February 2019 Vol. 18, No. 4
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Editors: David Majchrzak and Edward McIntyre
In the final quarter of 2018, we received guidance on some issues that lawyers may not instantly connect with ethics--fees and effective assistance of counsel--as well as those that they readily do--such as the no contact rule with represented persons. All of these, of course, concern issues about the law of lawyering. Additionally, the San Diego County Bar Association and the American Bar Association published new ethics opinions addressing tools that lawyers may use.
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. If there is an issue impacting a significant portion of the legal community that you would like to see us address in a formal opinion, please let us know that as well. Just follow the instructions and a Committee member will get back to you with ethics authority you might consider.
In This Issue
Among the questions answered by rulings abstracted in this issue of Ethics Quarterly are:
18.4.1 Schultz v. Jeppesen Sanderson (2018) 27 Cal.App.5th 1167– Court of Appeal of California, Second Appellate District, Division One (September 5, 2018)
Should the reasonableness of fees be limited by the amount recovered?
No. A lawyer agreed, in exchange for a forty percent contingency fee, to represent members of a family, including minors, in bringing a wrongful death action. The lawyer obtained a settlement in excess of $18 million and requested the court to allocate 31% of the recovery to fees. While noting the lawyer had done a good job and realized a substantial sum, the trial court exercised its discretion to reduce the fee to 10% based on the facts that the clients needed the money, the lawyer did not have to try the case, and the lawyer had not notified some of the daughters about the lawsuit until it was already underway.
The Court of Appeal concluded that the trial court abused its discretion. California Rule of Court 7.955 does not dictate a presumptively reasonable percentage or method of determining the reasonable fees under a contingency agreement. The Judicial Counsel, in fact, preempted local rules regarding such calculations. Among other things, the trial court, failed to consider the terms of the engagement agreement or to balance the factors in Rule 7.955, which here included a substantial risk of non-payment at the time the agreement was entered into.
18.4.2 People v. Espinoza (2018) 27 Cal. App. 5th 908 – Court of Appeal of California, Fourth Appellate District, Division Two (September 28, 2018)
May a criminal defendant establish ineffective assistance of counsel by offering evidence that his lawyer failed to advise about immigration consequences of a guilty plea?
Yes. The client was charged with one count of possession of methamphetamine for sale. Approximately one week later, the client pleaded guilty and the court placed the client on probation. Following a probation violation, the client was then sentenced to 16 months in county jail. More than a year after completing his sentence, the client moved to withdraw his guilty plea because he had been placed into removal proceedings.
Such matters turn on whether prejudicial error damaged a criminal defendant’s ability to meaningfully understand or accept the actual or potential adverse immigration consequences of his guilty plea. Although the court admonished Espinoza before entering his plea that “this conviction may have the consequences of deportation, exclusion from admission to the U.S., or denial of naturalization pursuant to the laws of the United States,” the criminal defendant was still able to establish he received ineffective assistance of counsel. In particular, he showed that his lawyer failed to advise him of the immigration consequences or to defend against those consequences. His lawyer acknowledge that he considered what the client had done was a serious crime, but was not aware that it was considered an aggravated felony. And he did not even consult with an immigration lawyer, let alone attempt to negotiate a plea with better immigration consequences.
18.4.3 Lofton v. Wells Fargo Home Mortgage (2018) 27 Cal.App.5th 1001– Court of Appeal of California, First Appellate District, Division Three (September 28, 2018)
May lawyers claim a separate $5.5 million fee for a settlement on behalf of class members who were already members of an existing $19 million class settlement?
No. The Court of Appeal upheld the trial court injunction mandating the lawyers turn over $5.5 million, as additional settlement proceeds, to the $19 million settlement already achieved. The 600 class members, whom the lawyers represented, were already members of the class that was the beneficiary of a $19 million settlement. The court held that the lawyers had attempted to take without justification millions in fees for claims resolved in the other settlement. The lawyers had urged their clients to accept that settlement and directed them to submit claims. None of the clients opted out of the $19 million settlement. Then the lawyers purported to settle their clients’ claims for $50 each, and claim $5.5 million in fees—for which they did not seek court approval. The court held, it was part of the common settlement fund; hence, the court properly ordered total disgorgement.
18.4.4 Warren v. Kia Motors America, Inc. (2018) 30 Cal.App.5th 24– Court of Appeal of California, Fourth Appellate District, Division Two (December 12, 2018)
In an action brought under a consumer protection statute with a fee-shifting provision, may the trial court award attorney fees that are proportional to the plaintiff’s modest award?
No. Plaintiff’s jury award under the Song-Beverly Consumer Warranty Act was about $17,000. Her three law firms submitted a combined fee application for $526,582—a $351,055 lodestar figure (hours multiplied by reasonable hourly rate)—and a multiplier of 1.5. The trial court applied a 33% negative multiplier and awarded $115,848, stating on the record that it was seeking to achieve some proportionality between the modest award and the fees; it remarked that the $115,000 fee award was still high.
The Court of Appeal reversed. It held that, when a consumer protection statute provides for fee-shifting, considerations of proportionality are impermissible. But the trial court was within its discretion to select a multiplier to arrive at a reasonable fee based on the factors of the case, including factoring in excessive time spent on the matter.
18.4.5 City of San Diego v. Superior Court (2018) 30 Cal. App. 5th 457– Court of Appeal of California, Fourth Appellate District, Division One (December 19, 2018)
When a lawyer violates the “no contact” rule and communicates with a party the lawyer knows is represented by counsel and obtains attorney-client privileged information, is the lawyer’s disqualification or disqualification of the lawyer’s office automatically the appropriate remedy?
No. A police detective brought an employment action against the City. Two internal affairs detectives questioned her about the unauthorized disclosure of a confidential police report. A lawyer from the City Attorney’s office, representing the City in the employment action, attended the interview, initially as an “observer.” The detective’s lawyer was not present. The internal affairs officers required the detective, over her objection, to reveal discussions she had had with her lawyer. In addition, the Deputy City Attorney questioned the detective about her employment action against the City.
The trial court found that the detective’s attorney-client privilege had been violated and that the Deputy City Attorney had violated former Rule of Professional Conduct 2-100, knowingly communicating with a represented party about the subject matter of the representation; the court disqualified the City Attorney’s office from representing the City in the employment action.
The court of appeal agreed that both attorney-client privilege and rule 2-100 had been violated, but reversed on the disqualification. Whereas disqualification may often occur in such situations, courts do not disqualify lawyers merely to punish for mistakes or even unethical behavior. Rather, disqualification is a remedy designed to mitigate an unfair advantage. Here, the court reversed disqualification because it found—based on the transcript of the detective’s interview—there was “no reasonable probability” or “no genuine likelihood” that the City’s misconduct would give it an unfair advantage or otherwise “affect the outcome of the proceedings before the court.” The court expressed no opinion about potential sanctions or other response the trial court might wish to consider to the City’s conduct.
18.4.6 San Diego County Bar Association Formal Opinion 2018-3
To what extent may lawyers use technology assisted review to identify documents to be produced in response to demands for production requiring analysis of voluminous documents?
Whereas lawyers may use technology assisted review (“TAR”) to identify responsive documents for productions, they should communicate with their clients about such use, must take care to understand the products they use, and may not cede their independent judgment.
As part of the duty to communicate, lawyers should discuss the proposed means to employ in the representation. This includes the advantages and disadvantages of technology, like TAR. This should include consideration of the extent to which use of TAR poses a risk to confidentiality. And, if TAR is employed, lawyers should remain involved in the significant determinations of how to search for, review, and produce documents.
18.4.7 American Bar Association Formal Opinion 483
What obligations do lawyers have after an electronic data breach or cyberattack?
Lawyers should use reasonable efforts to monitor for potential data breaches. An ethical violation, however, does not necessarily occur simply because a lawyer does not immediately identify the fact that a breach has occurred.
Model Rule 1.4 requires lawyers to keep clients reasonably informed about the status of a representation and to explain matters to the extent reasonably necessary for the client to make informed decisions. Accordingly, if the breach has a substantial likelihood of involving client information or if it imperils the lawyer’s ability to provide legal services, then the lawyer must notify the clients of the breach. Lawyers need not disclose other breaches.
Once a breach of client information is detected, a lawyer must act reasonably and promptly to stop the breach and mitigate damage. The lawyer should then determine what happened during the breach, investigate to ensure the intrusion has been stopped, and then evaluate the data that was lost or accessed.
18.4.8 American Bar Association Formal Opinion 484
What obligations do lawyers have when clients use brokers of companies to finance fees?
A lawyer who is willing to allow a client to finance a fee has a duty under Model Rule 1.4 to explain to the client the arrangement in a manner reasonably necessary to permit an informed decision. This should include explaining the lawyer’s relationship, if any, with the entity, how fees will be paid, the costs and benefits of the transaction, and other facts that the lawyer knows to be material to the financing. If the lawyer elects not to discuss the terms with the client, then the lawyer must comply with Model Rule 1.2(c).
Notwithstanding the fact that the lawyer may have increased costs associated with fee financing, the fee charged to the client must still be reasonable. And if the fee is higher than ordinary because of the financing, the lawyer must so inform the client. And, in any case, the lawyer must be sure to maintain confidentiality as required by Model Rule 1.6, including not revealing confidential information to the lender.
To the extent the lawyer refers the client, the lawyer should be cognizant of Model Rule 1.7(a)(2), considering whether there are any material limitations, such as the possibility that the referral is not in the client’s best interests, but provides the lawyer increased security for the fee. A lawyer may refer clients to fee financing companies without further obligations if the referring lawyer has no interest in the financing entity. If the lawyer does have a financial interest in the entity, then the lawyer would need to disclose that fact to the client and comply with the requirements of Model Rule 1.8(a) for business transactions with a client.
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.