Has the Supreme Court sealed the lips of California lawyers?

By Diane Karpman

It seems that the lips of California lawyers are sealed forever, especially after the-much anticipated Oasis West Realty LLC v. Goldman, filed May 16, S181781, the first major professional responsibility case with new Chief Justice Tani Cantil‑Sakauye. Authored by Justice Marvin Baxter, this case has dominated the ethics community, because there are many profound concepts juxtaposed in this unique fact pattern.

Oasis retained Kenneth Goldman, an attorney and a community activist involved in the development of Beverly Hills property, to assist in their plans to redevelop the Hilton Hotel in Beverly Hills. Goldman was hired to interface with city officials and to assist in strategic planning. He worked on the project for about a year, was compensated, and the representation ended. About two years later, substantial opposition to the project developed, and local citizens created a political action committee to put a referendum on the ballot for an up or down vote.

Goldman, the former lawyer for the project, did three things. At the City Council  meeting, he voiced opposition to the proposal that those gathering signatures for the referendum be required to “lug 15-1/2 pounds of material from home to home to home to home” (Fn. 3) in collecting signatures for the referendum. Also, Goldman and his wife spent about 90 minutes soliciting signatures on the referendum petition from their neighbors. They also left a “dear neighbor" letter at some houses exclaiming their opposition. (Fn. 2) Oasis sued Goldman, and Goldman’s motion to dismiss went all the way to California’s highest court.

This jam-packed case raises a plethora of questions. Bets were placed all over the Internet. Some ethics folks were hoping there would be a clear delineation of the duty of loyalty. When does it end ― or does it? But as is consistent with California ethics jurisprudence, the Court resolved the issue based upon confidentiality, because current clients are owed loyalty, and former clients are owed confidentiality. Flatt v. Superior Ct. (1994) 9 Cal. 4th 275. Although the term “loyalty” is used in the decision, it is always in the context of confidentiality.

The Supreme Court revitalized the antique “doctrine,” Wutchumna Water Co. v. Bailey (1932) 216 Cal. 564. Wutchumna has two fundamental theories: 1) a lawyer may not do anything that will injuriously affect the client in a matter in which he formerly represented the client; and 2) a lawyer may never use, against his client, any knowledge or information acquired by virtue of the previous relationship. An interesting aspect of the argument was that Goldman was acting on his own behalf.  There was no other client.

The Supremes adopted the Rest. 3d. Law Governing Lawyers analysis of confidentiality. They clearly articulated a concept not often found in California cases, which is a prohibition on a lawyer using or disclosing client confidential information. “Goldman was obligated under rule 3‑310(B) of the State Bar Rules of Professional Conduct to disclose to Oasis any personal relationship or interest that he knew or reasonably should have known could substantially affect the exercise of his professional judgment.” (Pg.11) Here, the Supreme Court suggests that his opposition developed over the course of representation, “fueled by the confidential information he gleaned during it.” (Pg.12)

This is tantamount to asserting that the access the lawyer had to information in the first case is imported to his new position. Therefore, use of the information is presumed. In other words, because Goldman didn’t disclose his personal opposition at the outset, obviously we can infer that it developed over time, when Goldman changed his mind about the development, because of his exposure to confidential information.

The loyalty/confidentiality topic is a major issue, because like other members of society, lawyers too have rights of free speech. The representation of a client does not mean that we espouse their positions (ABA Model Rule 1.2 (b)), but is that now still true? Suppose the young lawyer idealist represents an advocacy group (pick any: pro‑choice, pro‑life, anti‑Prop 8, pro-Prop 8) in accomplishing her goal. The lawyer moves on, and years later has a dramatic conversion. She now believes the view of the former client is profoundly wrong and is personally opposed to the former client. Oasis suggests the lawyer can’t take a public position on that issue.

Also, the Court rejected a broad categorical bar on attorney speech. Oasis suggests a step back from taking part in public discourse if it involves a former client, or you too could be sued for about $4 million. According to reliable sources, Goldman was retained for one project, which over time morphed into an entirely different development. Others maintain that Oasis intentionally retained Goldman, a vociferous activist, to guarantee his silence. Still others maintain he should not have taken the client in the first place. Once you take a client, you are requesting that they trust you and implying that you will not become a turncoat on the “same” project. 

When we sign on with a client, we are not espousing their position. But if we can never take a position against that position, isn’t that tantamount to becoming either a member of the client’s team or now being forced to stand silently by? It is almost as if our silence can be bought by a single retention. Many consider this to be a First Amendment issue. The lesson to be learned from this case is to be exceedingly careful in client selection, because in some cases, you may have sold your soul.

Oasis sued for more than $4 million in damages, the cost of opposing the referendum, which passed by about 129 votes. Yet, the Supreme Court states, “because of Goldman’s overt acts in opposition to the project, it was forced to investigate Goldman’s conduct and prepare a letter demanding defendants’ adherence to their legal and fiduciary duties, thereby incurring over $3,000 in legal fees.” (Pg. 12) We know that damages in legal malpractice must be certain and not speculative. Maybe the Supreme Court has placed a cap on the viable monetary damages. The trial on remand is going to be very interesting. More will be revealed soon.

• Legal ethics expert Diane Karpman can be reached at 310-887-3900 or at karpethics@aol.com