Malek Media Group v. AXQG Corporation, Second App. Dist., Div. 3, case no. B299743, filed 12/16/20.

Plaintiff and defendant formed Foxtail LLC to produce a film. The relationship dissolved in acrimony, including allegations that MMG’s principal Malek had sent sexually explicit messages to a prospective Foxtail employee. AXQG filed a petition with JAMS alleging for breach of fiduciary duty, fraud, and breach of the Foxtail agreement. MMG and its principal Malek counterclaimed for breach of contract, breach of fiduciary duty, conversion, fraudulent concealment, and declaratory relief. The arbitrator found for AXQG and denied all of MMG/Malek’s claims. Predictably, AXQG petitioned to confirm the award and MMG petitioned to vacate it. At that point, as the Court of Appeal relates the tale:

Malek “commenced a deep-dive, internet search into [the arbitrator’s] background.” He found the GLAAD [Gay and Lesbian Alliance Against Defamation] organization website which stated that the arbitrator had been a founding board member of GLAAD and its chief counsel decades ago. MMG argued that the arbitrator failed to disclose his background and “his self-proclaimed status as a gender, social, female and LBGTQ activist and icon, while facing a matter grounded in gender and social issues, particularly sexual harassment.” Specifically, MMG asserted that the arbitrator was obligated to disclose his prior affiliation with GLAAD once made aware of Malek’s Catholic background. MMG claimed that GLAAD was at odds with the Catholic Church after the passage of Proposition 8, which banned same-sex marriage in California. Thus, MMG asserted that GLAAD and the Catholic Church were antagonistic to each other and, by extension, the arbitrator against Malek, casting doubt on the arbitrator’s impartiality.

The trial court confirmed the award and the appeal followed. In support of the appeal, appellant MMG filed two requests for judicial notice with the Court of Appeal. Among other things, the appellant asked for judicial notice of “the #MeToo movement and the phrase a woman alleging sexual harassment must be believed” that was denied, the Court finding that “MMG failed to provide sufficient evidence or explanation that the #MeToo movement and the phrase a woman alleging sexual harassment must be believed are facts of such generalized knowledge that they cannot reasonably be the subject of dispute.” The Court also declined to take judicial notice of press clippings from the GLAAD website a twitter posts from the arbitrator’s purporting to show a connection between the #MeToo movement and GLAAD, and a connection between GLAAD and the arbitrator demonstrating that the arbitrator’s perspective on “white privilege, men, religion, abuse of women and anything that does not comport with [the arbitrator’s]social justice view of the world…..and the arbitrator’s inability to act impartially in a case involving a Catholic white male accused of sending sexually explicit texts to a prospective employee.”

The Court of Appeal found that the arbitrator was not required to disclose his relationship with GLAAD. Arbitrators must make disclosure of “all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial.” Code Civ. Proc. section 1281.9, including grounds specified for disqualification of judges under section 170.2 and matters subject to the ethical standards for contractual arbitrators adopted in the California Rules of Court. The test is on objective one; the “reasonable person under this objective test “‘is not someone who is “hypersensitive or unduly suspicious,” but rather is a “well-informed, thoughtful observer.”’[Citations.]‘[T]he partisan litigant emotionally involved in the controversy underlying the lawsuit is not the disinterested objective observer whose doubts concerning the judge’s impartiality provide the governing standard.’”

There were many issues in arbitration besides the alleged sexual harassment. The Court of Appeal characterized MMG arguments as “ridiculous” because “MMG cannot show that the arbitration had anything to do with LGBTQ issues, GLAAD, religion, or the Catholic Church.”

AXQG moved to sanction MMG and its counsel in the amount of $56,0005 for filing a frivolous appeal. Sanctions may be imposed for frivolous appeals where the appeal was prosecuted for an improper motive or the appeal indisputably has no merit.(Code Civ. Pro. section 907; Cal. Rule of Court 8.276(a)(1).) To determine whether an appeal is frivolous, “we apply both a subjective standard, examining the motives of appellant and its counsel, and an objective standard, analyzing the merits of the appeal. In re Marriage of Flaherty (1982) 31 Cal.3d 637, 649–650.” The Court of Appeal readily concluded that MMG’s appeal was both subjectively and objectively frivolous, lacking legal merit and “prosecuted for an improper motive—to harass the respondent or delay the effect of an adverse judgment.” The lack of merit is evidence that it was appealed for an improper motive. “MMG adopted a war-like mentality toward AXQG, its counsel, and anyone else involved with this case. The record is replete with personal attacks on Gou and AXQG’s counsel, as well as numerous unsubstantiated claims that everyone who was purportedly against Malek and MMG was engaged in an elaborate conspiracy to destroy him.”

Moreover, the Court found both MMG and its counsel “equally culpable for pursuing this frivolous and bigotry-infused appeal.” It ordered MMG and it’s counsel to pay AXQG $46,000, sanctioned MMG and its counsel $10,000 payable to the Court, ordered counsel to report the sanction (independently reportable under Bus. & Prof. Code section 6068(o)(4) and itself reported counsel to the State Bar under Bus. & Prof. section 6086.7.

California Rule of Professional Conduct 3.1 is the obvious point of departure. It’s requirements parallel the inquiry described in Flaherty: “(a) A lawyer shall not: (1) bring or continue an action, conduct a defense, assert a position in litigation, or take an appeal, without probable cause and for the purpose of harassing or maliciously injuring any person…” But discipline prosecutors are looking for cases to apply some of the “new” Rules, for instance new Rule of Professional Conduct 8.4.1, titled Prohibited Discrimination and Harrassment. Given the Court of Appeal’s description of a “bigotry laden appeal” can Rule 8.4.1(a) gain any traction?

Probably not. The first part of the rule offers a glimmer of possibility:

(a) In representing a client, or in terminating or refusing to accept the representation
of any client, a lawyer shall not: (1) unlawfully harass or unlawfully discriminate against persons on the basis of any protected characteristic; or (2) unlawfully retaliate against persons.

But even if the lawyer’s conduct in pursuing this appeal is characterized as harassment or retaliation, it’s basis must be a protected characteristic, defined in the Rule itself in subsection (c), a very specific type of harassment or retaliation. AXQG, the target of the frivolous appeal, does not fall into the category.

(c) For purposes of this rule: (1) “protected characteristic” means race, religious creed, color, national
origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, sexual orientation, age, military and veteran status, or other category of discrimination prohibited by applicable law, whether the category is actual or perceived

To cap it off, section (f) of the Rule says it is not a violation of the Rule to represent someone accused of such conduct, and that providing advice or advocacy “as otherwise permitted under these Rules [e.g. Rule 3.1] does not violate the Rule.”

California’s Rule is not as broad as the Pennsylvania rule, based on Model Rule 8.4(g), whose enforcement was recently enjoined by a Federal judge. The Pennsylvania rule provided that it “is professional misconduct for a lawyer to: in the practice of law, by words or conduct, knowingly manifest bias or prejudice, or engage in harassment or discrimination, as those terms are defined in applicable federal, state or local statutes or ordinances, including but not limited to bias, prejudice, harassment or discrimination based upon race, sex, gender identity or expression, religion, national origin, ethnicity, disability, age, sexual orientation, marital status, or socioeconomic status.”

Counsel’s conduct in Malek is might be within the reach of the ABA Model Rule 8.4(g), which may or may not be comforting to California lawyers contemplating the efficacy of our Rule 1.8.1.

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The American Bar Association (ABA) has issued formal ethics opinion 495 “Lawyers Working Remotely.” A timely topic in the midst of the pandemic and an opinion that will offer some comfort to those who are currently living and practicing in a jurisdiction where they are not licensed. The digest concludes:

Lawyers may remotely practice the law of the jurisdictions in which they are licensed while physically present in a jurisdiction in which they are not admitted if the local jurisdiction has not determined that the conduct is the unlicensed or unauthorized practice of law and if they do not hold themselves out as being licensed to practice in the local jurisdiction, do not advertise or otherwise hold out as having an office in the local jurisdiction, and do not provide or offer to provide legal services in the local jurisdiction. This practice may include the law of their licensing jurisdiction or other law as permitted by ABA Model Rule 5.5(c) or (d), including, for instance, temporary practice involving other states’ or federal laws. Having local contact information on websites, letterhead, business cards, advertising, or the like would improperly establish a local office or local presence under the ABA Model Rules.

It sounds good as far as it goes. But can a lawyer rely on it? The opinion interprets the ABA Model Rules, not the law of any particular jurisdiction, as the opinion carefully points out. While the ABA Model Rules are the model for the ethical rules in every US state now – California, the last holdout, succumbed in November 2018 – every state has enacted its own version, some (like California) with very significant changes indeed.

The opinion bases much of its analysis on the text of Model Rule 5.5(a) and 5.5(b):

(a) A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so. (b) A lawyer who is not admitted to practice in this jurisdiction shall not: (1) except as authorized by these Rules or other law, establish an office or other systematic and continuous presence in this jurisdiction for the practice of law; or (2) hold out to the public or otherwise represent that the lawyer is admitted to practice law in this jurisdiction.

More good news is that California’s version of this part of 5.5 is virtually identical:

(a) A lawyer admitted to practice law in California shall not: (1) practice law in a jurisdiction where to do so would be in violation of regulations of the profession in that jurisdiction; or (2) knowingly assist a person in the unauthorized practice of law in that jurisdiction. (b) A lawyer who is not admitted to practice law in California shall not: (1) except as authorized by these rules or other law, establish or maintain a resident office or other systematic or continuous presence in California for the practice of law; or (2) hold out to the public or otherwise represent that the lawyer is admitted to practice law in California.

The only significant change is the addition of the word “a resident office” to the prohibition on lawyers not admitted in California. And it is of significant interest because there are many lawyers living in California that are not admitted here but carrying on a “virtual” law practice for clients in other states where they are admitted. This was the case even before the pandemic.

Does “resident office” include the spare bedroom that you have outfitted as your home office? While it does not address the California rule, the Formal Opinion 495 is helpful (but not dispositive) in answering that question:

The purpose of Model Rule 5.5 is to protect the public from unlicensed and unqualified practitioners of law. That purpose is not served by prohibiting a lawyer from practicing the law of a jurisdiction in which the lawyer is licensed, for clients with matters in that jurisdiction, if the lawyer is for all intents and purposes invisible as a lawyer to a local jurisdiction where the lawyer is physically located, but not licensed. The Committee’s opinion is that, in the absence of a local jurisdiction’s finding that the activity constitutes the unauthorized practice of law, a lawyer may practice the law authorized by the lawyer’s licensing jurisdiction for clients of that jurisdiction, while physically located in a jurisdiction where the lawyer is not licensed if the lawyer does not hold out the lawyer’s presence or availability to perform legal services in the local jurisdiction or actually provide legal services for matters subject to the local jurisdiction, unless otherwise authorized.

The opinion is consistent with the case law, which seems to emphasize a multi-factor test, with the location of the client as one of the most important factors, in deciding “where” the practice of law is taking place; see Barker, William T., Extrajurisdictional Practice by Lawyers. Available at SSRN: https://ssrn.com/abstract=283269.

There is no California authority finding that such “invisible” practice by “extrajurisdictional” lawyers not admitted in California violates Business and Professions Code section 6125 and 6126, where the prohibitions on unauthorized practice of law principally reside. Perhaps that is because it is invisible. But the deeper explanation is such practice does not tread on the fundamental nature of these prohibitions as protectionism – a way to keep out of state lawyers from poaching California clients. This protectionism has always been couched as necessary to protect the public from unqualified lawyers and the ABA opinion dutifully recites the shibboleth, which grows more hollow as technology conquers geography.

In the meantime, lawyers not admitted to practice in California are probably safe to virtually practice for clients in their licensed jurisdictions, so long as they remain “invisible”.