Program #35

Ethics for Solo and Small Firm

Practitioners

Saturday, January 18
-
9:45 alm. 11:45 alm

STATE BAR
SECTION
EDUCATION January 17-19,2003
INSTITUTE Claremont Resort & Spa, Berkeley
Points of view or opinions expressed in these pages are those of the speaker(s)
and/or author(s). They have not been adopted or endorsed by the State Bar of
California s Board of Governors and do not constitute the oficialposition orpolicy
of the State Bar of California. Nothing contained herein is intended to address any
specijk legal inquiry, nor is it a substitutefor independent legal research to original
sources or obtaining separate legal advice regarding specijk legal situations.

02003 State Bar of California

All Rights Reserved
 THE SOLO & SMALL FIRM SECTION
PRESENTS

ETHICS
FOR
SOLO AND SMALL FIRM PRACTITIONERS
Saturday, January 18,2003 -
9:45-a.m. 11:45 a.m.

RISK MANAGEMENT TIPS

Presented by Ellen R. Peck, Esq.

1, INTRODUCTION
The purpose of this program is to provide tips on how to avoid ethical traps
and pitfalls for the solo and small firm practitioners.

2, MANAGING CONFLICTS OF INTEREST

1, RULE 3-310:

2, RULE 3-300

3. PREVENTING STATE BAR COMPLAINTS AND LEGAL

MALPRACTICE CLAIMS

4, MANAGING CLIENTS TRUST ACCOUNTS

5, QUESTIONS AND CONCLUSIONS

Page 1 of 25
 EXCERPTS FROM THE CALIFORNIA RULES OF PROFESSIONAL CONDUCT
(January 2003)

Rule 3-300. Avoiding Interests Adverse to a Client.

A member shall not enter into a business transaction with a client; or knowingly acquire an ownership, possessory, security, or other pecuniary interest
adverse to a client, unless each of the following requirements has been satisfied:

(A) The transaction or acquisition and its terms are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in
a manner which should reasonably have been understood by the client; and

(B) The client is advised in writing that the client may seek the advice of an independent lawyer of the client's choice and is given a reasonable
opportunity to seek that advice; and

(C) The client thereafter consents in writing to the terms of the transaction or the terms-of the acquisition.

Discussion:

Rule 3-300 is not intended to apply to the agreement by which the member is retained by the client, unless the agreement confers on the member an
ownership, possessory, security, or other pecuniary interest adverse to the client. Such an agreement is governed, in part, by rule 4-200.

Rule 3-300 is not intended to apply where the member and client each make an investment on terms offered to the general public or a significant portion
thereof. For example, rule 3-300 is not intended to apply where A, a member, invests in a limited partnership syndicated by a third party. B, A's client,
makes the same investment. Although A and B are each investing in the same business, A did not enter into the transaction "with" B for the purposes of
the rule.

Rule 3-300 is intended to apply where the member wishes to obtain an interest in client's property in order to secure the amount of the member's past due
or future fees.

Rule 3-3 10. Avoiding the Representation of Adverse Interests.

(A) For purposes of this rule:

(1) "Disclosure"means informing the client or former client oftherelevant circumstances and ofthe actual and reasonably foreseeable adverse
consequences to the client or former client;

(2) "Informed written consent" means the client's or former client's written agreement to the representation following written disclosure;

(3) "Written" means any writing as defined in Evidence Code section 250.

(B) A member shall not accept or continue representation of a client without providing written disclosure to the client where:

(1) The member has a legal, business, financial, professional, or personal relationship with a party or witness in the same matter; or

(2) The member knows or reasonably should know that:

(a) the member previously had a legal, business, financial, professional, or personal relationship with a party or witness in the
same matter; and

(b) the previous relationship would substantially affect the member's representation; or

(3) The member has or had a legal, business, financial, professional, or personal relationship with another person or entity the member knows
or reasonably should know would be affected substantially by the resolution of the matter; or

(4) The member has or had a legal, business, financial, or professional interest in the subject matter of the representation.

Page2of 25
(C) A member shall not, without the informed written consent of each client:

(I) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or

(2) Accept or continue representation of more than one client in a matter in which the interests of the clients actually conflict; or

(3) Represent a client in a matter and at the same time in a separate matter accept as a client a person or entity whose interest in the first
matter is adverse to the client in the first matter.

(D) A member who represents two or more clients shall not enter into an aggregate settlement of the claims of or against the clients, without the
informed written consent of each client.

(E) A member shall not, without the informed written consent of the client or former client, accept employment adverse to the client or former client
where, by reason of the representation of the client or former client, the member has obtained confidential information material to the employment.

0;) A member shall not accept compensation for representing a client from one other than the client unless:

(I) There is no interference with the member's independence of professional judgment or with the client-lawyer relationship; and

(2) Information relating to representation of the client is protected as required by Business and Professions Code section 6068, subdivision
(e); and

(3) The member obtains the client's informed written consent, provided that no disclosure or consent is required if:

(a) such nondisclosure is otherwise authorized by law, or

(b) the member is rendering legal services on behalf of any public agency which provides legal services to other public agencies or
the public.

Discussion:

Rule 3-3 10 is not intended to prohibit a member from representing parties having antagonistic positions on the same legal question that has arisen in different
cases, unless representation of either client would be adversely affected.

Other rules and laws may preclude making adequate disclosure under this rule. If such disclosure is precluded, informed written consent is likewise precluded.
(See, e.g., Business and Professions Code section 6068, subsection (e).)

Paragraph (B) is not intended to apply to the relationship of a member to another party's lawyer. Such relationships are governed by rule 3-320.

Paragraph (B) is not intended to require either the disclosure of the new engagement to a former client or the consent of the former client to the new
engagement. However, both disclosure and consent are required if paragraph (E) applies.

While paragraph (B) deals with the issues of adequate disclosure to the present client or clients of the member's present or past relationships to other parties
or witnesses or present interest in the subject matter of the representation, paragraph (E) is intended to protect the confidences of another present or former
client. These two paragraphs are to apply as complementary provisions.

Paragraph (B) is intended to apply only to a member's own relationships or interests, unless the member knows that a partner or associate in the same firm
as the member has or had a relationship with another party or witness or has or had an interest in the subject matter of the representation.

Subparagraphs (C)( 1) and (C)(2) are intended to apply to all types of legal employment, including the concurrent representation of multiple parties in
litigation or in a single transaction or in some other common enterprise or legal relationship. Examples of the latter include the formation of a partnership
for several partners or a corporation for several shareholders, the preparation of an ante-nuptial agreement, orjoint or reciprocal wills for a husband and wife,
or the resolution of an "uncontested" marital dissolution. In such situations, for the sake of convenience or economy, the parties may well prefer to employ
a single counsel, but a member must disclose the potential adverse aspects of such multiple representation (e.g., Evid. Code, $962) and must obtain the
informed written consent of the clients thereto pursuant to subparagraph (C)(l). Moreover, if the potential adversity should become actual, the member
must obtain the further informed written consent of the clients pursuant to subparagraph (C)(2).

Subparagraph (C)(3) is intended to apply to representations of clients in both litigation and transactional matters.

Page 3 of 25
*
There are some matters in which the conflicts are such that written consent may not suffice for non-disciplinary purposes. (See Woods v. Superior Court
(1983) 149 Cal.App.3d 93 1 [I97 CaLRptr. 1851; Klemm v. Superior Court (1977) 75 Cal.App.3d 893 [I42 Cal.Rptr. 5091; Ishmael v. Millindon (1966)
-241 Cal.App.2d 520 [50 CaLRptr. 5921.)

Paragraph (D) is not intended to apply to class action settlements subject to court approval.

Paragraph (F) is not intended to abrogate existing relationships between insurers and insureds whereby the insurer has the contractual right to unilaterally
select counsel for the insured, where there is no conflict of interest. (See San Diego N a w Federal Credit Union v. Cumis Insurance Society (1 984) 162
Cal.App.3d 358 [208 CaLRptr. 4941.)

Rule 4-100. Preserving Identity of Funds and Property of a Client.

(A) All funds received or held for the benefit of clients by a member or law firm, including advances for costs and expenses, shall be deposited in one
or more identifiable bank accounts labelled "Trust Account," "Client's Funds Account" or words of similar import, maintained in the State of
California,or, with written consent of the client, in any other jurisdiction where there is a substantial relationship between the client or the client's
business and the otherjurisdiction. No funds belonging to themember or the law firm shall be deposited therein or otherwise commingledtherewith
except as follows:

(I) Funds reasonably sufficient to pay bank charges.

(2) In the case of funds belonging in part to a client and in part presently or potentially to the member or the law firm, the portion belonging
to the member or law firm must be withdrawn at the earliest reasonable time after the member's interest in that portion becomes fixed.
However, when the right of the member or law firm to receive a portion of trust funds is disputed by the client, the disputed portion shall
not be withdrawn until the dispute is finally resolved.

(B) A member shall:

(I) Promptly notify a client of the receipt of the client's funds, securities, or other properties.

(2) Identify and label securities and properties of a client promptly upon receipt and place them in a safe deposit box or other place of
safekeeping as soon as practicable.

(3) Maintain complete records of all funds, securities, and other properties of a client coming into the possession of the member or law firm
and render appropriate accounts to the client regarding them; preserve such records for a period of no less than five years after final
appropriate distribution of such funds or properties; and comply with any order for an audit of such records issued pursuant to the Rules
of Procedure of the State Bar.

(4) Promptly pay or deliver, as requested by the client, any funds, securities, or other properties in the possession of the member which
the client is entitled to receive.

(C) The Board of Governors of the State Bar shall have the authority to formulate and adopt standards as to what "records" shall be maintained by
members and law firms in accordance with subparagraph (B)(3). The standards formulated and adopted by the Board, as from time to time amended, shall
be effective and binding on all members.

Standards:

Pursuant to rule 4-100(C) the Board of Governors of the State Bar adopted the following standards, effective
January 1, 1993, as to what "records" shall be maintained by members and law firms in accordance with subparagraph (B)(3).

(1) A member shall, from the date of receipt of client funds through the period ending five years from the date of appropriate disbursement
of such funds, maintain:

(a) a written ledger for each client on whose behalf funds are held that sets forth:
(9 the name of such client,
(ii) the date, amount and source of all funds received on behalf of such client,
(iii) the date, amount, payee and purpose of each disbursement made on behalf of such client, and
(iv) the current balance for such client;

Page4of 25
 (b) a written journal for each bank account that sets forth:
(0 the name of such account,
(ii) the date, amount and client affected by each debit and credit, and
(iii) the current balance in such account;

(c) all bank statements and cancelled checks for each bank account; and

(d) each monthly reconciliation (balancing) of (a), (b), and (c),

(2) A member shall, from the date ofreceipt of all securities and other properties held for the benefit of client through the period ending five
years from the date of appropriate disbursement of such securities and other properties, maintain a written journal that specifies:

(a) each item of security and property held;

(b) the person on whose behalf the security or property is held;

(c) the date of receipt of the security or property;

(d) the date of distribution of the security or property; and

(e) person to whom the security or property was distributed.

(Trust Account Record Keeping Standards as Adopted by the Board of Governors on July 11, 1992, effective January 1, 1993.)

Page 5 of 25
 LA WYERLAW 2003:
RECENTAUTHORITIES AFFECTING THE LAW OF LAWYERS
0 2003 By Ellen R. Peck. All rights reserved.

American Airlines, Inc., v. Sheppard, Mullin, Richter & Hampton (2002) 96 Cal.App.4th 1017, 117
Cal.Rptr.2d 685:

Held Attorney and law firm breached their fiduciary duty to a client-airline by accepting the role of FRCP 30(b)(6)
spokesperson in litigation for an aircraft broker, over the objection of the client airline.

Facts: In July 1990,dissatisfiedwith the performance of MD-11 aircraftconcerningits "payload capacity" and "range"which
American had purchased from McDonnell-Douglas (MDC) the previous year, American hired Lawyer and Law Firm to
advise it with regard to whether it had claims or remedies against MDC. Although Lawyer drafted a complaint against MDC
for fraud and breach of contract,in 1993,American settledwith MDC and never filed any action. Although Lawyer reviewed
some of MDC's letter agreements for American, neither he nor his firm were informed of the final resolution of the matter
or the settlement terms.

In May 1993,ADO, a Swiss aircraft broker, sued MDC in federal court about the deficiencies in MDl 1 aircraft purchased
by it. In early February 1994, MDC was ordered to produce to ADO some documentsrelated to American's dealings with
MDC regardingthe MD11. American asked Lawyer to advise it in connection with the documentrequest, and to oppose the
production of documents as appropriate. Lawyer spent 40 hours through July 1995 in this American engagement.

During February 1996,Lawyer also provided advice to American concerningfurther requests for documentproduction from
ADO, although American never became a party in ADO's action against MDC. In February 1996,after ADO was ordered
to designate a FRCP 30(b)(6) witness (whose function is to testify on behalf of a corporation or other organization as to
matters known or reasonably available to the organization,as to those matters described in the deposition notice), Lawyer
was asked by ADO's attorneys to serve in this capacity. American objected on the grounds that Lawyer could be
disqualifiedfrom doing future work for American in the ADO litigation,and that he couldreveal confidentialinformation and
refused to sign a proposed conflicts letter. Believing that he did not need American's permission to serve as ADO's
FRCP30(b)(6) deponent, Lawyer accepted the engagement provided that he would not discuss any information he learned
during the course of his representation of American.

On March 14,1996, Lawyer advised American that he had completed his work for American and was agreeing to be ADO's
FRCP 30(b)(6) representative, advising American that:

" MDC has completed its production of American Airlines related documents. Thus, I do not anticipate that I or

my firm will play any additional role in connection with that matter. . . .ADO has informed me that it has not served
a subpoena for the production of documents on American Airlines and that it does not intend to do so. Therefore,
I do not anticipate that either I or my firm will be required to represent American Airlines with respect to any
document dispute between it and ADO. I am not aware of any dispute that exists between ADO on the one hand
and American Airlines on the other, and should any such dispute arise in the future, ADO has waived its right to
dispute the involvement of me or my firm on behalf of American Airlines."

MDC also objected to Lawyer's service as ADO's FRCP Rule 30(b)(6) witness on conflict of interest grounds. At his
deposition,at which American's in-housecounselattended, MDC's questioningfocused on informationLawyer had previously
obtained from American. When Long asserted the attorney-clientprivilege as to all questions related to American and did
not disclose information, MDC terminatedthe deposition. A specialmaster denied ADO's motion for a protective order and
sanctions finding that Lawyer was an improper FRCP 30(b)(6)witness. The special master found that Lawyer's continuing

P a g e 6 o f 25
duty to keep American’sconfidences and privilegeswould interfere with his role as an effective ADO 30(b)(6) witness since
MDC would have a right to explore what informationLawyer received prior to his education from ADO and what information
he had from his prior representation of American, about which he would be prohibited from testifymg.

American sued Lawyer and Firm for legal malpractice and breach of fiduciary duty.

Proceduralposture: American rejected a CCP 998 settlementoffer ofalmost $60,000. After a jury verdict finding Lawyer
and Firm liable for breach of fiduciary duties and professionalnegligence, American appealedtrial court rulings, as relevant
here, granting a motion for summaryjudgment regarding its punitive damageclaims and awarding litigationcosts and expenses
to Lawyer and Firm because of American’s refusal of a CCP 998 offer. Lawyer and Firm filed a cross-appeal contending
that the evidence did not support the jury’s finding of breach of fiduciary duty. Division 4 of the Second Appellate District
affirmed the judgment and the post judgment award of costs.

Rationale: The Court held that Lawyer and Firm breached their fiduciary duties to American:

1. Rule 3-3 1O(C) was breached because Lawyer and Firm concurrentlyrepresented American and ADO with
respect to the same litigation in which the parties were adverse and that rule includes representation of a
party as a FRCP 30(b)(6) witness.

2. Rule 3-3 1O(C) and the duty of loyalty prohibited Lawyer from terminating his representation of American
respecting the ADO vs. MDC litigation in favor of representing ADO as a witness.

3. Rule 3-3 10(E) prohibits any side-switching in the same litigation without American’s informed written
consent. Even though American was never a party to the litigation, its interests in keeping information
confidential was adverse to ADO for the purposes of the “adversity” requirement of the rule.

4. Even though no confidential information was disclosed, rule 3-3 10(E) also prohibits the acceptance of
representation where the possibility of breach of confidence could occur.

The Court rejected the claim that punitive damages were appropriate. Breach of fiduciary duty or mere carelessness without
malice, fraud or oppression does not warrant punitive damages and there was no evidence of reprehensible, fraudulent,
conduct which was in blatant violation of law or policy or tortious conduct which constitutedextreme indifferenceto plaintiffs
rights which citizens should not have to tolerate.

The Court also affirmed the award of $126,022.79 in costs to Lawyer and Firm, since the jury awarded American damages
of almost $35,000 which was less than Lawyer’s and Firm’s CCP $998 offer of $59,200.

Annod Corp. v. Hamilton & Samuels (2002) 100 Cal.A~p.4‘~

1286,123 Cal.Rptr.2d 924:

Law firm, which had a lease for office space in which no partner was personally liable, stopped paying on the lease andthen
dissolved. After Landlord obtained a judgment against the defunct law firm, Landlord sued the former general partners
seeking payment of rent and alleging fraudulent conveyance of partnership assets. Landlord alleged that the partners
received a partnership draw instead of paying rent. The Court affirmed the trial court granting of summaryjudgment for the
lawyer-defendants, holding that they made a showingof good faith and reasonably equivalentvalue to defeat the Landlord’s
action based on Civil Code, section 3439.04, subdivision (a). The fact that the law firm in good faith chose to pay its debts
to its members and creditors to whom the partners were personally liable does not establish bad faith.

Armenta v. Superior Court (James Jones Company) (2002) 101 Cal.App.4th 525,124 Cal.Rptr.2d 273:

Page 7 of 25
* Facts: Armenta brought a qui tam action for violation of the California False Claims Act (Gov.Code, 8 12650 et seq.).
Armenta, on behalf of the Los Angeles Department of Water and Power (LADWP) and 164 other municipal water systems
sued Jones, Mueller Co., Tyco International ( U S ) , Inc. (Tyco), and Watts Industries, Inc. (Watts). She alleged that
defendants sold the water systems water valves, fittings and other metal water distribution parts that did not meet contract
specifications,containingsignificantly higher levels of lead and zinc which could potentially lead to higher lead levels in the
water supply and that the parts could degrade prematurely.

Effective January 1,1999, Armenta and LADWP executed ajoint prosecution agreement "to ensure that the exchanges and
disclosuresofplaintiffs'materials contemplated by the Agreement do not diminish in any way the confidentialityofplaintiffs'
materials and do not constitute a waiver of any privilege otherwise available." The agreementprovided for confidentiality
and work product privilege for communicationsamong counsel, any joint interviews of prospective witnesses, materials
received from other counsel orjointry obtained by any one counsel on behalf of the other counsel.

In April and May 1999, Richard Preston Maas (Maas) was retained as Armenta's and LADWP's joint expert on lead
leaching from bronze water distribution parts. He produced several reports and memoranda for LADWP concerning the
status and results of lead leaching tests he performed. These reports and memoranda, although paid for by LADWP,
addressed as well the concerns and views of Armenta's counsel.

Maas and Armenta's lawyer consulted extensively with two other experts that LADWP retained, Exponent, Inc. and
Stephen Rothenberg (Rothenberg). Exponent, Inc. analyzed the results of Maas's testing, conferred with counsel about
Maas's report, discussed litigation theories and tactics and prepared written reports. Rothenberg, a toxicologist, discussed
litigation theories and strategy with counsel but did not prepare written reports.

On October 5,200 1, LADWP moved for trial court approval of a settlement agreement with defendantsincludinga provision
by which LADWP would provide defendants all data, reports and studies generated or developed by or on behalf of the
LADWP and its retained experts or consultants in the action including all documents which reflect any analysis, opinions
andor data related to the LADWP and developed by or on behalf of the LADWP's experts or consultants. LADWP
believed that these materialswere exempt from thejoint prosecution agreement and that neitherpartyto thejoint prosecution
agreement could claim work product privilege.

Armenta disputed approval of the settlementunder these terms and asserted the work product privilege. The trialjudge ruled
that the expert documents were subject to the joint prosecution agreement but found that the Public Records Act required
a governmental agency settling a case to make public documents underlying the decision to settle and overruled Armenta's'
objections. Defendantsmoved for an order permitting them to use Maas's written reports "for any purpose", for production
of reports prepared by Exponent, Inc. and to interview and retain Rothenberg and Exponent, Inc. Armenta opposed the
motion and the court granted the motions.

Procedural posture: Armenta petitioned for a writ of mandate. Division 1 of the Second Appellate District granted a
peremptory writ of mandate commanding the superior court to set aside its order permitting defendants to use the expert
testimony, documents and reports.

Held: LADWP, as a party to a confidentialjoint prosecution agreement cannot waive Armenta's work product privilege
as to experts jointly retained by all plaintiffs to the agreement. Permitting Armenta to assert the privilege regarding
communications with experts not to be called as witnesses in the action, does not cause unfair prejudice to the defendants.
[Apparently, in the non-published part of the opinion, the Court concluded that the Public Records Act did not change this
result.]

Beck v. Wecht (2002) 28 Cal.4th 289, 48 P.3d 417, 121 Cal.Rptr.2d 384

Page 8 of 25
Held: Co-counsel do not owe a fiduciary duty to conduct their joint representation in a manner that does not diminish or
eliminate the fees each expects to collect and disapproved Pollack v. Lytle (198 1) 120 Cal.App.3d 93 1, 175 Cal.Rptr. 81.

Facts: Michael and Robert Stephens were injured when the pickup truck in which they were riding rolled over and burst
into flames. The Stephenses’ hired Attorney B to sue General Motors for their personal injuries. B associated ,to recover
for seriousinjuries the Stephenses sustainedwhen the pickup truck they were riding in rolled over and burst into flames. With
the Stephenses‘ consent, Beck associated Texas Attorney McB, experienced in prosecuting ”side-saddle” gas tank cases
against General Motors and Attorney W. In separate written agreements, the lawyers agreed that McB would advance all
costs, and Beck’s contingent fee would be split 53 percent for McB, 47 percent for By10% for W, to be shared pro rata from
McB’s and B’s shares.

During trial, General Motors offered a $6 million settlement. The night before closing arguments, the Stephensesinstructed
McB and W to settle the case. [By this time B was an observer because his relationship with McB had eroded.] McB was
to contact General Motors and discuss settlement,but never did so. After, the jury returned a defense verdict, the Stephenses
brought a legal malpractice action against McB and W for failing to carry out their settlement instructions, but not against
Beck. The settlement with McB was confidential; B was paid $224,000 out of this sum, in exchange for a release of his
claims against McB. W’s insurer paid $1.4 million to settle the Stephenses’claims.

B then filed an action against W for breach of fiduciary duty to recover the fee he would have received had McB and W
settled with General Motors for $6 million. W filed a cross-complaint for indemnity, breach of fiduciary duty, comparative
fault and breach of contract. American Equity intervened and sued B in subrogation, seeking contribution from B toward
the settlement amount it paid on W’s behalf. Both parties successfullymoved for summaryjudgment of the other’sclaims.

Proceduralposture: Both parties timely appealed; in B’s appeal, the Court of Appeal affirmed the trial court’s entry of
summary judgment in favor of W. In American Equity’s appeal, the Court of Appeal affirmed the trial court’s entry of
judgment in favor of B. The Supreme Court granted B’spetition for review; American Equity did not petition for review.

Rationale: Whether a lawyer may maintain a cause of action for breach offiduciary duty against a co-counsel for
malpractice handling their mutual client’scase reduced or eliminatedthe other’s fees is subject of a split of authority. Pollack
v. Lytle (198 1) 120 Cal.App.3d 93 1, 175 Cal.Rptr. 8 1 (Pollack)found such a fiduciary duty, but Joseph A. Saunders, P.C.
v. Weissburg& Aronson (1999) 74 Cal.App.4th 869,87 Cal.Rptr.2d 405 (Saunders ) rejected it as potentially inconsistent
with counsel’s paramount duty of loyalty to the client.

The Court observed that if co-counsel are dissatisfied with one another’s handling of a mutual client’s case because of the
effect upon their abilitytorecoup fees and costs, a number of conflictsmay arise resulting in inability which resulting inability
to protect the clients’best interests. To prevent prejudice or harm to the jointly represented client, “it is imperative that no
collateral duties arise to interfere with the duty of ‘undividedloyalty and total devotion’owed to the client.” For this reason,
the Court adopted the position of Saunders, supra, and disapproved Pollack. The Court adopted a bright-line rule refusing
to recognize such a fiduciary duty between and among co-counsel and affirmed the Court of Appeal affirmingthe trial court
granting of summaryjudgement against B for W, because there is no fiduciary duty between co-counsel as a matter of law.

Benasra v. MitchellSilberberg & Knupp, LLP(2002) 96 Cal.App.4th 96,116 Cal.Rptr.2d 644) reh.den.
(Mar 12, 2002), rev. den. (May 22, 2002): The fact that an arbitrator refused to disqualify an attorney from
representingan adverse party in an arbitrationproceeding does not bar a later legal malpractice action arising from the same
facts and circumstances.

Caressa Camille, Inc. v. Alcoholic Beverage Control Appeals Board (2002) 95 Cal.App.4th 829,115 Cal.Rptr.2d
847: While a corporations cannot appear in a court of law other than through licensed attorneys, in executive branch
administrativeproceedings, a corporationmay represent itselfby a non-attorney as permitted by administrativeregulations.

Page9of 25
Carroll v. Interstate Brands Corp. (2002) 99 Cal.A~p.4'~
1168,121 Cal.Rptr.2d 532:

In employmentdiscriminationaction,lead attorney's clients filed motion to expungelien assertedby former co-counsel.The

Court of Appeal held that trial court had no jurisdiction to determine or expunge the lien.

Carroll v. Superior Ct. (San Diego County Health and Human Services Agency) (2002) 101 Cal.App.4"
1423,124 Cal.Rptr.2d 891:

In an action by the Countyhealth and human servicesagency to terminateparental rights, the Court of Appeal held that public
defender, who sought to withdraw because of an actual conflict between and among the seven minor children jointly
represented, was required to be relieved.

Chambers v. Kay (2002) 29 Cal.4th 142,56 P.3d 645,126 Cal.Rptr.2d 536:

Facts: Attorneys Chambers and Kay maintained different law practices in San Francisco. They employed different office
letterheads; different offices and separate professional liability insurance policies and did not list each other as employees
or partners in any official documents.

In 1992 and 1993,Kay rented space and services from Chambers $200 for a monthly fee. Kay retained Chambers to assist
him with some work on a few cases and Chambers's staff regularly assisted Kay with case-related documents.

During 1992and 1993,Chambers served as cocounsel with Kay in a sexual harassment action against the law firm of Baker
& McKenzie, but after a dispute with Kay, Chambers was removed. Chambers had advanced costs and expenses of
$3,356.32.

Kay sent a letter to Chambers promising that in the event the case settled before depositions, Kay would receive 16.5% of
Kay's attorney's fees and thereafter, an "increase to 28%" and reimbursement of costs advanced. Kay sent a copy of the
letter to the client, Weeks, but never sought or obtained her written or oral consent to any fee splitting arrangement with
Chambers. (Id., pp. 539-540)

The Weeks case eventually generated a large award of compensatory and punitive damages for Weeks and a significant
award of attorney fees. Kay's lawyer then accused Chambers of failing to perform services in the case; that Chamber's
improper billing and accounting as well as changed circumstancesin the case was a basis for abrogationof any fee division
agreement between them. After Kay offered to compensate for $200 per hour for the total number of hours recited in
Chambers' billing, Chambers refused the offer. After Weeks' judgment was affirmed on appeal in 1998 and Kay received
his attorney fees, Chambers filed an action against Kay for breach of contract and one common count.

Procedural posture: The trial court granted summary judgment for Kay ruling that the fee splitting agreement was
unenforceable since there had been no compliancewith rule 2-200, Rules of Professional Conduct and that common count
for quantum meruit recovery was barred by the statutes of limitations (Code Civ. Proc., $$$$ 337,339). The Court of
Appeal reversed as to the statute of limitations barring the quantum meruit claim only. Chambers sought review which the
CaliforniaSupreme Court granted but Kay did not seek review of the Court ofAppealreversal. The SupremeCourt affirmed
the Court of Appeal judgment (not before the court was the reversal of the trial court's ruling that the common count for
quantum meruit was barred by the statutes of limitations [see fn. 111).

Rationale:

The CaliforniaSupremeCourtheld that rule 2-200 bars enforcement of a fee splitting agreementbetween two attorneys from
different firms unless the written disclosure and consent provisions are complied with. In so holding, the Court observed:

Page 10 of 25
 1. The scope of the rule is not limited to referral fees but covers any fee division between lawyers not in the
same firm.

2. Lawyers who are co-counsel are not “partners” within the meaning of the rule but still must comply.

3. Lawyers who engage in a “joint venture” to represent joint clients are not “partners” and must therefore
comply with the rule.

4. A lawyer from another independent practice that works with another lawyer for a contingent fee is not an
“associate” and therefore must comply with the rule.

5. The Court disapprovedSims v. Charness,supra, 86 Cal.App.4th 884,103 Cal.Rptr.2d 6 19, insofar as it was
inconsistent in holding that a lawyer from an independent law firm could “function as an associate” and
thereby obviate the need to comply with rule 2-200.

6. The Court also approved the test for determining whether or not one lawyer’s compensation for another
lawyer’s serviceswas exempt from rule 2-200’scompliance as set forth in State Bar Formal Opinion Formal
Opinion No. 1994-138:

a. The amount paid to the outside lawyer is compensation for the work performed and is paid whether
or not the law office is paid by the client;

b. The amount paid by the attorneyto the outside lawyer is neither negotiated nor based on fees which
have been paid to the attorney by the client; and

C. The outside lawyer has no expectation of receiving a percentage fee.

7. The Court held that a quantum meruit award could not be predicated upon an apportionment of the
contingent fee.

City National Bank v. Adams (2002) 96 Cal App.4th 315,117 Cal.Rptr.2d 125:

Facts: Bank loaned $150,000 to Adams secured by shares of stock purchased with the loan proceeds. The stock bore a
restrictive legend. When Adams could not repay the loan and when the price of the stock started falling, Adams requested
that Bank sell the stock. Bank was unwilling to sell the stock without an opinion that it could sell the stock in light of the
restrictivelegend. Adams suggestedthat Bank retain attorneyDavidson, which it did. Davidson gave Bank a written opinion
that it could sell the stock.

Bank sued Adams for repayment of the loan when the stock became almost worthless; Adams cross complained against
Bank alleging that Bank wrongfully delayed selling the stock. Adams was represented by Davidson in the litigation; Bank
moved to disqualify Davidson and the court granted the motion.

Held: Absent informed written consent of a former and a current client, an attorney cannot represent a party with interests
adverse to a former client when the two representations are in the same matter or where the current representation involves
work performed by the lawyer for the former client. In this case, there was substantial evidence that the attorney switched
sides in the same litigation and that the attorney actually received confidential information.

DCH Health Services Corp. v. Waite (2002) 95 Cal.App.4th 829,115 CaI.Rptr.2d 847:

Page 11of 25
 Facts: Hospital, Foundation and Husband and Wife sued Defendant and Organization for defamation in connection with
a a very public dispute in the Downey community concerning the operationsof the hospital and the foundation. Judge served
as a member of Foundation’s board at the outset of litigation, for two years. She resigned, married attorney K, who
thereafter commenced representation of Defendant. Hospital, Husband and Wife brought a motion to disqualify Attorney
K which the trial court granted on the basis that Judge received confidentialinformationwhile serving on the board; and that
because of the unique nature of the marital relationship,the prophylactic rule of disqualification should be applied to avoid
the appearance of impropriety.

Held: The appellate court reversed the disqualification order and remanded the matter.

Absent the existenceof a lawyer-clientrelationshipor otherrelationshipimposing a duty of confidentiality,anotherparty, such

as hospital or plaintiffs other than Foundation, are not entitled to seek attorney K’s disqualification.

The “appearance of impropriety”arising from the “uniquenature of the rnarkal relationship” is an inadequatebasis for the
order disqualifyrng an attorney. In considering disqualificationson the basis of the marital relationships between lawyers,
courts should start with the presumption that, unless proven otherwise,lawyerswill behave in an ethical manner. Societyhas
entrusted lawyers with confidences, and we should not assume that lawyers will violate these confidences when involved
in particularrelationships. A marital relationship or the appearance of impropriety, standing alone, are insufficientgrounds
for disqualification.

Equal Employment Opportunity Commission v. Sidley Austin Brown & Wood ( 7 Cir.
~ 2002 ) -F.3d
-[2002 WL 313875251:

Law Firm demoted 32 of its equitypartners to “counsel”or “seniorcounsel.” The EEOC investigated to determine whether
the demotions might have violated the Age Discrimination in Employment Act. Law Firm conceded that the demotions
constituted adverse personnel actions within the meaning of the antidiscriminationlaws. The EEOC sought discovery of
“coverage,” since the ADEA protects employees but not employers and the Commission would have to show that the 32
partners were employees before their demotion. It also sought information on discrimination.

Law Firm provided most of the informationrelating to coverage but no informationrelating to discrimination,assertingthat
demotions were due inadequate performance rather than age. Law Firm asserted that it had demonstrated that the 32
partnerswere ‘‘real’’partners, i.e. employersrather than employees,and that EEOC had no basis to continueits investigation.
EEOC obtained a district court order requiring Law Firm to comply in full. Law Firm appealed. On appeal, the EEOC also
sought information concerningwhether Law Firm was forcing other partners (who might be employees within the meaning
of the age discrimination law) to retire because of their age, contrary to the abolition of mandatory retirement by the age
discriminationlaw. Since the issue on appeal was whether Law Firm’s partners were employees not employers,both issues
were considered simultaneously.

The Court of Appeal for the Seventh Circuit vacated the district court order and remanded the matter with directions that
Law Firm be required to turn over all documents regarding coverage. The Court observed that the label within a firm of a
“partner” is not determinative;that a state law definitionof “partner”maynot be determinativeofwhether aperson is entitled
to protection under discriminationlaws as an “employee”but that the “functional test” of employer status, toward which the
EEOC is leaning, is too uncertain to enable law firms and other partnerships to engage in preventive law and to determine
any potential exposure to discrimination actions. However, the Court refused to rule on whether a partner is an employee
for discriminationpurposes until Law Firm finishescomplyingwith the coverage part ofthe subpoena. It held only that there
is enough doubt about whether the 32 demoted partners are covered by the age discrimination law to entitle the EEOC to
full compliance with that part, at least, of its subpoena.

Gafcon, Znc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 120 Cal.Rptr.2d 392, reh. den. (Jun
26,2002), rev. den. (Sep 11,2002)

Page 12 of 25
Facts : Insured sued Insurer and its captive, in-house law firm for declaratoryjudgment concerning the use of in-house
counsel to defend the insured.

Held: Use of in-house or captive firm lawyers appointed to represent the interests of the insured does not inherently involve
the unauthorized practice of law. Where Insurer introduced evidence demonstratingthat it did not profit by reimbursement
collected by insurer from other insurers sharing the costs of appointed in-house counsel, there was no unlawful fee splitting.
In order to prevail Insured’s claim of conflict of interest requiring appointment of Cumis counsel in a reservation of rights
matter, the Insurer must show that its in-house lawyers cannot impact coverage in conducting the defense and to make a
showinghow the issues presentedby the reservationofrights differs from or is extrinsicto the issues in the underlying action.
There was no present controversy against the in-house lawyers since they no longer represented the Insured.

Garretson, v. Harold I . Miller (2002) 99 Cal.App.4th 563, 121 Cal.Rptr.2d 317, rev. den. 9/11/02

Held: The appellate court affirmed the trial court grant of a judgment notwithstanding verdict against the Plaintiff, since
Plaintiff failed to prove that any part of the judgment would have been collectible.

Facts: Plaintiff received a severe electric shock when she came to work one winter morning and turned on the lights and
was severely injured. Plaintiff consulted with Attorney, employed by Law Corporation, who advised her she had a workers’
compensation claim. Law Corporationpursued the workers’ comp claim on plaintiffs behalf, but never advised plaintiff she
might have a viable personal injury claim against third parties. Law Corporation’ssole shareholderadvised Plaintiffthat the
workers’ compensation insurer had investigated the matter and would not have paid benefits had there been third parties
responsible for the incident, after the statute of limitations ran on the third party claim. Thereafter, Plaintiff hired a new
attorney; Plaintiff learned that Law Corporation should have filed a personal injury claim on her behalf and filed a legal
malpractice action against Law Corporation and its sole shareholder.

Proceduralposture: A jury found that Law Corporationwas negligent. The trial court granted Law Corporation’s motion
for judgment notwithstanding the verdict on the grounds that Plaintiff failed to present evidence that any judgment against
third parties was collectible. Plaintiff.appealed.

Rationale: California law requires that a legal malpractice plaintiff prove not only negligence on the part of his or her
attorney but that careful management of the case-within-a-case would have resulted in a favorablejudgment its collection.

To prevail over a motion for judgment notwithstanding the verdict, a malpractice plaintiff needs to prove that he could have
collected something from the defendant in the case-within-a-case, and it is that amount that is the proper measure of his
damages in the malpractice action. Judgment notwithstandingthe verdict for a malpractice defendant is appropriate only if
there is no substantial evidence that plaintiff could have collected at least some part of the underlying judgment.

Plaintiff failed to produce evidence that she could have collected a judgment from the tortfeasor in the case-within-a-case
which she proved. Although the trial court precluded Plaintiff from assertingclaims against two other tortfeasorsfrom whom
she could have proven a collectiblejudgment, Plaintiff did not appeal that ruling. Moreover, Plaintiff did not provide an offer
of proof that the manufacturer and the distributor would have been found liable or that either could have satisfied all, or part,
of a judgment.

The appellate court also rejected that a new tial rather than judgment notwithstandingthe verdict was appropriate. Plaintiff
had had the opportunitytopresent existing evidence on the issues presented; failed to present sufficient evidence; and should
not have a second bite at the apple. Plaintiffs failure to make a prima facie case by failing to offer evidence of collectability
was not due to any enoneous ruling by the tial court and thereforejudgment notwithstandingthe verdict was properly granted
to Law Corporation.

Gisbrecht v. Barnhart (2002) -U.S. -, 122 S.Ct. 1817:

Page 13 of 25
Facts: Three clients brought separate actions in federal district court seeking Social Security disability benefits. Their
lawyers had contingency fee agreements with them for 25% of the benefits awarded. The District Court did not give effect
to the contingency fee agreements but rather awarded fees (about one-half of the amount claimed) employing the “lodestar”
method. The Ninth Circuit affirmed. The United States Supreme Court granted certiorari.

Held: The Social Security Act (42 USC $406) permits petitions for fees and contingency fees to be paid form claimants’
recoveries not to exceed 25%. Section 406(b) can not displace contingency fee agreements for successful Social Security
claimants. However, Courts may review the attorney’s work to determine whether the contingency fee is reasonable,
including (1) reducing an attorney’s recovery based upon the character of the representation and the results achieved; (2)
reducing an attorney’s fees if the attorney was responsible for delay so that the attorney does not profit from the delay; or
(3) reducing the attorney’s fees if the benefits are large in comparison to the amount of time counsel spent on the case (and
a record of the hours spent in representation may be required to aid the court’s assessment of reasonableness).

Hambarian v. Superior Court (2002) 27 Cal.4th 826,118 Cal. Rptr.2d 725

Held: Assistance provided by a public agencykomplainant’sforensicaccountantdid not require disqualificationofthe district

attorney’s office.

Facts: City provided payments of more than $314,000 to a certified public accountantto provide forensic servicesto assist
the DistrictAttorney’s Officeconduct a criminalinvestigationof City’scomplaintagainst Trash Collectorfor financialfraud.
The trial court denied Trash Collector’s motion for recusal of the District Attorney’s Office.

Rationale: Penal Code $ 1424 provides that a “conflict of interest” necessary for disqualification of a prosecutor exists
whenever the circumstancesof a case evidence a reasonable possibility that the district attorney’s office may not exercise
its discretionary function in an evenhanded manner. In applying the statute there is a two-part test: (1) whether there a
conflict of interest and (2) whether the conflict is so severe as to disqualify the district attorney.

Even though the City’s payment of more than $3 14,000 for a certified public accountant’s forensic services in a district
attorney’sinvestigationof alleged financial fraud freed the district attorney’sauditor to work on other cases, it did not warrant
recusal of the action since (1) the district attorney was unaware of the total amount of the assistance until the recusal motion
was filed; (2) City was a public agency not a private victim, and (3) the court found that City’s assistance was not the nature
and magnitude likely to put the prosecutor’sdiscretionarydecisionmaking within the influence or control of City. The court
also held that providing a victim periodic briefing on the status of the investigationor sharing information does not warrant
disqualificationof the prosecution.

Home Insurance Company v. Zurich Insurance Company (2002) 96 Cal.App.4th 17, 116 Cal.Rptr.2d
583, rev. den. (May 22,2002)

Facts: Home Insurance paid its insured $222,466 as a result of an arbitrated UIM claim. Home sued Zurich (successor
in interest to Maryland Casualty) for fraud, declaratory relief, and subrogation or indemnity.

The underlying case involvedthe following: OnNovember 5,1993, Michelle Canfield,the daughterofMr. and Mrs. Fahmer,
while driving the Fahrner car, with their consent,negligentlydrove the car into the back end of Luana Pinasco’scar, injuring
her. Pinasco and her husband sued Canfield. They settled with Pinasco’s carrier (Maryland) for $15,000. Canfield’s
attorney (provided by Maryland) represented that the coverage was $15,000 (permissiveuser), knowing the coverage was
actually $500,000. Pinasco’scarrier (Home)paid the arbitrated amountto avoid a claim ofbad faith and initiated the lawsuit
against Zurich. Zurich’s demurrer was sustained by the trial court and Home appealed.

Page 14 of 25
Held: The litigationprivilege applies to any communication(1) made injudicial or quasi-judicialproceedings; (2) by litigants
or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or
logical relation to the action. This absolute litigationprivilege applied to counsel’smisrepresentationsconcerningpolicy limits
for permissive users.

Reliance on the representation of available policy limits by counsel for Maryland Casualty was unreasonable as a matter of
law because such representation was absolutely privileged under the litigation privilege.

The litigation privilege does not apply to an equitableaction to set aside a settlementagreement for extrinsic fraud. However,
the settlement could not be set aside since the misrepresentation was intrinsic fraud.

Leasequip, Inc,et al. v. Dappeer (2002) 103 Cal.App.4th 394,126 Cal.Rptr.2d 782:
A lawyer will be equitably estopped from asserting the statute of limitations as a defense in a legal malpractice lawsuit ifthe
lawyer advises a corporate client that the failure to comply with required corporate formalitieswill have no negative impact
upon the corporation; the corporation relies upon the lawyer’sadvice and the statute of limitations expires because of the
corporation’s failure to comply with corporate formalities.

Lynch v. Warwick (2002) 95 Cal.App.4th 267, 115 Cal.Rptr.2d 391:

Held: The actual innocense requirement for a criminal legal malpractice case applies whether seeking damages for a
wrongful conviction, a longer sentence or for attorney fees. (Lynch, supra, at p. 275.)

Facts: Criminal Defendant retained Lawyer to represent him in several matters for a fee of $17,500. Criminal Defendant
fired Lawyer the day before trial when Lawyer advised Criminal Defendant to plead guilty. Criminal Defendant paid
Successor Lawyer another $20,000 and ultimately pleaded guilty to kidnaping and assault with a deadly weapon. Criminal
Defendant then sued Lawyer for legal malpractice, breach of contract and breach of fiduciary duty alleging that Lawyer
failed to perform legal services for which he was retained by failing to interview key witnesses, seeking unnecessary
continuances, failing to adequately communicate with him.

Procedural posture: The trial court granted Lawyer’s motion for summary judgment on the grounds that Criminal
Defendant did not prove or allege his actual innocense. Criminal Defendantappealed on the grounds that his guilt or innocense
was not relevant, since he was not suing for being wrongfully convicted and since his cause of action was based on breach
of contract. Division 1 of the Fourth Appellate District affirmed the trial court ruling.

Rationale: A legal malpractice case arising out of a criminal proceeding requires proof of actual innocence as a necessary
element. ( Wiley v. County ofSan Diego (1998) 19 Cal.4th 532,545,79 Cal.Rptr.2d 672,966 P.2d 983 (Wiley ).) The court
rejected Criminal Defendant’s attempts to distinguish his case from Wiley.

First, contrary to Criminal Defendant’s assertions, his guilt or innocence is relevant in his causes of action. He claims that
he had meritorious defenses, that had Lawyer exercised proper care, skill and diligence, he would have received a proper
or reasonable defense with respect to the underlying criminal charges and he would not have been forced to fire Lawyer and
retain other legal counsel. Unless he shows that he was actually innocent,the fact that Lawyer could have conducted a more
thorough investigationor have communicatedmore with his client fails to establishthat Lawyer’snegligenceresulted in any
harm, including the need to retain a second attorney. (Lynch, supra, at pp. 272-273 .)

Second, the court rejected the claim that a breach of contract case not covered by Wiley.Under California law, a wrongful
act may constitute both a breach of contract and an invasion of an interest protected by the law of torts. Although Criminal
Defendant seeks a contractual type damage (out-of-pocket expenses for attorney fees) and labels his cause of action as a
breach of contract, this cause of action actually seeks recovery on a tort theory for Lawyer‘snegligence. Since the breach
Page 15 of 25
 of contract action sounds in negligence, Criminal Defendant may not maintain the action without a showing of actual
I innocence. (Lynch, supra, at pp. 273-274.)

Marriage of Friedman (2002) 100 Cal.App.4th 65,122 Cal. Rptr. 412

Facts: After marriage, Husband retained Lawyer to represent him in a post-nuptial agreement with Wife who was also a
lawyer. Lawyer advised Wife in two separate writings that he represented only Husband, not Wife, that it was a conflict
of interest to represent Husband and Wife concurrently in the post-nuptial matter and that she should get other counsel.
During the negotiationof the post-nuptial agreement, anotherattorneyin Lawyer’s firmjointlyrepresentedHusband and Wife
concerning an estate plan, in preparing simple wills and durable powers of attorney. Wife represented herself in the post-
nuptial agreement, which provided that each spouse would have no interest in the other’s business.

Duringthecourse of the marriage Wife built up a good law practice and Husband’s forensicconsultingbusiness was far more
successful than either spouse contemplated. During a subsequent dissolution of marriage proceeding, Wife argued that the
post-nuptial agreement was invalid and unenforceablebecause of the conflict of interest of the law firm at the time. The trial
and appellate courts found the agreement valid and enforceable.

Held: The law firm’sjoint representation of Husband and Wife concerning estate planning did not create a conflict of
interest that voided postnuptial agreement since Wife’s signatureon the post nuptial agreementwith the written disclosures
is tantamount to informed, written consent.

Marriage of Read (2002) 97 Cal.App.4th 476, 118 Cal.Rptr.2d 497:

In a divorce action,the Court of Appeal reversed a trial court order requiringhusband to pay attorneys’ fees directly to wife’s
former attorneys,even though the attorneyshad been discharged by wife prior to their submissionof a motion for attorneys’
fees.

McPhearson v. The Michaels Company (2002) 96 CaLAppAth 843,117 Cal.Rptr.2d 489

Note: This case creates a split of authority from Gilbert v. National COT. for Housing Partnerships (1999) 71
Cal.App.4th 1240, 84 Cal.Rptr.2d 204 (“Gilbert”).

Facts: Plaintiff sued the Michaels Companyfor employmentdiscriminationand harassmentand was represented by Attorney
R. Michaels brought a disqualificationmotion sinceAttorney R. had previously representedFormer Client in an employment
discrimination suit against Michaels which had resulted in a confidential settlement and Former Client was likely to be a
witness in Plaintiffs case. The trial court disqualified Attorney R based upon Gilbert.

Held: The Third AppellateDistrict disagreedthat this situationposes a conflict as suggested by Gilbert. Although the party
to a confidential settlementagreement is precluded from discussingthe terms and conditions of that agreement, it would be
irrelevant in a different action involving a different employee. Moreover, no confidentiality provision can prohibit the
testimony of a competent witness.

Where successive representation involves the representation of parties who are not actually adverse to one another, there
is no rule of automaticdisqualification. If a court’s disqualificationorder is unsupported by sufficientreason, it disturbsthe
current client’s right to counsel and constitutes an abuse of discretion.

Mickens v. Taylor (2002) 122 S.Ct 1237:

Page 16 of 25
In a death penalty case, on habeas corpus, the United States District Court for the Eastern District of Virginia, denied the
petition; the United States Court ofAppeals for the Fourth Circuit, reversed and the United States Supreme Court affirmed,
holding that, to demonstrate Sixth Amendment violation where trial court failed to inquire into potential conflict of interest
about which it knew or reasonably should have known, defendant had to establish that this conflict of interest adversely
affected counsells performance.

Mix v. Tumanjan Development Corp. (2002) 102 Cal.App.4th 1318,126 Cal.Rptr.2d 267:

Attorney-tenant, in propria persona, filed an action against against landlord for fraud, rescission, breach of contract,
declaratory relief, and an accounting, alleging he had been overcharged for rent. Landlord filed a cross-action against
attorney-tenant for breach of the written lease agreement. Attorney-tenant filed motion for attorney fees and costs, after
successfully obtaining a judgment and a ruling on appeal. The Court of Appeal held that pro se attorney-tenant, having
prevailed in action on lease with attorney fee provision, could recover reasonable attorney fees incurred for legal services
of assisting attorney, even if they did not appear as attorneys of record in action.

Musser v. Provencher (2002) 28 Cal.4th 274, 48 P.3d 408, 121 Cal.Rptr.2d 373

Facts: SGM, a family law practitioner, represented Wife in dissolution of mamage proceedings in 1992. After filing a
motion for spousal and child support, Husband declared that he had filed for bankruptcy resulting in continuance of all
proceedings. SGM retained DP, a bankruptcy specialist,to obtain relief from the automatic stay imposed by the bankruptcy
court. DP did not obtain relief from the stay, but advised SGM that further dissolutionproceedings could go forward without
violatingthe bankruptcycourt stay.This advice was contrary to well-established legal authority. Acting on DP’sadvice, SGM
continued with the hearing, although the family law judge warned of potential violation of the automatic stay.

Husband appealed. The Court ofAppeal reversed the support awards on the grounds they were void ab initio due to violation
of the automatic stay. Wife settled with Husband for less than the original support order because of potential punitive
damages for violation of the automatic stay.

Wife then sued SGM for malpractice and breach of contract; SGM cross-complained against Wife for past-due attorney
fees and costs. After DP and his insurance carrier refused to contribute to a settlement offer to Wife, SGM filed a cross-
complaint against DP for indemnity and settled the case with Wife.
Husband filed a complaint against SGM for her part in the violation of the automatic stay. After DP refused to contribute
to a settlement,SGM amended her cross-complaintagainst DP to allege these additional damages, and settled with Husband.

SGM’s settlement with Husband and Wife included$85,000 ($10,000 of which SGM’s direct payment of deductible) and
$20,000 in waived legal fees and costs. SGM and her insurer spent $62,000 in defending both malpractice actions.

The trial court eliminated virtually all of SGM’s and her insurer’s causes of action through pretrial motions and motion for
nonsuit.

Procedurafposture:SGM and her insurer appealed. The Court of Appeal reversed and remanded the judgment holding that
SGM was not barred from seeking indemnificationfrom DP but that the insurer could not pursue a subrogationclaim against
DP. The Supreme Court granted review.

Rationale: The California Supreme Court observed that the California Courts of Appeal have generally barred
indemnification between predecessor and successor counsel for three public policy reasons:

1. Preventing conflicts of interest between attorney and client: Potential indemnification actions potentially creates a
Page 17 of 25
 conflict of interest between the successor attorney and the client “because the greater the award the successor
. attorney managed to obtain for the client in the malpractice action, the greater the exposure to the predecessor
attorney in the indemnification action.” (Musser, supra, p. 281 .)

2. Protecting confidentiality of attorney-client communications: In defending against an indemnification action, a

successor attorney might be tempted to disclose confidential information.

3. Protectingthe client’s right ofchoice ofcounsel:The potential for an indemnificationactionmightinhibit successor

attorneys representation of clients because successor attorneys would be handicapped in defending against the
indemnification claim by his duty to maintain the confidentialityof the client communications.

The Court examined indemnityactionsbetween concurrentcounsel or co-counsel arising fiomjoint representationof mutual
clients againstthese public policies. It determinedthat an attorney’sself-interestshould not interferewith loyalty to the client
“justbecause the attorney,as ajoint tortfeasor,may face an indemnification ciaim if the client sues the attorney’s concurrent
counsel or co-counsel for malpractice. (Musser,supra, at p. 284.) Also, Wife expresslywaived the attorney-clientprivilege
regarding any case against DP. (Musser, supra, at p. 285.) The Court concluded that “the policy considerations that
underlie the rule barring indemnificationclaims in predecessor/successorcases” are not applicableto this concurrentcounsel
case.

With respect to SGM’s insurer’s claims for subrogation against DP, the Court observed that the subrogation against the
attorney was not an impermissibleassignment of a client’s legal malpractice action. It held that where the subrogor is not
the client,but the defendantattorneyheld liable to the client for negligenceat least partially attributableto concurrentcounsel,
the subrogation claim will stand.

Neal v. Health Net. Inc. (2002) 100 Cal.App.4th 831,123 Cal.Rptr.2d 202:

Held: N o disqualification warranted under existing law.

Facts: Lawyer represented Plaintiff 1 against Defendant Company in an employment discrimination action. During the
pendency of the action, Lawyer accepted representation by Plaintiff 2 against same Defendant in a separate employment
discriminationaction, after Plaintiff 2, a legal secretary,was fired after downloading a computer file containingprivileged
attorney-client informationrelated to the first litigation. Lawyer specifically advised Plaintiff 2 that she could not give him
any information that she might have regardingthe Plaintiff 1’scase; Plaintiff 2 indicatedthat she had no such information and
Lawyer denied receiving any information or documents from Plaintiff 2.

Proceduralposture: The trial court granted Defendant’s motion to disqualify Plaintiff 1’s lawyer on the ground that he
possessed confidential informationpursuant to Hull v. Celanese Corporation (2d Cir. 1975) 5 13 F.2d 568,569-571,and In
re Complex Asbestos Litigation (1991) 232 Cal.App.3d 572,585-603,283 Cal.Rptr. 732. Plaintiff appealed and Division
5 of the Second Appellate District reversed.

Rationale: The Court gave six factors upon which it based its reversal of the trial court’s disqualification as an abuse of
discretion:

1. Anumber of Californiadecisionsthat have concluded that mere exposureto confidentialinfomation ofthe opposing
party does not require disqualification. (See Fox SearchlightPictures, Inc. v.Paladino (2001) 89 Cal.App.4th 294,
302-304, 308-315, 106 Cal.Rptr.2d 906; Bell v. 20th Centuly Ins. Co. (1989) 212 Cal.App.3d 194, 198, 260
Cal.Rptr. 459; Maruman Integrated Circuits, Inc. v. Consortium Co. (1985) 166 Cal.App.3d 443, 448, 212
Cal.Rptr. 497; C o o k v. Superior Court (1978) 83 Cal.App.3d 582,592,147 Cal.Rptr. 915.)

Page 18 of 25
2. Even if confidential information was disclosed,there is no applicable legal standardthat supports disqualificationof
the lawyer in one case as a sanction for a client's actions in another.

3. Decisional authority has consistently concluded that a party cannot improperly disclose confidential informationto
one's own counsel in the prosecution of one's own lawsuit, since (1) the purpose of confidentiality, which is to
promote fulland open discussionsbetween attorney and client and (2) disclosureto one's own attorney ofconfidential
information does not justify disqualification. (Fox Searchlight Pictures, Inc. v. Paladino, supra, 89 CaLAppAth
at pp. 302-304,308-315,106 Cal.Rptr.2d 906; Bell v. 20th CenturyIns. Co., supra, 212 Cal.App.3d at p. 198,260
Cal.Rptr. 459; Cook v. Superior Court, supra, 83 Cal.App.3d at p. 592, 147 Cal.Rptr. 915.)

4. Disqualification would be an ineffectiveremedy because it would not prevent the party from giving new counsel the
information and then the adversary would be in the same position as before.

5. Sincethe purpose of a disqualificationmust be prophylactic, an attorneymay not be disqualifiedpurely as a punitive

or disciplinary measure.

6. The right of the employer to avoid unwarranted public disclosure of its confidencesmust be balanced against the
employee's right to maintain his or her lawsuit. Since client confidences can be protected from disclosure by less
drastic measures through (a) protective orders, (b) limiting the admission of evidence; (c) in camera proceedings;
(d) the use of sealed records; (e) payment of attorney fees and costs; and (0disciplinarysanctionsthrough the State
Bar of California in appropriate circumstances, disqualification is unwarranted.

The Court furtherheld that Lawyer should not be disqualified for violating rule 2- 100 of the State Bar Rules of Professional
Conduct [prohibitingcommunications with parties represented by counsel, since subparagraph (C)(3) specificallyprovides
that the rule does not apply to "[c]ommunications otherwise authorized by law." There is no violation here, since
communications of even confidential or privileged information with one's own attorney are authorized by law.

New Plumbing Contractors, Inc., v. Edwards, Sooy & Byron (2002) 99 Cal.App.4th 799, 121 Cal.Rptr.2d 472:

Insured-Contractor sued a lawyer, appointed by the insurance company, for legal malpractice and breach of fiduciary duty
because the lawyer defended and settled an underlying construction defect case without consultingInsured Contractor. The
Contractor alleged that its insurance costs increased as a result. The Court of Appeal affimed summaryjudgment for the
lawyer finding no causation,because the consent clause of the insurance policy permitted the Insurance Company to settle
the case.

Pangborn Plumbing Corporation, et al., v. Carruthers & Skiffgton, et al., (2002) 97 Cal.App.4th 1039,
119 Cal.Rptr.2d 416:

The Court of Appeal held that: (1) debtor had standing to challenge an order for a creditor's judgment lien against trust
account monies because the order interferedwith the debtor's abilityto continuetoretain counsel for remaining issues against
an accounting firm; (2) law firm's contractual lien for attorney's fees has priority over creditor's judgment lien; and (3)
accounting firm was liable for creditor's judgment lien.

Rojas v. Superior Court (2002) 102 Cal.App.4th 1062, 126 Cal.Rptr.2d 97:

In an action by apartment complex tenants against the complex's owners and builders for concealing the building's defects
and microbe infestation alleged to have caused the tenants to suffer health problems, the trial court denied tenants' motions
to compel production ofmaterialproduced by owners and builders in connectionwith pre-litigation mediation. The Court of
Appeal granted the tenants' petition for writ of mandate. While the mediation privilege protects the substance of the
negotiations and communicationsin furtheranceof mediation, it does not protect raw evidence. The Court furtherheld that
Page 19 of 25
.the mediation privilege protects information in the same manner as the work- product doctrine.
Petition granted; peremptory writ issued.

Stroock & Stroock & Lavan LLP v. Tendler (2002) 102 Cal.App.4th 318, 125 Cal.Rptr.2d 694:

Corporation sued Law Firm for legal malpracticeallegingthat in representingunderwriterof initial public offering (PO), it
had a conflict of interest when it later represented corporation's auditor. After Corporation's legal malpractice action was
dismissed following an adverse appellate ruling, Law Firm brought malicious prosecution action against Corporation's
principals and Corporation's Lawyers. The trial court granted summaryjudgment for Corporations principals and struck
complaintagainstCorporation's Lawyersbased on anti-StrategicLawsuit Against Public Participation (SLAPP) statute.Law
Firm appealed. The Court of Appeal held that while malicious prosecution claim was within ambit of anti-SLAPP statute,
the Law Firm sustained its burden in demonstratingthat it would prevail on malicious prosecution claim because there was
no probable cause for the malpracticeclaim and malice had been established. The Court of Appeal ruled that an interim trial
court disqualification order against Law Firm in the underlying action did not support probable cause to bring the legal
malpractice action. The Court further held that Corporation'sprincipalswere not liable for malicious prosecution since they
relied, in good faith on advice of counsel.
Affirmed in part, reversed in part, and remanded with direction.

Swat-Fame, Inc. v. Goldstein (2002) 101 Cal.A~p.4'~

613, 124 Cal.Rptr.2d 556:

In a malicious prosecution action brought by Employer against Former Employee and her Lawyers, the Court of Appeal
affirmed thejudgment re Lawyers, reversed as to Former Employee, and remanded to the trial court for furtherproceedings.
In granting summaryjudgment for the lawyers, the trial court properly found that the undisputed facts established that the
lawyers had probable cause to assert a fraudulent inducement claim since they relied upon the facts given to them by their
client. The court also held that the trial court erred in granting summaryjudgment for the former employee, since there were
triable issues of fact as to whether the former employee was entitled to rely on the advice of counsel defense to malicious
prosecution. There was also a triable issue as to whether the former employee fully and truthfully disclosed a store'sreason
for discontinuingits orders from the employer. The court furtherheld that (1) the trial court improperly weighedthe evidence
in determining no triable issue of fact existed as to whether the former employee knew the employer's allegedly false
statements were true when made and (2) the trial court erred in granting summaryjudgment for the former employee, since
there were triable issues of fact with respect to whether the former employee acted with malice.

Village Nurseries, L.P. v. Greenbaum (2002) 101 Cal.A~p.4'~

26, 123 Cal.Rptr.2d 555:

Held: In a legal malpracticeaction arising from client's liens on real property,the Court of Appeal held that: (1) defendants
failed to show they exercised informed judgment when they rendered professional advice to client, as was required to
establishjudgmental immunitydefense; (2) client's claims againstattorneyand law firms were barred by statute of limitations;
and (3) attorney's notices ofjoinder in the summaryjudgment motionsof other defendantswere not motions seekingjudgment
in attorney's favor and, thus, did not provide basis for grant of summaryjudgment in favor of attorney.

Facts: Village Nurseries, a landscapeand irrigation systems contractor,provided servicesto Baldwin BuildingContractors
(Baldwin) on its properties in Orange and San Diego Counties. After July 1995, when Baldwin filed for chapter 11
bankruptcy protection. its owners continued doing business as debtors in possession and Village Nurseries continued to
perform services on Baldwin properties. Village Nurseries recorded several mechanic's liens for amounts owed it for such
services.

In August 1995,VillageNurseries retained attorneyRaymond King of Coulombe, Kottke & King for legal advice regarding
the Baldwin bankruptcy and its ability to collect receivables for its services to Baldwin. In September 1995, Village
Nurseries sought advice about whether it should protect its mechanics liens by filing, through a service that filed 'Notices of
Perfectionof SecurityInterest' with the Bankruptcy Court per SectionCode 546." Title 11United StatesCode section 546(b)
Page 20 of 25
has been interpreted to provide "where state law requires 'commencement of an action to accomplish ... perfection, or
maintenance or continuation of perfection of an interest in property' and the action has not been commenced prepetition,
'perfection of such interest shall be maintained or continued, by giving notice within the time fixed by such law for ...such
commencement.' I' (In re Baldwin Builders (9th Cir.BAP 1999) 232 B.R. 406,410-41 1 .)

King advised Village that in his opinion, the BankruptcyCode Section 546 procedure would not be effectivebecause, in his
opinion, that section provided "a means for notifylng parties in a bankruptcy that a lien is claimed." King further advised
Village that the "only means to perfect a mechanic's lien is to file suit in the appropriate state court in the county where the
property is located."

In October 1995, Village Nurseries retained the Greenbaum lawyers to perfect Village's mechanic's liens. The Greenbaum
lawyers filed complaints to foreclose on the mechanic's liens in Orange and San Diego Counties, but did not serve or
prosecute the actions because of the automatic stay in Baldwin's pending bankruptcy action.

On January 26,1996, Village Nurseries filed a proof of claim in the Baldwin bankruptcy, listing its mechanic's liens with a
value of $1,128,733.76. Village Nurseries continued to perform work for Baldwin through May 1996. After Baldwin was
removed as debtor in possession in June 1996, a trustee was appointed.

VillageNurseries rehired King as its bankruptcy law specialistregardingthe protection of its mechanic's liens. In July 1996,
King and Coulombe, Kottke & King terminated their professional affiliation with each other; King set up his own practice
and Village Nurseries became solely King's client. Thereafter, on August 16,1996, King substituted in for the Greenbaum
defendants as counsel in the state foreclosure actions.

On August 30, 1996, the Trustee argued that Village Nurseries' failure to file a section 546(b) notice regarding its liens
rendered the liens unperfected. Judge Riblet granted the Trustee's motion regarding a transfer of property, ordered the
replacement liens for disenfranchised lienholdersbut declined to rule on the validityof VillageNurseries' liens since the issue
was not before the court and required additional legal research. That day, King advised Village Nurseries to immediately
refile its liens on the transferred properties so that King could file a section 546(b) notice, but the refiling was untimely.

In early September 1996, King discussed with Village Judge Riblet's statement doubting the liens' validity; suggested that
Village Nurseries consider obtaining another attorney and that it might explore King's potential malpractice. King also
reiterated his opinion that the previous steps taken to perfect the liens were appropriate and Village Nurseries would
eventually prevail.

On October 3,1996, King advised Village Nurseries in writing that the Trustee and the bankruptcy Judge were questioning
the validity ofthe liens. Thereafter, Village Nurseriesreceived some payments on some of its liens but received no payments
on the transferred properties or replacement liens. Its motion to compel the Trustee to give it replacement liens which the
trial court denied in September 1997onthe ground that Village Nurseries' liens were invalid because Village Nurseries failed
to serve a section 546(b) notice required to perfect its mechanic's liens on the transferred properties. The trial court's ruling
was affirmed on appeal in March 1999. On January 16, 1998, Village Nurseries filed its complaint for legal malpractice
against King, the Greenbaum lawyers and the Coulombe law firm. ,

Proceduralposture: The Greenbaum and Coulombedefendantsbrought motions for summaryjudgment on the grounds of
judgmental immunity and statute of limitations. King filed a notice of joinder in these motions. The trial court granted
summaryjudgment on the grounds ofjudgmental immunity and Village Nurseries appealed. The Court of Appeal affirmed
the summaryjudgment as to the Greenbaum and Coulombe defendants holding that the legal malpractice action was barred
not byjudgmental immunitybut by the statute of limitations. It reversed thejudgment as to King, holding that since no motion
with supporting evidence had been filed.

Rationale:

Page 21 of 25
 Thejudgmental immunity doctrine:
*
The judgmental immunity doctrine applies only if the following two elements are met:

1. The unsettled state of the law that was the subject of professional advice and

2. The attorney's efforts to perform "reasonableresearch in an effort to ascertain relevant legal principles and
to make an informed decision as to a course of conduct based upon an intelligent assessment of the
problem."

The Court of Appeal held that the trial court erred in findingjudgmental immunity even if the state of the law was unsettled
about the effective means of perfecting a mechanics lien in a bankruptcy case since the lawyer defendants did not
demonstrate the second element. The lawyer defendants produced no evidence that they had conducted any research or
made any effort to ascertain the relevant legal principles at the time to make an intelligent assessment of the problem,
contemporaneous with the advice King and Greenbaum gave to Village Nurseries. Therefore, even though the state of the
law may have been unsettled, the lawyers' failure to meet the second prong of the test results in loss of this theory of a
defense.

Statute of limitations:

The Court of Appeal held that summary judgment should have been granted in favor of the Greenbaum and Coulombe
lawyers, since Village Nurseries was aware that it had sustained injuries in September 1996 and did not file its legal
malpractice more than one year later in 1998.The action was not tolled since Greenbaum and Coulombe ceased to represent
Village Nurseries in July 1996.

Joinder Was Inadequate:

The Court of Appeal reversed the summaryjudgment as to King on the basis that King had filed a notice ofjoinder but did
not support his motion with affidavits or other discovery materials and a statement setting forth all material facts the moving
party contends are undisputed. Because King had not filed a motion for summary judgment or a separate statement in
support of such a motion, it was inadequate to be adjudicated as a summaryjudgment motion. The Court of Appeal also
refused to decide whether, if one were filed, King would prevail.

Walker v. San Francisco Housing Authority (2002)lOO Cal.App.4th 685, 122 Cal.Rptr.2d 758,
petition for review filed (Sep 04,2002):

Facts: Plaintiff, employed as ajourneyman painter, filed an action the San Francisco Housing Authority (SFHA) and JT,
a former SFHAemployee for sexual harassment and sex discrimination; defamation; invasion ofprivacy; interferencewith
prospective economic advantage; negligent hiring, retention and supervision; assault; and trespass to property.

During the litigation, Plaintiff brought numerous motions for discovery abuse against SFHA which were granted. When
SFHA continued to comply with court orders, Plaintiffbroughtterminatingsanctionswhich were granted. SFHA's answer
was stricken and after a prove up hearing, the Court entered a default judgment. Plaintiff was awarded $1,611,979.60.

SFHA's motion to set aside the default and default judgment pursuant to CCPg 473@), was denied on the ground that
SFHA's counsel and its representatives were negligent.

Held: On appeal, the Court affirmed the default judgment and the order denying SFHA's motion to set aside the default
judgment. In the unpublishedpart of the opinion, the Court discussed why the lower court rulings would be affirmed. In the
published part of the opinion,the Courtheld that the commissionerproperly acted upon the motion and defaultjudgment, since
Page22of 25
SFHA had stipulated to jurisdiction to hear the motion as a temporary judge.

Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 74 Cal.Rptr.2d 510: Ajury found that a former secretary
had been sexually harassed his secretary by an attorney and that the law firm at which she had worked had disregarded her
safety. The jury awarded her $50,000 in compensatory damages from both the attorney and the firm.The jury further
awarded Weeks $225,000 punitive damages from the attorney and $6.9 million punitive damages from the law firm. The
latter award was reduced to $3.5 million by the trial court. The court awarded Weeks $1,847,437.86 in attorney fees and
expenses. This figure was calculated, in part, by fixing reasonable hourly fees for each legal professional representing
Weeks, multiplying those figures by the number ofhours reasonably devoted by the respective professional to the case, and
multiplying that amount by a factor of 1.7.

The judgment of compensatory damages and as to the award ofpunitive damages was affirmed. While Civil Code, $3294
(a) provides that punitive damages may be awarded only upon a showing that the defendant was guilty of oppression, fraud
or malice, subdivision (b), permits awards of punitive damages against employers without an additional finding that the
employer engaged in oppression, fraud or malice. Civil Code 9 1021.5, does not authorize an award of attorney fees in an
action brought by a single individual to redress her own economicinjury. The Court of Appeal found that attorney fees were
properly awarded under the Fair Employment and Housing Act (FEW), Civil Code section 12900 et seq., but held that the
trial court's enhancement of those fees through the use of a multiplier of 1.7 was unsupported by the facts.

White v. Leuinson & Lieberman (2002) WL 3 1421097: In amalicious prosecution action, the trial court sustained
defendant's demurrer without leave to amend. In Plaintiffs appeal, the Court of Appeal held that: (1) cause of action for
malicious prosecution accrued when Court of Appeal issued remittitur in underlying action, and (2) defendant was entitled
to attorney fees for appeal of denial of strategic lawsuit against public participation (anti-SLAPP) motion.

Zamora v. Clayborn Contracting Group, Inc. (2002) 28 CalAth 249, 47 P.3d 1056, 121 Cal.Rptr.2d
187

Facts: Plaintiff sued Defendant for breach of contract. Plaintiffs Attorney's Legal Assistant typed the word "against"
instead of the phrase "in favor of' in a settlement offer resulting in a mistaken CCP$998 offer to settle Plaintiffs claim for
a judgment against Plaintiff for $149,999. The opposing party jumped at the offer.

Shortly thereafter, after discovering the mistaken offer, Plaintiffs counsel moved the court to set aside "thejudgment based
on mistake, inadvertenceand excusableneglect" pursuant to CCP$473, subd.(b). In support of the motion, Plaintiffs counsel
declared that he instructed his legal assistant telephonicallyto prepare a document offering to settle for a judgment against
Defendant for $149,999; that he authorized his legal assistant to send the document with his stamped signatureeven though
he had not reviewed it, because he was out of town and time was of the essence. The legal assistant generally corroborated
Plaintiffs story and claimed that she "mistakenlytyped the word 'against' as opposed to the phrase 'in favor of [Plaintiff]. I 1

Proceduralposhrre: The trial court granted the motion, finding that Plaintiffs counsel made a ministerial or clerical error
and the Court of Appeal affirmed. The Supreme Court granted review.

Rationale:
The Court held that reliefpursuant to CCP$473(b) is applicableto both involuntaryjudgments as well as voluntaryjudgments
such as a CCP $998 offer.

The Court further held that the trial court applied the section properly to this situation, as follows:

The standards for section 473 relief are (1) relief is permitted only from attorney error "fairly imputable to
the client, i.e., mistakes anyone could have made"; (2) conduct falling below the professional standard of
Page 23 of 25
 care is not excusable since that would eliminate the express statutory requirement of excusability and
t effectively eviscerate the concept of attorney malpractice; and (3) the party seeking relief under section
473 must also be diligent.

The trial court reasonably concluded that the mistake made by Plaintiffs counsel was excusable since the
accidental substitution of the word “against”instead of the words “in favor of is a clerical or ministerial
mistake that could have been made by anybody. The Court observed that counsel’s failure to review the
documentbefore sendingit out was imprudent,but concludedthat the imprudencedid not render the mistake
inexcusable. Finally, Plaintiffs counsel was diligent in pursuing relief.

2002 ETHICS OPINIONS

CAL BAR FORMAL ETHICS OPINION NO. 2002-158: The creation of a physically separate “firm” within a public
office charged with indigent criminaldefense, so that different ““firms”” represent different defendants,can avoid conflicts
arising from the representation of multiple defendants, but only with adequate safeguards including maintaining the
separateness of the two firm^.'^''
Does the creation of a physically separate “firm”within a public office charged with indigent criminal defense avoid ethical
issues arising out of the representation of multiple criminal defendants?

CAL BAR FORMAL ETHICS OPINION NO. 2002-159:

ISSUE: Is it ethically permissible for a lawyer to: (1) to tell a potential client of the possibility of financing the legal
representation by taking out a mortgage loan on the client’sreal property and (2) to refer the client to an independent broker
who might arrange the financing,where the resulting loan funds are placed in an escrow account which is not controlled by
the lawyer and from which the funds are disbursed to the lawyer for fees and costs for work performed on behalf of the
client?
DIGEST: A lawyer may refer a potential client to a broker for a real property loan to pay for attorney"^ fees and costs so
long as the lawyer does not provide legal representationor receive compensation with regard to the referral or the resulting
loan or escrow transactions, and has no undisclosed business or personal relationship with the broker.

CAL BAR FORMAL ETHICS OPINION NO. 2002-160:

ISSUE: 1. What ethical constraints govern an attorneywhose client has conferred upon her authority to settle,
without instituting litigation, claims of the client for specificpercentages of the amounts claimed,
when the client has disappeared?

2. What ethical constraints govern the attorney’sright to collect legal fees from settlement proceeds
when communication with the client is not possible?

DIGEST: 1. An attorneywho has not been specificallyauthorizedby a client to sesttle a claim has no implied or
apparent authority to bind a client to any settlement. If the client has authorized the attorney to
settle specific claims without instituting litigation, to receive the settlementproceeds, and to take a
percentage of the recovery in payment of her fees, the attorney still has a n ethical obligation to
represent the client competently and to avoid reasonably foreseeable prejudice to the client.
Depending on the circumstances,the attorney may have an obligation to make reasonable efforts
to locate the client and communicate with the client before proceeding with the settlement. If the
Page24of 25
 settlement offer falls outside the attorney’s authorization, the attorney does not have a duty to file
an action to avoid the running of the statute of limitations.

2. If the settlement is permitted by the terms of the client’s authorization, if the fee agreement is
enforceable,and if the client’s authorizationto the attorneyincludes endorsing the client’s name on
checks paid in settlement of claims, then the proceeds must be placed in the attorney’s client trust
account and attorney’s fees promptly withdrawn from the account.

Page 25 of 25
 SPEAKER'S BIOGRAPHY

Ellen Peck is a past chair and immediate past advisor of the State Bar's Committee on
Professional Responsibility and Conduct. Between 1989 - 1995, Ms. Peck served as one of nine
judges appointed by the California Supreme Court to serve on the State Bar Court, and served as
Assistant Supervising Judge between 1992 and 1993. She has served as Ethics Counsel to the
State Bar's and the ABA's ethics committee, in addition to serving as the former Director of the
State Bar's Office of Professional Standards. As office diiector, Judge Peck implemented the
State Bar's toll free Ethics Hotline and was managing editor of the California Compendium on
Professional Responsibility. She was a member of the State Bar Commission for the Revision of
the Rules of Professional Conduct from 1986-1989 and currently serves on that Commission; an
advisor to the Bar's Consortium on Competence; a member of the Statewide Committee on
Professionalism and Public Action, the Committee on Evaluation of Professional Standards, and
the American Criminal Justice Committee on Ethical Standards. She has served as chair of the
Los Angeles County Bar Association's Committee on the State Bar, as well as a member of that
bar's Committee on Professional Ethics and Responsibility. She is a co-author of The Rutter
-
Group's California Practice Guide Professional Responsibility. She also is a visiting
professor at Concord University School of Law teaching Professional Responsibility.