2002 California State Bar Meeting PULLOUT SECTION

LACBA 2002-03Directory 2002 California State Bar Meeting PULLOUT SECTION

OCTOBER 2002, VOL.25, NO.7 / $3.00

Los Angeles lawyers EARN MCLE CREDIT Mark Mermelstein and Judicial Joel M. Athey offer Review of strategies for dealing with witnesses who invoke Arbitration the Fifth Amendment Decisions in civil cases page 35 page 28 Contractual Attorney’s Fees In the Fifth page 12 Distinguishing Dimension Dicta page 17 Offers to Compromise page 22 L EXISN EXIS AND THE L OS A NGELES C OUNTY B AR A SSOCIATION

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*The LexisNexis total research system “free trial offer” is available to law ﬁrms in the United States who do not subscribe to the LexisNexis online services as of 8/1/2002. Additional restrictions may apply. Current LexisNexis customers should contact their account representative for information. LexisNexis and the Knowledge Burst logo are trademarks of Reed Elsevier Properties Inc., used under license. It’s How You Know is a trademark of LexisNexis, a division of Reed Elsevier Inc. © 2002 LexisNexis, a division of Reed Elsevier Inc. All rights reserved. AL4806 page 28 Contents Los Angeles Lawyer departments

The Magazine of the 12 Practice Tips How prevailing parties may obtain Los Angeles County contractual attorney’s fees Bar Association By Donald P. Wagner and Megan L. Wagner October 2002 17 Practice Tips Vol. 25, No. 7 The distinction between judicial dicta and obiter dicta By Robert G. Scoﬁeld cover 22 Practice Tips Making effective use of Section 998 offers to compromise By Frank E. Marchetti and Eric A. Schneider

43 Ethics Opinion No. 508 Insurance coverage—contacting a defendant’s insurer

45 Computer Counselor Using antivirus strategies to protect features law ﬁrm data By Benjamin Sotelo and James Gillen 28 In the Fifth Dimension 47 By the Book Motions to delay or even retake a deposition can resolve the The Truth about Lying Reviewed by Elizabeth J. Church dilemma that frequently arises when a critical witness invokes the Fifth Amendment in a civil lawsuit

columns By Mark Mermelstein and Joel M. Athey Mark Mermelstein (left) and 11 Barristers Tips Joel M. Athey are associates in Writing motions for summary judgment 35 Uncertain Appeal the litigation practice group By Rebecca Woodson Neither federal nor state courts have rendered a final ruling on and the business crimes and 52 Closing Argument the enforceability of expanded judicial review provisions in Educating clients on ADR arbitration agreements investigations practice group alternatives By Robert F. Cochran Jr. in the Los Angeles office of By Ronald M. Greenberg Plus: Earn MCLE credit. MCLE Test No. 109, Gibson, Dunn & Crutcher. In 10 Letters to the Editor sponsored by West, begins on page 39. their article, “In the Fifth 49 Classiﬁeds

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Cover photo: Tom Keller LosAngelesLawyer

VISIT US ON THE INTERNET AT www.lacba.org/lalawyer Southland E-MAIL CAN BE SENT TO [email protected] EDITORIAL BOARD Chair Knows You Better ABILIO TAVARES JR. (In Memoriam) Chair Pro Tem With many financial institutions to choose from, it’s sometimes STEVEN HECHT hard to determine who has your best interests in mind. While most Articles Coordinator offer competitive rates and a wide array of financial products, odds JERROLD ABELES DANIEL L. ALEXANDER are you’ll just become another account number. HONEY KESSLER AMADO LINDA A. BURROWS ROBERT J. COMER At Southland Credit Union, everything we do revolves around CHAD C. COOMBS KEITH E. COOPER our Members. How can you be sure? Because as a not-for-profit ANGELA J. DAVIS financial institution, we think of you first – we don’t have HEATHER DAVIS KERRY A. DOLAN stockholders to worry about. Our only concern is providing GORDON ENG JENNIFER E. FISHER you with the best financial services around: JOSEPH S. FOGEL MICHAEL E. FOX ■ STUART R. FRAENKEL 24-Hour Southland eBranch JOHN M. GALLAGHER J. SUSAN GRAHAM Manage your finances online whenever you want DEAN HANSELL from the comfort of your home or office. KATHERINE M. HIKIDA MAURICE SYLVAN KANE JR. JEFFREY ERIC LANGAN ■ No-Fee Southland ePay JOHN P. LECRONE HYACINTH E. LEUS Pay your bills electronically. With Southland ePay, your PAUL MARKS PHILIP S. MILLER payments will always be on time, with peace of mind. ELIZABETH MUNISOGLU RICHARD H. NAKAMURA JR. ■ ® KAREN NOBUMOTO Southland Visa Check Card DENNIS PEREZ Accepted at over 21 million locations worldwide. GERALD F. PHILLIPS EDWARD POLL The purchase is simply deducted from your GARY RASKIN JACQUELINE M. REAL-SALAS Southland Checking Account. SUE CAROL ROKAW KURT L. SCHMALZ ■ JACOB STEIN Loans R. BRUCE TEPPER JR. Great rates for Vehicle Loans, Home Loans and everything PATRIC VERRONE MARIA D. VILLA in between. We have the right loan for your needs. JOEL B. WEINBERG

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We Do Business In 896-6503. Periodicals postage paid at Los Angeles, CA and additional Accordance With the mailing offices. Annual subscription price of $14 included in the Federal Fair Housing Association membership dues. Nonmember subscriptions: $28 annually; Law and the Equal Credit Opportunity Act single copy price: $3 plus handling. Address changes must be submitted six weeks in advance of next issue date. POSTMASTER: ADDRESS SERVICE REQUESTED. Send address changes to Los Angeles Lawyer, P.O. Box 55020, Los Angeles CA 90055. Copyright ©2002 by the Los Angeles County Bar Association. All rights reserved. Reproduction in whole or in part without permission is SOUTHLAND CREDIT UNION prohibited. Printed by Banta Publications Group, Liberty, MO. Member Business Publications Audit of Circulation (BPA). The opinions and positions stated in signed material are those of the Southern California’s Preferred Credit Union authors and not by the fact of publication necessarily those of the Association or its members. All manuscripts are carefully considered by the Editorial Board. Letters to the editor are subject to editing.

4 LOS ANGELES LAWYER / OCTOBER 2002 YOUR JOB IS TO MATCH THE RIGHT SHIPPING CHARGE WITH THE RIGHT CLIENT.

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When you can’t do it yourself, but you still need a brief or ASSOCIATION OFFICERS: memo done—and done well, by experienced attorneys who President are skilled writers—turn to Quo Jure Corporation. MIRIAM ARONI KRINSKY President-Elect ROBIN MEADOW Quo Jure provides premium legal writing and research services Senior Vice President to practicing attorneys. Our work has contributed to million- JOHN J. COLLINS dollar settlements and judgments. Oppositions to motions for Vice President EDITH R. MATTHAI summary judgment are our specialty. Call for a free analysis TM Assistant Vice President and estimate. The Winning Edge BERNARD E. LESAGE Assistant Vice President DANETTE E. MEYERS Treasurer CHARLES E. MICHAELS Executive Director REVILLA RICHARD WALCH INVESTIGATIVE BOARD OF TRUSTEES STEPHEN P. AJALAT GROUP DAVID B. BABBE Part of the O&R Enterprises, Inc. family of professional services BARBARA J. BACON LINDA D. BARKER ELIZABETH M. CALCIANO • ACTIVITY CHECK • INTELLECTUAL PROPERTY • PROCESS SERVICE SCOTT W. CARLSON • AOE/COE • LOCATES • PUBLIC RECORDS FRANK W. CHEN • ASSET SEARCH • PERSONAL PROTECTION • SUB-ROSA RICHARD E. DROOYAN • BACKGROUND CHECK • PRE-EMPLOYMENT • SURVEILLANCE MICHAEL S. FIELDS • ELECTRONIC COUNTER SCREENINGS • WITNESS ERNESTINE FORREST INTELLIGENCE • POLYGRAPH STATEMENTS CRISTINA E. PEREZ GONZALEZ LYLE F. GREENBERG 123 South Jackson Street, Glendale, CA 91205 • PI-15357 DANIEL GRUNFELD (818) 551-7111 • Fax (818) 551-7101 • National Toll-Free (800) 901-5858 RITA GUNASEKARAN BRIAN S. KABATECK JEFFREY G. KICHAVEN DENA A. KLEEMAN JOEL W.H. KLEINBERG PHILIP H. LAM LAWRENCE E. LEONE JAMES C. MARTIN GRETCHEN M. NELSON JENNIFER F. NOVAK DOUGLAS WILSON OTTO LISA K. KIM PAI ANN I. PARK AMY M. PELLMAN KENNETH G. PETRULIS MARGARET P. STEVENS MARIA E. STRATTON IVAN TETHER COMM'R MELISSA N. WIDDIFIELD

AFFILIATED BAR ASSOCIATIONS BEVERLY HILLS BAR ASSOCIATION BLACK WOMEN LAWYERS ASSOCIATION OF LOS ANGELES, INC. CENTURY CITY BAR ASSOCIATION CONSUMER ATTORNEYS ASSOCIATION OF LOS ANGELES CULVER/MARINA BAR ASSOCIATION EASTERN BAR ASSOCIATION OF LOS ANGELES COUNTY GLENDALE BAR ASSOCIATION ITALIAN AMERICAN LAWYERS ASSOCIATION OF LOS ANGELES COUNTY JAPANESE AMERICAN BAR ASSOCIATION OF GREATER LOS ANGELES JOHN M. LANGSTON BAR ASSOCIATION KOREAN AMERICAN BAR ASSOCIATION OF SOUTHERN CALIFORNIA LAWYERS’ CLUB OF LOS ANGELES COUNTY LHR: THE LESBIAN AND GAY BAR ASSOCIATION LONG BEACH BAR ASSOCIATION MEXICAN AMERICAN BAR ASSOCIATION PASADENA BAR ASSOCIATION SAN FERNANDO VALLEY BAR ASSOCIATION SAN GABRIEL VALLEY BAR ASSOCIATION SANTA MONICA BAR ASSOCIATION SOUTH ASIAN BAR ASSOCIATION OF SOUTHERN CALIFORNIA SOUTH BAY BAR ASSOCIATION OF LOS ANGELES COUNTY SOUTHEAST DISTRICT BAR ASSOCIATION SOUTHERN CALIFORNIA CHINESE LAWYERS ASSOCIATION WHITTIER BAR ASSOCIATION WOMEN LAWYERS ASSOCIATION OF LOS ANGELES

6 LOS ANGELES LAWYER / OCTOBER 2002 Is A Malpractice Insurance Crisis Looming In Your Horizon? Are You Ready?

11 carriers have withdrawn from the California market. Will your carrier be next? The changes in the marketplace are troubling. It is an unknown future. Non-renewals are commonplace. Some carriers can’t secure sufficient reinsurance to operate their professional liability programs. A major carrier was recently declared insolvent. Other carriers have been downgraded by A.M. Best. Severe underwriting restrictions are now being imposed. Dramatic rate increases are certain. It’s all very unsettling. Be Prepared. Be Informed. Lawyers’ Mutual Policyholders Are.

CHECKLIST You owe it to yourself to find the answers to these critical questions! Will your carrier still be writing professional liability policies in California at your next renewal? Will your carrier impose a substantial rate increase at your next renewal due to unstable market conditions? Will your carrier continue to insure “your type” of practice at your next renewal? Will your carrier leave the marketplace because they can’t secure sufficient reinsurance for their professional liability program? Will your carrier offer you a tail of unlimited duration if they decide to leave the market? Our policyholders don’t need to worry about these questions. Do you? Secure Your Future. Insure With Lawyers’ Mutual. Investigate Lawyers’ Mutual. Call us directly at (800) 252-2045. Find us at www.lawyersmutual.com Email us at [email protected]

LAWYERS’ MUTUAL INSURANCE COMPANY 134 N. Kenwood Street Burbank, CA 91505-4263 from the chair

By Steven Hecht

ith the death of Bil Tavares a dull including former chairs, members of the ache has settled in the heart of the Editorial Board, and professional staff— WLos Angeles Lawyer community. We shared an evening of memories with Bil’s miss him very much. family, coworkers, friends, and clients. Bil’s Abilio “Bil” Tavares Jr. was to be chair of only brother, Joseph Tavares, who lives in the Los Angeles Lawyer Editorial Board for the Rhode Island, and one of his two sisters, 2002-03 bar year. Bil walked out of his down- Beatrice Betley, who lives in Orange County, town office at lunchtime on shared personal memories of Monday, July 15, suffered a heart Steven Hecht their brother, their parents, and attack, and was taken by ambu- practices trans- their special experiences grow- lance to Good Samaritan Hos- actional business ing up together. These were the pital, where he died in the early law in Century City. happy, funny, and sweet remem- afternoon. Bil was 46. His funeral He is the chair pro brances that one often hears only was held that week on Saturday tem of the 2002-03 at the most poignant moments. near his family home in East Los Angeles Lawyer They told us of the family’s pride Providence, Rhode Island. Editorial Board. in Bil’s many academic and other Bil had officially begun his achievements. They told us of work as chair on July 1. He had Bil’s love for his work with the met with the professional staff to magazine and how it was a very plan his year. He had written and circulated special part of his life. Bil’s fellow lawyers at his introductory memo to this year’s Editorial his firm spoke of his repeated willingness to Board. He had written his first From the help on matters that were not his direct Chair column, published in the July/August responsibility and of his caring attention to the 2002 issue, in which he wrote of his honor in development of the skills of the firm’s younger being chosen to lead the Editorial Board and lawyers. Bil’s clients spoke of his careful of his privilege in serving as chair. Bil was a counseling and of his good judgment. member of the Editorial Board for six years, When I chaired this year’s first meeting of during which he was one of the coordinating the Editorial Board, I was filled with mixed editors of the annual Entertainment Law emotions. The Association had asked me if I Issue, and was last year’s articles coordinator. would return for this coming year. I will. I will Bil was excited to be chair and we were do so with sadness but with enthusiasm as I excited, too. We were looking forward to be now work closely again for a second year led by him and to work with him. with so many friends and talented colleagues. Bil Tavares was a wonderful person. He I was incorrect when I wrote earlier that Bil was a thoughtful person. He was a kind per- Tavares was to have been our chair for this son. He was a very good lawyer. For many of coming year. I will edit myself. Bil is our chair us who knew him less well, we saw these for this year. As chair pro tem I will do my qualities but did not experience the fullness very best for all of you to be certain that Bil’s of them. For his family, friends, and clients year is our strongest year ever. ■ who knew him fully, they experienced the richness of his qualities, and having shared his life with him, they shared some of their thoughts of Bil with us. On the afternoon of July 30, we held our first meeting of the new editorial year. We spoke of Bil, remembering his friendliness, his openness, his humor, and the excellence with which he edited so many articles with an always generous spirit. On the evening of July 30, Bil’s law firm, Negele & Associates, hosted a celebration of Bil’s life. Those of us from the magazine—

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I found Steven Hecht’s column (From the claims history). The workers’ compensation MP3.com or the Napster case. A review of Chair, LAL, June 2002) on why the public attorneys are going to strangle California the case on the federal court Pacer system or lacks respect for lawyers somewhat puzzling. business. a call to our offices would have quickly My limited experience and observations Here are six suggestions: revealed this fact. make it abundantly clear: There are too many 1) The loser pays all costs in personal injury Second, and more important, the EFF has greedy lawyers working to perfect the art of litigation. never claimed that the sharing of copyrighted lying at the public’s expense while 1) pursu- 2) The state, county, and municipalities should works in peer-to-peer systems always consti- ing cases that often have little merit and only have sovereign immunity except in the most tutes “expression.” The EFF has instead serve to enrich the attorneys, and 2) pushing egregious of circumstances, such as criminal argued that technologists should not have to unnecessary and overly complex legislation or grossly negligent conduct by government beg permission from content holders when- in order to create new legal subspecialties. employees. ever they create new ways for consumers to Let me provide four examples: 3) Class action attorneys only get paid on a interact with copyrighted works. Specifically, 1) I was recently chosen to serve as an alter- reasonable hourly basis or no more than 5 per- we have argued that the Morpheus computer nate juror in a case held at a courthouse in cent of all judgments in excess of $10 million. program (owned by Streamcast Networks, Redondo Beach. The plaintiff claimed she The attorneys receive nominal fees unless whom we do represent) is protected by the was injured while delivering a pizza to the the class members recover a reasonable per- Betamax doctrine because it is capable of defendant’s house in Palos Verdes after the centage of their loss. substantial noninfringing uses. Our briefs on defendant’s dogs barked at her and allegedly 4) No juries in civil trials and only in serious this issue before the court in the MGM v. pushed her over. There were no witnesses, felony criminal trials. Grokster case are available on our site at http: and no proof of an actual medical injury was 5) Jury instructions in criminal cases that //www.eff.org/IP/P2P/MGM_v_Grokster/. furnished to the jury by the two MDs who tes- introduce DNA evidence include a statement In addition, the exact nature of our claims tified. The plaintiff had been living in her car to the effect that there is a billion-to-one are a matter of public record in our court fil- with her two daughters prior to bringing the chance that two individuals have the same ings and are available through a Google suit and had tried to secure permanent dis- DNA. search or a call to our offices. It is difficult to ability before retiring from the U.S. Air Force. 6) The cost of certain nonroutine investiga- believe that anyone checked the veracity of That jurors must take four days out of tions (for example, regarding private plane this statement before you printed it. their work schedules to hear these types of crashes) performed by governmental agen- Note that the EFF, along with the Dean of cases, and that taxpayers fund such litiga- cies be netted out against the amount of the Stanford Law School, Kathleen Sullivan, 46 tion, are outrages. No other profession is em- judgment awarded to personal injury plaintiffs law professors, the ACLU, and many others powered to take over taxpayers’ lives in order and their attorneys. have raised arguments concerning the loss of to perpetuate itself at the public’s expense. These are six pragmatic and equitable freedom of expression due to provisions of the Unfortunately, this was not an aberration but solutions that the State Bar and Sacramento Digital Millennium Copyright Act, but this is an example of a typical fact pattern. should work toward implementing. Regret- issue is quite separate, legally and factually, 2) Class actions are another abuse. Paying 30 tably, self-interest and greed will prevent this. from the legal issues that arise from peer-to- to 40 percent of a multimillion-dollar verdict Daniel L. Hess peer systems. See, e.g., http://www.eff.org/IP reached against publicly traded corporations /Video/MPAA_DVD_cases/. to the trial attorneys provides little benefit for Cindy A. Cohn the class members. The EFF and Napster EFF Legal Director Have you ever actually tried to be included I read with interest Donald E. Biederman’s as a class member? The attorneys and their article titled “Entertainment Law: Playing firms are unresponsive and have no regard for Catch-up with New Technologies” in the Correction you as an individual class member. Self-enrich- March 2002 edition of Los Angeles Lawyer, In “The Need to Rethink Reifler” (Closing ment is the objective. until the point where he mentioned my organ- Argument, LAL, April 2002), the case Reifler 3) The personal injury plaintiff judgment grab ization, the Electronic Frontier Foundation, v. Superior Court, 39 Cal. App. 3d 479 (1974), bags permitted by the State of California and and made unfounded factual assertions. was cited incorrectly. Los Angeles Lawyer City and County of Los Angeles are a con- Biederman states: “Self-styled free regrets the error. tinuing abuse of taxpayers’ resources. How speech/fair use advocates such as the many injuries resulting from high- or low- Electronic Frontier Foundation had taken up speed police and sheriff chases must Los the cause of MP3.com and Napster, claim- Articles Solicited Angeles have to pay for in order to have daily ing that the practice of taking an artist’s Los Angeles Lawyer encourages the sub- media fodder? recording and transmitting it willy-nilly to mission of well-researched legal articles. 4) The workers’ compensation premium at strangers around the world somehow con- Manuscripts and query letters should be sent our company is increasing from $370,000 last stituted ‘expression.’” to: Los Angeles Lawyer, P. O. Box 55020, Los year to almost $800,000 this year. It is costing This statement is false and could have Angeles, CA 90055. us about $2,000 per employee per year just for been corrected by rudimentary fact checking. Samuel Lipsman this coverage (and we have an excellent First, the EFF played no role in either the Publisher and Editor

10 LOS ANGELES LAWYER / OCTOBER 2002 barristers tips

By Rebecca Woodson

Writing Motions for Summary Judgment Clarity of fact and argument can dispel judicial doubt regarding whether a triable issue exists

t is easy to experience anxiety when considering the significance getting into a car without knowing where you are going. In short, a to your client of filing a motion for summary judgment. As a motion for summary judgment will be defeated by a triable issue of Iresult, a motion for summary judgment is perhaps the most feared fact, so the summary of the undisputed facts—in clear, concise lan- pleading of them all. This pleading, however, is less daunting if the guage, supported by easily identifiable evidence—is paramount. attorney who is filing it remembers some basic rules. Recently, Judge For this reason, state your facts as simply as possible: “Mr. Smith David A. Garcia, a widely respected member of the San Francisco judi- did not work with or around product X at his job site in Sacramento, ciary, was leading a seminar on summary judgment pleadings and indi- California,” is preferable to “On January 1, 2002, the fifth day of his cated what he had gleaned from his experience. The judge explained deposition, plaintiff, Mr. Smith, testified he did not recall working what he looks for in the moving papers and what attorneys can do to with.…” Concerning discovery propounded between the parties, it is improve their chances of success. worth remembering that unverified discovery responses are not The basic rule for writing and arguing a summary judgment admissible evidence.1 If the plaintiff has not sent verifications by the motion is: Make the judge’s job easy. This means 1) condensing your time the motion for summary judgment is due, do not mention the facts basic argument down to one sentence (“The undisputed facts of the stated in the discovery responses. Instead, indicate only that the case show that Plaintiff has failed to establish Mr. Smith worked responses are unverified, attaching excerpts from the discovery as with or around product X”) and 2) presenting a straightforward sep- proof. Fewer facts mean fewer possible triable issues. arate statement of facts. Once the fact pattern has established the route, the points and Your moving papers will either establish that the plaintiff’s action authorities can serve as the vehicle. This section should be short and has no merit or that your client, the defendant, has a complete defense easy for the judge to decipher. Condense your argument into one intro- to a particular cause of action. In the first instance—which is a more ductory sentence (which you will reiterate to the judge during the hear- common filing—the defendant must prove that the action has no ing on the motion). merit because the plaintiff cannot establish a particular element of the When the time comes, keep your argument to the point. If dis- complaint. This is not easy to prove, so it is wise to get the case’s facts covery is concluded, argue that the plaintiff will not obtain new evi- in order before starting to write the motion. Facts are the backbone dence to establish an element of the cause of action. It is tempting to of the motion, and they must be presented with care. There is no need refute every argument that the plaintiff has offered in opposition to to throw in every available fact or to believe that more evidence your motion, but this can be counterproductive because it takes the means a better argument. The reverse is actually true: a pile of evi- spotlight away from the four corners of the pleadings. dence implies that a triable issue lies buried within. The more facts Motions for summary judgment can be overwhelming, but they presented, the greater the chance of a finding that will defeat the afford an excellent opportunity to get to know the case, warts and all. motion. Uncovering the key facts may also allow a lawyer to avoid It can be exciting to prepare a separate spending time and money on an unnecessary pleading and uncover statement of facts based on solid evi- issues and evidentiary problems before trial. dence. You begin to realize the possibil- With a list of facts compiled, the next step is to review whether the ity of getting your client out of the action. foundation for each of the facts is admissible. For example, sworn depo- (You may also consider keeping sepa- sition testimony is admissible, but hearsay contained in letters and rate statements handy as references in other documents is not. Whittle away the weaker facts and leave the case the client calls.) Having these state- strongest possible fact pattern as a finished product. This leaves you ments is like having a summary of the ready to devise the separate statement of undisputed facts. case. Learning to present a case with clarity is a rare and rewarding skill. ■ The Separate Statement

A measure of the statement’s significance is that judges often ask 1 See CODE CIV. PROC. §2030(g) (“The party to their research attorneys to turn directly to the separate statements sub- whom the interrogatories are directed shall sign Rebecca Woodson is mitted by each party and then compare them side by side, ignoring the response under oath.”) and Laguna Auto with McKenna Long Body v. Farmers Ins. Exchange, 231 Cal. App. 3d the other moving papers. Accordingly, it may be a good habit to write & Aldridge LLP in 481, 489 (1991) (“Unverified discovery responses San Francisco. this part of the motion first. Another reason for this approach is that are ‘legally invalid.’”). writing the points and authorities before the separate statement is like

LOS ANGELES LAWYER / OCTOBER 2002 11 practice tips

By Donald P. Wagner and Megan L. Wagner

How Prevailing Parties May Obtain Contractual Attorney’s Fees

Who the prevailing the case will not always assure dant in whose favor a dismissal is the court from finding a prevail- an award of attorney’s fees. entered, a defendant in cases in ing party and awarding attorney’s party is and how More than 150 statutes autho- which neither plaintiff nor defen- fees. rize an award of attorney’s fees to dant obtains any relief, and a On the other hand, in a case contractual fee one of the parties.2 However, defendant against whom the falling within the scope of Section Sections 1032 and 1033.5 of the plaintiff does not recover any 1717, the issue of monetary relief clauses apply are Code of Civil Procedure and Sec- relief. In cases in which factors need not arise. The court can tion 1717 of the Civil Code are “other than monetary relief” decide that greater relief was not simple matters the statutes most relevant to a apply, the prevailing party is to be obtained by one party even if contractual fee case. Unfor- determined by the court. more money went to the other tunately, inconsistencies between Yet under Civil Code Section party. These differences between he high cost of litigation these statutes have bedeviled Cal- 1717, the touchstone of net mon- Code of Civil Procedure Section has led many experienced ifornia courts.3 etary recovery is wholly omitted. 1032 and Civil Code Section 1717 Ttrial attorneys to recognize Section 1032 provides for the Except when the defendant ten- make it essential for counsel and counsel their clients in busi- recovery of “costs” to the pre- ders full payment and so alleges seeking fees as a prevailing party ness disputes that, absent an vailing party. Specifically, Section in the answer,6 “the party pre- to determine which provision enforceable contractual attorney’s 1033.5(a)(10)(A) defines as an vailing on the contract shall be applies. fees clause, a case may be too item of those recoverable costs the party who recovered a expensive to pursue. Thus, attor- “[a]ttorney fees, when authorized greater relief in the action on the Breach of Contract ney’s fees provisions have by…[c]ontract.” On the other contract. The court may also In a straightforward breach- become increasingly important hand, Civil Code Section 1717 determine that there is no party of-contract claim, “[S]ection 1717 in business contracts. But often it states that “[i]n any action on a prevailing on the contract for pur- is the applicable statute when is not enough simply to win the contract, where the contract poses of this section.”7 Finally, determining whether and how case to invoke the right to fees. specifically provides [for] attor- Section 1717(b)(2) specifically attorney fees should be awarded The ordinary attorney’s fees neys fees and costs…the party provides that “[w]here an action under a contract. It is the statute clause generally provides for the who is determined to be the pre- has been voluntarily dismissed that expressly deals with attor- prevailing party in any litigation vailing party on the contract… or dismissed pursuant to a set- ney fees under a contract, and to to recover reasonable attorney’s shall be entitled to reasonable tlement of the case, there shall be apply Code of Civil Procedure fees. The language of an attor- attorney’s fees in addition to other no prevailing party for purposes Section 1032 in such cases would ney’s fees clause, however, does costs.” of this section.” obviate Civil Code Section 1717.”8 not alone determine the right of Problems arise, however, In a case within the scope of However, a defendant who recov- a litigant to fees. because the defini- Code of Civil Procedure Section ers neither money nor any affir- According to the Donald P. Wagner tion of “prevailing 1032, however, the statute’s appli- mative relief on the contract may California Supreme and Megan L. party” is not the cation seems mandatory. The in fact still be the prevailing party Court, a “party’s Wagner practice same in the Civil court is to identify a prevailing under Section 1717. In Hsu v. entitlement to at- business and Code and the Code party, and that party will typically Abbara,9 the supreme court held torney fees in a appellate law with of Civil Procedure.4 be the one to have obtained the that the trial court abused its dis- lawsuit based on a Wagner, Lautsch, In fact, one party net monetary recovery. The cretion when it failed to award contract containing LLP, in Orange can be the prevail- court’s discretion regarding the fees to a defendant who obtained an attorney fees County. ing party under identity of the prevailing party a “simple, unqualified win.” The provision often de- Civil Code Section arises only if something “other Hsu court approved of National pends not just 1717 and the other than monetary relief” needs to Computer Rental, Ltd. v. Bergen upon the language of the con- can be the prevailing party under be considered. But the court still Brunswig Corporation,10 which tractual provision but also upon Code of Civil Procedure Section must make the finding that one of upheld an attorney’s fees award the complex interaction of sev- 1032.5 Specifically, under Section the parties prevailed. Moreover, to a defendant who prevailed on eral statutes that affect a party’s 1032, the prevailing party, unless unlike under Civil Code Section the only disputed contractual contractual right to attorney the context clearly requires oth- 1717(b), under Code of Civil claim, even though a money judg- fees.”1 In practice, that complex erwise, includes the party with Procedure Section 1032 a volun- ment was entered against him on interaction means that winning a net monetary recovery, a defen- tary dismissal does not foreclose an amount the parties had nei-

12 LOS ANGELES LAWYER / OCTOBER 2002

ther litigated nor disputed. Under Civil Code in the defense of the contract claim. But this ten agreement asserted by the landlord, the Section 1717, then, no relief can be the greater conclusion does not affect the…defendants’ tenant deserves an award of its own attor- relief. right to recover as costs the attorney fees ney’s fees incurred in proving the nonexis- Code of Civil Procedure Section 1032 ap- they incurred in defense of the tort claims. tence of contractual fee provision. However, plies to a prevailing party’s claim to attorney’s Because Section 1717 does not apply to those reciprocity is limited. According to the fees incurred on tort claims arising from or claims [citations], it does not bar recovery of California Supreme Court, only fees incurred related to a contract with a clause allowing attorneys fees that were incurred in litiga- in defending against the contract action are attorney’s fees to be awarded to the prevailing tion of those claims and that are otherwise subject to reciprocity.16 There is no reciproc- party. Case law interpreting Section 1032 per- recoverable as a matter of law.”14 ity if the sole statutory basis for a fee award mits such recovery if the attorney’s fees clause Adding to the complex interaction of the is Section 1032. is sufficiently broadly phrased to encompass statutes is the fact that the contractual right the noncontractual claim.11 Additionally, Civil of a party to fees does not necessarily depend One Suit, Two Winners Code Section 1717 may not be invoked to upon contractual language explicitly giving It is clear that one party can prevail on the recover fees incurred in pursuing or defend- the right. The right to fees is reciprocal irre- contract and deserve fees under Section 1717, ing against noncontract claims.12 spective of any contrary contract limitation. If while the other party can prevail on the tort Code of Civil Procedure Section 1032 also one party would be entitled to fees were that claims by obtaining a net monetary recov- applies in cases of pretrial dismissal. Civil party to prevail, the opponent is equally so ery and thus deserve fees under Section 1032. Code Section 1717(b) specifically provides entitled, even if the opponent is not a party to It is also clear that a litigant can prevail on the that there is no prevailing party when the the contract or proves that no contract actu- contract for fee purposes by disproving the contract action is voluntarily dismissed. ally exists.15 existence of the contract. These conflicting cir- However, the Section 1032 right to fees For example, in an unlawful detainer cumstances form the basis for battles over incurred on tort causes of action is not limited action involving a standard commercial lease attorney’s fees in which counsel argue by pretrial dismissal. The California Supreme with a boilerplate provision for attorney’s whether a win was a win or whether it was a Court made precisely this point in Santisas v. fees, the tenant might assert that the written big enough win. Goodin.13 According to the court: “Under lease expired and that the tenant continued to Under Section 1717, the court has dis- Section 1717, the…defendants are not occupy on a holdover month-to-month basis. cretion to find that neither party has pre- ‘[p]arties prevailing on the contract’ because If the tenant establishes the lease expiration, vailed. This determination will be disturbed that section specifies that there is no party no written contract governs the relationship. only on a clear showing of abuse of discre- prevailing on the contract when, as here, the But the absence of a valid contract does not tion.17 Courts have held there to be no pre- plaintiffs have voluntarily dismissed the defeat the tenant’s right as prevailing party to vailing party in cases in which the opposing action, and therefore, defendants may not a fee award. Because the landlord would have sides could each claim some success.18 As recover the attorneys fees thereby incurred deserved a fee award under the alleged writ- explained in Deane Gardenhome Association v. Denktas, “Typically, a determination of no Enforceable Attorney’s Fees Clauses prevailing party results when both parties seek relief, but neither prevails, or when the The many cases analyzing attorney’s fees under Civil Code Section 1717 and Code of Civil ostensibly prevailing party received only a Procedure Section 1032 do not always quote the contractual language that serves as the basis part of the relief sought. In other words, the for the fee request. However, enough cases do discuss enforceable language to give the prac- judgment is ‘considered good news and bad titioner guidance in drafting an effective attorney’s fee clause. news’ as to each of the parties.”19 In a real estate contract, Section 1032 allowed for the recovery of fees to a plaintiff who In such “good news and bad news” cases, proved fraud and negligent misrepresentation in which the contract read: the supreme court’s Hsu decision provides Attorney Fees: In any legal action, proceeding or arbitration arising out of this agree- some general instructions to courts that are ment, whether instituted by or against the BUYER or SELLER, or the Broker named herein, considering fee arguments. These instruc- the prevailing party(s) shall be entitled to reasonable attorney’s fees and costs.1 tions essentially amount to the admonition to Fees were permitted under Section 1717 in a case involving a homeowners’ association do justice and are at least as useful as anything when breach of contract was proven and the contract (the association’s codes, covenants, else courts have said in this area of the law: and restrictions) provided: [C]ontractual provisions for attorneys’ In any legal or equitable proceeding for enforcement or to restrain the violation of these fees will not be inflexibly enforced[,] [codes, covenants, and restrictions], the losing party or parties shall pay the attorneys’ and…the form of the judgment is not fees of the prevailing party or parties in such amount as may be fixed by the court in necessarily controlling, but must give such proceeding.2 way to equitable considerations.… Attorney’s fees were available under both Civil Code Section 1717 and Code of Civil [T]he trial court is to compare the Procedure Section 1032 in an action in which the contract awarded the prevailing party its relief awarded on the contract claim or fees in any “lawsuit or other legal proceeding [to which] this Agreement gives rise.”3 claims with the parties’ demands on Finally, in a lease dispute in which the lease stated that the prevailing party “shall be enti- those same claims and their litigation tled to his reasonable attorney’s fees to be paid by the losing party as fixed by the court,” objectives as disclosed by the plead- fees were properly awarded even though the prevailing party had not in fact incurred such ings, trial briefs, opening statements, fees because a separate insurance policy gave a defense.4 —D.P.W. & M.L.W. and similar sources. The prevailing party determination is to be made only 1 Childers v. Edwards, 48 Cal. App. 4th 1544, 1548 (1996). upon final resolution of the contract 2 Deane Gardenhome Ass’n v. Denktas, 13 Cal. App. 4th 1394, 1396 n.2 (1993). claims and only by “a comparison of 3 Xuereb v. Marcus & Millichap, Inc., 3 Cal. App. 4th 1338, 1342 (1992). the extent to which each party ha[s] 4 Staples v. Hoefke, 189 Cal. App. 3d 1410 (1987). succeeded in its contentions.”20

14 LOS ANGELES LAWYER / OCTOBER 2002 If justice so requires after this analysis, the COMPUTER FORENSICS court can ultimately rule that no party pre- JESSICA LANGER vailed. Certified Data Discovery DAY IN THE LIFE A similar rule applies to fee requests aris- Hidden/deleted file recovery VIDEOGRAPHY ing under Section 1032, with the difference, ¥ at least in the final step of the analysis, that the ¥ Docs, Graphics, E-mail Trials, Arbitrations, Mediations, Settlement Conferences court must find a prevailing party. In Sears v. ¥ Internet use & Date Codes Baccaglio, the First District Court of Appeal ¥ Expert Witness Testimony LIENS AVAILABLE interpreted Section 1032’s qualifying language ¥ Litigation Support “unless the context clearly requires other- ¥ Full Forensic Computer Lab (Imagine the potential uses!) wise” to provide much the same equitable Northern and Southern California discretion the Hsu court found in Section 909-780-7892 (213) 842-5154 or 1717 cases. While the Sears court recognized [email protected] that clearly prevailing parties, even if “less DATACHASERSINC.COM than sympathetic,” must be awarded fees, Section 1032 otherwise is properly interpreted to permit trial court discretion to “consider all factors which may reasonably be considered to indicate success in the litigation.”21 The most likely situation in which, by arguing that a win is not a win, an attorney can defeat a motion to award attorney’s fees arises when the prevailing party obtains a Pyrrhic victory along with its net monetary recovery. Such victories arise, for example, where a party seeks an unreasonably large sum in the litigation and yet wins only a de minimus judgment. This is especially so if the prevailing party’s demand was so out of touch with reality as to frustrate settlement efforts. Pyrrhic victories are also found in cases in which the only cause of action on which the plaintiff wins is for declaratory relief. The plaintiff technically has won in this situation, but when the case was actually about much more and clearly would not have been brought only on such a declaratory claim, the victory is indeed Pyrrhic. The court’s discretion to deny fees in such cases should caution overreaching litigants and their counsel; one cannot bill high fees in confidence that a fee award will be made because at least one valid cause of action will be found. STRONG SUPPORT FOR ANY ARGUMENT The courts agree that Civil Code Section 1717 and Code of Civil Procedure Section ProData Imaging provides document solutions, and comprehensive 1032 are not entirely harmonious. Ultimately, service and support for the legal field. With over 13 years in whether a party deserves an award depends business and annual awards, including Office Dealer magazine's upon the facts of a specific case. Even if the (Top 50 Dealers in the nation for outstanding customer support, it's ( court is not examining equitable factors, a no wonder we're the favored representation of so many lawyers. strict application of the attorney’s fees statutes can produce counterintuitive results. An example of these statutes and legal principles in action is instructive. Consider a case in which tort and con- FREE Network Printing option with any Digital Copier. Offer good thru 10/02. Call 1-800-675-4566 tract claims are asserted by a plaintiff against several defendants. Two of those defendants then deny that the contract binds them, and discovery proves these defendants have the better argument. Before trial, the plaintiff therefore voluntarily dismisses all claims against these defendants. If the defendants make a motion for fees, it would properly be www.prodataimaging.com denied.

LOS ANGELES LAWYER / OCTOBER 2002 15 As nonparties to the contract, the defendants could get fees under the reciprocity provisions of Reynolds. However, Reynolds reciprocity only applies to the contract action.22 No award would be permitted on the contract, because Civil Code Section 1717(b)(2) denies fees if there is a pretrial dismissal. Similarly, fees under Section 1032 would not be available because the former defendants are not—by their own admis- sion—parties to the contract providing for an award of fees. Thus, under the statutes they are not prevailing parties, despite their vindication. On the other hand, the result of their motion for an award of attorney’s fees would have been completely different regarding the tort claims if the defendants were parties to the contract and could have invoked Code of Civil Procedure Section 1032.23 Accordingly, it is not enough to win. For a litigant to invoke a contractual right to attorney’s fees, counsel must consider why the party won and how much was won to sort through the complex attorney’s fee scheme. ■

1 Scott Co. of Cal. v. Blount, Inc., 20 Cal. 4th 1103, 1106 (1999). 2 See Murillo v. Fleetwood Enters., Inc., 17 Cal. 4th 985, 998 n.4 (1998). 3 See, e.g., Sears v. Baccaglio, 60 Cal. App. 4th 1136, 1139 (1998) (describing the attempt to determine prevailing party as “a question that routinely troubles trial courts”). 4 McLarand, Vasquez & Partners, Inc. v. Downey Sav. & Loan Ass’n, 231 Cal. App. 3d 1450, 1456 (1991). 5 Sears, 60 Cal. App. 4th at 1157. Asset Protection Planning Now 6 Civil Code §1717(b)(2) provides a safe harbor to a defendant facing an overreaching plaintiff. If there is no Can Insulate Your Clients’ Assets dispute that some money is owed by the defendant on the contract, that amount can be tendered to the plain- From Future Judgments tiff. If the tender is made and alleged in the answer, the plaintiff will not, upon prevailing at trial for the tendered amount, be considered the prevailing party. Yes, it’s true. By properly restructuring your clients’ estate plan, their assets and the 7 CODE CIV. PROC. §1717(b). assets they leave to their family will be protected from judgment creditors. Here are 8 Foothill Props. v. Lyon/Copley Corona Ass’n, L.P., 46 some of the situations in which our plan can help protect your clients' assets: Cal. App. 4th 1542, 1554 (1996). 9 Hsu v. Abbara, 9 Cal. 4th 863, 876 (1995). ■ Judgments exceeding policy limits or exclusions from 10 National Computer Rental, Ltd. v. Bergen Brunswig policy coverage. Corp., 59 Cal. App. 3d 58 (1976). 11 ■ Judgments not covered by insurance. Xuereb v. Marcus & Millichap, 3 Cal. App. 4th 1338 (1992). ■ Children suing each other over your client's estate. 12 Reynolds Metals Co. v. Alperson, 25 Cal. 3d 124, 129 ■ A current spouse and children from a prior marriage (1979) (“[A]ttorney’s fees incurred solely for defend- suing each other over your client's estate. ing…against the tort cause of action are not recoverable.”). ■ A child’s inheritance or the income from that 13 Santisas v. Goodin, 17 Cal. 4th 599 (1998). inheritance being awarded to the child’s former spouse. 14 Id. at 619. 15 Reynolds Metals, 25 Cal. 3d 124. 16 Id. at 129. STEVENSTEVEN L.L. GLEITMAN,GLEITMAN, E ESQ.SQ. 17 Deane Gardenhome Ass’n v. Denktas, 13 Cal. App. 4th 1394, 1397 (1993). 310-553-5080 18 Bankes v. Lucas, 9 Cal. App. 4th 365 (1992). Biography available at lawyers.com or by request. 19 Deane Gardenhome Ass’n, 13 Cal. App. 4th at 1398. 20 Hsu v. Abbara, 9 Cal. 4th 863, 876 (1995) (quoting Mr. Gleitman has practiced sophisticated estate planning for 24 years, specializing for more than 12 Bank of Idaho v. Pine Ave. Assocs., 137 Cal. App. 3d 5, years in offshore asset protection planning. He has had and continues to receive many referrals from 15 (1982)). 21 major law ﬁrms and the Big Four. He has submitted 36 estate planning issues to the IRS for private let- Sears v. Baccaglio, 60 Cal. App. 4th 1136, 1155-56 (1998). ter ruling requests; the IRS has granted him favorable rulings on all 36 requests. Twenty-three of those 22 Reynolds Metals Co. v. Alperson, 25 Cal. 3d 124, 129 rulings were on sophisticated asset protection planning strategies. (1979). 23 Santisas v. Goodin, 17 Cal. 4th 599, 619 (1998).

16 LOS ANGELES LAWYER / OCTOBER 2002 practice tips

By Robert G. Scoﬁeld

The Distinction between Judicial Dicta and Obiter Dicta

Unlike obiter dicta, granted greater weight than court has considered the issue also arise when an opinion pro- obiter dicta. Judicial dicta should and deliberately made provides guidance to the lower court which are not be followed unless they are erro- nouncements thereon intended upon remand12 or to courts about neous or there are particularly for guidance of the lower court future conduct.13 binding, judicial strong reasons for not doing so.4 upon further proceedings.”8 In United Steelworkers of Among recent cases one had Judicial dicta generally are America, Local 8599, AFL-CIO dicta carry great to look outside California to ﬁnd statements reflecting a court’s v. Board of Education,14 the court courts that follow the explicit thorough analysis of an issue.9 failed to make the distinction authority nomenclature of obiter dicta and More specifically, as noted by between judicial dicta and obiter judicial dicta.5 Only one California People’s Lumber, courts make dicta and as a result conflated case has used the correct nomen- statements that are judicial dicta ratio decidendi and judicial dicta. awyers are familiar with clature: People’s Lumber Company when responding to an argument At issue was a part of an opinion the distinction between a v. Gillard,6 which was decided in made by attorneys in the case,10 from the California Supreme Lcase’s holding, also called 1907. People’s Lumber also is the “especially where,” according to Court. In response to an argu- its ratio decidendi, and its dicta.1 only California case that explicitly an English authority, “had the ment that the passage in ques- The ratio decidendi is that part of notes the distinction between facts been otherwise, [the court’s tion was dicta, the court of appeal a court’s opinion that judges obiter dicta and judicial dicta. The response] would have formed decided that the passage was in deciding later cases are required court in People’s Lumber stated part of the ratio.”11 Judicial dicta fact ratio decidendi.15 The court of to follow, and the dicta generally that a court’s statements in re- are the statements from the court sponse to issues directly pre- that do not have to be followed. sented and argued by attorneys There are two types of dicta, how- should be classified as judicial ever: judicial dicta and obiter dicta as opposed to obiter dicta. dicta. The former carry greater Later California cases gener- authority than what are com- ally have discussed dicta without monly referred to as mere dicta; identifying the two types by the latter are mere dicta. The fail- name. In People v. Lozano, a 1987 ure of some judges to understand California case, the court noted the distinction between judicial that “‘[a] statement which does dicta and obiter dicta has led to not possess the force of a square some confusion in case law. holding may nevertheless be con- Obiter dicta are “by the way” sidered highly persuasive, par- statements.2 Since courts usually ticularly when made by an able do not give as seri- court after careful ous consideration Robert G. Scoﬁeld is consideration, or in to the statements a contract research the course of an they make in pass- and writing attorney elaborate review of ing as they do to in Woodland, the authorities, or the ratio decidendi, California. when it has been the statements do long followed.’”7 not constitute the The Lozano court binding part of a was referring to judicial precedent.3 Therefore judicial dicta. So was the court obiter dicta are viewed as those in County of Fresno v. Superior statements by a court that can Court, which observed in a 1978 be safely ignored. But judicial decision, “Dicta are not to be dicta are the product of a com- ignored. Dicta may be highly per- prehensive discussion of legal suasive, particularly where made

RICHARD EWING issues and therefore should be by the Supreme Court after that

LOS ANGELES LAWYER / OCTOBER 2002 17 appeal cited Paley v. Superior Court16 for the afforded a reasonable opportunity to of California authority regarding the issue.34 proposition that part of an opinion respon- respond thereto, either in person or The California Supreme Court correctly sive to an argument raised by the attorneys in writing. Nothing less will satisfy holds that a statement is a dictum when a and intended for guidance for the trial court standards of fundamental fairness court has already decided to reverse a judg- and the attorneys upon a new hearing “prob- required by the due process clause.26 ment before reaching the issue the statement ably cannot be put aside as mere dictum.”17 These judicial dicta in Prewitt were to in question addresses.35 Thus all of the propo- A mere dictum is an obiter dictum, not a become a holding in Olson.27 sitions of law contained in the Trout opinion, judicial dictum. But those unfamiliar with the The Olson court stated that “the rationale as it appears in its published form, are dicta. two types of dicta could conclude that a propo- of Prewitt” is that a policy of not giving doc- Insofar as the court’s discussion was a thor- sition of law that is not a mere dictum must uments to inmates is unfair because an inmate ough one that gave future guidance to the trial be a holding. Such reasoning takes the deduc- cannot prepare his or her case or challenge court, the dicta are classified as judicial dicta. tively valid form known as disjunctive syllo- false or inaccurate information unless the Trout is an example of a case published under gism.18 What the court did not realize, how- inmate learns what information prison officials the partial publication rule that has no true ever, was that there was a third alternative; are considering in determining the length of published ratio decidendi.36 Does that mean that the statements in question were neither incarceration or whether to grant parole.28 that California practitioners can disregard obiter dicta nor a holding but were judicial The Olson court stated: the Trout case? Given that the opinion is dicta, dicta. Perhaps the court could have avoided We are disposed to accept the forego- does it lack any authority whatsoever? An this confusion if it had more carefully studied ing rationale of Prewitt as applicable to answer of yes to this last question would con- People’s Lumber, one of the cases it cited.19 the present case even though the state- stitute a very good reason for at least the However, the result is that United Steelworkers ments alluded to do not possess the force modification, if not the abolition, of California’s has developed an unorthodox view of ratio of a square holding. They are persua- partial publication rule. However, the cor- decidendi. It recognized as a holding what sive and were concurred in by the rect answer to the question is no, because judi- other courts and scholars would clearly clas- whole court after careful consideration. cial dicta ordinarily have to be followed. sify as dicta. Accordingly, they are entitled to great weight.29 Weight and Authority Applicability of Judicial Dicta In California, the question of the authori- Courts have discussed the authoritative- An example of judicial dicta eventually tative status of judicial dicta is particularly ness of judicial dicta, noting that they are becoming a ratio decidendi occurred in the important. This is due to Rule 976.1 of the “entitled to substantial weight,”37 “entitled to cases of In re Prewitt20 and In re Olson.21 Both California Rules of Court, which allows the great weight,”38 “generally entitled to weight cases were habeas corpus actions litigating California Court of Appeal and the appellate and should be followed unless found to be the right of prisoners to gain access to docu- division of the superior court to certify only erroneous,”39 “entitled to much greater weight ments given to prison authorities that con- a part of an opinion for publication in the law than mere obiter dictum and should not be tained statements by third parties that had reports. It is theoretically possible for a court lightly disregarded,”40 or “should be followed been used to deny the prisoners release on to issue an opinion in which the ratio deci- in the absence of some cogent reason for parole. In Prewitt, the California Supreme dendi appears only in its unpublished por- departing therefrom.”41 According to an Court stated that prisoners should be given tion. Does that mean that the part of the opin- English case, judicial dicta have a weight access to these documents pursuant to prin- ion that is published can be dismissed as nearer to a ratio decidendi than to obiter dicta ciples enunciated in Morrissey v. Brewer, a mere dicta, with no precedential value what- and “carr[y] [their] own intrinsic authority.”42 U.S. Supreme Court case.22 However, soever? The case of People v. Trout high- To say that judicial dicta should be fol- Prewitt’s petition for a writ of habeas corpus lights this dilemma.30 lowed unless clearly erroneous distinguishes was denied because his parole rescission In Trout, the defendant, who had a prior judicial dicta from a holding, at least with occurred 14 months before the date that conviction, was convicted of burglary. The respect to following the precedents of higher Morrissey was to apply to cases like Prewitt’s.23 court of appeal reversed Trout’s conviction on courts, because lower courts are required to The ratio decidendi of Prewitt is that the the ground that he was denied his constitu- follow even the erroneous holdings of higher rights provided by Morrissey apply only to tional right to represent himself.31 However courts.43 It seems reasonable that the author- parole revocation or rescission hearings held the part of the opinion presenting the court’s ity of various judicial dicta might be weighted after June 29, 1972.24 reasoning in support of reversing the con- differently depending upon the thorough- However, the Prewitt court expounded, viction was not published pursuant to ness of the analysis that leads to the dicta.44 in the form of judicial dicta, its view of the California’s partial publication rule.32 The At a minimum, a judicial dictum should be rights that prisoners and parolees were enti- published portion of the opinion addressed given great weight because it is an “expres- tled to in parole rescission and revocation the defendant’s claim that his prior conviction sion emanating from the judicial conscience hearings. The court clearly indicated that its could not be used to enhance his sentence on and the responsibilities that go with it.”45 If a statements on prisoner rights were dicta by the ground that he had not been advised of court’s judicial dicta are the product of a thor- this statement: “We are nevertheless con- the constitutional rights he relinquished when ough analysis of an issue, the dicta should be strained to remark, although the issue is not he entered the guilty plea that resulted in treated as having almost as much authority as now before us….”25 The supreme court fur- the prior conviction. The court of appeal a ratio decidendi. ther noted: announced that it would address this issue for There are some cases in which judicial At a minimum, and subject to limitation the guidance of the trial court should the dicta will have as much authority as any state- only when an informant will be defendant be convicted after a retrial,33 and the ment emanating from a court can have. For exposed to an undue risk of harm, an remainder of the published opinion contains example, the only statements from the U.S. inmate should be provided with a copy a thorough discussion of the court’s views on Supreme Court declaring that arrest war- of any document submitted pursuant to the issue. Several cases are cited in the opin- rants allow police to enter a house are dicta.46 sections 3022 and 3042, and should be ion, and the Trout court discussed a conflict No one, from a rookie police officer to a griz-

18 LOS ANGELES LAWYER / OCTOBER 2002

zled public defender, will doubt for a minute that an arrest warrant gives the police the right to enter a private residence in order to make an arrest. There is even a theory to explain why an arrest warrant empowers the police to enter a house. According to Payton v. New York, “If there is sufficient evidence of a citizen’s participation in a felony to per- suade a judicial officer that his arrest is jus- tified, it is constitutionally reasonable to require him to open his doors to the officers of the law.”47 According to Steagald v. United States, “Because an arrest warrant authorizes the police to deprive a person of his liberty, it necessarily also authorizes a limited inva- sion of that person’s privacy interest when it is necessary to arrest him in his home.”48 The existence of the theory bolsters the fact that there is no real doubt that an arrest warrant empowers the police to enter a house in JudgmentsEnforced order to make an arrest. Yet the fact remains JudgmentsEnforced that the ultimate authority for this proposition of law is still based upon dicta. It is instructive to think about what it Law Office of Donald P. Brigham would take for a case to actually have as its 23232 Peralta Dr., Suite 204, Laguna Hills, CA 92653 ratio decidendi the proposition that an arrest P: 949.206.1661 warrant gives the police the power to enter a F: 949.206.9718 private residence in order to make an arrest. [email protected] AV Rated An attorney arguing to the contrary would risk his or her credibility by doing so. Indeed, the issue that has concerned the courts is whether the police can enter a house to make an arrest without a warrant.49 Given the current state of our legal culture, it is self-evident that an arrest warrant authorizes the police to enter a house. Thus, it is not surprising to find that the most unquestionable propositions of law sometimes will be expressed by judicial dicta.50 Finally, one should not overlook the pos- sibility that the dicta one wishes to use, whether judicial or obiter, have evolved into a ratio decidendi in subsequent cases. The court of appeal in People v. Fields points to an example of this type of evolution,51 as does the fact that the judicial dicta in Prewitt became the holding in Olson. There is a research technique that can be used to track if judicial dicta have become a ratio decidendi. Both the official and unofficial reports of a case should be compared. Very often a case published in West’s California Reporter will have more headnotes than the same case published in the official reports. This is because the unofficial reports have a tendency to place language in an opinion that sounds like black-letter law into a headnote even though the proposition of law is fairly far removed from the ratio decidendi. If one finds a dictum in an official report of a particular case, and that dictum is not found in a headnote in the official report, then one should look in the California Reporter version

20 LOS ANGELES LAWYER / OCTOBER 2002 32 of the case to see if the dictum is found in the (1955); State v. Rainier, 103 N.W. 2d 389, 396 (Minn. Id. at 814 n.1. 1960); see also Regina v. Seymour, 77 Crim. App. 215, 33 Id. at 814. unofficial headnotes. If it is, one can then 223 (H.L. 1983) (passage not obiter when “essential to 34 Id. at 814-17. Shepardize or Key Cite the headnote to see the reasoning leading to the rejection of Mr. Littman’s 35 See People v. Pearson, 42 Cal. 3d 351, 358 (1986). if the dictim has become a holding in a later argument”). 36 See also People v. Harris, 192 Cal. App. 3d 943 (1987). case. ■ 11 Brunner v. Greenslade, [1971] Ch. 993, 1003 (1970). 37 Smith v. Mount Diablo Uniﬁed Sch. Dist., 56 Cal. App. 12 See County of Fresno, 82 Cal. App. 3d at 194; Paley, 3d 412, 418 (1976). 137 Cal. App. 2d at 460. 38 In re Olson, 37 Cal App. 3d 783, 789 (1974). 1 “Holding” is an American term referring to the ratio 13 See State v. Fahringer, 666 P. 2d 514, 515 (Ariz. 1983). 39 American Country Ins. Co. v. Cline, 722 N.E. 2d 755, decidendi. See Jan M. Broekman, Analogy in the Law, 14 United Steelworkers of Am., Local 8599, AFL-CIO v. 762 (Ill. 1999). in LEGAL KNOWLEDGE AND ANALOGY: FRAGMENTS OF Board of Educ., 162 Cal. App. 3d 823 (1984). 40 State v. Rainier, 103 N.W. 2d 389, 396 (Minn. 1960). LEGAL EPISTEMOLOGY, HERMENEUTICS AND LINGUISTICS 15 See id. at 834-35. 41 State v. Fahringer, 666 P. 2d 514, 515 (Ariz. 1983). 217, 231 (Patrick Nerhot ed., 1991). See also Krupnick 16 Paley, 137 Cal. App. 2d at 460. 42 Brunner v. Greenslade, [1971] Ch. 993, 1003 (1970). v. Hartford Accident & Indem. Co., 28 Cal. App. 4th 185, 17 United Steelworkers, 162 Cal. App. 3d at 835. 43 See Campbell v. Allstate Ins. Co., 60 Cal. 2d 303, 307 199 (1994) (equating ratio decidendi to holding). 18 A disjunctive syllogism can be expressed as follows: (1963); Auto Equity Sales, Inc. v. Superior Court, 57 Cal. 2 See RUPERT CROSS & J.W. HARRIS, PRECEDENT IN Premise 1: Either P or Q 2d 450, 457 (1962). ENGLISH LAW 41 (4th ed. 1991) [hereinafter CROSS & Premise 2: Not P 44 Cf. CROSS & HARRIS, supra note 2, at 77-81. HARRIS]. Therefore: Q 45 State v. Rainier, 103 N.W. 2d 389, 396 (Minn. 1960). 3 See id. at 40-41. 19 United Steelworkers, 162 Cal App. 3d at 835; see 46 See Payton v. New York, 445 U.S. 573, 603, 63 L. Ed. 4 The types of situations in which judicial dicta appear People’s Lumber Co. v. Gillard, 5 Cal. App. 435, 439 2d 639, 100 S. Ct. 1371 (1980). According to the that are discussed in this article are not exclusive. (1907). California Supreme Court, the statement of the U.S. Other types are suggested by the discussion in CROSS 20 In re Prewitt, 8 Cal. 3d 470 (1972). Supreme Court in Payton that an arrest warrant allows & HARRIS, id. at 77-81. 21 In re Olson, 37 Cal. App. 3d 783 (1974). the police to enter a house is dicta. See People v. Jacobs, 5 See State v. Fahringer, 666 P. 2d 514, 515 (Ariz. 1983); 22 See Prewitt, 8 Cal. 3d at 473-75 (applying Morrissey 43 Cal. 3d 472, 480 n.4 (1987). American Country Ins. Co. v. Cline, 722 N.E. 2d 755, 762 v. Brewer, 408 U.S. 471, 33 L. Ed. 2d 484, 92 S. Ct. 47 Payton, 445 U.S. at 602-03. (Ill. 1999); State v. Rainier, 103 N.W. 2d 389, 396 (Minn. 2593 (1972)). 48 Steagald v. United States, 451 U.S. 204, 214 n.7, 68 L. 1960). 23 Id. at 477. Ed. 2d 38, 101 S. Ct. 1642 (1981). 6 People’s Lumber Co. v. Gillard, 5 Cal App. 435, 439 24 See id. at 476-77. 49 See, e.g., Payton, 445 U.S. 573; People v. Ramey, 16 (1907). 25 Id. at 475. Cal. 3d 263 (1976). 7 People v. Lozano, 192 Cal. App. 3d 618, 632 (1987). 26 Id. at 476. 50 Nor should one be surprised by statements like the 8 County of Fresno v. Superior Court, 82 Cal. App. 3d 27 See In re Olson, 37 Cal App. 3d 783, 790 (1974). following in reference to a particular point of law: “The 191, 194 (1978). 28 Id. at 789. law, although often stated as dicta or appearing as the 9 See Lozano, 192 Cal. App. 3d at 632; Smith v. Mount 29 Id. (emphasis added). unstated premise of a related discussion, clearly is con- Diablo Unified Sch. Dist., 56 Cal. App. 3d 412, 418 30 People v. Trout, 145 Cal. App. 3d 812 (1983) (partially trary to respondent’s position.” People v. Collins, 59 Cal. (1976). unpublished). App. 4th 988, 995 (1997) (emphasis added). 10 See Paley v. Superior Court, 137 Cal. App. 2d 450, 460 31 Id. at 813-14. 51 People v. Fields, 159 Cal. App. 3d 555, 571 (1984). THE SHERNOFF INSURANCE BAD FAITH SEMINAR

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LOS ANGELES LAWYER / OCTOBER 2002 21 practice tips

By Frank E. Marchetti and Eric A. Schneider

Making Effective Use of Section 998 Offers to Compromise

Effective Section is precluded from recovering to go to trial. However, a Section a second Section 998 offer of postoffer costs pursuant to 998 offer will effectively shift $30,000, a judgment of $20,000 998 offers hinge Section 1033 and must pay the costs and fees only in cases in will be deemed more favorable defendant’s postoffer costs, even which the merits of the plaintiff’s for the defendant, and the plain- on thorough if the plaintiff was the prevailing claims and damages are already tiff will not be able to recover party. The court or arbitrator also well known by each side. Other- expert witness fees and prejudg- evaluation of the has the discretion to order the wise, the offer may be deemed ment interest. plaintiff to pay the defendant’s unreasonable under the circum- The Section 998 offeree must case and statute expert witness fees that were stances and invalid. accept the offer within 30 days incurred while preparing for and General principles of contract after it is served or before trial or attending trial or arbitration. law govern the interpretation of arbitration begins, whichever alifornia Code of Civil On the other hand, if a defen- Section 998 offers and accep- occurs first, unless the offeror Procedure Section 998 was dant fails to obtain a judgment or tances, but only if such principles revokes the offer in writing Cenacted to encourage the award that is more favorable than are in accord with Section 998 before it is accepted.8 Acceptance early settlement of lawsuits and a statutory offer that was made by and the legislative purpose of of a statutory offer to compro- penalize litigants who fail to a plaintiff, the court or arbitrator encouraging settlements.4 There mise should be communicated in accept reasonable settlement has the discretion to require the are no exceptions, however, to writing, but it need not be served offers.1 However, before attor- defendant to pay the costs and the rule that a Section 998 offer on the offeror. A faxed letter of neys decide to serve an offer to fees incurred by the plaintiff for must be in writing and must be acceptance is sufficient.9 compromise pursuant to Section expert witnesses. The plaintiff served on the other party. This The recipient of a Section 998 998, they need to give careful can also recover prejudgment in- means that orally making an offer offer should consider the pros consideration to the timing of the terest from the time of the offer to settle, such as during a depo- and cons rather than reject it out- offer, its reasonableness, and the for all personal injury damages sition, cannot be treated as a right. For example, letting the potential benefits to the client. It pursuant to Code of Civil Pro- Section 998 offer, even if the offer expire has the same effect is in this context that the partic- cedure Section 3291.3 Additional- offeror specifically cites the pro- as a rejection, but a rejection ular provisions of the section ly, as the prevailing party, the visions of Section 998.5 This also before the deadline limits the come to the fore. plaintiff will be entitled to recover means that serving the offer on a opportunity of the client to settle Section 998 penalizes litigants costs pursuant to Section 1033. nonparty (a defendant’s insurer, the case should circumstances who fail to accept reasonable A statutory offer to compro- for example) fails to invoke change in the time remaining. offers by 1) shifting the recov- mise may be served at any time Section 998.6 When rejecting an offer, the rejec- ery of costs normally awarded 10 or more days before a trial or There is no limit to the num- tion is ineffective unless it is pursuant to Code of Civil Proce- arbitration begins. A plaintiff may, ber of Section 998 offers that par- unequivocal. Mere criticism of dure Section 1033 from plaintiffs for example, serve a Section 998 ties may make during litigation, an offer (for example, complain- to defendants, 2) offer along with and as they learn of new facts ing that the amount offered is making prejudg- Frank E. Marchetti the summons and that change the likelihood of suc- insulting and demeaning) does ment interest avail- and Eric A. Schneider the complaint, and cess, they may serve a new offer not constitute rejection, and the able to plaintiffs in are civil litigators a defendant may that is more likely to be accepted offer can still be accepted so long personal injury ac- with Anderson, serve a Section 998 (or shift costs and expert fees if as it has not expired.10 tions, and 3) ena- McPharlin & Conners offer in conjunction it is not accepted). Only the last Likewise, counteroffers— bling the offeror to LLP in Los Angeles. with the answer to rejected Section 998 offer will be including those that are served recover the fees of the complaint. The compared to the final judgment pursuant to Section 998—do not expert witnesses service of a Section or award for purposes of deter- constitute rejections of the origi- (and, in limited jurisdictions, 998 offer along with the initial mining whether to apply Section nal offer.11 This rule makes a attorney’s fees from the offeree).2 pleading enhances the likelihood 998 sanctions.7 For instance, if a clear departure from general Under provisions of Section of obtaining an early settlement, plaintiff’s first Section 998 offer is common law contract principles 998, if a plaintiff obtains a judg- because the offer starts the proc- for $15,000 and later the plaintiff that a counteroffer that deviates ment or award that is less favor- ess of negotiation and carries discovers favorable evidence that from the original offer generally able than an offer previously with it the chance of higher costs increases the potential value of operates to revoke the original made by a defendant, the plaintiff if the offeree makes the decision the case, and if the plaintiff serves offer.12

22 LOS ANGELES LAWYER / OCTOBER 2002 Section 998 can be used in most types of The courts have not yet fully addressed would not promote the legislature’s intent to litigation, and the statute expressly allows the effect of Proposition 51 on offers to or settle lawsuits before trial. for its use in actions in arbitration as well as from multiple defendants. Under Proposition The test for determining whether a statu- in court. This would appear to include dis- 51 (codified at Civil Code Section 1431.2), tory settlement offer meets the good faith putes in which the parties agree to arbitrate defendants who have been sued on theories requirement was first stated in Elrod v. Oregon and neither party initiates an action in court.13 of comparative fault are no longer severally Cummins Diesel, Inc.24 First, the reasonable- However, Section 998 does limit the effects of liable for noneconomic damages suffered by ness of the offer is measured by determining statutory offers to compromise in actions for the plaintiff. Rather, each defendant is liable whether it represents a reasonable predic- eminent domain. The only effect Section 998 only for that amount of noneconomic damages tion of liability to the plaintiff following trial, has in an eminent domain action is to preclude that is allocable to that defendant in propor- discounted by an appropriate factor for how a plaintiff from recovering postoffer costs tion to percentage of fault. Therefore, in early in the litigation the settlement can be and to award a defendant postoffer costs actions in which Proposition 51 is applicable, achieved. In making this determination, the when the plaintiff fails to obtain a judgment codefendants will rarely, if ever, be jointly court will examine what facts the offeror that is more favorable than the defendant’s and severally liable for the entire amount of knew or should have reasonably known at offer. a plaintiff’s damages.18 As a result, in situa- the time of the offer and whether, in light of tions involving defendants who are not jointly those facts, the offer was reasonable. If a Multiple Parties and severally liable for the plaintiff’s injuries statutory offer is reasonable under the first Attorneys need to take special care in and damages, settlement offers made to the part of this test, the court then examines drafting Section 998 offers when the case defendants and joint settlement offers made what facts the offeree knew or reasonably involves multiple defendants or multiple plain- by the defendants must apportion among the should have known at the time the offer was tiffs. Because Section 998 offers must be defendants the amount that is being offered. open for acceptance. If the offeree had or unconditional, they cannot be conditioned A plaintiff that makes a single, unapportioned reasonably should have had knowledge of on acceptance by all parties to whom they are statutory settlement offer to multiple defen- sufficient facts to know that the offer was offered.14 This can be particularly trouble- dants who are not jointly and severally liable reasonable but did not accept it, then the some for defendants who have been sued by cannot recover Section 998 penalties if the court may impose sanctions against the more than one plaintiff in the same action. If plaintiff receives a judgment against one of the offeree pursuant to Section 998. The courts one plaintiff accepts the offer and another defendants that is more favorable than the charge parties with knowledge of facts they does not, the defendant must honor the set- joint offer to multiple defendants.19 reasonably should know so that parties do not tlement agreement with the settling plaintiff On the other hand, California’s courts attempt to protect themselves against Section and still litigate whatever claims remain have held that when defendants in a particu- 998 sanctions by waiting until the last minute against it by the nonsettling plaintiff. A single lar lawsuit are jointly and severally liable for to conduct discovery and claiming that, at Section 998 offer made to multiple plaintiffs a plaintiff’s injuries and damages, a Section the time the offer was made, they did not may be valid, however, if its terms can be 998 offer to compromise does not need to have sufficient information to know that the accepted by each plaintiff and the amount specifically apportion the settlement amount offer was reasonable.25 offered to each plaintiff is clearly allocated.15 among the separate defendants, because they Normally, under the Elrod test, a token or In order to avoid a later determination that an are each fully liable for the entire judgment. nominal offer will not satisfy the good faith offer was conditional and invalid, it is usually For instance, in Steinfeld v. Foote-Goldman requirement, because there is no reasonable best for a defendant to make separate offers Proctological Medical Group, Inc.,20 the plain- prospect that it will be accepted. However, the to each plaintiff. tiff made a statutory offer of $225,000 to two Elrod test is not meant to preclude defen- Multiple plaintiffs who consider making a defendant doctors she was suing, on an dants with no reasonable likelihood of los- Section 998 offer face similar problems. Cal- agency theory, for medical malpractice.21 ing from making a nuisance value Section ifornia courts have been reluctant to award Steinfeld was eventually awarded $1,164,400 998 offer to extract themselves from a case. expert witness fees and prejudgment interest in damages against both defendants, and the California courts have accordingly held that, to plaintiffs when it is impossible to deter- court thereafter awarded her expert costs under the appropriate circumstances, an offer mine whether each of the plaintiffs recov- and prejudgment interest. The Steinfeld court for a waiver of costs in one case,26 and an ered more after trial or arbitration than they opined that because the defendants were offer for $100 when the plaintiff’s claim is for jointly offered to the defendant under Section sued as joint tortfeasors and were each liable approximately $69,000 in another,27 were valid 998. In the case Gilman v. Beverly California for the entire judgment against them, the under Section 998. Corporation,16 the plaintiffs in a wrongful offer did not need to apportion the amount The reasonableness requirement reduces death action made a joint statutory offer to sought in settlement from each individual the opportunity that parties would otherwise compromise the action for $150,000, which defendant.22 have to make statutory offers early in the lit- the defendant rejected. The plaintiffs received igation. A Section 998 offer that is served a judgment in excess of $228,000, but the Reasonableness Requirement together with a summons and complaint or court declined to award them expert witness Section 998 does not have an express good with an answer may later be deemed to be costs and prejudgment interest because it faith requirement, but California courts have unreasonable if the offeree lacked sufficient was impossible to determine whether each uniformly read one into the statute. They information about the merits of the lawsuit to plaintiff obtained a judgment that was more have held that Section 998 penalties are not be able to determine whether the offer was favorable than the offer. The Gilman court allowed if the statutory offer is not realistic reasonable. Therefore, attorneys who make concluded that each plaintiff had suffered a and reasonable under the circumstances at an early settlement offer should maintain an separate and distinct loss as a result of the the time the offer is made.23 The courts open channel of communication with the decedent’s death, and the joint offer improp- enforce a reasonableness requirement offeree and convey the information that the erly precluded the defendant from evaluating because imposing sanctions against a party offeree is going to need in order to realize that each plaintiff’s claim.17 that failed to accept an unreasonable offer the offer is reasonable.

LOS ANGELES LAWYER / OCTOBER 2002 23 Another matter for litigators and clients to award attorney’s fees to the prevailing party consider, in conjunction with determining in an action for unlawful employment prac- what would be a reasonable statutory offer, is tices, and Code of Civil Procedure Section what costs and fees are to be added to the 1021.5 provides the court with the discretion judgment before it is compared to the statu- to award attorney’s fees, under the private tory offer. Section 998 is silent on whether the attorney general doctrine, to parties that suc- court is to exclude or include particular items cessfully bring claims of unfair competition or in determining whether the judgment other unfair business practices. obtained by the plaintiff is more favorable Before the judgment is compared to a than the offer to compromise. However, statutory offer made by a defendant in an courts have addressed this issue and held action in which attorney’s fees are available that certain items are to be added to the judg- to the prevailing party by contract or statute, ment before it is compared to the offer to the attorney’s fees incurred by the plaintiff compromise. Therefore, before making an before the plaintiff or defendant made the offer to compromise, attorneys should exam- statutory offer are added to the judgment ine whether attorney’s fees are available— and then the total amount is compared to the whether by statute or contract—to the pre- statutory offer in order to determine whether vailing party, what costs have already been the offer is indeed more favorable than the incurred by the plaintiff, and whether prejudgment.32 judgment interest is available to the prevail- The appellate courts have not yet ing party. Punitive damages should also be addressed how attorney’s fees should be examined because they are part of the judg- added to a judgment when that judgment is ment that will be compared to the 998 offer.28 being compared to a plaintiff’s statutory offer However, there is no need to be concerned to compromise, but the courts will likely hold about whether there are liens on the judg- that the plaintiff’s preoffer and postoffer attor- ment, such as by a workers’ compensation ney’s fees should be added to the judgment carrier or a treating physician, because liens before comparing it to the plaintiff’s offer to are not considered when determining compromise to determine whether the plain- whether the judgment is more favorable than tiff has received a more favorable judgment. the offer to compromise.29 By allowing the plaintiff to add the preoffer and postoffer attorneys’ fees to the judgment, Calculating the Costs the courts may encourage early settlement of Before comparing the judgment to the claims. Defendants will be more inclined to offer, the court will first add to the judgment accept reasonable offers to compromise if certain costs (identified in Code of Civil their likelihood of receiving a more favorable Procedure Sections 1033 and 1033.5) that the judgment is reduced. plaintiff has incurred. What costs are added Civil Code Section 3287 provides that in Show them to the judgment depends largely on who made actions in which the plaintiff’s damages “are the statutory offer to compromise and when capable of being made certain by calcula- what makes the plaintiff incurred the costs. If the judg- tion,” the plaintiff is entitled to recover pre- ment is being compared to a statutory offer judgment interest. In determining whether you made by a defendant, the court will add only the judgment exceeds a defendant’s Section those costs that the plaintiff incurred before 998 offer to compromise, prejudgment inter- an expert. receiving the defendant’s 998 offer.30 When a est that accrues prior to the offer is added to judgment is being compared to a statutory the judgment, but postoffer prejudgment marketcenter.findlaw.com offer made by a plaintiff, the plaintiff’s pre- interest is excluded.33 offer and postoffer costs will be added to the In tort actions for personal injury, Civil judgment before the judgment is compared to Code Section 3291 permits the plaintiff to the statutory offer.31 Defendants will likely recover prejudgment interest at a rate of 10 benefit more by making an offer before the percent, calculated from the date on which the plaintiff incurs significant costs. plaintiff served the Section 998 offer, when the Legal Market Center In analyzing whether to make or accept a plaintiff receives a judgment that is more statutory offer to compromise, some attor- favorable than the offer. If the plaintiff receives 1-888-FINDLAW neys will need to consider the attorney’s fees a judgment that compensates for personal (1-888-346-3529) that the plaintiff has incurred at the time of the and nonpersonal damages, the burden is on offer. Many contracts provide that the pre- the plaintiff to prove what portion of the total vailing party shall be entitled to recover rea- award represents damages for personal sonable attorney’s fees. Likewise, a number injuries, to which interest will apply.34 of statutes provide that if the plaintiff pre- Therefore, when dealing with mixed dam- vails, reasonable attorney’s fees are recover- ages, attorneys representing plaintiffs should able in addition to damages or restitution. request a special verdict that specifies how © 2001 West Group W-100939R/10-01 Trademarks shown are used under license. For example, Government Code Section much is being awarded to the plaintiff for 12965(b) gives the court the discretion to personal injuries.

24 LOS ANGELES LAWYER / OCTOBER 2002 Occasionally, a mistake is made in an offer to compromise. If the offer has not yet been COMPETENT REAL ESTATE BROKERAGE accepted, the mistake is best ﬁxed by immediately faxing a revocation. However, if the ■ Specializing in helping attorneys and their clients buy and sell offeree accepts an erroneous offer, the offeror real estate in bankruptcy, probate, family, and real estate law needs to seek relief from the court if the of- ■ Experienced negotiator with legal background feree insists on pursuing the offer. The appro- ■ Licensed broker, California Department of Real Estate priate procedure to challenge a judgment that has been entered upon the acceptance of ■ Call for LACBA member discount an offer is to request that the trial court vacate the judgment pursuant to Code of Civil OFFICE: (818) 905-7111 EXT. 251 Procedure Section 473(b). A judgment OFFICE: (310) 820-2229 TODD RUBINSTEIN, J.D., BROKER ASSOCIATE entered pursuant to Section 998 cannot be FACSIMILE: (818) 905-7299 EMAIL: [email protected] appealed, because the trial court retains jurisdiction and an appeal would be meaningless without a record to review.35 Thus, in requesting that the judgment be vacated, the party seeking relief needs to establish that the judgment was entered as a result of mistake, inad- vertence, surprise, or excusable neglect and that a reasonably prudent person under the same or similar circumstances might have made the same error.36 In Pazderka v. Caballeros Dimas Alang, Inc., the First District Court of Appeal reversed the trial court’s decision to set aside a judgment entered pursuant to the acceptance of a statutory offer to compromise. The defendant in this action for breach of a lease had requested relief because it mistakenly omitted language dealing with the issue of attorney’s fees. After accepting the defendant’s offer and obtaining a judgment, the plaintiff moved for attorney’s fees under the attorney’s fees clause in the lease and was awarded almost $30,000 in attorney’s fees. The California Court of Appeal reversed, holding that failure to include a provision regarding attorney’s fees and costs in a statutory offer to compromise is not the type of mistake that is ordinarily made by a person with no special training or skill. Therefore, the defendant was not entitled to relief from the judgment pursuant to Section 473(b) and had to pay the plaintiff’s attorney’s fees. Many attorneys use statutory offers to compromise aimlessly or not at all. These attorneys are failing to use an effective tool for resolving cases before trial and for obtaining an added advantage should the case go to trial. Section 998 should give parties some additional comfort that if their opponent fails to obtain a more favorable judgment, the offeror will receive the beneﬁts offered by Section 998. ■

1 See Bank of San Pedro v. Superior Court, 3 Cal. 4th 797, 804 (1992); Bodell Constr. Co. v. Trustees of Cal. State Univ., 62 Cal. App. 4th 1508, 1518 (1998). 2 Effective Jan. 1, 2002, the legislature reinstated Code of Civil Procedure §1021.1, which—on a trial basis in Riverside County only—expressly gives litigants the ability to recover attorney’s fees under §998 if their offer to compromise is not accepted and the offeree does

LOS ANGELES LAWYER / OCTOBER 2002 25 LAWSUIT & ASSET PROTECTION not obtain a more favorable result. Prior to expiration O.C. ATTORNEY–REFERRAL FEES PAID on Jan. 1, 2001, §102.1 applied to Riverside and San Bernardino Counties. See also CODE CIV. PROC. DOUGLAS S. UNGER §1021.1(7)(e): “Nothing in this section shall be con- ATTORNEY AT LAW strued to repeal or modify any other statutory provision The City Tower, 17th Floor, 333 City Blvd. West for the award of attorney’s fees.…” Orange, CA 92868 3 If the judgment for the plaintiff is for personal injuries 714-938-3855 and other damages, such as property damages, the ✔ Calif/Nevada Corporations, Family LPs & LLC’s burden is on the plaintiff to prove what portion of the ✔ Offshore Companies, Trusts, Private Banking DUI/FAMILY LAW/ final judgment was intended to compensate for personal ✔ Estate Planning, Real Estate, IRS, Tax Matters CRIMINAL DEFENSE injuries. See Lakin v. Watkins Associated Indus., 6 Cal. ✔ Financial Strategies, Investment Planning Highest Integrity & Professionalism 4th 644, 650 (1993). 4 TM Cobb Co. v. Superior Court, 36 Cal. 3d 273, 278- 20 Years Experience STEVEN SEARS CPA, ATTORNEY AT LAW 80 (1984). Save time, gas and hassle. Let O.C. 5 Saba v. Crater, 62 Cal. App. 4th 150, 153 (1998). Professional 949-262-1100 attorney handle your O.C. matters 6 Moffett v. Barclay, 32 Cal. App. 4th 980, 981-82 (1995); Confidential www.searsatty.com and receive referral fee. see also Ward v. Superior Court, 35 Cal. App. 3d 67, 69- 70 (1973) (revocation of offer by letter to defendant’s insurance carrier was ineffective because offer, and revocation of that offer, must be directed to a party). 7 Wilson v. Wal-Mart Stores, Inc., 72 Cal. App. 4th 382, 213.251.5486 office Maturing Cases 391 (1999). 310.466.7589 cell 8 The 30-day deadline can be extended by stipulation between the parties. The death of either the offeror or offeree before acceptance terminates the offer. See Estate of Watts, 162 Cal. App. 3d 1160, 1164 (1984). Richard W. Swartz 9 Hofer v. Young, 38 Cal. App. 4th 52, 55 (1995). Although judgment is entered pursuant to a §998 offer Civil Trial when the acceptance is filed with the court, mere filing 068391 of the acceptance, without communicating the acceptance to the offeror, is insufficient. Drouin v. Fleetwood Seasoned Enters., 163 Cal. App. 3d 486, 491-92 (1985). 10 Guzman v. Visalia Cmty. Bank, 71 Cal. App. 4th 1370, 3435 Wilshire Blvd. • Suite 2700 • Los Angeles, Calif. 90010 1376-77 (1999). 11 Poster v. Southern Cal. Rapid Transit Dist., 52 Cal. 3d 266, 272 (1990). 12 Landberg v. Landberg, 24 Cal. App. 3d 742, 750 (1972). 13 See CODE CIV. PROC. §998(b)(1). 14 Hutchins v. Waters, 51 Cal. App. 3d 69, 73 (1975) (offer made to multiple plaintiffs, conditioned on being accepted by all, held invalid). 15 See Meissner v. Paulson, 212 Cal. App. 3d 785, 791 (1989). The defendant’s offer to the plaintiffs was invalid because it did not specifically indicate how much of the settlement was being offered to each plaintiff. Without this allocation, the court could not, as a matter of law, determine whether the judgment after trial was more favorable than the offer. 16 Gilman v. Beverly Cal. Corp., 231 Cal. App. 3d 121, 126 (1991). 17 Id. See also Hurlbut v. Sonora Cmty. Hosp., 207 Cal. App. 3d 388, 409-10 (1989), in which the court held that the joint nature of an offer made by two parents and their minor child precluded a determination of whether each plaintiff received a judgment more favorable than the offer, because there was no single, indivisible injury to evaluate for settlement purposes. But see Fortman v. Hemco, Inc., 211 Cal. App. 3d 241, 263 (1989), in which Confidence At The Courthouse. the court held that joint demands should not mechanically be held invalid if it is clear that the plaintiff has Business litigation is increasingly complex. That is why we believe valuation recovered more at trial than what was possible under issues must be addressed with the same meticulous care the joint offer. as legal issues. Analysis must be clear. Opinions must be 18 See Taing v. Johnson Scaffolding Co., 9 Cal. App. defensible. Expert testimony must be thorough and 4th 579, 584 (1992), stating in dicta that the validity of articulate. HML has extensive trial experience and can unapportioned §998 offers to several defendants are provide legal counsel with a powerful resource for expert questionable in light of Proposition 51. testimony and litigation support. 19 See id. at 584-85, in which the plaintiff’s offer to compromise an action against three defendants for $249,999 was held invalid and not the proper basis for awarding For More Information Call 213-617-7775 expert witness costs and prejudgment interest against Or visit us on the web at www.hmlinc.com one of the defendants who was found solely liable for damages of $492,626. The court rejected the plaintiff’s BUSINESS VALUATION • LOSS OF GOODWILL • ECONOMIC DAMAGES • LOST PROFITS argument that by any calculation the judgment was more favorable because even if the guilty defendant had

26 LOS ANGELES LAWYER / OCTOBER 2002 paid the entire amount of the 998 offer, that defendant would have still been better off. The court held that when an offer is made, the offeree must be able to ROBERT G. SCOFIELD, PH.D. determine how much is being requested of him or her ATTORNEY AT LAW in particular. When an unapportioned offer is made to multiple defendants, the defendants cannot discern how much they are each being asked to pay individu- ■✔ Research and Writing ■✔ Argument Analysis ally, and therefore they have nothing to evaluate against their potential liability. But also see Bihun v. AT&T Including Criminal Law, Formal Logic, Informal Info. Sys., Inc., 13 Cal. App. 4th 976, 999-1000 (1993), Evidence, and Statutory Logic, Technical Aspects of in which the court held that an unapportioned statutory Interpretation the Doctrine Precedent offer to compromise made to employee and employer defendants was sufficient to allow an award of expert costs against the employer defendant, because it was Telephone: 530.668.1078 E-mail: [email protected] sued on a theory of respondeat superior and therefore was jointly liable for the full amount of damages. Taing Post Office Box 8777, Woodland, CA 95776-8777 appears to contradict the ruling in Fortman, 211 Cal. App. 3d at 263, in which the court of appeal held that joint demands should not be mechanically held to be invalid if it is absolutely clear that the plaintiff has recovered more at trial than was possible from the joint offer to compromise. The plaintiff in Taing clearly recovered more from the guilty defendant than the plaintiff would have recovered from that defendant even if that defendant paid the entire amount requested in the plaintiff’s 998 offer. The Fortman rule would appear to further settlement more than Taing, but the California Supreme Court has not yet addressed these conﬂicting opinions. The Taing Court distinguished Fortman on the basis that it involved multiple plaintiffs making a joint offer to a defendant, but Fortman appears better reasoned regardless of which side holds multiple parties. 20 Steinfeld v. Foote-Goldman Proctological Med. Group, Inc., 50 Cal. App. 4th 1542, 1548-49 (1996). 21 Id. at 1545. 22 Id. at 1548-49. See also Brown v. Nolan, 98 Cal. App. 3d 445, 451 (1979), in which the court awarded both defendants their expert witness fees and postoffer costs after the plaintiff rejected their joint statutory offer to compromise of $12,500 and thereafter received a verdict against only one of the defendants for $3,000. 23 Wear v. Calderon, 121 Cal. App. 3d 818, 821 (1981) (defendant’s offer of $1 held to be invalid). 24 Elrod v. Oregon Cummins Diesel, Inc., 195 Cal. App. 3d 692, 699 (1987). 25 Id. at 700. 26 Jones v. Dumrichob, 63 Cal. App. 4th 1258, 1263-64 (1998). 27 Colbaugh v. Hollis Hartline, 29 Cal. App. 4th 1516, 1529 (1994). 28 Lakin v. Watkins Associated Indus., 6 Cal. 4th 644, 662, n.13 (1993). 29 Manthey v. San Luis Rey Downs Enters., Inc., 16 Cal. App. 4th 782, 790 (1993) (the judgment is compared to the 998 offer before deduction of the workers’ compensation lien); Culbertson v. R. D. Werner Co., Inc., 190 Cal. App. 3d 704, 708 (1987). 30 Mesa Forest Prods., Inc. v. St. Paul Mercury Ins. Co., 73 Cal. App. 4th 324, 330 (1999). To hold otherwise would encourage plaintiffs to increase their postoffer costs in order to increase the likelihood that the ﬁnal judgment will exceed the defendant’s 998 offer. See Bennett v. Brown, 212 Cal. App. 2d 685, 688 (1963). 31 Stallman v. Bell, 235 Cal. App. 3d 740, 748-49 (1991). 32 Adam v. DeCharon, 31 Cal. App. 4th 708, 713 (1995). 33 Bodell Constr. Co. v. Trustees of Cal. State Univ., 62 Cal. App. 4th 1508, 1512 (1998). 34 Lakin v. Watkins Associated Indus., 6 Cal. 4th 644, 658-62 (1993). 35 Pazderka v. Caballeros Dimas Alang, Inc., 62 Cal. App. 4th 658, 667 (1998). But a decision by the trial court granting or denying a request that the judgment be vacated is properly the subject of an appeal. 36 Id. at 671.

LOS ANGELES LAWYER / OCTOBER 2002 27 By Mark Mermelstein and Joel M. Athey In the Fifth Dimension5th Practitioners face predicaments worthy of Dimensionthe Twilight Zone when a witness invokes the Fifth Amendment in a civil lawsuit

t is a dilemma few civil litigators want to be best handled by specialists in the ﬁeld. But encounter. Days before the deposition of a with increasing frequency, civil practitioners client in a civil litigation, the lawyer for the must confront the dilemmas posed when civil client learns that the government is investi- proceedings intersect with criminal investigating the client’s former employer. Calls to gations. Given the current surge of criminal the investigating agency yield no concrete investigations in the corporate sector, civil answers about whether the client is viewed as practitioners need to have at least a basic a possible subject or target of the govern- understanding of criminal law, particularly ment’s investigation. Understandably, the the effects of simultaneous criminal and civil client wants to avoid any possible criminal proceedings, in order to advise their clients exposure that might arise from the deposi- properly. Further complicating matters is the tion. The lawyer, although not a criminal law fact that often the civil litigant and the poten- specialist, generally is aware that the client’s tial target or subject of the criminal investi- I deposition testimony could someday be used gation require separate counsel and have against the client by the government. opposing interests. Another lawyer, representing a corporate In order to appreciate the implications of client in a civil trial, is informed that some cur- concurrent civil and criminal proceedings, rent and former corporate employees who are it is important to remember what the Fifth essential to the case have just learned that Amendment does and how it works in prac- they are possible subjects or targets of a tice. To do so requires a review of four basic criminal investigation. They will therefore assert their Fifth Amendment privilege and Mark Mermelstein and Joel M. Athey are asso- refuse to answer questions at the civil trial. ciates in the Los Angeles office of Gibson, Dunn Consequently, shortly before trial, the inabil- & Crutcher, LLP, and are members of the ﬁrm’s ity to call these witnesses to testify leaves litigation practice group as well as the business the lawyer with virtually no case. crimes and investigations practice group. The Many seasoned civil litigators, even those authors would like to thank Tom Holliday, who consider themselves experienced gen- Marcellus McRae, and Stephen Miller for com- eral practitioners, stop short of advising menting on drafts of the article and Eileen

clients on criminal matters, believing them to Ahern for her contribution. HADI FARAHANI

28 LOS ANGELES LAWYER / OCTOBER 2002 principles about the Fifth Amendment privi- ination.12 Therefore, it is improper for a wit- a plaintiff is likely to seek a protective order lege against self-incrimination: 1) when it ness to make a blanket assertion of the Fifth barring a defendant from testifying at trial may be asserted, 2) who may assert it, 3) Amendment privilege by, for example, refus- about matters on which the defendant refused how it may be asserted, and 4) what effect its ing to answer any questions on a particular to be deposed.22 In addition, federal appel- assertion may have on a civil proceeding. subject.13 A witness who claims the Fifth late courts have upheld trial courts that struck Amendment privilege has the burden of show- affidavits supporting or opposing summary Proper Invocation of the ing that the testimony or other evidence could judgment after parties offering the affidavits Fifth Amendment tend to be incriminating.14 Once the privilege had asserted the privilege during discovery The Fifth Amendment privilege, which is has been asserted, the court must make a and refused to answer deposition questions on applicable to the states through the Four- “particularized inquiry” as to whether the the subjects in the affidavits.23 teenth Amendment,1 provides that no person claimant has met that burden with respect to However, there are limitations on the trial “shall be compelled in any criminal case to be each claim of privilege.15 The court may con- court’s authority to “punish” a defendant for a witness against himself.”2 Federal decisions duct in camera hearings for this inquiry but asserting the Fifth Amendment privilege.24 have made clear that the Fifth Amendment must make its findings on the record as to One decision by a state court held that a privilege may actually be asserted more whether the claim of privilege is valid for default judgment was not warranted against broadly “in any proceeding, civil or criminal, each question.16 a defendant who asserted the Fifth administrative or judicial, investigatory or As a result, for a noticed deposition, oppos- Amendment during discovery and, while the adjudicatory,” in which the witness reasonably ing counsel may not be content with a letter defendant could not testify, the trial could believes that the information sought or dis- from the lawyer representing the deponent proceed.25 And while some federal courts coverable as a result of testimony or a state- stating that his or her client will either not have gone so far as to preclude a civil defen- ment could be used in a subsequent state or appear to testify or will assert the Fifth dant from introducing any evidence at trial federal criminal proceeding.3 Amendment privilege in response to all ques- regarding matters covered by a Fifth California statutes and decisional law tions. In practice, a court is likely to find such Amendment assertion,26 other federal courts afford similar protection. California’s a tactic equally unpersuasive.17 The bottom have ruled that such stringent restrictions Evidence Code allows any witness, whether line is that a lawyer cannot simply call off a make asserting the Fifth Amendment privi- in a civil trial or criminal proceeding, to deposition upon learning that the deponent is lege too “costly.”27 Certainly, in either forum, “refuse to disclose any matter that may tend the potential subject or target of a concur- the defendant may find the ability to defend to incriminate him or her.”4 According to case rent criminal investigation. Instead, the depo- a civil suit substantially compromised because law, any party or nonparty witness in a dis- nent and his or her lawyer will most likely of a parallel criminal investigation that pre- covery proceeding may assert the Fifth have to endure the exercise of sitting through cludes participating in discovery. Amendment privilege against disclosing infor- the deposition and asserting the deponent’s At least one significant difference exists mation that might tend to be incriminating Fifth Amendment privilege to each and every between state and federal civil practice when under either federal or state law.5 The privi- question for which it may be properly invoked. a witness asserts the Fifth Amendment priv- lege extends to compelled testimony in any What are the ramifications of asserting ilege at trial. In federal practice, opposing form and may properly be invoked in the Fifth Amendment in a civil proceeding? counsel may comment to the jury during response to deposition questions,6 inter- The answer to this question is critical to decid- closing argument that a witness asserted the rogatories,7 or trial testimony. ing on a course of action. While it is true that Fifth Amendment on the stand and the jury In short, whenever individuals are asked no punishment can be imposed against a may draw a negative inference from that fact.28 to give sworn testimony, whether at a depo- party or witness for claiming the Fifth Amend- Under California law, however, neither the sition or trial, they may assert the Fifth ment privilege, it is also true that courts will court nor counsel may comment on the fact Amendment and refuse to answer a question not endorse parties taking advantage of their that a witness asserted the Fifth Amendment if there is a good faith belief that the answer adversaries by invoking the Fifth Amendment. privilege, and the jury may not draw any infer- “would in [itself] support a conviction…[or] Thus, a party “may be required to either waive ences—about the credibility of the witness or would furnish a link in the chain of evidence the privilege or accept the civil consequences any other matters at issue in the trial—from needed to prosecute” them.8 This good faith of silence if he or she does exercise it.”18 that assertion.29 Interestingly, this ban on belief exists when there is a reasonable belief So when the plaintiff in a civil litigation commenting on a claim of privilege does not that the individual is the subject or target of asserts the Fifth Amendment privilege, sev- prevent counsel from commenting on gaps in a criminal investigation.9 eral things can happen. At the pleading stage, the opposing party’s case resulting from the Who may assert the privilege? Signifi- commencing a lawsuit waives the privilege as exercise of the Fifth Amendment privilege cantly, the privilege protects only natural per- to the factual issues raised in the complaint, by a witness.30 Clearly, then, even civil liti- sons; it does not apply to corporations.10 and a plaintiff who persists in refusing to gants who survive discovery sanctions and Consequently, for an individual to assert the answer risks dismissal of the lawsuit.19 At the proceed to trial face a substantial obstacle Fifth Amendment privilege, the witness must discovery stage, a plaintiff may suffer less when their witnesses invoke the Fifth fear actual self-incrimination. Individuals who drastic but equally damaging sanctions for Amendment privilege. assert the privilege for testimony that would refusing to answer questions. For example, a With all these considerations, the lawyer only incriminate another person—or, as hap- plaintiff may be barred from introducing evi- whose client may be the subject of a criminal pens often, a current or former employer— dence at trial on issues relating to discovery investigation and is being asked to appear are doing so improperly.11 questions that he or she refused to answer.20 for a deposition in a civil case has a difficult How is the privilege asserted? The Fifth Likewise, defendants in both state and decision to make. First, the lawyer needs to Amendment can only be invoked on a ques- federal proceedings who claim the Fifth advise the client on whether it is proper for the tion-by-question basis because the court must Amendment privilege during a deposition client to assert the Fifth Amendment privi- have the opportunity to determine whether run the risk that the court will preclude their lege. Next, even if such an assertion is proper, specific questions pose a threat of self-incrim- entire testimony at the time of trial.21 Indeed, the lawyer should advise the client on whether

30 LOS ANGELES LAWYER / OCTOBER 2002 asserting the Fifth Amendment is a good postponing the civil proceedings. This alter- It is important to note that a Pacers motion move strategically. If the client refuses to tes- native also gives parties the benefit of pre- is not grounded in notions of due process, and tify or asserts the Fifth Amendment in the civil serving the future testimony of nonparty wit- there is no constitutional right to have a civil suit, the client may avoid disclosing incrimi- nesses who may need to assert the Fifth proceeding postponed because of a parallel nating information that could be used in a Amendment privilege. criminal proceeding.38 Rather, the motion is criminal proceeding. But invoking the Fifth The seminal case in this area is Pacers, Inc. grounded in the court’s inherent discretion to Amendment may be tantamount to admitting v. Superior Court,31 in which three individuals “stay civil proceedings when the interests of defeat in the civil case, as the client may be were simultaneously defendants in a civil justice seem to require such action.”39 precluded from testifying at the civil trial or, action and under investigation by the U.S. One remedy is to bring a motion for a worse, called to testify knowing that the jury Attorney’s Office for the same conduct. The protective order to stay the civil deposition or will be able to draw negative inferences from defendants sought to postpone their deposi- vacate the trial date until a deponent or wit- In order to escape the quandary of either testifying to help the civil case and risking criminal exposure, or refusing to testify criminalto avoid criminal exposure and risking defeat in the civil lawsuit, parties can look to California decisional law for an alternative that involvesexposure postponing the civil proceedings. an assertion of the Fifth Amendment privi- tions until after the statute of limitations had ness can freely answer questions without hav- lege. In short, the lawyer must weigh the rel- run on their alleged criminal conduct. The ing to assert the Fifth Amendment privilege. ative exposure that the client faces in the civil trial court denied this request and held that the The deponent or witness could do so after the and criminal proceedings and advise the client three individuals could not testify in their own criminal statute of limitations has run or once that he or she may essentially have a defense at the civil trial because they had the deponent or witness is no longer a poten- Hobson’s choice. refused to sit for depositions.32 The court of tial subject or target of a government inves- Similarly, the lawyer representing a cor- appeal overruled, holding, “A party asserting tigation. The strongest case for deferring porate client in a civil case with essential wit- the Fifth Amendment privilege should suffer civil proceedings until after a criminal pros- nesses who are current or former employees no penalty for his silence,”33 and commenting ecution is completed occurs when a party facing a criminal investigation most likely has that “in this context ‘penalty’ is not restricted being investigated for a serious offense is a conflict of interest in advising the witnesses to fine or imprisonment…[but] the imposi- also involved in a civil action concerning the whether to assert their Fifth Amendment priv- tion of any sanction which makes assertion of same matter.40 The fact that an indictment ilege. For each witness, another lawyer—one the Fifth Amendment privilege ‘costly.’”34 The has not yet been returned in the criminal qualified to handle a criminal defense and Pacers court further held that “where, as here, proceeding is a factor to be considered by the whose only concern is the interests of the a defendant’s silence [as to the criminal inves- court but does not make a Pacers motion to witness rather than the corporation’s civil and tigation] is constitutionally guaranteed, the stay civil proceedings any less appropriate.41 criminal exposure—generally should be con- court should weigh the parties’ competing Generally, a court will consider five factors sulted and will likely advise the witness to interest with a view toward accommodating the when deciding whether to delay civil pro- assert the Fifth Amendment privilege. Once interests of both parties, if possible.”35 The ceedings—which can constitute a single depo- this happens, corporate counsel is left in the court ruled, in what may seem an extraordi- sition, all discovery, or the entire trial—in unenviable position of having to proceed to nary remedy, that the defendants’ depositions the face of parallel criminal proceedings: trial while unable to elicit testimony that may (essentially the entire civil discovery) should 1) The interest of the plaintiff in proceeding be critical to the company’s defense. be postponed for a year and a half until the expeditiously, and the potential prejudice to In these situations, the lawyers and the criminal statute of limitations had run. the plaintiff of a delay. parties may face unpleasant choices. However, This remedy is in accord with federal prac- 2) The burden that any particular aspect of the there may be another, more palatable option tice, in which it has been consistently held that civil proceedings may impose on defendants. for clients whose civil cases require an asser- when both civil and criminal proceedings 3) The convenience of the court in the man- tion of the Fifth Amendment privilege. arise out of the same related transactions, agement of its cases. the trial court has discretion to grant an 4) The interests of persons not parties to the Pacers Motion objecting party a stay of discovery in the civil civil litigation. In order to escape the quandary of either tes- action until there is a disposition of the crim- 5) The interest of the public in the pending tifying to help the civil case and risking criminal matter.36 Federal courts have recognized civil and criminal litigation.42 inal exposure, or refusing to testify to avoid the need to balance the interests of the party It is important to note that a Pacers motion criminal exposure and risking defeat in the claiming protection against self-incrimination is far from a perfect solution. First, a typical civil lawsuit, parties can look to California and the adversary’s entitlement to equitable Pacers motion seeking to stay civil discovery decisional law for an alternative that involves treatment.37 until the criminal proceedings are resolved is

LOS ANGELES LAWYER / OCTOBER 2002 31 an extraordinary remedy. This is true because the government may investigate and seek an indictment during the entire statute-of-limitations period, which, for example, is generally five years for nonviolent federal crimes and ten years for crimes affecting federally insured financial institutions.43 For nonviolent state crimes, the statute of limitations generally varies from three to six years.44 Complicating the situation is that, as a prac- tical matter, prosecutors rarely indicate that an investigation is closed or confirm that an individual is no longer an active subject or target. Typically, the only time a potential witness knows for certain that there is no longer a risk of self-incrimination by testifying in a civil proceeding is after the criminal statute of lim- ATTORNEY-CPA-LITIGATION CONSULTANT itations has run. Thus, civil litigants who file Pacers motions could theoretically be seeking Experienced Expert Witness Since 1957 a stay of the civil proceedings for up to six Professor of Law and Accounting years or even for ten years if a financial insti- Special Master, Mediator, Arbitrator tution is a putative victim. Courts rarely grant stays in civil litigation for six years or more.45 AUTHOR • LECTURER Modified Pacers Motion ■ DAVID OSTROVE ATTORNEY-CPA There is however, another solution—a mod- TELEPHONE 323/939-3400 • FAX 323/939-3500 ified Pacers motion. Using this procedure, a party to the civil suit (whether an individual 5757 WILSHIRE BOULEVARD, SUITE 535, LOS ANGELES, CALIFORNIA 90036 or corporation) would agree to allow the deposition to go forward. At the deposition, a deponent—whether a party or a nonparty witness—would assert the Fifth Amendment privilege as needed. Afterward, the party to OVER 25 YEARS OF SUCCESS the suit who is faced with the prejudice caused We by the assertion of the privilege would bring a motion seeking an order mandating that if circumstances should change in the criminal Understand investigation making it possible for the deponent to testify fully, a new deposition would be Bankruptcy taken, thereby preserving the deponent’s ability to testify at trial. This motion requests much more limited relief from the court than the The Legal Side and Clients troubled by debts? Pacers motion and does not seek to delay civil The Human Side We are experts at: proceedings. It also allows potential deponents • Debt Restructuring Plans time to either resolve the criminal matter or • Chapters 7, 11, and 13 Relief clarify whether the government views them as • Conservative Asset Protection actual subjects or targets of a criminal investigation. The modified Pacers motion is not a Refer your clients with perfect solution either, but when the tradi- confidence: tional Pacers motion is unlikely to prevail or has • AV Rating already failed, it may be a suitable alternative. • Free Consultations In California, a civil court has the author- • Reasonable Fees ity to grant a motion immunizing a potential witness from state criminal prosecutions,46 Professional, Compassionate Solutions which presents another potential solution to the dilemma—requesting immunity directly Laurence D. Merritt from the civil court.47 But such a motion also Attorney at Law must be served on the prosecutor’s office, and Phone: 818.710.3823 • email: [email protected] the prosecutor merely needs to submit an Internet: www.legalknight.com opposing declaration stating that there are reasonable grounds to believe that the proposed grant of immunity might unduly hamper a Formerly with Merritt & Hagen criminal proceeding, including the subse-

32 LOS ANGELES LAWYER / OCTOBER 2002 quent prosecution of that witness.48 The trial scandal and resulting investigations, civil 479, 486 (1951). 9 A “target” is a person about whom the prosecutor or court must treat the prosecutor’s declaration practitioners need to stay alert to the ramifi- the grand jury has substantial evidence linking him or as conclusively establishing that the potential cations that arise when the Fifth Amendment her to the commission of a crime and who, in the pros- witness’s request for immunity cannot be privilege is asserted in a civil proceeding. ecutor’s judgment, is a putative defendant. See UNITED granted.49 Thus, this solution does not hold And lawyers should understand that there STATES ATTORNEY’S OFFICE MANUAL ¶9-11.151 (2000- out much promise of success unless the indi- are options available if a civil proceeding is 01 Supp.). A “subject” is a person whose conduct is within the scope of the prosecutor’s or grand jury’s vidual was never a target or subject in the first affected by a client or third-party witness investigation. Id. place. who cannot participate in discovery or at trial 10 Braswell v. United States, 487 U.S. 99, 104 (1988) (a Sometimes plaintiffs benefit from civil lit- because of concerns about self-incrimination. corporation has no Fifth Amendment privilege); Avant! igation that overlaps with an existing or sub- Pursuing these options might make it possi- Corp. v. Superior Court, 79 Cal. App. 4th 876, 883 sequently commenced criminal investigation. ble for clients to avoid facing an uncomfort- (2000) (same); George Campbell Painting Corp. v. Indeed, from a less charitable standpoint, able choice between vigorously prosecuting Reid, 392 U.S. 286, 288 (1968) (same); see also Bellis v. United States, 417 U.S. 85, 100 (1974) (partnerships can- when a civil complaint is filed in the wake of or defending a civil claim and protecting them- not claim privilege). a well-publicized criminal investigation, or selves against criminal exposure. ■ 11 See Rogers v. United States, 340 U.S. 367, 371 (1951). when the civil and criminal complainants are 12 Fuller v. Superior Court, 87 Cal. App. 4th 299, 305 the same (such as when the government is 1 Malloy v. Hogan, 378 U.S. 1, 6 (1964). (2001). 13 2 Id. See also Warford v. Medeiros, 160 Cal. App. 3d the victim of a fraud),50 the motives of the U.S. CONST. art. V. The same privilege is included in 1035, 1045 (1984) (requiring trial court to conduct par- civil plaintiff can be questioned. If the civil the California Constitution. CAL. CONST. art. I, §15. 3 United States v. Balsys, 524 U.S. 666, 672 (1998) (cit- ticularized inquiry of questions to which Fifth complainant is suing or noticing depositions ing Kastigar v. United States, 406 U.S. 441, 444-45 Amendment privilege is asserted to determine if invo- to get the benefit of the negative inference of (1972)); see also McCarthy v. Arndstein, 266 U.S. 34, 40 cation was appropriate). 14 a party or third-party witness asserting the (1924) (the privilege “applies alike to civil and criminal Fuller, 87 Cal. App. 4th at 305. 15 Fifth Amendment privilege, other remedies proceedings, wherever the answer might tend to sub- Id. 16 ject to criminal responsibility him who gives it”). Id. surface. For example, if the opposing party 17 4 EVID. CODE §940. In addition, a defendant in a crimi- Id. could demonstrate that a deposition was not 18 nal case has a statutory privilege not to be called as a Blackburn v. Superior Court, 21 Cal. App. 4th 414, 425- reasonably calculated to lead to relevant evi- witness to testify. EVID. CODE §930. 26 (1993). 19 dence, grounds would exist to bar the depo- 5 Zonver v. Superior Court, 270 Cal. App. 2d 613, 620- Fremont Indem. Co. v. Superior Court, 137 Cal. App. sition from going forward.51 Assuming that 21 (1969). 3d 554, 557 (1982) (“Plaintiff cannot have his cake and 6 eat it too.”). one cannot demonstrate bad faith on the part See Marriage of Hoffmeister, 161 Cal. App. 3d 1163, 20 Dwyer v. Crocker Nat’l Bank, 194 Cal. App. 3d 1418, of the civil plaintiff, a Pacers motion, or a 1171 (1984). 7 Id. 1432-33 (1987). 21 modified Pacers motion, may be the answer. 8 Blackburn v. Superior Court, 21 Cal. App. 4th 414, 428 Marriage of Hoffmeister, 161 Cal. App. 3d 1163, 1169 Given the current climate of corporate (1993). See also Hoffman v. United States, 341 U.S. (1984); Guiterrez-Rodriguez v. Cartagena, 882 F. 2d IMMIGRATION LAW

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www.hirson.com • also in San Diego, CA • Phoenix, AZ • Las Vegas, NV • New York, NY • Wilton, CT • Toronto, Canada David Hirson and Mitchell L. Wexler are certiﬁed by the State Bar of California Board of Legal Specialization as specialists in Immigration and Nationality Law. All matters of California state law are provided by active members and/or under the supervision of active members of the California State Bar.

LOS ANGELES LAWYER / OCTOBER 2002 33 553, 577 (1st Cir. 1989) (“A defendant may not use the admissible and competent evidence introduced for U.S., 1992 WL 115191, *1 (N.D. Ohio 1992). Fifth Amendment to shield herself from the opposition’s their adverse inferential value against a defendant). 41 Brock v. Tolkow, 109 F.R.D. 116 (E.D. N.Y. 1985) inquiry during discovery only to impale her accusers An adverse inference from the assertion of the Fifth (considered Pacers issue in preindictment context). with surprise testimony at trial.”); United States v. Amendment privilege in a criminal proceeding is not 42 Avant!, 79 Cal. App. 4th at 510-11. Sack, 118 F.R.D. 500 (D. Neb. 1987). permitted. Mitchell v. United States, 526 U.S. 314, 327- 43 18 U.S.C. §3282 (forbidding prosecution, trial, or 22 Pacers, Inc. v. Superior Court, 162 Cal. App. 3d 686, 28 (1999). punishment “unless the indictment is found or the 688-89 (1984). 29 EVID. CODE §913(a). information is instituted within ﬁve years next after 23 In re Edmond, 934 F. 2d 1304, 1308-09 (4th Cir. 30 People v. Redmond, 29 Cal. 3d 904 (1981). such offense shall have been committed”); 18 U.S.C. 1991); United States v. Parcels of Land, 903 F. 2d 36, 43 31 Pacers, Inc. v. Superior Court, 162 Cal. App. 3d 686 §3292 (setting forth 10-year statute of limitations for (1st Cir. 1990), cert. denied, 498 U.S. 916 (1990). (1984). This case is so well known that the motion made crimes affecting federally insured financial institutions). 24 Securities & Exch. Comm’n v. Colello, 139 F. 3d 674, to seek this type of relief is known as a Pacers motion. 44 See PENAL CODE §§800, 801. 677 (9th Cir. 1998); Wehling v. Columbia Broad. Sys., 32 Id. at 688. 45 See Fuller v. Superior Court, 87 Cal. App. 4th 299, 309 608 F. 2d 1084, 1089 (5th Cir. 1979) (if invocation of the 33 Id. at 689. (2001) (stay is not favored when limitations period on Fifth Amendment privilege prejudiced the other party, 34 Id. (quoting Griffin v. California, 380 U.S. 609, 614 criminal prosecution has years to run). the district court “would be free to fashion whatever (1965)). 46 People v. Superior Court (Kaufman), 12 Cal. 3d 421 remedy is required to prevent unfairness”). 35 Id. at 690. (1974). 25 Alvarez v. Sanchez, 158 Cal. App. 3d 709, 715 (1984). 36 See, e.g., Campbell v. Eastland, 307 F. 2d 478 (5th Cir. 47 See, e.g., Blackburn v. Superior Court, 21 Cal. App. 4th 26 Securities & Exch. Comm’n v. Cymaticolor Corp., 106 1962), cert. den., 371 U.S. 955; Perry v. McGuire, 36 414, 424 (1993). F.R.D. 545, 549-50 (S.D. N.Y. 1985); Securities & Exch. F.R.D. 272 (S.D. N.Y. 1964); Paul Harrigan & Sons, Inc. 48 See Philibosian v. Superior Court, 149 Cal. App. 3d 938, Comm’n v. Benson, 657 F. Supp. 1122 (S.D. N.Y. 1987); v. Enterprise Animal Oil Co., Inc., 14 F.R.D. 333 (E.D. 940 (1983). but see United States v. Talco Contractors, Inc., 153 Pa. 1953); National Discount Corp. v. Holzbaugh, 13 49 Id. F.R.D. 501, 507 (W.D. N.Y. 1994) (questioning the F.R.D. 236 (E.D. Mich. 1952). 50 At least one federal court has questioned the propriety grant of total preclusion orders in Cymaticolor and 37 Securities & Exch. Comm’n v. Graystone Nash, Inc., of the government using a criminal investigation to Benson). 25 F. 3d 187, 192 (3d Cir. 1994); Campbell v. Gerrans, further its own civil lawsuit. See, e.g., United States v. 27 Securities & Exch. Comm’n v. Graystone Nash, Inc., 592 F. 2d 1054, 1058 (9th Cir. 1979) (reversing district Tweel, 550 F. 2d 297 (5th Cir. 1977) (examining impli- 25 F. 3d 187, 192 (3d Cir. 1994); Campbell v. Gerrans, court’s dismissal of civil rights action due to defen- cations of parallel civil and criminal proceedings in the 592 F. 2d 1054, 1058 (9th Cir. 1979) (reversing district dant’s refusal to answer deposition questions based Fourth Amendment context). court’s dismissal of civil rights action due to defen- on the Fifth Amendment privilege). 51 The court is empowered to issue a protective order dant’s refusal to answer deposition questions based 38 Baxter v. Palmigiano, 425 U.S. 308, 318 (1976); see also quashing a deposition notice in order to protect a party on the Fifth Amendment privilege). Blackburn v. Superior Court, 21 Cal. App. 4th 414, 435- or deponent against “unwarranted annoyance, embar- 28 Baxter v. Palmigiano, 425 U.S. 308, 318 (1976) (“[T]he 36 (1993); People v. Coleman, 13 Cal. 3d 867, 885 (1975). rassment or oppression.” CODE CIV. PROC. §2025(i). Fifth Amendment does not forbid adverse inferences 39 Avant! Corp. v. Superior Court, 79 Cal. App. 4th 876, The court may also do this if it determines that the “bur- against parties to civil actions when they refuse to tes- 885 (2000). See Klein v. Superior Court, 198 Cal. App. den…or intrusiveness of that discovery clearly out- tify in response to probative evidence offered against 3d 894, 905 (1988). weighs the likelihood that the information sought will them.”); see LiButti v. United States, 107 F. 3d 110, 123 40 Securities & Exch. Comm’n v. Dresser Indus., Inc., lead to the discovery of admissible evidence.” CODE CIV. (2d Cir. 1997) (Fifth Amendment privilege claims are 682 F. 2d 1368, 1375-76 (D.C. Cir. 1980); Newman v. PROC. §2017(c). 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34 LOS ANGELES LAWYER / OCTOBER 2002 MCLE ARTICLE AND SELF-ASSESSMENT TEST Sponsored by By reading this article and answering the accompanying test questions, you can earn one MCLE credit. To apply for credit, please follow the instructions on the test answer sheet on page 39. WEST Uncertain By Ronald M. Greenberg Both opponents and advocates Appeal of expanded judicial review of arbitration decisions invoke the intent of the Federal Arbitration Act

disparate systems exist for the refusal of the arbitrator to hear relevant yet addressed the issue of expanded judicial the determination of civil dis- and material evidence. Basically the proce- review of FAA-governed agreements. putes. One is the judicial sys- dure itself is reviewed on appeal as opposed The trend of allowing parties to contract Two tem; the other, arbitration. to the merits of the dispute. for expanded judicial review, however, does Each system has its own unique benefits and Thus the willingness to give up appellate not extend to the California Arbitration Act. drawbacks. Generally, the judicial system rights is a factor when considering arbitration. As a result of the decision earlier this year in affords greater discovery and the right to a Nevertheless, because of an evolving trend in Crowell v. Downey Community Hospital jury trial. Arbitration is perceived as more matters governed by the Federal Arbitration Foundation2 and the recent decision in efficient and less expensive. Act,1 parties who opt for arbitration governed Oakland-Alameda County Coliseum Authority There are also significant differences by the FAA may be able to secure the best of v. CC Partners,3 if a matter is governed by the between the two systems at the appellate both worlds—the efficiencies of arbitration CAA,4 any provision for expanded judicial level. The losing party in a trial has a wide and the more extensive bases for appeal. This review is void. However, because of a conflict range of appellate rights and can challenge, trend is due to the fact that some courts have between these two decisions, it is unsettled for example, the sufficiency of evidence or the upheld agreements for expanded judicial whether the inclusion of a clause providing for application of law. On the other hand, the los- review of arbitration awards, but it depends expanded judicial review will void the entire ing party in an arbitration has limited rights upon the circuit in which the judicial review arbitration agreement. to judicial review. The losing party cannot occurs. The Ninth Circuit is one of the circuits What this means is that practitioners raise challenges based on evidence, including that allows parties to agreements governed by its insufficiency, or legal errors. For the most the FAA to agree to expanded judicial review. Ronald M. Greenberg is of counsel with the part, judicial review is limited to issues involv- Although California state courts also are law firm Berkes Crane Robinson & Seal LLP, ing due process, such as not receiving notice called upon to review arbitration awards that where he specializes in civil litigation, inter- of hearings, not having a neutral arbitrator, or are governed by the FAA, no state court has national and domestic ADR, and civil appeals.

LOS ANGELES LAWYER / OCTOBER 2002 35 called upon to draft arbitration agreements for adopt this formula, though without three judges expressed three different views clients who reside in California must now rejecting it. Two have criticized it….We on this subject. The underlying facts involved fully understand the present state of the law can understand neither the need for parties to an international joint venture who in both the federal and state judicial systems the formula nor the role that it plays in agreed to arbitration in San Francisco pur- in California. If expanded judicial review of judicial review of arbitration (we sus- suant to the Rules of the International arbitration awards in California is desired, pect none-that it is just words). If it is Chamber of Commerce. The arbitrators were the practitioner must find a way for the arbi- meant to smuggle review for clear to “issue a written award which shall state the tration agreement to be governed by the FAA error in by the back door, it is incon- bases of the award and include detailed find- and have a basis (such as diversity) for federal jurisdiction or, alternatively, hope that California state courts will adopt a position of expanded judicial review for arbitration awards governed by the FAA. If practitioners cannot find a way to place an arbitration agreement under the FAA, they must hope that another California Court of Appeal will render an opinion opposite to Crowell and Oakland- Alameda County Coliseum Authority, thereby establishing a conflict for resolution by the California Supreme Court. Appellate Review in Federal Court The purpose of the FAA, which was enacted in 1925, was to abolish longstanding antiarbitration laws and to make agreements to arbitrate that fall within its purview specifically enforceable.5 Section 10(a) of the FAA6 allows the court to vacate an award on specified grounds regarding the conduct of the arbitrators. In commenting upon this provision, the court in Barbier v. Shearson Lehman Hutton Inc., stated, “It is well-settled that judicial review of an arbitration award is narrowly limited. The award may be vacated only if at least one of the grounds specified in 9 U.S.C. Section 10 is found to exist.”7 These grounds include: • The procurement of an award “by cor- sistent with the entire modern law of ings of fact and conclusions of law.”15 The ruption, fraud, or undue means.”8 arbitration. If it is intended to be syn- arbitration agreement further provided that • The “evident partiality or corruption” of the onymous with the statutory formula the U.S. District Court for the Northern arbitrator.9 that it most nearly resembles— District of California could confirm, vacate, • The arbitrator refused to “postpone the whether the arbitrators “exceeded modify, or correct the award. The parties hearing, upon sufficient cause,” or refused “to their powers”—it is superfluous and also agreed to the following in their arbitra- hear evidence pertinent and material to the confusing. There is enough confusion tion agreement: “The decisions and awards of controversy,” or engaged in “any other mis- in the law. The grounds for setting the Tribunal may be enforced by the judg- behavior by which the rights of any party aside arbitration awards are exhaus- ment of the Court or may be vacated, modi- may have been prejudiced.”10 tively stated in the statute.…13 fied or corrected by the Court (a) based upon • The arbitrator “exceeded [his or her] pow- Despite the seemingly well-established any grounds referred to in the Act, or (b) ers, or so imperfectly executed them that precedents for limited judicial review of arbi- where the Tribunal’s findings of fact are not mutual, final, and definite award upon the tration awards in the federal judicial system, supported by substantial evidence, or (c) subject matter submitted was not made.”11 some federal courts also have recognized where the Tribunal’s conclusions of law are Some federal courts have augmented that parties may agree to a broader scope of erroneous.”16 these grounds by articulating that an award judicial review of an award. Specifically, to The district court, when asked to conduct may also be vacated when it is in “manifest dis- avoid the FAA’s limitations on the scope of the expansive review to which the parties regard of the law.”12 However, this concept is judicial review, parties to an agreement to had agreed, declined. The court held that not uniformly accepted in the federal system. arbitrate have provided in their agreements the parties could not contract for a more As the court stated in Baravati v. Josephthal, that an award may be vacated if it is not sup- expanded judicial review than what was Lyons & Ross Inc.: ported by substantial evidence or if it is based allowed under Section 10 of the FAA.17 A number of courts, including our own, upon errors of law. This evolution, however, In reversing that decision, the Ninth have said that they can set aside arbi- has not been uniformly accepted. Circuit held that parties to an arbitration tral awards if the arbitrators exhibited Best exemplifying the divergence of views agreement could contract for a more expan- a “manifest disregard of the law.” Two on this issue is the case of Lapine Technology sive judicial review than that allowed by the courts, however, have declined to Corporation v. Kyocera Corporation,14 in which FAA. According to Judge Ferdinand F. KEN CORRAL

36 LOS ANGELES LAWYER / OCTOBER 2002 Harry Pidgeon Collection, UCR/California Museum of Photography, University of California at Riverside © 2002West Group Trademarks shownwithinare usedunderlicense.W-106113/8-02 www.westgroup.com Only CaliforniaOfficial Reportscarriesweightincourt. it makesasolidconnection. foundation ofCaliforniacaselaw. LikethisbridgeinMaderaCounty, for accuracy. For140years, summary andheadnoteinitisapprovedbytheReporter of Decisions With authoritymandatedbyCaliforniaRulesofCourtRule313, California Official Reports E-mail [email protected] is theonlyofficial sourceofcasecitations. California Official Reports Differences thatmatter. has beenthe e very Fernandez, who authored the court’s opinion: arbitration agreement can contract for a more tration awards and who have an option of This appeal boils down to one major expansive scope of judicial review of an arbi- where to petition to confirm or vacate an arbi- issue: Is federal court review of an arbitration award and have upheld the right of the tration award should not file the petition tration agreement necessarily limited parties to do so.21 The Third Circuit, in a dif- before considering the available locations for to the grounds set forth in the FAA or ferent context in which the issue was whether filing. Indeed, if a basis for federal jurisdiction can the court apply greater scrutiny, if parties could agree to a more limited judicial exists, the FAA allows a party to petition to the parties have so agreed?… review procedure under state law than that confirm or vacate an award in any location We hold that we must honor that allowed by the FAA, cited the Fourth, Fifth, considered a proper venue—even if the arbi- agreement. We must not disregard it and Ninth Circuits in support of its decision: tration was conducted elsewhere.28 by limiting our review to the FAA “We now join with the great weight of author- grounds….18 ity and hold that parties may opt out of the Appellate Review in State Court In a concurring opinion, Judge Alex FAA’s off-the-rack vacatur standards and fash- Until the California Court of Appeal’s decision Kozinski stated: ion their own (including by referencing state in Crowell, it was unsettled whether California While I join Judge Fernandez’s opin- law standards).”22 courts would adopt the concept of the right ion, I find the question presented The Tenth Circuit, however, has expressly of the parties to contractually agree to closer than most. The Supreme Court rejected expanded judicial review.23 It refused expanded judicial review of arbitration awards cases on which the opinion relies are to give effect to a provision in an arbitration governed by the FAA or CAA. State courts are helpful…but they don’t get us all the agreement that allowed for appeal of an arbi- called upon to enforce the FAA because the way there. As Judge Mayer points out, tration award if it is “not supported by the evi- FAA does not create a basis for federal juris- they say that parties may set the time, dence.”24 The court’s basis for reaching this diction.29 place and manner of arbitration; none conclusion was its view of the FAA’s provision Under applicable law, decisions of federal says that private parties may tell the for limited judicial review, as well as its focus courts of appeals on federal questions are federal courts how to conduct their on the distinction between the litigation not binding on state courts; they are merely business…. process and arbitration.25 persuasive.30 Moreover, if the federal appellate Nevertheless, I conclude that we Lining up with the Tenth Circuit are the courts are divided, “state courts must make must enforce the arbitration agree- Seventh and Eighth Circuits. For example, in an independent determination of federal ment according to its terms. The Chicago Typographical Union No. 16 v. law.”31 This is true in California even when a review to which the parties have Chicago Sun-Times, Inc., the Seventh Circuit Ninth Circuit opinion exists on the very mat- agreed is no different from that per- held, “An agreement to submit a dispute over ter at issue.32 formed by the district courts in appeals the interpretation of a labor or other contract The Second Appellate District in Crowell, from administrative agencies and bank- to arbitration is a contractual commitment to and the First Appellate District in Oakland- ruptcy courts, or on habeas corpus. I abide by the arbitrator’s interpretation. If the Alameda County Coliseum Authority, inter- would call the case differently if the parties want, they can contract for an appel- preted the CAA—and their decisions leave agreement provided that the district late arbitration panel to review the arbitra- open the question of what California courts judge would review the award by flip- tor’s award. But they cannot contract for judi- will do when asked to enforce an expanded ping a coin or studying the entrails of cial review of that award; federal jurisdiction judicial review component of an arbitration a dead fowl. Given the strong policy of cannot be created by contract.”26 agreement governed by the FAA. The uncer- party empowerment embodied in the Likewise, in UHC Management Company tainty is compounded by the fact that Crowell Arbitration Act, I see no reason why v. Computer Sciences Corporation the Eighth was a majority decision. the Congress would object to enforce- Circuit stated, “Notwithstanding these cases, In rejecting expanded judicial review ment of this agreement. This is not we do not believe it is yet a foregone conclu- under the CAA, the court in Crowell stated: quite an express congressional autho- sion that parties may effectively agree to “Because the Legislature clearly set forth the rization but, given the Arbitration Act’s compel a federal court to cast aside sections trial court’s jurisdiction to review arbitration policy, it’s probably enough.19 9, 10 and 11 of the FAA.”27 awards when it specified grounds for vacating Disagreeing with this result, Judge H. A review of these opinions shows that or correcting awards in sections 1286.2 and Robert Mayer in his dissent wrote: while the results are all based upon an inter- 1286.6, we hold that the parties cannot expand Whether to arbitrate, what to arbitrate, pretation of the FAA, the focus, however, dic- that jurisdiction by contract to include a how to arbitrate, and when to arbitrate tates the result. For the Third, Fourth, Fifth, review on the merits.”33 The Oakland-Alameda are matters that parties may specify and Ninth Circuits, the focus is upon the County Coliseum Authority court expressly contractually. However, Kyocera cites FAA’s strong policy of enforcing the right of adopted this holding.34 no authority explicitly empowering lit- the parties to define their agreements to arbi- That conclusion mirrors the Tenth igants to dictate how an Article III trate. For the Seventh, Eighth, and Tenth Circuit’s decision regarding the FAA. Both court must review an arbitration deci- Circuits, the focus is upon the congressional rely upon legislative intent to limit the scope sion. Absent this, they may not. Should intent of the FAA, which is to limit the scope of judicial review of arbitration awards. Thus, parties desire more scrutiny than the of appellate review. there is reason to believe that at least the Federal Arbitration Act authorizes Given the split among the circuits, unless First and Second Appellate Districts would courts to apply, “they can contract for and until the U.S. Supreme Court takes up the apply that same reasoning for cases governed an appellate arbitration panel to review issue, the circuit in which a party attempts to by the FAA. What other California appellate the arbitrator’s award[;] they cannot enforce an agreement for expanded judicial courts might do is an open question, because contract for judicial review of that review will dictate whether the agreement the decisions of one district of the court of award.”20 will be enforced. Thus, practitioners repre- appeal are not binding on other districts of the The Fourth and Fifth Circuits have also senting clients whose arbitration agreements court of appeal.35 considered the issue of whether parties to an provide for expanded judicial review of arbi- The dissent in Crowell mirrored the focus

38 LOS ANGELES LAWYER / OCTOBER 2002 MCLE Answer Sheet #109

This Los Angeles Lawyer MCLE self- UNCERTAIN APPEAL Sponsored by WEST study test is sponsored by WEST. Name Law Firm/Organization

Address MCLE Test No. 109 City The Los Angeles County Bar Association certifies that this activity has been approved State/Zip for Minimum Continuing Legal Education credit by the State Bar of California in the E-mail amount of 1 hour. Phone State Bar # 1. Parties to an arbitration agreement governed by are void. the California Arbitration Act (CAA) can agree to True. Instructions for Obtaining MCLE Credits expanded judicial review of an arbitration award. False. True. 11. Decisions of the Ninth Circuit Court of Appeals 1. Study the MCLE article in this issue. False. are binding upon federal district courts in California 2. Answer the test questions opposite by 2. The Ninth Circuit has held that parties to an arbi- even if contrary authority exists in other circuit marking the appropriate boxes below. Each tration agreement governed by the Federal courts of appeals. question has only one answer. Photocopies of Arbitration Act (FAA) can agree to expanded judi- True. this answer sheet may be submitted; however, this form should not be enlarged or reduced. cial review of an arbitration award. False. True. 12. Decisions of the U.S. Supreme Court on fed- 3. Mail the answer sheet and the $15 testing fee False. eral questions are binding on state courts. ($20 for non-LACBA members) to: 3. If federal appellate courts are divided on a fed- True. Los Angeles Lawyer eral question, state courts must make an inde- False. MCLE Test pendent determination of federal law. 13. Decisions of one district of the California Court P.O. Box 55020 True. of Appeal are binding upon other districts of the Los Angeles, CA 90055 False. court of appeal. Make checks payable to Los Angeles Lawyer. 4. A Ninth Circuit Court of Appeals opinion on a True. federal question that is not in conflict with any other False. 4. Within six weeks, Los Angeles Lawyer will federal court of appeals opinion is binding on 14. The purpose of the FAA was to abolish long- return your test with the correct answers, a California state courts. standing antiarbitration laws and to make arbi- rationale for the correct answers, and a True. tration agreements within its purview specifically certificate verifying the MCLE credit you earned False. enforceable. through this self-assessment activity. 5. In all federal courts, an arbitration award can be True. 5. For future reference, please retain the MCLE vacated if it is determined to be in “manifest dis- False. test materials returned to you. regard of the law.” 15. Section 10(a) of the FAA authorizes a court to True. vacate an arbitration award that contains errors of Answers False. law. Mark your answers to the test by checking the 6. Parties to an arbitration agreement governed by True. appropriate boxes below. Each question has the FAA can enforce their agreement, or a result- False. only one answer. ing award, in federal court because the FAA pro- 16. The CAA authorizes a court to vacate an arbi- vides a basis for federal jurisdiction. tration award that contains errors of law. 1. ■ True ■ False True. True. 2. ■ True ■ False False. False. 3. ■ True ■ False 7. Which one of the following federal circuits does 17. Under the FAA, an arbitration conducted ■ ■ not allow parties to agree to expanded judicial within one federal circuit can be confirmed or 4. True False review of arbitration awards? vacated in another federal circuit if venue exists. For 5. ■ True ■ False A. Third Circuit. example, an arbitration conducted in Los Angeles 6. ■ True ■ False B. Fourth Circuit. can be confirmed or vacated in Chicago if venue ■ ■ ■ ■ C. Fifth Circuit. exists in Chicago. 7. A B C D D. Tenth Circuit. True. 8. ■ A ■ B ■ C ■ D 8. Which one of the following federal circuits False. 9. ■ A ■ B ■ C ■ D allows parties to agree to expanded judicial review 18. Crowell v. Downey Community Hospital 10. ■ True ■ False of arbitration awards? Foundation was a majority, as opposed to unani- A. Fifth Circuit. mous, decision. 11. ■ True ■ False B. Seventh Circuit. True. 12. ■ True ■ False C. Eighth Circuit. False. 13. ■ True ■ False D. Tenth Circuit. 19. Under California law, arbitration can be stayed ■ ■ 9. In what year was the FAA enacted? pending a judicial determination whether the arbi- 14. True False A. 1925. tration should proceed on a classwide basis. 15. ■ True ■ False B. 1935. True. 16. ■ True ■ False C. 1945. False. ■ ■ D. 1955. 20. The decision in Crowell construed both the FAA 17. True False 10. In California, it is unsettled whether arbitration and the CAA. 18. ■ True ■ False agreements governed by the CAA that contain a True. 19. ■ True ■ False provision for expanded judicial review of an award False. 20. ■ True ■ False

LOS ANGELES LAWYER / OCTOBER 2002 39 Expert Witness, Consultant, of the Third, Fourth, Fifth, and Ninth Mediation, Dispute Resolutions EXPERT WITNESS Circuits upon the broad policy of enforcing HANK KRASTMAN, PH.D., J.D. arbitration agreements. Justice Michael G. Retired L. A. City Building Inspector and Mechanical Nott wrote, “I conclude that the parties Inspector, ICBO licensed for all other Municipalities. INDUSTRIAL/COMMERCIAL Tel/Fax: 818/727-1723 ¥ Toll Free: 1-866/496-9471 entered into an arms-length arbitration I.C.B.O. (International Conference of Building Officials) Certified: REAL ESTATE agreement to have the trial court act in Licensed BÐGeneral Building, C-10 Electrical, C-20 Heating Ven- Care, Duty & Broker Responsibility tilating and Air Conditioning, 33 years experience in construction; excess of its statutory authority by review- State E.Q. Certified Inspector. Lease & Purchase Contracts ing the award for errors of law and suffi- (Since 1986ÐHigh Settlements) Slip and Fall, Construction Condition of Premises Defects, Wrongful Death, Toxic-Environmental, Burn-Fire, Electric ciency of the evidence. I perceive no sub- injuries, Contract Dispute, Landslides, Failing Walls/Retaining, Earthquake, Disabled Access, Construction Injuries, Building and 39 Years of Experience stantial argument that would make it Safety matters. Planning Zoning, Fallen Trees, Holes in street, inappropriate for the trial court to act in Sidewalk, Parking Lots, Scalding. Contractors License Board, etc., C.V. on request. accord with the wishes of the parties.”36 Associate Experts: Ken Bedirian, R.E. Broker, J.D., Eric Fintzi, JACK KARP Art-Antique & Appraisals and Sam Mahseredjian, Investigator Were the issue not confusing enough, the Free Case Evaluation: LAWNETINFO.COM (310) 516-0022 FAX: (310) 516-8555 recent decision in Sanders v. Kinko’s Inc.37 makes it even more so. The Sanders court addressed whether the FAA precludes a state court from determining if class certification NEUTRAL REAL ESTATE ARBITRATOR issues should be resolved before an arbitra- • More than 30 years experience as a real estate lawyer dealing with tion agreement covered by the FAA is industrial, commercial, office and shopping centers including purchas- enforced. In upholding the right of the state es, sales, leasing, ground leasing, financing, development, joint ven- court to stay the arbitration pending deter- tures, construction, real estate brokerage, title insurance, easements and mination of the class certification issues, the protective covenants. court held that state procedural law applied • 18 years as counsel to the forms committee of the American Industrial even though the right to arbitration was gov- Real Estate Association, publishers of the AIR lease and purchase forms. erned by the FAA’s substantive law. Real estate law and ADR lecturer on programs sponsored by the • Moreover, in Mount Diablo Medical Center California State Bar, the extension divisions of UCLA, UCI, USCB and Authority v. Health Net of California,38 the Arthur Mazirow various educational and realty organizations. First Appellate District addressed a generic PENTHOUSE SUITE 1200, 3415 SEPULVEDA BOULEVARD, LOS ANGELES CA 90034-6060 choice-of-law provision that specified PHONE: 310-255-6114 • FAX: 310-391-4042 • E-MAIL: [email protected] • www.ffslaw.com California law as governing the validity, construction, interpretation, and enforcement of an agreement containing an arbitration clause that would otherwise be governed by the FAA. The court construed the provision to mean that California procedural law governed the enforcement of the arbitration. Under the CAA the court had the authority to stay the arbitration, whereas no comparable authority exists under the FAA. If Sanders and Mount Diablo apply to the right to contract for expanded judicial review under the FAA, enforcement of that right may turn upon whether the party seeking to enforce it in California is confined to the state court, where enforcement is unlikely, or can find an independent basis for federal court jurisdiction, where enforcement is assured. Sanders and Mount Diablo also create the same type of uncertainty if a federal court is asked to enforce an agreement for expanded judicial review of an arbitration award governed by the CAA. That situation could arise when federal jurisdiction is based upon diversity. Since decisions of the Ninth Circuit are binding upon federal district courts in California, even if contrary authority exists in other circuits,39 a CAA-governed agreement that provides a right for expanded judicial review deemed to be procedural would be enforceable in federal district court in California—although a California state court would not enforce the agreement. Apart from the uncertainty as to what

40 LOS ANGELES LAWYER / OCTOBER 2002 Construction Claims California courts will do when called upon to enforce an agreement for expanded judicial review of arbitration awards, Crowell also When you’re handling a raises the issue of whether agreements to construction dispute, you’ll be arbitrate that contain provisions for expanded glad to know who we are. judicial review are even enforceable. Recog- Pacific Construction nizing that for some people and entities a will- Consultants, Inc. will assist in ingness to agree to arbitrate is dependent uncovering and analyzing facts upon being able to contract for expanded judicial review, the court in Crowell refused to important to your case. sever the expanded judicial review portion of Our highly experienced staff the arbitration agreement and, instead, inval- will provide support from the idated the entire arbitration agreement.40 first analysis to the last day in The Oakland-Alameda County Coliseum courtÐinvestigating, making the Authority court refused to follow the portion complex understandable, and of Crowell’s holding that voided the entire presenting evidence through arbitration agreement. Two primary distin- expert testimony and trial guishing factors referenced by the court were support graphics. the existence of a severance clause and the Pacific Construction fact that the argument to void the arbitration Consultants, Inc. is responsive, agreement was first made after the arbitration factual, and results-oriented. award. In Crowell, the agreement at issue contained no severance clause, and the argu- For more information, call ment to void the arbitration agreement was 1-800-655-PCCI. first raised prior to the arbitration. As a result of these differences, it may be that arbitration agreements that contain provisions for expanded judicial review of PACIFIC CONSTRUCTION arbitration awards may be valid in the First CONSULTANTS, INC. Appellate District and void in the Second Appellate District. In the remaining appellate districts the issue is still open. The implications of Crowell and Oakland- Alameda County Coliseum Authority are significant. For those who now have agreements for arbitration that contain an enhanced judicial review provision, should they still want arbitration even if the enhanced judicial review portion is unenforceable, they should JACK TRIMARCO & ASSOCIATES so specify in an amendment to their arbitration agreements before a dispute arises and POLYGRAPH/INVESTIGATIONS, INC. one side changes its mind about arbitration. It would also be prudent for lawyers aware of a provision for expanded judicial review in an 9454 Wilshire Blvd. arbitration agreement to advise their clients Sixth Floor of the present state of the law on this subject. In today’s commercial world, a system Beverly Hills, CA 90212 that allows for expanded judicial review of (310) 247-2637 arbitration awards in some parts of the country, including federal courts in California, and prohibits it in other parts of the country, 1361 Avenida De Aprisa including state courts in California, cannot Camarillo, CA 93010 remain. Apart from being a trap for the unwary and promoting forum shopping, the Jack Trimarco - President (805) 383-8004 dichotomy makes no sense. Only the U.S. Former Polygraph Unit Chief Supreme Court can now resolve the conflict Los Angeles F.B.I. (1990-1998) email: [email protected] over whether the FAA allows for agreed-upon CA. P.I. #20970 provisions for expanded judicial review of arbitration awards. State courts are obligated Former Polygraph Inspection Team Leader to follow U.S. Supreme Court opinions inter- Member Society of Former Special Agents Office of Counter Intelligence preting federal law.41 Federal Bureau of Investigation U.S. Department of Energy As for California law, given the conflicts among the federal circuits and the fact that

LOS ANGELES LAWYER / OCTOBER 2002 41 6 9 U.S.C. §10(a). two California appellate courts have rejected enforceable, let alone if expanded judicial 7 Barbier v. Shearson Lehman Hutton Inc., 948 F. 2d the Ninth Circuit’s position—though the dis- review will be allowed. Also, those who con- 117, 120 (2d Cir. 1991). sent in one of the decisions adopted the Ninth template entering into arbitration agreements 8 9 U.S.C. §10(a)(1). Circuit’s position—the California Supreme should know whether they can contract for 9 9 U.S.C. §10(a)(2). Court should decide whether the CAA allows expanded judicial review. ■ 10 9 U.S.C. §10(a)(3). 11 for expanded judicial review. This decision will 9 U.S.C. §10(a)(4). 12 Health Servs. Mgmt. Corp. v. Hughes, 975 F. 2d 1 be of great importance for California practi- Federal Arbitration Act, 9 U.S.C. §§1 et seq. 1253 (7th Cir. 1992). Though the award in this case, 2 tioners and persons and entities doing busi- Crowell v. Downey Cmty. Hosp. Found., 95 Cal. App. which involved an architect prevailing on a claim for ser- ness in the state. 4th 730 (2002). vices performed, was not vacated, the court did opine 3 Oakland-Alameda County Coliseum Auth. v. CC In the final analysis, certainty from both that the concept of “manifest disregard of the law” Partners, California Court of Appeal No. A094859 (Aug. the U.S. Supreme Court and the California meant “something beyond and different from mere 27, 2002). error in law or failure on the part of the arbitrators to 4 Supreme Court is needed so that those with California Arbitration Act, CODE CIV. PROC. §§1280 et understand or apply the law; it must be demonstrated existing arbitration agreements that contain seq. that the majority of arbitrators deliberately disregarded 5 provisions for expanded judicial review can Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219- what they knew to be the law in order to reach the result know if their arbitration agreements are even 20, 105 S. Ct. 1238, 1241-42, 84 L. Ed. 2d 158 (1985). they did.” Id. at 1267. 13 Baravati v. Josephthal, Lyons & Ross Inc., 28 F. 3d 704, 706 (9th Cir. 1994) (citations omitted). 14 Lapine Tech. Corp. v. Kyocera Corp.,130 F. 3d 884 (9th Cir. 1997), affirming in part, reversing and remand- ing in part, 909 F. Supp. 697 (N.D. Cal. 1995). 15 Id., 130 F. 3d at 887. 16 Id. 17 Lapine Tech. Corp. v. Kyocera Corp., 909 F. Supp. 697 If referring clients (N.D. Cal. 1995). 18 Lapine, 130 F. 3d at 887-88. 19 Id. at 891. to a Financial Advisor 20 Id. (quoting Chicago Typographical Union No. 16 v. Chicago Sun-Times, Inc., 935 F. 2d 1501, 1505 (7th Cir. 1991)). is part of your job, 21 Syncor Int’l Corp. v. McLeland, 120 F. 3d 262 (4th Cir. 1997), 1997 WL 4532245 (unpublished); Gateway Techs., Inc. v. MCI Telecomms. Corp., 64 F. 3d 995 (5th then your job just got easier. Cir. 1995). 22 Roadway Package Sys., Inc. v. Kayser, 257 F. 3d 287, SM SM 293 (3d Cir. 2001). UBS PaineWebber introduces AdviceLink 23 Bowen v. Amoco Pipeline Co., 254 F. 3d 925, 933-37 (10th Cir. 2001). As a trusted advisor, your clients probably ask you to provide advice about 24 Id. at 933. financial planning and other investment-related issues. UBS PaineWebber 25 Id. at 932. can make it easier to give clients the guidance they want—and increase the 26 Chicago Typographical Union No. 16 v. Chicago Sun-Times, Inc., 935 F. 2d 1501, 1505 (7th Cir. 1991) value you already provide. (emphasis in original). AdviceLink allows you to continue to provide the services your clients have 27 UHC Mgmt. Co. v. Computer Scis. Corp., 148 F. 3d 992, 997 (8th Cir. 1998). come to expect from you, while a highly trained UBS PaineWebber Financial 28 Cortez Byrd Chips Inc. v. Bill Hebert Constr. Co., 529 Advisor creates a more complete investment picture for your clients. U.S. 193, 120 S. Ct. 1331, 146 L. Ed. 2d 171 (2000). 29 By participating in AdviceLink, you may be eligible to receive a portion of Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25, n.32, 103 S. Ct. 927, 74 L. Ed. 2d the asset-based fee. Your payment would come from UBS PaineWebber 765 (1983). and not increase the fee your client pays. 30 Rohr Aircraft Corp. v. County of San Diego, 51 Cal. 2d 759, 764 (1959). 31 Id. To schedule a lunch meeting or an upcoming 32 Forsyth v. Jones, 57 Cal. App. 4th 776, 783 (1997) online seminar, call The PC Financial Group (“Where the federal circuits are in conflict, the decisions of the Ninth Circuit are entitled to no greater weight at 562-495-5597 or 800-343-6084. then those of other circuits.”). 33 TM Crowell v. Downey Cmty. Hosp. Found., 95 Cal. App. Lisa A. Petrie, CFP 4th 730, 739 (2002). TM Lisa A. Chapman, CFP , CIMA 34 Oakland-Alameda County Coliseum Auth. v. CC Senior Vice Presidents—Investments Partners, California Court of Appeal No. A094859, at 10- 12 (Aug. 27, 2002). Thomas L. Schiada 35 Estate of Cleveland, 17 Cal. App. 4th 1700, 1709 Financial Advisor (1993); McAdory v. Rogers, 215 Cal. App. 3d 1273, 1277 (1989). 301 East Ocean Boulevard, Suite 1600 Long Beach, CA 90802 36 Crowell, 95 Cal. App. 4th at 750. 37 Sanders v. Kinko’s Inc., 99 Cal. App. 4th 1106 (2002). 38 Mount Diablo Med. Ctr. v. Health Net of Cal., Inc., Cal- ifornia Court of Appeal No. A096018 (Aug. 28, 2002). 39 Zuniga v. United Can Co., 812 F. 2d 443, 450 (9th Cir. 1987). CFP™ is a certification mark owned by the Certified Financial Planner Board of Standards, Inc. 40 Crowell, 95 Cal. App. 4th at 739-40. UBS PaineWebber and UBS PaineWebber are service marks of UBS AG. 41 Forsyth v. Jones, 57 Cal. App. 4th 776, 782 (1997). ©2002 UBS PaineWebber Inc. All Rights Reserved. Member SIPC

42 LOS ANGELES LAWYER / OCTOBER 2002 ethics opinion no. 508

Los Angeles County Bar Association Professional Responsibility and Ethics Committee

Insurance Coverage—Contacting a Defendant’s Insurer

SUMMARY: An attorney does not violate his or her ethical duties by contacting a defendant’s insurer directly, so long as the attorney does not actually know that the insurer is represented by counsel in the matter.

AUTHORITIES CITED: California Rules of Professional Conduct, Rule 2-100(A); Utah State Bar Ethics Advisory

Committee, Opinion No. 98-07; California State Bar Formal Opinion No. 1996-145; California State Bar Formal Opinion

No. 1993-131; Gregory v. Gregory, 92 Cal. App. 2d 343 (1949); In re Inuz, 616 A. 2d 233 (Vt. 1992); San Diego

Navy Fed. Credit Union v. Cumis Ins. Soc., 162 Cal. App. 3d 358 (1984); State Farm Mut. Auto. Ins. Co. v. Federal

Ins. Co., 72 Cal. App. 4th 1422 (1999); Truitt v. Superior Court, 59 Cal. App. 4th 1183 (1997); Waller v. Kotzen, 527

F. Supp. 424 (C.D. Pa. 1983).

Facts and Issues Presented: that the other party is represented by another lawyer in the matter.2 The lawyer often would be the defendant’s counsel, who typically is Attorney represents Plaintiff in suing Defendant. Attorney learns that deemed to be representing the insurer who assigned him or her to Defendant has an insurance policy that might provide coverage for defend its insured.3 Plaintiff’s claim, but Defendant has advised attorney that it will not sub- On the facts presented there is no indication that Insurer is rep- mit the matter to Insurer. Attorney believes that the involvement of resented by a lawyer in the matter. To the contrary, Defendant has Insurer will facilitate a beneﬁcial resolution of the matter for Plaintiff. advised Attorney that Defendant has not submitted—and does not intend to submit—the matter to Insurer. Under these facts, Attorney Question Presented: does not know that Insurer is represented by a lawyer in the matter. May Attorney contact Insurer without violating any ethical duties? Accordingly, Rule 2-100 imposes no limitation on the propriety of Attorney contacting Insurer to advise Insurer of the action against Discussion Defendant.4 Prudence may, nonetheless, dictate that Attorney begin Rule 2-100(A) of the California Rules of Professional Conduct any communication with Insurer by conﬁrming that Insurer is not rep- restricts the ability of lawyers to make contact with other persons with resented by counsel in the matter.5 an interest in a matter. This rule provides: Nothing in this opinion pertains to the more common situation While representing a client, a member shall not communicate in which an insurer has accepted the defense of a party to an action directly or indirectly about the subject of the representation and is involved in the litigation. In such circumstances, the attorney with a party the member knows to be represented by another representing a defendant is generally representing the insurer and lawyer in the matter, unless the member has the consent of the the insured.6 Accordingly, Rule 2-100(A) would make it improper for other lawyer.1 the attorney to contact the insurer directly.7 Of course, in such a sit- Under the rule, the critical inquiry is whether the member knows uation the concerns presented in this inquiry would not arise—the insurer would already be represented by counsel and plaintiff’s The LACBA Professional Responsibility and Ethics Committee (PREC) counsel could communicate with the insurer through the insurer’s prepares written opinions and responds to questions by lawyers counsel. (Different issues, not addressed here, may arise where an concerning lawyers’ ethical duties and responsibilities. Formal opin- insurer defends under a reservation of rights, and the insured has ions are completed within six months to a year. If you have a legal separate counsel.8) ethics issue (not currently in litigation), please contact Grace Lee at The same distinction drawn here was seen by the Utah State Bar (213) 896-6407 or [email protected]. Ethics Advisory Committee in a 1998 opinion.9 The Utah Committee

LOS ANGELES LAWYER / OCTOBER 2002 43 was asked whether a lawyer for a plaintiff could ethically contact the adjuster for a defen- Anita Rae Shapiro dant’s insurer without obtaining permission from the defendant’s lawyer. The committee SUPERIOR COURT COMMISSIONER, RET. advised that if the matter is in an informal PRIVATE DISPUTE RESOLUTION prelitigation stage, it is reasonable for the lawyer to believe (absent being informed to PROBATE, CIVIL, FAMILY LAW the contrary) that the insurer is not a repre- PROBATE EXPERT WITNESS sented party and make contact. If, however, the matter is in or likely to proceed to litiga- TEL/FAX: (714) 529-0415 CELL/PAGER: (714) 606-2649 E-MAIL: [email protected] tion, the committee concluded that the insurer http://adr-shapiro.com would have a direct interest in the matter and be considered a party to the matter, and that FEES: $300/hr the plaintiff’s counsel could properly contact the adjuster about the matter only upon con- ﬁrmation that the insurer is not represented by counsel in the matter. Here, where the facts show that counsel for Defendant does not currently represent Insurer, and Attorney does not know that Insurer is represented in the matter by other counsel, Attorney is not precluded by the Rules of Professional Conduct from making direct contact with Insurer. This opinion is advisory only. The committee acts on speciﬁc questions submitted ex parte, and its opinions are based only on such facts as are set forth in the questions submitted. ■

1 CAL. RULES OF PROF’L CONDUCT R. 2-100(A) (emphasis added); see also Discussion to Rule 2-100 (“As used in paragraph (A), ‘the subject of the representation,’ ‘matter,’ and ‘party’ are not limited to the litigation context.”). 2 Truitt v. Superior Court, 59 Cal. App. 4th 1183, 1188 (1997) (Rule 2-100 “does not apply where the attorney does not actually ‘know’ but merely ‘should have known’ that the opposing party was represented.”). In so holding, Truitt displaced prior ethics opinions to the contrary. See State Bar Formal Op. No. 1996-145; State Bar Formal Op. No. 1993-131. 3 State Farm Mut. Auto. Ins. Co. v. Federal Ins. Co., 72 Cal. App. 4th 1422, 1428-29 (1999). 4 See generally Gregory v. Gregory, 92 Cal. App. 2d 343 (1949) (discussing obligations of lawyer communicating with unrepresented party). 5 See State Bar Formal Op. No. 1996-145 (recom- mending that attorney ask party if it is represented in context of contract dispute where attorney knew party had been represented by counsel in entering contract). 6 See State Farm, 72 Cal. App. 4th 1422, 1428-29. 7 See Waller v. Kotzen, 567 F. Supp. 424, 426-27 (M.D. Pa. 1983) (plaintiff’s counsel violates Pennsylvania “Mr. Truck” disciplinary rule by directly contacting insurer after insurer provides defense counsel to defendant); In ACCIDENT re Inuz, 616 A. 2d 233 (Vt. 1992) (ethical rule vio- INVESTIGATION and RECONSTRUCTION lated by direct contact to insurers providing defense to defendant). ✔ Court Qualiﬁed Expert Witness Regarding 8 See generally San Diego Navy Fed. Credit Union v. Car vs Car, Car vs Bicycle, Truck vs Car Cases Cumis Ins. Soc., 162 Cal. App. 3d 358 (1984). ✔ Low Speed Accident Analysis 9 Utah State Bar Ethics Advisory Committee, Opinion ✔ Trucking Industry Safety and Driver Training Issues No. 98-07 (interpreting Rule 4.2 of the UTAH RULES OF ✔ Power Point Court Presentations PROF’L CONDUCT, which prohibits a lawyer, in representing a client, from communicating “about the sub- William M. Jones 800 337 4994 ject of the representation with a party the lawyer knows P. O. Box 398 925 625 4994 to be represented by another lawyer in the matter, Brentwood CA 94513-0398 Pager 510 840 4627 unless the lawyer has the consent of the other lawyer [email protected] www.mrtruckar.com Fax 925 625 4995 or is authorized by law to do so”).

44 LOS ANGELES LAWYER / OCTOBER 2002 computer counselor

By Benjamin Sotelo and James Gillen

Using Antivirus Strategies to Protect Law Firm Data

A few preventive on antivirus security may still face DNS). Newer copies of antivirus 98 users can go to Settings, infection from one employee. programs update themselves Control Panel, and Add/Remove measures can As a result, law offices not automatically, but older versions Programs. From there, the next only need to take measures may not, which means that users step is to choose the Windows make a valuable against viruses but also should will need to keep the definitions Setup tab, the Accessories item, be prepared for infections. A virus current by downloading updates and then the Details button. If difference when that breaches a law firm’s de- from the Web site of the com- the Windows Scripting Host is fenses is likely to cause a sub- pany that makes the antivirus selected, deselect it and click on viruses lay siege stantial decline in productivity software that the firm uses. OK. By default, Windows 2000 and a significant loss of impor- Performing this download every and XP block scripts and may tant data. Attorneys can take three days is recommended prompt users to allow installation computer virus is a pro- steps, however, to stop viruses (remember: 8,000 new viruses of a script. Unless the source is gram that propagates before infection and limit the per month), which makes buy- expected and verifiable, installing Aitself across computer damage afterward. ing the latest version of the scripts can be dangerous and hard drives and networks and The first issue to address is antivirus software an appealing should be avoided. produces undesirable effects on network protection. This is not alternative. An additional way that data, systems, and networks. an issue to address casually, Windows users can avoid acti- Virus writers release approxi- because the data that law firms Office Computer Settings vating embedded code is to install mately 8,000 new viruses every now keep on their computer hard Another step is to alter the the Office Viewers for Word, month, obliging all users, includ- drives is simply too valuable. settings of the firm’s office com- Excel, and Power Point. Each ing law firms, to participate in a Moreover, the option that is puters to raise their defenses viewer can be downloaded for costly and frustrating race. cheap today may be expensive against viruses. On each local free from the Microsoft Web site Constant work is necessary to tomorrow. An antivirus program computer, the administrator or and is contained on the Microsoft preserve data in the face of the may offer settings that, if misap- user can disable booting from the Office CD. The viewers allow continuing attempts of virus writ- plied, render the application all floppy drive by going into the users to view a file but do not ers to vandalize data. To make but useless. For example, net- CMOS (a manual or a knowl- activate macros and other poten- things worse, antivirus software work administrators may choose edgeable user may help those tial hazards. often detects a virus only after it an option on the firm’s antivirus users who do not know how) and Users should also disable any has released its disruptive code. software that decreases the level changing the boot sequence from option in their Internet browsers Because computer viruses are of protection against infection by “A then C” to “C then A” only. that they do not use often. The hard to stop with e-mail. While some This change will stop viruses that options may include Java Script software alone, ed- Benjamin Sotelo is employees may ex- load to boot sectors and parti- and ActiveX. A compromise is to ucation is the key president of press their prefer- tions. (However, this step will not set the software to post an alert to protecting a law legalfriendly.com, ence for avoiding stop all viruses, including multi- every time these potential confirm’s data. Educa- and he can be the inconvenience partite viruses in their boot sec- duits for viruses are detected on tion relies on user reached at Benjamin of an e-mail gate- tor infection stage.) When a user a Web page. While changing cooperation, how- @legalfriendly.com. keeper, the alter- needs to boot the computer from browser settings to a higher secu- ever, and too many James Gillen practices native is leaving a floppy drive, it takes 30 seconds rity level, users should also dis- attorneys are will- personal injury law in the front door to to switch the setting back to “A able HTML support in their e- ing to evade the Marina del Rey. the firm’s data then C” before shutting the com- mail software so that potentially small annoyances unlocked. puter down to reboot from a harmful code that arrives of network secu- Once the firm’s floppy. Afterward, the user should attached to e-mail messages is rity—considering them intrusive antivirus software is properly return the boot sequence setting not allowed to run. In Internet and counterproductive—even installed, administrators should to its safer mode. Also, users Explorer, these settings can be when doing so increases the risk keep its definitions updated, espe- should write-protect all floppies found under Tools, Options, and of propagating a virus that is cially on computers that host pub- after scanning them for viruses. the Advanced tab. much more counterproductive lic services and are accessible Other settings to change After each office computer’s than a safeguard or two. A firm through the firewall (these involve scripts, a common avenue settings are reset to security lev- that spends thousands of dollars include HTTP, FTP, mail, and of attack for viruses. Windows els that are higher than standard,

LOS ANGELES LAWYER / OCTOBER 2002 45 fewer gateways will remain open for viruses does not recognize a new virus. A good rela- system, the first step should be containment. to enter. Nevertheless, they still may. Users tionship with the antivirus software supplier Viruses replicate themselves, so to destroy should set their virus protection software to is an important factor in a firm’s antivirus copies without locating the original will not schedule weekly scans of their complete sys- strategy, but it is no substitute for having pro- disinfect the system. As a means of keeping tem. With all these measures in place, the cedures in effect to limit the damage of an the virus from spreading, infected items office computers will be far less receptive to infection. should be separated from the network. If the viruses and far more likely to detect them To get started on a systematic antivirus items reside on an office computer, for exam- when they appear. program, make backups of all software ple, it should be physically disconnected from (including operating systems) and formulate the network. Network Protection Measures a contingency plan with a specialist. Viruses Once infected systems are isolated, recov- If there is a server on the network, the not only can destroy data, which is bad ery involves disinfecting or fully removing next step is to protect the server. Servers enough, but also can corrupt it. Data cor- infected files and recovering or replacing the require separate antivirus software that is ruption is worse than destruction because corrupted data. A forensic analysis can help different from that of the office computers. corruption is often difficult to detect, and locate affected files, and trusted media (such Additionally, servers require virus protection months may pass before it is noticed. as original software disks and data backups methods that are different from those of desk- Resorting to backups to retrieve the data may that pass inspection) can restore them. This top computers. In short, virus protection for not be an option, since documents and spread- process can become herculean if each office servers requires knowledge and techniques sheets change and documents retrieved from computer has its own particular software, beyond those of the average office computer a backup may also be infected. Considerations obliging computer personnel to diagnose and user, so a firm should plan accordingly. such as this need to be taken into account solve each infected computer’s problems in a Many virus strains automatically attach when discussing and implementing the con- different way. If a company standard for soft- and send themselves from an infected system tingency plan. ware is not in practice before the contingency without the owner’s knowledge. Even if users Should a virus manage to penetrate all plan is created, it should be after. The great- know and trust the sender of a message, it the defenses put in its path, the company est expense of an infection is likely to be may contain a virus of which the sender is must have effective procedures in place to be time, since it will probably be necessary to dis- unaware. In short, network administrators able to limit the infection to as few computers infect and restore every infected work station, should be prepared for the worst. For those as possible and to restore the infected com- one at a time. If each work station has the who maintain small networks, keeping desk- puters. This complex operation should err same software, considerable time should be top antivirus software up-to-date is a difficult on the side of thoroughness rather than saved. but essential task. Virus penetration usually adherence to any set procedure. When a After disinfection, the contingency plan occurs when a system’s antivirus software destructive virus infects the firm’s computer should include a method for finding out what went wrong in the firm’s virus protection system. A general security analysis that leads REAL ESTATE/REAL PROPERTY MATTERS to the source of the virus should help avoid a reinfection by the same route. This part of Specializations: the plan will have to address the human factor, including issues of whether policy was Customs & Standards of Practice, Agency Relationships being followed. Material Disclosure in Residential Real Estate Sales Many people think that the only way to get a virus is by downloading an e-mail attach- ment. The truth is that the Web has a multi- tude of Web pages that carry viruses. An employee at a computer with access to the Web can unwittingly download infected files. Everyone at the firm should be informed that if a bit of Web surfing on the job brings a virus to the company’s network, the infec- TEMMY WALKER, REALTOR® tion can be traced back to the person who Real Estate Consulting Expert Witnessing downloaded it first. The best defense against viruses includes proper education and prepa- SERVICES RENDERED: ration. Litigation Consulting, Expert Testimony, Broker Practice, An effective antivirus contingency plan is Liability Audit, Educational Services, Industry Mediator likely to affect a broad range of policies and procedures, A thorough review of firewalls; Certified Residential Broker Graduate Realtors Institute, Certified Residential Specialist, backups; storage media security; laptop and California Association of Realtors® Director Since 1981, National Association of handheld security; Internet, e-mail, and Realtors® Director, State Faculty Master Instructor, Member, Real Estate Education intranet policies; browser security and set- Association, Past President, San Fernando Valley Board of Realtors tings; and encryption is likely to require the 5026 Veloz Avenue, Tarzana, California 91356 help of a specialist. In addition, law firms Telephone (818) 760-3355, ext. 344 • Pager (818) 318-2594 should implement a plan not only to reduce e-mail: [email protected] the cost of recovery of infected systems but CALIFORNIA BROKER LICENSE NO. 00469980 also to avoid the potential legal problems that could result from lost data. ■

46 LOS ANGELES LAWYER / OCTOBER 2002 by the book

Reviewed by Elizabeth J. Church

The Truth about Lying

For attorneys, light.” Deception is achieved in ing to identify deviations. Change Checking for constancy is an numerous ways, including by in a person’s constant behavior inexact process. The interviewer spotting deception means of communication that may indicate deception. The pitch may not always be able to dis- lacks completeness, relevance, of the speaker’s voice may cern whether the change in is a professional or clarity, or that contains equiv- change in volume. He or she may behavior is due to deception ocation. A deceiver may use ver- gesture more or less rather than nervous- skill, and this book bal and nonverbal behaviors to or become more ness. Walters also in- appear poised, pleasant, and rambling or more dicates that inter- can help under control. It usually takes concise. The interviewers should not more than words to tell a con- viewer should con- attribute changed be- vincing lie. sider what is normal havior to the wrong The Truth about Lying According to the author, ver- for the particular question. The inter- By Stan B. Walters bal communication is achieved speaker rather than viewer must limit Sourcebooks, 2000 through language (including rely on general pre- analysis to the spe- $14.95, 256 pages body language), voice quality, conceptions; it may ciﬁc question posed speech content, and micro- be normal, for exam- just before the ob- n The Truth about Lying: How expressions (minute facial ple, for the speaker served change. to Spot a Lie and Protect Your- expressions that typically are not to mumble or avoid Lack of constancy Iself from Deception, Stan B. under the control of the person eye contact, in which case such offers one clue that an intervie- Walters attempts nothing less lying and that often escape recog- behavior has negligible value as wee is too busy calculating what than to teach his readers how to nition by the person being lied an indication of deception. lie to tell to maintain conscious detect lies. Attorneys who do not to). Only about 7 percent of com- When the speaker is unfamil- control over voice and gesture, have the luxury of always giving munication is achieved through iar to the interviewer, the task of but it is not entirely reliable. lie detector tests to their potential actual speech content; nearly two- determining constancy is con- Judging a person’s truthfulness clients, witnesses, potential thirds of communication is non- siderably more demanding. The based upon a single behavior is jurors, and teenage children will verbal. Some experts estimate first issue to address is the risky. Multiple behaviors, or clus- certainly appreciate having the that 55 percent of a speaker’s amount of time available to learn ters, may be a stronger indicator ability to detect deception. The impact is due to body language the speaker’s usual behavior. of deception. Additionally, the success that readers may expe- and appearance. Walters sum- Walters suggests that the inter- notable absence of a cluster of rience in improving their skill at marizes the categories to con- viewer engage in a conversation behaviors may also indicate de- lie detection de- sider when attemp- about sports, movies, the ception. Consistency occurs pends, for the most Elizabeth J. Church ting to detect lies: weather, or other topics uncon- when the same cluster of behav- part, on their ability practices law with a constancy, clusters, nected with the primary issue. iors occurs when a topic is raised. to divest them- focus on mental consistency, pre- Even better is to engage inter- Interviewers may look for lack selves of precon- health issues. She conceptions, con- viewees in conversations about of consistency as an indication of ceptions and ob- serves in and around tamination, and things they are familiar with and possible deception. serve carefully and New Mexico as a due cross-checking. A will be at ease discussing. Once Finally, Walters indicates that accurately. process hearing focus on these cat- the interviewer has a sense of the proven method of cross- People lie for officer in special egories can help the speaker’s ordinary behaviors checking (confirming informa- the same reason education disputes. people notice the and turns the discussion to more tion by more than one means) is they tell the truth, moments in which sensitive issues, it is time to watch necessary to evaluate the results which is to get deceivers are unfor a new behavior. Walters uses of an interview. what they want and avoid what able to conceal their feelings. the example of a child who nor- they do not want. Sometimes, mally talks with her hands. When What to Avoid lying meets basic needs of self- What to Look For she is asked about a broken vase, One of the biggest obstacles esteem and affiliation. Some- Constancy, for example, refers she hides her hands behind her to the detection of deception is times, the deceiver enjoys the to a person’s constant (or nor- back and begins a long explana- the interviewer’s preconceived lying game and experiences what mal) behavior, which interview- tion about how the cat knocked notions. Walters uses the exam- Walters refers to as “duping de- ers should gauge before attempt- over the vase. ple of the preconception that res-

LOS ANGELES LAWYER / OCTOBER 2002 47 idents of a certain state are poor drivers. If a TRUST DEED FORECLOSURES man who holds this preconception travels to “Industry Specialists For Over 15 Years” that state, he will perceive driving behaviors to confirm the preconception. An interviewer t Witkin & Eisinger we specialize in the Non-Judicial A Foreclosures of obligations secured by real property who has preconceptions about the interview- or real and personal property (mixed collateral). ee is vulnerable to deception. Spouses who When your client needs a foreclosure done profession- have discovered infidelity can attest to the ally and at the lowest possible cost, please call us at: erroneous preconception that their loved 1-800-950-6522 ones would not lie to them. We have always offered free advice to all attorneys. Contamination is another problem. It takes two to communicate, whether the communi- WITKIN cation is a lie or the truth. The interviewer is EISINGER, LLC not only a receiver but a conveyor and can RICHARD& G. WITKIN, ESQ. ✦ CAROLE EISINGER affect the responses of the interviewee in ways that the interviewer may not recognize. To avoid contamination, Walters suggests The National Institute for Trial Advocacy conducting an evaluation only when the envi- Presents California Programs ronment is free from distractions and the Pacific Trial Skills Advocacy Teacher Training Southern California interviewer is relaxed. October 19n26, 2002 November 8n10, 2002 Trial Skills Folk wisdom identifies certain nonverbal n Mission Valley Hilton Hotel University of San Francisco January 2 8, 2003 behaviors as indicative of deception, includ- San Diego School of Law Loyola Law School San Francisco Los Angeles ing pupil dilation, blinking, smiling, head Western Deposition Skills movements, shrugs, foot and leg movements, n Pacific Deposition Skills October 25 27, 2002 Pacific Advanced and postural shifts. Only pupil dilation and Golden Gate University Trial Skills February 6n8, 2003 School of Law November 21n25, 2002 Mission Valley Hilton Hotel blinking are legitimately associated with San Francisco Marines Memorial Club & Hotel San Diego deception. Portions of the body over which San Francisco the speaker has more control do not provide Visit us at the 2002 State Bar of California Annual Meeting, Booth 303 reliable information. An aware speaker will For more information on our California programs call 800-225-6482 or control facial expressions. For a detailed listing of program offerings check our Web site at www.nita.org Similarly, using eye contact to gauge deception is unreliable. People do not maintain consistent eye contact during conversations with others. People may break eye contact if they are uncomfortable with the topic, if they feel inferior to the interviewer, or if they AlisalAlisal GuestGuest RanchRanch & & ResortResort hold the other person in contempt. Walters Specializing in Meetings and Corporate Retreats states that nothing could be further from the truth than the assumption that deception may be determined by whether the interviewee breaks eye contact. Timely breaks in eye contact that appear to be a change from the person’s established constant and that appear as part of a cluster of behaviors, however, may be a sign of stress and possible deception. Additionally, a change in a person’s blink California’s Most Sought After rate that is not due to allergies, contact lenses, and other variables may indicate that the per- Resort Destination son is under stress. Studies have established that the blink rate coincides with how fast 73 spacious guest rooms and suites with wood-burning fireplaces the brain is processing information. Whether or not the techniques Walters 6,000 sq. ft. of combined diverse meeting space describes will result in an increased ability to Two 18-hole championship golf courses • 7 Tennis courts distinguish honesty from dissembling 100-acre private lake for boating and fishing • Ropes course depends upon the reader’s ability to observe Horseback riding on over 50 miles of riding trails keenly and dispassionately. Lack of detection Mountain biking and hiking trails skills may be a result of the norms of polite interaction, a lack of ability to note and inter- pret relevant cues, and a reluctance to attribute dishonesty. With the help of books Located in the Heart of the Santa Barbara Wine Country such as The Truth about Lying, however, attorneys may develop their skills at evaluating ver- 800 4 ALISAL • (805) 688-6411 • FAX 805 688-2510 bal and nonverbal communication in order to www.alisal.com [email protected] detect deception. ■

48 LOS ANGELES LAWYER / OCTOBER 2002 Classifieds

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50 LOS ANGELES LAWYER / OCTOBER 2002 CLE Preview

26th Annual IPELS Symposium Secession for Real Estate ON SATURDAY, OCTOBER 26, the Association’s Intellectual Property and Entertainment Attorneys Law Section, in conjunction with Southwestern University School of Law’s National Entertainment and Media Law Institute, will present the 26th annual symposium on ON TUESDAY, OCTOBER 9, intellectual property in entertainment law. The first panel discussion, which will be the Land Use Planning and held from 8:45 to 10 A.M., will examine how to manage the relationship between in- the Environmental Law house and outside intellectual property counsel, including what types of IP issues Subsections of the Real require hiring outside counsel. The panelists will be Louis Meisinger, Joanne Hoffman, Property Section will Gary Bostwick, and Stephen Monas. Then, from 10 to 11:15 A.M., Judge David present a program titled Horowitz, Patricia Horton, Mark Wooster, Judge Audrey Collins, and Jeff Kichaven will “Possible Secession of the be the panelists for a discussion on entertainment litigation as viewed by court and Valley and Hollywood from counsel. Those who attend can gain insights that can be put to immediate use. The the City of Los Angeles— third panel discussion, from 11:30 A.M. to 12:45 P.M., will address advanced issues in What Does This Mean for intellectual property and feature panelists Jeffrey Mausner, Mary Ledding, Todd Real Estate Lawyers?” At Albertson, and Lon Sobel. They will discuss a variety of issues, including the Perfect this program, distinguished speakers will discuss the Ten case, ISP liability and peer-to-peer file sharing, and the impact of new technology effect of possible secession on content owners. The panelists may also discuss other topical issues. The symposium on real estate lawyers and will take place at Southwestern University School of Law, Bullocks Wilshire Building, address such questions as: 3050 Wilshire Boulevard in Los Angeles. Secured parking will be available on the Will secession result in premises for $5 per car. On-site registration will be available starting at 8 A.M., with increased work? Different the program continuing from 8:30 A.M. to 12:45 P.M. The event code number is types of work? What about 8023J26. Prices below include meal. issues of conflicts of $60—CLE+PLUS members interest? What about the $160—Intellectual Property and Entertainment Law Section members interim versus the long- $190—other LACBA members term effects? The program $220—all others will take place at the New $230—at the door for all Otani Hotel, 120 South Los 3.75 CLE hours Angeles Street, Downtown. Valet parking at the hotel costs $8 and Persuasive Legal Writing self parking $4. On-site registration will begin at ON WEDNESDAY, NOVEMBER 6, the Association will present a seminar on legal writing. 11:45 A.M. and lunch at Speaker Daniel U. Smith is a highly experienced certified appellate specialist with an noon, with the program enviable record of favorable results. Participants will be able to learn to write in a style continuing from 12:30 to that captures the court’s attention and study the style of America’s greatest lawyers and 1:30 P.M. The event code writers, including Thomas Jefferson, Abraham Lincoln, Henry David Thoreau, Walt number is 803LJ09. Whitman, Ernest Hemingway, and E. B. White. Learn how to lead the court to your result, CLE+PLUS members may write shorter briefs more easily and more quickly, and increase your chances of winning. attend for free (meal not This course advocates brevity, simplicity, and clarity in word choice, punctuation, and included). Prices below the structure of sentences and paragraphs. The course also shows how to structure a include meal. persuasive argument and reviews the key steps for drafting and editing. The seminar will $45—Real Property Section take place at the LACBA/Lexis-Nexis Publishing Conference Center, 281 South Figueroa members Street, Downtown, from 6 to 9:15 P.M.; the registration code number is 7094K06. $55—other LACBA $90—CLE+PLUS members members $160—other LACBA members $65—all others, including $195—all others all at-the-door registrants 3.25 CLE hours 1 CLE hour

The Los Angeles County Bar Association is a State Bar of California MCLE approved provider. To register for the programs listed on this page, please call the Member Service Department at (213) 896-6560 or visit the Association Web site at http://forums.lacba.org/calendar.cfm. For a full listing of this month’s Association programs, please consult the October County Bar Update.

LOS ANGELES LAWYER / OCTOBER 2002 51 closing argument

By Robert F. Cochran Jr.

Educating Clients on ADR Alternatives The Rules of Professional Conduct should require lawyers to inform clients about ADR

n the early 1990s, alternative dispute resolution emerged as an should be based on client dignity, which is the basis for the duty of essential component of a litigator’s practice. ADR has mush- doctors to obtain informed consent from patients. To the fullest extent Iroomed in importance ever since, and one of the challenges to the possible, individuals should control decisions that affect them. State Bar of California’s Commission for the Revision of the Rules of Unfortunately, the new ABA Model Rules are ambiguous on this Professional Conduct is to update the rules in light of the emergence issue.1 A Comment to Model Rule 2.1 states, “[W]hen a matter is likely of ADR. ADR is an integral part of law practice, but there are still a to involve litigation, it may be necessary…to inform the client of substantial number of attorneys who, as a result of ignorance or per- forms of dispute resolution that might constitute reasonable alter- sonal taste, have resisted it. I therefore propose that California adopt natives to litigation.” Some states are ahead of the ABA on this issue. a rule stating: “A lawyer shall inform clients of the advantages and dis- Arkansas, Colorado, Georgia, Hawaii, and Ohio have rules encouraging advantages of reasonably available means of dispute resolution and lawyers to discuss ADR options with clients. Massachusetts, Michigan, abide by their decision whether to pursue one of them.” Pennsylvania, and Virginia have rules requiring lawyers to present ADR The decision about whether to pursue ADR is very important for options to clients. There is precedent in California for requiring the client. ADR methods are likely to resolve the case more quickly, lawyers to inform clients about their ADR options. In Blanton v. save the client time and attorney’s fees, reduce hostility between the Womancare,2 the California Supreme Court held that a lawyer may not parties, generate creative resolutions of issues, yield a more stable res- opt for arbitration against the client’s wishes. In a concurring opinion, olution of the dispute, and protect the client’s privacy. While ADR is Chief Justice Rose Bird stated, “An attorney should explain to the client not always better than lawyer negotiation and litigation, the client is the strategic considerations that determine whether a jury trial or some likely to bear most of the risks of the choice. For example, the lawyer other form of dispute resolution should be exercised.”3 may not realize how important it is for the client to maintain an ami- Some lawyers have expressed a concern that a rule requiring cable relationship with the opposing party. Studies have shown that lawyers to present ADR options to clients would subject lawyers to mal- clients are consistently more satisfied with ADR than with litigation practice claims if they failed to discuss ADR with clients. Ideally, this and attorney negotiation. ADR increases clients’ feelings of self-worth should not be the concern of the bar. The bar should be concerned as they take more control of their lives. with protecting clients and encouraging competent legal represen- In addition, the lawyer and client are likely to have a conflict of inter- tation. I do not believe that my proposed rule would lead to many mal- est over this issue. Pursuing ADR may conflict with the lawyer’s practice claims. If the bar adopts such a rule, lawyers will develop boil- interest in high attorney’s fees or the lawyer’s desire to maintain a erplate language that explains ADR options in clear, simple terms, and “hardball” image. they will include this information in their client agreements. Clients will be able to look over their agreements Clients and Patients at their leisure. Indeed, many lawyer-client Fifty years ago, courts began to impose liability on doctors for the agreements already include this type of failure to allow patients to choose alternatives to surgery. Underlying provision. this cause of action was support for patient autonomy against doctor The State Bar should amend the paternalism. The patient is the person who bears the greatest con- California Rules of Professional Conduct sequences of the choice. Legal clients have similar interests in being to require lawyers to present ADR able to choose ADR over litigation. What surgery is to the patient, lit- options to clients. The decision to pursue igation is to the client. Both surgery and litigation carry risks and ADR is important to clients and is likely potential benefits. ADR is not always better than litigation, any more to be within their competence, and the than nonsurgical medical care is always better than surgery. But ulti- lawyer is likely to have a conflict of inter- mately who should decide? est on this issue. ■ Robert F. Cochran Jr. In fact, the argument for allowing clients to choose whether to pur- is the Louis D. sue ADR may be even stronger than the argument for allowing 1 For a fuller discussion of the themes presented Brandeis Professor of patients to choose medical procedures, because medical decisions are in this article, see Robert F. Cochran Jr., Pro- Law at Pepperdine likely to be more technical and complicated than the decision to opt fessional Rules and ADR, 4 FORDHAM URB. L.J. 895-914 (2001). University School of for ADR instead of litigation. An attorney disciplinary rule requiring 2 Blanton v. Womancare, 696 P. 2d 645 (1985). Law. the lawyer to present the client with the option of pursuing ADR 3 Id. at 656.

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