by Members of the OCBA Professionalism & Ethics Committee
When do prelitigation demand letters cross the line from professionally acceptable to extortion? When do beneficiaries have standing to sue an estate planning attorney for malpractice in creating the estate? May an attorney-witness be disqualified from representing a client in a matter even if the client consents to the attorney’s dual role as witness and advocate? What popular fee agreement provisions may run afoul of the Rules of Professional Conduct? These and other questions are answered in the notable appellate decisions and ethics opinions covered below. These decisions also include the rare appearance of not one but two cases addressing lawyer civility—one holding an attorney’s fee award may be substantially reduced based on the attorney’s incivility, the other that attorney incivility itself may not support a civil restraining order.
Anti-SLAPP and Extortion This anti-SLAPP case, Flickinger v. Finwall, 85 Cal. App. 5th 822 (2022), addresses the propriety of pre-litigation demand letters and when they become extortionate. Flickinger sued Finwall, a lawyer, for civil extortion. Finwall, on behalf of his client Pendergrast, had written a prelitigation demand letter calculated to discourage homeowner Flickinger from pursuing litigation against Pendergrast, a contractor who had allegedly done shoddy work. While intoxicated, Flickinger had allegedly confided to Pendergrast that he had taken illegal kickbacks from Apple vendors. The letter written by Finwall sought to discourage Flickinger from litigation by, in effect, threatening that this sensitive information would, in discovery, be made public, and implying that it might result in adverse action by Apple. Finwall brought an anti-SLAPP motion under Code of Civil Procedure section 425.16, seeking to strike Flickinger’s complaint. Flickinger defended the motion on the basis that the letter was extortionate, which would provide an exception to the protections of the anti-SLAPP statute under Flatley v. Mauro, 39 Cal. 4th 299 (2006), for conduct that is criminal as a matter of law. The trial court agreed and accordingly denied the motion.
The court of appeal reversed the trial court’s ruling, finding that the letter was not extortionate. Certain threats to disclose information in litigation do not amount to extortion. Here, the only express threat in Finwall’s letter was that Pendergrast would aggressively defend the litigation. The letter suggested that plaintiff Flickinger’s counsel should advise him about how litigation could result in Apple opening an investigation of plaintiff’s prior conduct, but there was no express or implied threat to report Flickinger to any authorities. As such, the letter did not lie outside the bounds of professional conduct. Having decided that the Flatley exception would not bar the use of the anti-SLAPP statute, the court exercised its discretion to consider the second prong of the test as to whether plaintiff could meet the burden of showing a probability of prevailing. The court concluded that the letter was a protected communication under the litigation privilege of Civil Code section 47, and plaintiff therefore could not prevail. The case is significant in its analysis of what types of prelitigation threats are within the boundaries of professional conduct and therefore not extortionate.
In Geragos v. Abelyan, 88 Cal. App. 5th 1005 (2023), the court of appeal held that threatening to file a State Bar complaint, without more, is not extortion and does not constitute “illegal” conduct exempt from anti-SLAPP protection. The court also held that communicating directly with a represented party, even though unethical, is not “illegal” conduct.
According to Abelyan, the Geragos firm took $27,500 from him and failed to perform any legal services in connection with a criminal matter. Abelyan reported the Geragos firm to a number of bar organizations. He then retained an attorney (Tiomkin) to represent him in an action against the Geragos firm to recover the $27,500.
In a meet and confer conversation between Tiomkin and the lawyer for the Geragos firm (Kirakosian), Tiomkin stated that the Geragos firm should return the $27,500 “or Abelyan would be immediately filing a State Bar complaint.” Geragos, 88 Cal. App. 5th at 1014. Tiomkin then contacted a lawyer at the Geragos firm directly, in violation of rule 4.2 of the California Rules of Professional Conduct. In a recorded conversation to which Tiomkin did not consent, he told the Geragos firm lawyer that if the Geragos firm paid $27,500, he would not report the matter to the State Bar and the case would be dismissed. Id.
The Geragos firm then cross-complained against Abelyan and Tiomkin, alleging that Tiomkin attempted to extort money from both Kirakosian as well as the Geragos firm directly. In response, Abelyan and Tiomkin filed an anti-SLAPP motion, arguing that Tiomkin’s alleged conduct was protected litigation activity. The trial court agreed and denied the anti-SLAPP motion.
The court of appeal affirmed. The court rejected the Geragos firm’s contention that Tiomkin’s conduct was illegal as a matter of law, as required under Flatley v. Mauro, 39 Cal. 4th 299 (2006). The court found that Tiomkin’s emails concerning a State Bar complaint were not coupled with a demand for money. Geragos, 88 Cal. App. 5th at 1027. Communicating directly with a represented party was unethical but not illegal. And although Tiomkin’s call to the Geragos firm lawyer contained a money demand, it was illegally recorded and thus inadmissible.
In Ross v. Seyfarth Shaw LLP, 96 Cal. App. 5th 722 (2023), a former linguistics professor and her spouse (plaintiffs) brought a federal employment discrimination action against various university and state officials. After the federal action was dismissed, plaintiffs brought a state court suit for defamation against a lawyer and law firm (defendants) that had been engaged by the university to conduct a prior internal investigation into the professor’s allegations of harassment. Plaintiffs took issue with defendants’ investigation, claiming they had issued a defamatory report.
Defendants filed an anti-SLAPP motion pursuant to Code of Civil Procedure section 425.16. The trial court issued a tentative ruling partially granting the motion, striking some of plaintiffs’ causes of action. That same day, plaintiffs voluntarily dismissed their entire lawsuit. Defendants then filed a motion for attorneys’ fees and costs pursuant to section 425.16(c). The trial court only awarded defendants 80% of the claimed fees, finding defendants would have only partially prevailed since the trial court would have struck only three causes of action and allegations of protected activity.
A partially successful defendant on a special motion to strike is not necessarily entitled to recover fees; that is a discretionary determination. A pre-adjudication dismissal does not automatically render the defendant a “prevailing party” under section 425.16. However, once a defendant is found to be the prevailing party, a fee award becomes mandatory.
The court of appeal acknowledged two different approaches for this determination: Coltrain v. Shewalter, 66 Cal. App. 4th 94, 107 (1998), which holds that the question turns on whether the plaintiff dismissed for reasons unrelated to a probability of success on the merits (e.g., because plaintiff achieved a settlement, or the defendant was insolvent), compared with Liu v. Moore, 69 Cal. App. 4th 745, 752 (1999), which holds that the trial court is required to consider the merits of the anti-SLAPP motion and determine whether the defendant would have been the “prevailing defendant” if the complaint had not been dismissed.
The court of appeal held defendants were entitled to fees as “prevailing defendants” under either approach. Further, because defendants’ entire motion was meritorious and should have been granted in full, defendants should have been awarded 100% of their fees.
Legal Malpractice: Duty In Gordon v. Ervin Cohen & Jessup LLP, 88 Cal. App. 5th 543 (2023), the court of appeal affirmed an order granting summary judgment in favor of defendant law firm in a legal malpractice action. A beneficiary of a trust sued the law firm that had prepared his mother’s estate planning documents, alleging that the law firm negligently prepared documents that permitted the transfer of LLC interests to one of her grandchildren that she previously had disinherited in her trust. Those LLC interests, plaintiff argued, should have been transferred to him and his children consistent with his mother’s intent as set forth in her “integrated estate plan.”
The court of appeal held that a lawyer’s duty, and the accompanying right to sue for legal malpractice, extends to nonclients only if the client’s intention to benefit the nonclient is clear, certain, and undisputed. The court rejected plaintiff’s argument that the mother’s decision to disinherit certain grandchildren in her testamentary trust also was reflective of her intent to preclude the same grandchildren from receiving LLC interests in the form of a lifetime gift. The court of appeal emphasized that nothing in the LLC operating agreement reflected any such intent, and it was undisputed that the mother had never told the law firm of any desire to prevent the grandchildren from receiving the LLC interests.
The intent to disinherit someone in a testamentary trust, the court held, does not by itself constitute clear, certain, and undisputed intent to disinherit them in every subsequent transaction the client makes with property contained in the trust. Accordingly, summary judgment was proper because the law firm owed no duty to the nonclient beneficiary to guard against the transfer of assets to the previously disinherited grandchildren.
Attorney Disqualification Militello v. VFARM 1509, 89 Cal. App. 5th 602 (2023) examines the standards for disqualification based upon a showing that opposing counsel has access to, and has used, privileged communications. The case involves claims that plaintiff was unlawfully removed from her position as a director of a corporation by its directors in furtherance of a fraudulent scheme. Plaintiff also named as a defendant a spouse of one of the directors. Plaintiff obtained electronic communications between the defendant spouses using her exclusive role as the “super-administrator” of the corporation’s email service. Plaintiff provided those spousal communications to her counsel, who submitted the communications and quoted them extensively in support of a motion to appoint a receiver.
The trial court granted the defendant spouses’ subsequent motion to disqualify plaintiff’s counsel on the ground that plaintiff’s counsel had received and used communications protected by the spousal privilege, set forth in Evidence Code section 980. The opinion affirms the trial court’s disqualification order, citing the established rule that where improper access to privileged information is shown, counsel may be disqualified “because the situation implicates the attorney’s ethical duty to maintain the integrity of the judicial process.” Militello, 89 Cal. App. 5th at 618.
Among other things, the opinion declines to follow “dicta” from Roush v. Seagate Technology, LLC, 150 Cal. App. 4th 210 (2007), which plaintiff contended stands for the proposition that disqualification is never justified by virtue of a party disclosing confidential information to his or her own counsel. Instead, the opinion cited with approval Clark v. Superior Court, 196 Cal. App. 4th 37, 54-55 (2011), which held that a court may disqualify counsel who received stolen privileged documents from his client and affirmatively used information from the documents in litigation. Militello, 89 Cal. App. 5th at 620. The opinion also notes that to the extent the dicta in Roush depends on lack of sophistication of a “lay client,” the rule does not apply to the client in this case who is an active member of the State Bar. Id. at 620, n.13.
The court in Geringer v. Blue Rider Finance, 94 Cal. App. 5th 813 (2023), interprets rule 3.7 of the California Rules of Professional Responsibility, which provides that a lawyer cannot act as an advocate in a matter where the lawyer is likely to be a witness unless certain exceptions are met. One of the exceptions, rule 3.7(a)(3), states that the rule does not apply if the lawyer has the informed written consent of the client. Comment 3 to rule 3.7 allows a trial judge to override client consent to prevent the trier of fact from being misled or the opposing party from being prejudiced.
This case involves a series of financial transactions between plaintiff Geringer and his companies and defendant Blue Rider Finance over a number of years. After litigation between them went to the court of appeal, the matter was settled. Jeffrey Konvitz, Blue Rider’s attorney, was involved in negotiating the settlement. The agreement was documented by Geringer’s attorney. When this transaction failed, Blue Rider sued Geringer claiming that Geringer committed fraud in inducing Blue Rider to sign the agreement. It was clear from the beginning that Blue Rider’s attorney would be a key witness in the litigation, so Konvitz obtained informed written consent from Blue Rider to allow him to testify if the case went to trial. Shortly before trial, Geringer moved to prohibit Konvitz from testifying in the case, or in the alternative to disqualify him.
The trial court granted the motion to disqualify Konvitz from representing Blue Rider. The judge acknowledged the informed consent, but found the likely confusion of the trier of fact (the judge) and prejudice to Geringer justified disqualification. The court of appeal reversed, finding: “This is not a particularly close case.” The court held that neither Geringer nor the trial judge cited any specific likelihood of confusion or prejudice, both of which are required in such a motion. The court also held that Geringer’s delay in filing the motion prejudiced Blue Rider, and that it was the result of manipulation by Geringer. The court also noted the extreme prejudice to Blue Rider if Konvitz was disqualified or not allowed to testify.
In United States v. Williams, 68 F.4th 564 (9th Cir. 2023), the District Court disqualified the entire Arizona U.S. Attorney’s Office after multiple criminal defendants accused one Assistant U.S. Attorney (AUSA) of professional misconduct. The Ninth Circuit reversed. The government charged nineteen alleged gang members with racketeering, conspiracy, murder, assault, and drug and firearms offenses. Williams and fifteen other co-defendants alleged that the attorney for another (Moneen) had simultaneously represented yet another defendant arrested for unrelated charges, who had agreed to cooperate against the gang, resulting in a conflict of interest which the prosecutor became aware of, but failed to notify defendants or the court about for over six months. Further misconduct was also alleged under seal, and Williams requested firewall counsel outside the District of Arizona. The AUSA handling the hearing on disqualification offered to be walled off from the rest of the office, but the magistrate judge considered it problematic for any Arizona AUSA to handle the matter and disqualified the entire Arizona U.S. Attorney’s Office. The district court upheld the order, leading to the appeal. The Ninth Circuit held that the disqualification of an entire U.S. Attorney’s Office offended separation of powers principles, and found that defendants must show prejudice from a prosecutor’s potential conflict of interest or present clear and convincing evidence of prosecutorial misconduct to justify disqualification. The court said there was no showing that continued representation would result in a legal or ethical violation and no attorney-specific factual findings or legal conclusions demonstrating that the conflict so pervaded the office that less intrusive remedies would be inadequate. Therefore, the court reversed the disqualification order, noting that the generally accepted remedy was to disqualify the specific attorney rather than the whole office.
Civility In Hansen v. Volkov, 96 Cal. App. 5th 94 (2023), the court of appeal reversed the trial court’s issuance of a three year civil harassment restraining order sought by Attorney Hansen against Attorney Volkov based on Attorney Volkov’s argumentative, self-serving, and unnecessary emails after the clear cancelation of his client’s deposition and his appearance at Attorney Hansen’s office for the deposition after he had been notified that it was canceled. The trial court issued the restraining order on the grounds that Attorney Volkov’s course of conduct seriously alarmed, annoyed, or harassed Attorney Hansen, served no legitimate purpose, was not constitutionally protected, and would cause a reasonable person, and did cause Attorney Hansen, substantial emotional distress. The court of appeal reversed the restraining order on the grounds that Attorney Volkov’s emails did not contain any threats of violence and constituted constitutionally protected litigation activity and the single incidence office visit at issue was insufficient to establish that Attorney Volkov’s conduct caused Attorney Hansen to suffer severe intense, enduring, and nontrivial emotional distress.
In Snoeck v. ExakTime Innovations, Inc., 96 Cal. App. 5th 908 (2023), the court of appeal confirmed the trial court’s ruling that an attorney’s fees award can be reduced due to an attorney’s incivility. After the jury awarded Snoeck $130,038 in economic and non-economic damages against ExakTime, Snoeck’s attorney asked for the lodestar attorney fee amount of $1,193,970 plus a 1.75 positive multiplier for a total of $2,089,272.50. Instead, the trial court applied a .4 negative multiplier to its $1,114,659.36 adjusted lodestar calculation on the finding that plaintiff’s counsel was repeatedly and intentionally uncivil to defense counsel and the court, awarding attorney’s fees of $686,795.62. The trial court remarked that it had found plaintiff’s counsel’s tone of voice both belittling and antagonistic, which at times verged on contemptuous, and noted that incivility heightens stress and debases the legal profession. The court of appeal concluded that there was substantial evidence to support the trial court’s finding that plaintiff’s counsel was uncivil toward opposing counsel and the court and that his attacks were unnecessary for the zealous representation of his client, which justified a reduction in attorney’s fees.
Legal Malpractice: Statute of Limitations In Engel v. Pech, 95 Cal. App. 5th 1227 (2023), an attorney represented a limited liability partnership (LLP) in an underlying legal dispute. After that litigation ended, one of the LLP’s individual partners sued the attorney for malpractice within the one-year period to bring a claim for legal malpractice. After the one-year period expired, the partner filed an amendment to add the LLP as a plaintiff to the action.
The court affirmed the trial court’s sustaining of a demurrer based on the statute of the limitations because the LLP was not timely added. While amendments to add new parties may relate back to the date of an original complaint, the relation-back doctrine applies only if the new plaintiff is seeking to enforce the same right as a previously named plaintiff. The court held that the malpractice claims brought by the new plaintiff, the LLP, did not relate back to the filing of the individual partner’s claims because the attorney’s obligation to the LLP was different and distinct from the attorney’s obligation to the partner. The retainer agreement identified two different clients, the LLP and the individual. The attorney owed separate obligations to each client, and each had distinct potential claims against the attorney for malpractice. The court affirmed the trial court’s determination that the partnership’s claim against the attorney was not timely brought.
The court also held that the individual partner’s claim for malpractice, though timely, failed as a matter of law. The parties’ retainer agreement explicitly limited the attorney’s duties to legal representation in the underlying litigation. Only the LLP was a party to that proceeding. The malpractice alleged in the complaint was limited to alleged deficiencies during that litigation. Thus, the only entity who could have suffered damages and had claims for malpractice was the LLP. A partnership’s potential claim for malpractice was property that belonged solely to the LLP, not the individual partner. Finally, because all damages from any malpractice claims were suffered by the LLP, the court held there was no reasonable possibility that the individual partner could amend to state a viable malpractice claim.
Fee Agreements San Francisco Bar Association Opinion 2023-1 applies to any lawyer who is presenting a fee agreement to a client and seeks to provide guidance on popular provisions which may run afoul of a lawyer’s ethical obligations.
Specifically, provisions shifting authority over the client’s objectives from the client to the lawyer on substantive decisions run afoul of California Rules of Professional Conduct, rule 1.2. When a lawyer is making a decision on substantive rights, such as whether to dismiss parties or claims or to submit to arbitration, waive a jury trial, concede on essential elements, or to settle a case, lawyers must provide advice relating to the client’s choices and make recommendations. The lawyer cannot obtain prior authorization for such decisions in a fee agreement because the decision made by the client would not be deemed an “informed decision regarding representation.” See Cal. R. Prof’l Conduct, rule 1.4.
Likewise, provisions prohibiting or restricting a client’s authority to settle are typically improper. For example, mandating mutual consent of a client and the lawyer is void as against public policy. Calvert v. Stoner, 33 Cal. 2d 97 (1948). Similarly, a provision mandating that the case be taken to trial or settlement to ensure a lawyer is paid for the representation is invalid. Lemmer v. Charney, 195 Cal. App. 4th 99, 104 (2011).
Provisions for nonrefundable fees are also improper unless the fee is a true retainer and the client agrees in writing after adequate disclosure. Cal. R. Prof’l Conduct, rules 1.5(d) and 1.16(e)(2). And, charging fees in excess of statutory limits may be prohibited by California Rules of Professional Conduct, rule 1.5(a), which prohibits unconscionable or illegal fees.
Pre-authorization to unilateral withdrawal without sufficient notice will run afoul of California Rules of Professional Conduct, rule 1.16(d) and should not be included in fee agreements. Similarly, a lawyer must promptly release to the client all client materials and property, irrespective of whether fees are owed. A provision that attempts to carve out work product from such requirement may run afoul of a lawyer’s ethical duty if said materials are reasonably necessary to the client’s representation. See Cal. R. Prof’l Conduct, rule 1.16(e)(1).
Lastly, as to the destruction of the client’s file, no California rule of professional conduct states a specific time period to maintain such records. California lawyers should consider several ethics opinions on this issue when drafting provisions in retainer agreements relating to such matters.