State Bar of California

REGULATORY AGENCY ACTION

sultation with specified departments andrepresentatives, to prepare and adopt aprogram for telecommunications servicesfor disabled persons for motorist aid in theevent of a freeway emergency, to complywith specified federal standards. [A. Trans]

SB 141 (Alquist), as amended March17, would appropriate funds for the supportof the PUC in the 1994-95 fiscal year, in lieuof funds appropriated by the Budget Act of1994. This bill and several others are in-tended to force legislative discussion of thepossible consolidation of the California En-ergy Commission into the PUC or into a newDepartment of Energy and Conservation, asproposed by Governor Wilson in his January5 "State of the State" address. [A. W&M]

AB 2333 (Morrow), as amended March3, would require telephone, gas, and elec-tric utilities to provide district attorneyinspectors and investigators with limitedcustomer information under specifiedconditions with respect to investigationsrelating to missing or abducted children.The bill would require inspectors and in-vestigators requesting this information toprepare and sign a written affidavit sup-porting the request, and would providethat specified persons and entities shallnot be subject to criminal or civil liabilityfor reasonably relying on an affidavit pur-suant to this provision. [S. Inactive File]

AB 1879 (Peace). Existing law requiresthe PUC to designate a baseline quantity ofelectricity and gas necessary fora significantportion of the reasonable energy needs of theaverage residential customer. The PUC isalso required to establish a standard lim-ited allowance of gas and electricity towhich specified residential customers areentitled in addition to the baseline quan-tity. As amended April 21, this bill wouldinclude, within those residential custom-ers to which the additional limited allow-ance of gas and electricity applies, cus-tomers 62 years of age or older who residein extreme climatic zones, as defined. Itwould also establish a different baselinequantity of gas and electricity for thosecustomers. [S. E&PU]

SB 335 (Rosenthal), as amended May10, is no longer relevant to the PUC.

AB 2363 (Moore). Existing law pro-hibits gas, heat, or electrical corporationsand their subsidiaries that are regulated aspublic utilities by the PUC from conduct-ing work for which a contractor's licenseis required, except under specified condi-tions. As amended April 19, 1993, this billwould also permit the work to be per-formed if the work is incidental to anotherutility function and is performed by a util-ity employee who is present on the prem-ises for the other function. [A. InactiveFile]

AB 2028 (Bronshvag), as amendedApril 13, 1993, would require the PUC toimplement the consensus recommenda-tions contained in the report of the Cali-fornia Electromagnetic Field ConsensusGroup dated March 20, 1992. [12:2&3CRLR 260] [S. Appr]

AB 766 (Hauser), as amended April21, would require the PUC to undertake apropane safety inspection and enforcementprogram for propane distribution systems toensure compliance with the federal pipelinestandards by propane operators within thestate, and permit the PUC to adopt rules, atleast as stringent as the federal law, in orderto protect the health and safety of customersserved by propane distribution systems. Thisbill would require the State Board of Equal-ization and the PUC to establish a uniformbilling surcharge designed to cover the costof implementing these provisions. [S. Inac-tive File]

AB 173 (V. Brown), as amended Au-gust 30, 1993, would limit the amount ofsalary paid to the President and each mem-ber of the PUC to an amount no greaterthan the annual salary of members of thelegislature, excluding the Speaker of theAssembly, President pro Tempore of theSenate, Assembly majority and minorityfloor leaders, and Senate majority and mi-nority floor leaders. [S. Inactive File]

The following bills died in committee:AB 683 (Moore), which would have re-quired the PUC to reopen and reconsidera specified decision relating to ratescharged retail electric customers for elec-tricity from the Diablo Canyon NuclearPowerplant; SB 828 (Mello), which wouldhave required the PUC to adopt and imple-ment regulations to assure that electricalcorporations meet specified requirementsin providing electric power to commercialcustomers maintaining high technologydependent operations; SB 1177 (Alquist),which would have required the PUC toreview the federal Energy Policy Act of1992 and to report to the legislature byMarch 31, 1994, concerning the effects ofthe Act on electric transmission servicesin California; SB 1077 (Lewis), whichwould have repealed various provisionsrelating to the establishment of the rateswhich are charged by common carriers;and SB 1147 (Rosenthal), which wouldhave required the PUC to determine thetotal statewide dollar amount of socialcosts which are embedded in regulatedutility rates for delivered natural gas, andspread that amount equally as a surchargeto all consumers of natural gas in the state,whether regulated or unregulated, utilityor nonutility.

* FUTURE MEETINGS

The full Commission usually meetsevery other Wednesday in San Francisco.

STATE BAR OFCALIFORNIAPresident: Margaret MorrowExecutive Officer:Herbert Rosenthal(415) 561-8200 and(213) 765-1000TDD for Hearing- and Speech-Impaired:(415) 561-8231 and(213) 765-1566Toll-Free Complaint Hotline:1-800-843-9053

T he State Bar of California was createdby legislative act in 1927 and codified

in the California Constitution at ArticleVI, section 9. The State Bar was estab-lished as a public corporation within thejudicial branch of government, and mem-bership is a requirement for all attorneyspracticing law in California. Today, theState Bar has over 141,000 members,which equals approximately 17% of thenation's population of lawyers.

The State Bar Act, Business and Pro-fessions Code section 6000 et seq., desig-nates a Board of Governors to run the StateBar. The Board President is elected by theBoard of Governors at its June meetingand serves a one-year term beginning inSeptember. Only governors who haveserved on the Board for three years areeligible to run for President.

The Board consists of 23 members-seventeen licensed attorneys and six non-lawyer public members. Of the attorneys,sixteen of them-including the Presi-dent-are elected to the Board by lawyersin nine geographic districts. A representa-tive of the California Young Lawyers As-sociation (CYLA), appointed by thatorganization's Board of Directors, alsosits on the Board. The six public membersare variously selected by the Governor,Assembly Speaker, and Senate RulesCommittee, and confirmed by the stateSenate. Each Board member serves athree-year term, except for the CYLA rep-resentative (who serves for one year) andthe Board President (who serves a fourthyear when elected to the presidency). Theterms are staggered to provide for the se-lection of five attorneys and two publicmembers each year.

The State Bar includes twenty standingcommittees; fourteen special committees,

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addressing specific issues; sixteen sec-tions covering fourteen substantive areasof law; Bar service programs; and theConference of Delegates, which gives arepresentative voice to 291 local, ethnic,and specialty bar associations statewide.

The State Bar and its subdivisions per-form a myriad of functions which fall intosix major categories: (1) testing State Barapplicants and accrediting law schools;(2) enforcing the State Bar Act and theBar's Rules of Professional Conduct,which are codified at section 6076 of theBusiness and Professions Code, and pro-moting competence-based education; (3)ensuring the delivery of and access to legalservices; (4) educating the public; (5) im-proving the administration of justice; and(6) providing member services.

Almost 75% of the Bar's annual $56million budget is spent on its new attorneydiscipline system. The system includes thefirst full-time professional court for attor-ney discipline in the nation and a largestaff of investigators and prosecutors. TheBar recommends sanctions to the Califor-nia Supreme Court, which makes finaldiscipline decisions. However, Businessand Professions Code section 6007 autho-rizes the Bar to place attorneys on invol-untary inactive status if they pose a sub-stantial threat of harm to clients or to thepublic, among other reasons.

U MAJOR PROJECTS

1993 Disciplinary Performance.During the spring, the State Bar releasedits 1993 annual report, which describesmajor projects of the Bar during 1993 andincludes statistics on its discipline andlicensing programs.

The State Bar's discipline system un-derwent major overhaul during the late1980s as a result of the passage of severalmajor reform bills-including SB 1498(Presley) (Chapter 1159, Statutes of 1988),which created the professional State BarCourt-and the external pressure providedby the independent State Bar DisciplineMonitor from 1987-1992. [11:4 CRLR 1;8:4 CRLR 123-24; 7:3 CRLR ]]This year,a blue-ribbon commission is undertakingthe first comprehensive review of theBar's new discipline system (see below);in the meantime, the system's statistics areindicative of its enhanced performance.

The Bar's Office of Intake/Legal Ad-vice receives and processes complaintsagainst attorneys through the Bar's toll-free complaint hotline. During 1993, In-take fielded over 111,000 communications,generating 20,625 "inquiries" (minor com-plaints) and 7,247 formal complaints. Intakealso received over 6,100 statutorily re-quired reports about lawyer misconduct

from attorneys, banks, insurance compa-nies, courts, and law enforcement agen-cies, and entered this information into theBar's computerized database. Astound-ingly, the Bar received over 4,300 noticesfrom banks that attorneys were overdrawnon their client trust accounts, which can bean early sign of incompetent office man-agement or embezzlement.

The Office of Investigations (01) isresponsible for formal investigations ofcommunications to the Bar which are clas-sified as complaints. Under state law, theBar is supposed to complete investiga-tions within six months of receipt of thecomplaint, except cases which are desig-nated as "complex," in which the Bar hastwelve months to complete the investiga-tion. In 1993, according to the annual re-port, "the average time for processing in-vestigations ...was 8.2 months." During1993, 01 received 7,247 complaints con-taining 18,373 allegations against 7,791attorneys; completed investigations in-volving 7,595 attorneys; and referred 155matters involving 138 attorneys to lawenforcement agencies for possible crimi-nal investigation. Once 01 completes aninvestigation, it has several options. If 01determines that the case should be for-warded to the Bar's Office of Trials for thefiling of formal charges, it prepares a"statement of the case" (SOC) which sum-marizes the investigative findings. If 01determines that no disciplinary violationshave been found or can be proven, it maydismiss the case. For cases in between, 01may issue a variety of lesser sanctions ornegotiate an "agreement in lieu of discipl-ine" (ALD). In 1993, 01 prepared 1,200SOCs; forwarded 1,473 matters to the Of-fice of Trials; issued 407 letters of warn-ing, 151 directional letters, and 30 admo-nitions; entered into 13 ALDs; and dis-missed about 4,000 cases.

Based on OI's investigations, the Bar'sOffice of Trials (OT) files formal charges(a "notice to show cause" or NTSC)against attorneys, prosecutes cases beforethe State Bar Court, and is authorized toenter into stipulations and ALDs and issuewarning letters. In 1993, OT filed 559NTSCs and stipulations in original dis-cipline cases in the State Bar Court; soughtimmediate involuntary inactive enroll-ment ("interim suspension") of 20 attor-neys who posed a continuing threat ofsubstantial harm to the public and 14 oth-ers for health-related disabilities; and han-dled more than 500 other matters such asprobation violations, moral characterhearings, Rule 955 violations, petitionsfor reinstatement, and failures to complywith conditions attached to public or pri-vate reprovals.

Created in 1989, the State Bar Court isthe nation's first full-time independentdisciplinary court; the court consists ofseven hearing judges (any one of whommay preside over a particular disciplinecase) and a three-judge Review Depart-ment which issues the final agency deci-sion in State Bar discipline cases. In 1993,the State Bar Court disposed of 1,282 dis-cipline and regulatory cases, an increaseof 201 over 1992 and 18% more than thetotal number of cases filed during the sameperiod. These dispositions included 40 dis-barments, 135 resignations with chargespending, 68 public reprovals with condi-tions, and 112 private reprovals with con-ditions; the court placed a total of 40 attor-neys on interim suspension (17 of whichwere health-related).

The State Bar Court also publishes thequarterly State Bar Court Reporter, whichcontains decisions by the hearing judgesand the Review Department. 112:2&3CRLR 268] According to the annual re-port, the widespread dissemination ofthese cases "contributes significantly tothe parties' knowledge of pertinent StateBar case law and the predictability of fu-ture results. This predictability, togetherwith the consistency of the proceedingsand satisfaction with Hearing Departmentdecisions, is reflected in the fact that re-view before the Review Department hasbeen sought in less than 11% of thosedecisions."

Technically, a final disciplinary deci-sion of the State Bar Court is only a rec-ommendation to the California SupremeCourt, which has direct and original juris-diction over State Bar Court cases by wayof a petition for review. Prior to the 1988reforms to the State Bar Court, the Su-preme Court was highly critical of theBar's disciplinary decisionmaking and re-viewed every single discipline decision(even in cases where no petition wasfiled). Since the reforms and the restruc-turing of the State Bar Court, the SupremeCourt has approved the so-called "finalityrule," under which disciplined respon-dents must affirmatively petition the Su-preme Court for review of a Bar disciplin-ary decision; if a respondent does not pe-tition, the Bar's decision is final. Further,the petition is discretionary, meaning thatthe Supreme Court need not hear the ap-peal if the decision is proper; the SupremeCourt simply adopts the State Bar Court'srecommendation as its decision. [11:1 CRLR148] In 1992-93, the Supreme Court did notgrant one petition for review in a Bar dis-cipline case. Consequently, none of theopinions issued by the Supreme Court in1992-93 were attorney disciplinary mat-ters, whereas 38.4% of the Court's 1990-

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91 caseload was Bar discipline cases.Thus, the improvements to the State BarCourt have enabled the California Su-preme Court to give significantly greaterattention to its civil and criminal caseload.In 1993, the California Supreme Courtadopted State Bar Court decisions result-ing in 67 disbarments, 105 resignationswith charges pending, 296 suspensions(with actual time off), and 139 probationactions.

Complainants' Grievance Panel An-nual Report. In April, the Complainants'Grievance Panel (CGP) issued its SixthAnnual Report covering the period of Jan-uary through December 1993. Created in1986 in Business and Professions Codesection 6086.11, the CGP was establishedto review-at the request of the complain-ant-complaints which have been dis-missed by the Bar's discipline system atan early stage, and report to the Board ofGovernors and the legislature its findingsregarding the Bar's standards for investi-gation and closure of complaints. Thus,the Panel serves two functions-it pro-vides a last review of closed disciplinarycomplaints, and it audits the performanceof the Bar's discipline system. Although itappears to be an outside check on the Bar,it is a Bar program housed within thediscipline system and financed by Bardues.

In 1993, the CGP reviewed 2,109 peti-tions, for a seven-year total of over 8,000cases. It denied 1,420 petitions and or-dered further investigation in 689 cases(33%). CGP also audited 141 cases whichhad been closed at various stages of theprocess, and ordered further investigationin 22 cases (16%). Based on these statis-tics, the CGP concluded for the seventhyear in a row that "there are too manycomplaints being closed prematurelyand ...varying standards for closure areused." To fulfill its statutory duty, the CGPreiterated many of the recommendations itmade last year [13:4 CRLR 214-15] andrepeated its October 1993 challenge to theBoard's Discipline Committee and theBar's discipline system to reduce, by 50%,the number of cases ordered returned forthe following reasons: (1) failure to pro-vide complainants with a clear and accu-rate explanation of why their cases wereclosed; (2) failure to identify potential eth-ical violations; (3) failure to corroboraterespondent replies or obtain complainants'rebuttals or to seek out other relevant evi-dence from third-party sources; and (4) fail-ure to employ appropriate informal disci-plinary sanctions.

Discipline System Review Commit-tee Update. During the spring, the "blue-ribbon" committee which is conducting a

review of the Bar's four-year-old revampeddiscipline system held several public hear-ings to receive comments from Bar staff,licensees, and members of the public. Thecommittee is chaired by retired U.S. NinthCircuit Court of Appeals Judge Arthur L.Alarcon. [14:1 CRLR 175; 13:4 CRLR214]

At hearings on March 4 and March 16,the committee heard from consumergroup representatives who testified that,although the Bar has improved, its discipl-ine system still fails to detect and sanctionmany dishonest attorneys. At the samehearings, lawyers who represent respon-dents in Bar discipline proceedings testi-fied that the Office of the Chief TrialCounsel is "over-prosecuting" attorneyswho have committed relatively minor vi-olations due to a lack of prioritizationwithin the Office and external pressurefrom the legislature and other sourceswhich causes the Bar to focus on hikingup its discipline numbers rather than com-mitting serious resources to serious cases.

Professor Robert C. Fellmeth, Directorof the Center for Public Interest Law andformer State Bar Discipline Monitor, pre-sented a somewhat different perspective,contending that the discipline system (1)inadequately addresses an endemic prob-lem of attorney dishonesty, and (2) doesnot provide a reasonable assurance ofcompetence which is the raison d' etre ofmost regulatory regimes. At the sametime, he conceded that one of the mostimpractical ways to enhance honesty andcompetence is through discipline enforce-ment-which he termed a "last resort" atbest. Professor Fellmeth discussed atsome length his view that people responderratically to a problematical sanction;most people simply do not believe it willapply to them, and deterrence has littleimpact unless somehow imbued into a so-cial structure. Rather, he advocated moreattention to prevention strategies, and tochanging the incentives at the "front end"(licensing) rather than relying on the"back end" (discipline).

Professor Fellmeth's unusual propos-als included the following. First, he saidthe Bar should create a system similar tothe British barrister model, with onechange-all counsel would be paid by thecourt. He contended that a false myth aboutthe adversarial system ("truth emerges fromunfettered conflict") has created an ethic ofdishonesty, as many counsel lie by omis-sion if not commission. His theory is thatattorneys will moderate dishonesty, con-cede more which should be conceded, andtruly be officers of the court (while repre-senting clients with some vigor, but withlimits now lacking) if the court also paysthem.

Second, Professor Fellmeth said theBar could solve the incompetence prob-lem by designing a regulatory system that"relates" to it. He argued that a systemrequiring a single examination taken atage 25, followed by minimal tax-deduct-ible continuing education courses with noretesting, does not assure attorney compe-tence over a fifty-year practice. ProfessorFellmeth was critical of the Bar for notrequiring malpractice insurance and thennot covering damages due to negligencefrom its Client Security Fund-even as a"payor of last resort" for gross negligence.He also contended that the Bar rarely, ifever, restricts a license or otherwise dis-ciplines attorneys based on incompetence.According to Professor Fellmeth, if thepurpose of Bar regulation is to prevent theirreparable harm which can occur fromincompetence, then the Bar should licenseby specialty (e.g., bankruptcy, patent, per-sonal injury, or criminal defense) and re-test every five years. The tests need not bedifficult, but would inhibit the incompe-tent "dabblers" in bankruptcy, criminaldefense, real estate, and patent law (whichsome attorneys attempt).

Third, to compensate for somewhathigher barriers to entry, Professor Fellmethadvocated the authorization of regulated,independent "legal technicians" licensed,again, by specific subject areas (e.g., land-lord-tenant, family law, consumer bank-ruptcy, or immigration), particularly inareas where needed legal services are sub-stantially unaffordable for most.

Professor Fellmeth acknowledged thatat the "back end," California has the mostadvanced attorney discipline system in thenation and disputed its allegedly "exces-sive" cost, noting that it cost less to createthan one-tenth the current average mal-practice premiums per attorney-about2.5 hours of billing at prevalent rates.

For his part, Judge Alarcon has raiseda number of possible recommendations,ranging from a suggestion that State BarCourt hearing judges refrain from writingelaborate opinions in favor of quickerdecisionmaking, to a recommendation thatdisciplined attorneys be required to fullyreimburse the Bar for its costs of investiga-tion, to structural issues involving control ofthe Office of Trial Counsel separate andapart from the Board of Governors. How-ever, Judge Alarcon and other committeemembers cautioned witnesses and the pressnot to assume that their questions, whichhave been wide-ranging and often provoca-tive, imply any point of view. At this writing,the committee expects to release a report andrecommendations in late August.

Monetary Penalties for DisciplinedAttorneys. At this writing, the Board of

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Governors' Committee on Discipline andClient Assistance is seeking public com-ments on its proposal to adopt Guidelinesfor the Imposition of Monetary Sanctionsin Attorney Disciplinary Proceedings. Ef-fective January 1, 1994, Business and Pro-fessions Code section 6086.13 authorizesthe imposition of monetary sanctionsagainst attorneys who are suspended ordisbarred or who resign from the State Barwith disciplinary charges pending againstthem; the statute provides that the finemay not exceed $5,000 for each violationfound, up to a total of $50,000. Section6086.13 also requires the Bar to adoptrules setting forth guidelines for the im-position and collection of the monetarysanctions.

The Guidelines establish two ranges offines for disciplinary violations of theState Bar Act and the Rules of Profes-sional Conduct (RPC). The upper range($2,600-$5,000 per violation) is applica-ble to the most serious statutory or RPCviolations such as those involving moralturpitude, acts of dishonesty, or inten-tional misappropriation or mishandling ofclient funds. The lower range ($100-$2,500 per violation) is applicable to allother statutory or RPC violations. Underthe Guidelines, the specific sanction to beimposed within the applicable range willbe determined by the State Bar Courtjudge upon application of specified cri-teria, including whether the violation wascommitted in the course of the practice oflaw; the magnitude of the misconduct; thelength of time over which the misconductoccurred; the nature and extent of the harmcaused; the extent of the member's priordisciplinary record; and the extent towhich the member has mitigated the dam-age or harm caused. Relief from monetarysanctions ordered by the Supreme Courtwould be available only upon grounds offinancial hardship or that collection wouldimpair the collection of criminal penaltiesor civil judgments arising out of the sametransactions. Monetary sanctions will bepaid into the Bar's Client Security Fund,which assists in compensating clients whohave been victimized by the intentionaldishonesty of their lawyers. [13:4 CRLR215; 8:4 CRLR 1]

At this writing, the comment period onthe proposed Guidelines closes on June 2.

Alternative Dispute Resolution Cli-ent-Attorney Mediation Program. Lastfall, Bar President Margaret Morrow ap-pointed several members of the Board ofGovernors to a new Client Relations TaskForce, whose purpose is to develop waysto improve attorney-client communica-tion and minimize misunderstandingswhich lead to client dissatisfaction, com-

plaints to the Bar's disciplinary system,and the poor public image of the legalprofession. [14:1 CRLR 175] One of themajor projects of the Task Force, which ischaired by Board member Susan Troy, isto guide the creation of the Bar's Alterna-tive Dispute Resolution Client-AttorneyMediation Program (ADRCAMP). Thisproject implements a provision of SB 645(Presley) (Chapter 982, Statutes of 1993),which added section 6086.14 to the Busi-ness and Professions Code; section 6086.14authorizes the Bar to establish an alternativedispute resolution (ADR) discipline media-tion program to resolve "complaints againstattorneys which do not warrant the institu-tion of formal investigation or prosecution."[13:4 CRLR 216-17] The Bar's ADR pro-gram must identify sources of client dissat-isfaction and provide a mediation processto resolve those complaints or disputes,unless the client objects to mediation. Therefusal of an attorney to participate in theState Bar's ADR program, or the failure ofan attorney to comply with any agreementreached in the Bar's ADR program, maysubject that attorney to discipline.

Preliminarily, the Task Force intendsto implement SB 645 through a pilot proj-ect in which six local bar associations willconduct mediations of client-lawyer dis-putes under minimum standards adoptedby the Board of Governors; the local barsmay mediate disputes voluntarily broughtby either the lawyer or the client and mat-ters referred to the local bar by the ChiefTrial Counsel.

In January, the Task Force-in con-junction with the Board's Committee onAdmissions and Competence and theCommittee on Discipline and Client As-sistance-released proposed minimumstandards for the six participating localbars for public comment. By the close ofthe public comment period on May 5, theBar had received only one comment; theTask Force subsequently modified the lan-guage of the minimum standards to incor-porate this comment and feedback re-ceived from the six participating local barassociations, and presented the standardsto the Board for approval at its May 14meeting.

The standards, which were approvedby the Board on May 14, require the localbars to adopt rules of procedure whichprovide for (among other things) a fair,speedy, and impartial mediation procedure;adequate training for mediators, which in-cludes classroom and practical training withtechnical assistance provided by the StateBar, the maintenance of specified statistics;an appropriate procedure for parties tochallenge a mediator for cause; an appropri-ate procedure for a mediator to disclose any

possible conflict of interest; a procedurefor preserving the confidentiality affordedby Evidence Code section 1152.5 andBusiness and Professions Code section6086.1(b); a procedure which complieswith requirements developed by the Of-fice of the Chief Trial Counsel for trans-mitting the results of mandatory media-tion matters to that Office (see below); anda procedure covering what action, if any,will be taken in those instances whereinformation regarding lawyer misconductmay be disclosed during a mediation. Atthis writing, the Bar hopes that the six pilotproject bar associations-those in Los An-geles, San Francisco, Santa Clara, Ven-tura, Sacramento, and San Joaquin coun-ties-will have their mediation centers inoperation by mid-summer.

Also at its May meeting, the Board ofGovernors adopted emergency amend-ments to the Bar's Rules of Procedureconcerning ADRCAMP; these amend-ments include the rules under which theChief Trial Counsel will refer matters tolocal bar associations for mediation.Under the amendments, the Chief TrialCounsel must consider the following fac-tors in determining whether to require anattorney to participate in ADRCAMP: theattorney's prior discipline record; the ex-istence of open inquiries or investigationsinvolving the same conduct; disciplinaryproceedings pending in the State BarCourt; client willingness to participate inthe program; the availability of AD-RCAMP in the county where the attorneymaintains his/her principal place of prac-tice; and prior efforts to resolve the dis-pute. The amended rules also provide thatwhen mediation is concluded, the discipl-ine matter will be considered closed sub-ject to reopening if the client advises theChief Trial Counsel that the lawyer hasfailed to comply with the terms of theagreement. The Board adopted the emer-gency rule changes to facilitate the com-mencement of ADRCAMP.

California Legal Corps Rules. At itsJanuary 21 meeting, the Board's Commit-tee on Legal Services released for publiccomment its proposed rules to govern theCalifornia Legal Corps, a multifaceted um-brella organization whose purposes are toenhance access to the legal system, encour-age attorneys to provide legal services tothose in need, and provide funding and sup-port for projects that employ unique andcreative ways to achieve these goals.[13:2&3 CRLR 218-19] The rules pro-vide for the creation of a Legal CorpsCommission to administer the rules andall provisions of law regarding the CLCand allocate CLC funds; the rules also setforth the three components of the CLC:

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- The "Fellows Corps" will includenew attorney fellows, summer law studentfellows, and others funded by grants fromthe CLC. Funded in part by the CLC,fellows will work at local bar associations,legal services programs, and other non-profit organizations devoted to projectswithin the scope of the CLC.

- The "Volunteer Corps" will be volun-teers who devote a significant amount oftime on pro bono efforts through existinglocal programs and bar associations.

- The "Benefactor Corps" will be con-tributors who provide a significant levelof financial support for local legal servicesprograms or other efforts within the CLC'smission.

The rules establish criteria for CLCfellows who receive CLC funds; set forthapplication procedures; establish a proce-dure whereby the CLC may apply for fund-ing from unclaimed class action residualsunder SB 536 (Petris) (Chapter 863, Stat-utes of 1993) [13:4 CRLR 216-17]; setforth rules governing the monitoring ofrecipients of CLC funds and required re-porting from recipients; and establish aprocedure for the receipt and handling ofcomplaints about CLC members or fund-ing recipients.

The public comment period on theseproposed rules closed on April 22; at thiswriting, Bar staff is analyzing the com-ments received and the Committee onLegal Services is scheduled to review therules and the comments at its June meet-ing. These rules must be approved by boththe Board of Governors and the CaliforniaSupreme Court before they become effec-tive.

Rules of Procedure for State BarCourt Proceedings. In January, the Bar'sExecutive Committee approved the re-lease for public comment of its revisedRules of Procedure for State Bar CourtProceedings and Rules of Practice of theState Bar Court. These revised rules wouldreplace the transitional and provisional ruleswhich were temporarily adopted when theState Bar Court was created in 1989. Thedraft rules are a culmination of a lengthyprocess by an advisory committee chairedby Review Department Judge Ronald W.Stovitz; the advisory committee also in-cluded two State Bar Court hearingjudges, two attorneys from the Bar's Of-fice of Trials, and two members of the Barin private practice who regularly representdisciplinary respondents, moral characterapplicants, and reinstatement petitionersin State Bar Court proceedings.

By consensus of the advisory commit-tee, the rules have been released for publiccomment; however, some of the proposedrules have already created controversy

within the committee, including the fol-lowing:

- Proposed Rule 23 provides that, uponthe motion of any party, the State BarCourt may issue an order sealing a portionof the record in a public proceeding if it isestablished "that the compelling publicinterest in the public nature of the proceed-ing is outweighed by a statutory privilegeor constitutionally protected interest of aparty, witness, or other interested person."Although the rule also provides that reliefunder the rule must be "narrowly tailoredto serve the specific interest sought to beprotected," the Office of the Chief TrialCounsel has expressed concern that therule's application should be expressly lim-ited to narrowly defined circumstances"so as not to be used by defense counselto improperly shield a respondent's repu-tation."

- The proposed rules would authorizethe imposition of monetary sanctions fordiscovery abuses in State Bar Court pro-ceedings. However, both the Bar's ChiefTrial Counsel and the defense counsel rep-resentatives argue that the Court has notbeen granted statutory authority to imposefines for discovery abuses, and the ChiefTrial Counsel views the proposal as anunnecessary and fertile area of expensivelitigation.

- The proposed rules grant the StateBar Court the power to dismiss cases withor without prejudice (which goes beyondwhat is provided in the current transitionalrules), and permits dismissal with preju-dice as a discovery sanction; the ChiefTrial Counsel opposes this change.

At this writing, the deadline for writtencomments on the revised Rules of Proce-dure for State Bar Court Proceedings andthe Rules of Practice of the State Bar Courtis June 14.

Other State Bar Rulemaking. Thefollowing is a status update on other pro-posed regulatory amendments consideredby the State Bar in recent months anddescribed in detail in previous issues ofthe Reporter

- Attorney Advertising. At its April 9meeting, the Board of Governors amendedexisting standard (5) and adopted five newattorney advertising standards under Ruleof Professional Conduct 1-400. [14:1CRLR 175-76; 13:4 CRLR 215; 13:2&3CRLR 219] All of these regulatory changesbecame effective on May 11.

Amended standard (5) prohibits mail-ers (except professional announcements)that do not bear the word "advertisement"or "newsletter" on the first page. Newstandard (12) prohibits advertising (ex-cept professional announcements) whichdoes not state the name of the attorney

responsible for it. New standard (13) pro-hibits the use of dramatizations in adver-tising, unless it includes a disclaimer stat-ing "this is a dramatization." New stan-dard (14) prohibits attorney advertising of"no fee" contingency arrangements unlessthe ad also specifies whether a client isliable for the attorney's expenses in han-dling a case. New standard (15) prohibitsadvertising which states or implies thatlegal services are available in a languageother than English unless the member canactually provide legal services in such lan-guage or the ad states the employment titleof the person who speaks the languageother than English and discloses that suchperson is not a State Bar member, if that isthe case. New standard (16) prohibits un-solicited advertising which sets forth aspecific fee or range of fees for a particularservice where, in fact, the member chargesa greater fee than advertised in such the adwithin a period of 90 days following dis-semination of the ad, unless the ad speci-fies a shorter period of time regarding theadvertised fee; fees advertised in tele-phone directories must be adhered to forone year.

- Gifts to Attorneys From Clients. Atits April 8 meeting, the Bar's Committeeon Admissions and Competence consid-ered 28 public comments which had beensubmitted on the December 10, 1993 ver-sion of proposed amendments to Rule ofProfessional Conduct 4-400, regardinggifts to attorneys from their clients. Fol-lowing a public hearing and discussion,the Committee further revised the lan-guage of the proposed amendments andforwarded them to the Board of Governorsfor consideration at its May meeting.

As revised, the rule states that "[a StateBar] member shall not: (A) induce a clientto make any gift, including a testamentarygift, to the member or to a person whomthe member knows is related to the mem-ber; or (B) prepare an instrument whichprovides for any gift from a client, includ-ing a testamentary gift, to the member orto a person whom the member knows isrelated to the member, except where theclient is related to the member or trans-feree." The Discussion section to the re-vised rule states that a person "related to"the member means the member's spouseor predeceased spouse; relatives andspouses of relatives within the third de-gree of the member, the member's spouse,or predeceased spouse; cohabitants withthe member; partners or shareholders ofany partnership or corporation in whichany person described previously has a10% or greater ownership interest, andany employee of such person, partnership,or corporation; and employees of the

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member. A client "related to" the membermeans the member's spouse or prede-ceased spouse, relatives and spouses ofrelatives within the third degree of themember, the member's spouse or prede-ceased spouse; and cohabitants with themember. A client "related to" the trans-feree means the transferee's spouse or pre-deceased spouse; relatives and spouses ofrelatives within the third degree of thetransferee, the transferee's spouse or pre-deceased spouse; and cohabitants with thetransferee. [14:1 CRLR 176; 13:4 CRLR217; 13:2&3 CRLR 220]

At its May 14 meeting, the Board ofGovernors approved the proposed amend-ments. At this writing, the Bar's amend-ments have not yet been approved by theCalifornia Supreme Court.

- Employment of Disbarred, Sus-pended, Resigned, or Involuntarily Inac-tive Lawyers. Following discussion at itsApril meeting, the Bar's Committee onDiscipline and Client Assistance revisedthe language of proposed Rule 1-311, andtransferred the revised language to theCommittee on Admissions and Compe-tence with a request that it be released forpublic comment. [14:1 CRLR 176; 13:4CRLR 216]

The revised language of the proposedrule, which has engendered considerablecontroversy, would prohibit a State Barmember from employing or otherwise uti-lizing a disbarred, suspended, resigned, orinvoluntarily inactive lawyer to performservices on behalf of clients of the memberunless (1) the activities performed by suchlawyer do not constitute the practice oflaw; (2) such lawyer has no direct contactwith the clients of the member; (3) suchlawyer does not receive, disburse, or oth-erwise have any involvement with clienttrust funds or property; and (4) such law-yer does not negotiate with third parties onbehalf of the clients of the member. Therule also requires State Bar members,prior to employing or utilizing such a law-yer, to provide written notice to the StateBar and to each client on whose behalfsuch lawyer will work; the notice mustinclude a full description of such lawyer'scurrent Bar membership status and theactivities to be performed by such lawyer.The member must obtain the client's datedsignature on the client's written notice,and must retain a copy of the client's writ-ten notice for two years following termi-nation of the member's employment withthe client.

The Committee on Admissions andCompetence considered the revised lan-guage and the Discipline Committee's re-quest at its May 13 meeting, but declinedto release the language for additional pub-

lic comment until it has been further re-vised. At this writing, the Committee onAdmissions and Competence is scheduledto revisit this matter at its June 17 meeting.

- Use of the Term "Certified Special-ist." At its April meeting, the Board ofGovernors approved the new version ofRule of Professional Conduct 1-400(D)(6),which prohibits a California attorney fromadvertising as a "certified specialist" un-less the attorney is certified by the Bar'sBoard of Legal Specialization or by an-other entity approved by the Bar to desig-nate specialists. 114:1 CRLR 176; 13:1CRLR 142] At this writing, the new rulehas not yet been approved by the Califor-nia Supreme Court.

-Discrimination in Management of aLaw Practice. On February 3, the Califor-nia Supreme Court approved new Rule2-400, which provides that "in the man-agement or operation of a law practice a[State Bar] member shall not unlawfullydiscriminate or knowingly permit unlaw-ful discrimination on the basis of race,national origin, sex, sexual orientation,religion, age or disability in: (1) hiring,promoting, discharging or otherwise de-termining the conditions of employmentof any person; or (2) accepting or termi-nating representation of any client." 114:1CRLR 176; 12:4 CRLR 235-36] The ruletook effect on March 1.

- Copies of Documents for Clients. InSeptember 1993, the Board of Governorsforwarded proposed new Rule of Profes-sional Conduct 3-520, which would re-quire attorneys to provide to a client, uponrequest, one copy of any significant docu-ment or correspondence received or pre-pared by the attorney relating to the em-ployment or representation, to the Califor-nia Supreme Court for review and ap-proval. [14:1 CRLR 176; 13:1 CRLR 142]At this writing, the rule has not yet beenapproved by the court.

* LEGISLATIONAB 3659 (Horcher), as amended May

18, would delete an existing attorney ad-vertising provision which prohibits the useof an impersonation of any person directlyor implicitly purporting to be that of theattorney or client featured in the advertise-ment, or a dramatization of events (unlessdisclosure of the impersonation or dramati-zation is made in the advertisement), andenact new regulations of attorney advertis-ing in electronic media. Among other things,it would prohibit an advertisement that con-tains any statement or claim relating to thequality of the lawyer's legal services that isnot objectively verifiable.

The bill would also provide that anadvertisement may be communicated by

electronic media only if it contains infor-mation permitted by this article, articu-lated only by the lawyer or an employee,and with no other background sound. Itwould also provide, in the case of televi-sion, that no visual display shall be al-lowed except those words in written formas articulated by the lawyer or employee.The bill would also require certain disclo-sures to be made in connection with adver-tising in electronic media. This bill issponsored by the California Trial LawyersAssociation and has sparked tremendouscontroversy. Proponents of the bill assertit is needed to prevent testimonials inwhich ex-clients of the advertising attor-ney state that the attorney won them thou-sands of dollars despite being found atfault or told by insurance companies thattheir claim is frivolous. Opponents, led byJacoby & Meyers and Long Beach attor-ney Larry H. Parker, contend that furtherrestrictions on lawyers advertising willhurt poor, minority, and elderly consumersby reducing their access to informationabout legal services and restricting com-petition. [A. Floor]

AB 2662 (Snyder). Existing law, withcertain exceptions, makes privileged anyconfidential communication between aclient and lawyer, as specified. As amendedMarch 14, this bill would specifically pro-vide that such information transmitted byfacsimile, cellular radio telephone, orcordless telephone between the client andlawyer is confidential. [S. Jud]

SB 1718 (Alquist). Existing law regu-lating admission to the practice of lawprovides that, among other requirements,a first-year law student attending a nonac-credited law school must pass an exami-nation (known as the "baby bar") given bythe Committee of Bar Examiners, andshall not receive credit for the first year ofstudy until he/she has passed the examina-tion. A student also shall not receive creditfor any study subsequent to the first yearthat is done prior to passing the examina-tion, unless good cause exists for givingcredit for some or all of the study. Asamended April 27, this bill would elimi-nate the requirement that a student at anonaccredited law school pass the exami-nation as a condition of receiving creditfor the first year of study or subsequentstudy, and of admittance to the practice oflaw; and instead require only that studentstake the examination. This bill would fur-ther require the Committee to notify astudent who has taken the "baby bar" ofwhat his/her score suggests about thestudent's probability of becoming an at-torney. A student may continue his/herlegal studies as long as he/she can satisfythe law school's academic standards. Both

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the Bar and former State Bar DisciplineMonitor Robert C. Fellmeth oppose thisbill. [S. Floor]

AB 2928 (W. Brown), as amendedMarch 2 1, would provide that any attorneycomplained against shall receive any ex-culpatory evidence from the State Barafter the initiation of a disciplinary pro-ceeding in State Bar Court, and thereafterwhen this evidence is discovered andavailable. This provision would not re-quire the disclosure of mitigating evi-dence. [S. Jud]

AB 3219 (Connolly). SB 645 (Pre-sley) (Chapter 982, Statutes of 1993) au-thorizes the Board of Governors to formu-late and adopt rules and regulations to estab-lish, and standards and guidelines to imple-ment, an Alternative Dispute ResolutionDiscipline Mediation Program to resolvespecified complaints against attorneys (seeMAJOR PROJECTS). As amended May 12,this bill would provide that those rules mayauthorize discipline mediation to proceedunder discipline mediation programssponsored by local bar associations in Cal-ifornia, and the rules shall authorize thecharging of reasonable administrative feesfor specified purposes. The bill also wouldprovide that the standards and guidelinesmay encompass those sponsored pro-grams.

Under existing law, an attorney whocontracts to represent a plaintiff on a con-tingency fee basis must, at the time thecontract is entered into, provide a dupli-cate copy of the contract, signed by boththe attorney and the plaintiff, or his/herguardian or representative, to the plaintiffor to the plaintiff's guardian or represen-tative. This bill would substitute the term"client" for the term "plaintiff."

Under existing law, an attorney whocontracts to represent a client on termsother than a contingency fee basis, inwhich it is reasonably foreseeable thattotal expense to a client, including attor-ney fees, will exceed $1,000 is required touse a written contract. This bill wouldprovide that at the time the contract isentered into, the attorney shall provide aduplicate copy of the contract signed byboth the attorney and the client to theclient. Under existing law, the contract isrequired to include the hourly rate andother standard rates, fees, and charges ap-plicable to the case. This bill would in-stead require that the contract include anybasis of compensation including, but notlimited to, hourly rates, statutory fees orflat fees, and other standard rates, fees,and charges applicable to the case.

Under existing law, there is no require-ment that upon the payment of $100 ormore in settlement of any third-party lia-

bility claim the insurer provide writtennotice to the claimant. This bill wouldrequire this written notice if the claimantis a natural person and the payment isdelivered to the claimant's lawyer or otherrepresentative by draft, check, or other-wise.

Under existing law, an applicant forregistration as a law corporation shall sup-ply to the State Bar all necessary and per-tinent documents and information re-quested by the State Bar concerning theapplicant's plan of operation. This billwould provide that an applicant shall in-clude with the application, for each share-holder of the corporation licensed in aforeign country but not in this state or inany other state, territory, or possession ofthe United States, a certificate from theauthority in the foreign country currentlyhaving final jurisdiction over the practiceof law verifying the shareholder's admis-sion to practice and other specified infor-mation.

Under existing law, the Board of Gov-ernors is required to establish, maintain,and administer a system and procedure forthe arbitration of disputes concerning fees,costs, or both, charged for professionalservices by members of the State Bar orby members of the bar of other jurisdic-tions. This bill would enable the Board toestablish, maintain, and administer a sys-tem and procedure for mediation of thesedisputes that would be voluntary for bothclients and attorneys, and would providethat all discussions and offers of settle-ment of the mediation are confidential andmay not be disclosed in any subsequentarbitration or other proceedings.

Under existing law, pursuant to rulesadopted by the Board of Govemors, an at-torney is required to forward a written noticeto the client prior to or at the time of serviceof summons or claim in an action against theclient for recovery of fees, costs, or both,including a statement of the client's right toarbitration. A client's right to arbitration iswaived by the client's proceeding with anaction or seeking affirmative relief. Thisbill would provide that if the client waivesthis right to arbitration, the parties maystipulate to set aside the waiver and pro-ceed with arbitration. [A. Floor]

AB 3302 (Speier). Under existing law,the State Bar is required at the time ofissuance or renewal of a license to requirethat any licensee provide its federal em-ployer identification number if the licen-see is a partnership or his/her social secu-rity number for all others. As amendedMay 18, this bill would provide that alicensing board may not process any ap-plication for an original license or for re-newal of a license unless the applicant or

licensee provides its federal employeridentification number or social securitynumber where requested on the applica-tion. [A. W&M]

AB 3432 (O'Connell). Existing lawprovides for the regulation of lobbyingactivities of attorneys at the state level. Asamended April 26, this bill would specif-ically authorize a city, county, or city andcounty to regulate lobbying activities ofattorneys, to the extent that those activitiesoccur within each jurisdiction. [S. Jud]

AB 1926 (Peace), as amended April 7,would-among other things-provide thatconviction of certain insurance-relatedcrimes is conclusively presumed to meetthe requirements for a crime requiringsummary disbarment of attorneys. [S.Jud]

AB 2911 (Goldsmith). Existing lawspecifies that a party who is adjudged guiltyof contempt may be fined or imprisoned, orboth, as specified. As amended April 6, thisbill would provide that a party adjudgedguilty of contempt may, in addition, beordered to pay to the party initiating thecontempt proceeding his/her reasonableattorney's fees and costs incurred in con-nection with the contempt proceeding.

Existing law specifically provides thatupon a first finding of contempt for failureto comply with a family law order, thecourt shall order the party to perform com-munity service in lieu of imprisonment.This bill would instead provide that thecourt shall order the party either to per-form community service or to serve a termof imprisonment, as specified. [S. Jud]

The following is a status update onbills reported in detail in CRLR Vol. 14,No. 1 (Winter 1994) at pages 176-77:

AB 1287 (Moore), as amended Janu-ary 27, would, until January 1, 1998, enacta comprehensive scheme for the identifi-cation, study, and regulation of "nonlaw-yer providers" (also called "legal techni-cians" or "independent paralegals") underthe jurisdiction of the Department of Con-sumer Affairs. [14:1 CRLR 176-77] [S.Jud]

AB 602 (Speier), as amended Septem-ber 8, 1993, would authorize recovery ofattorneys' fees by a prevailing plaintiff inan action to recover prescribed hospital,medical, or disability benefits for a life-threatening cancer condition; and makeunenforceable any contractual waiver ofthe right to attorneys' fees under the bill.[S. Inactive File]

AB 108 (Richter). Under existing law,every pleading is required to be signed bythe party or his/her attorney. Existing lawauthorizes every trial court to order a party,the party's attorney, or both, to pay anyreasonable expenses, including attorneys'

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fees, incurred by another party as a resultof bad faith actions or tactics, as defined,that are frivolous or solely intended tocause unnecessary delay, as specified. Asamended June 22, 1993, this bill wouldprovide as a pilot project applicable onlyin Butte, San Diego, San Bernardino, andRiverside counties, until January 1, 1998,unless that date is extended or deleted bylater enacted legislation, that, except asspecified, the signature of an attorney orparty on any pleading, motion, and anyother paper filed or served in a civil action,constitutes a certificate that he/she hasread the paper, has made a reasonableinquiry into the allegations, and presentsit in good faith and not for an improperpurpose. The bill would require any plead-ing, motion, or other paper that is notsigned to be stricken unless it is promptlysigned after the omission is called to theattention of the pleader or moving party.The bill would require an appropriatesanction to be imposed by the court if apaper is signed in violation of these re-quirements. The bill would also requirethe Judicial Council to conduct a specifiedstudy of the pilot project and report itsfindings to the Legislature on or beforeJanuary 1, 1997. [S. Jud]

AB 335 (Ferguson). Existing law au-thorizes the State Bar to establish and ad-minister a minimum continuing legal ed-ucation program. Existing law also ex-empts from this program retired judges,officers and elected officials of the Stateof California, full-time law professors,and full-time employees of the state ofCalifornia, as specified. As amended June9, 1993, this bill would delete the exemp-tions for officers and elected officials ofthe state of California. [S. Jud]

AB 2300 (Morrow). Existing law au-thorizes, and in certain cases requires, thecourts to submit civil matters for arbitra-tion by retired judges or licensed attorneys.Under these provisions of existing law, theparties are entitled to a trial de novo afterarbitration, but, with certain exceptions, areliable for specified costs of the arbitrationand prescribed expert witness fees, and maynot recover costs as a prevailing party, unlessthe party obtaining the trial de novo obtainsa more favorable judgment, in either theamount awarded or the type of relief granted,than under the arbitration award. Underexisting law, in superior courts with ten ormore judges where the amount in contro-versy, in the opinion of the court, will notexceed $50,000, the court is required tosubmit the matter to this arbitration. Underexisting law, other superior courts mayprovide for submittal of these cases to thisarbitration by local court rule where theamount in controversy, in the opinion of

the court, will not exceed $50,000. Underexisting law, in superior courts with fewerthan ten judges and which have notadopted such a local rule, matters are re-quired to be submitted to this arbitration ifthe plaintiff files an election therefor andagrees that the arbitration award shall notexceed $50,000. As amended June 9, 1993,this bill would, until January 1, 1996, in-crease the above $50,000 maximums to$100,000. [S. Jud]

SB 102 (Lockyer). Existing law, asdetermined by the California SupremeCourt in Neary v. Regents of University ofCalifornia, 3 Cal. 4th 273, authorizes anappellate court to reverse a trial courtjudgment upon the stipulation of the par-ties. As amended May 13, this bill wouldspecify that an agreement or stipulation ofthe parties may not be the basis for revers-ing or vacating a judgment duly enteredby a court of competent jurisdiction, ex-cept upon a showing of substantial legalor factual justification. The bill would de-clare agreements to the contrary to be vi-olative of prescribed public policy, exceptupon a showing of substantial legal orfactual justification. [A. Jud]

The following bills died in committee:AB 500 (Goldsmith), which would haverevised existing law which provides withrespect to the settlement of civil actionsthat, if an offer made by a defendant is notaccepted and the plaintiff fails to obtain amore favorable judgment, the plaintiffshall not recover his/her costs and shallpay the defendant's costs from the time ofthe offer, to add reasonable attorneys' fees,at the discretion of the court, from the timeof the offer to the costs recoverable underthis provision; and AB 2302 (Morrow),which would have required mandatorymediation in certain civil actions upon thefiling of a request for mediation by a partyagainst whom a complaint or cross-com-plaint has been filed, within thirty days ofthe latter filing.

* LITIGATIONFor the third year in a row, an indepen-

dent arbitrator has ruled that the State Baris accurately calculating the proportion ofits activities which are "chargeable" tocompelled Bar licensing fees and thosewhich are "non-chargeable" under the U.S.Supreme Court's 1990 decision in Kellerv. State Bar of California. [13:2&3 CRLR223-24; 12:2&3 CRLR 270] To imple-ment the Keller decision, the Bar offers anannual "Hudson deduction" reduction inBar dues to attorneys who are not willingor able to pay for Bar activities which arenot germane to regulation of the legal pro-fession or improvement of the quality oflegal services. Brosterhous, et aL v. State

Bar of California, the Pacific LegalFoundation's challenge to Bar's calcula-tion of its "non-chargeable" expenses andto the validity of the arbitration require-ment, is still pending in the Third DistrictCourt of Appeal. [13:2&3 CRLR 223-24;12:4 CRLR 237]

The California Supreme Court re-cently agreed to review the First DistrictCourt of Appeal's decision in Flatt v. Su-perior Court, No. S031687 (Apr. 21,1994). In this case, plaintiff William L.Daniel met with attorney Gail Flatt ofO'Brien, Watter, Davis & Piasta in July1989 concerning a possible legal malprac-tice case against another attorney. Approx-imately one week later, Flatt realized thather firm had represented the prospectivedefendant attorney on another matter andwrote a letter withdrawing as counsel dueto the conflict. But Flatt's letter did notwarn Daniel about an impending statute oflimitations bar to his malpractice action;Daniel did not file within the period, andhe sued Flatt for professional negligencein failing to warn him. Flatt contended thatno attorney-client relationship existed im-posing such a duty, because it was refusedfor legitimate reasons almost immediatelyand before agreeing to handle the case.

In January 1993, the Sonoma CountySuperior Court refused summary judgmentfor the defendant; in March 1993, the FirstDistrict Court of Appeal summarily denieda writ of mandamus. However, the Califor-nia Supreme Court ordered the court of ap-peal to hear argument and write an opinion.That opinion upheld the denial of summaryjudgment by the superior court, citing Millerv. Metzinger, 91 Cal. App. 3d 31 (1979), forthe proposition that the initial contact be-tween a client and an attorney, where legaladvice is sought, establishes a prima facieattorney-client relationship. Justice MichaelPhelan dissented, arguing that while Flattincurred a duty of confidentiality towardDaniel, no attorney-client relationship hadbeen formed. The Supreme Court acceptedreview and vacated the First District's opin-ion; the case awaits final decision.

The Flatt case deals with an importantethical problem facing licensed attorneys:Does an initial inquiry by a possible clientconcerning representation create the fidu-ciary and other duties of care normally pres-ent between an attorney and client? Is therean interrelationship between the degree ofcare required and the "acceptance of a case"or other agreement to serve as counsel?From the defendant's perspective, at issue iswhen a duty to advise a consumer arises; ifit arises before the consumer is a client, whatdoes that portend in terms of initial contact?Can an attorney, as a practical matter, re-fuse at least an initial inquiry and compe-

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tent advice as to any matter and any client?Failure to inquire into possible causes ofaction and periods of limitation may benegligence. Further, what is Flatt to dowhen her previous or present client is theattorney Daniel wants to sue, and to whomshe owes an established duty-can sheethically advise Daniel to sue her ownclient, or assist in such a suit by advice onthe statute of limitations?

On January 13, the Supreme Court alsogranted review on a case exploring theunderlying issue in Flatt-the statute oflimitations for legal malpractice actions.In ITT Small Business Finance Corpora-tion v. Niles, 24 Cal. App. 4th 719 (Oct.21, 1993), the plaintiff alleged that theattorney had prepared inadequate loandocuments. The trial court granted sum-mary judgment for the defendant based ona failure to file within the one-year statuteof limitations for professional negligenceby attorneys. But the Second DistrictCourt of Appeal held that the action wasnot barred because the statute was tolleduntil "actual injury" had occurred, as pro-vided for in Code of Civil Procedure sec-tion 340.6(a)(1 ). The appellate court ruledthat actual injury did not occur until theplaintiff was "forced to settle" a case chal-lenging the sufficiency of the loan docu-mentation arranged by the attorney. Theattorney argued that "actual injury" oc-curred when a case was filed alleging in-adequate loan preparation (which had beenperformed by counsel)-a filing more thanthe one-year statute of limitations from themalpractice filing against the attorney.The Second District's decision appears tobe consistent with the recently-decidedLaird v. Blacker, 2 Cal. 4th 606 (1992),which indicated that actual injury occursat the point the actions of an attorney leadto an adverse judgment (precluding fur-ther delay into appeal).

This case deals with the tension be-tween two policies: (I) the desire to re-quire timely filing of cases to give partiesnotice of the need to preserve evidence,and to encourage adjudications close tothe time of the events to which they per-tain; and (2) the policy discouraging thefiling of actions unless there are damagesrequiring court intervention. As to thislatter concern, many acts of professionalnegligence do not give rise to immediateharm, but serve as a ticking time bombwhich might, or might not, explode. Ifplaintiffs are barred based on a time cer-tain from the act, then two problems occurwhere the act is such a time bomb: Plain-tiffs will file suit in many cases wherethere is no harm in order to preserve theirrights in case harm should occur; and therewill be no remedy for time bomb-created

damages-regardless of the degree oferror or devastating consequences. On theother hand, as noted, many decisions ofcounsel have impacts many years later,and the allowance of suit without any timelimitation whatever, based merely ondamages occurring later creates a largeand undefined exception to statute of lim-itations policy.

In Ramirez v. Sturdevant, 21 Cal. App.4th 904 (Jan. 12, 1994), the First DistrictCourt of Appeal has ruled that a potentialconflict of interest between a client andher attorney with regard to attorney feesduring settlement negotiations requires animpartial review by the trial court of thesettlement agreement.

Patricia Ramirez was fired by her em-ployer, and hired attorney James Sturdev-ant to represent her before the labor com-mission. Sturdevant obtained a favorableruling for Ramirez, but the employer re-fused to abide by the ruling, requiringRamirez to file a wrongful terminationaction. After hiring and firing another law-yer to represent her, Ramirez returned toSturdevant, who drafted an attorney feeagreement awarding him 33-1/3% beforetrial and 40% after commencement of trialof any amounts awarded Ramirez. Theagreement also provided for possible feesfrom the defendant separate and apart fromthe judgment obtained (i.e., "the basic feeprovision gave Sturdevant the discretion tonegotiate either a lump-sum settlement, ora bifurcated or trifurcated settlement, onepart of which would be his attomey fee").The trial court granted summary judgmentin favor of the employer, and Ramirezdeclined a postjudgment settlement offerof $66,000 plus a waiver of costs, choos-ing instead to appeal.

Because he had begun to have doubtsabout the strength of Ramirez' case andbelieved that she had an inflated idea ofthe value of her case, Sturdevant agreed torepresent her on appeal but only on threeconditions-one of which was that she mustagree to accept any settlement offer of atleast $150,000. The appellate court reversedthe summary judgment, and settlement ne-gotiations began in earnest. Although allprior settlement negotiations had contem-plated a lump sum payment from whichSturdevant would extract his contingency,Sturdevant convinced the employer thatthe better approach would be to negotiateseparate amounts for damages to Ramirez,costs, and attorney fees paid directly toSturdevant. He eventually negotiated afinal figure of $400,000-$150,000 forRamirez, $35,000 for costs, and $215,000for attorneys' fees. Ramirez was satisfiedwith the gross amount of the settlement,but maintained that Sturdevant's fees

should be limited to no more than 33-1/3%of that amount. This litigation ensued.

Both the trial court and the First Dis-trict agreed that "the record demonstratesno breach of duty on the part of Sturdev-ant." However, in a case of first impres-sion in California, the court noted that thenature of the fee agreement created aninherent conflict of interest for the attor-ney. Analogizing from federal class actioncases where counsel often negotiate settle-ments for a class and fees for themselvessimultaneously-and from the same fund,the First District noted that courts ofteninsist on "settlement of the damage aspectof the case separately from the awardof.. .fees." However, the court rejected a"bright-line" approach which might inval-idate prior or pending settlements, optingfor a "case-by-case approach" but holdingthat the trial court is obligated to reviewfinal awards in situations where an attor-ney negotiates his/her own award from thesame fund going to the client and deter-mine whether counsel adequately "pro-tected his client's interest" in such cases.The First District remanded the matter tothe trial court for an evidentiary hearingon the matter; on April 21, the CaliforniaSupreme Court denied Sturdevant's peti-tion for review.

Ramirez serves as an example of thedual regulatory scheme affecting attor-neys. The court here enunciated a policywithin the possible province of State Barinterest. It would appear that the Bar is notprecluded by this decision and relatedcases from fashioning a bright-line regu-latory rule to preclude such conflicts cat-egorically. There are numerous options toinhibit counsel from negotiating an awardfor herself out of sums which would oth-erwise go to her client separate and apartfrom a pre-established amount or formula.Thus far, however, the Bar has not doneSO.

On May 17, the Review Department ofthe State Bar Court issued an opinion inIn the Matter of Respondent Q, No. 93-0-xxxxx. An attorney had filed a motionfor a protective order to prevent the Officeof the Chief Trial Counsel (OCTC) (in-cluding the Bar's investigators) from con-tacting any of his clients who had notspecifically complained to the State Bar.[Editor's Note: At one time, the State Barprohibited such contacts with "non-com-plaining" clients without a special proba-ble cause showing before the Board's Dis-cipline Committee, a majority of whosemembers are licensed attorneys. [7:3 CRLR1, 12] State Bar discipline reforms begin-ning in 1987 eliminated these limitationson Bar investigators, which were criti-cized by the State Bar Discipline Monitor

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and others as not applicable to any otherprofessional regulatory regime in the stateand as overly solicitous to the profession.]However, the Review Department heldthat it lacks statutory or other jurisdictionto rule on the practices of the OCTC;applicable law gives it jurisdiction onlyupon the filing of a NTSC or other plead-ing by the OCTC. The Review Depart-ment declined to analogize its powers toequitable powers held by appellate courtsto grant writs to prevent various types ofexecutive abuse in the absence of an au-thorizing statutory provision or SupremeCourt order granting it such authority. TheState Bar Court does have some specificauthority under the State Bar Act to quashsubpoenas, including pre-filing subpoe-nas, but the court declined to expand thatpower to intervene in the investigatoryinterviews and other procedures of the Barnot involving formal legal process. How-ever, the Court noted that should the Barobtain evidence by "improper means," itmay be subject to a motion to exclude.

* RECENT MEETINGSThe January 21-22 meetings of the Bar's

committees and the Board of Governorswere cancelled due to the January 17 North-ridge earthquake. Following the quake,Law-Help-California, the State Bar's state-wide disaster assistance program, coordi-nated efforts by local legal service provid-ers and bar associations to provide directrepresentation and long-term assistance toquake victims. More than 700 attorneysvolunteered to staff tables at Disaster Ap-plication Centers and to answer hotlinephones, providing help with a variety oflegal problems brought about by thequake, including landlord-tenant and in-surance matters. In addition, the Bar sentteams of investigators to local Red Crossshelters to advise people of their legalrights and warn them that lawyers whosolicit at such locations are violating statelaw and the Rules of Professional Con-duct.

At its April meeting, the Board of Gov-ernors approved the distribution of up to$5.7 million derived from interest on law-yer trust accounts (also known as IOLTAfunds) to help fund legal services pro-grams during 1994-95. This year's distri-bution is only 40% of the $15.2 milliondistributed in 1993-94, and only 26% ofthe $21.6 million distributed in 1990-91.[10:2&3 CRLR 214] According to the Bar,the huge decrease is due solely to declin-ing interest rates on client trust accounts.Judy Garlow, director of the Bar's LegalServices Trust Fund Program, noted thatBar staff is working to develop ways toenhance the revenue generated on the mil-

lions of dollars in client funds that lawyersplace in bank accounts annually. At thesame meeting, the Board voted to opposeSB 1791 (Johannessen), which would di-vert TOLTA funds from legal services pro-grams to government services such as pro-bation officers and crime victim restitu-tion programs; that bill later died in thelegislature.

* FUTURE MEETINGSJune 17-18 in San Francisco.July 22-23 in Los Angeles.August 26-27 in San Francisco.September 22-24 in Anaheim

(annual meeting).

California Regulatory Law Reporter • Vol. 14, Nos. 2&3 (Spring/Summer 1994)