Tuesday, May 17, 2011
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S.C. Revives Suit Against Attorney Over Petition Activity
By KENNETH OFGANG. Staff Writer
The state Supreme Court yesterday revived a former client’s lawsuit against Reed Smith LLP and one of its partners based on the attorney’s actions opposing the client’s proposed development project after the representation ended.
Oasis West Realty Inc. showed a reasonable probability of prevailing on its claims that Kenneth Goldman’s participation in a referendum campaign opposing the company’s project constituted a breach of fiduciary duty, professional negligence, and a breach of contract, Justice Marvin Baxter wrote for the court.
The ruling overturns a contrary decision by Div. Five of this Court of Appeal, which held that Goldman was exercising his First Amendment rights by seeking support for a petition drive to force a referendum on Oasis’ plan for the redevelopment of the Beverly Wilshire Hotel site. Opponents obtained enough signatures to place the issue on the ballot, but lost the election by 129 votes.
Div. Five ordered that the suit be stricken under the anti-SLAPP statute, reasoning that a lawyer does not forfeit his constitutional right to speak on matters of public interest involving a former client so long as he does not misuse confidential information garnered from the attorney-client relationship.
Baxter, however, said Oasis had shown the “minimal merit” required to go forward with the suit, a conclusion reached earlier by Los Angeles Superior Court Judge Norman P. Tarle, who said the gravamen of Oasis’ action was breach of an attorney’s duties of loyalty and confidentiality.
Oasis retained Reed Smith in 2004 to help it redevelop the property with a new hotel, luxury condominiums, and other improvements. The company alleged in its complaint that it specifically sought Goldman’s assistance because he was an expert in civic matters and “a well-respected, influential leader who was extremely active in Beverly Hills politics.”
Reed Smith represented Oasis in connection with the Hilton project until April 2006, and during that time, Oasis claimed, Goldman “was intimately involved” in the formulation of the development plan and Oasis’ “overall strategy to secure all necessary approvals and entitlements from the City and its efforts to obtain public support for the Project.”
Oasis averred that “Goldman was a key Oasis representative in dealing with Beverly Hills City Officials,” and that it had “revealed confidences to Mr. Goldman, which it reasonably believed would remain forever inviolate.”
The development proposal was put before the council in June 2006, and the council passed an ordinance approving a development agreement in April 2008.
Shortly thereafter, a political action committee called Citizens’ Right to Decide Committee was formed, with the stated goal of putting a referendum on the ballot which would leave approval of the project up to the voters.
Oasis contended that Goldman “switched sides” and “engaged in acts of treachery and disloyalty” by lending his support to the committee’s efforts.
Goldman said that he addressed the council to oppose a rule which required individuals seeking signatures on the referendum petition to carry the 15 pounds of documents related to the project and spent about 90 minutes soliciting signatures for the referendum petition over two years after Reed Smith’s relationship with Oasis was terminated.
He denied ever disclosing confidential information to anyone and said he did not believe he ever disclosed that he had worked for Oasis in connection with the Hilton project.
Baxter, however, said Goldman must be assumed to have used such in his effort to defeat the project at the ballot box.
“In light of the undisputed facts that Goldman agreed to represent Oasis in securing approvals for the project, acquired confidential information from Oasis during the course of the representation, and then decided to publicly oppose the very project that was the subject of the prior representation, it is reasonable to infer that he did so,” the justice said.
He also noted that while representing Oasis, Goldman never notified the client that he had a personal relationship or interest that might substantially affect the exercise of his professional judgment, as required by the Rules of Professional Conduct. The implication, Baxter said, is that his opposition to the project “was fueled by the confidential information he gleaned.”
The use of confidential information in contravention of the client’s interests, he went on to say, is unethical even if there is no successive representation and no actual disclosure. “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,” the justice wrote.
Chief Justice Tani Cantil-Sakauye and Justices Kathryn M. Werdegar, Ming Chin, and Carol Corrigan concurred in the opinion. Justice Joyce L. Kennard concurred separately, joined by assigned Court of Appeal Justice Kathryn Doi Todd of this district’s Div. Two.
Kennard agreed with the defendants that the action implicated Goldman’s free speech rights, satisfying the first prong of the anti-SLAPP motion analysis—an issue the majority found unnecessary to resolve. Kennard agreed with Baxter, however, that Oasis’ showing on the merits was sufficient to defeat the motion.
The case was argued in the Supreme Court by Rex S. Heinke of Akins Gump Strauss Hauer & Feld for Goldman and Reed Smith, and by H. Steven Schiffres of Rosoff, Schiffres & Barta for Oasis.
The case is Oasis West Realty, LLC v. Goldman, 11 S.O.S. 2443.
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