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Some rules can cause an uncivil ruckus

By Diane Karpman

Diane Karpman

The California Rules of Professional Conduct state right at the outset that the “rules are not intended to create new civil causes of action.” (Rule 1-100) However, some of them do cause a ruckus in the civil arena. Violations of our conflict or anti-contact rules are the predicates for disqualification motions. They don’t usually result in substantial discipline if they are the only violations alleged at the State Bar.

Rule 3-300, however, has profound consequences at both the State Bar and in civil litigation. It is triggered when an attorney enters into a business transaction with a client or knowingly acquires an ownership, possessory, security or other pecuniary interest adverse to a client. Complying with Rule 3-300 requires that the terms of the transaction or acquisition be fair and reasonable and disclosed to the client in writing in a manner that should be understood. The client must be advised in writing to seek the advice of independent counsel, be given a reasonable opportunity to do so (about three working days), and consent in writing to the terms of the transaction.

This is one of the areas where “no good deed goes unpunished.” In Connor v. State Bar (1990) 59 Cal. 3d 1047, the lawyer allowed a client’s home to be transferred to him to block foreclosure. At the Supreme Court, Connor argued this was not adverse to the client. The court rejected his argument, because it could become detrimental to the client, even though Connor’s intention was to aid the client. The absence of client harm will not relieve a lawyer from the strict requirements of this rule.

There is a dearth of reported cases where lawyers have been successful in obtaining the benefits of such a deal. In BGJ Associates v. Wilson (2003) 113 Cal. App. 4th 1217, the client actually consulted with independent counsel. However, the terms of the agreement were not fair and reasonable, and independent counsel was not required to ferret out the problems.

The concept regarding interest adverse to clients is ancient, but some applications, such as to an attorney’s lien in an hourly fee agreement case, is relatively recent. Fletcher v. Davis (2004) 33 Cal. 4th 61. The foundational ideas expressed in Rule 3-300 are almost from the Pleistocene Era of Anglo American Jurisprudence. In Gibson v. Jeyes (1801) 6 Vesey, 266, Lord Eldon explained that the lawyer must give the client “all the reasonable advice against himself, that he would have given her against a third person.”

The taint resulting from a violation of Rule 3-300 is so broad that plaintiffs have attempted to apply it in situations where wives (Fergus v. Songers (2007) 150 Cal. App. 4th 552), and children (Casey v. State Bar (2008) 04-O-11237) have been involved. In both instances, application of this rule to family members was rejected.

We are already overburdened by our rules. Can you imagine what trouble could result if the rules captured our families within their scope?

• Legal ethics expert Diane Karpman can be reached at 310/887-3900 or at

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