State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
What are the ethical responsibilities under rule 7-104 when representing a client who intends to file a licensing complaint against an adverse party pending resolution of a separate civil matter?
An attorney may not threaten to present administrative or disciplinary charges against an opposing party to obtain an advantage in a civil action but may assist the client in presenting such charges if there exists a legitimate reason for doing so. When in doubt about the propriety of the proposed action, the most prudent course of conduct is to postpone any action until the civil matter has been concluded.
Rule 7-104, of the Rules of Professional Conduct of the State Bar of California.
The Committee has been asked to interpret rule 7-104, Rules of Professional Conduct, in a situation where a client involved in a civil dispute as a plaintiff requests that counsel assist the client in bring administrative charges against the defendant for violation of state licensing statutes and regulations which govern the defendant's activities. The client is sophisticated in the operation of the state licensing authority and advises the attorney that he intends to immediately file a complaint with the appropriate licensing agency which could result in the loss of the defendant's license. By its terms, rule 7-104, Rules of Professional Conduct, prohibits an attorney from (1) threatening to present criminal, administrative or disciplinary charges to obtain an advantage in a civil action, and (2) from presenting or participating in presenting criminal, administrative or disciplinary charges solely to obtain an advantage in a civil matter. However, there are several issues under this rule which are not directly addressed by the rule which require interpretation. First, to what extent may the attorney merely advise the defendant or the defendant's attorney of the client's intent to bring administrative or disciplinary charges without making an express threat or demand for resolution of the civil matter on favorable terms? Second, may counsel assist the client in filing an administrative or disciplinary complaint under circumstances where that fact is not communicated to the defendant? Third, in the event that the client decides to proceed to file administrative charges on his own and/or to threaten the defendant with such charges, is it counsel's duty to discourage the client from doing so even though the client is not subject to the Rules of Professional Conduct?
Rule 7-104 provides:
"A member of the State Bar shall not threaten to present criminal, administrative or disciplinary charges to obtain an advantage in a civil action nor shall he present or participate in presenting criminal, administrative or disciplinary charges solely to obtain an advantage in a civil matter."
Rule 7-104 is similar to American Bar Association Code of Professional Responsibility, Disciplinary Rule 7-105(A),1 and relates to the same subject matter addressed in a series of California cases disciplining attorneys for conduct equivalent to the crime of extortion. Libarian v. State Bar (1952) 38 Cal.2d 328; Lindenbaum v. State Bar (1945) 26 Cal.2d 565; Arden v. State Bar (1959) 52 Cal.2d 310. Unlike rule 7-104, Rules of Professional Conduct, the American Bar Association rule only prohibits the use, or threat of use, of criminal proceedings to obtain a civil advantage. Rule 7-104 extends the protections of the American Bar Association rule to administrative and disciplinary proceedings.2
Rule 7-104 seeks to discourage the collateral use, or threat of use, of criminal, administrative or disciplinary proceedings to exert leverage in the settlement of civil disputes. The rule promotes the public policy of allowing free and open access to civil courts without fear that the criminal or administrative process will be used to coerce the resolution of private civil controversies.3
Rule 7-104's legacy in attorney discipline for acts amounting to extortion is apparent when considering that Penal Code section 518 defines extortion as "obtaining of property from another, with his consent... by the wrongful use of force or fear, or under color of official right." (Emphasis added.) Penal Code section 519, subdivision (2), provides that a threat to accuse one of a crime constitutes the "fear" necessary to give rise to extortion. Because attorneys are perceived, at least by the public as frequently acting under color of official right, they are in a unique position to use the criminal process to obtain settlement leverage in a civil proceeding, particularly when dealing with former clients. See, e.g., Lindenbaum v. State Bar, supra, 26 Cal.2d 565 (attorney disciplined for attempted extortion in reporting client's wife, an alleged alien, to immigration authorities to obtain payment of legal fees.)
While there is no prohibition under rule 7-104, Rules of Professional Conduct, against an attorney merely advising opposing counsel that his client intends to bring administrative charges against the defendant, such a communication may easily be interpreted as a veiled threat. In Crane v. State Bar (1981) 30 Cal.3d 117, an attorney representing a client in a real property matter wrote a letter to his client's adversaries requesting a beneficiary statement and offering to waive the statutory penalty if it was promptly received. The letter stated that if the statement was not received within five days an action would be commenced for damages and forfeiture and that "the Department of Savings and Loan and the Attorney General's office will be requested to assist us in solution." The letter contained a notation stating that copies were being sent to official agencies. Although the attorney contended that the letter could not reasonably be interpreted as an improper threat, the Supreme Court viewed the letter "in context" and concluded that the letter could quite easily be construed as violative of rule 7-104:" (See Crane, supra, 30 Cal.3d at 123.)
The import of Crane is that a threat need not be expressly stated but may be inferred from the circumstances. This result is consistent with cases under the extortion statute which hold that a threat may in some cases be implied. (See, e.g., People v. Choynski (1892) 95 Cal. 640, 641-42) ("Parties guilty of [extortion]... seldom... speak out boldly and plainly, but deal in mysterious and ambiguous phrases . . . [which] in light of surrounding circumstances. . . have no uncertain meaning.")
Despite counsels' best intentions, there is a definite risk that a mere communication to an opponent stating that administrative or disciplinary charges will be brought by the client can be interpreted as an implied threat. It would be advisable to simply file such charges without making any threats or even advising the client's opponent of such action. However, as discussed below, the safest course of conduct may be to wait until the civil dispute is resolved.4
The second clause of rule 7-104, Rules of Professional Conduct, provides that an attorney may not present or assist a client in presenting administrative or disciplinary charges "solely" to obtain an advantage in a civil matter.5 The rule seems to suggest that where an administrative claim is brought even with a scintilla of justification, there will be no violation of rule 7-104.6 It is the Committee's opinion that where there is a dual motive on the part of counsel in presenting charges, one motive being legitimate and the other not, the benefit of the doubt must be given to the attorney such that there can be no violation of rule 7-104 under the circumstances.
This result is warranted for at least three reasons. First the plain meaning of the rule with reference to the word "solely" suggests that a violation of the rule can occur only if the attorney files charges with the exclusive purpose of seeking to obtain a civil advantage. The inclusion of the word "solely'' in the second clause, when contrasted with its exclusion in the first clause in reference to "threats", promotes the conclusion that the rule contemplates a more serious ethical violation in situations where the attorney actually threatens criminal, administrative or disciplinary charges. The motives of an attorney who threatens prosecution are more dubious and suspect than one who merely presents charges to the administrative agency. Moreover, once charges are filed, the party responding to the charges at least has a measure of protection or vindication in the administrative tribunal where the charges are pending.
Second, when there is more than one subjective motivating factor for a decision to present administrative or disciplinary charges it becomes virtually impossible to balance an improper motive against a proper one. The fact that an attorney may have an ulterior purpose of dubious legitimacy should not negate the weight and legitimacy of a coexisting proper objective.
Third, and more importantly, in most instances, there is a public policy recognizing the filing of administrative complaints against government-regulated persons and entities. The filing of such complaints tends to insure that the regulated party operates within the bounds of the law. "[S]trong public policy reasons exist to assure free and open channels of communication between citizens and public agencies and authorities charged with investigating wrongdoing... without which protection would effectively close such important channels." Tiedemann v. Superior Court (1978) 83 Cal.App.3d 918, 925-26. In addition, the client may have a constitutional right to petition the government for redress of grievances through quasi-judicial channels. Cf. City of Long Beach v. Bozek (1982) 31 Cal.3d 527 (city may not sue for malicious prosecution because right to petition a municipality is absolutely privileged); Matossian v. Fahmie (1980) 101 Cal.App.3d 128 (liquor licensee may not sue for malicious prosecution against competitors who opposed transfer of his license because of right of petition and statutory policy granting right to protest proposed administrative action). The qualification of the second clause by the word "solely" is therefore justified on the basis that there is little public benefit gained when a party threatens prosecution. That is, a narrower prohibition is needed where a lawyer presents charges, than where the lawyer threatens to do so. Rather than conferring a public benefit, the attorney threatening charges is in most instances likely to be seeking a private benefit to his client in the civil matter.
Although on the surface the word "solely" may appear to give an attorney a license to use marginally justifiable administrative or disciplinary proceedings as a subterfuge for exerting leverage in a civil matter, this fear is allayed by rule 2-110(A), Rules of Professional Conduct, which prohibits an attorney from taking steps for the purpose of harassing or maliciously injuring any person. Additionally, Business and Professions Code section 6068 requires an attorney to only present charges which appear to him to be "legal or just" ( 6068(c)) and prohibits an attorney from commencing an action "from any corrupt motive of passion or interest" ( 6068(g)). Moreover, as discussed in the next section, the client's conduct is not governed by the same ethical prohibition applicable to attorneys, and to that extent, a client has the right to have counsel assert his legitimate interests in an administrative forum. In essence, rule 7-104, Rules of Professional Conduct, seeks to balance the opponent's right to unfettered access to the civil courts against the client's own right to similar access to the criminal and administrative process. As long as the complaining party seeks to present legitimate charges without making any threats or intimations seeking a quid pro quo in the civil dispute, the two goals are mutually respected.
Under some circumstances, the client may decide to threaten to present charges against the opponent and/or to tile such charges solely to obtain a civil advantage. The client's independent activities are, of course, not covered by the Rules of Professional Conduct. There may thus be a conflict between what the attorney is ethically proscribed from doing and what the client has a right to do. As discussed above, the client may be privileged against civil liability to engage in a course of conduct, which if engaged in by the attorney, would violate the Rules of Professional Conduct. For example, Civil Code section 47, subdivision (2) provides an immunity against civil lawsuits based on defamatory statements made in the course of judicial proceedings. This section has been held to apply not only to defamation actions, but also to damage claims for abuse of process, intentional infliction of emotional distress and inducing breach of contract. See Portman v. McDonald Law Corp. (1959) 99 Cal.3d 988, 990 and cases cited therein. The section 47, subdivision (2) privilege has been held to apply both to judicial and quasi-judicial proceedings, including statements made in connection with administrative proceedings. For example, in Long v. Pinto (1981) 126 Cal.App.3d 946, a surgeon complained to the Board of Medical Quality Assurance implicating a physician as having performed a large number of unnecessary operations. The statement, even if false or malicious, was held absolutely privileged against a civil action for libel, interference with contract and interference with prospective economic advantage. Similarly, a complaint to the Internal Revenue Service concerning tax fraud by a third party was held to be absolutely privileged under section 47, subdivision (2) in Tiedemann v. Superior Court (1978) 83 Cal.App.3d 918. (See also, Block v. Sacramento Clinical Labs (1982) 13 Cal.App.3d 386.7 Threats during the course of litigation are also protected by Civil Code section 47, subdivision (2). An implied threat was held privileged in Asia Investment Co. v. Borowski (1982) 133 Cal.App.3d 832, which stated that ''[e]ven considering the settlement proposal was made in a manner which might be considered a veiled 'threat' we recognize 'this type of language' is part of the adversary system, and, as such, is to be anticipated in the course of 'heated battle' between adverse parties to proceedings considered to be within the context of 'judicial proceedings.'" Consequently, the "alleged threat" during a judicial proceeding regarding settlement was within the privilege of Civil Code section 47, subdivision (2). (Id. at 843.)
Therefore, unless the client proposes a course of action which would constitute a crime (e.g., extortion) or would expose the client to civil liability not protected by section 47, subdivision (2) or any other privilege, the attorney should advise the client that while the Rules of Professional Conduct prohibit the attorney from assisting the client in the matter, the client is free to bring administrative charges on his or her own. At the same time, the attorney should refrain from giving the client any "behind the scenes"' support or advice regarding the matter. That is, an attorney should not violate the Rules of Professional Conduct by assisting the client in doing indirectly what the attorney cannot do directly.
We conclude that while an attorney may merely inform the opposing counsel of the client's intent to bring administrative charges, there is a definite risk that such a statement may be interpreted as an implied or veiled threat in violation of rule 7-104 of the Rules of Professional Conduct. As an alternative, counsel should consider merely presenting administrative charges without informing the opponent of such action. However, since it may be asserted that counsel's conduct violated the second clause of rule 7-104 in that his intent may be viewed as solely to exert a civil advantage, counsel should give careful consideration as to whether to refrain from taking any action until the civil dispute has been resolved. If the client insists on pursuing a course of conduct which if carried out by the attorney, or with attorney's assistance, would violate the attorney's obligations under rule 7-104, the attorney should thereafter take a neutral role by not discouraging the client to engage in such conduct unless there are reasons unrelated to rule 7-104 which require the attorney to advise the client against taking such action.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of The State Bar of California. It is advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.
1 DR 7-105(A) states:
"A lawyer shall not present, participate in presenting, or threaten to present criminal charges solely to obtain an advantage in a civil matter."
2 Rule 7-104 also differs from Disciplinary Rule 7-105(A) in that the latter prohibits an attorney from threatening to present charges where the attorney's intent is "solely" to obtain a civil advantage. In rule 7-104, Rules of Professional Conduct, the word "solely" only modifies the second clause which provides that an attorney shall not "present or participate in presenting... charges solely to obtain an advantage in a civil matter."
3 The public policy of Disciplinary Rule 7-105(A) is described in Ethical Consideration 7-21 which provides as follows:
"The civil adjudicative process is primarily designed for the settlement of civil disputes between parties, while the criminal process is designed for the protection of society as a whole. Threatening to use, or using the criminal process to coerce adjustment of private civil claims or controversies is a subversion of that process; further, the person against whom the criminal process is so misused may be deterred from asserting its legal rights and thus the usefulness of the civil process in settling private disputes is impaired. As in all cases of abuse of judicial process, the improper use of criminal process tends to diminish public confidence in our legal system."
4 Of course, in some situations it may not be in the client's interests to wait until the civil dispute is resolved For example, postponing action may impair the client's ability to present the claim adequately in that witnesses may disappear, evidence may be lost and memories may fade. Moreover, given court congestion, it may be several years before the civil dispute is completed and times may bar the administrative or disciplinary proceeding. The client may need to have the administrative complaint heard expeditiously so that the administrative agency may be in a position to afford a remedy to the client such as by injunctive relief, which may be moot if the client postpones seeking relief until the civil dispute is formally resolved. Given the client's right to file administrative charges and the public policy encouraging such action (see infra, Section C), it may not always be advisable or feasible to wait until the civil matter has been concluded.
5 The first clause in rule 7-104, Rules of Professional Conduct, uses the phrase civil "action" whereas the second clause uses the phrase civil "matter." Since the distinction is not material to this opinion, we do not reach the issue, nor do we consider, whether there is any distinction between the two terms.
6 The term "solely" as used in Disciplinary Rule 7-105(A) was interpreted in Decato's Case (N.H. 1977) 379 A.2d 825 where an attorney seeking payment of a debt wrote to the debtor, asked for an explanation for non-payment and stated that the attorney would consider filing a criminal complaint. The Court interpreted American Bar Association Code of Professional Responsibility, Disciplinary Rule 7-105 subsection (A) as requiring that there be proof that the attorney charged with a violation acted with the exclusive purpose of obtaining an advantage in the civil matter.
7 These cases should be compared to Kinnamon v. Staitman & Snyder (1977) 66 Cal. App.3d 893 which held an attorney civilly liable for violating rule 7-104, Rules of Professional Conduct, by writing a letter to a debtor demanding payment of a bad check, stating that writing checks with insufficient funds was a misdemeanor, and advising that the defendants intended to file a criminal complaint. Although the Kinnamon court found that a cause of action for civil damages was stated, the reasoning was subsequently criticized in O'Neil v. Cunningham (1981) 118 Cal. App.3d 466. In general, the Kinnamon decision represents an isolated instance where the breadth of the section 47, subdivision (2) privilege has been circumscribed.