This article is reprinted with permission from The Pennsylvania Bar News.
Jeffrey P. Lewis is a member in the Philadelphia office of the Pittsburgh-based law firm of Eckert Seamans Cherin & Mellott, LLC. He serves on the PBA Professional Liability Committee. He can be reached at 215.851.8437, and by email at email@example.com.
By: Jeffrey Lewis
On occasion, lawyers are called upon to represent clients engaged in a project, although perfectly legal, that the lawyer does not consider sound public policy. A common example would be a real estate development project. The lawyer may not personally feel that the proposed project would be good for the neighborhood, but would be breaching no professional ethical code in taking on this representation. There is no question that the lawyer cannot take on the representation of another client, such as a citizen’s opposition group, in the same or in a substantially related matter. There is also no question that the lawyer cannot breach any confidences of his or her former client. But to what extent can the lawyer act as a private citizen in opposition to the project, once he or she ceases representing the developer, without it being actionable conduct? The Supreme Court of California recently considered this issue.
In Oasis West Realty, LLC v. Goldman, 250 P.3d 1115 (Cal. 2011), a developer had retained a lawyer to represent it in an effort to procure the approval by city council of a redevelopment project, which approval was granted. After about two years, the lawyer terminated his representation of the developer. Two years after that, as a private citizen and not as a lawyer, he and his wife became involved in a campaign to oppose the project. By letter and in person, they solicited signatures on a referendum petition to overturn city council’s approval, which he had previously sought on his client’s behalf, of the project. He was successful in getting a referendum vote, but, by a narrow vote, the voters upheld city council’s approval. The lawyer denies that he, at any time during the course of his active opposition to the project, disclosed “confidential information acquired during his representation of [the developer],” or that he had disclosed his previous representation of the developer.
In a letter to the lawyer, the developer contended that the lawyer’s conduct was a “manifest violation” of both his and his “firm’s fiduciary obligations as our prior counsel.” As a result, it demanded that the lawyer and his firm cease and desist from “any and all activities that may in any manner be construed as adverse to the Project, its approval or [the developer’s] interests.” In response to a letter from the lawyer’s firm, the developer later demanded that the lawyer and his wife (in their capacities as “mutual agents of each other”) “retract the letter and their support for the petition and referendum.” Thereafter, the developer brought suit against his former lawyer and his law firm for breach of fiduciary duty, professional negligence and breach of contract.
Whether the complaint states any cause of action was tested in the context of a special motion based upon a statute designed to provide for the early dismissal of lawsuits that have been brought in an effort to improperly curb a citizen’s “exercise of the right of petition or speech in connection with a public issue.” Such actions are referred to as “SLAPP” lawsuits. SLAPP is an acronym for “strategic lawsuit against public participation.” In this context, the test is not whether the complaint states a cause of action, but whether “plaintiff has demonstrated a probability of prevailing on the claim.”
The trial court denied the motion on the basis that the anti-SLAPP statute does not apply because “the gravamen of the causes of action was not [the lawyer’s] petitioning activity but his breach of the duties of loyalty and confidentiality as well as his duty to disclose adverse interests at the outset of the representation…” On appeal, the Court of Appeal reversed, finding both that the anti-SLAPP statute does apply and that the developer failed to “demonstrate a probability of prevailing on the claim.” The parties both agreed that lawyer “had acted adversely to his former client with respect to an ongoing matter that was the precise subject of the prior representation.” Notwithstanding, “the [Court of Appeal] declared that there is ‘no authority for a rule which would bar an attorney from doing what [the lawyer] did here.’” The Supreme Court reversed the Court of Appeal.
The defendants argued, and the Court of Appeal agreed, that liability should lie only “(1) where the attorney has undertaken a concurrent or successive representation that is substantially related to the prior representation and is adverse to the former client, or (2) where the attorney has disclosed confidential information.” The Supreme Court found this view too limiting, instead finding liability, for example, “where the attorney has used the former client’s confidential information to actively oppose the former client with respect to an ongoing matter that was the precise subject of the prior representation.” But the court does not limit liability to instances where the lawyer has used confidential information from one client to advise another client. It also recognizes liability where the lawyer has taken confidential information from a client “’significantly into account in framing a course of action’ such as ‘deciding whether to make a personal investment’—even though…no second client exists and no confidences are actually disclosed.” As a result, the Supreme Court holds that the attorney is barred both from disclosing or using a former client’s confidential information against the former client, even though he or she has not disclosed it to anyone.
Here, the Supreme Court found that the allegation that the lawyer had used his former client’s confidential information “in active and overt support of a referendum to overturn the city council’s approval of the…project, where the council’s approval of the project was the explicit objective of the prior representation” states a claim, at least at the pleading stage.
What lesson does this case teach? As a practical matter, the burden will be on a lawyer to demonstrate that he or she did not use a former client’s confidential information against that client. Therefore, the prudent course would be to either decline the representation in the first place or refuse to get involved in the opposing activity subsequent to the termination of the representation. Foregoing representation of a client under certain circumstances is part of the cost of doing business and declining representation may be one of the better malpractice avoidance tools available to the practitioner.