Monday, September 24, 2018
Court of Appeal:
Lawyer’s Violation of Ethics Rule Gives Rise to UCL Action
By a MetNews Staff Writer
An attorney’s violation of Rule 3-300 of the Rules of Professional Conduct—which bars business transactions with a client absent a written explanation of the risks, a suggestion that independent legal advice be sought, and securing the client’s written assent—can form the basis of an action under the Unfair Competition Law, the First District Court of Appeal held Friday.
Div. Four, in an unpublished opinion by Justice Jon B. Streeter, rejected the notion of Marin Superior Court Judge Mark Talamantes that a violation of the rule is merely matter between the attorney and the State Bar.
The decision comes in an appeal by Barbara Epis, described by Streeter as “a wealthy elderly woman and sophisticated real estate investor,” of Talamantes’s ruling that the breach by her former attorney, Vernon Bradley (now deceased), could not give rise to liability for her financial losses in certain transactions.
Epis insisted that the breach of Rule 3-300 satisfies two of the three alternative bases for an action under the Unfair Competition Law (“UCL”) contained in Business & Professions Code §17200 et seq. Sec. 17200 provides that “unfair competition” includes “any unlawful, unfair or fraudulent business act or practice.”
‘Scandalous,’ Not Actionable
Talamantes decided the causes of action under the UCL and for declaratory relief, while a jury decided other issues presented by the complaint and cross complaint (which are not subjects of the appeal). The judge termed Bradley’s conduct “scandalous,” but held:
“The issue is whether a violation of the Rules of Professional Conduct (‘The Rules’) gives rise to a violation of the rule of law. The Rules are intended to establish the standards for members for the purposes of discipline….The fact that a member has engaged in conduct that may be contrary to these rules does not automatically give rise to a civil cause of action….The State Bar administers discipline for violating the rules governing lawyers.”
The judge went on to say:
“”The rules of conduct are enforced by the State Bar. While the jury determined that Bradley breached his ethical duty to Ms. Epis, this breach alone is not a violation of any law. Therefore, it is not an unfair business practice.”
Disagreeing, Streeter said the cases Talamantes cited were not in point in that they merely hold that the violation of a rules of professional conduct does not in and of itself give rise to a cause of action. The cases, he noted, do not deal with the UCL.
The jurist drew attention to the First District Court of Appeal’s 2012 decision in People ex rel. Herrera v. Stender. There, Presiding Justice J. Anthony Kline of Div. Two said:
“[V]iolation of a rule of professional conduct cannot, in and of itself, serve as the basis for a damages award….Violation of the rules can be used, however, to establish a breach of fiduciary duty….Similarly, here, the complaint does not allege any independent cause of action for breach of a rule of professional conduct. Rather, the complaint alleges unlawful business practices under section 17200, using violation of the Rules of Professional Conduct as a measure of the unlawful practice….
“It is well established that a section 17200 claim may be based on violation of a statute that the plaintiff could not directly enforce with a private action.”
In announcing the need for a remand, Streeter set forth the extent of the holding, saying:
“We do not hold an attorney’s violation of the rales of professional conduct invariably amounts to an unfair, unlawful or fraudulent act or practice. We only hold that a rales violation is not automatically, categorically exempted from constituting an unlawful, unfair or fraudulent act or practice under the UCL. The trial court should have determined as a matter of fact whether it amounted to an unlawful, unfair or fraudulent act or practice in this case.”
The cause of action for declaratory relief pertained to ownership of a houseboat on which Bradley had lived and maintained a law office for more than 20 years. Streeter said Talamantes incorrectly decided the issue, in Bradley’s favor, based on preponderance of the evidence.
He pointed to Evidence Code §662, which provides:
“The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.”
Inasmuch as title was in Epis’s name, Streeter said, clear and convincing evidence was required to rebut the presumption in her favor.
Rejecting Bradley’s contention that the ruling should simply be examined under an abuse of discretion standard, Streeter said:
“It makes no difference whether we think the record contains sufficient evidence to sustain a finding that a reasonable factfinder would consider clear and convincing, for no such finding was made in this case. Epis was entitled to have the trial court determine the issue by clear and convincing evidence, and we must remand the case so that determination can be made by the judge who heard the evidence.”
The case is Epis V. Jolley, A143387.
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