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LosAngelesLawyer Channel Discovery 2002 Guide to Law Office Technology
Po
PC
et 38
ckpage
2002 Guide to Law Office Technology
s
LosAngelesLawyer
JUNE 2002, VOL.25, NO.4 / $3.00
EPA
Reactivation
Policy
Los Angeles lawyer
Christine Byrd
explains the new law
page 11
governing the use of
Peculiar
Risk
Doctrine
discovery referees
page 22
Discovery
page 16
Channel
Unauthorized
Practice
of Law
page 44
EARN MCLE CREDIT
Recent Developments
in Legal Ethics
page 27
L EXISN EXIS
AND THE
L OS A NGELES C OUNTY B AR A SSOCIATION
WORKING TOGETHER TO SUPPORT THE LEGAL PROFESSION
NO
M AT T E R W H AT
T H E S I Z E O F YO U R F I R M ,
YO U G A I N S T R E N G T H I N N U M B E R S
AS A MEMBER OF
THE
L OS A NGELES C OUNTY
B A R A S S O C I AT I O N .
Count on gaining not just the support of the Los Angeles County Bar Association, but LexisNexis as well.
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page 22
Contents
Los Angeles Lawyer
departments
The Magazine of the
11 Practice Tips
Making sense of the EPA’s
reactivation policy
By Lisa A. Binder
Los Angeles County
Bar Association
June 2002
Vol. 25, No. 4
cover
16 Practice Tips
A status report on the peculiar risk
doctrine in California
By Daniel L. Germain
38 Computer Counselor
Pocket PCs help traveling attorneys
lighten their load
By Carole Levitt and Mark Rosch
columns
8
Barristers Tips
Preparing yourself for oral
argument
By Stephen A. McEwen
features
44 Closing Argument
Fighting the unauthorized practice
of law
By Karen Nobumoto
41
Classifieds
42
Index to Advertisers
43
CLE Preview
22 Discovery Channel
Litigators who know how to use referees effectively can
reduce the time and cost of discovery
By Christine Byrd
27 2001 Ethics Roundup
Christine Byrd is a partner at
Issues of confidentiality and relationships between attorneys
Irell and Manella LLP, where
highlighted last year’s rulings on legal ethics
she specializes in litigation and
By John W. Amberg and Jon L. Rewinski
discovery matters. She is also
Plus: Earn MCLE legal ethics credit. MCLE Test No. 106,
an arbitrator with the American
sponsored by West Group, begins on page 30.
Arbitration Association. In
“Discovery Channel,” she
analyzes how practitioners can
36 Special Section
most effectively use discovery
2002 Guide to Law Office Technology
referees in light of recent
changes in the law. Her article
begins on page 22.
page 27
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from
the
chair
By Steven Hecht
M
of us in public as well as private practice may
y year as chair of the Los Angeles
be choosing to engage in gladiatorial and
Lawyer Editorial Board ends with
game-playing tactics as a result of our frusthis issue of the magazine, so this is
tration with the view of the legal profession
my last From the Chair column. I am saying
that is held by our clients and the public. I say
good-bye plus about 600 more words.
to lawyers who behave this way, get over it.
How does a nation that respects its laws
What I also learned from a year working
not respect its lawyers? As I look back on a
with so many talented lawyers
year in which I worked with so
is that pride and satisfaction in
many wonderful lawyers, I wonSteven Hecht
accomplishments do not always
der why it is that lawyers are not
practices transrequire outside recognition. A
held in higher regard by a sociactional business
bit more of an inner sense of
ety that seemingly exalts the law
law in Century City.
pride and satisfaction might calm
and the legal process and prides
He is the 2001-02
down too much frenzied lawyeritself on being a nation of laws
chair of the Los
ing. We may dream of a job in
and not of persons. The legally
Angeles Lawyer
which we provide something
contested election of a president
Editorial Board.
that the recipients actually want
ended swiftly with public accepand willingly pay for when they
tance, not rioting in the streets.
get it—and after they pay they go
Lawyers and parties treat the
away happy. But that would not be a law job,
decisions of appellate courts with deference,
at least not most of the time.
even if there is no joy in the outcome, and
Thinking back over the year, September
those who disagree with the decisions go to
11 was the defining event. It caused us all to
work to reverse them.
think more carefully and critically about what
Of course, the legal process is not always
we do and how we do it.
held in high regard. Ten years ago a jury
In thanking the members of the Editorial
verdict in the criminal trial of four policemen
Board, I am sure they share my private feelinvolved in the beating of Rodney King was
ings of accomplishment and will accept my
followed in Los Angeles by the worst urban
public expression of appreciation. In thanking
rioting in U.S. history. But that catastrophic
the staff, I am pleased to have written about
event seemed more about frustration, longthem early in my year and to have benefited
held anger, and lawlessness than about a sysfrom their assistance throughout it. In thanktemic disrespect for the jury system.
ing Sam Lipsman for his help and friendship
Maybe the lack of respect for lawyers is
in an often difficult year, I join many past
not such a big deal. It seems like this attitude
chairs and others in crediting his continuing
has been prevalent for a long time, and
devotion to this magazine. In thanking Lauren
lawyers generally have thick enough skin.
Milicov Jomie, I acknowledge her patient and
Still, law schools remain full. Perhaps the
thoughtful editorial guidance of this column.
applicants either do not care that others in
She was always graceful and I will always be
society will get more pats on the back or they
grateful.
do not know how they will be perceived once
I thank you, our readers, for your comthey pass the bar exam. It is noteworthy that
ments to me throughout the year and your
many of today’s law students are choosing the
continuing and growing interest in our work.
profession in the middle of their lives rather
Join us on the Editorial Board. It is free and
than their youth. Moreover, television confun and good for the soul.
tinues to feature shows about lawyers. Movies
I have been privileged to have had this
too are populated by characters who are
past year’s experience. For me, it was a great
lawyers. Books about lawyers still litter airport
show, and as the curtain drops, I am the one
lounges.
left wanting more.
■
Even so, I believe most of us who practice
law feel there is a general lack of respect for
our profession, and this bothers us. What
should bother us more is how this perception
may affect our attitudes and behaviors. Those
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LOS ANGELES LAWYER / JUNE 2002 7
barristers
tips
By Stephen A. McEwen
Preparing Yourself for Oral Argument
Attorneys appearing before an appellate court
need to speak rather than recite
I
n the world of appellate advocacy, oral argument is the reward for
the hard work you put into writing your brief. There is nothing
more intellectually challenging and satisfying than engaging in a
productive discussion about your case with a panel of appellate judges.
Your level of enjoyment, however, is usually directly proportional to
the effectiveness of your preparation. Preparing properly, of course,
is easier said than done even for experienced practitioners.
The most common complaint that appellate judges make about oral
argument is lack of preparation by attorneys. I doubt that many attorneys approach oral argument without having at least attempted to prepare. Therefore this complaint likely stems from a lack of proper
preparation. Just as some ways of studying for law school exams are
better than others, better ways exist to prepare for oral argument.
Proper perspective is necessary at the outset. Effective preparation is impossible if you do not consider oral argument as something
more than a regurgitation of the briefs. By the time you reach the
podium, the court has already read your briefs. At this stage of the
proceedings, the court needs guidance on how to resolve the conflicting legal views presented in the briefs and address public policy
issues. The form of this guidance varies from case to case and judge
to judge. The court’s questions will often focus on the subjects on
which the judges want guidance. Therefore, in preparing for argument,
you must anticipate these concerns and formulate articulate responses.
You may falter during oral argument if your preparation consists
only of rereading the briefs and trial record and assuming that you can
repeat some text to answer the court’s questions. An attorney who does
nothing more than study the briefs and the record can probably
explain the issues in the case but is ill prepared to answer difficult and
probing questions about it. Reviewing the briefs and trial record is
always a good starting point, but thorough preparation requires a much
more active approach.
Knowing the trial record inside and out should be a major focus
of your preparation. If you do not have time to read through the
entire record again, at least read through the portions that are relevant to the appeal. Learning the trial transcript requires memorization,
and there are countless ways to accomplish this. I like to outline the
testimony of key witnesses so that I develop a clear picture of the order
in which evidence was produced at trial. In doing so, I pay careful attention to where items of interest are located in the transcripts so that I
can quickly direct the court to relevant passages if asked to do so during oral argument. The importance of mastering the trial record cannot be overstated. You can never anticipate every question a court may
have, but a firm grasp of the facts will allow you to respond in most
situations. The more command you have with the record, the more
confidence the court will have in your argument.
8 LOS ANGELES LAWYER / JUNE 2002
An equally important step in preparation for oral argument is
identifying and addressing your position’s weaknesses. While you probably did this during the brief writing stage, many weaknesses become
more apparent after the case is fully briefed and time has passed for
reflection. Assess your case as objectively as possible. If you do not,
you can rest assured that the appellate panel will. Ignorance is bliss
sometimes, but certainly not when you are standing in front of three
appellate judges and your appeal is going down in flames. Being able
to identify the weaknesses of your argument and address them will
strengthen your argument and credibility. Like all jurists, appellate
judges appreciate candor and will lose trust in you if you refuse to
acknowledge an obvious weakness.
Do not assume that all the necessary legal research is accounted
for in your brief. Before oral argument, research the relevant legal
issues again to determine if there have been any new developments.
In addition, recheck your authorities to make sure they are still good
law. The last thing you want to hear is your opponent arguing for the
application of a recent court decision about which you know nothing.
Finally, research whether any judge from the panel has written an opinion on a case relevant to your argument. Any such opinion should provide insight on what you need to emphasize during your presentation.
Throughout the analysis of your case, you should brainstorm by
yourself or with colleagues for potential questions, areas of concern,
and arguments that require emphasis.
As you develop these ideas, preserve
them in writing. Predicting questions
and concerns from the panel is notoriously difficult, but this exercise is valuable because it will force you to think
more actively and critically. Do not limit
yourself to questions that probe the weaknesses of your case. It is not uncommon
for judges to ask you questions that highlight strengths in your case in order to
emphasize a point.
Stephen A. McEwen
When you have your list of questions,
is a deputy attorney
concerns, and arguments, start working
general in the
on responses. Some attorneys find it very
Criminal Division of
helpful to write these responses. The
the California Departgoal is not to create a script for your
ment of Justice and
argument but to edit and revise the key
a member of the
points so that you can discuss them in the
Barristers Executive
most articulate manner possible. The
Committee.
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oral argument. If you wait until oral argument to articulate the theme of your appeal,
you may get by, but your responses are likely
to be rambling, disjointed, and ineffective.
Famed Los Angeles attorney Vincent
Bugliosi employs a similar philosophy when
preparing for summation in his trials. In his
book Outrage, he argues that a summation
must either be written in full or set down in
an outline. In doing so, the goal is to compose
the all-important articulation of each point.
According to Bugliosi, it is simply not possible to articulate a number of points extemporaneously. He explains that there is a best
way to phrase a point, and to find it “takes
sweat.” Bugliosi’s advice applies equally to the
preparation of an oral argument, which is
about articulating, not reciting. The process
of composing, revising, and rehearsing a key
legal point or answer to a potential question
will increase your comfort level and make
your argument far more persuasive.
Once you have your facts, arguments, and
answers floating around in your head and on
paper, the best way to organize all the material is with an outline. The main purpose of the
outline is to help you stay focused during
your presentation and ensure that you address
the necessary elements of your argument.
Your outline should usually be no more than
one page per issue and should include the
points you need to make in favor of your position, the points you need to rebut, and important record citations. I also find it helpful to
leave space on each page of my outline for
note-taking during my opponent’s argument.
This helps me avoid shuffling pieces of paper
while standing at the lectern.
Moot Court Rehearsal
After mapping out your argument and
completing your outline, arrange a moot
court. Provide each member of the court
with the briefing from your case and encourage the participants to be skeptical and critical. Moot court should be approached as seriously as the real thing—abide by the
applicable time limits, avoid scripts, and do not
call for a time out when you get stumped. A
moot court is an invaluable element of oral
argument preparation because it gives you a
chance to practice and refine your argument
and highlights potential weaknesses in your
presentation.
Finally, familiarize yourself with the appellate court’s oral argument procedures. Each
courtroom is run a little differently, so learn
in advance what is expected of you upon your
arrival to court. The best method for learning
about courtroom procedures is to attend a
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session of arguments in that particular court.
Attending an argument in person also gives
you an opportunity to familiarize yourself
with the court’s location and parking area.
The last thing you want on the morning of an
oral argument is to be flustered or even late
because of missed turns or parking difficulties. Save your energy for the argument.
Keep in mind that no amount of preparation can eliminate the possibility of surprises
during oral argument. U.S. Supreme Court
Justice Robert H. Jackson once said: “I used
to say that, as Solicitor General, I made three
arguments of every case. First came the one
that I planned—as I thought, logical, coherent, complete. Second was the one actually
presented—interrupted, incoherent, disjointed, disappointing. The third was the
utterly devastating argument that I thought of
after going to bed that night.”1
Such second-guessing will probably occur
after ever y appellate argument. However,
with thorough and thoughtful preparation,
you can narrow the gaps between those three
arguments significantly and have a much
more enjoyable experience in the court of
appeal.
■
1
Resolutions in Memoriam: Mr. Justice Jackson, 99 L.
ED. 1311, 1318 (1955).
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10 LOS ANGELES LAWYER / JUNE 2002
practice
tips
By Lisa A. Binder
Making Sense of the EPA’s
Reactivation Policy
An industrial plant
source, the facility may become
subject to the New Source Review
that shuts down
(NSR) or the Prevention of
Significant Deterioration (PSD)
temporarily may
permitting programs under the
federal Clean Air Act. 1 When
be considered new
applied, these programs require
a reactivated source to install conwhen it reopens
trol technology on every single
emissions unit and may, in practical terms, prevent the source
magine that the operator of a from resuming operations.
Although the EPA has applied
large industrial facility (for
example, a forging company the reactivation policy to sources
or a wood processing plant) is since 1978, it has never published
forced one day to halt operations, the policy in the Federal Register
perhaps due to an economic for public comment and review.
downturn or a major industrial In fact, until recently the EPA
accident. The operator plans on relied only on a patchwork of
starting again as soon as possible. memoranda and letters to private
The facility’s equipment is moth- parties and local permitting agenballed, but regular inspections cies to explain the scope and
and maintenance continue. A applicability of the policy. Without
guard or two are constantly at a definitive written summary of
the site to make sure all is in the policy, the EPA was free to
order, and the operator contin- revise the policy over time to
ues to pay permit fees. A year or affect an increasing number of
more later, the operator is ready sources. These revisions have
been subject to
to resume operaLisa A. Binder is an
controversy. The
tions. The plant’s
associate in the Los
EPA’s air permitpermits are still
Angeles office of
ting programs, for
current. The equipLatham & Watkins.
example, are curment will be ready
She would like to
rently the topic of
to run as soon as
thank Michael Carroll
serious debate at
some maintenance
and David O. Kahn of
the agency and
work is done. The
Latham & Watkins
may be revised to
facility may not be
for their assistance in
allow sources to
fully ready, howthe preparation of
operate with enever, to resume
this article.
hanced flexibility.
production.
Regardless of the
Under the reacpolitical and legal
tivation policy that
has been established by the EPA, rationales for the EPA’s evolving
stationar y sources that shut and seemingly ad hoc policy,
down, even temporarily, may be sources that cease operations
deemed new sources upon reac- may face regulator y complicativation. In particular, if potential tions when they seek to restart
emissions meet the regulatory operations. However, there are
thresholds defining a “major” steps that sources can follow to
RICHARD EWING
I
reduce their chances of triggering NSR or PSD.
These two permitting programs concern ambient air pollution and apply to the construction of major new sources and
major modifications to existing
sources.2 The PSD provisions
apply to pollutants for which the
area has attained the national
ambient air quality standards, and
the NSR provisions apply to pollutants for which the area has not
attained ambient air quality standards. The PSD permitting program requires new and modified
sources to install the best available control technology (BACT)
and under take an air impacts
analysis.3 NSR requires sources
to install pollution control technology that meets the lowest
achievable emission rate (LAER).
This is more stringent and costly
than the BACT standard. Additionally, NSR requires a source to
obtain offsets to ensure that the
project will not result in increased
emissions in the area.4
Under the Clean Air Act and
current federal regulations, a
major source typically triggers
LOS ANGELES LAWYER / JUNE 2002 11
NSR or PSD only if it meets one of two conditions: It is a major new source, or it is an
existing major source that is undergoing a
nonexempt modification that will result in a
significant net emissions increase.5 The federal regulations do not define what a new
source is, thereby leaving unresolved the status of preexisting, reactivated sources. The
regulations provide that a modification is a
“physical change” or a “change in method
operation” and establish specific exemptions
that do not, by themselves, constitute a modification.6 These exemptions include routine
maintenance activities7 and increases in hours
of operation and production rates, to the
extent that such increases are not prohibited
by an enforceable permit condition.8 (State
p e r mitting programs, wh ich must be
approved by the EPA before they can be
incorporated into the State Implementation
Plan, generally employ this federal framework as a model.)
Expanding Reactivation’s Reach
The EPA’s reactivation policy is a hodgepodge of more than 20 years of letters and
memoranda to local agencies and the EPA
regions regarding the status of reactivated
sources. Over the years, the EPA has expanded the scope of its policy to bring more
sources into the PSD and NSR programs.
The EPA’s earliest statements suggest that
reactivated sources do not generally trigger
NSR or PSD.9
For example, in 1977 the EPA concluded
that the reactivation of a steel plant that had
been shut down the previous year would not
trigger NSR permitting requirements.10 The
EPA’s conclusion was based on the following
three factors: 1) the plant had closed at its own
d i s c retion and the applicable State
Implementation Plan (also known as a SIP)
allowed its continued operation, 2) the plant
would not emit more than its allowable limits,
and 3) the state had continued to maintain the
source in its active emission inventory and
control strategy. 11 However, the EPA soon
developed a more comprehensive approach.
One year later, the EPA concluded that
sources that had been permanently deactivated were, upon reactivation, new sources.
In a September 1978 memo the EPA addressed the issue of what constitutes permanent deactivation:
Whether a shutdown was permanent
depends upon the intention of the
owner or operator at the time of shutdown as determined from all the facts
and circumstances, including the cause
of the shutdown and the handling of
the shutdown by the State. A shutdown lasting for two years or more,
or resulting in removal of the source
12 LOS ANGELES LAWYER / JUNE 2002
from the emissions inventory of the
State, should be presumed permanent.
The owner or operator proposing to
reopen the source would have the burden of showing that the shutdown was
not permanent.12
The EPA has rejected proposed state plans
that are less rigorous than this permanent
shutdown analysis, and various states have
adopted the EPA’s methodology.13 (De facto,
California applies the EPA’s guidelines.)
This permanent shutdown approach has
yielded mixed results; many sources have
triggered NSR or PSD, but others have satisfied the EPA’s intent-based standard. For
example, an incinerator that had been shut
down for five years and removed from the
state’s emissions inventory was presumed
new upon reactivation.14 Similarly, the closure of a kiln was deemed permanent after the
unit had been inoperative for four years, the
owner had stated that the shutdown was permanent, and the emissions had been removed
from the state’s inventor y. 15 A reactivated
acid plant was deemed a new source after
the unit had been shut down for 10 years,
the owner had surrendered the permits, and
the emissions from the plant had been deleted
from the state inventor y.16 The owner of the
acid plant was unable to overcome the twoyear presumption, even though he presented
a previous statement of intent for long-term
operation and evidence of custodial maintenance and searches for materials to restart
operations.17
Other sources have been able to persuade
the EPA that their shutdowns were not
intended to be permanent. The EPA concluded in 1982 that a refinery’s eight-year
shutdown of boilers and a fluid catalytic cracking unit was not intended to be permanent.18
In 1991, the EPA determined that a power
plant had not been permanently shut down,
although the units had been on “cold standby” status for 10 years and the source had
allowed its operating permits to expire.19 The
agency relied on the owner’s consistent and
longstanding expressions of intent to resume
operations, the presence of two full-time
employees on the site, the periodic testing and
maintenance of the system, and the minimal
amount of time and capital needed to resume
operations. However, the EPA cautioned,
“This is a unique situation given the ver y
long period of the shutdown.”20
In 1999, the EPA explained that it would
examine, in order to determine whether a
reactivated source is new for purposes of
PSD or NSR, factors including:
• The amount of time the facility was out of
operation.
• The reason for the shutdown.
• Statements by the owner or operator
regarding intent.
• The cost and time required to reactivate the
facility.
• The status of the facility’s permits.
• The record of maintenance and inspections during the shutdown.21
The EPA also noted that owners or operators of facilities that have been shut down
“must continuously demonstrate concrete
plans to restart the facility sometime in the
reasonably foreseeable future . … ” 22 T h i s
explanation may be of somewhat limited use
to plant operators that are seeking guidance
on what will and will not trigger PSD or NSR,
but for the present it offers a measure of direction. Previously, the EPA’s standard of review seemed to many critics of the agency to
fluctuate according to the political influences
in effect at the moment.
The Modification Analysis
In the late 1980s, the EPA diverged from
its 1978 conclusion that sources that had
been permanently deactivated were, upon
reactivation, new sources. The agency
announced that reactivated sources may trigger NSR or PSD because they are modified
rather than new. EPA Region IX, which
includes California, adopted this new standard, dubbed the modification analysis, in
1987, when it reviewed the applicability of
PSD to the resumption of operations at an acid
plant. The EPA had originally concluded that
the acid plant was a new source because it had
been permanently shut down. 23 Following a
change in ownership at the source, the agency
revisited the issue and confi rmed in a letter
(known as the Cyprus Casa Grande Letter)
that the source was subject to PSD not only
under a new source analysis but also under a
modification analysis. 24 The EPA explained
that the reactivation was a nonroutine phys ical change (resumption of operations would
involve four months of maintenance work
and equipment replacement at a cost of
approximately $805,000) and a nonexempt
change in method of operation (resumption
of operations was deemed a de facto operational change).25
Although some subsequent EPA guidance
appears to disregard this modification analysis,26 the EPA recently reaffirmed it. In June
1999, then-EPA Administrator Carol Browner
issued the Monroe Electric Order,27 which
required PSD permits for the reactivation of
three boilers that had not been regularly
operated since 1981. The source had initiated activities in September 1988 to prepare
the units for an extended reserve shutdown,
including draining, disconnecting, and covering the equipment. The owner maintained
the existing air permits, applied for required
new permits, and continued to pay air quality
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❏ No. 6: (Legal Ethics credit) TURNING OVER CLIENT FILES What
you don’t know can hurt you-2/93
#222
will often depend on important
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soon after filing the notice of appeal9/99 #291
❏ No. 24: (Law Practice Management
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❏ No. 77: THE UNTOUCHABLES
The Foreign Sovereign Immunity Act
has failed to provide practitioners
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involving foreign nations and their instrumentalities-10/99 #292
❏ No. 42: (Legal Ethics credit) GOLDEN RULES A series of decisions and
opinions issued in 1995 provides
lawyers with clear guidance through
ethical minefields-7-8/96 #253
❏ No. 46: FOR WHAT IT’S WORTH
Recent California rules that allow the
buying and selling of law practices
have opened up opportunities for
small firms and solo practitioners12/96 #257
❏ No. 57: WISE DEDUCTIONS
(Law Practice Management credit)
The deductibility of a lawyer’s educational expenses may be more questionable than you think-12/97 #269
❏ No. 60: AN INDISCRIMINATE
MEASURE (Elimination of Bias credit) Now that Proposition 209 has survived judicial scrutiny, considerable litigation to determine its scope and
reach can be expected-3/98 #273
❏ No. 63: RULING ON THE RULES
(Legal Ethics credit) While 1997 was a
busy year for the development of legal ethics, no dramatic departures
from precedent emerged-6/98 #276
❏ No. 75: FIRING AT WILL Has the
Green decision opened the floodgates for the use of wrongful termination litigation to achieve public policy goals?-7-8/99 #289
❏ No. 76: ON TO A HIGHER
COURT The outcome of an appeal
❏ No. 78: PUT UP OR SHUT UP An
understanding of the shifting burdens
of production is central to arguing
summary judgment motions-11/99
#293
❏ No. 79: STOPPING THE MERRYGO-ROUND The choice between
California and federal preclusion law
can determine the outcome of a second action-12/99 #294
❏ No. 80: STAYING CLEAN To
avoid problems with the IRS, tax advisers need to consider the imprecise
distinctions between environmental
remediation costs that can be expensed and those that must be capitalized-1/00 #295
support payments-4/00 #298
❏ No. 84: 1999 ETHICS ROUNDUP
(Legal Ethics credit) Court decisions in
1999 make it clear that a risk management strategy is a lawyer’s best
method of preventing ethical liabilities-5/00 #299
❏ No. 85: WHO’S THE CLIENT?
(Legal Ethics credit) Last year’s court
decisions on lawyer conflicts of interest have handed attorneys an array of
sometimes conflicting rules-6/00
#311
❏ No. 86: CHOICE LOCATIONS
While public policy favors the enforcement of contractual choice of
law provisions, practitioners need to
be mindful of the general exceptions7-8/00 #312
❏ No. 87: BONUS POINTS (Legal
Ethics credit) Bonus provisions agreed
to by attorneys and their clients will
likely be enforceable if the agreement
clearly delineates an “extraordinarily
favorable result”-9/00 #313
❏ No. 88: STOCK IN TRADE To
achieve maximum advantages for the
❏ No. 81: DISABLING SWITCH Un- company and recipients, an equity
der a recent U.S. Supreme Court deci- compensation plan must comply with
a host of securites and tax laws-10/00
sion, lower courts will have to deter#314
mine when a claim for disability discrimination is barred by an appli❏ No. 89: WILL POWER With good
caiton for disability benefits-2/00
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tion most will contests can be resolved short of a trial-11/00 #315
❏ No. 82: ABOUT FACE Does the
1992 amendment to Code of Civil
❏ No. 90: RESPECTING OUR ELProcedure Section 1008 violate the
DERS The California Supreme
doctrine of separation of powers?Court’s decision in Delaney has alert3/00 #297
ed litigators to the strength of the Elder Abuse Act-12/00 #316
❏ No. 83: CHILDREN OF FORTUNE High-earning entertainers may
❏ No. 91: TOXIC TIMELINE The
be able to avoid the use of the statuSupreme Court’s decision in Hamilton
tory guidelines when calculating child
will have little relevance when apply-
ing the statute of limitations in other
toxic tort contexts-01/01 #317
❏ No. 92: DRIVEN TO EXCESS In
judging the potential liability of excess
insurers, courts must look to the language of the contract to determine
whether vertical or horizontal exhaustion is required-02/01 #318
❏ No. 93: TIME BANDITS (Legal
Ethics credit) Attempts by lawyers to
pad hours can often be uncovered by
a careful examination of billing statements-03/01 #319
❏ No. 94: MINDING YOUR O’S
AND P’S U.S. immigration law provides special visa categories to facilitate the entry of foreign entertainers
into the country-04/01 #321
employees-10/01 #326
❏ No. 100: EXPERT GRILLING To
prevent experts in legal malpractice
cases from wielding undue influence,
counsel must crack their facade of
impartiality and reliability-11/01 #327
❏ No. 101: THE COSTLY CLIENT
Case law provides guidance on how
lawyers can void the Trope rule
against awarding attorney’s fees12/01 #328
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The California Supreme Court has
ruled that damages from construction
defects must be manifest in order to
bring a tort cause of action-1/02
#329
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Trends in federal securities fraud legislation and case law may not fully
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#331
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(Legal Ethics credit) Last year’s court
decisions affecting legal ethics clarified the duties of lawyers to clients
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Taxpayers have a unique opportunity
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(Elimination of Bias credit) California’s
new Domestic Partnership Registration Act may aid same-sex partners in
providing a legal basis for their life relationships-07-08/01 #324
❏ No. 105: FIVE CASES THAT
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maintenance fees. In 1996, after the boilers
had been offline for between 8 and 15 years,
the owner sought approval to restart the
units. Reactivation would cost approximately
$5.3 million and entail some physical work,
including the replacement and repair of various components.
Despite the evidence of the owner’s longstanding intent to restart the facility, the EPA
concluded that the reactivation did, in fact,
trigger PSD because it was a nonexempt
change in the method of operation. The EPA
noted, “The mere fact that the plant is changing from a lengthy ‘non-operational’ and
‘unmanned’ condition, to one in which the
plant is fully operational, fits the common
sense meaning of a ‘change in the method of
operation.’”28 The EPA also reaffirmed its
position that reactivation activities do not fall
under the exemption afforded to an increase
in hours and production rate, because the
exemption was intended to address the
responses of sources to short-term fluctuations in markets. 29 As a result, the owner
could not reactivate the plant without first
undergoing PSD review.30
Few options are available to sources that
seek to avoid PSD or NSR liability under the
modification theory. Sources may be able to
avoid triggering PSD or NSR under the physical change prong of the modification theory,
but only if they persuade the agency that the
work associated with reactivation is routine.
The EPA’s broad application of the “change
in method of operation” prong is more problematic. Sources may be able to avoid PSD or
NSR under this theory if they can persuade
the agency that their reactivation will not
result in a significant net emissions increase.
However, such a showing would likely be difficult, because the source’s prereactivation
emissions baseline is likely to be low. 31
Since the mid-1990s, the EPA has been
preparing a reform package for NSR and PSD
permitting programs.32 In a prior proposal, the
EPA expressed its willingness to allow states
to adopt plantwide applicability limits, or
PALs, that would give sources greater flexibility in modifying their individual emissions
units.33 The agency has also proposed allowing states to look to earlier emissions as a
means of establishing premodification baselines34 and exempting emissions units from
NSR and PSD requirements if the units had
installed BACT or LAER plans in the previous
10 years.35 If the EPA adopts these proposals
and if local air districts revise their rules to
reflect these more lenient re q u i re m e n t s ,
sources may be less likely to trigger the reactivation policy.
However, recent statements suggest that
the EPA remains committed to NSR and PSD
enforcement actions under the existing rules.
14 LOS ANGELES LAWYER / JUNE 2002
For instance, the agency is proceeding with
actions against utilities and refineries around
the country for failing to obtain permits for
activities that the EPA considers nonroutine
modifications, and some of these cases are
proceeding to trial.36 The agency also appears
committed to the reactivation policy and (at
least for now) to the modification analysis
established in the Cyprus Casa Grande Letter
and the Monroe Electric Order.37 In addition
to drafting additional opinion letters on the
policy, the EPA and, in some cases, private
p l a i n t i ffs have commenced enforc e m e n t
actions against reacti vated sourc e s . 3 8
Although the policy may be subject to challenge on a variety of grounds, including the
Administrative Procedure Act and the fair
notice doctrine, at least one court has suggested that the policy may be enforceable. 39
As a result, until the validity of the policy is
determined by the courts or until the EPA
revises its permitting programs to accommodate source reactivation, sources may find
themselves subject to the older, less flexible
policies regarding NSR and PSD.
Reducing the Risk
At the present time, no foolproof method
exists by which reactivated sources can avoid
NSR or PSD. However, there may be ways to
reduce the risks. At the outset, a source
should review the SIP and local rules to determine whether any permitting or notification
requirements affect its deactivation and reactivation activities. In addition, those managing
the source may wish to consider the following measures:
• Compile helpful documentation.
• Document intentions to resume operations (in correspondence, internal memoranda, annual reports, press releases, and
other documents) and avoid any expressions
of contrary intent.
• Document efforts to resume operations (by
securing financing, making repairs, and
obtaining necessary equipment).
• Maintain existing permits and pay air quality fees.
• Monitor permit status and apply for new
permits as required.
• Maintain the site’s emissions on the state
emissions inventory.
• Keep the facility in good condition.
• Minimize the duration of the shutdown—
to less than two years, if possible.
• Maintain periodic operations at the site,
particularly operations related to the primary
purpose of the facility.
• Maintain some air emissions from the fa cility.
• Conduct regular inspections of and maintenance on the deactivated equipment.
• Keep deactivated equipment at the site.
• Undertake decommissioning and mothballing activities in ways that will minimize the
effort required to bring equipment back into
service.
• Treat the equipment in a way that comports with the stated intent to resume operations at some specific point in the future.
• Retain personnel on the site.
• Minimize the costs, work, and time needed
for reactivation.
• Avoid combining reactivation work with
other projects unnecessary for the reactivation.
• Work with the permitting agency to ensure
that the reactivation complies with applicable
requirements.
• Consider the potential benefits and risks of
obtaining a determination of nonapplicability
from the EPA.
These measures may reduce the likelihood that the agency will consider the shutdown to be permanent. They may also help
persuade the agency that the reactivation is
a routine physical change and hence not subject to PSD or NSR. Unfortunately, these measures will be less helpful if the permitting
agency decides to apply an operational modification analysis to the reactivation project.
The EPA’s reactivation policy has serious
potential repercussions for plants that are
being reactivated. Until the EPA revises its
policy or the courts rule on the validity of
the policy, sources may be able to reduce the
risks of triggering the requirements by documenting a specific intention to resume operations, maintaining the source’s equipment
and per mits, and minimizing the work
involved in bringing the equipment back
online.
■
1
Clean Air Act, 42 U.S.C. §§7401 et seq.
See 42 U.S.C. §7475 (PSD requirements) and §7503
(NSR requirements). See also 40 C.F.R. §51.166(i)-(r)
and §52.21(i)-(r) (PSD); 40 C.F.R. §51.165(a)(2) and
§52.24 App. S (NSR).
3
See, e.g., 42 U.S.C. §7475(a); 40 C.F.R. §51.166(j),
(k), (m) and §52.21(j), (k), (m).
4
See, e.g., 42 U.S.C. §7503(a)(2), (c) and 40 C.F.R.
§51.165(a)(2); §52.24 App. S.
5
See 42 U.S.C. §7502(c)(5) (NSR); 40 C.F.R. §51.166(i)
and §52.21(i) (PSD).
6
See 40 C.F.R. §51.166(b)(2) and §52.21(b)(2) (PSD);
40 C.F.R. §51.165(a)(1)(v) and §52.24(f)(5) (NSR).
7
See 40 C.F.R. §51.166(b)(2)(iii)(a), §52.21(b)(2)(iii)(a)
(PSD); 40 C.F.R. §51.165(a)(1)(v)(C)(1), §52.24(f)
(5)(iii)(a) (NSR).
8
See 40 C.F.R. §51.166(b)(2)(iii)(f), §52.21(b)(2)(iii)(f)
(PSD); 40 C.F.R. §51.165(a)(1)(v)(C)(6), §52.24(f)
(5)(iii)(f) (NSR).
9
Memorandum from Edward E. Reich, Director,
Division of Stationary Source Enforcement, to Howard
R. Heim, Chief, Air Programs Branch, re Interpretation
of Offset Policy, Sept. 15, 1977 [hereinafter the Heim
Memorandum]. Record of Communication—Phone
Call, from Rich Biondi to Roger Pfaff re Old Sources
Being Brought On Line—PSD Applicability, June 18,
1980 (Retention of a deactivated source’s emissions
2
on the state’s inventory would be sufficient to exempt
the source from PSD permitting upon reactivation—
even if the source had been deactivated for longer than
two years.). These EPA guidance documents are available on the EPA Region VII’s database: http://www.epa
.gov/region07/programs/artd/air/policy/search.htm.
10
Heim Memorandum, supra note 9, at 1.
11
Id.
12
Memorandum from Director, Division of Stationary
Source Enforcement, to Stephen A. Dvorkin, Chief,
General Enforcement Branch, EPA Region II 1 (Sept.
6, 1978).
13
See, e.g., 52 Fed. Reg. 38787 (Oct. 19, 1987) (rejecting a Virginia SIP provision more lenient than the
EPA’s policy); Memorandum from Ruben Herrera,
Technical Specialist, Texas Natural Resource
Conservation Commission, to Victoria Hsu, NSRP
Division Director, Texas Natural Resource Conservation
Commission, re PSD and Non-Attainment (NA)
Applicability to Restart of Sources that Are Down for
More Than Two Years (Aug. 4, 1998) (outlining permanent shutdown analysis).
14
Memorandum from Edward E. Reich, Director,
Stationary Source Enforcement Division, to William
K. Sawyer, General Enforcement Branch, EPA Region
II, re PSD Applicability Determination: Babylon 2 (Aug.
8, 1980).
15
Memorandum from Edward E. Reich, Director,
Stationary Source Enforcement Division, to Sandra S.
Gardebring, Director, Enforcement Division, EPA
Region V, re PSD and NSPS Applicability to a
Reactivated Source (Oct. 3, 1980).
16
Memorandum from John S. Seitz, Director, Stationary
Source Compliance Division, to David Howekamp,
Director, Air Management Division, EPA Region IX, re
Reactivation of Noranda Lakeshore Mine’s RLA Plant
and PSD Review (May 27, 1987).
17
Id. at 3.
18
Memorandum from Edward E. Reich, Director,
Division of Stationary Source Enforcement, to Conrad
Simon, Director, Air and Waste Management Division,
EPA Region II, re Reactivation of Amerada Hess
Corporation’s Port Reading Facility and PSD Review
(July 9, 1982).
19
Memorandum from John B. Rasnic, Director,
Stationary Source Compliance Division, to Douglas M.
Skie, Chief, Air Programs Branch, re Applicability of
PSD to Watertown Power Plant, South Dakota,
Shutdown for Nine Years (Nov. 19, 1991) [hereinafter
Watertown Power Memo].
20
Id. at 2.
21
In re Monroe Electric Generating (Petition No. 6-992), EPA Order Partially Granting and Partially Denying
Petition for Objection to Permit 10 (June 11, 1999)
[hereinafter Monroe Electric Order].
22
Id.
23
See note 16, supra.
24
Letter from David Howekamp, Director, Air
Management Division, EPA Region IX to Robert T.
Connery, Holland & Hart, re Supplemental PSD
Applicability Determination Cyprus Casa Grande
Copper Mining and Processing Facilities (Nov. 6, 1987).
25
Id. at 6.
26
See, e.g., Watertown Power Memo, supra note 19
(relying solely on a permanent shutdown analysis to
conclude that source reactivation does not per se trigger PSD).
27
See Monroe Electric Order, supra note 21.
28
Id. at 22.
29
Id. at 13.
30
The EPA did not decide whether the reactivation was
a nonroutine physical change sufficient to trigger PSD.
See id. at 21-22.
31
See 40 C.F.R. §51.166(b)(21) and §52.21(b)(21)(iv)
(PSD); 40 C.F.R. §51.165(a)(1)(xii) and §52.24(f)(13)
(NSR); Monroe Electric Order, supra note 21, at 15
(“EPA…has applied its discretion narrowly in assigning representative periods other than the two years
immediately preceding the physical or operational
change.”).
32
See 61 Fed. Reg. 38250 (July 23, 1996) (notice of proposed rulemaking regarding NSR and PSD reforms).
33
61 Fed. Reg. at 38264.
34
61 Fed. Reg. at 38258.
35
61 Fed. Reg. at 38255.
36
See, e.g., New Source Review a High Priority at Justice
Department, Official Says, Daily Envtl. Rep. (BNA),
Mar. 28, 2002, at A-1.
37
Letter from R. Douglas Neeley, Chief, Air and
Radiation Technology Branch, the EPA Region IV, to
Ronald Methier, Chief, Air Protection Branch, Georgia
Environmental Protection Division, re Southern LNG,
Inc., Elba Island Terminal, Draft Air Quality Permit
and PSD Preliminary Determination 2 (Dec. 13, 2000)
(local agency must undertake modification analysis).
38
EPA Region IX recently settled a reactivation enforcement action against Cenco Refining Company. 2001
EPA Consent LEXIS 23 (Jan. 18, 2001). In November
2000, EPA Region V settled a reactivation claim against
Detroit Edison for resuming operations of boilers that
had been mothballed for 10 years. 2000 EPA Consent
LEXIS 598 (Nov. 9, 2000).
39
Communities for a Better Env’t v. Cenco Refining Co.,
179 F. Supp. 2d 1128, 1143 (C.D. Cal. 2001) (concluding that the plaintiff made a “strong showing that the
Reactivation Policy is a reasonable interpretation of
the Clean Air Act regulations that does not conflict
with any terms of the NSR program”).
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LOS ANGELES LAWYER / JUNE 2002 15
practice
tips
By Daniel L. Germain
A Status Report on the Peculiar
Risk Doctrine in California
Does hirer liability
rare depar tures from the supreme court’s steady march away
apply if an
from hirer liability under the
peculiar risk doctrine.
independent
In three earlier decisions
issued during the last decade—
contractor is not
Privette v. Superior Court,3 Toland v. Sunland Housing Group,
insured?
Inc.,4 and Camargo v. Tjaarda
Dairy5—the supreme court ruled
in favor of hirers and against
n Januar y 31, 2002, the employees of independent conCalifornia Supreme Court tractors under the peculiar risk
handed down two long- doctrine. In these rulings, the
awaited decisions involving the court’s decision to preclude hirer
liability of hirers of independent liability was based, in part, upon
contractors for injuries sustained the fact that injured employees
by employees of independent are covered under the workers’
contractors under the “peculiar compensation system, which
risk doctrine.” In its holdings, the af fords employees automatic
supreme court opened a narrow recovery for on-the-job injuries.
One issue these cases did not
window of hirer liability after
almost a decade of decisions that address is the question of hirer
liability if the indeall but precluded
Daniel L. Germain is
pendent contractor
these claims.
a partner in the law
fails to maintain
In Hooker v. Defirm of Rosman &
workers’ compenpartment of TransGermain LLP. His
sation coverage for
por tation, 1 the
practice emphasizes
its employees. Is
court ruled that a
business, real estate,
an otherwise innohirer of an indeand insurance litigacent hirer then afpendent contractor
tion matters. He was
forded the same liamay be held liable
counsel to Burlington
bility protection?
to an employee of
Northern and Santa
Although no pubthe contractor only
Fe Railway Company
lished California
if the hirer’s exerin litigation involving
case has directly
cise of retained
an employee of an
addressed this iscontrol af firmauninsured independsue, sufficient intively contributed
ent contractor
formation can be
to the employee’s
injured on the job.
gleaned from past
injuries. Similarly,
decisions of the
in McKown v. Walsupreme court to
Mart Stores, Inc.,2
the court ruled that a hirer may forecast how the cour t might
be held liable to an injured em- resolve this issue.
For many years, California folployee of an independent contractor if the hirer provides lowed the minority view that a
unsafe equipment that affirma- hirer who engages an indepentively contributes to the employ- dent contractor to per form
ee’s injuries. These two cases are “inherently dangerous” work can
O
16 LOS ANGELES LAWYER / JUNE 2002
be held liable in tort, regardless
of fault, when the contractor’s
employee is injured on the job.6
This theory of liability, known as
the peculiar risk doctrine, was
grounded in the Restatement
(Second) of Torts.
According to Section 413 of
the Restatement, a person who
hires an independent contractor
to do inherently dangerous work,
but who fails, contractually or otherwise, to take special precautions to avoid the peculiar risk,
may be liable for injuries caused
by such failure. Courts often refer
to Section 413 liability as “direct”
liability, because it is the failure
to do some affirmative act that
led to the injury.
Under Section 416 of the
Restatement, a person who hires
an independent contractor may
still be liable even if the hirer provides for special precautions but
the contractor fails to exercise
reasonable care to take such precautions, and someone is injured
as a result. Courts often refer to
liability under Section 416 as “vicarious” because the hirer’s liability flows from the independent
contractor’s failure to take precautions.
The theory behind the imposition of liability, without a finding of fault, was to ensure that
employees who are injured while
performing inherently dangerous work receive adequate compensation for their injuries, that
the person who benefits from the
work (most commonly, a landowner) bears responsibility for
any risk of injury to others, and
that adequate safeguards are
taken to prevent injuries.7 However, in a series of cases beginning with Privette in 1993, the
California Supreme Court substantially narrowed this liability.
The Rise and Fall of the
Peculiar Risk Doctrine
In Privette, the defendant
hired an independent roofing contractor to install a new roof on
his property.8 During the work,
the roofer’s employee, Contreras,
was instructed to carry buckets
of hot tar up a ladder to the roof
for installation.9 While performing the task, Contreras fell from
the ladder and was severely
burned by the hot tar.10 Contreras
subsequently filed for workers’
compensation benefits, and he
sued the landowner, Privette, for
vicarious liability under the peculiar risk doctrine, pursuant to
Section 416. 11 The trial cour t
denied Privette’s motion for summary judgment, and the court of
appeal denied his writ petition.12
After granting review, the
California Supreme Court unanimously held for the first time
that a hirer may not be held liable
for injuries to an independent contractor’s employee, in part, because the workers’ compensation
system provides for the automatic
recovery of benefits for injuries
“arising out of and in the course
of the employment.”13
Privette invokes the common
law rule that a hirer employing an
independent contractor is not ordinarily vicariously liable for torts
committed by the contractor. The
court then examined the historical roots and the evolution of the
peculiar risk doctrine. As the
court pointed out: “Over time,
the courts have, for policy reasons, created so many exceptions
to this general rule of nonliability
that ‘the rule is now primarily
important as a preamble to the catalog of its
exceptions.’”14
At first, liability was only extended to innocent bystanders or neighboring property owners who were injured by the acts of an independent contractor hired by the landowner to
perform work on the property. Over time, a
minority of jurisdictions, including California,
expanded liability to allow a hired contractor’s
employees to seek recovery from the property owners for on-the-job injuries.15 Although
acknowledging that California followed the
minority position by extending liability to hirers of independent contractors whose employees are injured on the job, the Privette court
was persuaded to abandon that approach and
to preclude liability under the peculiar risk
doctrine.
The court reasoned that, under the Workers’ Compensation Act, all employees are
automatically entitled to recover benefits for
injuries arising out of and in the course of
employment.16 The court specifically cited
Labor Code Section 3716, which the court
described as “setting up an uninsured employers fund to provide benefits for employees not
covered by workers’ compensation insurance.”17 The court reasoned that the workers’
compensation scheme achieves the same purpose as the peculiar risk doctrine by ensuring
that an employee’s injuries will be compensated regardless of fault.18
The court concluded that to permit injured
employees to recover from both the workers’ compensation system and the hirer of
the contractor under the peculiar risk doctrine
would contravene public policy, because
employees could potentially receive an
“unwarranted windfall”—an opportunity, the
court points out, denied to other workers.19
Additionally, hirers would be exposed to liability without the opportunity to seek equitable indemnity from the negligent contractor
because the workers’ compensation system
shields the contractor from potential liability.20
After Privette, lower cour ts disagreed
about the viability of the peculiar risk doctrine
in situations in which the hirer made no provision for the use of special precautions on the
job as set forth in Restatement Section 413.21
Apparently, some lower courts believed that
hirer liability protection only existed under the
scenario laid out in Section 416, when the
hirer of an independent contractor makes
provisions “in the contract or otherwise” that
special precautions be taken with regard to
the peculiar risk involved, as was the case in
P r i v e t t e.22 In To l a n d, the supreme cour t
stepped in to clarify whether the hirer could
be held liable for injuries sustained by the
independent contractor’s employee if the
hirer failed to make provisions for the use of
special precautions.
In Toland, the plaintiff was an employee of
a framing subcontractor who was injured
when a heavy framed wall fell on him. 23 The
plaintiff filed suit against the developer, alleging that raising the wall created a peculiar risk
of injury for which the developer should have
required the subcontractor to take special
precautions.24 The developer moved for summary judgment under Privette. The trial court
granted the motion, and the court of appeal
affirmed.
On review in the supreme court, the defendant contended that under Section 416 of the
Restatement, it should not be held vicariously
liable, because the injury did not result from
the hirer’s negligence. Plaintiff argued that
under Section 413, direct liability should be
found, because the hirer failed to provide
special precautions in light of the peculiar
risk of the work.
In rejecting the plaintiff’s arguments, the
court concluded that there was no meaningful distinction between the factual situations
a d d ressed by the two sections of the
Restatement for purposes of imposing liability
under the peculiar risk doctrine.25 In reaching
this conclusion, the court again relied upon
the policy consideration enunciated in Privette.
The court stated, “Imposing on the hiring
person a liability greater than that incurred by
the independent contractor (the party with the
greatest and most direct fault) is equally
unfair and illogical whether the hiring person’s liability is premised on the theory of section 413…or the theory of section 416….”26
Although Toland put to rest the question
of liability with respect to the two factual scenarios set forth under Sections 413 and 416,
several lower courts continued to question
whether an employee of an independent contractor could assert claims against the hirer
of the contractor under a different tort-based
theory of liability. 27 Once again, the supreme
court stepped in to answer this question.
In C a m a rg o, the family of a deceased
worker, who was fatally injured when his tractor tipped over while driving over a large
mound of manure, brought suit against the
hirer of his employer, alleging liability under
the theory of “negligent hiring” as set forth
in Restatement (Second) of Torts Section 411.28
The plaintiffs contended that the dairy was
liable for the worker’s death, because it was
negligent in hiring the contractor, which failed
to determine whether the employee was qualified to operate the tractor safely.29 In rejecting the plaintiffs’ theory of liability, the
supreme court relied upon two policy considerations cited in Privette:30 the exclusivity
of the workers’ compensation system and the
unwarranted windfall that employees of independent contractors would get (the right to
recover tort damages for industrial injuries
caused by their employer’s failure to provide
a safe working environment).
Against this backdrop, the supreme court
this year addressed the application of the
peculiar risk doctrine when the hirer affirmatively contributes to the employees’ injuries. In Hooker v. Department of Transporta tion,31 a crane operator employed by a general
contractor hired by Caltrans was killed when
the crane he was operating tipped over. 32 His
widow filed suit against Caltrans, alleging
that it was liable for her husband’s death
because Caltrans “retained control” over the
worksite.33 Specifically, the plaintiff relied
upon the existence of a Caltrans safety manual that set forth various guidelines for job-site
safety.34 Caltrans’s motion for summary judgment under Privette and Toland was granted
by the trial court, but the court of appeal
reversed. The supreme court granted review
to consider the issues that arise when the
hirer retains control of the worksite.
The supreme court began its analysis by
reviewing its prior decisions in Privette, To land, and Camargo.35 The court then reviewed
the decisions of other state courts that have
addressed the issue.36 Finding little guidance,
the court concluded that other states are
evenly divided on the question of whether
an employee of a contractor may sue the hirer
of the contractor for negligent exercise of
retained control. 37
The court then reviewed two California
appellate decisions—Grahn v. Tosco Corpora tion38 and Kinney v. CSB Construction, Inc.39
The court noted that although these two
cases found that under certain circumstances
a hirer may be held liable to an employee of
a contractor under a theory of retained control, the courts disagreed on whether mere
retention of control was sufficient to create liability or whether something more, such as
active par ti cipation, must b e shown. 4 0
Whereas the Grahn court found that a hirer
may be held liable when the hirer retains sufficient control over the work of the independent contractor to be able to prevent or eliminate the dangerous condition through the
exercise of reasonable care, the Kinney court
found that mere retention of control of safety
conditions was not enough. Instead, the court
found that to establish liability the plaintiff
must show that the hirer affirmatively contributed to the use of methods or procedures
that caused the injury.41
Adopting the more nuanced approach in
Kinney, the supreme court found:
Imposing tort liability on a hirer of an
independent contractor when the conduct [of the hirer] has affirmatively
contributed to the injuries of the contractor’s employee is consistent with
the rationale of our decisions in Pri LOS ANGELES LAWYER / JUNE 2002 17
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vette, Toland and Camargo because
the liability of the hirer in such a case
is not “in essence ‘vicarious’ or ‘derivative’ in the sense that it derives from
the ‘act or omission’ of the hired contractor.” To the contrary, the liability of
the hirer in such a case is direct in a
much stronger sense of that term.42
In rejecting Caltrans’s argument that hirers should never be held liable under the
peculiar risk doctrine, the supreme court
specifically dismissed the contention that
workers’ compensation exclusivity should
prevail because the contract price paid by
the hirer would have taken into account the
added cost of coverage. The court concluded
that the contract price could not have reflected
the cost of injuries that are attributable to
the hirer’s affirmative conduct and the contractor has no way of calculating an increase
in the costs of coverage attributable to the conduct of third parties.43 However, based upon
its finding that Caltrans did not affirmatively
contribute to the accident, the court affirmed
the motion for summary judgment.44
Similarly, in a companion case issued the
same day, McKown v. Wal-Mart Stores, Inc.,45
the supreme court ruled that a hirer may be
held liable for injuries sustained by the
employee of an independent contractor if the
hirer provides the worker with tools that affirmatively contribute to the injur y-causing
event.46 In McKown, the plaintiff was severely
injured while operating a forklift provided to
him by Wal-Mart, the hirer of his employer.47
At trial, the jury returned a verdict against
Wal-Mart and other defendants, finding that
Wal-Mart was negligent in providing unsafe
equipment and was 23 percent at fault.48 The
court of appeal affirmed, finding that Privette
and Toland did not bar recovery when the
hirer provides unsafe equipment to the employee of an independent contractor.49 Closely
tracking and repeatedly referring to its
detailed analysis in Hooker, the court found
that “the hirer’s affirmative contribution to the
employee’s injuries eliminates the unfairness
in imposing liability where the contractor is
primarily at fault.”50
Uninsured Contractors
The supreme court has never been called
upon to specifically determine whether the
peculiar risk doctrine applies to a hirer that
engages an uninsured independent contractor whose employee is injured on the job.
Nevertheless, the supreme court’s opinions
regarding the application of the peculiar risk
doctrine give substantial guidance as to how
it might resolve the issue.
Nowhere, in its lengthy decisions in Privette, Toland, and Camargo, does the supreme
court state that its holdings do not apply if the
18 LOS ANGELES LAWYER / JUNE 2002
independent contractor had no workers’ compensation coverage. Instead, throughout
those cases, the court repeatedly refers to
the redundancy of the peculiar risk doctrine
because the workers’ compensation “statutory
scheme” and workers’ compensation “system of recovery” apply.51 Those repeated references to the workers’ compensation
“scheme” and “system” are no mistake. Indeed, as the court acknowledges, even when
an employer fails to obtain or maintain workers’ compensation insurance coverage, an
injured employee may still receive compensation under the state’s uninsured employers
fund. This fund was established by the legislature “to create a source of benefits to the
employee who otherwise would receive no
benefits, because of the failure or refusal of
his or her employer to obtain workers’ compensation liability coverage.”52
Moreover, in addition to the right to
receive compensation from the uninsured
employers fund, the injured employee may
also sue the uninsured employer for damages pursuant to Labor Code Section 3706. In
addition, under Labor Code Section 3708 the
employer is presumed negligent and the ordinar y affirmative defenses of contributor y
negligence and assumption of risk are unavailable. Thus, California law guarantees that an
employee of an uninsured employer is compensated regardless of the employer’s lack of
insurance coverage or ability to pay.
In both Privette and Toland, the supreme
court specifically referred to the uninsured
employers fund. In Privette, the court explained its decision to prohibit the application
of the peculiar risk doctrine to hirers of independent contractors by discussing the workers’ compensation system itself. The court
stated: “The workers’ compensation system
was created to provide, in the words of our
state Constitution, ‘for the comfort, health
and safety and general welfare of any and all
workers and those dependent upon them for
support to the extent of relieving from the
consequences of any injury or death incurred
or sustained by workers in the course of their
employment….’”53 According to the court,
“Under the Workers’ Compensation Act…all
employees are automatically entitled to
recover benefits for injuries ‘arising out of
and in the course of the employment.’”54
The court then referred to the uninsured
employers fund, established under Labor
Code Section 3716, which provides for “setting up an uninsured employers fund to provide benefits for employees not covered by
workers’ compensation insurance.”55
If the supreme court had intended to limit
the application of Privette only to cases in
which the employer maintained workers’
compensation insurance coverage, it would
not have referred to the uninsured employers
fund. Any doubt about the court’s thinking on
this issue was put to rest by Toland.
In Toland, the court once again specifically
referred to the uninsured employers fund,
which the court described as providing “workers’ compensation benefits to workers employed by uninsured employers.”56 The Toland court distinguished the vastly different
situations of neighboring property owners or
innocent bystanders who may be injured by
the negligence of an independent contractor
from that of contractor’s employees.57 The
Toland cour t stated, “The neighboring
landowner or innocent bystander may have no
other source of compensation for injuries
resulting from the contractor’s negligence in
doing the inherently dangerous work. In contrast, an employee of the negligent contractor
can, for workplace injury caused by the contractor’s negligence, recover under the workers’ compensation system regardless of the
solvency of the contractor.”58
Thus, by repeatedly referring to the uninsured employers fund in discussing the application of the peculiar risk doctrine to hirers
of independent contractors, the supreme
court signaled that employees of uninsured
contractors may not recover from the hirers
of independent contractors under the peculiar
risk doctrine any more than employees of
contractors carrying workers’ compensation
insurance may.59 This distinguishes employees from innocent bystanders and neighboring landowners, who “may have no other
source of compensation for their injuries
resulting from the contractor’s negligence”
except from the hirer of the contractors.60
In the two most recent decisions involving
the peculiar risk doctrine, Hooker and McKown, the cour t again did not address
whether the doctrine applies when the injured
worker’s employer is uninsured. However,
by rejecting the argument that hirers should
never be liable for injuries sustained by an
independent contractor’s employees, the
court demonstrated a more nuanced analysis
that focuses upon the level of involvement of
the hirer in the injury-causing event—to what
extent the hirer “affirmatively contributed” to
the employee’s injuries.
In the case of an uninsured independent
contractor, when there is no allegation that the
hirer affirmatively contributed to the employee’s injuries (whether by retained control or
the provision of defective equipment), there
is no direct relationship between the employee’s injuries and any act or omission by the
hirer. Thus, there is no rationale for holding
the hirer vicariously liable for injuries sustained by a worker.
It should also be noted that the supreme
court depublished a court of appeal decision
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WILLIAM M. JONES
P. O. BOX 398
BRENTWOOD, CA 94513-0398
R E A L E S TAT E / R E A L P R O P E R T Y M AT T E R S
Specializations:
Customs & Standards of Practice, Agency Relationships
Material Disclosure in Residential Real Estate Sales
TEMMY WALKER, REALTOR®
that found in favor of an injured employee. In
Andreini v. Superior Court,61 the defendant
homeowners hired a licensed contractor to
perform touch-up painting on their home.62
While performing the job, one of the contractor’s employees, Solorio, was injured when
he fell off the roof of the property.63 Thereafter, Solorio sued the homeowners for negligence under the peculiar risk doctrine.64
During the litigation, the homeowners’ motion
for summary judgment was denied.65
The homeowners then petitioned the
court of appeal for a writ of mandate directing the trial court to grant summary judgment.66 The First Appellate District, Division
Two, issued a published decision denying
the homeowners’ petition.67 The court of
appeal ruled, as a matter of law, that Privette
does not apply when the contractor carries no
workers’ compensation insurance.68
The homeowners then petitioned the
supreme court for review.69 Nineteen days
after issuing its opinion in Toland, the supreme court denied the petition for review
and ordered Andreini depublished.70 Although
speculation about the reasons that the
supreme court depublishes a particular decision is done at great peril, surely the court did
not depublish Andreini merely because of
some simple procedural flaw. Andreini was
depublished because the court disagreed
with its clear holding that a hirer may be held
liable under the peculiar risk doctrine when
the employee of an independent contractor
has no workers’ compensation insurance.
It is likely that the supreme court would
find that there simply is no rational basis to
permit a worker to obtain a windfall of double
recovery and to allow a class of individuals to
thwart the reasonable limits imposed by the
workers’ compensation system, merely
because the worker’s employer failed to maintain workers’ compensation coverage. This is
especially true in situations in which the hirer
was not responsible for the injury-causing
event and played no role in the failure of the
independent contractor to obtain or maintain
workers’ compensation coverage.
■
Real Estate Consulting Expert Witnessing
SERVICES RENDERED:
Litigation Consulting, Expert Testimony, Broker Practice,
Liability Audit, Educational Services, Industry Mediator
Certified Residential Broker Graduate Realtors Institute, Certified Residential Specialist,
California Association of Realtors® Director Since 1981, National Association of
Realtors® Director, State Faculty Master Instructor, Member, Real Estate Education
Association, Past President, San Fernando Valley Board of Realtors
5026 Veloz Avenue, Tarzana, California 91356
Telephone (818) 760-3355, ext. 344 • Pager (818) 318-2594
e-mail: [email protected]
CALIFORNIA BROKER LICENSE NO. 00469980
20 LOS ANGELES LAWYER / JUNE 2002
1
Hooker v. Department of Transp., 27 Cal. 4th 198
(2002).
2
McKown v. Wal-Mart Stores, Inc., 27 Cal. 4th 219
(2002).
3
Privette v. Superior Court, 5 Cal. 4th 689 (1993).
4
Toland v. Sunland Hous. Group, Inc., 18 Cal. 4th 253
(1998).
5
Camargo v. Tjaarda Dairy, 25 Cal. 4th 1235 (2001).
6
Aceves v. Regal Pale Brewing Co., 24 Cal. 3d 502, 508
(1979); Griesel v. Dart Indus., Inc., 23 Cal. 3d 578, 58586 (1979); Van Arsdale v. Hollinger, 68 Cal. 2d 245, 250
(1968); Woolen v. Aerojet Gen. Corp., 57 Cal. 2d 407,
410-11 (1962); Ferrel v. Safway Steel Scaffolds, 57 Cal.
2d 651 (1962).
7
Privette, 5 Cal. 4th at 691.
8
Id. at 692.
9
Id.
10
Id.
Id.
12
Id.
13
Id. at 696-97.
14
Id. at 693 (citing Van Arsdale v. Hollinger, 68 Cal. 2d
245, 252 (1968)).
15
Id. at 696 (citing Woolen v. Aerojet Gen. Corp., 57 Cal.
2d 407 (1962); Ferrel v. Safway Steel Scaffolds, 57 Cal.
2d 651 (1962); Van Arsdale v. Hollinger, 68 Cal. 2d 245
(1968); Griesel v. Dart Indus., Inc., 23 Cal. 3d 578
(1979); Aceves v. Regal Pale Brewing Co., 24 Cal. 3d 502
(1979)).
16
Id. at 696-97 (citing LABOR CODE §3600(a)).
17
Id. at 697.
18
Id. at 691-92, 701.
19
Id. at 699-700.
20
Id. at 698.
21
Toland v. Sunland Hous. Group, Inc., 8 Cal. 4th 253,
257 (1998). RESTATEMENT (SECOND) OF TORTS §413:
One who employs an independent contractor
to do work which the employer should recognize as likely to create, during its progress, a
peculiar unreasonable risk of physical harm
to others unless special precautions are taken,
is subject to liability for physical harm caused
to them by the absence of such precautions if
the employee (a) fails to provide in the contract
that the contractor shall take such precautions,
or (b) fails to exercise reasonable care to provide in some other manner for the taking of
such precautions.
22
Toland, 8 Cal. 4th at 257. RESTATEMENT (SECOND) OF
TORTS §416:
One who employs an independent contractor
to do work which the employer should recognize as likely to create during its progress a
peculiar risk of physical harm to others unless
special precautions are taken, is subject to liability for physical harm caused to them by the
failure of the contractor to exercise reasonable care to take such precautions, even though
the employer has provided for such precautions in the contract or otherwise.
23
Toland, 8 Cal. 4th at 257.
24
Id.
25
Id. at 265.
26
Id. at 270.
27
Grahn v. Tosco Corp., 58 Cal. App. 4th 1373 (1997);
Zamudio v. City and County of San Francisco, 64 Cal.
App. 4th 445 (1999).
28
“An employer is subject to liability for physical harm
to third persons caused by his failure to exercise reasonable care to employ a competent and careful contractor (a) to do work which will involve a risk of physical harm unless it is skillfully and carefully done, or (b)
to perform any duty which the employer owes to third
persons.” RESTATEMENT (SECOND) OF TORTS §411.
29
Camargo v. Tjaarda Dairy, 25 Cal. 4th 1235, 1238
(2001).
30
Id. at 1244-45.
31
Hooker v. Department of Transp., 27 Cal. 4th 198
(2002).
32
Id. at 202.
33
Id. at 203.
34
Id. at 202.
35
Id. at 203-06.
36
Id. at 206-08.
37
Id. at 207.
38
Grahn v. Tosco Corp., 58 Cal. App. 4th 1373 (1997).
39
Kinney v. CSB Constr., Inc., 87 Cal. App. 4th 28
(2001).
40
Hooker v. Department of Transp., 27 Cal. 4th 198, 20809 (2002).
41
Id. at 209.
42
Id. at 211-12 (citations and footnote omitted).
11
43
Id. at 213.
Id. at 215.
45
McKown v. Wal-Mart Stores, Inc., 27 Cal. 4th 219
(2002).
46
Id. at 222.
47
Id. at 222-23.
48
Id. at 223.
49
Id.
50
Id. at 226.
51
Privette v. Superior Court, 5 Cal. 4th 689, 692-97
(1993); Toland v. Sunland Hous. Group Inc., 18 Cal. 4th
253, 261 (1998); Camargo v. Tjaarda Dairy, 25 Cal. 4th
1235, 1239 (2001).
52
DuBois v. Workers’ Comp. Appeals Bd., 5 Cal. 4th 382,
389 (1993); LAB. CODE §3716.
53
Privette, 5 Cal. 4th at 697 (citing CAL. CONST. art.
XIV, §4).
54
Id. at 696-97 (citing LAB. CODE §3600(a)).
44
55
Id. at 697.
Toland, 18 Cal. 4th at 261.
57
Id.
58
Id. (citing LAB. CODE §3716.)
59
Id.
60
Id.
61
Andreini v. Superior Court (Solorio), 60 Cal. App. 4th
1415, 71 Cal. Rptr. 2d 153 (1998), depublished (May
13, 1998).
62
Id. at 71 Cal. Rptr. 155.
63
Id.
64
Id.
65
Id. at 156.
66
Id.
67
Id. at 153.
68
Id.
69
Id.
70
Id.
56
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LOS ANGELES LAWYER / JUNE 2002 21
Recent legislation makes the use of court-appointed
discovery referees more user friendly
C H A N N E L
BY CHRISTINE BYRD
22 LOS ANGELES LAWYER / JUNE 2002
tion dramatically amended Section 639 and
other provisions applicable to discovery referees. The legislature also directed the
Judicial Council to collect and report information regarding the use of discovery referees under Section 639. The next year, the
legislature extended the reporting deadline
but underscored its mandate: “It is the intent
of the Legislature that the practice and cost
of referring discovery disputes to outside referees be thoroughly reviewed.”3
The new requirements for the appointment of a discovery referee without the consent of all parties are clear regarding what a
court cannot do and what an appointment
order must contain:
• The court cannot appoint a discovery referee absent “exceptional circumstances.”
• The court cannot appoint a discovery ref-
eree without express findings regarding the
ability of the parties to pay for the referee’s
fees.
• The court order appointing a discovery referee must be in writing.
• The court must specify in the order the
scope of the reference.
• The court order must include the name,
business address, and telephone number of
the referee.
• The court order must specify the maximum hourly rate the referee may charge and,
if a party requests, the maximum number of
Christine Byrd is a litigation partner at Irell &
Manella LLP with over 25 years of experience
in litigation and discovery matters. She is also
an arbitrator with the American Arbitration
Association.
KEN CORRAL
ntil recently, California courts had
the authority under Code of Civil
Procedure Section 639 to require
parties to use discovery referees
whenever “necessary.” The decision as to when a discovery referee was necessary was left to
the discretion of the trial court. However,
critics charged that discovery referees were
often unnecessary and imposed undue financial burdens on the parties.
Responding to such criticisms, two years
ago the California Legislature enacted a new
law, AB 2912,1 that, beginning in 2001, eliminated the trial cour t’s discretion under
Section 639 and imposed specific conditions
on the appointment of discovery referees in
order to protect parties against unnecessary
or inappropriate appointments.2 The legisla-
hours that the referee may charge.
One of the most significant requirements
is the change in the standard under which a
discovery referee can be appointed absent
the consent of the parties. Under the new
law, a discovery referee can be appointed
only under “exceptional circumstances…,
which must be specific to the circumstances
of the particular case.”4 This amendment
should go far in preventing any
unnecessar y appointments,
although what constitutes “exceptional circumstances” justifying a cour t’s decision to
appoint a discover y referee
remains to be seen. It is worth
noting that the language is substantially similar to the language
in Rule 53 of the Federal Rules
of Civil Procedure, governing
the appointment of special masters, which provides that a reference to a master “shall be the
exception and not the rule.”5
eree must set forth clearly the maximum
number of hours for which the referee may
charge.10 The maximum may be modified but
only upon written application (by a party or
by the referee) and only for good cause.
The provision for a cap on a discovery
referee’s fees is an obvious response to past
criticisms, and its benefit to the parties is
clear. It may also help the court by making it
Ability to Pay
A requirement in the new law
that is as impor tant as the
changed standard for appointment of a referee involves the
referee’s fees. Even if exceptional circumstances warrant
the appointment of a discovery
referee, the cour t cannot
appoint one without first determining whether the parties have
the ability to pay the referee’s
fees.6 In fact, the bulk of the
amendments enacted in 2000
address this issue. To appoint a
discover y referee, the cour t
must find that “no party has
established an economic inability to pay a pro rata share of the
referee’s fees.”7 As for the obvious question of whether a
lawyer’s ability to pay may be
considered, the answer is no.
The court is allowed to consider
“only the ability of the party, not the party’s
counsel, to pay these fees.”8
The economic analysis of a party’s ability
or inability to pay for a discovery referee
must not take place in a vacuum. The court
is expressly directed to consider “the estimated cost of the referral and the impact of
the proposed fees on the party’s ability to
proceed with the litigation.”9 The purpose of
this amendment is to ensure that no party is
forced to sacrifice necessary case preparation
in order to pay the costs of a discovery referee. Indeed, at the request of a party, the
order for the appointment of a discovery ref24 LOS ANGELES LAWYER / JUNE 2002
easier to assess the economic impact of an
appointment, particularly on parties with limited financial resources who might benefit
from the appointment of a discovery referee.
If one party is unable to pay, then a discovery referee cannot be appointed unless
any other party, even an opposing party, “has
agreed voluntarily to pay that additional share
of the referee’s fee.”11 In this circumstance,
the court may proceed to appoint the discovery referee. While such cases may not
be common, this provision will be a benefit in
large multiparty cases in which the larger
parties are willing and able to pay a referee’s
fees and the smaller parties are unable to do
so. The legislature did not address the implications of having a discovery referee paid by
only one side in a lawsuit. In that situation, to
avoid an appearance of bias, the court may
wish to withhold from the discovery referee
the identity of the party or parties paying the
referee’s fees.
The new law also requires that the court
specify the scope of the reference at the time the discovery
referee is appointed. This requirement appears twice in the
amendments. First, Section
639(c) requires that the order
“indicate whether the referee
is being appointed for all discovery purposes in the action.”12
Second, Section 639(d)(3) requires that the order specify
“the subject matter or matters
included in the reference.”13
These changes are a significant
improvement, because the written order will give clear direction to the referee and to the
parties as to the scope of the
appointment. However, the use
of different language in subsections (c) and (d) is puzzling.
The remaining requirements are informational in
nature. The court order now
must be in writing, and it must
include the name, business
address, telephone number, and
maximum hourly rate of the referee.14 Also, a copy of the order
must be forwarded to the presiding judge of the court.15
In the event that a party disagrees with a discovery referee’s report, a full review by the
court is available: “[T]he decision of the referee…is only advisory.”16 The court may adopt
the referee’s decision in whole
or in part, change the decision,
or disregard it entirely, but only
“after independently considering the referee’s
findings and any objections and responses
thereto filed with the court.”17 It should be
noted that, regarding the review, the statute
does not provide the parties with any right to
a hearing.
Benefits of Using a Referee
These new requirements should eliminate
unnecessary appointments, but discovery
referees should continue to be appointed in
appropriate cases. The types of cases in which
discovery referees have traditionally been
appointed are those requiring the full-time
attention of a judge, those requiring technical
expertise, or both.
For example, environmental cleanup cases
can easily involve dozens of parties if all current and prior landowners are named in an
action or in the cross-actions. They can also
include technical issues. Likewise, construction defect cases, in which numerous contractors and subcontractors are sued, can
also contain multiple parties and technical
issues.
A discovery referee who understands the
technical problems in a multiparty case can
handle discovery matters quickly and ef ficiently. Such a referee can be a tremendous
benefit to the parties. However, for parties
who are individuals without insurance coverage, the cost of a discovery referee can be
burdensome. The changes to Section 639
allow the courts to continue to appoint discovery referees in those cases in which they
will be a benefit to the parties, but the changes
protect small parties against prohibitive fees.
Of course the appointment of a discover y
referee does not guarantee that discovery
will proceed more efficiently than it would
before a judge. Some judges are excellent at
actively supervising discovery matters and
rarely appoint discovery referees. For example, Judge J. Stephen Czuleger is reluctant to
appoint referees even when lawyers request
one. “It is not enough for lawyers to tell me
there is a need for a referee in their case,”
Judge Czuleger said. “They need to tell me
specifically what they want the referee to do,
rather than leaving it open-ended.”18
Lawyers frequently see the appointment of
a referee as leading to a delay of the trial.
However, the appointment of a discovery referee should not prolong the resolution of a
case. Indeed, one of the benefits of having a
discovery referee should be the faster handling of discovery matters. A good discovery referee can allow the parties to obtain
legitimate discovery and enforce legitimate
objections while minimizing the time and
expense normally associated with discovery
disputes.
For example, a discovery referee can 1)
require that disputes be raised immediately,
2) eliminate “meet and confer” sessions, and
3) streamline the documentation that must
accompany a motion to compel. With a discovery referee, counsel can sit down and discuss precisely what information is being
sought; what information is relevant; what
persons or locations are likely to have that
information; what logistics, software requirements, or organizational issues are involved;
and what type of search is likely to result in
useful information. A discovery referee also
can work with counsel to develop a discovery
program that serves the interests of all par-
Anita Rae Shapiro
SUPERIOR COURT COMMISSIONER, RET.
PRIVATE DISPUTE RESOLUTION
PROBATE, CIVIL, FAMILY LAW
PROBATE EXPERT WITNESS
TEL/FAX: (714) 529-0415 CELL/PAGER: (714) 606-2649
E-MAIL: [email protected]
http://adr-shapiro.com
FEES: $300/hr
LOS ANGELES LAWYER / JUNE 2002 25
ties. The appointment of a discovery referee
should shorten, rather than lengthen, the life
of a case.
The Delay Issue
Although the amendments to Section 639 are
a definite improvement, they do not address
the critical issue of delay. Not one of the
changes to Section 639 requires that a referee
hear discovery matters promptly. Code of
Civil Procedure Section 643 does provide that
the referee must report to the court “within
20 days after the hearing, if any, has been
concluded and the matter has been submitted.”19 However, before Section 643 applies,
the referee continues to have discretion and
control over the speed with which a matter is
heard and submitted.
Although legislative changes to address
the issue of delay will no doubt be suggested
in years to come, the courts can also address
this problem in the meantime. One simple
way to eliminate delay is for the court to
ensure that the discover y referee is both
active and knowledgeable. Another way is
by including a sunset provision in the appointment order, so that the appointment automatically concludes at a certain date with the
issuance of a final report. Judge Czuleger
has also developed a simple way to eliminate
delay. His policy is to maintain the original trial
date, regardless of the appointment of a referee. He believes that this policy is effective
in encouraging efficiency in the discovery
process.
The changes to Section 639 do not apply
to the appointment of discovery referees with
the consent of all parties, which is addressed
by Section 638. Even so, parties should contemplate using the new amendments as guidelines when consenting to Section 638 appointments. The new Section 639 requirements
are thoughtful and worthwhile. Parties also
should consider requesting a sunset provision
in any appointment of a discovery referee,
whether under Section 638 or 639.
The overall impact of the new changes
governing the appointment of discovery referees under Section 639 remains open to
debate, but data on the implementation of
the new amendments will be available soon.
The Judicial Council is required to collect all
orders appointing discovery referees, both
under Section 638 and Section 639. The
Judicial Council is then required to report to
the legislature on the number of appointments, the cost to the parties, and the time
spent by the discovery referees.20 The deadline for that report is July 1, 2003.21
It will be interesting to review the information collected by the Judicial Council and
to see what ef fect, if any, the legislative
changes have had on discover y referee
appointments.
■
1
2000 Cal. Stat. ch. 644, §2.
When all parties consent to the appointment of a discovery referee, Code of Civil Procedure §638 applies,
not §639. When the parties do not consent, §639 is
applicable. The focus of this article is on §639.
3
CODE CIV. PROC. §640.5. The legislature also expanded
its mandate by requiring the Judicial Council to report
on the use of referees in discovery matters pursuant to
either Code of Civil Procedure §638 or §639.
4
CODE CIV. PROC. §639(d)(2).
5
FED. R. CIV. P. 53(b).
6
CODE CIV. PROC. §639(d)(6). No such finding is required
if the referee is serving gratis. The requirement of findings regarding the parties’ ability to pay for the referee
applies only when the referee is being appointed “at a cost
to the parties.” CODE CIV. PROC. §639(d)(6)(A).
7
CODE CIV. PROC. §639(d)(6)(A).
8
CODE CIV. PROC. §639(d)(6)(B) (emphasis added).
9
Id.
10
CODE CIV. PROC. §639(d)(5).
11
CODE CIV. PROC. §639(d)(6)(A).
12
CODE CIV. PROC. §639(c).
13
CODE CIV. PROC. §639(d)(3).
14
CODE CIV. PROC. §639(d)(4) and (5).
15
CODE CIV. PROC. §639(e).
16
CODE CIV. PROC. §644(b). No such review is available
for a consensual general reference pursuant to §638.
CODE CIV. PROC. §644(a).
17
CODE CIV. PROC. §644(b); CODE CIV. PROC. §643.
18
Telephone interview with author, Mar. 13, 2002.
19
CODE CIV. PROC. §643(a).
20
CODE CIV. PROC. §§638(c), 639(e), 640.5.
21
Id.
2
26 LOS ANGELES LAWYER / JUNE 2002
MCLE ARTICLE AND SELF-ASSESSMENT TEST
Sponsored by
By reading this article and answering the accompanying test questions, you can earn one MCLE legal ethics
West Group
credit. To apply for credit, please follow the instructions on the test answer sheet on page 31.
By John W. Amberg and Jon L. Rewinski
2001 ETHICS
Old issues and new forms of practice
defined developments in legal ethics in 2001
John W. Amberg, a partner in the Santa Monica office of Bryan Cave LLP, is chair of the Los
Angeles County Bar Association’s Professional Responsibility and Ethics Committee. Jon L.
Rewinski is a shareholder in the Los Angeles office of Heller Ehrman White & McAuliffe LLP
and is vice chair of the Professional Responsibility and Ethics Committee.
to eavesdrop on inter views between
lawyers and their clients in derogation of
the confidentiality in the lawyer-client
relationship.
The Duty of Confidentiality
In California, the duty to maintain client confidence and secrets is of paramount importance. Business and Professions Code
Section 6068(e) provides, “It is the duty of an
attorney…[t]o maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her
client.” Last year, in Adams v. Aerojet-General
Corporation,1 the Third District Court of
Appeal considered this duty in the context of
a lawyer’s move from one law firm to another.
The lawyer was previously a principal of a law
firm that provided legal advice to AerojetGeneral Corporation on its disposal and treatLOS ANGELES LAWYER / JUNE 2002 27
RON OVERMYER
ast year, legal ethics in California involved renewed self-examination by the legal profession as well as new challenges to practitioners. During 2001, the State Bar reactivated the
Commission for the Revision of the Rules of Professional
Conduct for the purpose of conducting the first comprehensive
review and revision of the Rules of Professional Conduct since
1992. This process is expected to take several years. Meanwhile,
separate advisory task forces appointed by the California Supreme Court and State Bar recommended the first tentative steps towards easing restrictions on multijurisdictional and multidisciplinary practices. (See “New Forms of Practicing Law,” page 32.)
Nationally, representatives of the Los Angeles County Bar Association were key participants in the debate over recommendations by the American Bar Association’s Ethics 2000
Commission to amend the ABA Model Rules of Professional Conduct. And in the aftermath
of the September 11 terrorist attacks, lawyers throughout the country, including members
of LACBA’s Professional Responsibility and Ethics Committee, publicly registered their opposition to rules issued by Attorney General John Ashcroft that would permit the government
ment of hazardous wastes. The lawyer had not
billed any of his time to Aerojet-General and
stated in his declaration that he possessed no
client secrets. The lawyer resigned from his
law firm and became a principal of a new
firm, which represented plaintif fs suing
Aerojet-General over alleged groundwater
contamination.
Aerojet-General moved to disqualify the
lawyer and his new firm. The trial court
granted the motion, but the court of appeal
reversed. In so doing, the court of appeal
rejected Aerojet-General’s contention that
there should be a nonrebuttable presumption of imputed knowledge from the lawyer’s
previous law firm to the lawyer. Rather, the
court of appeal held that if the lawyer did not
personally represent the former client who
seeks to remove the lawyer from the case, the
trial court must determine whether confidential information material to the current
representation would normally have been
imparted to the lawyer during his tenure at
the old firm.2 To hold otherwise, the appellate
court reasoned, would unfairly restrict lawyer
mobility and was unrealistic in view of the
growth of large law firms in recent years.
The court of appeal did not reject the
notion that confidential information possessed
by a lawyer can be imputed to the law firm.
Instead, the court addressed, and rejected, the
reverse—the presumption that the knowledge of a law firm should be imputed to an
individual lawyer. Under the facts of the case,
the court concluded that the paramount duty
to maintain client confidence and secrets did
not warrant denying plaintiffs their choice of
counsel.
The duty to maintain client secrets may
commence upon the initial consultation with
a potential client, even before the attorneyclient relationship is formalized. This situation
is illustrated by an opinion issued on January
2, 2001, by LACBA’s Professional Responsibility and Ethics Committee. According to
the facts in Ethics Opinion No. 506,3 the
lawyer learned in an initial consultation with
a potential client that the potential client was
contemplating filing a bankruptcy petition.
While per forming a conflicts check, the
lawyer learned that his law firm was representing an existing client in unrelated litigation against the potential client. The fact that
the potential client was contemplating bankruptcy was presumed to be important to the
existing client.
The committee concluded that neither the
lawyer nor the law firm could tell the existing
client that the potential client was contemplating bankruptcy. This conclusion rested, in
part, on the determination that the confidential information was not related to the law
firm’s current representation of the existing
28 LOS ANGELES LAWYER / JUNE 2002
client within the meaning of Rule 3-500 of the
Rules of Professional Conduct, which requires
a lawyer to keep a client reasonably informed
about “significant developments relating to
the employment or representation.”
Secrets of Third Parties
Does an attorney also have an obligation to
preserve the confidentiality of information
that originates with someone other than the
client? California courts addressed this question in a trio of cases in 2001. In Packard Bell
NEC, Inc. v. Aztech Systems, Inc.,4 a U.S. district court disqualified the defendant’s lawyers
under Rule 3-310 of the Rules of Professional
Conduct in order to prevent them from using
the plaintiff’s privileged information. Rule 3310 prohibits lawyers from representing
actual or potentially adverse interests without
written disclosure and, in many cases, a client’s written consent. The court did this even
though both parties agreed that Rule 3-310 did
not apply, and the court acknowledged the
case was a “square peg which does not fit
into the round holes of the rules.”5
Packard Bell sued the defendant, Aztech
Systems, for breach of warranty and fraud,
alleging that Aztech had misrepresented that
its printed circuit boards qualified for duty-free
impor tation. Aztech’s defense was that
Packard Bell knew the boards did not qualify
for duty-free importation, and Aztech supported this contention with the testimony of
Metzler, a former Packard Bell of ficer.
Metzler was represented during his deposition by the Levy law firm. Aztech subsequently retained the Levy firm as counsel.
Packard Bell moved to disqualify the Levy
firm on the grounds that its representation of
Aztech violated the portion of Rule 3-310 that
provides that a lawyer shall not, without the
informed written consent of each client,
accept representation of more than one client
in a matter in which the interests potentially
conflict. Packard Bell acknowledged that Rule
3-310 did not literally apply because the Levy
firm never represented Packard Bell.
Nevertheless, it argued that since Metzler, as
a former Packard Bell officer, owed a continuing fiduciary duty not to disclose privileged communications between Packard Bell
and its lawyers, the Levy firm, as Metzler’s
agent, owed a similar duty to Packard Bell and
could not disclose or use this confidential
information to help Aztech.
Aztech observed that this argument could
prevent a terminated officer from ever finding counsel to sue his or her former employer.
Nevertheless, the district court held that the
Levy firm’s representation of Aztech, following its representation of Metzler, “undermined the judicial process and will effect
[sic] the proceedings before this Court.”6
The cour t concluded the lawyers had
obtained an “unfair advantage” over Packard
Bell. It reached this conclusion with difficulty, citing Gregori v. Bank of America,7 a
case that denied disqualification, and the prescription of the ABA Model Code of
Professional Responsibility that a lawyer
“should avoid even the appearance of professional impropriety,” which has never been
adopted in California.
The confidential information that the Levy
firm was presumed to possess consisted of
communications between the opposing party,
Packard Bell, and Packard Bell’s lawyers.
The Levy firm never represented Packard
Bell, and as counsel to Aztech, the lawyers
arguably had a duty to exploit the information
for the benefit of their client. The cour t
acknowledged this clash of principles and
disqualified the Levy law firm: “‘Though such
information cannot be unlearned, and the
lawyer who obtained it cannot be prevented
from giving it to others, disqualification still
serves the useful purpose of eliminating from
the case the attorney who could most effectively exploit the unfair advantage.’”8
On the other hand, both the trial court and
the appellate court in Fox Searchlight Pictures,
Inc. v. Paladino refused to disqualify lawyers
with knowledge of the opposing party’s confidential information and secrets. 9 Fox
Searchlight sued its former in-house counsel,
Paladino, for disclosing privileged communications in the course of preparing her
wrongful termination lawsuit against the company. The plaintiff moved to disqualify the
defendant’s attorneys because they possessed
confidential and privileged information. The
superior court denied the motion to disqualify, and the Second District Court of Appeal
affirmed.
According to the court of appeal, disqualification was not warranted because the
defendant’s attorneys did not learn the confidential information while representing Fox
Searchlight. The court noted that California
cour ts had never disqualified attorneys
merely because, absent a professional relationship, they were exposed to an opposing
party’s confidential information. Furthermore,
the cour t found an implied exception to
Business and Professions Code Section
6068(e).
In General Dynamics v. Superior Court,10
an earlier case, the California Supreme Court
had held that an in-house attorney, in the
same manner as a nonattorney employee,
was permitted to pursue a wrongful termination claim against his former employer. A
former in-house counsel may sue his or her
employer for wrongful termination “provided
it can be established without breaching the
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241513
attorney-client privilege or unduly endangering the values lying at the heart of the
professional relationship.”11 Privileged information may be protected from unwarranted
disclosure through State Bar discipline, judicial management, and dismissal if the plaintiff’s case could not be fully established without breaching the attorney-client privilege.12
The Fox Searchlight court weighed the
lawyer’s duty of confidentiality under Section
6068(e) against the right of an in-house attorney not to be discriminated against in his or
her employment. It concluded that Paladino,
the former in-house counsel, may disclose
confidences to her lawyers “to the extent
they may be relevant to the preparation and
prosecution of her wrongful termination claim
against her former client-employer.”13 The
Fox Searchlight court found that this limited
disclosure was contemplated by the supreme
court in General Dynamics.14 The attorneys for
the former employee are bound by the rules
of confidentiality and attorney-client privilege
and, therefore, disclosure to them does not
constitute a public disclosure.15
Although Section 6068(e) on its face
“brooks no exceptions,” the court of appeal in
Fox Searchlight found the section was
impliedly qualified by other statutes and ethical rules that permit a lawyer to breach client
confidentiality.16 As an example, the court
cited Evidence Code Section 958, which states
the attorney-client privilege does not apply “to
an issue of breach, by the lawyer or by the
client, of a duty arising out of the lawyerclient relationship.” If the Evidence Code permits the lawyer to use otherwise privileged
communications during trial, the court said,
Paladino must be entitled to disclose them
before trial to her attorneys. The problem
with this argument is that Section 6068(e)
requires a lawyer to protect the client’s
secrets, which are generally understood to be
much broader than privileged communications, and a limited exception to the Evidence
Code privilege would not establish a broad
exception to lawyers’ statutory duty of confidentiality.
The court of appeal, as additional support
for its ruling, asserted the State Bar Court had
held that the duty of confidentiality in Section
6068(e) is modified by the exceptions to the
attorney-client privilege in the Evidence Code.
However, the State Bar Court decision cited
for this proposition, In the Matter of Lilly,17
states nothing of the kind. Except for the
court’s ipse dixit, there is no support in the
case for the proposition that Section 6068(e)
is modified by the Evidence Code.
Unfortunately, the same unsubstantiated
assertion from Fox Searchlight was repeated
in People v. Dang.18 In Dang, the Second
District Court of Appeal held it was not im30 LOS ANGELES LAWYER / JUNE 2002
proper for an attorney to testify about confidential communications in which his client
made physical threats against witnesses. The
court held that Evidence Code Section 956.5
exempts disclosures that would prevent a
client from committing a criminal act that
the lawyer believes is likely to result in death
or substantial bodily harm. The court of
appeal noted the conflict between Section
956.5 and Section 6068(e) but concluded:
“Since our issue is limited to the admissibility of the testimony by [the lawyer], we need
not resolve the conflict.” The court continued,
“We note that the State Bar Court has held the
duty of confidentiality under Business and
Professions Code Section 6068(e) is modified by the exceptions to the attorney client
privilege codified in the Evidence Code.” This
is incorrect. The State Bar Court has not
held that the duty under Section 6068(e) is
modified by the Evidence Code.
In Solin v. O’Melveny & Myers, LLP,19 a
different panel of the Second District Court
of Appeal permitted a legal malpractice case
to be dismissed rather than risk disclosure of
confidential information. Published just two
days after Fox Searchlight, the Solin opinion
derived a dif ferent lesson from General
Dynamics: “[A]s General Dynamics Corp. v.
Superior Court teaches, unless a statutory
provision removes the protection afforded
by the attorney-client privilege to confidential
communications between attorney and client,
an attorney plaintiff may not prosecute a lawsuit if in doing so client confidences would be
disclosed.”20
Plaintiff Solin, a lawyer, retained defendant O’Melveny & Myers to advise him concerning his representation of two clients.
Solin disclosed privileged and confidential
information from his clients, implicating them
in criminal activities, to the O’Melveny firm.
Subsequently, Solin sued O’Melveny for malpractice, and his clients intervened to prevent the disclosure of the incriminating
secrets. The superior court determined that
the O’Melveny firm could not defend the
action without disclosing the third parties’
secrets, and dismissed Solin’s suit. The court
of appeal affirmed.
There was no attorney-client relationship
between O’Melveny and the inter venors.
Nevertheless, the court recognized that Solin,
as their attorney, had a duty under Evidence
Code Section 955 to claim the privilege on
their behalf, which the trial court would sustain. Thus, the plaintiff would gain an unfair
advantage: “Solin would be permitted to sue
his lawyers for malpractice, yet gag
O’Melveny in defending the charge by preventing full disclosure of all matters counseled upon.”21 The court was unwilling to second-guess O’Melveny’s assertion that this
This Los Angeles Lawyer MCLE
self-study test is sponsored by
WEST GROUP.
MCLE Test
No. 106
The Los Angeles County Bar Association
certifies that this activity has been
approved for Minimum Continuing
Legal Education legal ethics credit by
the State Bar of California in the
amount of 1 hour.
1. The California Rules of Professional Conduct
last underwent a thorough revision in:
A. 1975.
B. 1989.
C. 1992.
D. 2001.
2. California lawyers receive guidance on ethics
questions in published opinions from:
A. The Professional Responsibility and
Ethics Committee of the Los Angeles
County Bar Association.
B. The Committee on Professional
Responsibility and Conduct (COPRAC) of
the State Bar of California.
C. Both A and B.
3. Under California law, it is the duty of an
attorney to preserve the secrets of a client at every
peril to himself or herself.
True.
False.
4. When a lawyer moves from one firm to
another, there is a nonrebuttable presumption of
imputed knowledge from the lawyer’s previous
law firm to the lawyer. Thus the lawyer is disqualified from taking a position adverse to a
client of the former firm.
True.
False.
5. In considering whether to disqualify a lawyer
who moved to another firm and took a position
adverse to a client of his or her former firm, a
court must consider:
MCLE Answer Sheet #106
A. Whether the lawyer personally represented the client.
B. Whether confidential information normally would have been imparted to the
lawyer.
C. Whether the confidential information is
material to the current representation.
D. All of the above.
6. An attorney’s duty to maintain client secrets
does not arise until the attorney-client relationship is formalized.
True.
False.
7. A lawyer has a duty to inform his or her client
about significant developments relating to the
employment or representation.
True.
False.
8. A lawyer in California must avoid even the
appearance of professional impropriety, consistent with the ABA Model Code of Professional
Responsibility.
True.
False.
9. In-house lawyer X may not sue X’s former
employer if it means that X would have to disclose the confidences of X’s former employer to
X’s lawyers.
True.
False.
10. Lawyer Y may not sue Y’s lawyers for malpractice if their defense would require the disclosure of the privileged information of Y’s clients.
True.
False.
11. Under Evidence Code Section 958, in the
event of a breach of a duty by a lawyer or client
arising out of the attorney-client relationship:
A. There is no attorney-client privilege
regarding the breach.
B. There is no attorney-client privilege.
C. There is no duty of confidentiality for
client secrets.
D. All of the above.
12. Under Evidence Code Section 956.5, a lawyer
can testify about confidential communications in
which a client made physical threats against witnesses without breaching the attorney-client
privilege.
True.
False.
13. A lawyer employed by the state of California
believes an agent of her department is violating
the law. In accordance with her duty to her
client, which action can she currently not take?
A. Urge the agent to reconsider the action
by explaining the likely consequences.
B. Refer the matter to higher authority
within the organization.
C. Resign.
D. Disclose the lawbreaking to the state
legislature.
2001 ETHICS ROUNDUP
Sponsored by WEST GROUP
Name
14. An attorney is employed by a city. He was
appointed by the mayor and confirmed by the city
council, which is the municipal corporation’s
governing body. Who is the attorney’s client?
A. The mayor.
B. The city council.
C. The city.
D. All of the above.
Law Firm/Organization
Address
City
State/Zip
E-mail
Phone
15. A lawyer may divide a fee for legal services
with another lawyer who is not a partner, associate, or shareholder, if:
A. The total fee is not increased by the
division of fees and is not unconscionable.
B. The lawyer discloses to the client in
writing that a division of fees will be made
and the terms of the division.
C. The client consents in writing.
D. All of the above.
16. A lawyer has a First Amendment right to tell
a jury during closing argument, without fear of
sanction, that his or her client has not received
a fair trial.
True.
False.
17. When a lawyer accepts a private reproval
under the State Bar’s attorney disciplinary process,
the State Bar cannot publicize the lawyer’s discipline on its Web site.
True.
False.
18. Under Rule 1-400(F) of the Rules of
Professional Conduct, a lawyer who maintains a
Web site must keep all the pages of every version of his or her Web site and make them available to the State Bar, if requested, for:
A. One year plus one day.
B. Two years.
C. 10 years.
D. The life of the lawyer’s laptop.
19. A task force on multijurisdictional practice
recommended to the California Supreme Court
that California adopt full reciprocity with other
states regarding the admission of lawyers.
True.
False.
20. Multidisciplinary practice would require modification of the Rules of Professional Conduct
because the rules currently prohibit a lawyer
from:
A. Forming a partnership with a nonlawyer
if the activity of the partnership includes
the practice of law.
B. Sharing legal fees with a nonlawyer.
C. Both A and B.
State Bar #
Instructions for Obtaining MCLE Credits
1. Study the MCLE article in this issue.
2. Answer the test questions opposite by
marking the appropriate boxes below. Each
question has only one answer. Photocopies of
this answer sheet may be submitted; however,
this form should not be enlarged or reduced.
3. Mail the answer sheet and the $15 testing
fee ($20 for non-LACBA members) to:
Los Angeles Lawyer
MCLE Test
P.O. Box 55020
Los Angeles, CA 90055
Make checks payable to Los Angeles Lawyer.
4. Within six weeks, Los Angeles Lawyer will
return your test with the correct answers, a
rationale for the correct answers, and a
certificate verifying the MCLE credit you earned
through this self-assessment activity.
5. For future reference, please retain the MCLE
test materials returned to you.
Answers
Mark your answers to the test by checking the
appropriate boxes below. Each question has
only one answer.
1.
■A
■B
■C
■D
2.
■A
■B
3.
■ True
4.
■ True
5.
■A
6.
■ True
■ False
7.
■ True
■ False
8.
■ True
■ False
9.
■ True
■ False
10.
■ True
11.
■A
12.
■ True
13.
■A
■B
■C
■D
14.
■A
■B
■C
■D
15.
■A
■B
■C
■D
16.
■ True
■ False
17.
■ True
■ False
18.
■A
19.
■ True
20.
■A
■C
■ False
■ False
■B
■C
■D
■ False
■B
■C
■D
■ False
■B
■C
■D
■ False
■B
■C
LOS ANGELES LAWYER / JUNE 2002 31
evidence was necessary to its defense. Citing
General Dynamics, the Solin court concluded
that since the lawsuit was incapable of complete resolution without breaching the attorney-client privilege, the suit against
O’Melveny must be dismissed.22
Loyalty and Whistle-Blowing
Rule 3-310 of the Rules of Professional
Conduct makes it clear that a lawyer owes his
or her client a duty of undivided loyalty. What
happens, though, when a lawyer for an organization believes the organization is embarking
on an unlawful course of action that will harm
the public? Rule 3-600 in its current form provides that when a lawyer represents an organization, the lawyer owes duties of confidentiality and loyalty to the organization, and not
to individual representatives of the organization with whom the lawyer routinely communicates and receives instructions or to the
organization’s constituents. If the lawyer has
reason to believe that the organization may be
about to violate the law and an individual representative refuses to act, Rule 3-600 permits
the lawyer to urge reconsideration of the
decision and/or refer the issue to the next
highest authority within the organization. If
the organization does not change its course,
the lawyer may need to withdraw from the
representation pursuant to Rule 3-700. In
accordance with Section 6068(e), the lawyer
is bound to maintain the client’s confidence
and secrets.
The recent Department of Insurance scandal involving former Insurance Commissioner
Chuck Quackenbush has caused some to
reassess this approach. The scandal began
brewing in 2000 when, in confidential reports,
the Department of Insurance concluded that
the practices of several insurance companies
handling claims from the 1994 Northridge
earthquake violated insurance regulations.23
Nevertheless, the Department of Insurance
decided not to impose fines or finalize the
reports. Subsequently, the insurance companies allegedly contributed several million
dollars to foundations that then-Insurance
Commissioner Chuck Quackenbush had created, and the funds were purportedly used in
part to pay for television commercials fea-
turing Quackenbush. 24 An Insurance
Department lawyer, Cindy Alayne Ossias,
was outraged that no fines were levied in
view of the internal reports’ conclusions. She
provided copies of the internal reports to the
Assembly Insurance Committee,25 which triggered an investigation, public outrage, and the
eventual resignation of Quackenbush.26
Thereafter, the State Bar opened an investigation of Ossias’s conduct. Ultimately, the
State Bar terminated its investigation without
taking any action. Nevertheless, the tension
between a government lawyer’s “duty” to the
public and duty to protect confidential information, as illustrated by the Insurance
Department scandal, prompted reassessment
of Rule 3-600 of the Rules of Professional
Conduct. In February 2001, Assemblyman
Darrell Steinberg and several coauthors introduced AB 363, which proposed that on or
before Januar y 31, 2002, the Rules of
Professional Conduct be amended to give
guidance to public agency lawyers to disclose
privileged communications when necessary
to protect the interests of the public.
In response, the State Bar’s Committee on
New Forms of Practicing Law
Last year, California, through two separate task
forces, for the first time suggested approaches
for permitting multijurisdictional practice (MJP)—
legal practice across state lines—and multidisciplinary practice (MDP)—the practice of
law in conjunction with other disciplines, such
as accounting. The early results satisfied no
one, but the process of study and reform is likely
to continue.
Many lawyers would no doubt be surprised to learn that they or their colleagues may
be engaged in the unauthorized practice of
law. Rule 6125 of the California Rules of
Court states: “No person shall practice law in
California unless the person is an active member of the State Bar.” Yet it is common for
lawyers admitted in other jurisdictions to perform legal services in California. For example,
in-house counsel give legal advice, assist in
transactions, or interview witnesses in
California, even though they are not admitted
to practice in the state. Out-of-state attorneys
come to California to take depositions or to
conduct investigations. Still other out-of-state
attorneys in law firms with offices in multiple
states work together, short of making appearances, on lawsuits pending in California courts
or on transactions occurring in the state. As the
California Supreme Court Advisory Task Force
on Multijurisdictional Practice noted, “Today’s
reality is that the needs of many clients do not
32 LOS ANGELES LAWYER / JUNE 2002
stop at state borders, and neither does the legal
practice of the attorneys who represent them.”
The MJP task force issued a preliminary
report last year that recommended very modest changes in California law. It did not advocate reciprocity with other states but did recommend allowing out-of-state lawyers to practice
in California for limited periods of time and for
limited purposes in return for registration. The
task force recommended that in-house counsel
not admitted to practice in California be permitted to represent their employers in California
without taking the bar exam in return for State
Bar registration and compliance with various
regulations. It recommended that litigators be
allowed to work on a lawsuit until it is filed in
California and they could apply for admission pro hac vice. The task force also recommended that litigators be permitted to perform
tasks in California for suits filed elsewhere. It recommended that transactional lawyers be
allowed to apply for temporary admission,
similar to pro hac vice admission for litigators,
for the purpose of performing limited tasks.
These recommendations were the subject of
public comment and further study, and on
January 7, 2002, the task force issued a Final
Report and Recommendations that was consistent with the preliminary report.1
The State Bar of California Task Force on
Multidisciplinary Practice also reported its rec-
ommendations last year.2 Proponents of MDP
envision a profession in which lawyers deliver
legal services in combination with accountants,
physicians, scientists, and other specialists, similar to the way the major accounting firms have
attempted to operate in recent years. MDP
also is common in Europe. Currently, Rule 1-310
of the Rules of Professional Conduct prohibits a
lawyer from forming a partnership with a nonlawyer if the activity of the partnership includes
the practice of law, and Rule 1-320 prohibits
sharing legal fees with a nonlawyer.
The MDP task force was charged with
studying whether there were viable models for
California. It concluded that MDP would
require modification of the Rules of Professional
Conduct, but that MDP could be implemented
without compromising the legal profession’s
“core values” by continued individual accountability of lawyers and through a certification
process for MDP entities. The report recognized
five models:
1) A cooperative model, in which lawyers
employ nonlawyer professionals who are under
the lawyers’ control.
2) An ancillary business model, in which a law
firm owns a separate, nonintegrated business
that provides nonlegal services.
3) A strategic alliance model, in which there
is an agreement between a law firm and a professional service firm to purchase goods and
Professional Responsibility and Conduct
(COPRAC) issued a report in August 200127
recommending clarification of Rule 3-600,
which is titled “Organization as Client.”
COPRAC suggested adding a new section to
address the special issues regarding government lawyers without weakening the need
to maintain the client’s (i.e., the public agency’s) confidence and secrets. The committee in effect urged a government lawyer who
believes a public agency is considering unlawful conduct to follow a procedure comparable
to the one set forth in existing Rule 3-600 for
lawyers serving corporate clients.
Thus, according to Rule 3-600(B), the
lawyer may not violate his or her duties under
Business and Professions Code Section
6068(e) but “may take such actions as appear
to the [lawyer] to be in the best lawful interest of the organization. Such actions may
include among others: (1) Urging reconsideration of the matter while explaining its
likely consequences to the organization; or (2)
Referring the matter to the next higher
authority in the organization, including, if
warranted by the seriousness of the matter,
services, or to refer business.
4) A command and control model, in which
lawyers share legal fees and equity interests with
nonlawyers, the nonlawyers agree to comply
with the lawyers’ rules of professional conduct,
and the lawyers take responsibility for the acts
of the nonlawyers.
5) A fully integrated model, or “pure form”
MDP, which is currently prohibited in California.
As with MJP, the MDP recommendations
received public comment and are currently
undergoing further review.
It is unclear how strong the interest in MDP
remains. An American Bar Association committee
met fierce opposition last year when it recommended expanding opportunities for MDP.
Also, the apparent failure of major accounting
firms to provide independent advice and oversight to Enron and Global Crossing before
their ignominious collapses should dampen
enthusiasm for emulating the accounting profession and provide fresh reasons for lawyers
to appreciate the ethical standards of their profession.—J.W.A. & J.L.R.
1
See California Supreme Court Advisory Task Force
on Multijurisdictional Practice, Final Report and Recommendations (Jan. 7, 2002), available at http://www
.calbar.org/ebriefs/02/010902.htm.
2
See Report and Findings of the State Bar of California
Task Force on Multidisciplinary Practice, available at
http://www.calbar.org/2bar/3com/3cp0106.htm.
referral to the highest internal authority that
can act on behalf of the organization.” To
date, there has been no decision on the form
of the appropriate amendment to the rules,
but it seems likely that an amendment to
Rule 3-600 will emerge.
COPRAC also addressed ethics issues
relating to public agency lawyers in its Formal
Opinion No. 2001-156 on a matter involving
the city of Paradise. The Paradise city charter established the city council as the municipal corporation’s governing body. The city
also employed a full-time city attorney, who
was appointed by the mayor and confirmed by
the city council. When the city faced a fiscal
crisis, a member of the city council introduced a motion to borrow $100 million in
earmarked funds. The city attorney advised
both the mayor and the city council that the
borrowing would be lawful. The mayor disagreed with the advice and accused the city
attorney of representing two different and
adverse clients (the city council and the mayor)
without written consent pursuant to Rule 3310(C) of the Rules of Professional Conduct.
In Formal Opinion No. 2001-156, COPRAC
concluded that the city attorney’s client was
the city, not the mayor, and therefore the city
attorney did not represent two clients with a
conflict of interest. Thus, the city attorney
was not required to obtain written consent
pursuant to Rule 3-310(C).
Equitable Indemnity between
Lawyers
How powerful is the duty of undivided loyalty
owed to a client? Is such a duty so important
that cocounsel should be precluded from
asserting claims against each other? During
a two- week period in 2001, the First District
Court of Appeal considered this issue twice,
with seemingly contradictory conclusions.
The California Supreme Court has granted
review in both cases.
In the first case, American Equity Insurance Company v. Beck,28 family members
retained lawyer Beck to represent them in a
lawsuit against an automobile manufacturer
as a result of serious injuries the clients sustained when their pickup truck rolled over and
burst into flames. With the clients’ permission,
lawyer Beck associated a Texas lawyer experienced in prosecuting “side-saddle” gas tank
cases and a law firm as local trial counsel. The
three sets of attorneys agreed to split the
contingent fee. During trial, the defendant
offered to settle for $6 million. The clients
wanted to accept and instructed the Texas
lawyer to contact the defendant to discuss
settlement. The Texas lawyer failed to do so.
The jury returned a defense verdict.
The clients sued the Texas lawyer and
the trial counsel for malpractice. Both the
Texas lawyer and the trial counsel settled.
Lawyer Beck claimed that he too suffered a
loss (his portion of a contingency fee based
on a $6 million settlement) as a result of the
other lawyers’ malpractice. The Texas lawyer
settled his claims with lawyer Beck. The trial
counsel, however, refused. Thereafter, lawyer
Beck sued the trial counsel for breach of fiduciary duty. The trial counsel’s insurance carrier responded by asserting a cross-claim
against lawyer Beck for indemnity under the
theory that the lawyers’ joint representation
of the clients constituted a joint venture.
Through summary judgment, the trial court
concluded that cocounsel do not owe a fiduciary duty to each other and therefore denied
lawyer Beck’s claim. The court also found
that the arrangement between cocounsel
does not constitute a joint venture and therefore denied the cross-claim by the trial counsel’s insurance carrier.
The First District Court of Appeal affirmed. It concluded that cocounsel jointly
representing a client do not owe a fiduciary
duty to each other and that the relationship
LOS ANGELES LAWYER / JUNE 2002 33
between cocounsel is not a joint venture permitting one cocounsel to seek indemnity from
the other. The court noted that “[t]o avoid any
detriment to the jointly represented client, it
is imperative that no collateral duties arise to
interfere with the duty of ‘undivided loyalty
and total devotion’ owed to the client.”29
In the second case, Musser v. Provencher,30
a different division of the First District Court
of Appeal concluded that the duties owed to
a client do not, as a matter of law, prohibit
cocounsel from asserting claims for indemnity
against each other. The client was a wife seeking a dissolution of marriage. Lawyer Musser
filed a petition on the client’s behalf for child
and spousal support. The husband filed for
bankruptcy. Lawyer Musser arranged for a
bankruptcy specialist, lawyer Provencher, to
obtain relief from the automatic stay. Lawyer
Provencher advised lawyer Musser and the
client to go forward with the petition for child
support in spite of the stay. This advice was
wrong. The award for spousal and child support was set aside on appeal for violation of the
automatic stay.
Faced with a claim for punitive damages for
violation of the automatic stay, the client settled
with her former husband for less than the
original support order. She then sued lawyer
Musser for malpractice. The former husband
also sued lawyer Musser for violating the automatic stay. Lawyer Musser cross-claimed
against lawyer Provencher for indemnity. The
trial court dismissed the cross-claim, but the
court of appeal reversed, noting that “it would
be extremely unjust to bar Musser from seeking indemnity or contribution from Provencher
when Musser was sued by [the client] for
damages allegedly attributable to Provencher’s
tortious conduct, absent a real potential for
conflict between Provencher’s duty to [the
client] and his duty to Musser during the
course of their joint representation or of a real
impact upon attorney-client confidentiality presented by Musser’s indemnity action.”31
Fee Splitting
The relationship between cocounsel may be
regulated by the Rules of Professional
Conduct even when there is no demonstrable
harm to the clients. For example, fee splitting
is generally prohibited unless, according to
Rule 2-200 of the Rules of Professional
Conduct, the client has given written consent after full written disclosure of the terms
of the division. But when is an agreement to
divide fees subject to the rule? Two cases
answered that question in diametrically opposite ways in 2001.32 The supreme court has
accepted one case for review.
In Sims v. Charness,33 both parties were
lawyers. Charness was engaged to prosecute
34 LOS ANGELES LAWYER / JUNE 2002
his clients’ claims against a motel, and he
retained Sims to try the case in return for 60
percent of the attorney’s fees due under
Charness’s written retainer agreement with
the clients. The retainer agreement between
Char ness and Sims was oral. The trial
resulted in a jury verdict favorable to the
clients, and Charness paid Sims a portion of
the attorney’s fees. Sims was dissatisfied with
the split and sued Charness. Charness argued
that the oral fee-splitting agreement was void
because it was against public policy and contrary to Rule 2-200.
The Second District Court of Appeal held
the oral agreement was not prohibited by
Rule 2-200 because it was not a “pure referral.”
The cour t relied on COPRAC’s Formal
Opinion No. 1994-138, which defined a “pure
referral” as one “which compensates one
lawyer with a percentage of a contingent fee
for doing nothing more than obtaining the signature of a client upon a retainer agreement
while the lawyer to whom the case is referred
does all the work….” A pure referral does
not encompass an outside lawyer who is
employed for his or her expertise in an area
of the law, including trial skills, and is paid for
these services, the court said. Charness did
not relinquish his involvement in the case by
referring it to Sims in return for a percentage
of the fees. Indeed, Charness continued to
participate in the case. The court also concluded that Sims was functioning as
Charness’s “associate” within the contemplation of Rule 2-200, which expressly exempts a
lawyer’s division of fees with his or her partners, associates, and shareholders. The court
held the oral agreement was enforceable.
The First District Court of Appeal declined
to follow the same rationale in Chambers v.
Kay.34 Chambers and Kay were cocounsel for
the plaintiff in the Rena Weeks sexual harassment lawsuit against the law firm Baker &
McKenzie. Kay orally agreed to pay Chambers
a percentage of the attorney’s fees, but after
a disagreement over discovery, Kay removed
Chambers from the case. Kay nevertheless
confirmed that Chambers would receive the
agreed percentage in a letter that was copied
and sent to the client, but the terms were not
explained and the client’s written consent was
not obtained. Following the sizeable verdict,
Kay abrogated the agreement and instead
offered to compensate Chambers for the
hours Chambers had worked on the case.
Chambers sued to enforce the agreement,
and the superior court granted summary judgment to Kay on the ground the fee-splitting
agreement violated Rule 2-200.
The court of appeal affirmed. It held that
Rule 2-200 is not limited to pure referrals,
and the rule required full disclosure to the
client and the client’s written consent.
Chambers and Kay were not associates within
the meaning of the rule. Because the lawyers
did not comply with Rule 2-200, the agreement
was illegal and void.35 On July 11, 2001, the
supreme court granted review of Chambers.
Contempt and Lawyer
Discipline
A breach of ethical duties may not only subject a lawyer to forfeiture of his or her fees but
also to contempt proceedings or formal discipline. In Hanson v. Superior Court of Siskiyou
County,36 a lawyer for the defendant in a criminal trial stated to the jury in closing argument
that, among other things, the job of a lawyer
is “to bend the facts” and the defendant “has
not received a fair trial in this case.” The trial
court sustained the prosecutor’s objections to
these statements and issued an order to show
cause to hold the defendant’s lawyer in contempt. After the jury was discharged, another
trial judge held a hearing on the matter, found
the defendant’s lawyer in contempt, and
ordered the lawyer to pay a $200 fine or to
serve four days in the county jail. The court
of appeal affirmed, holding that the lawyer’s
statement that the defendant “has not
received a fair trial” impugned the judge’s
integrity by suggesting the judge had failed
in his duty to guarantee a fair trial. The court
also held that a contempt charge against the
defendant’s lawyer was warranted because it
was inappropriate for the lawyer “to assert
that opposing counsel’s job is to misrepresent the facts.”
Ethical violations can also lead to formal
disciplinary proceedings before the State Bar.
In two recent cases, the state supreme court
reminds lawyers that certain violations constitute grounds for summary disbarment. In
In re Cristeta S. Paguirigan,37 a lawyer was
summarily disbarred after entering a plea of
no contest to one felony count of forgery for
affixing a witness’s signature on two declarations that were then filed in opposition to
summary judgment motions. The supreme
court upheld the summary disbarment. In
doing so, it rejected the lawyer’s contentions
that summary disbarment required an evidentiary hearing and that the summary disbarment statute violates the principle of separation of powers by usurping the inherent
authority of the supreme court over attorney
discipline.
Lawyers should be aware that the State
Bar posts on its Web site the disciplinary history of lawyers, even though the discipline
may be a private reproval. In Mack v. State Bar
of California,38 a lawyer sued the State Bar to
remove from its Web site a notice that the
lawyer “has a public record of discipline.”
The Web site did not describe the nature of
the disciplinary proceedings or the sanctions
imposed. Rather, the Web site noted that an
interested party could request a copy of the
file from the State Bar. Years before, the
lawyer settled disciplinary proceedings in
exchange for a private reproval, pursuant to
which the State Bar agreed not to publicize
affirmatively the lawyer’s discipline. The stipulation noted, though, that the lawyer’s discipline was a matter of public record that
would be furnished to members of the public
upon request.
The trial court granted the State Bar’s
motion for judgment on the pleadings. The
court of appeal affirmed, concluding that posting the fact that the lawyer “has a public
record of discipline” did not violate the terms
of the earlier stipulation.
Web Sites and Lawyer
Advertising
More and more lawyers have Web sites
describing their services. The use of a Web
site, though, raises several ethical issues, as
illustrated by COPRAC’s Formal Opinion No.
2001-155. In the opinion, COPRAC concluded
that a Web site constitutes a “communication” within the meaning of Rule 1-400(A) of
the Rules of Professional Conduct and, therefore, must comply with all of the rules governing communications, such as Rule 1400(D) (which prohibits false and misleading
communications), Rule 1-400(F) (which
requires lawyers to retain copies of communications for two years), and Business and
Professions Code Sections 6157 et seq. (which
prohibit, for example, advertisements including a guarantee of a particular outcome or a
promise of quick payment). The committee
also noted that according to Rule 1-400(F),
lawyers must keep copies of their Web sites,
including each page of every version and
revision of the Web site, for two years—and
these copies must be made available to the
State Bar if requested.
COPRAC further states in its opinion that
pursuant to Rule 1-300(B), a member lawyer
“shall not practice law in a jurisdiction where
to do so would be a violation of regulations of
the profession in that jurisdiction.” The committee warned that other jurisdictions may
construe the posting of a Web site as the
unauthorized practice of law if individual
lawyers are not licensed in that jurisdiction.
To avoid this problem, the committee suggested that lawyers:
• Explain in the Web site where they are
licensed to practice law.
• Describe where the firm maintains offices
and practices law.
• State that they will appear in certain courts
only.
• State that they do not seek to represent anyone based on a Web site visit.
None of these methods, however, provides assurance that a Web site will necessarily comply with the rules of other jurisdictions.
■
1
Adams v. Aerojet-General Corp., 86 Cal App. 4th 1324
(2001).
2
Id. at 1340.
3
Los Angeles County Bar Association Professional
Responsibility and Ethics Committee, Ethics Opinion
No. 506, Initial Client Interview—Duty of Confidentiality,
LOS ANGELES LAWYER, July-August 2001, at 60.
4
Packard Bell NEC, Inc. v. Aztech Sys., Inc., ___ F.
Supp. 2d ___, 2001 WL 880957 (C.D. Cal. 2001).
5
Id., 2001 WL 880957, at *9.
6
Id.
7
Gregori v. Bank of Am., 207 Cal. App. 3d 291 (1989).
8
Packard Bell, 2001 WL 880957, at *9-10 (quoting
Gregori, 207 Cal. App. 3d at 309).
9
Fox Searchlight Pictures, Inc. v. Paladino, 89 Cal.
App. 4th 294 (2001).
10
General Dynamics v. Superior Court, 7 Cal. 4th 1164
(1994).
11
Id. at 1169.
12
Id. at 1190.
13
Fox Searchlight, 89 Cal. App. 4th at 310.
14
Id.
15
Id. at 311.
16
Id. at 313.
17
In the Matter of Lilly, 2 Cal State Bar Court Rptr. 473,
478 (1993).
18
People v. Dang, 93 Cal. App. 4th 1293 (2001).
19
Solin v. O’Melveny & Myers, LLP, 89 Cal. App. 4th
451 (2001).
Id. at 457-58.
21
Id. at 464.
22
Id. at 467.
23
See COPRAC Report and Recommendation on AB 363
(Aug. 17, 2001), at 4-5, available at http://calbar.org
/2bar/3com/3cp0107c.pdf [hereinafter COPRAC
Report]. See also Virginia Ellis & Carl Ingram, WhistleBlower Emerges in Quackenbush Probe, LOS ANGELES
TIMES, June 23, 2000, at A1.
24
See COPRAC Report, supra note 23.
25
See id. For Ossias’s description of what happened, see
http://www.guerrillalaw.com/cindyO.html.
26
Quackenbush resigned effective July 10, 2000. See LOS
ANGELES TIMES, June 29, 2000, at A1.
27
See COPRAC Report, supra note 23.
28
American Equity Ins. Co. v. Beck, 90 Cal. App. 4th 162
(June 26, 2001), review granted, ___ Cal. 4th ___, 31 P.
3d 1270, 112 Cal. Rptr. 2d 258 (2001).
29
Id., 90 Cal. App. 4th at 171 (quoting Joseph A. Saunders, P.C. v. Weissburg & Aronson, 74 Cal. App. 4th 869,
874 (1999)).
30
Musser v. Provencher, 90 Cal. App. 4th 545 (July 10,
2001), review granted, ___ Cal. 4th ___, 31 P. 3d 1271,
112 Cal. Rptr. 2d 258 (2001).
31
Id., 90 Cal. App. 4th at 560.
32
See Charlotte E. Costan, Fee-Splitting Headaches, LOS
ANGELES LAWYER, Dec. 2001, at 26.
33
Sims v. Charness, 86 Cal. App. 4th 884 (2001).
34
Chambers v. Kay, 88 Cal. App. 4th 903 (2001), review
granted, ___ Cal. 4th ___, 109 Cal. Rptr. 2d 301 (July 28,
2001).
35
Id., 90 Cal. App. 4th at 919.
36
Hanson v. Superior Court of Siskiyou County, 91
Cal. App. 4th 75 (July 31, 2001).
37
In re Cristeta S. Paguirigan, 25 Cal. 4th 1 (2001).
38
Mack v. State Bar of Cal., 92 Cal. App. 4th 957 (2001).
20
LOS ANGELES LAWYER / JUNE 2002 35
2002
GUIDE TO
LAW OFFICE TECHNOLOGY
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LOS ANGELES LAWYER / JUNE 2002 37
computer
counselor
By Carole Levitt and Mark Rosch
Pocket PCs Help Traveling
Attorneys Lighten Their Load
More powerful
concern to most attorneys, however, is that a PDA’s software,
than a PDA, the
while compatible, does not have
the same look and feel as the softpocket PC rivals
ware they use most (for example,
Word, Excel, and Outlook) on
a laptop and fits
their main computer. Unfortunately, PDAs generally oblige
in a pocket
their users to learn new applications. Additionally, trading data
between a PDA and a regular
dvances in technology computer is sometimes an exercontinue to pack more cise in frustration. Handheld comand more computer proc- puters occupy the gap between
essing power into less and less the size advantage of PDAs and
space. One result of this trend is the well-known software that attorthat over the last few years, the neys are used to using on their
laptop computer has become an personal computers.
A number of manufacturers
indispensable tool for nearly
ever y attorney. It has allowed have developed handheld comlawyers to remain in touch with puters, known as pocket PCs, to
their offices while traveling on compete with PDAs. These handbusiness and to carry entire case helds use an operating system
files in an electronic format. that was developed by Microsoft
Recent technological develop- and include light versions of
ments have shrunk that comput- many of Microsoft’s applications,
ing power even more. Handheld including Word, Excel, and Outcomputers offer many of the fea- look (but not Power Point). Since
tures of laptop and desktop com- these applications function much
puters in a package that fits in a like their laptop or desktop counterparts, attorneys who make the
user’s hand or pocket.
Handheld computers are a transition to a pocket PC are finding the switch to be
step above personal
Carole Levitt and
nearly seamless
digital assistants
Mark Rosch are
and report that the
(a group that inprincipals of Internet
transfer of data
cludes the Palm
For Lawyers. Levitt
goes more smoothPilot and the Handcan be reached at
ly than it does with
spring Visor). Most
[email protected]
a PDA.
PDAs have only 2
.com
Also assisting
MB of memory (a
the transition from
standard PC has
PC to pocket PC is
hundreds) and are
limited to black-and-white screens. the handheld PC’s ability to allow
These limitations alone may pre- users to attach a keyboard via a
vent some attorneys from using a serial connector and employ all
PDA—although some of the the well-known keyboard shortnewest and most expensive PDAs cuts that are used with a deskhave 16 MB of memory and high- top computer (such as Control-X
resolution color screens. Of more to cut selected text). Think Out-
A
38 LOS ANGELES LAWYER / JUNE 2002
side’s Stowaway keyboard, distributed by Targus (the company’s Web page is at http://www
.targus.com/accessories .asp), is
full-sized but folds to a size nearly
as small as the pocket PC itself.
The keys are the same size as
those on a standard keyboard,
requiring little or no adjustment
when using the folding keyboard.
The keyboard also has hot keys
that open a variety of the pocket
PC’s programs and functions,
including Word, Excel, and the
calendar.
Pocket PC Features
The newest pocket PCs feature 206 MHz processors, 32 MB
of RAM memory (but no hard
drive, although one can be
added), and full-color, high-resolution screens. With other companies developing hardware and
software for pocket PCs, these
devices rival recent generations
of desktop and laptop computers
in both depth of features and
computing power. Some of these
features are third-party software
that allow pocket PC users to
send and receive faxes, view
Adobe Acrobat PDF documents,
create and display Power Point
presentations, and conduct
numerous other business-related
functions for which they currently use laptops.
Wired and wireless Internet
access allows attorneys to use
the Web for research, to send and
receive e-mail, and to find maps
and other online information
while traveling or even in court.
Three pocket PCs (Hewlett Packard’s Jornada 565, Casio’s EG800, and UR There Productions’
Amigo) represent a variety of the
configurations that are available.
The Jornada 565 fits easily
into the palm of one’s hand. Its
sturdy metal and plastic case features a flip-open cover that protects the device’s screen. The
Amigo’s all-metal case seems
more rugged than the Jornada’s
but has a square shape that
makes it less comfortable in one’s
hand. The EG-800 is even sturdier and more rugged, encased in
a heavy rubberized material with
seals covering its openings. Casio
claims that the EG-800 is waterresistant and can be dropped
from a height of approximately
three feet without damage (as
long as it does not land on its
glass screen). Not surprisingly,
this pocket PC is also the thickest
and heaviest of the three. All
three devices feature “one-button” recording of voice notes,
something that many attorneys
appreciate.
A key benefit of the pocket
PC is that users can input information—for example, while away
from the office—and then transfer the information to a laptop or
desktop. To transfer information
(including files, contact information, and e-mail) from a pocket
PC to a desktop, users must first
install Microsoft’s Active Sync
utility software onto their fullsized computer. Active Sync is
included with all pocket PC purchases. (The name of this utility
has led users to describe the
transfer of data from a pocket PC
to a full-sized computer as “syncing.”) Pocket PC software is usually transferred to the pocket PC
from the desktop’s CD drive with
a serial cable or what is called a
sync cradle. The sync cradle that
comes with the Jornada 565, for
example, is well worth owning
because it charges the pocket PC’s batteries
at the same time that syncing is in progress.
This cradle also holds the pocket PC at an
angle that makes it easy to see the progress
of the synchronization on the screen.
Apple users can also transfer documents
between their pocket PCs and their Mac computers with Pocket Mac software. Users with
Mac OS 9.x and 10.x can synchronize Word,
Excel, PDF, and other file formats. Synchronization of contact files, however, is not available in the current Regular Edition of Pocket
Mac, but a free converter is included that
saves contact files as Excel spreadsheets that
can be read on the Mac. The ability to sync
contact information is a feature promised for
the for thcoming Professional Edition of
Pocket Mac. Mac fans should note, however,
that a Windows PC is necessary to initially
install Pocket Mac on the Pocket PC.
Gadgets and Screens
A variety of expansion cards allow pocket
PC users to add a camera, modem, global
positioning device, or hard drive to a pocket
PC. The Jornada 565, Casio EG-800, and
Amigo all have a built-in expansion slot, but
some other pocket PCs require an optional
“sled” or “jacket” to add an expansion slot. If
you plan on using an expansion slot, you
should be aware that there is more than one
type. The four common types are not interchangeable, so examine the slot you need, as
well as labels and manuals, before buying.
Two more common types of expansion slots
are the PCMCIA (which is found on most
laptops) and the Compact Flash (or CF). The
Amigo is the only pocket PC that currently
includes a PCMCIA card expansion slot as a
standard feature. The Casio and Jornada
devices have a CF expansion slot.
In addition to add-on devices, pocket PCs
offer attorneys the ability to display information on a computer screen, data projector, or in some cases even a television screen.
These display capabilities can be exploited
with expansion cards (including the Margi
Presenter-to-Go and the Colorgraphic
Voyager). Using one of these display adapters,
users can show Power Point presentations
with their pocket PCs and leave their laptops
at home.
Although no pocket version of Power Point
exists, presentations can be converted to a format compatible with pocket PCs. The Margi
features slide show viewer software and a
display adapter in one package, and it makes
conversion of a Power Point presentation into
a slide show a simple, one-button process.
On the other hand, the Voyager is a display
adapter only, and thus requires users to buy
separate slide show software. One suitable
application is Pocket Slides, which also makes
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it simple to convert Power Point presentations into slide shows.
Users should not necessarily favor the
Margi because it comes complete with its
own software. Many users note that Pocket
Slides offers more features than the Margi’s
software. After a Power Point presentation
has been converted to the Pocket Slides format, for example, users can still add or delete
text from the slides and add new slides.
Pocket Slides also preser ves animations
within slides and transitions between slides.
In contrast, the Margi’s software does not
allow users to edit the text in slides or create
new ones and loses all animation and transitions. The Margi only allows users to delete
slides or put them into another order.
Both slide show viewers allow users to
view their Power Point speaker notes on the
pocket PC screen while hiding them from
the audience that is viewing the projected
slides. The Margi speaker notes screen is
larger than the Pocket Slides screen, and
thus easier for the speaker to see. The Margi
also includes a small remote control device
that can advance the slides or select a specific
slide to display.
Keeping the Battery Charged
One weakness of the pocket PC is its lack
of a hard drive. The pocket PC stores its data
in RAM memory, which requires constant
electrical power. All pocket PCs contain a
backup battery to preserve the data in case
the main battery is drained, but the backup
battery can only maintain the data for a day
or two before it too is drained and all data is
lost. Users must therefore learn to keep some
charge in the main battery at all times. This
can be accomplished by plugging the pocket
PC into an electrical outlet. Those who cannot meet the challenge of always remembering to keep their pocket PCs charged, however, have two options. The first is available
in the Jornada and Casio, which feature some
memory that is not dependent on batteries.
Users can use this memory for storing their
most important files. The second option is to
add a hard drive. Units that fit into the pocket
PC’s expansion slot are available.
As always with computers, lawyers who
are pondering whether to plunge into the
pocket PC world may, on the one hand, be
tempted to wait until some technological
advance makes the devices more powerful
and less expensive; on the other hand, they
may feel the need to keep pace with the competition. Lawyers who spend considerable
time in motion may already know, however,
if their tolerance for heavy laptops has
reached an end, while other users may simply appreciate a know-it-all gadget that fits
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IndextoAdvertisers
42 LOS ANGELES LAWYER / JUNE 2002
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Lawyers’ Mutual Insurance Co, p. 9
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AT&T Wireless, Inside Back Cover
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Law Office of Donald P. Brigham, p. 39
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The Chugh Firm, p. 40
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Noriega Chiropractic Clinics, p. 41
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CLE Preview
Revised
Article 9
Malpractice Insurance
ON TUESDAY, JUNE 18, the Los Angeles County Bar Association will present “The Legal
Malpractice Insurance Crisis: How Did We Get Here and What Can We Do?” Malpractice
insurance rates will be increasing for all attorneys. Those who attend this essential and
practical program will learn about this trend from an insurance industry professional and a
legal malpractice and ethics expert. The two experts will address the critical issues facing the
legal profession. Topics will include the causes for the sudden increase in malpractice insurance
rates, what to expect next and how malpractice insurance will change, the different levels of
risk and the importance of claim history, the effect on State Bar complaints, what attorneys
can do in response to increasing rates, the top 10 most common claims and how to avoid
them, claims that are not so obvious, conflicts to avoid, practice pointers on how to avoid
malpractice claims, and alternative actions to the crisis. Lawyers should not miss this
opportunity to learn what practical and practice-oriented steps they can take in response to
higher malpractice rates. The seminar will take place at the LACBA/LEXIS Publishing
Conference Center, 281 South Figueroa Street, Downtown. On-site registration will begin at
5:30 P.M., with the program continuing from 6:00 to 7:30. Registration code number:
709DF18. CLE+PLUS members free (light refreshments included).
$40—LACBA members
$60—all others
1.5 CLE hours, including 1 ethics hour
Computer
Malpractice
Labor and Employment
Law Cases
ON WEDNESDAY, JUNE 12, the Business and
Corporations Law Section will present “Ten
Ways to Commit Malpractice with Your
Computer,” a program focusing on the do’s
and don’ts of using your computer and the
Internet in your corporate practice. The
program will cover hidden dangers lurking in
your word processing documents, file sharing
with clients and cocounsel, backups, viruses,
and hackers. Speakers Daryl Teshima and
Robert E. Braun will lead the discussion at
Lawry’s Restaurant, 100 North La Cienega
Boulevard in Beverly Hills. On-site registration
will begin at 7:30 A.M., with the program
continuing from 8 to 9:30. Registration code
number: 808BF12. CLE+Plus members free
(meal not included). Prices below include meal.
$50—Business and Corporations Law
Section members
$60—other LACBA members
$70—all others, including all at-the-door
registrants
1.5 CLE hours
ON THURSDAY, JUNE 27, the Labor and
Employment Law Section will present a
program highlighting the Supreme Court’s
2001-2002 labor and employment law docket.
Cynthia Estlund will review the highlights of
the Supreme Court’s 2001-2002 term,
including B & K Construction v. NLRB, Chevron
U.S.A. v. Echazabal, Edelman v. Lynchburg
College, Hoffman Plastic v. NLRB, Ragsdale v.
Wolverine Worldwide, and U.S. Airways v.
Barnett. The conference will take place at the
Millennium Biltmore Hotel, 506 South Grand
Avenue, Downtown. On-site registration will
begin at 6:00 P.M. and dinner at 6:30, with the
program continuing from 7:00 to 8:00 P.M.
Registration code number: 817XF27. CLE+Plus
members free (meal not included). Prices below
include meal.
$55—Labor and Employment Law Section
members
$65—LACBA members
$75—all others
1 CLE hour
ON TUESDAY, JUNE 26, the
Commercial Law
Committee of the
Commercial Law and
Bankruptcy Section will
present “Financing
Receivables under Revised
Article 9: Overriding
Contractual and Legal
Restrictions on
Assignment.” Speakers
Meredith S. Jackson and
Anthony Callobre will
focus on the rules
facilitating financing of
different types of
receivables and the
exceptions that can still
derail a financing. Before
R9, contractual and legal
restrictions on assigning
receivables necessitated
extensive due diligence,
complicated legal analysis,
and increased the cost of
completing transactions.
Now, however, R9 has
provided attorneys with
new rules to address
restrictions on
assignability. This program
will take place at the
LACBA/LEXIS Publishing
Conference Center, 281
South Figueroa Street,
Downtown. On-site
registration will begin at
11:45 A.M. and lunch at
noon, with the program
continuing from 12:30 to
1:30 P.M. Registration code
number: 810LF13. CLE+Plus
members free (meal not
included). Prices below
include meal.
$55—Commercial Law and
Bankruptcy Section
members
$65—LACBA members
$75—All others
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 June County Bar Update.
LOS ANGELES LAWYER / JUNE 2002 43
closing
argument
By Karen Nobumoto
Fighting the Unauthorized Practice of Law
We must support proposed legislation that will
increase the penalties for this egregious fraud
C
onsumers in California may soon win needed protection from
the growing commerce in the fraudulent delivery of legal services. Earlier this year, State Senator Gloria Romero of Los
Angeles introduced SB 1459, which will increase penalties for individuals who present themselves as lawyers when, in fact, they are not
licensed to practice law in California.
The unauthorized practice of law (UPL) has been proliferating over
the past few decades, and many attorneys, district attorneys, and
other law enforcement officials have tried to stem the tide. But as
California has grown—and especially as our immigrant communities
have grown—the harm caused by the unauthorized practice of law has
become more egregious, more blatant, and, sadly, even more destructive to personal lives.
UPL, of course, is not a new issue for lawyers or, for that matter,
the State Bar. Public protection has always been the highest priority
of the State Bar. The State Bar, however, has limited jurisdiction over
nonattorneys who delve into the unauthorized practice of law. It cannot simply extend its regulatory functions to include enforcement
against nonlawyers who engage in harmful practices.
What we can do is work with the legislature to increase the criminal penalties regarding UPL. Current law categorizes nonlawyer
UPL as only a misdemeanor. This mild prohibition is understandable,
as the law was written years ago with the intent of stopping paralegals
who sometimes went too far with their good intentions.
This is why SB 1459 is so important. It, in effect, would make a
repeat offender who is not an active member of the State Bar or not
otherwise authorized to practice law in the state, guilty of a misdemeanor or a felony if he or she willfully and intentionally, with intent
to defraud, commits either of the following:
1) Specified actions indicating that he or she is an attorney or entitled
to practice law, or
2) Borrows, uses, purchases or appropriates the name, license number, or identity of a member of the State Bar for the purpose of practicing law.
We all recognize that when well-intentioned people are trying to
help others, lines are blurred and sometimes crossed. But our sympathy should not extend to the nonlawyer who engages in intentional
misrepresentation—the person who, for example, places “esquire” after
his or her name on a business card, or willfully and maliciously holds
himself or herself out to be a lawyer, or who tells unsuspecting clients
that his or her services include appearing in court on their behalf. This
is certainly not misdemeanor behavior, and the criminal penalties need
to reflect that.
SB 1459 accomplishes this by allowing prosecuters to charge a repeat offender with either a misdemeanor or a felony, which, in turn,
44 LOS ANGELES LAWYER / JUNE 2002
will motivate prosecutors to pursue these criminals. SB 1459 would
also help police agencies recognize recidivist behavior because a
prior conviction would specify UPL and not, as currently is the practice, a catchall grand theft charge. The sentencing structure would
work to deter these miscreants from harming unsuspecting people who
believe they are hiring legitimate legal representation.
Those whose unauthorized practice of law Senator Romero is
addressing act willfully and intentionally. They knowingly set out to
deceive the public. They have not passed the bar. Under current law,
one of the only means of prosecuting this form of fraud as a felony is
by charging grand theft by false pretenses. But frequently the harm
to consumers does not involve an exchange of money in excess of $400,
which precludes pursuing a felony grand theft conviction.
For example, in one of my last cases before becoming State Bar
president, I prosecuted an individual for unauthorized practice of
law. One of the victims suffered harm that did not result in an
exchange of monies exceeding $400, yet the victim was unable to pursue what he believed to be a legitimate inheritance claim because the
defendant never returned the victim’s original documentation.
This is but one example of the type of harm that consumers face
when dealing with individuals who intentionally and falsely represent
themselves as attorneys. We have heard the egregious stories recounted over and over in the past few years:
• People who give their life savings of $5,000 or $10,000 on the
guarantee of getting a green card, but who are left facing deportation.
• People who get sucked into the “slow drain”—paying a $200 fee
here, another $500 there—until they have paid thousands of dollars
to the nonlawyer, are out of money, and are no closer to what they are
seeking than the day they started.
• People who are attracted to illegitimate businesses because they advertise
an inside connection to the Immigration
and Naturalization Service.
Too often, the nonattorneys who take
this money and who occasionally are
caught and have their hands slapped,
pay their fines as a cost of doing business
and are soon back doing the same thing
somewhere else—and to someone else.
Lawyers are on the front lines and have
Karen Nobumoto is
seen close up the harm these cases bring.
president of the
We are well equipped to help change CaState Bar of
lifornia law to stem this tide. That is why
California.
we should fully suppor t Senator Romero’s laudable efforts.
■
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