In the Matter of Spielbauer, Review Dept. State Bar Court, case no. SBC-19-O-30700, filed 10/25/23

Within a span of weeks, the Review Department has given us two interesting and well written opinions that illuminate important issues in California discipline jurisprudence. For the California Ethics Lawyer, it is like an early Christmas present. Lest we are call this “fun”, let’s remember that for the Respondents involved in those proceedings (Thibault, filed 10/17/23, and now Spielbauer) the news is grim.

These opinions have at least two things in common.

They both arise from civil court proceedings, Thibault, a motion to disqualify, Spielbauer, a civil action resulting in a finding of fraud and an award of punitive damages. The civil action in Spielbauer had no relation to the practice law. The respondent was involved an real estate transaction where he was requested to furnish a payoff demand as authorized by Civil Code section 2943(b). Respondent issued a payoff demand for$269,500, far in excess of what was actually owed on the loan secured by the property, $7,152.03. The judgment included punitive damages of $332,550, under the authority of Civil Code section 3294. Like Thibaut, Spielbauer failed to report this event to the State Bar of California, as required by Business and Professions Code section 6068.

Both involved a failure to report to the State Bar under Business and Professions Code section 6068(o). Thibault failed to report a judicial sanction (subsection (o)(3).) Spielbauer failed to report the fraud judgment against him (subsection (o)(2).) Which sets up the first of the interesting issues in the Spielbauer opinion.

Deconstructing 6068(o)(2)

Statutory construction is always fun and especially fun with section 6068(o), hardly a model of clarity. (o)(2) says that an attorney has a duty to report the “entry of judgment against the attorney in a civil action for fraud, misrepresentation, breach of fiduciary duty, or gross negligence committed in a professional capacity.” Spielbauer’s defense to the (o)(2) charges was those five concluding words “committed in a professional capacity.” He contended that that clause modified everything that came before it. His fraud was not committed in a professional capacity therefore he had no duty to report. The hearing judge bought that argument and dismissed the failure to report count. The Review Department reversed. It relied on the “last antecedent rule of statutory construction “a restrictive relative clause usually modifies
the noun immediately preceding it, citing Yahoo Inc. v. National Union Fire
Ins. Co. etc. (2022) 14 Cal.5th 58, 73-74. Thus, the “professional capacity” clause only applies to “gross negligence”, not the other bad stuff that immediately precedes it. This is consistent with Business and Professions Code section 6106, which provides that dishonesty, corrruption or moral turpitude constitutes a cause for suspension or disbarment “whether the act is committed in the course of his relations as an attorney or otherwise.”

The statutory construction issue has potential application to the recently passed “rat” rule, new California Rule of Professional Conduct 8.3, another piece of ambiguous writing despite its many revisions. The rule lists two kinds of bad conduct that demand reporting, criminal acts and conduct involving dishonesty, fraud, deceit or misappropriation, and then jumps directly into this qualifying language “that raises a substantial* question as to that lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects.” Does this language modify the duty to report criminal acts? The Office of Chief Trial Counsel (OCTC) has seemingly taken the position that it does, to avoid the absurd result that minor criminal activity would be reportable. Sounds reasonable, especially in light of Comment 4 which advises that reporting is limited to the “those offenses that a self-regulating profession must vigorously endeavor to prevent.” But the comments are not rules and the existence of the last antecedent rule points up the sloppy drafting that it driving many people nuts in interpreting the new Rule.

Duty to Uphold What Law Exactly?

Spielbauer was charged with violating his duty to uphold the law by violating two Civil Code statutes. Civil Code section 2943(e)(4) sets forth a requirement to provide a payoff statement within 21 days of demand. The civil court found fraud liability by providing a false and inflated payoff statement. The civil court also found a basis for imposing punitive damages under Civil Code section 3294. This statute allows a court to award punitive damages in addition to compensatory damages in cases where a defendant acted with oppression, fraud, or malice and clear and convincing evidence supports such a finding. The hearing judge found culpability on two counts of violating Business and Professions Code section 6068(a), one of each statute. Section 6068(a) states that a lawyer has a duty to support the laws of the United States and the State of California. It is a “gateway” statute that allows discipline for violations of law not otherwise disciplinable, including not only statutes but common law (In the Matter of Lilley (Review Dept. 1991) 1 Cal. State Bar Ct. Rptr. 476, 487; seealso Kafkaesq “Squishy Justice.”) 6068(a) is a broad gateway but not so broad as to accommodated Civil Code section 3294. The Review Department correctly dismissed this count because section 3294 is a definitional statute and does not, alone, define any duty.

Collateral Damage

The mainspring of the opinion is the application of collateral estoppel by the hearing judge. Collateral estoppel may be applied in a disciplinary proceeding to prevent the re-litigation decided adversely to a lawyer in a civil proceeding where five requirements are met: (1) the issues that resulted in the civil court findings are substantially identical to the issues before the State Bar Court; (2) the findings were decided under the same burden of proof applicable to the State Bar Court—clear and convincing evidence; (3) the attorney was a party to the civil proceeding; (4) there was a final judgment on the merits in the civil case; and (5) no unfairness in precluding relitigation was proven by the attorney (In the Matter of Kittrell (Review Dept. 2000) 4 Cal. State Bar Ct. Rptr. 195, 205.) The application of collateral estoppel in State Bar Court usually flounders on requirement two – the clear and convincing burden of proof. Few civil findings rest on this burden of proof. Typically, the Office of Chief Trial Counsel has to rely on a less stringent standard, the principle that civil findings are entitled to “great weight and a presumption of correctness” where supported by substantial evidence (see In the Matter of Allen (Review Dept. 2010) 5 Cal. State Bar Ct. Rptr. 198, citing Maltaman v. State Bar (1987) 43 Cal.3d 924, 948.) Spielbauer tried to argue unfairness that he was “fatally compromised” by his poorly representation in the underlying civil action but no sale. The conclusive findings are civil fraud inevitable lead to culpability of violating Business and Professions Code section 6106. Spielbauer was ordered to pay $869,276.55, which included $332,550 in punitive damages in the civil case. The collateral damage was a six month actual suspension of his law license. Spielbauer did not help himself by continuing to argue that his actions were just, leading to a finding in aggravation that his was indifferent and lacked insight into his misconduct.

In the Matter of Thibault, Review Department, State Bar Court, case no. SBC-22-O-30033, filed 10/17/23.

There was a time when conflicts of interest, even conflicts leading to disqualification of a lawyer in litigation, seldom led to professional discipline. The trend began to change a few years ago. Increasing awareness of conflicts led to a recognition that disqualification was not always an adequate remedy. In 2015, despite a lack of Supreme Court discipline case law addressing discipline for conflicts of interest, the State Bar added new Standard 2.5, specifically addressing conflicts of interest. The Standard recommends actual suspension where a violation of the conflict rules, chiefly Rules of Professional Conduct 1.7 and 1.8, leads to harm and lesser discipline, stayed suspension or reproval, in cases where no harm resulted.

“Stand-alone” discipline for conflict of interest seems to be relatively rare, although it is difficult to gauge since the State Bar Court stopped publishing Hearing Department decisions in 2019. The published discipline cases from the Review Department involve multiple violations of the Rules of Professional Conduct or statutes from the State Bar Act. So it is with the Thibault decision. The hearing judge found Thibault culpable of (1) failing to obey a court order under section 6103 of the Business and Profession Code; (2) accepting employment adverse to another individual who respondent’s employer previously represented without informed written consent under former rule 3-310(E) of the Rules of Professional Conduct; and (3) failing to timely report a judicial sanctions order to the State Bar under section 6068, subdivision (o)(3). On review, the Review Department upheld these culpability determinations and evidently published the opinion for the reasons stated in the opening sentence: “This case underscores the need for attorneys to understand the broad scope of our conflicts of interest rules, which require the avoidance of adverse interests. and it demonstrates the perils that can result when an attorney is not careful in following the requirements of these rules.”

The facts are a little strange. Thibault worked for another lawyer (Peshawaria) who had previously represented the wife (Rattan) in a marital dissolution proceeding despite the fact that she was not licensed in California. Years later, after Thibault began working for this lawyer, Rattan’s husband Prasad employed the lawyer to represent him in the same proceeding on pending issues in the case related to child custody, child and spousal support, and the division of marital property. She assigned the case to Thibault. Rattan’s lawyer wrote to Thibault and informed her of the conflict of interest. Thibault withdrew but, after leaving the lawyer’s employment, began to represent Prasad again as a solo practitioner, seemingly not understanding the principle of imputed conflict despite having consulted with the State Bar’s Ethics Hotline. (Maybe the most important point here is the Ethics Hotline is not a substitute for obtaining legal advice from an experienced ethics lawyer.) Rattan’s lawyer successfully moved to disqualify Thibault and obtained a $5,000 sanction against her. Thibault waited eight months to pay the sanction. She also waited almost four years to report the sanction to the State Bar as required by Business and Professions Code section 6068(o)(3). This section requires reporting within 30 days of the time the lawyer knows the sanction.

Perhaps Thibault’s initial mistakes stemmed from sheer ignorance. But both the hearing judge and the Review Department found as an aggravating circumstance that she “displayed an attitude that demonstrates she lacks a full understanding of the seriousness of [her] misconduct.” Ignorance alone can kill you. Willful ignorance can kill you more. Thibault continued to argue that she was justified in representing Prasad throughout the pendency of the discipline proceeding. Her position seems especially contumnacious given that she attempted to cross-examine Rattan while representing Prawad at the July 2018 hearing with Rattan’s confidential information provided to Thibault’s former employer, Peshawaria, in 2008! The Review Department carefully noted that an attorney has a right to defend herself vigorously in discipline proceedings (citing In re Morse (1995) 11 Cal.4th 184, 209). Still, discipline proceedings are qualitatively different than other kinds of proceedings where a vigorous defense might not cross the line into a fatal failure to appreciate the nature of the attorney’s duties.

The basis of the section 6103 charge was Thibault’s failure to pay the sanction for eight months. In analyzing the appropriate discipline, the Review Department cited Standard 2.12(a), which prescribes actual suspension or disbarment as the harshest applicable Standard. But the statutory violations, including the failure to report the sanction, seem to be the tail and not the dog here, with the entire course of misconduct really arising from the respondent’s spectacular failure to recognize and avoid the successive representation conflict. The thirty-day actual suspension is all the more damaging because the Supreme Court has now mandated compliance with California Rule of Court 9.20 for every suspension, even a short one. The actual suspension also subjects Thibault to a $2,500 sanction.

Thibault is a significant case that is meant to convey a serious message. Discipline for conflicts of interest is a real possibility now.

The California State Bar’s Standing Committee on Professional Responsibility and Conduct (COPRAC) spent most of its meeting on Friday January 13 drafting a California version of ABA Model Rule 8.3. Model Rule 8.3, entitled “Reporting Professional Misconduct” has been referred to as the “rat” or “squeal” Rule. It says:

(a) A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority. …

(c) This Rule does not require disclosure of information otherwise protected by Rule 1.6 or information gained by a lawyer or judge while participating in an approved lawyers assistance program.

California, alone among United States jurisdictions, has no version of Rule 8.3. When California’s Rules of Professional Conduct were revised between 2014-2018, consideration was given to adopting a version of Rule 8.3, but a subcommittee of the rules revision commission voted not to recommend its adoption (see Carr – Model Rule 8.3: The Argument Against.) The subcommittee explained its reasoning this way:

On balance, the members of the drafting team agree with the Board’s prior decision not to recommend a reporting requirement. The pros of adopting a reporting requirement (whether in the mandatory form of ABA MR 8.3 or a hybrid permissive/mandatory form along the lines of RRC1’s proposed rule) include:

1. improving public protection by requiring lawyer reporting of certain known violations of the rules that raise a substantial question about a lawyer’s “honesty, trustworthiness or fitness as a lawyer;” and

2. bringing California’s rules more in line with the ABA Model Rules.

There are also significant cons to a reporting requirement; either the Model Rule or RRC1 hybrid approach would:

1. require a lawyer to determine whether a known violation raises a substantial question as to (or implicates) the lawyer’s honesty, trustworthiness or fitness as a lawyer;

2. despite the recognition that reporting could be trumped by the duty of confidentiality with respect to information learned in the course of representation of a client, pose a potential for conflict with that rule, or with the attorney-client relationship, to the extent lawyers might feel obligated to discuss waiver of confidentiality to further the reporting interests of the lawyer rather than the client’s own interests;

3. pose a potential for conflicts with a lawyer’s duty of loyalty if reporting posed a risk of adversely affecting a current or former client’s interests; and

4. potentially be viewed as inconsistent with the discretionary reporting policy reflected in Canon 3D(2) of the California Code of Judicial Ethics that states: “Whenever a judge has personal knowledge, or concludes in a judicial decision, that a lawyer has committed misconduct or has violated any provision of the Rules of Professional Conduct, the judge shall take appropriate corrective action, which may include reporting the violation to the appropriate authority.” (Emphasis added.)

On balance, the drafting team agrees that the cons outweigh the pros, particularly given that California has never had such a reporting requirement, and that the analysis required for lawyers to determine the scope of any reporting requirement seems inconsistent with this Commission’s charge to retain the historical nature of the California Rules as a “clear and enforceable articulation of disciplinary standards.”

Oh, the carefree days of our (relative) youth!

The Girardi Scandal broke in December 2020 and since then the days of the State Bar of California have not been carefree (see Kafkaesq: The Widening Gyre of Girardi-Gate), especially after the State Bar admitted that it had made mistakes in handling the many complaints against Girardi. Notable is the way the Los Angeles Times has not only covered the story but is driving story, including filing an action in the California Supreme Court to push the State Bar into disclosing the Girardi files. On October 28, 2022, the Los Angeles Times published a story on California’s lack of a rule requiring attorneys to report misconduct (“When It Comes to Crooked Colleagues, California Attorneys Can Remain Silent“). Within weeks, the push was on the enact a California version of Rule 8.3. That push gained enormous momentum when California Senator Tom Umberg, chair of the Judiciary Committee, introduced Senate Bill 42, which would add new section 6090.8 to the California Business and Professions Code:

6090.8. (a) A licensee of the State Bar who knows that another licensee has engaged in professional misconduct that raises a substantial question as to that licensee’s honesty, trustworthiness, or fitness as an attorney in other respects, shall inform the State Bar. (b) This section does not require disclosure of information otherwise protected by the attorney-client privilege or information gained by a licensee while participating in the Attorney Diversion and Assistance Program.

SB 42 seems a transparent move to force the Supreme Court (with the help of its administrative arm, the State Bar of California) to enact Rule 8.3. Pronto! And it is working. The proposed version of Rule 8.3 that COPRAC drafted in real time on Friday January 13 will be put out for a truncated 30 days public comment period and then moved directly on the Board of Trustees agenda for approval, rather than allowing COPRAC to follow its regular procedure of evaluating the public comment and refining its work product. The short public comment period will make it difficult for local bar associations, who work slowly, typically requiring their legal ethics committees to evaluate proposals first, to offer public comment. And everyone is signaling that something had to put in place quickly before the Legislature imposes its own, poorly thought-out statute on the State Bar and the lawyers of California. It seems hard to imagine that the California Supreme Court will say no.

One of the flaws in Model Rule 8.3 as noted by the drafting committee in 2016 is that successful prosecution requires the discipline authority to prove by clear and convincing evidence that the attorney knew a complex thing: that another lawyer has (1) violated the Rules of Professional Conduct and (2) that the violation raises a substantial question as to the lawyer’s honesty, trustworthiness or fitness as a lawyer. As a result there have not been a lot of prosecutions for failure to report. Rule 8.3 is not likely to have a substantial impact on public protection. It would have had no impact on the Girardi matter; the (as framed by the media coverage, without first hand knowledge) problem was not that the State Bar of California did not know, but that it knew but did nothing

But it really isn’t about public protection. It is about public confidence in the State Bar of California. By enacting Rule 8.3, the State Bar demonstrates that it is doing something, even if that something is not particularly helpful.

Shappell Socal Rental Properties v. Chico’s FAS, Fourth App. Dist., Div. 3, case no. G060411, filed 10/17/22.

Ethics lawyers, like every group of professionals, have a jargon all their own. One thing you might hear them talk about is “ethics with a big E” as opposed to “ethics with a small e.” Ethics with a big E refers to the black letter rules and statutes setting forth norms of lawyer behavior. This includes the Rules of Professional Conduct, sometimes codified as statutes, and other statutes, in California the statutes in the State Bar Act (Bus. & Prof. Code section 6000 et seq.) Ethics with a small “e” is taken to mean an undefined territory more vast, all the norms of the legal profession that have not been reduced to “black letter” rules. One principal difference is consequence; violation of a Big E rule raises a presumption of unfitness to practice and justifies discipline, but the sanction for violating a small e rule is usually significantly less, maybe even just the opprobrium of fellow lawyers or a court. A useful concept to keep in mind is the difference between normative ethics (absolutely Big E rules) and descriptive ethics, i.e. what lawyers actually do, which can be Big E but is mostly small e.

The distinction is important in understanding the incivility crisis. For some years now, the profession and the courts have been moaning about the decline of civility in the profession. This has produced a torrent of task-forces, reports, civility codes and much hand-wringing about what to do about it. Part of the problem is a lack of Big E rules, at least in California. California did have a civility rule, former Bus. & Prof. Code section 6068(f), which stated that it was the duty of lawyer to avoid “offensive personality.” Three decades ago, I prosecuted a lawyer for offensive personality. He had a habit of losing his temper in depositions and doing things like throwing chairs around the room. Definitely not civil. California lost the “offensive personality” rule when the Ninth Circuit found it unconstitutionally vague in US v. Wunsch 84 F.3d 1110 (1996). Now, the most recent civility proposals in California are looking at beefing up Rule of Professional Conduct 8.4(d) which states that “[i]t is professional misconduct for a lawyer to:…(d) engage in conduct that is prejudicial to the administration of justice…” (see Committee on Professional Responsibility and Conduct meeting agenda 10/14/22, item F.1) and other rules.

Small e violations are not without consequence, even if that consequence is not discipline. Shappell illustrates this. The Court of Appeal reversed the order denying the motion to vacate the default judgment because Shappell’s counsel violated the rule that “[a]n attorney has both an ethical and statutory obligation to warn opposing counsel, if counsel’s identity is known, of an intent to seek a default and to give counsel a reasonable opportunity to file a responsive pleading.” This rule cannot be found in the realm of Big E. Instead it comes from case law, specifically LaSalle v. Vogel (2019) 36 Cal.App.5th 127, 137. In LaSalle, the Fourth District Court of Appeal concluded “unequivocally, and without qualification…. that [this] obligation is rooted in decades of case authority and… is reinforced by a statutory obligation arising under Code of Civil Procedure section 583.130.” Justice Bedsworth, writing for the court, cited the small e California civility guidelines as cementing this duty as an ethical rule:

In contrast to the stealth and speed … courts and the State Bar emphasize warning and deliberate speed. The State Bar Civility Guidelines deplore the conduct of an attorney who races opposing counsel to the courthouse to enter a default before a responsive pleading can be filed. (Fasuyi v. Permatex, Inc. (2008) 167 Cal.App.4th 681, 702, 84 Cal.Rptr.3d 351 (Fasuyi), quoting section 15 of the California Attorney Guidelines of Civility and Professionalism (2007).) Accordingly, it is now well-acknowledged that an attorney has an ethical obligation to warn opposing counsel that the attorney is about to take an adversary’s default. (Id. at pp. 701-702, 84 Cal.Rptr.3d 351.) LaSalle was previously discussed on the California Legal Ethics blog where I characterized it as A Judicial Cri de Coeur on Civility. It is an impressively written opinion but it still rests on small e as the court’s dismissal of Bellm v. Bellia (1984) 150 Cal.App.3d 1036 (LaSalle at 136) and its distinction of “legal” v. “ethical” shows. Big E is all about the law, the law that can get you suspended or disbarred.

But what about Code of Civil Procedure 583.130 cited as supporting a duty to warn before taking default? It says “It is the policy of the state that a plaintiff shall proceed with reasonable diligence in the prosecution of an action but that all parties shall cooperate in bringing the action to trial or other disposition.” This is real black letter law, right in the Code of Civil Procedure! Could this be a route to get from small e to Big E? California Bus. & Prof. Code section 6068(a) says that it is duty of lawyer to support the laws of the state of California. The State Bar Court Review Department held in In the Matter of Lilley (Review Dept. 1991) 1 Cal. State Bar Ct. Rptr. 476, that “that the Supreme Court interprets section 6068(a) as a conduit by which attorneys may be charged and disciplined for violations of other specific laws which are not otherwise made disciplinable under the State Bar Act.” The Lilley court was unclear as to whether this conduit was so wide as to admit a violation of a statute not in the State Bar Act but 6068(a) is broadly worded. The statute is also vague about what cooperation entails, much as Rule 8.4(d) is vague in lacking anything like a definition of the prohibited conduct beyond “prejudicial to the administration of justice.”

Vague but Wunsch-caliber vague? So far OCTC has shown no appetite for creative theories justifying civility prosecution. But small e can make a big difference in in the civil courts, especially in the Fourth Division.

“Ethics is a club they beat you with…”

Former President of the Association of Professional Responsibility Lawyers

Brawerman v. Loeb & Loeb, Second App. Dist., Div 8, case no. B305802, filed 8/3/22.

The plaintiffs hired the defendant law firm to advise him in a financial transaction. The fee agreement contained an arbitration clause. Defendant law firm had an associate who was licensed in New York but not California work on the matter, contributing 382 hours to the total of 928 billed by the firm. The relationship went south and plaintiffs filed this action against the law firm and the unlicensed-in-California associate for professional negligence and breach of fiduciary duty. Defendants moved to compel arbitration. Before arbitration, plaintiffs discovered the licensing status of the associate and moved to remand the matter to the trial court, arguing that the unlicensed status of the associate meant the entire fee agreement, including the arbitration was clause was void due the fraud. The arbitrator denied the motion, finding the arbitration clause severable. The decision after arbitration found the firm and the associate liable but concluded that the plaintiffs suffered no damages. The award ordered disgorgement of $138,075 in fees paid for the unlicensed associate’s services and $94,933 for the plaintiff’s fees incurred in the arbitration in connection with litigating that issue. The trial court confirmed the arbitration and the inevitable appeal followed.

On appeal plaintiffs again argued that entire fee agreement was tainted with fraud due the associate’s lack of California licensing and the law firm’s ethical misconduct in having the unlicensed associate work on the case. Citing one of the most significant California Supreme Court cases of the recent past, Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59, 72, they contended the ethical misconduct meant the arbitration award must be voided and the matter remanded to the trial court because “the arbitration has been undertaken to enforce a contract that is ‘illegal and against the public policy of the state.” (Sheppard, supra, 6 Cal.5th at p. 73.)

Defendants based their argument on another heavyweight pronouncement from the California Supreme Court, this one from the last century, Birbrower, Montalbano, Condon & Frank v. Superior Court (1998) 17 Cal.4th 119. Birbrower held that an unlicensed attorney’s illegal practice of law pursuant to the retainer agreement does not render the entire retainer agreement illegal.

In this Clash of the Ethics Titans, the Court of Appeal found Birbrower persuasive and Sheppard distinguishable. They upheld the trial court’s confirmation of the arbitration award. Along the way, they chastised plaintiff’s counsel for not even discussing Birbrower until page 79 of their reply brief and remanded counsel that Rule of Professional Conduct 3.3(a)(2) requires counsel to disclose authority known to be adverse to their position (see Rule 3.3: Another Shot Across the Bow.)

The Court of Appeal demurred on directly addressing the ethics issues involved in the firm’s assignment of an unlicensed associate to provide legal services to a California client in California, despite plaintiffs’ invocation of yet another heavyweight California Supreme Court case In Re Rose (2000) 22 Cal.4th 430. “We are reviewing a lower court’s order confirming an arbitration award, not conducting attorney discipline proceedings. And our jurisdiction has been invoked by appeal, not through any original petition. In re Rose has no application here.” So the question of whether lawyers of the defendant law firm might have violated former Rule of Professional Conduct 1-300(A) (current Rule 5.5(a)(2)) will have to be answered in another forum, if it is to be answered at all.

While it doesn’t exactly fit the mould, Brawerman reconfirms a truth about legal ethics captured in the pithy quote cited above from a former president of the Association of Professional Responsibility Lawyers (APRL). In the civil arena, legal ethics are largely invoked in arguments about money, usually to justify non-payment of money. Here they were invoked in an unsuccessful effort to get another shot at proving up a claim of damages in front of a jury, a jury presumable less lawyer friendly than the arbitrator. It seems unlikely that this case will wind up in the pantheon of Supreme Court Titans, so the plaintiffs will likely have to be content with the disgorgement of fees.

Shiheiber v. JP Morgen Chase Bank, First App. Dist., Div. 2, A160188 filed 7/26/22.

The Court of Appeal upheld sanctions imposed on counsel by the trial court for violations of local trial court rules. Division 2 found sanctioned counsel’s argument lacking in a many areas, and bordering on frivolous, stating that they were publishing the opinion “to make clear that, in the future, an appellate argument such as this that is so lacking in even potentially persuasive value will indeed carry the possibility of sanctions as a frivolous appeal.” Among the leading infirmities was counsel’s failure on appeal to discuss the leading authority contrary to her position that the trial court lacked the authority to awared sanctions, the Bragg case. The Court reminded us that Rule 3.3(a)(2) provides that a lawyer shall not “fail to disclose to the tribunal* legal authority in the controlling jurisdiction known* to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel, or knowingly misquote to a tribunal the language of a book, statute, decision or other authority.” It also reminded us that it reminded us about Rule 3.3 once before in Davis v. TWC Dealer Group, Inc. (2019) 41 Cal.App.5th 662, 678.

The Court of Appeal neither sanctioned counsel or referred her to the State Bar. But it told us in certain terms that it could do those things and just might if it was faced with similar failures to comply with Rule 3.3(a)(2) in the future. The circumstances of this case, the relatively light sanction and the fact that bad faith was not found on counsel’s part militated against those measures in this case. The first part of Rule 3.3(a)(2) is a new Rule in California, adapted from the ABA Model Rules and adopted in 2018. There are no discipline cases applying it that can be found but the possibility of discipline in an appropriate case cannot be rules out.

At least one Court of Appeal has fired two warning shots concerning Rule 3.3. When and if they will direct their fire directly on the target remains to be seen.

Bowen v. Lin, Second App. Dist., Div. 6, case no. B312831, filed 6/6/22, certified for publication 6/23/22.

Fiduciary duty is not a level playing field. The essence of a fiduciary relationship is putting the interests of the other party ahead of your own. One of the incidents of the fiduciary relationship between lawyer and client is the client’s absolute right to discharge the lawyer, for a good reason, for a bad reason, or for no reason at all. This is sometimes difficult for lawyer’s to grasp, as the Bowen case shows.

“Victor and Calvin [Victor’s son] practiced medicine out of an Oxnard office owned by Victor and Yvonne [Victor’s wife.] The office sustained $25,000 in damages when a pipe in an adjacent office started leaking. The Lins hired Bowen as their attorney to demand that the owner of the adjacent office, Cynthia Lau, pay to rectify the water damage. After Lau rejected the settlement demands, Bowen recommended that the Lins sue. Victor and Yvonne agreed, but Calvin did not. Bowen nevertheless named him as a plaintiff in the lawsuit (the Lau case). He estimated that prosecuting the case would cost between $25,000 and $50,000. Over the next three years, the Lins paid Bowen nearly $68,000. Frustrated with ever-mounting costs, Victor told Bowen to cease all nonessential work on the Lau case while Gail [Victor’s daughter], a licensed attorney, tried to reach a settlement with Lau’s estate. Bowen replied that he would not cease work and would not grant Gail permission to settle the case as long as he was counsel of record. Gail then formally substituted in and settled the case.”

“Bowen sued Victor and Yvonne for breach of contract and quantum meruit, seeking to recover the unpaid balance of his fees. Victor and Yvonne cross-complained, alleging that Bowen breached his fiduciary duties, committed malpractice, and failed to execute a written fee agreement. Calvin joined the lawsuit as a cross-complainant.”

“Bowen then filed his own cross-complaint. His first cause of action asserted that Calvin breached his oral contract with Bowen when he stopped cooperating in the Lau case and fired Bowen as his attorney. The second, third, and fourth causes—for intentional interference with contractual relations, intentional interference with prospective economic relations, and negligent interference with prospective economic relations—asserted that Calvin and Gail encouraged their parents to stop cooperating with Bowen, fire him as their attorney, withhold payments due, and work with Gail to achieve a settlement. Bowen’s fifth cause asserted that Victor, Yvonne, and Calvin committed fraud when they induced him to provide legal services in the Lau case—all while providing minimal payments— knowing they would have Gail settle the case on the eve of trial. The sixth cause asserted that all four members of the Lin family conspired to defraud Bowen by encouraging him to work on the Lau case while knowing they would settle it themselves after
substituting him out.”

The Lins filed a SLAPP motion against Bowen’s cross-complaint. The trial court granted with respect to Gail, concluding that she engaged in protected activity and the litigation privilege (Civil Code section 47) meant that Bowen could not prevail on his cross-complaint against her. The trial court denied the motion with respect to Victor, Calvin and Yvonne, finding their communications “probably” did not come within the protection of the litigation privilege. It did not rule on whether Bowen was likely to prevail on his claims. Appeal, like flowers after a spring rain, naturally blossomed.

On appeal, Division 6 found that Victor, Calvin and Yvonne actions were “squarely protected” by the anti-SLAPP statute (Civil Code section 425.16(e)(1):“statement[s] or writing[s] made before a . . . judicial proceeding” and “written or oral statement[s] or writing[s] made in connection with an issue under consideration or review by a . . . judicial body.”) “The “filing, funding, and prosecution of a civil action” are protected acts. (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056.). Moreover, as noted above, a “client has the absolute right to change [their] attorney at any stage”, citing the venerable case of Gage v. Atwater (1902) 136 Cal. 170, 172, as well as the more recent case Taheri Law Group v. Evans (2008) 160 Cal.App.4th 482, 491. “The trial court thus erred when it concluded that Bowen’s breach of contract cause of action did not arise from protected activity.

The Court of Appeal reached the same conclusion with respect to the interference causes of action, citing the very recent case of Pech v. Doniger (2022) 75 Cal.App.5th 443, 462, for the proposition that advising clients to terminate an attorney’s services is protected activity. The fraud claims were also found subject to the SLAPP motion because they were based on the same protected communications activity specifically cited by the SLAPP statute.

Bowen tried to counterattack by noting that the Lins had cross-complained against him for malpractice but to no avail. The appellate court found that a malpractice claims does not chill petitioning activity but rather, the threat of a malpractice claim “encourages the attorney to
petition competently and zealously.”

Bowen’s appeal of the trial court’s granting of Gail’s part of the SLAPP motion failed for the same reasons. He attempted to distinguish Taheri by noting that the decision predated current Rule of Professional Conduct 4.2, but that rule is essentially the same as its predecessor, former Rule 2-100(a), which Taheri relied on. The rule was irrelevant in any case; Gail did not represent any party when she communicated with the Lins while they were represented by Bown, and the Rule only applies when the lawyer making the communication represents a party.

The Court of Appeal upheld the granting of the SLAPP motion as to Gail and remanded the matter back to the trial court to decide the issue of whether Bowen might prevail in his causes of action against Victor, Yvonne and Calvin.

While careful not to express an opinion, in discussing the trial court’s determination of that issue on Gail’s part of the SLAPP motion, the high court said this: “the litigation privilege bars liability for “any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that ha[s] some connection or logical relation to the action.” (Silberg v. Anderson (1990) 50 Cal.3d 205, 212.) It is “relevant to the second step in the anti-SLAPP analysis in that it may present a substantive defense [the nonmoving party] must overcome to demonstrate a probability of prevailing.” [Flatley v. Mauro (2006) 39 Cal.4th 299, 323.] Whether the privilege shields Gail’s actions is a question of law subject to our independent review. (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 913.) “Any doubt about whether the privilege applies is resolved in favor of applying it.”

So, Mr. Bowen would appear to have his work cut out for him. The important lesson for the rest of us is that clients and their causes of actions are not property and when push comes to shove, the interests of the clients always come first.