Becerra, 040318 CAAGO, AGO 14-301

Docket Nº:AGO 14-301
Case Date:April 03, 2018
XAVIER BECERRA Attorney General
LAWRENCE M. DANIELS Deputy Attorney General
AGO 14-301
No. 14-301
California Attorney General Opinion
Office of the Attorney General State of California
April 3, 2018
         THE HONORABLE MARK STONE, MEMBER OF THE STATE ASSEMBLY, has requested an opinion on the following questions:          1. May a city council member who is also an attorney advocate on behalf of a client’s interests when those interests are adverse to the city?          2. May a city council member who is also an attorney participate in a governmental decision concerning a client’s interests when those interests are adverse to the city?          CONCLUSIONS          1. A city council member who is also an attorney may not advocate on behalf of a client’s interests when those interests are adverse to the city.          2. A city council member who is also a practicing attorney may not participate in a governmental decision concerning a client’s interests when those interests are adverse to the city.          ANALYSIS          We are told of an elected city council member who, during his term on the council but in his separate capacity as a private attorney, represented clients in a dispute with the city over its ban of newspaper racks on city property. In the course of the representation, the council member wrote a letter to the city on behalf of his private clients, in which he argued that the city attorney’s position supporting the ban was legally untenable. The dispute ultimately resulted in litigation, though the council member ceased his representation of the clients before a case was filed against the city.          This episode prompted the questions presented here: whether a city council member who is also an attorney may advocate on behalf of a client’s interests, or participate in making official decisions affecting a client’s interests, when the client’s interests are adverse to those of the city. We conclude that a city council member may not advocate on behalf of a private client’s interests under such circumstances, because to do so would violate his or her fiduciary duties to both the client and the city, and would undermine respect and confidence in the legal profession. Moreover, a council member’s participation in an official decision involving a private client’s adverse interests would in most cases run afoul of one or more statutory or common law conflict-of-interest rules.          We are also asked whether our conclusions would differ if the attorney received no compensation, if the representation were limited to pre-litigation, or if the matter did not involve litigation. These circumstances do not change our conclusions.          1. A city council member who is also an attorney may not advocate on behalf of a client’s interests when those interests are adverse to the city.          The Rules of Professional Conduct of the State Bar of California regulate the professional conduct of attorneys licensed to practice law in this state, and serve as the basis for disciplinary action against attorneys.1 Having been adopted by the Board of Trustees of the State Bar of California, and approved by the California Supreme Court, these rules are binding.2          Rule 1-100 provides that the overarching purposes of the rules are “to protect the public and to promote respect and confidence in the legal profession.”[3] Rule 3-310 addresses an attorney’s representation of adverse interests.4 Rule 3-310(C) forbids an attorney, without the clients’ informed written consent, to accept representation of more than one client when the interests of the clients actually or potentially conflict.5 Moreover, in cases of actual conflict a client’s consent may be inoperative.[6]          As a threshold issue, we must determine whether rule 3-310(C) applies in the circumstances contemplated here. We believe that it does not, because the rule speaks to conflicting attorney-client relationships,7 and a council member does not have an attorney-client relationship with the city by virtue of his or her office alone.8          Our inquiry does not end there, however. As Rule 1-100 admonishes, “The prohibition of certain conduct in these rules is not exclusive,” and “[m]embers are also bound by applicable law,” including the “opinions of California courts.”[9] Further, the rules do not “create, augment, diminish, or eliminate any substantive legal duty of lawyers or the non-disciplinary consequences of violating such a duty.”[10] Specifically, the rules do not “supercede existing law relating to members in non-disciplinary contexts” such as judicial authority regarding attorney disqualification from representing a client.11          Where an attorney or his or her law firm simultaneously represents clients with adverse interests, “disqualification follows automatically regardless of whether the simultaneous representations have anything in common or present any risk that confidences obtained in one matter would be used in the other.”12 This is because “[a]ttorneys have a duty to maintain undivided loyalty to their clients to avoid undermining public confidence in the legal profession and the judicial process.”13          Based on the duty of loyalty, courts have held that an attorney is disqualified when a client’s interest is adverse to the interest of non-clients with whom the attorney has a fiduciary relationship.14 In Raley v. Superior Court, a partner in a law firm suing a corporation was also the director of the bank that was trustee of 100 percent of the common stock of the corporation.15 The Court of Appeal noted that, “Professional responsibilities do not turn on whether a member of the State Bar acts as a lawyer.”16 The court observed that a conflict of interest might result from a non-client relationship “‘where an attorney’s relationship with a person or entity creates an expectation that the attorney owes a duty of fidelity.’”17 The court further found that the attorney, “acting for the Bank as trustee, has fiduciary duties to the Trust beneficiaries to manage [the corporation] with reasonable skill, prudence and diligence.”18 The attorney’s fiduciary relationship with the corporation, and his partnership with the law firm, therefore placed him on both sides of the litigation.19 The court held that, despite the attorney’s attempt to isolate himself from the case, the trial court abused its discretion in not disqualifying the attorney’s firm.20          Later, in Allen v. Academic Games Leagues of America, the United States District Court for the Central District of California relied on Raley to conclude that one Mr. Wright, a California attorney, had a conflict of interest.21 Wright represented the defendants in a copyright and trademark infringement case brought by the National Academic Games Project.22 The court found that Wright had a fiduciary relationship with the business that was “similar to that of corporate director and raise[d] many of the same concerns.”23 The court noted that former rule 5-102, on which Raley relied, had been replaced by current rule 3-310, which does not require disqualification of an attorney representing interests adverse to a non-client.24 But the court concluded that rule 1-100 compelled the same result, stating that “Wright's actions would undermine the integrity of the legal profession if he is able to utilize a loophole in Rule 3-310 to avoid disqualification.”[25] The court ruled that “Wright’s conflict of interest and the clear suggestion of impropriety” required disqualification, and must be “imputed to his entire firm.”26          To determine whether this ethical prohibition applies here, we must examine whether an attorney’s fiduciary duty as a council member disqualifies him from representing a client with interests adverse to the city.27 The State Bar Committee on Professional Responsibility and Conduct has twice addressed this issue,28 concluding that the adverse representation would be an ethical violation, both in contractual matters and in litigation.29          In the first of these opinions, issued 40 years ago, the Professional Responsibility and Conduct Committee concluded that an attorney may not represent a client in a contract negotiation with a city if the attorney is a council member of the same city.30 The opinion reasoned that, otherwise, “the attorney may be tempted to use his influence of public office to gain advantages and concessions in contract terms for the benefit of his client.”31 Further, “[t]he city employees representing the city in a contract negotiation, who are subject to the council’s jurisdiction, may be reluctant to oppose the attorney in his contract demands; or they may...

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