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Professional Liability Update: Where Client Secrets Do Not Pertain To Lawyer's Liability, Dismissal Under Solin Doctrine Is Unavailable
By Allen L. Michel, Esq.
Although not all lawsuits against law firms are brought by former clients, most are. And in those suits, the defending law firm is completely free to reveal relevant attorney-client confidences. Evidentiary rules and statutes (such as California Evidence Code sections 954, et seq.) and principles of estoppel establish that when a client exercises his election to sue his lawyer, he “opens the door” to disclosure, by the defendant firm in its defense, of all pertinent communications with the client, even communications that were confidential.
However, law firms are sometimes sued by outsiders to the attorney-client relationship (e.g., when a former adversary sues opposing counsel for malicious prosecution), or by a former client where the lawyer had represented more than one client in the underlying matter.
In malpractice cases where there has been more than one client, but only one of the clients decides to sue the lawyer, the defendant faces a predicament: although duty-bound to preserve client confidences, the lawyer usually needs to respond to the dissatisfied client’s allegations of malpractice by disclosing information received in confidence from both clients. Although in disputes between clients, the confidentiality of communications exchanged with the lawyer by either client is lost (see, e.g., Cal. Ev. Code section 962), there is no statutory or common law exception to confidentiality where one client sues the lawyer and the other client does not join.
This issue was first addressed directly eight years ago in Solin v. O’Melveny & Myers, 89 Cal.App. 4th 451 (2001), but subsequent decisions on the subject had been virtually nonexistent until the recent case of Dietz v Meisenheimer & Herron, 177 Cal.App.4th 771 (2009).
Solin holds that a law firm cannot be required to defend a claim against it while the firm is simultaneously prevented by attorney-client confidentiality running in favor of a non-party from explaining why it did what it did. The remedy is that the malpractice case must be dismissed. In Dietz, a different district court of appeal evaluated the doctrine of mandatory dismissal in a factual matrix different from Solin. The dispute in Dietz was between two lawyers over a referral fee; the client was not a party to the case.
Although some appellate courts have mentioned Solin in passing, Dietz appears to be the first reported decision from a California appellate court addressing whether Solin’s principles apply to a matter where the plaintiff is not a client of the defendant.
Dietz had referred a bad faith case to Meisenheimer, who agreed to pay Dietz, as a referral fee, 25% of the fee he received (referral fees are permissible under California’s Rules of Professional Conduct so long as the client consents and the net recovery of the client is not impacted). The bad faith case was settled for a substantial sum but Meisenheimer paid Dietz only $50,000 instead of the $310,000 that the recovery in the bad faith case would have suggested was proper. Dietz sued Meisenheimer for the balance on a cause of action for “false promise fraud,” as well as claims based on contract theories.
Meisenheimer claimed in the trial court that certain confidential tax advice had been given at or around the time of the settlement and that, since he was not able to reveal the advice in defense of the present action, Dietz’s case had to be dismissed (which would have allowed Meisenheimer to keep over $250,000 he seemingly owed to Dietz).
The trial court dismissed only part of Dietz’s claim – the cause of action for fraud. That claim involved the reasons for Meisenheimer’s refusal to pay Dietz the larger referral fee, which (according to Meisenheimer) were based on the tax advice. But Dietz’s breach of contract and similar claims were permitted to proceed, the trial court commenting inter alia that the client had already agreed to waive all confidentiality as to communications relating to the referral fee payment, and also expressing some doubt whether Meisenheimer’s claimed inability to adequately defend the case really centered on any of the tax-related confidential communications. The jury found for Dietz.
The court of appeal affirmed. In doing so, the court correctly found there was no denial of due process. Just as Dietz argued, the issue in the case once the fraud cause of action was removed was not the tax advice that Meisenheimer purportedly wanted to introduce, but simply whether there had been a referral fee contract and, if so, whether Meisenheimer had breached it. The connection between the tax advice and the referral fee issues was never apparent.
Given the lack of any demonstrated connection between the issues before the court and the tax advice, there was nothing improper in finding that the attorney would have to defend the claim without revealing any confidences. Indeed, even in a customary malpractice case, the defending lawyer is not free to discuss confidences that are not “relevant to an issue of breach” of the duties of the lawyer. (Cal. Ev. Code section 958).
Rather than simply affirm on the basis that the tax issue communications were not relevant to the issues to be tried, the Dietz court went further than necessary. For example, in dicta, it implied that a trial court can sometimes permit a case to proceed against an attorney who is duty-bound to withhold some relevant confidential information, raising a “slippery slope” issue that was not present in the case before it. The Dietz court stated that if all the defendant needed to do was show that “any” relevant confidential evidence would be excluded before dismissal is permitted, “dismissal would become commonplace.”
Although Dietz seemingly cites General Dynamics v Superior Court, 7 Cal.4th 1164 (1994) for this otherwise speculative proposition, the Supreme Court had expressed no concern in that case over whether dismissals of valid cases might or might not become more frequent. In fact, General Dynamics was a case brought by the lawyer against the client, who was also the lawyer’s employer, so the Supreme Court was not addressing directly the issue of whether a lawyer sued for damages would be entitled to a dismissal where relevant but confidential information could not be introduced in the lawyer’s defense.
Nevertheless, apparently concerned that the test of relevance was too broad, the Dietz court introduced the issue of “materiality,” a concept not mentioned in Solin. The court in Solin had been very clear that it was never appropriate to leave the defending attorney with half-protections or to resort to Monday-morning quarterbacking to ascertain the degree of importance of the relevant evidence to the lawyer’s defense. Indeed, Solin had argued that it was unnecessary for O’Melveny to divulge the confidential communications because they were not central to his case against O’Melveny, but the argument was flatly rejected by the Solin court.
Explaining why it would apply a bright line test of relevance, the court in Solin stated that if O’Melveny were to prevail in the lawsuit despite being prevented from disclosing the secret material, then
… [W]e could say, after the fact, that O’Melveny did not ‘need’ to disclose the Clients’ Secrets in order to defend itself. If, however, O’Melveny is made to defend itself without the use of the Clients’ Secrets, and a jury returns a verdict for Solin, we cannot know whether the verdict would have been different had O’Melveny been permitted to present all relevant evidence regarding its consultation with Solin, including the Clients’ Secrets.
Given this potential impairment to the lawyer’s case, court held that the defendant is
entitled to present to the jury all relevant information consistent with whatever strategy it determines best serves its interests, regardless of Solin’s views of the ‘necessity’ of the evidence.
(Solin, supra, 89 Cal. App. 4th at 462-63, emphasis added.)
Solin thus stands squarely for the proposition that a lawyer will not be required to defend himself in a lawsuit with both hands tied behind his back due to his duty to maintain client confidences. If the lawyer wishes, in aid of his defense, to reveal information that is relevant to the issues in the suit against him, and the client has not waived confidentiality, dismissal is mandated.
To the extent the dicta in Dietz suggests that in some cases a lawyer may be required to defend with one hand tied behind his back (i.e., where the court agrees that information relevant to the lawyer’s defense is reflected in confidential communications, but that evidence is not in the court’s opinion sufficiently material to warrant dismissal of the case), the two decisions are in conflict, and the California Supreme Court may eventually resolve the inconsistency.
Since Dietz was not such a case (there was in fact no relevant information excluded at trial, because the client had consented to disclosure of all communications relating to the referral fee dispute), its language implying that a lawyer may sometimes be forced to defend himself without the benefit of all relevant evidence—evidence that the lawyer is barred from introducing solely due to his statutory obligation to maintain his client’s confidences—is unnecessary to the decision. Presumably, future courts will treat that dicta as such.
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©2009 Gladstone Michel Weisberg Willner & Sloane, ALC. All Rights Reserved.