Current and Timely Information and Analysis About
California Attorney Ethics in Practice

California Supreme Court Overturns Jewel Doctrine

The Jewel doctrine is no more in California.  In Heller Ehrman v. Davis Wright Tremain, the California Supreme Court held that a dissolved law firm has no property interest in fees generated after dissolution for hourly matters that were in progress when the firm dissolved.  The immediate implication is that a lawyer who leaves a dissolved law firm and takes clients to a new law firm does not have to give back profits earned on those matters at the new firm.  The case also has significant implications for partners departing even when the firm is not dissolving, since it confirms that client matters are not the property of the firm.

Jewel Doctrine Will be Revisited by California Supreme Court

The California Supreme Court is expected shortly to issue a decision in its review of Jewel v. Boxer, the long-standing and besieged case that stands for the proposition that a dissolved law firm has a right to recover profits for matters that departed partners take from the failed firm, absent an agreement otherwise.  The Court heard oral argument in December in the case, which reached the Court as a certified question from the 9th Circuit in the bankruptcy case of Heller Ehrman LLP:  “Under California law, what interest, if any, does a dissolved law firm have in legal matters that are in progress but not completed at the time the law firm is dissolved, when the dissolved law firm had been retained to handle the matters on an hourly basis?”

Jewel‘s so-called Unfinished Business rule, under which a law firm has a right to recover profits from matters at a dissolved law firm that transfer to new firms, has been attacked and upheld, embraced and distinguished, almost in equal measure, since it was issued.  Its application to hourly rate work has never been confirmed.  Some significant things have changed since Jewel was decided by the Court of Appeal in 1984.  California has since adopted the Revised Uniform Partnership Act; Jewel‘s reasoning is based in part on provisions of the then-applicable Uniform Partnership Act.  The Jewel partners did not have a written partnership agreement.  Today, many law firm partnership agreements contract around the Jewel question of who gets paid for unfinished business (remarkably, of course, many law firms still operate without a written partnership agreement).More

The Legal Ethics of Lawyer Wellness

The recent report of the ABA’s National Task Force for Lawyer Well-Being, entitled “The Path to Lawyer Well-Being: Practical Recommendations for Positive Change,” is striking for several reasons.  It’s the detailed description of the scope of the crisis in lawyer wellness, examined in a comprehensive analysis.  It’s the tone of the report–an urgent call to action–which is rare for any ABA committee.  But perhaps most striking is the fact that, for anyone who is a lawyer or who knows or works with lawyers, the scope of the problem and the crisis it has created matches familiar experience.  Addiction, anxiety, stress, depression, and suicide are familiar to the profession and have been for some time, which makes the report required reading for any lawyer.

Significantly, the report makes the compelling point that “lawyer well-being influences ethics and professionalism,” directly linking a lawyer’s wellness to the affirmative ethical duties of competence, diligence, truthfulness, communications, and relationships with people other than clients.  This highlights the ethical responsibilities of lawyers, law firms, law schools, regulators, judges, and bar associations to “build a more sustainable culture” for the legal profession in a five-step call to action:

“(1) Identifying stakeholders and the role that each of us can play in reducing the level of toxicity in our profession.
(2) Ending the stigma surrounding help-seeking behaviors. This report contains numerous recommendations to combat the stigma that seeking help will lead to negative professional consequences.
(3) Emphasizing that well-being is an indispensable part of a lawyer’s duty of competence. Among the report’s recommendations are steps stakeholders can take to highlight the tie-in between competence and well-being. These include giving this connection formal recognition through modifying the Rules of Professional Conduct or their comments to reference well-being.
(4) Expanding educational outreach and programming on well-being issues. We need to educate lawyers, judges, and law students on well-being issues. This includes instruction in recognizing mental health and substance use disorders as well as navigating the practice of law in a healthy manner. To implement this recommendation effectively, more resources need to be devoted to promoting well-being.
(5) Changing the tone of the profession one small step at a time. This report contains a number of smallscale recommendations, such as allowing lawyers to earn continuing legal education (CLE) credit for well-being workshops or de-emphasizing alcohol at bar association social events. These small steps can start the process necessary to place health, resilience, self-care, and helping others at the forefront of what it means to be a lawyer. Collectively, small steps can lead to transformative cultural change in a profession that has always been, and will remain, demanding.”

Your Ethical Duties to Plan for Law Practice Succession

Unlike some states, California does not have specific legal ethics rules that require attorneys to adopt a law practice succession plan, there are several Rules of Professional Conduct that impose equivalent duties to plan.  It’s not always easy to think about circumstances that could render you unable to continue practicing law–accidents, illness, disability, planned or unplanned retirement, or untimely death– but these events do occur.  Under any of these circumstances, your clients’ interests, as well as your own, must be protected.

Every California has a duty of competence under CRPC Rule 3-110, which means that you have an obligation to take reasonable steps to ensure that client matters will not be neglected in the event of death or disability.  Unexpected events could have serious impacts on your clients.  Important client matters, such as court dates, statutes of limitations, or document filings, could be neglected if you fail to plan for these contingencies.  California attorneys have a separate duty to keep clients informed of significant developments, under CRPC Rule 3-500.  This rule has been interpreted to impose duties on attorneys to advise clients regarding change of employment, and generally also implies a duty to plan for client communications in the event of your death or incapacity.  You also have a fiduciary duty and duty of loyalty to your clients, which means you must protect your clients’ interests in various contingent circumstances, including your death or incapacity.   CRPC Rule 3-700, related to termination of employment, provides an analogous scenario.  That rules requires attorneys to take reasonable steps to avoid reasonably foreseeable prejudice to client related situation in which they will no longer be able to represent client.

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Navigating California’s Narrowing Attorney-Client Privilege

Two recent cases suggest that the attorney-client privilege in California is narrowing from its traditional robust scope. In LA County Board of Supervisors v. Superior Court (ACLU), the California Supreme Court held that law firm invoices are not categorically privileged, and may be subject to disclosure depending on the content of the invoices, and the active status of the underlying matters. In Wadler v. Bio-Rad Laboratories, a Magistrate Judge in the Northern District of California held, among other things, that the Sarbanes-Oxley Act preempts California’s rules regarding attorney-client privilege.

Neither of these cases, in and of itself, redefines the scope of California’s attorney-client privilege. Either case could be limited to its own facts or procedure, which are quite distinct situations.  But taken together these cases suggest that California lawyers and firms need to be aware of the significant potential limitations on the attorney-client privilege, and how it may continue to evolve:

  1.  Law Firm invoices are not automatically privileged.  It is a not a departure from established rules and cases to say that communications are not automatically protected from disclosure based on the attorney-client privilege. The privilege is not a blanket protection that captures everything that lawyers send to their clients. The fact that law firm invoices are not themselves categorically protected shines a new light on the limitations of privilege, however. Most lawyers and law firms do not anticipate that the information in their invoices to clients could be subject to disclosure, and they act accordingly. Based on the ACLU case, it is a good idea to evaluate what information you convey on invoices and whether it would be privileged. Don’t draft client invoices with the expectation that they are categorically privileged.
  2. Not everything in a law firm invoice is privileged.  It stands to reason that not everything on a law firm invoice is privileged.  It is hard to see, for example, how the ZIP code for your office is privileged. It’s also not clear why the amount you pay for copies would be privileged, for example. But information about what you are copying would tend to suggest your legal strategy and tactics, your case staffing, and even your cost limitations, all of which likely would be, or at least arguably, should be, privileged. The Court in ACLU asserted that the privilege still would protect information that “lies in the heartland of the attorney-client privilege,” whatever that means. But gone are the days when lawyers could bill clients with a generic reference like “For legal services rendered.” Today, by client demand, invoices tend to be extremely detailed.  Don’t draft client invoices with the expectation that each of those details will be privileged.
  3. The scope of privilege may change when the active status changes.  Perhaps the most potentially troubling aspect of the ACLU case is the concept that the privilege for law firm invoices can change, depending on whether the matter is active, dormant, or closed. The scope of this concept is not yet clear, but the problems it could create are evident. Assume that your firm defends a series of class actions of a particular type, say wage-and-hour cases, for a particular client. Based on the ACLU case, could a litigation opponent successfully request your invoices for past, closed cases? Those invoices to clients, even though for closed matters, likely lay out your strategy and tactics for defending that particular type of case for that particular client, or type of client, in great detail. It is not difficult to imagine a scenario where the concepts of the ACLU case become a tool to subvert the protections of the privilege, through closed cases, even for the “heartland” information.
  4. Privileges will be evaluated case-by-case. Both the ACLU and Bio-Rad cases function as good reminders that privilege determinations are quite situation-specific, and will be evaluated that way. Lawyers and law firms should not assume that any category of communication will be per se protected by the privilege.
  5. California’s rules may not govern the privilege analysis. The Bio-Rad case illustrates the important point that the scope of the attorney-client privilege may not be determined under California rules or California law. Federal privilege may apply, or the particular privilege considerations of the federal statute at issue, like the whistleblower statute in Bio-Rad, and generally may be less robust.