Law firm discipline: in through the back door

The California Rules of Professional Conduct, by their own terms, are “intended to regulate professional conduct of members of the State Bar through discipline.” (Cal. Rule Prof. Conduct 1-100(a)). Thus it has been ever since the very first set of Rules was approved by the California Supreme Court in 1928.

A lot has changed since 1928.

At the dawn of the State Bar era, most lawyers practiced as solo practitioners, or in small law firms.

The development of large law firms, not to mention the “mega-firms” consisting of thousands of lawyers, was not foreseen or provided for in the rules.

These organizations, with their large numbers of both attorneys and non-attorney staff, typically display diffused decision making that presents a challenge to a discipline process that presumes that a member is completely responsible for all aspects of a particular case, for all sins committed, whether by commission or omission.

The concept of professional discipline for law firms themselves has been around for several decades, but has never really caught fire. Some moves in that direction are reflected in the American Bar Association’s Model Rules of Professional Conduct, first promulgated in 1983.

Model Rule 5.1(a) requires individual partners to make "reasonable efforts" to ensure that their firm has measures in effect that give "reasonable assurance" that all lawyers in the firm conform to ethical rules.

Model Rule 5.3(a) imposes upon individual partners the obligation of making "reasonable efforts" to ensure that the firm has measures in place giving "reasonable assurance" that the conduct of non-lawyers affiliated with the firm is compatible with the partner's professional obligations.

These rules were adopted to encourage firms to create firm cultures and institute prophylactic policies and procedures -- an "ethical infrastructure" -- that would prevent misconduct before it occurred (O’Sullivan, "Professional Discipline for Law Firms?" A Response to Professor Schneyer’s Proposal, 16 Geo. J. Legal Ethics 1-90 [2002]).

But the Model Rules are not the law in California, at least not yet. And the State Bar’s Commission on the Revision of the Rules of Professional Conduct, which has proposed a California version of the Model Rules (which includes 5.1 and 5.3) examined the concept of law firm discipline and rejected it.

But recent case law and legislative developments suggest that law firm discipline of a sort may be coming to California, through the unexpected vehicle of California unfair competition law (UC) (Bus. & Prof. Code §17200).

Late in March 2013, the California Supreme Court denied a petition for review of the First Appellate District’s decision in People ex rel. Herrara v. Stender (2013) 212 Cal. App. 4th 614.

Stender involved an action filed by the San Francisco city attorney against Guajardo, a former California attorney who had resigned with charges pending, and Stender, an attorney not admitted in California and Immigration Practice Group Inc. (IPG), a professional corporation.

Guajardo had been the principal of the professional corporation and sole shareholder; after he tendered his resignation, he changed the name of the corporation to IPG. After the resignation was accepted, Stender became the sole shareholder of the corporation.

Guajardo, however, continued to be actively involved in the operation of the practice.

The Court of Appeals held that the law corporation was required to follow State Bar rules, including the Rules of Professional Conduct.

The rule specifically implicated here was Rule Prof. Conduct 1-311, which requires a member to give notice of employment of a lawyer who has resigned with charges pending to the clients and to the State Bar.

Stender, of course, was not a member of the State Bar of California. The court also held that violation of a rule of professional conduct could be a measure of unlawful business practices (Stender, at 630-631.)

This despite the fact the Rule Prof. Conduct 1-100 states that the rules are not intended to create civil causes of action.

The Supreme Court denied review in Stender in late March and it is now binding law.

On its heels, AB 888, a “placeholder” bill, has been amended to authorize the State Bar to request that the attorney general, a district attorney or a city attorney acting as a local prosecutor, bring a UC enforcement action against entities engaged in the unauthorized practice of law. The State Bar could bring also bring a UC action in its own name.

While AB 888 concerns enforcement of the unauthorized practice of law statutes (Bus. & Prof. Code §§ 6125 et seq.) It could well be the model for further legislation authorizing the State Bar to bring its own actions for enforcement of the Rules of Professional Conduct through the UC law in appropriate situations, now that Stender has opened the door.

David Cameron Carr is an attorney in private practice in San Diego. Since 2001 he has specialized in representing attorneys in matters involving legal ethics and the law of lawyering. After practicing in business litigation and commercial law, Carr spent 12 years as staff attorney, discipline prosecutor and manager at the State Bar of California, before returning to private practice 10 years ago.

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