California Lawyers Association
California Ethics Annual Review 2024
CALIFORNIA ETHICS ANNUAL REVIEW 2024
Written by Neil J Wertlieb*
This article highlights the ethics advisory opinions that were issued during 2024 by the California Lawyers Association’s Ethics Committee (“CLAEC”), the California State Bar’s Committee on Professional Responsibility and Conduct (“COPRAC”), the American Bar Association’s Standing Committee on Ethics and Professional Responsibility (“ABA”), and the California Supreme Court’s Committee on Judicial Ethics Opinions (“CJEO”), as well as recent changes in the State Bar Act, and other regulatory law affecting the conduct of attorneys licensed in the State of California.[1]
The conduct of attorneys licensed in the State of California is regulated by the California Rules of Professional Conduct (the “California Rules”), the State Bar Act (California Business and Professions Code, § 6000 et seq.), and opinions of California courts.[2] The advisory opinions of ethics committees in California (including those cited herein) are not binding on California-licensed attorneys, but should be consulted for guidance on proper professional conduct.[3] The advisory opinions of other bar associations (including the ABA) may also be considered, but note that such opinions may be based on rules of professional conduct (such as the ABA’s Model Rule of Professional Conduct) that differ from the California Rules.
I. STATE BAR ACT Changes
Reporting Treason, Sedition, or Insurrection: New Business & Professions Code § 6090.8
Effective January 1, 2024, new Section 6090.8 of the California Business and Professions Code obligates all California-licensed attorneys to inform the State Bar of California when they know that another lawyer has engaged in, or conspired to engage in, “seditious conspiracy,” “treason” or “rebellion or insurrection.” Section 6090.8 defines these specific terms by reference to the prohibitions contained in Title 18 of the United States Code, which is the main criminal code of the federal government. Section 6090.8 is a companion piece to California Rule 8.3 (Reporting Professional Misconduct), which became operative on August 1, 2023.
New Section 6090.8 provides as follows:
(a)(1) A licensee of the State Bar who knows that another licensee has conspired to engage in or has engaged in any of the following shall inform the State Bar:
(A) Seditious conspiracy as prohibited under Section 2384 of Title 18 of the United States Code.
(B) Treason as prohibited under Section 37 of the Penal Code or Section 2381 of Title 18 of the United States Code.
(C) Rebellion or insurrection as prohibited under Section 2383 of Title 18 of the United States Code.
(2) For the purpose of this subdivision, “knows” means actual knowledge of the fact in question. A licensee’s knowledge may be inferred from circumstances.
(b) This section does not require disclosure of information otherwise protected by the attorney-client privilege or information gained by a licensee while participating in the Attorney Diversion and Assistance Program.
(c) A licensee of the State Bar who makes a complaint to the State Bar pursuant to subdivision (a) with the intent to intimidate, harass, or otherwise deter a fellow licensee from engaging in the lawful practice of law shall be deemed to have committed professional misconduct.
(d) The board may amend the Rules of Professional Conduct, and shall propose those amendments to the Supreme Court for approval, to implement this section.
Attorney’s Duty to Report Pro Bono Legal Services: New Business & Professions Code § 6073.2(b)
Effective January 1, 2025, paragraph (b) of new Section 6073.2 of the California Business and Professions Code obligates all California-licensed attorneys to report to the State Bar each year whether they have provided pro bono legal services, the number of hours of service and any reduced fee legal services performed for a low-income individual, nonprofit organization or public law library. Other provisions of new Section 6073.2 provide that certain categories of licensees may be exempt from such reporting obligations (see paragraph (d)), that the information so provided will be kept confidential (see paragraph (f)), and that failure to comply with such reporting obligations is not grounds for disciplinary or administrative recourse (see paragraph (g)).
New Section 6073.2(b) provides as follows:
An active licensee shall report whether they have provided pro bono legal services through the licensee’s My State Bar online profile on the State Bar’s internet website through a provided section where those hours shall be declared when payment of annual fees is due. Every licensee shall report both of the following:
(1) Amount of pro bono legal services hours performed during the calendar year preceding the year in which the annual fee is due.
(2) Hours of reduced fee legal services performed for a low-income individual, nonprofit organization, or public law library established under Section 6360 during the calendar year preceding the date the annual report is due.
Attorney’s Duty to Report Client Trust Account Information to State Bar upon Request: New Business & Professions Code § 6091.4(a)
Effective September 12, 2024, new Section 6091.4(a) of the California Business and Professions Code obligates all California-licensed attorneys to provide to the State Bar, upon request made as part of a State Bar compliance review or investigative audit, all requested client trust account-related information.
New Section 6091.4(a) provides as follows:
Notwithstanding subdivision (e) of Section 6068, Article 3 (commencing with Section 950) of Chapter 4 of Division 8 of the Evidence Code, the Attorney Work Product doctrine as restated in Chapter 4 (commencing with Section 2018.010) of Title 4 of Part 4 of the Code of Civil Procedure, or any other law, licensees of the State Bar, limited liability partnerships, or law corporations registered with the State Bar shall, pursuant to a request made as part of a compliance review or investigative audit being conducted by or at the direction of the State Bar, provide to the State Bar or its agents all requested information, records, or communications, including, but not limited to, account journals, client ledgers, fee agreements, client files, and billing statements related to the receipt, holding, and disbursement of funds, securities, or other property in which the licensee, limited liability partnership, or law corporation knows or reasonably should know a client or other person has an interest.
II. PROPOSED Rule Changes
During 2024, the State Bar of California has issued for public comment the following proposed new or amended rules impacting the conduct of attorneys licensed in the State of California, none of which have yet been approved by the State Bar. The details of such proposals, as well as the procedures available to provide public comment, can be found on the State Bar website.
Proposed Amendments to Client Trust Account Protection Program Rules: Proposed Rules 2.4, 2.5 and 2.6 of the Rules of the State Bar[4]
Proposed new rule 2.4 provides definitions that govern the interpretation of the rules applicable to the Client Trust Account Protection Program (CTAPP). Among other things, proposed amendments to rule 2.5 remove the defined terms (as they are proposed to be incorporated in the new rule 2.4), update paragraph letters due to the removal of the defined terms, clarify the trust accounts that must be registered annually, add the concept of designated licensee, update internal references to paragraphs, correct an erroneous caption to the former paragraph E, require licensees to furnish certain information to any financial institution in which they maintain a trust account, and revise the existing CTAPP compliance exemption for licensees who are not entitled to practice law at the time of the reporting deadline. Proposed new rule 2.6 establishes compliance reviews and investigative audits as part of CTAPP.
Proposed New Rule of Procedure Regarding Vexatious Litigants in State Bar Court: Rule 5.19 of the State Bar Rules of Procedure[5]
The State Bar Court seeks to address the problem of litigants who impose a disproportionate burden on resources by filing frivolous pleadings or by repeatedly attempting to relitigate issues that have already been resolved. Proposed new rule 5.19 of the State Bar Rules of Procedure will give the State Bar Court tools to control the behavior of vexatious litigants. The proposed rule sets out the criteria for a litigant to be declared a vexatious litigant, creates procedures for the court to make the determination as to whether a litigant meets those criteria, and sets forth the restrictions that can be imposed to control a vexatious litigant’s conduct. Those restrictions may include, when appropriate, a requirement that the litigant seek court approval before submitting pleadings for filing with the State Bar Court.
III. Advisor Opinions
Law Firm Staff Conflicts: CLAEC Formal Opinion No. 2023-1 (2024)[6]
California Rules of Professional Conduct, rule 5.3 requires a law firm’s managerial and supervisory lawyers to make reasonable efforts to ensure their nonlawyers’ conduct is compatible with lawyers’ professional obligations, including rules 1.7 [Conflict of Interest: Current Clients] and 1.9 [Duties to Former Clients]. Reasonable efforts include determining that nonlawyers understand a lawyer’s confidentiality obligations, educating nonlawyers on the firm’s procedures for identifying potential or actual conflicts and, where necessary, timely screening nonlawyers to avoid sharing of material confidential information.
Although the prohibitions of conflicts in rules 1.7 and 1.9 and the imputation of conflicts within a firm do not directly apply to nonlawyers, a lawyer has a duty to address nonlawyer conflicts of interest. The duty under rule 5.3 to supervise nonlawyers includes avoiding the possibility that a nonlawyer will share with firm lawyers confidential information of an adversary. Lawyers must use reasonable efforts to train nonlawyers about lawyer’s duties or confirm that nonlawyers understand these duties, educate nonlawyers on the firm’s procedures to allow the firm’s managerial and supervisory lawyers to identify potential or actual conflicts, and timely screen nonlawyers when necessary to avoid sharing of confidential information.
Succession Planning: COPRAC Formal Opinion No. 2024-209 (2024)[7]
Issue: What are a lawyer’s ethical obligations to engage in succession planning?
Digest: Lawyers have an ethical obligation to protect their clients’ interests throughout the representation, including in the event they are unable to continue practicing law on a temporary or permanent basis. The duty applies to all lawyers, regardless of firm size. To meet these obligations, lawyers must engage in an assessment of whether their professional responsibility obligations, including, but not limited to, the duties of competence, diligence, and communication, require a succession plan. Factors to be considered in this assessment include, but are not limited to, firm size, practice area coverage, the nature of the practice, and the lawyer’s age and health. Depending on this assessment, a lawyer may be required to take reasonable steps to plan for an interruption or cessation of practice, including engaging in formal succession planning, since a lawyer is unable to anticipate an inability to practice law.
Disqualification to Prevent the Misuse Use of “Confidential Government Information”: ABA Opinion 509 (February 28, 2024)[8]
Model Rule of Professional Conduct 1.11(c) protects a person from the misuse of certain information that the government used its authority to acquire. The confidential government information protected by Rule 1.11(c) is defined by the Rule as information obtained under government authority which the government is prohibited from disclosing to the public or has a legal privilege not to disclose and which is not otherwise available to the public. The Rule provides that a lawyer who acquired confidential government information about a person while serving as a government officer or employee (regardless of whether the lawyer was acting as a lawyer while employed by the government) is disqualified from representing a “private client” whose interests are adverse to that person. The purpose is to prevent the confidential government information from being used to the material disadvantage of that person. The Rule applies regardless of whether the lawyer seeking to represent the private client has left government employ or office or maintains a private law practice (e.g., a part-time practice) while still in government employ or office. The Rule applies to a lawyer representing a “private client,” meaning a client whom the lawyer represents in private practice, regardless of whether the client is a public entity or private individual or entity.
Avoiding the Imputation of a Conflict of Interest When a Law Firm is Adverse to One of its Lawyer’s Prospective Clients: ABA Opinion 510 (March 20, 2024)[9]
Under Rule 1.18 of the Model Rules of Professional Conduct, a lawyer who was consulted about a matter by a prospective client, but not retained, is disqualified from representing another client who is adverse to the prospective client in the same or a substantially related matter if the lawyer received from the prospective client “disqualifying information”—i.e., information that could be “significantly harmful” to the prospective client in the matter. But, if the lawyer “took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client,” and the firm takes specified procedural precautions, then the lawyer’s conflict of interest is not imputed to others in the lawyer’s firm.
This opinion addresses the “reasonable measures” necessary to avoid the imputation of conflicts of interest under Rule 1.18. First, information that relates to “whether to represent the prospective client” includes information relating to (1) whether the lawyer may undertake or conduct the representation (e.g., whether a conflict of interest exists, whether the lawyer can conduct the work competently, whether the prospective client seeks assistance in a crime or fraud, and whether the client seeks to pursue a nonfrivolous goal), and (2) whether the engagement is one the lawyer is willing to accept. Second, to avoid imputation, even if information relates to “whether to represent the prospective client,” the information sought must be “reasonably necessary” to make this determination. Third, to avoid exposure to disqualifying information that is not reasonably necessary to determine whether to undertake the representation, the lawyer must limit the information requested from the prospective client and should caution the prospective client at the outset of the initial consultation not to volunteer information pertaining to the matter beyond what the lawyer specifically requests.
Confidentiality Obligations of Lawyers Posting to Listservs: ABA Opinion 511R (May 8, 2024)[10]
Rule 1.6 prohibits a lawyer from posting questions or comments relating to a representation to a listserv, even in hypothetical or abstract form, without the client’s informed consent if there is a reasonable likelihood that the lawyer’s questions or comments will disclose information relating to the representation that would allow a reader then or later to infer the identity of the lawyer’s client or the situation involved. A lawyer may, however, participate in listserv discussions such as those related to legal news, recent decisions, or changes in the law, without a client’s informed consent if the lawyer’s contributions will not disclose, or be reasonably likely to lead to the disclosure of, information relating to a client representation.[11]
Generative Artificial Intelligence Tools: ABA Opinion 512 (July 29, 2024)[12]
To ensure clients are protected, lawyers using generative artificial intelligence tools must fully consider their applicable ethical obligations, including their duties to provide competent legal representation, to protect client information, to communicate with clients, to supervise their employees and agents, to advance only meritorious claims and contentions, to ensure candor toward the tribunal, and to charge reasonable fees.[13]
Duty to Inquire Into and Assess the Facts and Circumstances of Each Representation: ABA Opinion 513 (August 23, 2024)[14]
As recently revised, Model Rule 1.16(a) provides that: “A lawyer shall inquire into and assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation.” To reduce the risk of counseling or assisting a crime or fraud, some level of inquiry and assessment is required before undertaking each representation. Further inquiry and assessment is required when the lawyer becomes aware of a change in the facts and circumstances relating to the representation that raises questions about whether the client is using the lawyer’s services to commit or further a crime or fraud.
The lawyer’s inquiry and assessment will be informed by the nature and extent of the risk that the current or prospective client seeks to use, or persists in using, the lawyer’s services to commit or further a crime or fraud. If after having conducted a reasonable, risk-based inquiry, the lawyer determines that the representation is unlikely to involve assisting in a crime or fraud, the lawyer may undertake or continue the representation. If the lawyer has “actual knowledge” that the lawyer’s services will be used to commit or further criminal or fraudulent activity, the lawyer must decline or withdraw from the representation.
When the lawyer’s initial inquiry leaves the lawyer with unresolved questions of fact about whether the current or prospective client seeks to use or persists in using the lawyer’s services to commit or further a crime or fraud, the lawyer must make additional efforts to resolve those questions through further reasonable inquiry before accepting or continuing the representation. The lawyer need not resolve all doubts. Rather, if some doubt remains even after the lawyer has conducted a reasonable inquiry, the lawyer may proceed with the representation as long as the lawyer concludes that doing so is unlikely to involve assisting or furthering a crime or fraud.
Responding to Attorney Misconduct: CJEO Opinion 2024-025 (February 22, 2024)[15]
Question: The California Supreme Court Committee on Judicial Ethics Opinions (CJEO or committee) was asked: What are a judge’s statutory and ethical obligations to take corrective action when an attorney engages in misconduct? Using a hypothetical scenario for context, this opinion provides guidance on factors judges should consider when responding to misconduct, assessing the nature and seriousness of the misconduct, deciding what corrective action is warranted, and determining whether mandatory reporting obligations exist.
Factual Scenario: Before trial, a judge in a civil matter heard a discovery motion brought by plaintiff, granted the motion, and issued an order. After trial began, plaintiff’s attorney became concerned about defendant’s compliance with the court’s discovery order. Outside the presence of the jury, the judge conducted a hearing. Plaintiff’s attorney argued plaintiff suffered prejudice as a result of defendant’s failure to produce documents ordered by the court, and would accordingly need more time to evaluate the evidence before proceeding with trial. The judge found defendant was not in compliance with the court’s discovery order, and this noncompliance was solely the result of the attorney’s misconduct and not of the client. The judge also found defendant’s attorney relied on misguided advice from his supervising attorney in failing to produce the documents, and concluded the violation of the court order was neither willful nor in bad faith. Nevertheless, the judge found the failure to produce documents in violation of the court order caused undue prejudice to plaintiff, and on this basis, the judge declared a mistrial resulting in a continuance. The judge did not report the attorney to the State Bar.
Advice Provided: Generally, judges have two responsibilities with respect to attorney misconduct: (1) comply with their statutory obligations regarding conduct that must be reported to the State Bar, and (2) take appropriate corrective action consistent with the California Code of Judicial Ethics. The committee advises that under the hypothetical facts provided here, the judge would not be required to report the attorney’s misconduct to the State Bar. Only one of the statutory grounds for mandatory reporting is potentially applicable to these facts — and that is when a judge imposes sanctions against an attorney under Business and Professions Code section 6086.7, subdivision (a)(3). However, reporting is not required when the sanctions are for failure to make discovery, as was the case in the hypothetical. While more stringent action would also be appropriate, the mistrial addressed the prejudice the misconduct caused; the judge had reason to believe the offending attorney did not act in bad faith; there was no evidence the offending attorney had a history of ignoring court orders; and the judge’s ruling was likely to have a deterrent impact on the offending attorney. Accordingly, the committee advises, given the judge’s factual findings and the wide discretion permitted in these circumstances, the judge’s decision to declare a mistrial would constitute appropriate corrective action under the canons of the California Code of Judicial Ethics.
Public Comment on a Pending Proceeding in Connection with a Judicial Election or Recall Campaign: CJEO Formal Opinion 2024-027 (November 19, 2024)[16]
Question: In 2020, in response to the recall of Judge Aaron Persky, the following language was added to canon 3B(9) of the California Code of Judicial Ethics: “In connection with a judicial election or recall campaign, this canon does not prohibit any judge from making a public comment about a pending proceeding, provided (a) the comment would not reasonably be expected to affect the outcome or impair the fairness of the proceeding, and (b) the comment is about the procedural, factual, or legal basis of a decision about which a judge has been criticized during the election or recall campaign.” This canon applies to any judge, not just the one being criticized. In light of “any” judge’s now increased ability to respond to judicial criticism, what are the ethical parameters of such a response?
Advice Provided: A judge’s decisions may at times be publicly criticized in connection with a judicial election or recall. This scenario may arise when a judge issues a decision that critics then use in support of a challenge to an incumbent, or to spearhead a recall campaign. These challenges are often highly publicized, and a judge’s opinion may be misrepresented or oversimplified by an opponent. A judge may feel compelled to respond. The 2020 amendment to canon 3B(9) makes clear that a judge may publicly comment on a pending case in connection with an election or recall, so long as the comment would not impact the outcome or fairness of the proceeding, and only if the comment pertains to the procedural, factual, or legal basis of the decision(s) at issue.
If a judge decides to make a public comment on a pending proceeding under these circumstances, the judge is advised to consider how the commentary (or absence of the same) may affect public perception of the integrity, impartiality, and independence of the judiciary. Judges are also permitted under the code to enlist the assistance of a third party in responding to public criticism. This may include an organization with experience in responding to public criticism of judges, including California Judges Association’s (CJA) Response to Unfair Criticism Committee, the American Board of Trial Advocates (ABOTA), the American Bar Association, or state or local bar association. Judges may also seek assistance from a fellow judge. Judges making a public comment on a pending proceeding in defense of another judge must ensure that their commentary complies with the canons, including canon 3B(9) as amended.
- PROPOSED AdvisorY Opinions
During 2024, COPRAC has issued for public comment the following proposed advisory opinions, none of which have yet been presented to and approved by the State Bar of California Board of Trustees:
Flat Fees and Termination: Proposed COPRAC Formal Opinion Interim No. 20-0003 [Comment Deadline: 1/13/2025][17]
Issues: What are the ethical obligations of attorneys representing clients pursuant to a flat fee agreement where the representation is terminated before the legal services specified in the agreement have been completed or where the scope or complexity of the matter turns out to be greater than the attorney and client contemplated?
Digest: 1. An attorney may agree to charge a flat fee for legal services but must clearly state what services are covered by the fee and should clearly state when the fee or portion thereof is earned.
2. If the flat fee is paid in advance of the services being rendered, the attorney may deposit the fee into the lawyer’s operating account if compliance with rule 1.15(b) is met.
3. If the representation is terminated and any of the services for which the flat fee has been or will be paid are incomplete, then the lawyer must determine the appropriate amount to be charged and must refund any advanced unearned funds, even if deposited into the operating account.
4. If a flat fee is renegotiated “midstream,” a lawyer should comply with rule 1.8.1 and such renegotiation is subject to ethical scrutiny for fairness and reasonableness.
Conversion Clauses in Contingent Fee Agreements: Proposed COPRAC Formal Opinion Interim No. 20-0005 [Comment Deadline: 9/3/2024][18]
Issues: Under what circumstances, if any, are “conversion clauses” in contingent fee agreements ethically permissible?
Digest: A conversion clause is a term in any contingent fee agreement, in either a litigation or transactional matter, that provides that, upon termination of the relationship or refusal to settle on terms recommended by an attorney before the happening of the contingent event, the attorney’s fee may convert to an hourly rate or some other calculation other than the original contingent fee. Conversion clauses in contingent fee agreements are ethically prohibited primarily because their use improperly interferes with important client rights, including the client’s right to discharge the attorney or the client’s right to determine whether to settle. Conversion clauses violate an attorney’s ethical duties and may constitute an agreement to charge an unconscionable fee.
Ethics of In-House Counsel: Proposed COPRAC Formal Opinion Interim No. 21-0003 [Comment Deadline: 6/13/2024][19]
Issues: 1. Is there a conflict of interest when an in-house lawyer moves from one company to another?
2. Does a stock option agreement present a lawyer with any conflicts of interest and, if so, how and when should such conflicts of interest be addressed with the employer?
Digest: It is common for in-house lawyers to move from one company to another, often within the same industry. And, although conflicts rules apply equally to in-house lawyers as to law firm lawyers, the conflicts analysis must take into account the unique characteristics of the in-house role, which is typically both an attorney-client and employer-employee relationship.
A former client conflict of interest under Rule of Professional Conduct1.9 does not arise simply because an in-house lawyer moves between companies that are economic competitors. A conflict of interest will arise if the lawyer was personally involved in representing their former employer on a matter that is factually and legally identical or similar to a matter the lawyer is to handle for their new employer, and in which the companies are materially adverse. Alternatively, a conflict of interest will arise if the lawyer was not personally involved in the representation, but they obtained confidential information during their prior employment concerning the same or substantially similar, adverse matter. The conflict may be imputed to the entire legal department of the new employer unless screening measures may be implemented under rule 1.10.
In-house lawyers are often offered employee stock options as part of their compensation package. In a typical attorney-client relationship—which is inherently imbalanced in favor of the attorney—taking stock in a client requires compliance with rule 1.8.1: the transaction must be fair and reasonable; the lawyer’s role in the transaction must be fully and plainly disclosed to the client in writing; the client must be advised in writing to consult with independent counsel about the transaction and the client must thereafter provide informed written consent to the transaction. However, in the in-house context, where the new lawyer is offered the same general compensation terms as those offered to other employees and indicia of inequality do not exist, compliance with rule 1.8.1 would not be required. (See rule 1.8.1, Cmt. [6].) Factors to consider in determining whether rule 1.8.1 applies to an in-house lawyer’s compensation include: (1) whether the lawyer was involved in advising on the organization’s formation; (2) whether the proposed compensation agreement is drafted and proposed by the organization (or its counsel) or the lawyer; (3) whether the organization has independent counsel concerning the compensation agreement; (4) whether the compensation terms offered to the lawyer are substantively similar to those offered to employees at the same level; and (5) whether the compensation is part of the lawyer’s initial employment agreement, or modifications thereto, or related to lawyer’s work on a specific transaction. These factors are not exhaustive but are intended as an analytical tool to determine whether an indicia of inequality exists. If so, compliance with rule 1.8.1 is required.
Even if compliance with rule 1.8.1 is not required, stock ownership may still trigger a material limitation conflict under rule 1.7(b) if there is a significant risk that the in-house lawyer’s representation will be materially limited by their financial interest in connection with their stock ownership. Such a conflict could arise if the lawyer is asked to advise the company concerning a transaction that affects the character or price of the stock, such as a merger or acquisition. If so, the lawyer must obtain informed written consent from an authorized constituent of the company. If the lawyer does not reasonably believe they can competently represent the company due to the conflict, or if the company refuses to consent to the conflict, the lawyer must refer the matter to nonconflicted in-house counsel or outside counsel.
Colleague Impairment: Proposed COPRAC Revised Formal Opinion No. 2021-206 [Comment Deadline: 6/7/2024][20]
Issues: What ethical obligations does a lawyer have when the lawyer or a lawyer in that lawyer’s law firm has violated, is violating, or will violate the Rules of Professional Conduct or the State Bar Act in the course of representing a client as a result of the lawyer’s possible mental impairment?
Digest: This opinion addresses mental impairments that impede a lawyer’s fitness to competently and diligently engage in the practice of law in accordance with the rules and the State Bar Act. A lawyer’s impairment does not excuse that lawyer’s compliance with the rules and the State Bar Act. An impaired lawyer’s conduct can also trigger obligations for the impaired lawyer’s subordinates, supervisors, and other colleagues who know of the impaired lawyer’s conduct. These ethical obligations may include, but are not limited to, communicating significant developments related to the lawyer’s conduct to the client, promptly taking reasonable remedial action to prevent or mitigate any adverse consequences resulting from an impaired lawyer’s actions, and reporting the impaired lawyer’s conduct to the State Bar or an appropriate tribunal. The required scope of each lawyer’s action depends on the nature of the client’s representation, the severity of the impaired lawyer’s unethical conduct, whether the client has been harmed or will be harmed by the impaired lawyer’s conduct, the nature of the lawyer’s impairment, the size of the law firm and the resources available, and each lawyer’s position within the firm.
Standard of Review in Fee Disputes Where There Is a Written Fee Agreement: Proposed COPRAC Arbitration Advisory Interim No. 2022-0XA [Comment Deadline: 4/30/2024][21]
Under applicable California law, where a written fee agreement is required under California Business and Professions Code sections 6147, 6148, or related sections (a “complying agreement”), and such a written agreement does not exist, the applicable standard of review is the “reasonable fee” or “lodestar” standard. On the other hand, where the parties have entered into a complying agreement, under applicable California case law, the fee agreement determines the amount that is recoverable even if it may be more than what would be recoverable under the reasonable fee or lodestar standard.
As the Court of Appeal held in Pech v. Morgan (2021) 61 Cal.App.5th 841, 846 [276 Cal.Rptr.3d 97] (hereafter Pech), “when an attorney sues a client for breach of a valid and enforceable fee agreement, the amount of recoverable fees must be determined under the terms of the fee agreement, even if the agreed upon fee exceeds what otherwise would constitute a reasonable fee under the familiar lodestar analysis,” unless the fee agreement is found to be unconscionable or where a breach of the implied covenant of good faith and fair dealing may be found to have been breached. (Original italics.) “This requires a court adjudicating a fee dispute to determine, among other things, whether the attorney used reasonable care, skill, and diligence in performing his or her contractual obligations.” (Ibid.)
The apparent rationale for the decision in Pech is that the parties should be permitted to contract for a fee higher than a “reasonable fee” under the “lodestar” standard where circumstances make such an agreement appropriate. The holding in Pech is that such a contract should be enforceable in accordance with its terms provided that the attorney’s performance conforms to the standards articulated in Pech, including the necessity of the attorney’s services and whether the attorney exercised reasonable billing judgment, and also provided that it is not unconscionable.
Determination of a “Reasonable” Fee: Proposed COPRAC Arbitration Advisory Interim No. 2022-0XB [Comment Deadline: 7/21/2024][22]
An arbitrator is sometimes called upon to determine the amount of reasonable fees to be awarded to an attorney. This situation arises most commonly when the attorney has failed to obtain a written agreement with the client, or when the written agreement between the parties does not comply with the requirements of Business and Professions Code sections 6147 or 6148. In such cases the agreement is voidable at the option of the client, and the attorney is limited to a “reasonable” fee. Where the fee contract fully complies with the statutory requirements sections 6147 through 6148, and is otherwise enforceable, the arbitrators should enforce the contract; however, they still may consider the value of the services to the client as affected by inefficiencies, quality of the services or the attorney’s performance. (See Arbitration Advisory 1993-02, Standard of Review in Fee Dispute Where There is a Written Fee Agreement, dated November 23, 1993.) Additional factors must be considered where an attorney seeks an award of a reasonable fee after the written fee agreement has been voided for the attorney’s breach of an ethical duty.
This [proposed] arbitration advisory explores the factors which are applicable in determining the amount of such a “reasonable” fee.
* Neil J Wertlieb, the author of this article, is a transactional lawyer, educator and ethicist, who provides expert witness services in disputes involving business transactions and corporate governance, and in cases involving attorney malpractice and attorney ethics. He is an Inaugural Co-Chair, Advisor and Founding Member of the California Lawyers Association Ethics Committee, a member of the California Civility Task Force, a former Chair of the Business Law Section and its Corporations and Business Litigation Committees, and a Member of the Board of Representatives of the California Lawyers Association. Mr. Wertlieb served as a Partner at Milbank LLP for two decades and recently retired as General Counsel of the firm. For additional information, please visit www.WertliebLaw.com. The views expressed herein are his own.
[1] As of December 2024, no ethics advisory opinions were issued during 2024 by the Los Angeles County Bar Association’s Professional Responsibility and Ethics Committee (“PREC”), the San Diego County Bar Association’s Legal Ethics Committee (“SDCBA”), the San Francisco Bar Association’s Legal Ethics Committee (“BASF”), or the Orange County Bar Association’s Professionalism and Ethics Committee (“OCBA”).
[2] See California Rule 1.0(b)(2).
[3] See Comment [4] to California Rule 1.0, clarifying the legal effect of local bar ethics opinions.
[4] See https://www.calbar.ca.gov/About-Us/Our-Mission/Protecting-the-Public/Public-Comment/Public-Comment-Archives/2025-Public-Comment/Proposed-Amendments-to-Client-Trust-Account-Protection-Program-Rules-#:~:text=Among%20other%20things%2C%20proposed%20amendments,concept%20of%20designated%20licensee%2C%20update.
[5] See https://www.calbar.ca.gov/About-Us/Our-Mission/Protecting-the-Public/Public-Comment/Public-Comment-Archives/2024-Public-Comment/Proposed-New-Rule-of-Procedure-Regarding-Vexatious-Litigants-in-State-Bar-Court.
[6] See https://calawyers.org/california-lawyers-association/formal-opinion-no-2023-1/.
[7] See https://www.calbar.ca.gov/Portals/0/documents/ethics/Opinions/CAL_2024-209_Succession_Planning.pdf.
[8] See https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-509.pdf.
[9] See https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-510.pdf.
[10] See https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-511r.pdf.
[11] For a local California Bar Association opinion that raises similar concerns in a different context, see L.A. County Bar Ass’n Formal Opn. 529 (2017).
[12] See https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-512.pdf.
[13] In November 2023, the State Bar issued Practical Guidance For The Use Of Generative Artificial Intelligence In The Practice Of Law (11/16/23). In addition, in September 2024, the California Lawyers Association Task Force on Artificial Intelligence issued its Report on AI in the Practice of Law, California (9/2024), available at https://calawyers.org/california-lawyers-association/california-lawyers-association-task-force-on-artificial-intelligence/
[14] See https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-513.pdf. Note that California has not adopted the changes to Model Rule 1.16 as described herein. However, California lawyers may already have similiar duties under California Rules 1.2.1 and 3.1.
[15] See https://www.judicialethicsopinions.ca.gov/wp-content/uploads/CJEO-Formal-Opinion-2024-025.pdf.
[16] See https://www.judicialethicsopinions.ca.gov/wp-content/uploads/CJEO-Formal-Opinion-2024-027.pdf.
[17] See https://www.calbar.ca.gov/About-Us/Our-Mission/Protecting-the-Public/Public-Comment/Public-Comment-Archives/2024-Public-Comment/Proposed-Revised-Formal-Opinion-Interim-No-20-0003-Flat-Fees-and-Termination.
[18] See https://www.calbar.ca.gov/About-Us/Our-Mission/Protecting-the-Public/Public-Comment/Public-Comment-Archives/2024-Public-Comment/Proposed-Formal-Opinion-Interim-No-20-0005-Conversion-Clauses-in-Contingent-Fee-Agreements.
[19] See https://www.calbar.ca.gov/About-Us/Our-Mission/Protecting-the-Public/Public-Comment/Public-Comment-Archives/2024-Public-Comment/Proposed-Formal-Opinion-Interim-No-21-0003-Ethics-of-In-House-Counsel.
[20] See https://www.calbar.ca.gov/About-Us/Our-Mission/Protecting-the-Public/Public-Comment/Public-Comment-Archives/2024-Public-Comment/Proposed-Revised-Formal-Opinion-No-2021-206-Colleague-Impairment. Note that Formal Opinion 2021-206 was revisited and revised in light of the Supreme Court’s approval of CRPC 8.3, effective 8/1/2023.
[21] See https://www.calbar.ca.gov/About-Us/Our-Mission/Protecting-the-Public/Public-Comment/Public-Comment-Archives/2024-Public-Comment/Proposed-Arbitration-Advisory-Interim-No-2022-0XA-Standard-of-Review-in-Fee-Disputes-Where-There-Is-a-Written-Fee-Agreement.
[22] See https://www.calbar.ca.gov/About-Us/Our-Mission/Protecting-the-Public/Public-Comment/Public-Comment-Archives/2024-Public-Comment/Proposed-Arbitration-Advisory-Interim-No-2022-0XB-Determination-of-a-Reasonable-Fee.