fee” for services rendered, it does not apply to situations where the parties enter into the requisite fee agreement. When an attorney sues a client for breach of a valid and enforceable fee agreement, the amount of recoverable fees must be determined under the terms of the fee agreement, even if the agreed upon fee exceeds what otherwise would constitute a reasonable fee, based on the prevailing rate in the community, under a lodestar analysis. Lodestar calculations generally apply to situations where an opposing party, who has not had an opportunity to negotiate a contract with the lawyer or to select a lawyer who charges the prevailing rates. Applying that standard here would deprive the parties to the engagement agreement they had entered into.
21.1.8 Curtis v. Superior Court (2021) ___Cal.App.5th___ [2021 Cal. App. LEXIS 254] — Court of Appeal of California, Second Appellate District, Division Seven (March 24, 2021)
Is the identity of a non-testifying expert entitled to work product protection?
No. A lawyer who was a third party witness was asked in deposition to identify the nontestifying expert that the lawyer had consulted with before earlier litigation. The lawyer refused. The Court concluded that the expert’s identity was not protected.
Code of Civil Procedure section 2018.030 provides for an absolute protection from disclosure for a “writing that reflects an attorney's impressions, conclusions, opinions, or legal research or theories is not discoverable under any circumstances.” And it provides qualified protection for other work “unless the court determines that denial of discovery will unfairly prejudice the party seeking discovery in preparing that party's claim or defense or will result in an injustice.” Similar to the reasoning that identification of witnesses who had given statements is generally not protected, the court concluded that identification of a nontestifying expert would not always or even often reflect counsel’s premeditated and carefully considered tactics, impressions, or evaluation of the case.
21.1.9 American Bar Association Formal Opinion 496
How may lawyers properly respond to online criticism?
The opinion suggests, as a best practice, lawyers should consider not responding to a negative post or review, because doing so may draw more attention to it and invite further response from an already unhappy critic. Or they may request that the website or search engine host remove the information.
Lawyers who respond online must not disclose information that relates to a client matter, or that could reasonably lead to the discovery of confidential information by another, in the response. Such information is prohibited from disclosure by Model Rule of Professional Conduct 1.6(a) if it relates to any client’s representation or information that could reasonably lead to the discovery of confidential information by somebody other than the client.
The opinion notes that lawyers are regularly targets of online criticism and negative reviews do not meet the requirements of permissible disclosure in self-defense under Model Rule 1.6(b)(5). But, even if they did, an online response that discloses information relating to a client’s representation or that would lead to discovery of confidential information would exceed disclosure permitted under the Rule.
The opinion suggests that one possible permissible response may be an invitation to contact the lawyer privately to resolve the matter. Another permissible online response would be to indicate that professional considerations preclude a response.
21.1.10 American Bar Association Formal Opinion 497
What standards should lawyers, as part of a conflicts analysis, use to determine whether there are materially adverse interests?
Material adversity may arise in a number of situations, including where a lawyer is representing somebody suing or negotiating against a former or prospective client, where the lawyer is asked to attack the lawyer’s own work product, or where the lawyer is required to examine a former or prospective client.
Model Rules 1.9(a) and 1.18(c) address conflicts involving representing a current client with interests that are “materially adverse” to the interests of a former client or prospective client on the same or a substantially related matter. But neither rule specifies when the interests of the current client are “materially adverse” to those former or prospective clients. Some materially adverse situations are typically clear, such as those aforementioned. Where a former client is not a party to a current matter, such as proceedings where the lawyer is attacking her prior work for the former client, the adverseness must be assessed to determine if it is material. General economic or financial adverseness alone does not constitute material adverseness. It must be material to the rights or obligations of the former or prospective client with some demonstrable harm.
21.1.11 American Bar Association Formal Opinion 498
What issues should a lawyer consider when engaged in virtual practice?
The opinion suggests that lawyers who practice virtually should particularly consider how that practice impacts their ethical duties regarding competence, diligence, and communication, especially when using technology. In terms of confidentiality, lawyers must make reasonable efforts to prevent inadvertent or unauthorized disclosures of information relating to the representation, including when storing or transmitting such information. Examples of such steps include using a virtual private network or other secure internet portal, using unique complex passwords that are changed periodically, implementing firewalls and anti-malware/anti-spyware/antivirus software on all devices upon which client confidential information is transmitted or stored, using encryption for communications, and applying all necessary security patches and updates to operational and communications software, which often have such protections built in.
Lawyers should also ensure that data is regularly backed up and that secure access to the backup data is readily available in the event of a data loss. In anticipation of data being lost or hacked, lawyers should have a data breach policy and a plan to communicate losses or breaches to the impacted clients.
Lawyers should review the terms of service of video conferencing platforms they use to determine whether the platform is consistent with the lawyer’s ethical obligations. Access to accounts and meetings should be only through passwords. Likewise, any recordings or transcripts should be secured.
Additionally, lawyers should consider how virtual practice impacts their supervision of other lawyers and nonlawyers. A supervising lawyer must still take reasonable measures so that all members of the firm and any internal or external assistants operate in accordance with the lawyer’s ethical obligations of supervision. Among other things, this includes seeing that law firm tasks are being completed in a timely, competent, and secure manner.
Lawyers practicing virtually must also make sure that trust accounting rules, which vary significantly across states, are followed. This includes ensuring, to the extent required, that the lawyer is able to write and deposit checks, make electronic transfers, and maintain full trust-accounting records while practicing virtually.
21.1.12 San Diego County Bar Association Legal Ethics Committee Opinion No. 2021-1
In what circumstances may a lawyer join a networking group that is not registered with the State Bar of California as a licensed attorney referral service?
A lawyer may not be a member of a networking group that (1) limits the number of lawyer members; (2) prohibits membership in other networking groups; and (3) places pressure on non-lawyer members to make a minimum number of referrals to other members of the group. In addition, a lawyer’s payment of a membership fee to such a networking group, or providing referrals to other members, may violate Rules of Professional Conduct, rule 7.2(b).
On the other hand, a lawyer may join a networking group that does not promise referrals as a benefit of membership; does not limit the number of lawyer members; and does not pressure members to provide referrals to one another — provided the lawyer follows other Rules of Professional Conduct, including rules 5.4(e) and 7.2(b).
As the opinion discusses, accepting referrals from an unlicensed referral service violates Rules of Professional Conduct, rule 5.4(e), which prohibits lawyers from accepting referrals from, or otherwise participating in, an unqualified lawyer referral service, as well as Business and Professions Code section 6155, subdivision (a) (“no attorney shall accept a referral of . . . potential clients” from an unlicensed referral service). Such conduct also violates rule 8.4(a), which expressly prohibits lawyers from violating the State Bar Act.
A lawyer referral service is an individual or entity that operates “for the direct or indirect purpose, in whole or in part, of referring potential clients to attorneys.” (Bus. & Prof. Code § 6150, subd. (a).) The Court of Appeal defined “a referral as the act of directing a potential client to an attorney.” (Jackson v. Legalmatch.com (2019) 42 Cal.App.5th 760, 773 [rev. denied, Jackson v. Legalmatch.com (Mar. 11, 2020) 2020 Cal. LEXIS 1699].) The court further stated that “referral activity” covers “any entity ‘which, in person, electronically, or otherwise, refers the consumer to a lawyer or law firm not identified’ in permissible advertising.” (Id. at p. 771.) The court held that LegalMatch.com’s operations fell within the scope of section 6155 because LegalMatch.com placed limitations on the number of lawyers who could purchase subscriptions for a particular geographic area and type of law, and directed clients to a subset of lawyers who were permitted to join Legalmatch.com’s panel. (Id. at p. 777.)
Section 6155, subdivision (a)(1), provides, in pertinent part, that an individual or entity “shall not operate for the direct or indirect purpose, in whole or in part, of referring potential clients to lawyers, and no lawyer shall accept a referral of such potential clients” unless certain requirements are met, including, but not limited to, “[t]he service is registered with the State Bar of California and . . . is operated in conformity with minimum standards for a lawyer referral service established by the State Bar, or . . . is operated in conformity with” minimum standards.
Rules of Professional Conduct, rule 7.2(b) provides that a “lawyer shall not compensate, promise or give anything of value to a person for the purpose of recommending or securing the services of the lawyer or the lawyer’s law firm,” with five exceptions. In the example in the opinion, the lawyer’s membership in the organization required the lawyer to pay membership dues to the organization. Lawyer is also expected to bring referrals and/or visitors to meetings. Both qualify as “something of value.”
Payment of membership dues to an organization, such as a voluntary local bar organization or other nonprofit group would not normally qualify as providing something of value “for the purpose of” obtaining referrals, even if referrals are in fact informally exchanged among organization members. However, the structure and purpose of the organization discussed in the opinion puts it in a different category. The lawyer paid membership fees to the organization in exchange for being the sole lawyer member of a chapter in the organization, the sole or main purpose of which is for members to pass referrals to one another. In addition, other members were required to either bring visitors to meetings or bring referrals to other chapter members, of which the lawyer is one.
There are networking groups that are permissible for lawyer participation, but lawyers must be mindful of both rules 5.4 and 7.2 in determining whether the group is potentially problematic. The easiest case would be an organization that places no limitation on the number of lawyer members, does not promise referrals as a benefit of membership, does not advertise referral exchanges as a benefit of membership, and places no pressure on its members to provide referrals. Membership in such an organization would pose no problem, so long as other Rules of Professional Conduct are followed.
Many organizations, however, may advertise as a benefit of membership the benefits of networking and the attendant potential for members to develop sources of referrals. Such advertising is simply a truthful statement setting out one of the reasons lawyers network in the first place. There is no ethical prohibition on networking with the purpose of developing relationships that may lead to referrals in the future. Advertising these benefits of networking is also permissible, and an organization does not become an unlicensed attorney referral service by making those representations. A simple statement that networking can lead to referrals does not transform an otherwise lawful organization into an unlicensed attorney referral service, nor does it transform membership fees into unlawful payments “for the purpose of” securing employment.
This analysis changes, however, if there are other statements that go beyond this. For example, if an organization represents that referral exchanges (as opposed to networking) are a benefit of membership, that may prove problematic for lawyer participation. The facts of each case must be analyzed under rules 5.4(e) and 7.2(b), as well as applicable sections of the Business and Professions Code.
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.