State Bar of California

REGULATORY AGENCY ACTION

existing cable monopolies which are still in the California Constitution at Article Bar recommends sanctions to the Califor- largely unregulated. However, they re- VI, section 9. The State Bar was estab- nia Supreme Court, which makes final main concerned about possible telephone lished as a public corporation within the discipline decisions. However, Business cross-subsidization of cable operations judicial branch of government, and mem- and Professions Code section 6007 autho- from monopoly loop revenues. One mo- bership is a requirement for all attorneys rizes the Bar to place attorneys on invol- nopoly may end up merely replacing an- practicing law in California. Today, the untary inactive status if they pose a sub- other, except once cable is precluded and State Bar has over 145,000 members, which stantial threat of harm to clients or to the its lines are removed, there may be a more equals approximately 17% of the nation's public, among other reasons. absolute monopoly free from the prospect population of lawyers. *MAJOR PROJECTS of potential competition from another ex- The State Bar Act, Business and Pro- isting loop. This concern does not lead to fessions Code section 6000 et seq., desig- Bar Analyzes Recommendations of exclusion of telephone company entry nates a Board of Governors to run the State Discipline Evaluation Committee. In into cable markets, because it does little Bar. The Board President is elected by the August 1994, the "blue-ribbon" Discipl- good to have a potential competitor who Board of Governors at its June meeting ine Evaluation Committee (DEC) chaired is categorically precluded from compet- and serves a one-year term beginning in by retired U.S. Ninth Circuit Court of Ap- ing. But it does indicate a strong public September. Only governors who have peals Judge Arthur L. Alarc6n released a interest in regulating telephone entry to served on the Board for three years are report of its eight-month evaluation of the preserve continuing competition. eligible to run for President. State Bar's disciplinary system. Estab- In Assembly of the State of California v. The Board consists of 23 members- lished in December 1993 by then-Bar Public Utilities Commission, No. S044844, seventeen licensed attorneys and six non- President Margaret Morrow to conduct the Assembly Speaker Willie Brown has peti- lawyer public members. Of the attorneys, first external review of the Bar's restruc- tioned the California Supreme Court to re- sixteen of them-including the President- tured discipline system, the DEC was to view the PUC's disposition of a $49 million are elected to the Board by lawyers in nine thoroughly evaluate the structure, cost, ef- fund established to compensate Pacific Bell geographic districts. A representative of the fectiveness, and fairness of all compo- ratepayers for cross-subsidizing Pacific Tel- California Young Lawyers Association nents of the Bar's system-including its esis' development of its wireless operation, (CYLA), appointed by that organization's Intake/Legal Advice Unit, Office of Inves- which it recently spun off as a new company Board of Directors, also sits on the Board. tigations (01), Office of the Chief Trial called "AirTouch." In August 1994, the PUC The six public members are variously se- Counsel (OCTC), State Bar Court (SBC), decided that $7.9 million should be allocated lected by the Governor, Assembly Speaker, and Complainants' Grievance Panel (CGP). to PacBell ratepayers through a surcredit on and Senate Rules Committee, and con- While the DEC's final report contained monthly bills; $40 million should be used for firmed by the state Senate. Each Board high praise for the quality and quantity of telecommunications programs and facilities member serves a three-year term, except for adjudicative decisionmaking by the new in public schools statewide; and $2.1 million the CYLA representative (who serves for State Bar Court, it nonetheless contained should be used to continue the PUC's Tele- one year) and the Board President (who 52 recommendations on a wide spectrum communications Education Trust. [14:4 serves a fourth year when elected to the of issues-including several which have CRLR 201-02] Speaker Brown argues that presidency). The terms are staggered to pro- caused controversy within the Bar. A all of the money should be refunded to rate- vide for the selection of five attorneys and major theme of the DEC report is that the payers, or it should revert to the state general two public members each year. Bar, particularly the State Bar Court, has fund. At this writing, the Supreme Court has The State Bar includes twenty standing devoted excessive resources to upper not decided whether to review the PUC's committees; fourteen special committees, management and supervisory positions, decision. addressing specific issues; sixteen sec- while other components have been un- tions covering fourteen substantive areas derresourced. [14:4 CRLR 209-10] U FUTURE MEETINGS of law; Bar service programs; and the In September, new Bar President Don- The full Commission usually meets Conference of Delegates, which gives a ald Fischbach appointed Discipline Com- every other Wednesday in San Francisco. representative voice to 245 local, ethnic, mittee Chair James Towery to head the and specialty bar associations statewide. Task Force on Implementation of the DEC The State Bar and its subdivisions per- Report, and directed the Task Force to STATE BAR OF form a myriad of functions which fall into commence an initial analysis of the DEC six major categories: (I) testing State Bar report and recommend a procedure whereby CALIFORNIA applicants and accrediting law schools; the Discipline Committee and full Board President: Donald Fischbach (2) enforcing the State Bar Act and the could take action on those recommenda- Executive Officer: Bar's Rules of Professional Conduct, which tions as appropriate. Fischbach instructed Herbert Rosenthal are codified at section 6076 of the Busi- the Task Force to present its initial analy- (415) 561-8200 and ness and Professions Code, and promoting sis at the Bar's October meeting. (213). 765-1000 competence-based education; (3) ensur- Following two public hearings during TDD for Hearing- and Speech- ing the delivery of and access to legal September, the Task Force presented its services; (4) educating the public; (5) im- analysis to the Board at its October 30 Impaired: proving the administration of justice; and meeting. The Task Force categorized the (415) 561-8231 and (6) providing member services. recommendations in the DEC report as (213) 765-1566 Almost 75% of the Bar's annual $56 follows: Toll-Free Complaint Hotline: million budget is spent on its attorney - Recommendations that are already 1-800-843-9053 discipline system. The system includes the implemented or in place: With regard to first full-time professional court for attor- the State Bar Court, the Task Force noted T he State Bar of California was created ney discipline in the nation and a large that the Bar already reduced the time of by legislative act in 1927 and codified staff of investigators and prosecutors. The two of its three Review Departmentjudges

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by 40% effective September 1, has not relations as part of the Bar's minimum may pose. This has had the further nega- included the authorized seventh Hearing continuing legal education requirement; tive consequence that the discipline sys- Department judge in its 1995-96 budget, -replacement of the Complainants' tem is 'complaint-driven,' that is, the sys- and has not included funding for pro tem Grievance Panel with an Office of Con- tem responds reactively to client com- hearing judges in that budget. The Task sumer Advocate; plaints, rather than focussing proactively Force also observed that the Bar listed its -restructuring of the OCTC's prosecu- on more serious cases." The Subcommit- toll-free complaint number as a "con- tion unit; tee also opined that the Bar's annual re- sumer affairs" number in telephone direc- -development of a procedure to review ports of backlog status have created a false tories in 1991. and address situations involving multiple and misleading indicator of the Bar's per- - Recommendations whose implemen- complaints against an attorney which do formance. "In reality, these annual reports tation is in process: Among other things, not result in discipline; do nothing more than assess the success of the Bar has already commenced the rule- -elimination of the separate Office of the State Bar in investigating cases based making process to establish permanent Investigations and of the deputy director upon the age of the complaint. The reports disbarment for egregious misconduct (see positions within 01; fail to assess the more critical issue of how below); approved a voice mail system -reduction of support staff in the SBC well the system serves its mission in pro- which will also reduce the busy rate on the and reduction in the number of hearing tecting the public." The Subcommittee discipline system's toll-free complaint judges from six to four; and recommended that the Chief Trial Counsel hotline number; the SBC Executive Com- -the implementation of staggered terms explore either deleting the backlog statute mittee is planning to adopt standards for for SBC judges. in its entirety or amending it (which will publication of its opinions and publish Also at the Bar's October meeting, Task require legislation), and to explore alter- more selectively; and the Bar may sponsor Force/Discipline Committee chair James native "and more meaningful" perfor- statutory amendments to permit respon- Towery announced. the appointment of two mance measurements for the discipline dents to consent to discipline without ad- subcommittees-the Subcommittee on the system. mitting to culpability. Office of the Chief Trial Counsel and the Over the strong objections of the pub- - Recommendations that can be im- Complainants' Grievance Panel (OCTC/CGP) lic members of the Complainants' Griev- plemented in the last quarter of 1994 or and the Subcommittee on the State Bar ance Panel, the OCTC/CGP Subcommit- the first quarter of 1995: In this category, Court-to further study and analyze the tee also voted unanimously on December the Bar has commenced the rulemaking DEC recommendations. 6 to recommend to the Discipline Ccm- process to establish a five-year statute of Prior to the Bar's December meeting, mittee that the CGP be abolished on De- limitations on the initiation of Bar disci- the OCTC/CGP Subcommittee isolated the cember 31, 1995. CGP reviews closed com- plinary proceedings (see below); it is com- core OCTC issues upon which the DEC plaints at the request of the complainant, puterizing its discipline system forms to focused and condensed them into a set of and is authorized to request that 01 reopen eliminate duplication of effort; and it will directives to the Chief Trial Counsel. The and reinvestigate a closed case; it also include information on the attorney dis- consensus was to direct the Chief Trial audits the performance of the Bar's discipline process in Bar public education Counsel to develop models for the internal cipline system through a random review programs. structure of the OCTC based on several of investigative files. In 1993, it requested - Recommendations which require identified "policy principles," such as sys- reinvestigation in 33% of the cases it re- study: The Task Force recommended, and temwide teamwork and coordination viewed at the request of complainants, and the Board approved, that the bulk of the among the components of OCTC, in- requested reinvestigation in 16% of the DEC recommendations be referred to the creased attorney supervision of investiga- cases it audited. [14:2&3 CRLR 224; 13:4 Board's Discipline Committee for further tions, prioritization and expedited pro- CRLR 214-15] The Subcommittee focused study. Among others, these include the cessing of complaints, and identification on the cost of the panel ($840,000 annu- following issues: and removal of structural impediments to ally) and generally agreed that the CGP's -whether the overall management of cost efficiencies and public protection. appeals process could be better handled the discipline system should be delegated Interestingly, the Subcommittee focused through a new department reporting di- to the Bar's Executive Director, and whether on the Bar's "backlog statute" (Business rectly to the Bar's Chief Trial Counsel. reducing the costs of the discipline system and Professions Code section 6140.2) as Although several Subcommittee members should be a priority of senior manage- "a major impediment to the discipline sys- were upset that they were being required ment; tem operating in a cost-effective manner." to vote on the future of the CGP without a -expansion of summary disbarment The statute requires the Bar to investigate concrete proposal for its replacement from for conviction of a felony or other crime and dispose of complaints (either by way staff, Task Force Chair Towery promised involving moral turpitude; of dismissal, sanction, or referral for pros- that Chief Trial Counsel Judy Johnson -revision of the Bar's standards to in- ecution) within six months of receipt; a would present a comprehensive proposal crease sanctions for misconduct involving twelve-month period is allowed for cases to the Discipline Committee at its January multiple clients, and to preclude substance classified as "complex." According to the 20 meeting. abuse from being asserted as a mitigating Subcommittee, "the backlog statute has At its December 9 meeting, the Dis- factor; led to a discipline system in which the cipline Committee approved the timetable -whether to publish the name of the highest priority has become keeping as and policy principles established by the respondent's law firm when publicizing low as possible the number of backlog OCTC/CGP Subcommittee; it did not vote the discipline of an attorney; cases reported annually to the legisla- on the issue of CGP elimination. With the -whether to require disciplined attor- ture ....As a result, resources are allocated goal of presenting its response to the DEC neys to attend ethics school or other train- primarily based on the age of the com- recommendations to the full Board in ing programs (such as trust account man- plaint, ratherthan on the seriousness of the March 1995, the Subcommittee-work- agement or client relations), and whether alleged misconduct, or upon the imminent ing with the Executive Director and the to require one hour in discipline and client threat to the public which the respondent Chief Trial Counsel-is scheduled to re-

California Regulatory Law Reporter • Vol. 15, No. 1 (Winter 1995) 17 cREGULATORY AGENCY ACTION

turn to the Discipline Committee at its ously mistaken in a number of its major any incumbent judge if he/she has not January meeting with organizational mod- assumptions. DEC's recommendations do been recommended for reappointment. At els for OCTC and descriptions of pilot not recognize either the full extent of the the same meeting, the Board voted to re- programs to test the models. Thereafter, court's existing workload or the likely fu- lease the proposed amendments for a 45- these models will be sent for informal ture workload of the court. Adoption of day public comment period ending on Oc- comment to interested entities and per- DEC's sweeping recommendations would tober 11, transfer the proposal to the Cal- sons, and returned to the Discipline Com- seriously undermine the current ability of ifornia Supreme Court, and designate the mittee in March. the State Bar Court to perform the vital Discipline Committee as its agent to re- At this writing, the Subcommittee on functions which the Supreme Court has to view and respond to the public comments the State Bar Court is scheduled to begin date successfully entrusted to it and would received, and transmit the comments and work on implementing the DEC's recom- jeopardize not only the 1988 reforms, but any modifications it wishes to the Su- mendations in January. Its task does not also the credibility of the entire discipline preme Court by October 14. [14:4 CRLR promise to be easy. In November, the State system with the public." 210-11] Bar Court presented a detailed response to Reappointment Process for State Bar During the comment period, two com-, the DEC's findings that the SBC is "not Court Judges. SB 1498 (Presley) (Chap- ments were received. One was from State cost-effective." SBC noted that the DEC ter 1159, Statutes of 1988) created the Bar Court Review Department Judge Ken failed to acknowledge that the court has State Bar Court, the nation's first full-time Norian, the court's only non-attorney, who underspent its annual budget by at least professional attorney disciplinary court. suggested that the Bar nominate candi- 11% per year since 1991, and failed to The SBC currently consists of six hearing dates to sit on the special committee; the analyze any of the cost implications of its judges (any one of whom may preside Supreme Court would actually choose the recommendations that the number of SBC over a particular discipline case) and a members of the special committee, and judges and support staff be reduced. For three-judge Review Department (one of would have the discretion to choose mem- example, SBC argued that implementing whom must be a non-attorney) which is- bers not nominated by the Bar. Judge Nor- the DEC's recommendation that two of the sues the final agency decision in State Bar ian also suggested that the Bar nominate court's six hearing judges be eliminated discipline cases. Under Business and Pro- former members of the Board of Gover- "would cripple the State Bar Court while fessions Code section 6079.1, the Board nors to the special committee, rather than only saving the membership about $2 of of Governors is permitted to screen and current members. the $478 annual Bar dues (less than 1/2 of rate all applicants for appointment or re- The other comment was from SBC Pre- 1%)." SBC also noted that although it appointment as a State Bar Court judge siding Judge Lise Pearlman, who com- currently has five fewer staff members and submit at least three nominations for mended the Bar for eliminating the potential than it did in 1989, it now processes 2.5 each vacancy to the Supreme Court "un- conflict of interest by not allowing a current times as many cases per year. less otherwise directed by the Supreme member of the Discipline Committee to sit With regard to several faults in the case Court." The Supreme Court appoints SBC on the proposed special committee. How- processing and decisionmaking practices judges, and they serve for six-year terms. ever, she expressed continued concern over of the State Bar Court identified by the The fact that the initial terms of four of the "the Board's insistence on the appointment DEC, SBC disagreed with what it charac- six incumbent Hearing Departmentjudges of the seven-member special committee by terized as "three key assumptions of DEC...: and the three incumbent Review Depart- the President of the State Bar..... Judge (1)that findings of fact and conclusions of ment judges expire on June 30, 1995 re- Pearlman reiterated the concurrence of the law historically have not been mandated in cently triggered a struggle within the Bar Executive Committee of the State Bar Court Hearing Department decisions and are not between the Board of Governors (which with the recommendations of the so-called currently mandated; (2) that de novo review wants to retain as much input and control "Wiener Committee" which she commis- by the Review Department has not histori- over the judicial appointment process as sioned to come up with an alternative to the cally been mandated and is not currently possible) and the State Bar Court (which Board's proposal. The Wiener Committee, mandated; and (3) that the firestorm of pend- fears excessive interference in judicial ap- chaired by retired Justice Howard B. Wiener, ing complaints in 1985 has been perma- pointments by the Board, because the found that it would be an intrusion on the nently eliminated and 'entirely different cir- Board appoints the Chief Trial Counsel judicial independence of the State Bar Court cumstances... now prevail."' SBC also and oversees the Bar's prosecutorial of- for the Bar to approve and select judges strongly disagreed with the DEC's recom- fice, and may favor judges who rule in while at the same time overseeing the lead mendation that the discipline system revert favor of the prosecution). discipline enforcement personnel, and sug- to management by a single individual At its August 1994 meeting, upon the gested that (1) the Supreme Court appoint charged with carrying out the policies of the recommendation of its Discipline Com- the members of the special committee, or (2) Board of Governors; according to SBC, mittee, the Board of Governors approved utilization of the Bar's existing Judicial "[t]his recommendation is contrary to the proposed amendments to Rule 961, Cali- Nominees Commissions as the Supreme dictates of the key 1988 reforms ensuring fornia Rules of Court, regarding the pro- Court's agent for evaluating the proposed separation of powers and judicial indepen- cedure for the reappointment of State Bar reappointments of sitting SBC judges. dence so strongly recommended by...State Court judges. Under the Bar's proposal, a The Discipline Committee, authorized Bar Monitor [Robert C. Fellmeth and]...is seven-member special committee ap- by the Board to review and respond to the also contrary to the ABA McKay Commis- pointed by the President of the Board of public comments, made no revision to the sion's recommendations for reducing the Governors (which could not include a cur- August version of the amendments to Rule role of elected bar officials nationwide and rent member of the Board's Discipline 961, and transmitted the additional com- for strengthening the independence of Committee) would review and evaluate ments to the Supreme Court on October each state's disciplinary officials which the reappointment applications of incum- 13. the New Jersey Supreme Court used as a bent judges, and submit a confidential re- In December, the Supreme Court re- basis for restructuring its system in the port and recommendations to the Supreme jected the Bar's formulation and released summer of 1994. In sum, DEC was seri- Court; the special committee would notify its own amendments to Rule 961 for pub-

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lic comment. Under the Court's rule, the Commission quickly expanded its focus. expressed concern that a voluntary bar which addresses procedures for both the In July 1993, the Commission adopted a could easily become dominated by attor- appointment and reappointment of SBC mission statement which included (1) neys in large urban areas and inattentive judges, the Court itself will create an Ap- identification and examination of the fac- to the needs of traditionally underrepre- plicant Evaluation and Nomination Com- tors which will significantly influence the sented groups, such as rural and solo prac- mittee to solicit and evaluate applications delivery of legal services and the admin- titioners, women, and minorities. for vacancies on the State Bar Court. The istration of justice over the next quarter- The interim report did not include a seven-member Committee is required to century; (2) development of a vision of the synopsis of the public policy rationales of consist of four lawyers, two active or re- California legal profession of the future, the dissenting commissioners who voted tired judges, and one public member; no which anticipates and effectively meets to disintegrate the Bar and delegate its more than two members of the Committee societal challenges over the next quarter- state police powers to a traditional, non- may be present members of the Board of century; and (3) recommendations to the trade association occupational licensing Governors, and neither of those may sit on Bar of strategies and structures for meet- agency. The report's discussion of the the Board's Discipline Committee. The ing the future needs of the public and the competing recommendation to establish a Committee must evaluate the qualifica- profession and, in light of those future voluntary trade organization for non-reg- tions of all applicants and make recom- needs, proposals regarding the best frame- ulatory activities focused on the superior mendations to the Court after considering works for the governance of the lawyers ability of a voluntary trade association to a variety of relevant factors (including- of California. [13:4 CRLR 213-14] lobby effectively in the legislature (which for reappointment purposes-prior ser- Entitled Summa ry and Highlightsof Key the Bar, as a quasi-governmental agency vice as a State Bar Courtjudge). The Com- Recommendations, the Futures Commis- precluded from using mandatory dues for mittee must submit the names of at least sion's December 20 interim report pro- certain lobbying activities by the Keller three qualified candidates for each vacancy vides a synopsis of many of the principal decision, lacks), and perceptions that the to the Court; at the same time it transmits its proposals adopted by the Commission. current Bar is too large, overly bureau- recommendations to the Court, the Commit- Recommendations in the key governmen- cratic, and insensitive to the needs of its tee must inform any incumbent seeking re- tal areas of admissions, discipline, and Bar rank-and-file members. Most Bar critics appointment if he/she is not among the structure include the following: agree that the Futures Commission's fail- candidates recommended for appointment - Mandatory Barfor Admissions and ure to substantively address the strong to the new term. Discipline-A majority of the commis- policy reasons for precluding the inte- At this writing, the comment period on sioners felt that admission into the profes- grated Bar from administering state police the Supreme Court's version of Rule 961 sion and discipline of licensees should be power regulatory activities in its final re- is scheduled to end on January 13. handled by a mandatory bar. The Commis- port will no doubt encourage further leg- "Futures Commission" Circulates In- sion expressed its opinion that admissions islative initiatives to abolish the integrated terim Report for Public Comment. On and discipline are proper obligations of Bar (see LEGISLATION). December20, the Commission on the Future the profession as a whole, and should be - Bar Exam Educational Require- of the Legal Profession and the State Bar performed and financially supported by a ments-The Commission recommended (also known as the "Futures Commission") mandatory organization composed of all that only graduates of ABA- or California- released an interim report featuring a de- lawyers in the state. approved law schools should be allowed scription of some of the Commission's rec- - Retain Integrated Bar Structure for to take the California Bar Examination. ommendations. The Futures Commission All Current Functions-By a 13-8 vote, -Admissions Reciprocity-The Com- was created in 1992 by then-Bar President the Commission decided to recommend mission agreed that licensure reciprocity Harvey Saferstein primarily in response to that the integrated structure of the State should be available to active members in AB 687 (W. Brown), a serious legislative Bar be maintained with its current func- good standing, licensed for at least three effort to abolish the "integrated" State Bar tions and limitations. The report acknowl- years in another jurisdiction, who meet (part state agency; part trade association; edged that this recommendation, along California's moral character and ethical mandatory membership) and replace it with with a competing recommendation to es- standards, and are from a state which af- a more traditional occupational licensing tablish a voluntary trade organization for fords reciprocity to California attorneys. agency within the Department of Consumer non-regulatory activities, "sparked an ex- -Mandatory Malpractice Insur- Affairs. Speaker Brown later amended his tended debate within the Commission." ance-The Commission agreed that pro- bill to create a 21 -member task force to study According to the report, the proponents of fessional liability insurance should be alternatives to the current structure of the the mandatory bar structure carried the mandatory for all active members of the Bar, Governor Wilson vetoed it because the day by pointing to "an array of functions State Bar; if the minimum level of insur- composition of the task force did not include [which are] inherent or important within ance is not maintained, a member would any gubernatorial appointees and because he the context of a lawyer's professional and be suspended from practice. This recom- thought a study "broader in scope and rep- public obligations" and arguing that "the mendation finally implements a longtime resentation than that contemplated by this mandatory bar was best equipped to help suggestion of State Bar Discipline Moni- bill is warranted." [12:4 CRLR 233] The leg- the profession meet those needs." The ma- tor Robert C. Fellmeth. [11:4 CRLR 210- islative and executive branch interest in re- jority also contended that "the unified 11] structuring the Bar served as a wake-up call structure still provides the best assurance . Transfer State Bar Court to Su- to the Board of Governors, however, and the that the profession will further the admin- preme Court-A majority of the Commis- Futures Commission was created. [13:2&3 istration of justice." Although the Com- sion also recommended that the State Bar CRLR 219; 13:1 CRLR 140-41] mission acknowledged that many com- Court, which is currently part of the State Although the original intent behind the plaints about the Bar are valid, it contended Bar (see above), should be under the aegis Futures Commission was a study of the that these problems can be readily dealt with of the California Supreme Court; such a future of the integrated State Bar in regu- and "the baby shouldn't be thrown out with transfer "may assist in strengthening the lating the legal profession in California, the bathwater." Some commissioners also judicial role in attorney regulation and alifornia Regulatory Law Reporter - Vol. 15, No. 1 (Winter 1995) 17 REGULATORY AGENCY ACTION

thereby increase public confidence in the more meaningful access to the legal sys- ment presents information the member system." tem for more Californians." Although a knows is false, deceptive, or the use of - Discipline as a Function of Judicial task force appointed by the Bar itself first which would violate Business and Profes- Branch-The Commission agreed that proposed the legal technician concept in sions Code section 6068(d); (3) whether the Bar's discipline function should con- 1988 [8:3 CRLR 129-30], the Board of the extrajudicial statement violates a law- tinue to be a function of the judicial branch Governors has recently refused to con- ful 'gag' order to protective order, statute, of government, and that fact should be sider any meaningful formulation of the rule of court, or special rule of confidenti- publicized to lawyers and members of the legal technician concept. [11:4 CRLR 211; ality); and (4) the timing of the statement." general public (many of whom erron- 11:3 CRLR 198; 11:2 CRLR 181] In releasing the proposed rule, State eously believe that the practitioner-con- At this writing, the public comment Bar President Donald Fischbach noted, trolled State Bar solely controls disciplin- period on the Futures Commission's in- "Limiting pretrial publicity is a most dif- ary decisions). terim report is scheduled to end on Febru- ficult task when trying to balance the right - Supreme CourtAppointment of Chief ary 28; the Commission is scheduled to of free speech and the accused's right to a Trial Counsel-The Commission recom- meet in March to consider any comments fair trial." Fischbach further stated that the mended that the Bar's Chief Trial Coun- submitted, and to approve its final report Bar "also may become involved in estab- sel, who is the organization's chief prose- which will be submitted to the Board of lishing additional rules which will affect cutor, be appointed by the California Su- Governors. the ability of the profession to try a case preme Court rather than by the elected Bar Proposes Trial Publicity Rule. in the media rather than in the courtroom." Board of Governors. On September 26, Governor Wilson signed The "substantial likelihood of material The interim report also describes sev- SB 254 (Kopp) (Chapter 868, Statutes of prejudice" language in Rule 5-120 is eral measures which failed in a close vote 1994), which Senator Quentin Kopp au- based on current ABA Model Rule 3.6 and or provoked lengthy discussion. These in- thored in direct response to what he calls the U.S. Supreme Court's plurality deci- clude a proposal to transfer the entire dis- "the staggering excesses of lawyers and sion in Gentile v. State Bar ofNevada, 498 cipline system to the Supreme Court, the witnesses in the O.J. Simpson criminal U.S. 1023 (1991) [11:4 CRLR 213-14; permanent disbarment concept (see below), case." SB 254 enacted Business and Pro- 11:3 CRLR 202], in which the Court con- limited practice without passage of the fessions Code section 6103.7, which re- sidered a disciplinary action that had been California Bar Exam for corporate coun- quires the Bar to formulate a trial publicity imposed on a Nevada lawyer by the Ne- sel licensed in another state, and the cre- regulation governing out-of-court state- vada Supreme Court for allegedly im- ation of a voluntary bar association to ments made by attorneys concerning civil proper extrajudicial statements. Nevada's administer the Bar's trade association ac- and criminal adjudicative proceedings. trial publicity rule contained both the tivities (see above). SB 254 further requires the Bar to consider "substantial likelihood of material preju- The Futures Commission also set forth ABA Model Rule of Professional Conduct dice" standard and a safe harbor provision. a number of recommendations in other 3.6 in its deliberation, and to submit the Although the Court reversed the state's areas, such as administration of justice rule to the California Supreme Court by disciplinary action because the attorney's resources (including delivery of legal ser- March 1, 1995. [14:4 CRLR 214] statements appeared permissible under the vices to the poor, the development of ef- On October 11, the Bar's Committee state's vague safe harbor provision, Chief fective forums for resolving legal dis- on Admissions and Competence pub- Justice Rehnquist's plurality opinion up- putes, and enhancement of public trust in lished proposed new Rule of Professional held the "substantial likelihood" test as the justice system), services which the Bar Conduct 5-120 for a 90-day public com- constitutional, "for it is designed to protect should provide to and for lawyers (such as ment period. As published, the rule would the integrity and fairness of a state's judi- advisory opinions on questions involving prohibit a lawyer who is participating or cial system, and it imposes only narrow professional ethics, competence educa- has participated in the investigation or lit- and necessary limitations on lawyers' tion, an orientation program for new ad- igation of a matter from, directly or indi- speech." mittees, and representation of the profes- rectly, making an out-of-court statement Due to the controversial nature of the sion in the state legislature), and services "that a reasonable person would expect to proposed rule, the Bar scheduled two pub- to the public and professionalism (includ- be disseminated by means of public com- lic hearings to receive comments-one on ing the promotion of alternative dispute munication," if the lawyer knows or rea- November 29 in San Francisco and an- resolution, the augmentation of funding sonably should know the statement will other on December 1 in Los Angeles. Out for legal aid programs, and the encourage- have a "substantial likelihood of materi- in force to oppose the rule were represen- ment of legal internships for students, pro ally prejudicing" an adjudicative proceed- tatives of the American Civil Liberties bono service by lawyers and law students, ing in the matter. The proposed rule, which Union of Southern California, California and public education by the legal profes- is applicable to both civil and criminal Attorneys for Criminal Justice, the Free- sion). A significant recommendation in cases and both plaintiff and defense coun- dom of Information Committee of the So- this area pertains to the creation of a new sel, also contains a "safe harbor" provision ciety of Professional Journalists, the Cal- category of legal practitioner called legal which lists several types of extrajudicial ifornia Newspaper Publishers Associa- technicians (also known as "independent statements which attorneys are permitted tion, and the Los Angeles County and San paralegals") which has long been advo- to make. The Discussion section of the Francisco bar associations. Most argued cated as a way to ensure access to basic proposed rule notes that "[wihether an that the rule is an unnecessary overreac- legal services and the justice system for extrajudicial statement violates rule 5-120 tion to a unique high-profile case; the lan- low- and middle-income citizens. Here, depends on many factors, including: (1) guage of the proposed rule provides no the Futures Commission stated that "with whether the extrajudicial statement pres- standard or definition of the term "mate- proper safeguards first put in place, the ents information clearly inadmissible as rial prejudice"; and the safe harbor provi- legal profession should support a broader evidence in the matter for the purpose of sion should be expanded to permit attor- range of legal technician services to the proving or disproving a material fact in neys to make statements in reaction to public which will help achieve greater, issue; (2) whether the extrajudicial state- recent publicity not initiated by that attor-

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ney or that attorney's client, when the been considered by the State Bar in recent consideration, or (3) were suggestions for attorney's statements are "explanatory and months and described in detail in previous substantive revisions which have been pre- informative." Among the very few who issues of the Reporter viously considered and rejected. Hawley spoke in favor of the rule was Senator - PermanentDisbarment. October 21 recommended that the Discipline Com- Kopp, who noted that California is one of marked the close of the public comment mittee adopt the changes in category (1) only a handful of states which have de- period on the Bar's proposed amendment above and reject the changes in category clined to adopt ABA Model Rule 3.6. Sen- to Rule 95 1(f), which would provide for (3). He noted that consideration of the ator Kopp also noted that the legal profes- the permanent disbarment of an attorney comments in category (2) would delay the sion is held in low esteem by the public, from the Bar. Amended Rule 951 (f) would implementation of the rules beyond Janu- and the Bar's refusal to responsibly curb prohibit an application for readmission or ary 1, 1995, and recommended that they its members' out-of-court statements would reinstatement if an attorney has been con- be considered as part of a future revisions exacerbate that problem. Finally, he em- victed of a felony involving moral turpi- process. phasized that lawyers are not simply ad- tude, or the attorney has been found cul- At its December 9 meeting, the Dis- vocates for their clients; they are officers pable of a violation of the State Bar Act cipline Committee adopted the Rules of of the court, and owe a duty to protect the and/or the Rules of Professional Conduct Procedure, subject to the changes in cate- integrity of judicial proceedings. involving the misappropriation of clients' gory (1) above. They became effective on The Bar accepted public comments on funds in an amount which would consti- January 1. proposed Rule 5-120 until January 9; at tute grand theft under California law. [14:4 - Monetary Penalties for Disciplined this writing, staff is analyzing the com- CRLR 211-12] Attorneys. At its December 9 meeting, the ments received and preparing to submit During the comment period, the Bar Discipline Committee was scheduled to the issue to the Board's Committee on received two comments in support of the discuss the comments received on its pro- Admissions and Competence at its Janu- proposed amendment, and seven comments posal to adopt Guidelines for the Imposi- ary 20 meeting, and to the Board of Gov- against it. Proponents of the amendment tion of Monetary Sanctions in Attorney Dis- ernors at its January 21 meeting. argued that it would increase the respect ciplinary Proceedings pursuant to Business Statute of Limitations Concerning of the public for the Bar and for attorneys, and Professions Code section 6086.13, Initiation of Disciplinary Action. At its as the public would be assured that an which became effective on January 1, October 29 meeting, the Discipline Com- attorney who has committed acts of moral 1994. The Guidelines would establish two mittee voted to release for public comment turpitude (such as stealing clients' trust ranges of fines for disciplinary violations its proposal to establish a disciplinary stat- funds) is never again permitted to practice of the State Bar Act and the Rules of ute of limitations, as recommended by the law. Opponents argued that the rule would Professional Conduct (RPC)-an upper DEC (see above); currently, there is no repudiate the concept of rehabilitation; re- range ($2,600-$5,000 per violation) ap- limit, and AB 1544 (W. Brown), which duce the motivation for lawyers to make plicable to the most serious statutory or would have imposed a one-year statute of restitution to their clients or engage in RPC violations, and a lower range ($100- limitations, was vetoed by Governor Wil- other rehabilitative activities; create an in- $2,500 per violation) applicable to all son in 1993. [13:4 CRLR 217] The pro- centive to resign with charges pending, other statutory or RPC violations. Under posal would require a revision to the Rules seek reinstatement five years later, and the Guidelines, the specific sanction to be of Procedure of the State Bar Court. defend the stale charges at that time; and imposed within the applicable range will The proposed amendment would re- forever deprive a lawyer of his/her liveli- be determined by the SBC judge upon quire the Bar to initiate a disciplinary pro- hood. application of specified criteria. Monetary ceeding "based solely on a complainant's Although the Discipline Committee sanctions will be paid into the Bar's Client allegation" of a violation of the State Bar was scheduled to discuss the proposed Security Fund, which assists in compen- Act or the Rules of Professional Conduct permanent disbarment rule at its Decem- sating clients who have been victimized within five years from the date of the ber 9 meeting, consideration of the matter by the intentional dishonesty of their law- alleged violation. The limitations period was postponed until January. yers. [14:4 CRLR 213; 14:2&3 CRLR 224- may be tolled under certain circumstances - Rules of Procedure for State Bar 25; 13:4 CRLR 215] However, the Discipl- set forth in the rule, including continuing Court Proceedings. At its August 1994 ine Committee postponed discussion of representation of the client/victim by the meeting, the Board of Governors adopted the monetary penalties guidelines until its respondent attorney, the pendency of civil, revised Rules of Procedure of the State March 1995 meeting. criminal, or administrative proceedings Bar of California; the rules were to be- - IOLTA Account Rulemaking to En- arising out of substantially the same facts come effective on January 1, 1995, subject hance Funding for Legal Services. In or circumstances, and the respondent's to a 90-day public comment period ending July, the Bar's Committee on Legal Ser- wilful concealment of facts constituting on December 1. These revised rules re- vices published for comment a proposed the violation or failure to cooperate with place the transitional and provisional rules change in the Rules Regulating Interest- the investigation of the allegations. The which were temporarily adopted when the Bearing Trust Fund Accounts for the Pro- proposed rule exempts from the five-year SBC was created in 1989. [14:4 CRLR 212- vision of Legal Services to Indigent Per- limitations period the authority of the Bar 13; 14:2&3 CRLR 226] sons, which govern the Bar's Legal Ser- to initiate a disciplinary proceeding based During the comment period, the Bar vices Trust Fund Program. The proposed on information received from a source received four comments. Chief Assistant rule would continue to require attorneys to independent of a time-barred complain- General Counsel Robert A. Hawley deter- deposit client trust account funds in regu- ant. mined that the comments either (1) sought lated financial institutions, but would per- At this writing, the comment period is technical corrections which do not submit the institution to hold the funds either scheduled to close on January 26. stantively change the rules, (2) contained in interest-bearing accounts or in certain Other State Bar Rulemaking. The suggestions for further revisions of a sub- high-quality money market funds which following is a status update on other pro- stantive nature which have not yet been are registered as a mutual fund pursuant to posed regulatory amendments which have considered or were deferred for future federal law and comply with Securities

California Regulatory Law Reporter - Vol. 15, No. 1 (Winter 1995) 17 REGULATORY AGENCY ACTION

and Exchange Commission regulations member knows is related to the member, guably include activities which a non-at- for money market funds. [14:4 CRLR 213; except where the client is related to the torney may perform (thereby expanding 14:2&3 CRLR 231] The comment period member or transferee." [14:2&3 CRLR 226- the definition of the practice of law). Other on the proposed rule change ended on 27; 14:1 CRLR 176; 13:4 CRLR 217] At this problematic areas identified were the in- October 20; at its December meeting, the writing, the Supreme Court has not acted ability of the Bar to discipline the dis- Board of Governors approved the amend- on the proposal. barred, because they are outside the Bar's ment. -Employment of Disbarred, Sus- jurisdiction; and the notice requirement to - Inactive Enrollment for Failure to pended, Resigned, or Involuntarily Inac- clients where the services to be performed Pay Fee Arbitration Awards. At its Au- tive Lawyers. On September 30, the public do not involve legal services, which was gust 1994 meeting, the Board of Gover- comment period closed on the proposal of generally perceived to discourage poten- nors adopted new Chapter 20 (Rules 840- the Bar's Discipline Committee and its tial employers from hiring disciplined at- 851) of the Transitional Rules of Proce- Committee on Admissions and Compe- torneys and create constitutional challenges. dure on an emergency basis to enable it to tence to adopt a revised version of Rule Admissions Committee members agreed implement its new authority under AB 1-311, regarding the employment of dis- that the Bar should receive notice of the 1272 (Connolly) (Chapter 1262, Statutes barred, suspended, and inactive lawyers. employment and that some notice should of 1993). That bill added subsection (d) to [14:4 CRIB 214; 14:2&3 CRLR 227; 14:1 be provided to clients, but they disagreed Business and Professions Code section CRLR 1761 on the implementation of the rule. Unable 6203; effective January 1, 1994, the new As published by the committees, Rule to resolve the issues, the Admissions Com- provision authorizes the Bar to enforce the 1-311 would prohibit a State Bar member mittee decided to refer the rule back to the awards of its Mandatory Fee Arbitration from employing, associating profession- Discipline Committee. Unit by placing the attorney on involun- ally with, or aiding a person the member At its December 9 meeting, the Dis- tary inactive status if he/she fails to com- knows or reasonably should know is a cipline Committee entertained a slightly ply with a binding award. [14:4 CRL? 213; disbarred, suspended, resigned, or invol- revised version of the proposal, which 13:4 CRLR 218] Following its emergency untarily inactive member to perform the would require a Bar member who hires a adoption of the proposed rules, the Bar following on behalf of the member's cli- disciplined lawyer to "serve.. .written no- published them for public comment until ent: (I) render legal consultation or advice tice upon each client on whose specific November 28; thereafter, the rule changes to the client; (2) appear on behalf of the matter such person will work, prior to or were approved by the Discipline Commit- client in any hearing or proceeding or be- at the time of employing such person to tee as part of the new Rules of Procedure fore any judicial officer, arbitrator, medi- work on the client's specific matter." of the State Bar of California (see above) ator, court, public agency, referee, magis- However, the Discipline Committee also and became effective on January 1. trate, commissioner, or hearing officer; (3) postponed consideration of the rule, and - California Legal Corps Rules. At its appear as a representative of the client at directed staff to research several issues, July 1994 meeting, the Board of Gover- a deposition or other discovery matter; (4) including the number of occurrences of nors approved proposed rules to govern negotiate or transact any matter for or on this type of incident and other ways of the California Legal Corps (CLC), a mul- behalf of the client with third parties; (5) addressing these concerns. tifaceted umbrella organization whose receive, disburse, or otherwise handle the - Copies of Significant Documents purposes are to enhance access to the legal client's funds; or (6) otherwise engage in for Clients. In September 1993, the Board system, encourage attorneys to provide activities which constitute the practice of of Governors forwarded proposed new legal services to those in need, and provide law. The revised rule would require a Rule of Professional Conduct 3-520, which funding and support for projects that em- member to provide specified notice to af- would require attorneys to provide to a ploy unique and creative ways to achieve fected clients and to the State Bar prior to client, upon request, one copy of any sig- these goals. The rules provide for the cre- employment of such a person, and to the nificant document or correspondence re- ation of a Legal Corps Commission to State Bar following termination of the em- ceived or prepared by the attorney relating administer the rules and all provisions of ployment of such a person. to the employment or representation, to law regarding the CLC and allocate CLC During the comment period, the Bar the California Supreme Court for review funds. [14:4 CRLR 213-14; 14:2&3 CRLR received 19 comments, of which only five and approval. [14:1 CRLR 176; 13:1 CRLR 225-26; 13:2&3 CRL? 218-19] These rules supported the proposal. Those in opposi- 142] must be approved by the California Su- tion raised the following points: (1) the In May 1994, the Supreme Court re- preme Court before they become effec- proposed rule is unnecessary because its turned the proposed rule to the Bar, with tive; at this writing, staff has yet to forward provisions are contained in existing sec- instructions to release it for comments the rules to the court. tions of the Business and Professions from California superior and appellate * Gifts to Attorneys From Clients. On Code and the Rules of Professional Con- courts, particularly with regard to the po- October 19, the Bar forwarded its pro- duct; (2) the rule would restrict "tainted" tential fiscal impact of the proposed rule posed amendments to Rule of Professional attorneys from engaging in certain activi- on appellate courts in criminal cases in Conduct 4-400, regarding gifts to attorneys ties which non-attorneys are free to per- which counsel has been appointed by the from their clients, to the California Supreme form; and (3) the rule would make it al- court for indigent defendants. According Court for approval. As amended, the rule most impossible for a "tainted" attorney to to the Court, "[r]ecords and transcripts on reads as follows: "[A State Bar] member find employment in a law firm setting. appeal may consist of tens of thousands of shall not: (A) induce a client to make any At its October 28 meeting, the Com- pages. Such material arguably would be gift, including a testamentary gift, to the mittee on Admissions and Competence 'significant' to any appeal and it would member or to a person whom the member discussed the comments received and appear that the cost of complying with the knows is related to the member; or (B) pre- other policy considerations raised by the proposed rule, which would be passed on pare an instrument which provides for any proposed rule. The Committee determined to the courts, could be considerable." The gift from a client, including a testamentary that the major concern is the scope of the Court suggested that the Bar may wish, for gift, to the member or to a person whom the rule's prohibited activities in that they ar- example, to determine whether a defini-

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tion of the term "significant" or some tors. In response to Keller, the Bar adopted Amendment rights of objecting members. other means may be used to describe more Article IA, procedures under which it is Rather, they provide interim relief de- precisely "an attorney's duty in the crimi- required to analyze and categorize its ex- signed to counterbalance the power of a nal appellate context or even in other in- penditures as "chargeable" or "non-charge- labor union or integrated bar association stances in which an onerous fiscal burden able," and offer all Bar members an oppor- to exact fees without first establishing that may be placed on courts or counsel." Ad- tunity to decline to pay the "non-charge- such fees will be used for legitimate or- ditionally, the Court suggested that the Bar able" portion (the so-called "Hudson de- ganizational purposes." The Bar has filed contemplate including language in the duction"). Under Article IA, challengers a petition seeking review by the California rule to state that the rule does not super- may dispute the Bar's calculation of the Supreme Court of the Third District's de- "chargeable" sede any other statutory orjudicially-cre- portion, after which the Bar cision. ated protective orders or other nondisclo- must place the disputed amount in escrow; On December 28, a 4-3 majority of the sure agreements. if the Bar refuses to amend its calcula- California Supreme Court reversed the Accordingly, the Bar released the pro- tions, the matter is submitted to binding First District Court of Appeal's decision in posal for public comment in August, and arbitration, "subject to such appropriate Flatt v. Superior Court (Daniel, Real closed the public comment period on No- review as determined by the Supreme Court." Party in Interest), 9 Cal. 4th 275. In this vember 21. At this writing, staff is analyz- For the 1991 dues year, the Bar com- case, William Daniel approached attorney ing the comments received and formulat- puted the "non-chargeable" portion of its Gail Flatt and asked her to handle a possi- ing a recommendation to the Bar. expenditures as amounting to $3 per mem- ble legal malpractice action against Don- ber. Plaintiffs paid their Bar dues under ald Hinkle, Daniel's former attorney. Less LEGISLATION U protest and challenged the calculation, con- than one week later, Flatt advised Daniel SB 60 (Kopp), as introduced January tending that the actual "non-chargeable" she could not represent him because her 3, would implement the findings of the amount was $87 per attorney. All objectors firm had a conflict (it represented Hinkle DEC report (see above) by limiting the then participated in a single, consolidated in an unrelated action). Two years later, total amount of annual Bar licensing fees hearing before an arbitrator who ordered the Daniel sued both Hinkle and Flatt for legal to $378 ($100 less than the Bar's current Bar to refund an additional $4.36 per chal- malpractice-his claim against Flatt was fee of $478 per year), with correspond- lenger. [12:2&3 CRLR 270] Instead of that she failed to warn him of the applica- ingly lower fees imposed on attorneys ad- seeking direct review of the arbitration ble statute of limitations governing his mitted for less than three years. It would award, plaintiffs commenced this action in claims against Hinkle. Following discov- also require the Bar to conduct a plebescite superior court, alleging violation of their ery, Flatt moved for summary judgment on of its members to determine whether they rights to freedom of speech and associa- grounds she owed no duty to Daniel because favor changing the State Bar from a man- tion, 42 U.S.C. section 1983, and Article no attorney-client relationship had ever been datory to a voluntary association, and re- 1, sections 2-3 of the California Constitu- established. The trial court declined to grant port the results to the legislature by March tion. [12:4 CRLR 237] The Bar demurred, Flatt's motion, on grounds there were tri- 1, 1996. [S. Jud] claiming that the action is barred by the able issues of fact material to whether an binding effect * LITIGATION of the arbitrator's decision attorney-client relationship had arisen be- as provided in the Bar's procedures; the tween Flatt and Daniel. Flatt appealed; the In Brosterhous, et al. v. State Bar of superior court sustained the demurrer in First District affirmed. [14:2&3 CRLR 229- California,29 Cal. App. 4th 963 (Oct. 27, January 1993. [13:2&3 CRLR 223-24] 30] 1994), the Third District Court of Appeal On appeal, the Third District decided Writing for the majority, Justice Ar- dealt a serious blow to the Bar's desire to that the issue is "whether Article IA, as- mand Arabian disagreed with the lower limit challenges to its calculation of the suming it was lawfully adopted, estab- courts' assumption that the question of expenditures which may be charged to Bar lishes the exclusive remedy for adjudica- Daniel's client status is material to the members in the form of annual dues. Al- tion of a Keller challenge to State Bar dispositive issue raised by Flatt's motion though the trial court upheld the Bar's expenditures." Citing a long line of U.S. for summary judgment. Acknowledging procedures which establish binding arbi- Supreme Court cases holding that a bind- that neither the parties' research nor its tration as the method of challenging the ing arbitration procedure does not pre- own had uncovered case authority squarely propriety of the Bar's dues calculations, clude an independent judicial action alleg- on point, the majority held that an attorney's the Third District reversed and ruled that ing violation of statutory rights, the Third duty of undivided loyalty to an existing the Bar's binding arbitration procedure District held that the Bar may not confine client negates any duty on the part of the does not preclude adjudication of alleged the challengers' section 1983 claims to arbi- attorney to inform a prospective client of violations of the challengers' first amend- tration; "Congress intended such claim to be the statute of limitations applicable to a ment rights in a judicial forum. judicially enforced." To emphasize its proposed lawsuit or even of the advisabil- This dispute has its roots in Keller v. point, the court cited several cases (includ- ity of seeking alternative counsel. The ma- State Bar of California,496 U.S. 1 (1990) ing Hudson) in which an arbitration pro- jority warned that its holding is narrow [10:2&3 CRLR 215-16], in which the U.S. cess had been developed precisely to de- and confined to the facts of this case, in Supreme Court struck down the Bar's use cide first amendment claims; according to which the attorney is confronted "with a of compelled membership dues for ideo- the Third District, "even an arbitration mandatory and unwaivable duty not to logical or political purposes unrelated to scheme devised specifically to adjudicate represent the second client in light of an the Bar's primary purposes of "regulating First Amendment claims, as in Hudson.... irremediable conflict with the existing cli- the legal profession [or] improving the will not preclude an independent section ent and acts promptly to terminate the quality of legal services." The Court also 1983 judicial action." relationship after learning of the conflict. required the Bar to adopt adequate proce- In sum, the court held that "the proce- We caution the bar that, in the absence of dures, such as those outlined in Chicago dures outlined in Hudson and applied to such an irreducible conflict and manda- Teachers Union v. Hudson, 475 U.S. 292 the State Bar in Keller were never in- tory duty to withdraw, and attorney's duty (1986), to protect the interests of objec- tended to be a final adjudication of First to advise a new or even a 'prospective' alifornia Regulatory Law Reporter ° Vol. 15, No. 1 (Winter 1995) 17, REGULATORY AGENCY ACTION

client, once the nonengagement decision * FUTURE MEETINGS has been taken, may well be more exten- sive...." January 20-21 in San Francisco. Justice Joyce Kennard authored a sharp March 10-11 in San Francisco. dissent which found fault with the majority's April 7-8 in Los Angeles. entire approach. She noted that the majority May 19-20 in San Francisco. failed to clearly address the two distinct issues presented in the case: whether Flatt owed a duty of care to Daniel, and-if so- whether that duty obligated herto advise him about the statute of limitations when she terminated her representation of him. In Jus- tice Kennard's view, "once one assumes, as does the majority, that Daniel was Flatt's client, the conclusion is inescapable that Flatt owed a duty of care to Daniel." If that is true, then Flatt owed the same duty of care to Daniel as she did to Hinkle. "Instead, the majority myopically focuses solely on Flatt's duty to Hinkle, and holds that her duty of loyalty to Hinkle 'absolved her of a duty to provide any advice to Daniel adverse to the interests of Hinkle."' Justice Kennard concluded that "the effect of the majority's decision is to create two classes of clients, and to hold that the duties owed to the first- engaged client (here, Hinkle) not only can negate the duties owed to the second-engaged client (here, Daniel) but can also im- munize the lawyer from liability for injuring the second-engaged client to advance the interests of the first-engaged client. This result is unprecedented in the law...I cannot agree with the majority...that the reason Daniel should lose is that he belongs to a new species of client to whom lawyers owe no duty." In ITT Small Business Finance Cor- poration v. Niles, 9 Cal. 4th 245 (Dec. 28, 1994), the California Supreme Court affirmed the Second District Court of Appeal's holding which interprets Code of Civil Procedure section 340.6 regarding the one-year statute of limitations on legal malpractice actions. Section 340.6 provides that legal malpractice actions commence running when the client discovers or should have discovered the facts constituting the malpractice; however, the statute is tolled during the time the client "has not sustained any injury." In this case involving a challenge to the adequacy of loan documents prepared by an attorney, the Second District and the Supreme Court held that the statute of limitations in a transactional legal malpractice action commences upon the entry of adverse judgment, settlement, or dismissal of the underlying action. [14:2&3 CRLR 230] The court again noted that its holding is narrow, and is limited to transactional legal malpractice cases where the adequacy of documentation is the subject of the dispute.

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