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Archive for the ‘California LPL’ Category

A Quick Summary of the Ethics Rules on Discrimination for California Lawyers

Posted on: April 20th, 2021

By: Greg Fayard

For decades, the California State Bar had an anti-discrimination ethics rule applicable to lawyers. That rule prevented lawyers from unlawfully discriminating in hiring, promoting, firing, or accepting or not accepting cases based on certain protected characteristics—the big ones that people thought about in the early 1990s: race, sex, religion, sexual orientation, national origin, disability. However, for the State Bar to get jurisdiction over a lawyer for being discriminatory, a court had to first find the lawyer engaged in unlawful discrimination.

That never happened, so this rule was never enforced.

The current discrimination ethics rule addresses the prior jurisdictional gap, and now confers original jurisdiction upon the Office of the Chief Trial Counsel of the State Bar of California to investigate and prosecute discrimination claims and make recommendations on disciplinary orders to the California Supreme Court.  California’s ethics rule says lawyers shall not discriminate, harass, or retaliate in not taking a case, ending representation of case, or not hiring, or firing someone based on protected characteristics. These protected characteristics went from seven to 19 and now include genetic information, military status, veteran status, color, marital status, among others. There is no longer a requirement that a court first find the lawyer engaged in discrimination before this rule is triggered.

So in summary, rule of Professional Conduct 8.4.1, says a California lawyer cannot discriminate based on the 19 characteristics when:

  1. Representing,
  2. Terminating, and
  3. Refusing to accept a case.

As to a lawyer’s employees or potential employees, the lawyer cannot discriminate based on the 19 characteristics when:

  1. Hiring
  2. Refusing to hire or
  3. Firing.

If a lawyer is charged by the State Bar for violating this rule, the lawyer has to notify the California Department of Fair Employment and Housing, and the U.S. Department of Justice or federal Equal Employment Opportunity Commission of the disciplinary charge, depending on the type of charge. Given the breadth of civil state and federal discrimination law, this rule was controversial, passing the State Bar Board of Trustees and going to the California Supreme Court for approval on a 7 to 6 vote. In any event, civil liability is not the only penalty for the discriminatory lawyer. Now discriminatory California lawyers can be disciplined by the State Bar.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Are Non-Refundable Lawyer Retainers Legal in California?

Posted on: January 26th, 2021

By: Greg Fayard

Joe wants to hire Bill, a California lawyer, to defend a breach of contract case. Bill agrees to defend Joe but will only take a $10,000 non-refundable retainer. Is this legal? No. 

Under Rule 1.5(d) of the Rules of Professional Conduct that govern California lawyers, non-refundable retainers are now permitted in a very limited circumstance—the rare “true retainer” situation. The “true retainer” is from an earlier time when there were fewer lawyers and a client needed to secure a lawyer’s services for a specified time in a specific matter.

True retainers are most often used by some lawyers who contract as general counsel for their clients. For example, in exchange for being on call 24/7 to handle accident emergencies for a trucking company, a true retainer arrangement is permissible where the trucking company would pay the lawyer, say $5,000, at the first of the month to secure the lawyer’s availability for the upcoming month. This “true retainer” ensures the lawyer’s immediate availability for that month.

In this situation, non-refundable legal fees are permitted so long as disclosed and agreed to in writing by the client. Otherwise, in our example, Bill cannot accept a non-refundable retainer to defend Joe’s breach of contract case. 

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

California Lawyers Who Ignore Lienholders Do So At Their (Disciplinary) Peril

Posted on: October 20th, 2020

By: Greg Fayard

In personal injury law, California lawyers regularly must deal with medical liens. For example, lienholders have certain rights to proceeds from a settled case and expect to be paid. In the past, if a California lawyer ignored or mishandled a medical lien on personal injury proceeds, the lienholder could pursue the attorney for the amount owed.

But now, under Rule 1.15 of the Rules of Professional Conduct, California lawyers can now be disciplined for ignoring or mishandling lienholder rights. That is, money from a California lawyer’s client trust account can only be released to the client or a lienholder if there is NO dispute as to who gets what.

Until the dispute over the personal injury funds is resolved, California lawyers have to keep the money in their client trust account. If a lawyer does not do this, and disburses funds that were supposed to go to a lienholder, the lawyer can now be disciplined by the State Bar. This means a California lawyer who is not careful with handling medical liens now is subject to both civil and disciplinary exposure.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Avoiding Implied Attorney-Client Relationships with Individual Members of Small Companies

Posted on: September 15th, 2020

By: Jennifer Weatherup

Where an attorney represents a partnership or entity, there is the potential for him or her to create an implied attorney-client relationship with its individual members, imposing a duty of care that the attorney may not be prepared to satisfy. This risk is particularly strong with small entities and partnerships, and attorneys who act on behalf of these entities must avoid inadvertently creating an implied relationship with any individual officers or members.

In California, the factors for determining the existence of an implied attorney-client relationship were set forth in Responsible Citizens v. Superior Court (1993) 16 Cal. App. 4th 1717. The Court in Responsible Citizens noted that, as a general rule, the attorney for a corporation represents the corporate entity, and represents its stockholders and its officers exclusively in their capacity as corporate representatives. However, it held that an attorney for a partnership could, through his or her conduct, enter into an “implied” attorney-client relationship to represent the interests of individual partners. Various factors could indicate that an implied relationship existed, including the type and size of the partnership, the nature and scope of the attorney’s engagement, the parties’ conduct, the existence of agreements between the attorney and the individual partner, and the attorney’s access to information regarding the individual partner’s interests. These factors must be considered within the totality of the circumstances.

Responsible Citizens was most recently revisited in September 2019, in the matter of Sprengel v. Zbylut (2019) 40 Cal. App. 5th 1028. The court in Sprengel concluded that, although it was relevant that the attorney represented a limited liability company with two 50 percent shareholders, this arrangement did not, in itself, create implied attorney-client relationships between the attorney and the shareholders. Because there was no evidence to demonstrate that “the parties conducted themselves in a way that would reasonably cause a shareholder to believe the attorney would protect the shareholder’s individual interests,” the plaintiff in Sprengel was unable to establish an attorney-client relationship with the defendant attorney.

To avoid owing a duty to their corporate client’s officers or shareholders, attorneys who represent partnerships and closely-held corporations should set reasonable boundaries between their representation and individual shareholders or members to avoid creating any impression that the attorney would protect their individual interests.

If you have questions or would like more information, please contact Jennifer Weatherup at [email protected]

Are “Flat Fees” For Legal Services Okay in California?

Posted on: July 15th, 2020

By: Greg Fayard

Many lawyers in California charge their clients “flat fees.” That is, immigration lawyers, criminal defense lawyers, bankruptcy and estate planning lawyers, and patent lawyers all routinely charge “one price” for all services, regardless of the time it took the lawyer to do the work.

Under the old rules of Professional Conduct for California lawyers, if a lawyer received a flat fee, the rules were silent on where to put those funds—the lawyer’s trust account or operating account? Under the current rule, Rule 1.15, flat fees MAY go into the lawyer’s operating account.

Flat fees over $1,000 can go into the operating account provided the lawyer discloses in writing that the fee MAY go into the client’s trust account until earned and the client is entitled to a refund of any amount that is unearned.

If the lawyer does not have this disclosure in writing, which the client must sign, flat fees over $1,000 MUST go into the lawyer’s trust account.

Fortunately, the California State Bar has ethics guidelines to help lawyers determine what part of a flat fee is earned and when. For those California lawyers who charge flat fees, please read Rule 1.15 to make sure you are in compliance.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.