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Archive for the ‘California LPL’ Category

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.

Attorneys, Beware Of The “Settle & Sue” Maneuver!

Posted on: July 6th, 2020

By: Elizabeth Lowery

Malpractice lawsuits against attorneys are often referred to as a “case within a case” because they must delve deep into the underlying lawsuit in order to determine whether an attorney’s representation fell below the standard of care, and if so, what damages, if any, resulted. There is a common misconception that an attorney is always insulated from a malpractice action if the client consents to a settlement. However, many jurisdictions, including California, permit a client to “settle and sue.”

Last month in Maselllis v. Law Office of Leslie F. Jenson, California’s Appellate Court upheld a lower court’s $300,000 judgment against a divorce attorney whose client, the Wife, consented to a $1.2 million settlement. In that case the value of marital estate, which included several businesses, was hotly contested. In addition, Wife was suspicious that Husband had been hiding assets. A few days before the trial, Wife’s attorney pressured Wife to accept an $800,000 settlement; when she refused, Attorney said “I’m done,” and left. Panicked and without counsel, Wife accepted Husband’s last minute $1.2 million offer. She then sued Attorney for malpractice. 

During the 11-day malpractice trial, one report from Wife’s expert valued her half of the marital estate at $1.62 million, and another at $1.49 million. Wife prevailed and obtained a $300,000 judgment against Attorney. During the appeal, Attorney did not directly challenge the jury’s finding that her representation of Wife was negligent. Instead, Attorney argued that the standard of proof for “settle and sue” cases was, or should be, higher than the “preponderance of the evidence” burden of proof typical applied in attorney malpractice lawsuits, and that Wife hadn’t satisfied this higher standard. Wife’s counsel argued that Wife did not need to show that Husband was going to reach a settlement higher than $1.2 million; it was sufficient to show that it was “more likely than not” that she would have received a better result at trial. The Appellate Court confirmed that the lower burden of proof, i.e. the preponderance /”more likely than not” standard was correctly applied in the underlying trial, and that Wife had satisfied this burden. As a result, Wife’s victory was upheld. 

The foregoing illustrates that attorney malpractice lawsuits present special challenges, especially in jurisdictions which allow a client to “settle and sue.”  If you have any questions or would like more information, please contact Elizabeth Lowery 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.

When Laws Conflict: What Ethics Rule Applies to a California Lawyer Advising On Cannabis?

Posted on: June 30th, 2020

By: Greg Fayard

It goes without saying that a lawyer—from California or elsewhere—shall not counsel a client to do something illegal.

But what about a state law that conflicts with a federal law? For example, federal laws that criminalize the use of marijuana and state laws that don’t criminalize marijuana–how should the lawyer advise a client when laws conflict regarding a subject matter?

Under California’s Rules of Professional Conduct applicable to lawyers, a lawyer can assist a client in complying with California law, but must inform the client when California law conflicts with federal (or Tribal law). The lawyer then needs to discuss the consequences of complying with a California law that runs afoul with another law.

For those lawyers that work in the area of Cannabis law, Rule 1.2.1 is the Rule to follow in California.

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.