April 2017 Vol. 17, No.1
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Editors: David Majchrzak and Edward McIntyre
We have changed the format of Ethics Quarterly for this issue because of a development that may—quite likely will—change the professional responsibility landscape for California lawyers for many years to come. The Rules Revision Commission (the second one), completed its work, as the California Supreme Court directed; the Commission, after extensive public comment, proposed 68 new or revised Rules of Professional Conduct. The Board of Trustees approved the Commission’s recommendations and, just as the quarter closed, sent all the new or proposed rules to the Supreme Court for its review and possible adoption.
Because the changes are so significant in many areas that will affect everyone, we decided to identify several of the new or revised rules to begin to alert and inform lawyers what might become the legal ethics framework for their practices. We recognize that the Court may not adopt any of the proposed revisions—the Court did not accept the work of the first commission and, in late 2014, asked the State Bar to form the second commission, the work of which is now with the Court.
That notwithstanding, because many of the changes are significant, and because if adopted the effects will be far-reaching, we concluded that an introduction to some of these new ethics rules is warranted. We have also analyzed judicial decisions that are important from a professional responsibility perspective. We hope this format change serves the interests of Ethics Quarterly’s readers. Space constraints permit comment on only a few of the new rules; all of them are available on the State Bar website at http://ethics.calbar.ca.gov/Committees/RulesCommission2014/ProposedRules.aspx.
In This Issue
Among the questions answered by rulings abstracted in this issue of Ethics Quarterly are:
17.1.1 Leighton v. Forster (2017) 8 Cal.App.5th 467 – First Appellate District, Division Four (February 9, 2017)
May an electronic acceptance of a fee agreement suffice as a signature on an engagement agreement?
No. A lawyer sued her client for unpaid fees of $114,000 alleged to be owed under a fee contract. On summary judgment, the Superior Court of Alameda County ruled that she could not recover because there was no enforceable attorney fee agreement and a quantum meruit claim was time-barred. The Court of Appeal agreed and affirmed.
The lawyer had an agreement with a semi-retired attorney to provide contract services for $75 per hour, plus out-of-pocket costs. This agreement noted that the contract lawyer did not carry liability insurance, would not interact with the semi-retired attorney’s clients, and would be paid by the semi-retired attorney regardless of whether his clients paid him.
In this case, however, the contract lawyer issued invoices for approximately two and a half years that, for the most part, the client paid directly. When the contract attorney was hospitalized and the client learned that he was close to death, the client exchanged emails with the contract lawyer stating that he wanted to stick with the current plan, serving a complaint and discovery, with the hope of reaching a quick settlement. If that did not work, then the client would ask counsel who the semi-retired attorney had recommended to represent him at trial. The next day, the semi-retired attorney died. Two days later, the client paid the outstanding amount due on the last invoice the contract lawyer had sent.
Shortly thereafter, the client met with the contract lawyer and then sent an email asking her to represent the client and his wife “in the same capacity as now and also to be our negotiator.” He then proposed a payment schedule. Approximately three weeks later, the contract lawyer sent an engagement letter to the client, but told the client it was okay to simply confirm by email that he was okay with it, rather than signing and returning it. The client answered that he would review the letter. Months later, the client and the contract lawyer agreed that the client could pay $5,000 per month toward outstanding fees and costs. After client became ill, his wife signed two notices of limited scope representation so that the contract lawyer could make court appearances. The contract lawyer then began sending her invoices to the client’s wife.
Nearly four years after being relieved as counsel, the contract lawyer filed a complaint for breach of contract and account stated against the client’s wife.
Among other things, Business and Professions Code section 6148 provides that a non-contingency fee agreement must be in writing and the lawyer must provide to the client a copy signed by both the lawyer and the client. There are exceptions where the fee is implied because similar services were previously provided to and paid by the client, or if the client makes a knowing waiver of the writing requirement after disclosure of section 6148’s requirements.
The Court of Appeal concluded that the failure to sign was not a technicality, but “a material failure to comply with a crucial statutory requirement.” Moreover, the wife—and the only “client” alleged in the complaint—had not even seen the email exchange.
The facts also did not support an exception to the written agreement requirement. The earlier work that the contract lawyer had performed was based on a contract with the semi-retired attorney. And there was no evidence that the contract lawyer ever disclosed the contents of section 6148.
In many instances, when a written fee agreement is not enforceable, section 6148, subdivision (c) provides that lawyers may recover their “reasonable fee.” But Code of Civil Procedure section 339 provides a two-year limitations period for quantum meruit claims. Because the action was not filed until nearly four years after termination of the attorney-client relationship, it was time-barred.
17.1.2 Proposed Rule of Professional Conduct 1.7 Conflict of Interest – Current Clients
Conflict of Interest – Current Clients
Proposed rule 1.7 would replace current Rules of Professional Conduct 3-310 and 3-320. It is a hybrid of both the Model Rule and California’s current conflict rules. The proposed rule 1.7 contains two primary restrictions to their practice without first obtaining their clients’ informed written consent. Lawyers may not represent one client who is directly adverse to another client in the same or separate matter. And lawyers may not represent a client if there is a significant risk that the lawyer’s responsibilities, relationships, or own interests will materially limit the representation.
Notably, proposed rule 1.7 maintains the aforementioned standard of informed written consent for waiver of any conflict. The Model Rule, by comparison, allows the less formal approach of informed consent confirmed in writing.
Lawyers will still need to disclose legal, business, financial, professional, or personal relationships with a party or witness and certain relationships with other lawyers in the matter.
And, regardless of these safeguards, lawyers may not represent clients unless they reasonably believe they can do so competently and diligently, the representation is not prohibited by law, and the representation does not require the lawyer to assert the claim of one client against another client in the same litigation or other proceeding before a tribunal.
17.1.3 Proposed Rule of Professional Conduct 3.2 Delay of Litigation
Delaying or prolonging a proceeding.
This is a new rule for California. It prohibits using means in litigation that have no substantial purpose other than to delay or prolong a proceeding or to cause needless expense. California currently has no such ethical obligation, except the provision of Business and Professions Code section 6128, subdivision (b), which makes it a misdemeanor to willfully delay a client’s suit for the lawyer’s own gain. The comment to the proposed rule cites new rule 1.3, which addresses a lawyer’s duty to act with reasonable diligence.
17.1.4 Proposed Rule of Professional Conduct 3.3 Candor Toward the Tribunal
Duty of a lawyer to a tribunal, including ancillary proceedings (a deposition).
The revised rule includes the prohibition in current Rules of Professional Conduct, rule 5-200 against making a false statement of fact or law to a tribunal. It then adds to the prohibition against failing to correct a false statement of material fact or law previously made. The proposed rule not only prohibits proffering false evidence but imposes the affirmative obligation, if a lawyer learns that evidence submitted is false, to take reasonable remedial measures to correct it, including disclosure to the tribunal, unless proposed rule 1.6 (confidentiality) or Business and Professions Code section 6068, subdivision (e)(1), (client confidences) prohibit such disclosure. The duty of correcting materially false statements and of taking remedial measures lasts until the conclusion of the proceeding but judgment affirmed on appeal, until the time for appeal has run.
In addition to the prohibition against misquoting legal authority now found in rule 5-200, the proposed rule also imposes the affirmative obligation to disclose controlling legal authority directly adverse to the client’s position if not already disclosed by the lawyer’s opponent. In an ex parte proceeding where the opposing lawyer is not present, the proposed rule requires a lawyer to disclose all material facts to the tribunal, even if adverse to the lawyer’s client, so that the tribunal can make an informed decision.
Finally, the rule makes explicit that “tribunal” also includes ancillary proceedings, such as a deposition taken under a tribunal’s authority.
17.1.5 Proposed Rule of Professional Conduct 3.4 Fairness to Opposing Party and Counsel
Fairness in access to evidence.
The revised rule has a new provision that prohibits unlawfully obstructing another party’s access to evidence—including a witness—or unlawfully altering, destroying, or concealing a document or other material with potential evidentiary value or counseling or assisting someone else to do so. Such evidence includes digitally stored information.
The revised rule also reiterates the prohibitions against falsifying evidence, secreting a witness, or counseling a witness to leave the jurisdiction to make himself or herself unavailable or paying a witness contingent on the witness’s testimony, or asserting personal knowledge of facts at issue, now found in current Rules of Professional Conduct 5-200, 5-220, and 5-310.
17.1.6 Proposed Rule of Professional Conduct 3.7 Lawyer as Witness
Advocate as witness.
The proposed rule extends the prohibition of an advocate testifying as a witness—except on an uncontested issue or the nature and value of legal services—in any matter whether bench trial, jury trial, administrative law proceeding, or arbitration, without the client’s informed written consent. Current Rules of Professional Conduct, rule 5-210 bars such testimony only in a jury trial.
17.1.7 Proposed Rule of Professional Conduct 4.1 Truthfulness in Statements to Others
Duty to be truthful to third parties.
This rule is new for California. It mandates that a lawyer not make a false statement of fact or law to a third person or omit disclosing a material fact when disclosure is necessary to prevent assisting a client’s criminal or fraudulent act, subject to the provisions of Rules of Professional Conduct, rule 1.6 and Business and Professions Code section 6068, subdivision (e)(1) (confidentiality).
The comment to the proposed rule recognizes that some statements made in negotiation are not intended as statements of fact and, thus, may fall outside the scope of the new rule.
17.1.8 Proposed Rule of Professional Conduct 4.4 Duties Concerning Inadvertently Transmitted Writings
Inadvertently disclosed documents with privileged or confidential information.
Since the California Supreme Court’s decision in Rico v. Mitsubishi (2007) 42 Cal.4th 807, it has been an ethical standard for California lawyers when they conclude that documents, reasonably appearing to be privileged or confidential, were inadvertently disclosed, the lawyer must stop reading as soon as the documents reasonably appear to be privileged or confidential, immediately notify opposing counsel, and, if the parties cannot work out how to deal with the documents, take the issue to the court. The standard the Court articulated in Rico was not based on any then-existingrule or provision of the State Bar Act. The new proposed rule incorporates that court-articulated ethical standard as a Rule of Professional Conduct.
17.1.9 Proposed Rule of Professional Conduct 5.1 Responsibilities of Managerial and Supervisory Lawyers
Responsibilities of Managerial and Supervisory Lawyers
Although proposed rule 5.1 addresses the subject with more particularity than any existing Rule of Professional Conduct, the commission noted that it is an extension of the duty to act competently set forth in rule 3-110.
Proposed rule 5.1 addresses two aspects of attorney management and supervision. First, it requires lawyers who have managerial or supervisory authority to make reasonable efforts to ensure that those lawyers who they manage or supervise comply with their obligations under the Rules of Professional Conduct and the State Bar Act.
Second, the rule provides that lawyers may be responsible for others’ ethical violations in two situations. They may be responsible where they had knowledge of the facts and the conduct, and ratified the behavior. Or lawyers with firm managerial or direct supervisory roles may be found liable where they know of an ethical violation at a time when they fail to take reasonable remedial action at a time when consequences can be mitigated or prevented.
17.1.10 Proposed Rule of Professional Conduct 5.2 Responsibilities of a Subordinate Lawyer
Responsibilities of a Subordinate Lawyer
This rule is also a new one, but is arguably an extension of the duty of competency. It addresses the flip side of proposed rule 5.1. Acknowledging that the mere fact that a lawyer is in subordinate role does not absolve the lawyer of responsibility for conduct, it provides that subordinates may still be liable for violations even if they are acting at the direction of another.
Nonetheless, the proposed rule also recognizes the reality that subordinates may be placed in an untenable situation if they must also take the most conservative course of action on close calls, even when a firm manager or direct supervisor disagrees. Accordingly, rule 5.2 provides that a subordinate lawyer does not violate the Rules of Professional Conduct or the State Bar Act when they act in according to a supervisory lawyer’s reasonable resolution of an arguable question of their professional duties.
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.