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December 1, 2011 ACC – San Diego Chapter
Nancy L. Stagg
Benjamin J. Morris
Who wants to be a Millionaire
California Lawyer?
Ethical Issues Facing
California In House Counsel
Q: The California Rules of Professional Conduct, State Bar Act and California court opinions are binding on members of the State Bar. What ethics authority should
California lawyers consider in addition?
Opinions of ethics committees in California;
Opinions of ethics committees in other jurisdictions;
Rules and standards promulgated by other bar associations; or
All of the above.
A. B.
C. D.
A. B.
C. D.
Opinions of ethics committees in California;
Opinions of ethics committees in other jurisdictions;
Rules and standards promulgated by other bar associations; or
All of the above.
D. All of the above.
CRPC 1-100(A); Proposed CRPC 1.0 Comment [3]
Q: A lawyer is:
A representative of clients; An officer of the court;
A public citizen having special responsibility for the quality of
justice; or
All of the above.
A. B.
C. D.
D. All of the above.
ABA Model Rules of Professional Conduct Preamble ¶ 1 (2004)
A representative of clients;
All of the above.
A. B.
C. D. A public citizen having special
responsibility for the quality of justice; or
An officer of the court;
Q: Besides the black letter law, what should guide an attorney in determining the propriety of his or
her actions?
An attorney’s own conscience; The conscience of your colleagues;
Both A and B; or A but not B?
A. B.
C. D.
A. B.
C. D.
An attorney’s own conscience; The conscience of your colleagues;
C. “*A+ lawyer is also guided by personal conscience and the approbation of professional peers.”
ABA Model Rules of Professional Conduct Preamble ¶ 7
Both A and B; or A but not B.
Q: True or False: In California, a violation of the Rules of Professional Conduct provides a private right of action for a client against an attorney.
A: False. CRPC 1-100(A) expressly states that the Rules are not intended to create new civil causes of action and that conduct contrary to the Rules does not automatically give rise to a civil cause of action.
A: True. Because the CRPC establishes the minimum standards for permissible attorney conduct, courts have sometimes allowed proof of a violation to show (1) a breach of the fiduciary duty of care and/or (2) a failure to exercise the degree of care that an attorney of ordinary skill and knowledge would exercise.
Accord Proposed CRPC 1.0 Comment [2]
BONUS QUESTION
Advising Your Clients:
Selected Recurrent Ethical
Issues
Q: In California, a written agreement (e.g., an engagement letter) is needed to form an attorney/client relationship in what kind of case:
Commercial Disputes; Intellectual Property Disputes;
Contingency Fee Matters; or None of the above?
A. B.
C. D.
“An attorney-client relationship can be formed though no retainer is signed or no fees are paid. When a party seeking
legal advice consults an attorney at law and secures that advice, the relation of attorney and client is established prima facie.”
Gulf Ins. Co. v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2000) 79 Cal.App.4th 114, 126
Commercial Disputes; Intellectual Property Disputes;
Contingency Fee Matters; or None of the above?
A. B.
C. D.
To avoid forming an attorney/client relationship with individual employees:
Caution
A. DO give “Miranda” warnings (e.g., “I represent the company and may have to report what you tell me.”).
B. DO recognize situations where employees may require separate counsel (e.g., employment disputes, trade secret theft, director/officer liability, internal investigations).
C. DO encourage employees to retain separate counsel when necessary.
D. DON’T give advice on personal matters.
Q: May an in-house lawyer serve as “lawyer for the deal” (representing both the company and an employee) in the negotiation of an employment or severance agreement?
A: Surprisingly, yes. But, only if (1) the lawyer reasonably believes that the representation of each client will not be materially affected, (2) the lawyer discloses in writing to each party the potential or actual conflict of interest, and (3) obtains the fully informed written consent of both parties. Additionally, if the disclosure is precluded by the lawyer’s duty of confidentiality to either client, informed written consent is precluded.
CRPC 3-310(C) and Discussion - Note definitional change for “adverse interest” in proposed CRPC 1.7 (Conflict of Interest: Current Clients) CAUTION: This is a terrible practice. Have the employee retain her own counsel instead.
BONUS QUESTION
Q: While working on behalf of the company on a severance agreement for an employee who is not represented by counsel, the
employee makes statements that cause you to believe that she misunderstands your role in the matter. What duty, if any, would you have
with respect to the soon-to-be-ex-employee?
Duty to act in the best interest of the unrepresented employee;
Duty to act only in the interest of your only client, the company; or
Duty to make reasonable efforts to correct the employee’s
misunderstanding;
A. B.
C. D. Duty to act in the best interest
of both the employee and the company.
B. You must explain who you represent and must not mislead the employee into believing that he or she may confide in
you in a way that will not be used in the company’s interest.
CRPC 3-600(D); Proposed CRPC 1.13 & Comment [16]
Duty to act in the best interest of the unrepresented employee;
Duty to act only in the interest of your only client, the company; or
A. B.
C. D.
Duty to make reasonable efforts to correct the employee’s
misunderstanding;
Duty to act in the best interest of both the employee and
the company.
Q: An ex-employee who is now working for a competitor is about to disclose the company’s trade secrets.
When seeking an ex parte TRO to stop that disclosure, counsel may ethically:
Misstate a material fact to the court;
Withhold a material fact from the court;
Misstate material aspects of the law.
Withhold unfavorable authority from another jurisdiction; or
A. B.
C. D.
D. The California Rules are currently silent as to the duty to disclose unfavorable authority from another jurisdiction. However, the proposed CRPCs
adopt the language of the Model Rules which was previously advisory that states: “A lawyer must not knowingly . . . 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.”
CRPC 5-200(B); ABA Model Rule 3.3(a)(2); Proposed CRPC 3.3(a)(2)
A. B.
C. D.
Misstate a material fact to the court;
Withhold a material fact from the court;
Misstate material aspects of the law.
Withhold unfavorable authority from another jurisdiction; or
Q: A lawyer representing a party in ongoing litigation may ethically:
Contact the opposing party’s CEO to talk about the lawsuit;
Contact the opposing party’s former CEO to talk about
the lawsuit;
Contact the opposing party’s CEO to talk about the lawsuit, but
only if the CEO consents; or
Contact the opposing party’s former CEO who has retained
counsel to advise him.
A. B.
C. D.
B. The ethical rules do not prohibit lawyers from contacting former employees of a represented
organization, so long as they are not separately represented by counsel in the matter.
CRPC 2-100 Discussion ¶5; Proposed CRPC 4.2(b)(2) and Comment [13]; Triple A Machine Shop, Inc. v. State of California
(1989) 213 Cal.App.3d 131, 140
Contact the opposing party’s CEO to talk about the lawsuit;
Contact the opposing party’s former CEO to talk about
the lawsuit;
Contact the opposing party’s CEO to talk about the lawsuit, but
only if the CEO consents; or
A. B.
C. D. Contact the opposing party’s former CEO who has retained
counsel to advise him.
CRPC 2-100 states that “a member shall not communicate directly or indirectly about the subject of the
representation with a party the member knows to be represented by another lawyer in the matter, unless the
member has the consent of the other lawyer.” 2-100 is not limited solely to the litigation context and applies if
litigation is merely under consideration and not actually initiated.
Caution
CRPC 2-100 and Discussion ¶4; Proposed CRPC 4.2(b)(2) and Comment [4]
Q: Do the Rules of Professional Conduct prohibit a corporation from hiring an attorney
who has been adverse to the corporation in litigation:
No; Yes;
Probably, but it depends on the factual circumstances; or
Unclear as a matter of law.
A. B.
C. D.
A. The Rules of Professional Conduct apply to lawyers, not to corporations.
Probably, but it depends on the factual circumstances; or
Unclear as a matter of law.
A. B.
C. D.
No; Yes;
Q: May a lawyer who has been adverse to a corporation in litigation accept employment as an in-house
attorney for that corporation while the litigation is still ongoing if the lawyer first terminates the attorney-client relationship with
the adverse party?
Yes, as long as the new job does not question the validity of the services the lawyer provided to the
adverse party;
Yes, as long as the new job would not lead to the disclosure of confidential
information of the adverse party;
Yes, as long as the corporation “screens” or “walls” the lawyer from the
litigation; or
No, not without the consent of the adverse party.
A. B.
C. D.
D. Without first obtaining informed written consent, an attorney “shall not” accept employment adverse to a former client where the lawyer has obtained confidential
information of the former client material to the employment.
CRPC 3-310(E); Proposed CRPC 1.9(a) & (c)
Yes, as long as the new job does not question the validity of the services the lawyer provided to the
adverse party;
Yes, as long as the new job would not lead to the disclosure of confidential
information of the adverse party;
Yes, as long as the corporation “screens” or “walls” the lawyer from the
litigation; or
No, not without the consent of the adverse party.
A. B.
C. D.
If the corporation hires a lawyer with a conflict that prevents that lawyer from working on a matter, the CRPC and California case law may
impute that conflict to the entire in-house legal department.
Caution
A. A division, department, office, or group within a business entity, which includes more than one lawyer who performs legal services for the business entity is a “law firm” for purposes of the CRPC.
CRPC 1-100(B)(1)(c); accord proposed CRPC 1.0.1(c) B. When an attorney cannot obtain a waiver and is disqualified by a
conflict of interest, the attorney’s entire law firm may be vicariously disqualified as well based on the assumption “that attorneys, working together and practicing law in a professional association, share each other’s, and their clients’ confidential information.”
City & County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 847-848
Important Recent Development
Caution
Kirk v. First American Title Ins. Co., (2010) 183 Cal.App.4th 776, 784, 799
A. The Second District Court of Appeal ruled that the presumption that lawyers within
a firm share confidences can be rebutted by evidence of sufficient ethical screening. As the court acknowledged, this ruling creates a split of authority among the courts of appeal. Id. at 790 (citing City of Santa Barbara v. Superior Court (2004) 122 Cal.App.4th 17, 24 and Frazier v. Superior Court (2002) 97 Cal.App.4th 23, 30 as standing for the proposition that the “rule of vicarious disqualification is absolute.”)).
B. Kirk has not been de-published and the California Supreme Court has not granted
review. Thus, Kirk may be cited for the proposition that a party may use ethical walls to avoid vicarious disqualification of an entire firm where one of its attorneys has a conflict of interest.
Q: Must an attorney who did not personally represent a client of the lawyer’s old firm obtain the informed written consent of the firm’s client before accepting an in-house position with an adverse party?
A: It depends. The vicarious disqualification rule may not impute a firm’s knowledge of client confidences to attorneys who were not involved in representing the client. Instead, the court must determine whether “confidential information material to the current lawsuit would normally have been imparted to the attorney by virtue of the nature of the former representation.”
See Adams v. Aerojet-General Corp. (2001) 86 Cal.App.4th 1324, 1339
BONUS QUESTION
Q: Must an attorney who did not personally represent a client of the lawyer’s old firm obtain the informed written consent of the firm’s client before accepting an in-house position with an adverse party?
A: Proposed CRPC 1.9(b) will impact this analysis as that rule indicates the attorney would not have a conflict of interest and would not require informed written consent unless the attorney, while at the former law firm, had acquired information protected by Business and Professions Code section 6058(e) and Rules 1.6 and 1.9(c) that is material to the matter.
Proposed CRPC 1.9 (b) and Comments [8-9]
BONUS QUESTION
Attorney-client privilege; Trial preparation material (work product) privilege;
Trade secret privilege; or All of the above.
A. B.
C. D.
Q: A corporation commits to supply a product to several customers but later realizes that it cannot meet the
entire demand. Which of the following privileges might the corporation legitimately assert in a subsequent lawsuit to protect its
discussions about the ramifications of reducing supplies across the board versus favoring some customers over others?
Attorney-client privilege; Trial preparation material (work product) privilege;
Trade secret privilege; or All of the above.
A. B.
C. D.
D. Each of these privileges might provide at least some level of protection for the corporation’s internal discussions
and analyses.
See F.R.C.P. 26(b)(3); Cal. Civil Code §3426.5; Cal. Evid. Code §§950-954 & §1060; Cal. Code Civ. Proc. §2018.030
Q: True or False: The attorney-client privilege cannot apply to communications that address both legal and business issues?
A: False. The attorney-client privilege may protect communications where the attorney is fulfilling the dual role of legal advisor and business consultant if the dominant purpose of the relationship between the parties was to provide legal advice and the communication was made during the course of that relationship.
See Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 739-740
BONUS QUESTION
Q: Which of the following types of information can be recognized as trade secrets:
BONUS QUESTION
A. Pricing information B. Customer lists C. Marketing strategies D. Blueprints
E. Models F. Cost data G. Results of testing H. Business analyses
A: All of the above and many others.
The California Uniform Trade Secrets Act defines a “trade secret” as:
BONUS QUESTION
Information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
1. Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and 2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Cal. Civil Code §3426.1(d)
Q: Must in-house counsel who work for a corporation in California be fully licensed to practice law in California?
A: No. The in-house attorney, however, must (1) be an active member in good standing of another bar, (2) register with the State Bar of California, and (3) satisfy residency, MCLE and other requirements.
Cal. Rule of Court 9.46
CAUTION: Registered in-house counsel may not represent the owners, employees or agents of the “qualifying institution” that employs the lawyer—yet another reason to be careful to avoid forming unintended attorney-client relationships.
BONUS QUESTION
Relevant Ethics Opinions
in California and Unanswered
Questions
Q: True or False: Outside counsel may ethically withhold electronic versions or “soft copies” of e-mails, pleadings, discovery requests, depositions or transactional documents from a requesting client to keep from disclosing metadata that reflects confidential information of other clients.
A: False. The contents of the client file belong to the client, not to the attorney. If asked the attorney must release electronic items to the client, but the attorney need not create such items if they do not exist or change the format in which they exist (e.g., from Word (.doc) to WordPerfect (.wpd)). To solve the metadata problem, the attorney must take reasonable steps to strip metadata reflecting confidential information belonging to other clients before producing the file.
State Bar Formal Opinion No. 2007-174
BONUS QUESTION
Q: In a lawsuit by Attorney A against Defendant, Client has a statutory right to seek an award of attorney’s fees. Attorney B, Defendant's counsel, makes a settlement offer, conditioned on Client’s wavier of his statutory right to attorney’s fees, that is insufficient to compensate Attorney A for her fees. (1) May Attorney A bar the settlement notwithstanding Client’s desire to accept it? (2) Does Attorney B violate any ethical obligation by recommending or conveying fee-waiver settlement offers in cases generally?
A: (1) No. Attorney A must inform the client of a fee-waiver settlement offer and consummate the settlement in accordance with the client’s desires even if it reduces the likelihood of recovering some or all of his/her fees.
(2) No. Attorney B does not violate any ethical obligation by recommending or conveying fee-waiver settlement offers.
State Bar Formal Opinion No. 2009-176
BONUS QUESTION
Q: May a company protect from disclosure the results of an internal audit instigated and conducted by in-house counsel on the ground that materials are privileged?
A: Maybe. The “work product” doctrine may not shield the documents if the court believes that the company would have created the documents to help to ensure the company’s compliance with existing law, despite any threat of litigation. Correspondence marked as “confidential” to and from in-house counsel, documents referencing communications with counsel, and documents prepared by non-attorneys who are aware that the company is conducting the audit at the request of counsel may be attorney-client privileged. Documents created by individuals who are unaware of the purpose of the audit may not be attorney-client privileged.
Lewis v. Wells Fargo & Co. (N.D. Cal. Mar. 12, 2010) 266 F.R.D. 433, 2010 WL 890183, at *7
SHAMELESS PLUG: Hiring outside counsel to assist in the audit can help to bolster the claim of privilege and reduce the possibility of a conflict of interest if the in-house counsel owes independent fiduciary duties to the company, i.e. in-house counsel is a member of the board of directors.
BONUS QUESTION
Q: May a defendant claim “work product” protection for emails sent between defendant’s employees who were working with litigation counsel and employees of the third-party supplier that manufactured a part accused of infringement?
A: Yes. The emails may qualify under FRCP 26(b)(3) if sent by defendant’s employees who are working with litigation counsel, if they discuss the alleged infringing product, and if they refer to counsel’s thoughts regarding the product. The “common interest” exception may foreclose a waiver argument because the defendant and the supplier share a common interest in the accused part and the disclosures between them are not inconsistent with maintaining secrecy from possible adversaries.
Pulse Engineering, Inc. v. Mascon, Inc. (S.D. Cal. 2009) 2009 WL 3234177, at *2-4
BONUS QUESTION
Q: Do the “mediation confidentiality” provisions of Code of Civil Procedure § 1115, et seq. shield attorney-client communications or agreements made during a mediation from discovery or use in a later action between the attorney and the client?
A: Yes. The California Supreme Court held earlier this year that: 1) an attorney’s mediation related discussions with a client were confidential and, therefore, were neither discoverable nor admissible for purposes of proving a claim of legal malpractice, and 2) application of the mediation confidentiality statutes to malpractice actions does not implicate due process concerns so fundamental that they might warrant an exception on constitutional grounds.
Cassel v. Superior Court (2011) 51 Cal. 4th 113
BONUS QUESTION
Q: Are the statements of a witness that are recorded or written by an attorney (or representative) entitled to work product protection in state court?
A: Unknown. Recently the California Court of Appeal held that verbatim statements or statements that record the events without any interpretation, impression or analysis of the attorney (e.g. unedited audio recordings) are not work product. It further held that even if a statement contains attorney impressions or analyses, those statements are still discoverable if the impressions or analyses can be redacted from the summary of events or verbatim statements. The California Supreme Court granted review in this case to address a dispute this generated with another district of the California Court of Appeal.
Coito v. Superior Court (2010) 106 Cal.Rptr.3d 342, review granted, 110 Cal.Rptr.3d 462
BONUS QUESTION
Q: Does the attorney-client privilege extend to communications between multiple attorneys or other reasonably necessary parties representing a client, if those communications were not directly communicated to the client?
A: Yes. Leaving an attorney’s uncommunicated legal opinions, including impressions and conclusion, unprotected by the privilege would virtually destroy it. “Thus, legal opinions formed by counsel during representation of the client are protected confidential communications, even if the opinions have not been transmitted to the client.” The privilege also applies to communications between lawyers in the firm representing the client as well as non-attorney agents retained by the attorney to assist with the representation.
Fireman’s Fund Ins. Co. v. Superior Ct. (2011) 196 Cal.App.4th 1263, 1273
BONUS QUESTION
Q: Does the protection of the absolute attorney work product doctrine extend even to attorney impressions, conclusions, opinions, legal research, and theories not reduced to writing?
A: Yes. Reversing the trial court’s ruling, the California Court of Appeal recently held that the legislative history indicated that opinion work product was protected in every form and there was no indication that lesser protection was provided for unwritten work product. Lawyers should not be required to document their every thought in order to obtain protection for their work product at the expense of higher client bills and at the risk of malpractice lawsuits if the failure to document an opinion resulted in its being held discoverable.
Fireman’s Fund Ins. Co. v. Superior Ct. (2011) 196 Cal.App.4th 1263, 1279, 1281
BONUS QUESTION
Q: True or False: A company does not qualify for relief from a default or dismissal under Code of Civil Procedure § 473 if the mistake, inadvertence, surprise, or neglect of an in-house lawyer for company caused the default or dismissal.
A: False. In-house attorneys providing strictly legal services to the company come within the mandatory relief provision of Code of Civil Procedure § 473. Automatic relief from a default or dismissal is proper where in-house counsel declares that the action against the company was the result of his or her neglect alone, and that the company is blameless.
Gutierrez v. G & M Oil Company, Inc. (2010) 184 Cal.App.4th 551, 2010 WL 1818904, *1
BONUS QUESTION
Some Highlights of the
Proposed California Rules of
Professional Conduct
The proposed California Rules of Professional Conduct, which must be approved by the California Supreme Court, consist of 67 new and amended rules and adopt a new numbering system and basic structure similar to the ABA Model Rules. There are eight Chapters:
BONUS QUESTION
Chapter 1: Lawyer-Client Relationship (18 rules) Chapter 2: Counselor (3 rules) Chapter 3: Advocate (9 rules) Chapter 4: Transaction with Persons Other Than Clients (2 rules) Chapter 5: Law Firms and Associations (7 rules) Chapter 6: Public Service (5 rules) Chapter 7: Information About Legal Services (5 rules) Chapter 8: Maintaining the Integrity of the Profession (6 rules)
Most of the Proposed Rules do not change the substance of California’s law of lawyering but do clarify and integrate concepts from case law. Examples of proposed Rules that appear to substantively change California law are:
BONUS QUESTION
• Rule 1.7 – Conflict of Interest; Current Clients: adopts ABA standard that defines adverse interests as those that materially limit the lawyer’s ability to serve the client and requires that the lawyer have reasonable belief that he or she can provide competent and diligent representation to the client.
• Rule 1.18.10 – Sexual Relations With Clients: changes California’s former rule, which only banned sexual relations if it affected the competency of the representation, to mirror the ABA’s flat ban.
• Rule 4.2 – Communications with a Person Represented by Counsel: forbids contact with a “person” while the old rule prohibited contact with a “party” represented by counsel. 4.2(b) provides a detailed definition of “Person” that clarifies the rule applies only to “current” officers, directors, employees, etc.
Despite the restyling to more closely mirror the ABA Model Rules, the proposed California Rules of Professional Conduct retain key substantive differences, which include, but are not limited to:
BONUS QUESTION
Client secrets: As proposed, Rule 1.6 would retain California’s approach of favoring strict confidentiality. Currently, the only exception, in both statute and bar rules, permits a lawyer to reveal information reasonably necessary to prevent a criminal act likely to result in death or substantial bodily harm. The Model Rules take a broader approach and include additional exceptions to prevent or mitigate financial harm.
Unconscionable fees: California prohibits fees using standards that are different from the Model Rules. California uses an “unconscionable fee” standard to determine whether to impose discipline based on the fee charged or collected by a lawyer. Nearly every other jurisdiction has adopted the Model Rules’ “reasonable fee” standard for charging or collecting a fee. Proposed Rule 1.5 leaves in place the unconscionability standard.
BONUS QUESTION
Competence: The Model Rules broadly state that a lawyer shall provide competent representation to a client. The current California rule has a more precise formulation that subjects a lawyer to discipline only if incompetent conduct is reckless, repeated or intentional. The key difference is possible disciplinary exposure for single acts of simple negligence. Under the Model Rules’ language this is possible, but under the California rule, more egregious conduct must be shown. Proposed Rule 1.1 retains the current California approach, largely in recognition of the fact that a civil malpractice action is a more appropriate forum for redressing a lawyer’s single act of simple negligence.
The “snitch” rule: Model Rule 8.3 requires a lawyer to report certain misconduct committed by another lawyer, as long as the lawyer does not disclose information otherwise protected under the duty of confidentiality. The current California Rules have no such requirement and the Proposed Rules will continue the status quo.
Thank You
For more information, contact:
Nancy Stagg
858 678-4735
Or Ben Morris
858 678-4378
