[Below is a guest post by Jim Fischer, discussing the recent Oasis West Realty case.]
May a lawyer publicly oppose a former client’s project? Not if the lawyer worked on the project, said the California Supreme Court in Oasis West Realty, LLC v. Goldman, S181781 (May 16, 2011) (2011 WL 1833208). Goldman and his firm, Reed & Smith, (firm) assisted Oasis Realty (Oasis) on a redevelopment project in Beverly Hills, California. After the work was completed Goldman and his wife publicly supported an effort to qualify a referendum to challenge the City Council’s approval of the project. The referendum qualified for the ballot, but lost by a narrow vote. Oasis then sued Goldman and his firm. The defendants moved to strike the complaint under the anti-SLAPP statute (CCP '425.16) contending Goldman’s activities constituted protected speech.
The principle claim considered by the California Supreme Court was that Goldman and the firm breached their fiduciary duty to their former client by Goldman’s public opposition to the redevelopment project. Oasis contended that Goldman abused his duties by using client confidential information to oppose the project, thereby damaging Oasis. The Court agreed with Goldman that Oasis had not identified any disclosure of client confidential information by Goldman. The court concluded, however, that it could be presumed that Goldman used client confidential information in his public opposition and that such use would establish a breach of fiduciary duty on Goldman’s part.
The Supreme Court reasoned that the approach was justified by prior precedents that had presumed that confidences are disclosed in the course of the attorney-client relationship (citing People ex rel. Deukmejian v. Brown (1981) 29 Cal.3d 150, 156). Given that Goldman was now publicly opposing his prior work, the court stated that it was reasonable to infer that he used client confidential information to formulate his present view. Had Goldman opposed the project before he undertook the work for Oasis, he would have been required to disclose his personal opposition under Rule 3-310(B), California Rules of Professional Conduct. Because Goldman made no such disclosure, the court concluded that “it is likewise reasonable to infer that Goldman’s opposition of the representation developed over the course of the representation, fueled by the confidential information he gleaned during it.”
The Supreme Court rejected the position that the presumption should be restricted to situations when a lawyer is representing a client adverse to a former client or when the lawyer is seeking to advance the lawyer’s personal financial interests. The Court of Appeal had adopted that restriction as a necessary limitation on what it characterized as broad language in Wutchumma Water Co. v. Bailey, 15 P.2d 505 (Cal. 1932). The Supreme Court disagreed. The court noted that a former client, such as Oasis, could be harmed by the lawyer’s use of client confidential information to publicly oppose the client’s project. The goal is to prevent lawyers from harming former clients by the use of information obtained as a result of the representation.
The Supreme Court rejected contentions that it was unduly burdening Goldman’s First Amendment Rights. The court conceded that a lawyer retains the right to publicly advocate; however, the lawyer may not advocate specifically to the disadvantage of a former client if that advocacy involves the use of client confidential information. The court expanded on an example from The Restatement (Third) Law Governing Lawyers '126, com.e, illus.6 involving a lawyer representing a client before the IRS regarding tax depreciation allowances for past tax years. The court said a tax lawyer could publicly advocate for the repeal of tax depreciation allowances for future tax years. The court, agreeing with the Restatement, said such advocacy would not directly affect the client because the lawyer’s advocacy would affect only current and future tax years. The court distinguished that situation from the one before it saying that what Goldman publicly did here is analogous to the tax lawyer publicly advocating that his tax client should be denied tax depreciation allowances for the same year the lawyer was seeking favorable treatment before the IRS.
One surmises that many lawyers will agree with the Supreme Court’s resolution of the matter in Oasis Realty. Cases like Oasis Realty tend to present lawyer obligations in a stark light. Publicly opposing a former client on the same matter the lawyer previously represented the client is facilely perceived as a case of lawyer disloyalty. I would suggest, however, that the matter is much more difficult and nuanced than the Supreme Court’s somewhat cursory treatment of the issues in Oasis Realty suggests.
The first concern is the Supreme Court’s reliance on the presumption that confidential information was used without requiring that Oasis identify Goldman is actual use of such information. Absent the use of client confidential information, there is no breach of fiduciary duty on Goldman’s part in publicly opposing the project; hence, the presumption is critical to success of Oasis’s claim.
First, the Supreme Court cited no authority for its contention that a use presumption was appropriate. Historically, courts have applied a presumption that the lawyer acquired client confidential information when considering motions to disqualify counsel. If the facts warranted that presumption, a court would then inquire whether there was a significant risk that the information would be used to the detriment of the former client. To determine whether there was such a risk courts inquired whether the matters were the same or substantially related. Even here, however, the issue of the matters “relatedness” was directed at preserving the client’s confidential information from disclosure. “Relatedness” permitted courts to presume the lawyer had material client confidential information. If the information held by the lawyer was material, a court could presume the lawyer would use the information to help the current client to the detriment of the former client. In the context of motions to disqualify counsel that was enough; the former client would not be required to disclosed the very information the former client claimed was confidential. I Oasis Realty the vice is not use per se; no one cares why Goldman opposes the former client’s matter. The critical issue is whether he is disclosing or using client confidential information in his opposition. Moreover, because it is the public nature of his opposition that concerns Oasis, Goldman must be publicly using or disclosing client confidential information; elsewise Goldman’s opposition is indistinct from other opponents of the project. Public use and disclosure negates, however, any need for or cause to invoke a presumption.
That situation does not, however, travel well to the context presented in Oasis Realty. When the lawyer is exercising his or her First Amendment Rights a legitimate concern exists that resulting litigation may chill the exercise of those rights. Anti-SLAPP legislation is expressly designed to insure that speech is not unduly burdened by the threat of litigation. Manufacturing a use presumption in the context of the exercise of First Amendment rights is directly inconsistent with those rights. Indeed, as construed by the Supreme Court the California Rules of Professional Conduct now acts as a prior restraint on lawyer speech because of the presumption read into the Rules that lawyers necessarily use client confidential information if they publicly advocate against a matter they previously worked on while representing a client, regardless of the context or the reason for the public opposition.
Second, the Supreme Court failed to address a New Hampshire Supreme Court opinion that suggests the Oasis Realty position is incorrect. In Case of Wood, 634 A.2d 1340 (N.H. 1993) the lawyer publicly opposed a former client’s efforts to secure a zoning variance. As in Oasis Realty the lawyer had previously represented the client on the same matter. As in Oasis Realty the lawyer publicly advocated for a position that was disadvantageous to the former client’s interest; indeed, in Case of Wood the lawyer was more public in his opposition than in Oasis Realty, personally attending council meetings and advocating against the proposed variance. The New Hampshire court found that the lawyer breached a duty to his former client, but the court did not use a presumption to reach that result. The court found that the lawyer actually used client confidential information as part of his public attacks. Case of Wood, supra, 634 A.2d at 1344:
[W]e hold that Wood’s references to the fact that Heritage representatives explored another site and that the firm of Stebbins, Bradley, Wood & Harvey refused to represent Heritage because of his opposition to the project are related to the representation and were used to Heritage’s disadvantage.
(brackets added). Just as importantly, the court refused to find a basis for liability in general statements the lawyer made that were a matter of public record and/or generally known. Id. at 1343-44 (noting that lawyer’s references to certain problems associated with former client’s project were either generally known as associated with such projects, e.g., traffic and related impacts, or disclosed by the former client in its public filing regarding the matter, e.g., former client’s decision to bypass citizen’s committee).
Case of Wood did involve completed litigation involving lawyer discipline, while Oasis Realty involves a challenge to the pleading. However, as the Supreme Court noted in Oasis Realty, to survive an anti-SLAPP motion the plaintiff must “demonstrate[] a probability of prevailing on the claim,” citing City of Cotati v. Cashman (2002) 29 Cal. 4th 69, 76. Because court held that “Oasis has demonstrated a probability of prevailing on its claims,” it appears that Oasis Realty can rely on the presumption to satisfy its burden of proof on the issue at trial.
Third, the Supreme Court placed significant emphasis on Goldman’s failure to disclose his personal views opposing the project (pursuant to Rule 3-310(B), California Rules of Professional Conduct) as evidence that his views were based on what he learned about the redevelopment project during the course of the representation. Yet, even if the inference is legitimate, the court never established that such a disclosure was required by Rule 3-310(B). It is not only customary that lawyers assist clients in achieving objectives that the lawyer finds objectionable, such actions are applauded by the bar. ABA Model Rules, Rule 1.2(b) (“A lawyer’s representation of a client, including representation by appointment, does not constitute an endorsement of the client’s economic, social or moral views or activities.”) On its face, Rule 3-310(B) only requires disclosure of the lawyer’s legal, business, financial, or professional interests in the client’s matter, the Rule does not mention the lawyer’s personal or political interests. Given that limitation, the Supreme Court’s blithe assertion that Rule 3-310(B) provides support for its holding is unsupported.
Fourth, the implications of the Supreme Court’s disclosure holding are potentially staggering. Does Rule 3-310(B) now require a lawyer to disclose that the lawyer does not share the client’s objectives of the representation? Can a lawyer represent a health insurer without disclosing that personally the lawyer supports socialized medicine? Must a lawyer disclose to a death row inmate that the lawyer personally supports the death penalty? Such disclosures may be appropriate if the lawyer’s personal views risk compromising the client’s representation. See, e.g., ABA Model Rules, Rule 1.7, cmt.10. But the significance of such a conflict is that it is based on concrete facts, not hypothesized. Lawyers are entitled to some privacy and undertaking a representation should not subject the lawyer to the same full disclosure as would be required were one applying for a high level security clearance. The court treats Rule 3-310(B) as if it required Goldman to disclose any personal objections he had to the redevelopment project regardless of the effect that view would have on Goldman’s representation of the client.
Fifth, the Supreme Court’s treatment of the client’s “harm” is also disquieting. The court accepted Oasis’s claim that its response to Goldman’s advocacy – investigate Goldman’s conduct and prepare a letter demanding Goldman and his firm conform to their professional obligations – satisfied the “harm” requirement for a breach of fiduciary duty claim. Later the court expanded on this theme, stating that Goldman’s individual advocacy against the project was indistinguishable from advocacy on behalf of a new client:
It is not difficult to discern that use of confidential information against a former client can be damaging to the client, even if the attorney is not working on behalf of a new client and even if none of the information is actually disclosed . . . . Inasmuch as the harm to the client is the same, the rule appropriately bars the attorney from both disclosing or using the former client’s confidential information against the former client.
This language could readily be applied to positional conflicts when a lawyer, on behalf of a new client, argues for a legal position that is inconsistent with that advanced for a former client. Recall that the Supreme Court’s reference to the use of confidential information is not based on actual use, but presumed use based solely on the existence of the prior lawyer-client relationship. If a lawyer on behalf of a new client effects a reversal or modification of a legal principle or precedent that the lawyer advanced or obtained on behalf of a former client, hasn’t that former client been harmed? And because that former representation is admitted and the same legal proposition is involved, doesn’t Oasis Realty strongly suggest that the lawyer has now breach a fiduciary duty owed to the former client.
I raise this point not because I believe the Supreme Court intended to prevent lawyers from having positional conflicts, far from it. The vice of Oasis Realty lies in its loose language and reasoning that was seemingly invoked by the court’s displeasure at the lawyer’s conduct. Unfortunately, in addressing its apparent displeasure, the court misstated and misapplied existing law and created ambiguous precedent.
The Supreme Court seemed somewhat mindful of this possibility for it warned that its decision was limited:
[W]e are not announcing a broad categorical bar here, nor are we presented with a situation requiring us to articulate how imputed disqualification rules would apply in this context. Our task is solely to determine whether any portion of Oasis’s causes of action have evenminimal merit within the meaning of the anti-SLAPP statute.
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The absence of a “broad categorical bar on attorney speech” also disposes of defendant’s attempt to interpose a First Amendment defense.
Much like the “Disneyland Fast-Pass” that has a limited window of validity, the court appears to be attempting to limit its opinion. Because, for the reasons stated above, I find the opinion to be underwhelming, I hope the court’s effort in this regard is successful.