answer
February 1990, Question 3 [Professional Responsibility]
#1. Can Lawyer assist Officer, Bank or Boss?
I. Duty of Loyalty
L owes a duty of loyalty to the client, which requires L to put the interest of his client above all other interests and to avoid any conflicts of interest.
1) Corporate client
When L represents a corporation, the corporation itself is the client and all duties are owed to the corporation itself not to the officers or directors.
2) Conflict of interest:
L may not represent clients with conflicting interests. L may represent officers of a corporation individually, unless there is a conflict of interest. Where there is a conflict, L may represent both clients only if L reasonably believes there will not be an adverse effect, the clients are not asserting claims against each other, and each client gives informed written consent after consultation.
Here, Lawyer is Bank's regular outside counsel. Consequently, Bank is Lawyer's client and Lawyer owes a duty of loyalty to Bank. Out of necessity, Lawyer must communicate with bank officers and employees, but they are not individually owed a duty of loyalty.
Officer or Boss: Lawyer met with Officer away from the bank for "confidential" reasons, and Officer asked that the information disclosed be kept confidential. Officer disclosed that he and Boss have perpetrated a fraud on Bank. Officer and Boss's interests are so adverse to Bank's interests that it would not be possible for a disinterested lawyer to conclude that any client should agree to Lawyer representing both parties. Under the ABA Model Rules this means Lawyer should not even request that the parties agree to such a scheme since it is so patently adverse to their best interests. Consequently, Lawyer should not assist Officer or Boss. Lawyer should advise them immediately to seek independent counsel.
Bank
Lawyer met Officer off-site from the Bank and allowed Officer to share "confidential" information. Since Bank was already Lawyer's current client, Lawyer should not have met Officer "confidentially" off-site or allowed Officer to share this information. However, since Lawyer did so, it is probably most appropriate for Lawyer to withdraw because Lawyer now possess Officer's confidential information, which may prevent Lawyer from representing Bank in a matter involving Officer or Boss.
2. Can Lawyer disclose information to Boss, or other bank officials?
Duty of Confidentiality
L shall not reveal information relating to the representation of a client.
Boss: Lawyer has a duty of confidentiality, and all other duties imposed on a lawyer, to his client, which Bank. Under normal circumstances Bank would be considered a representative of Bank, and confidential communication could be shared with him. However, in light of the information Lawyer received from Officer about Boss's potential fraud perpetrated on Bank, it would not be prudent to discuss any of this confidential information with Boss. Boss has an interest adverse to Bank, and as such, Lawyer should not disclose this information to Boss.
Other Bank Officials: Lawyer does need to communicate with his client, Bank. Most likely, Lawyer should communicate with the Board of Directors since they ultimately are in charge of Bank. Any discussions should not include Boss or Officer and should remain confidential.
If Lawyer is determined to have an attorney-client relationship with Officer because of confidential nature of the communications here and Lawyer's firm's prior representation of Officer when he incorporated XYZ, then Lawyer may not disclose the confidential communications he received from Officer to Bank. However, since Officer knew Lawyer represented Bank and had a fiduciary relationship to Bank, it may be found that Lawyer and Officer did not develop an attorney-client relationship, and then Lawyer can disclose the confidential information to Bank.
3. Who can waive attorney-client privilege?
A client has a right not to disclose any confidential communication between L and client relating to the professional relationship. Client is the holder of the privilege.
Since Officer is a high-ranking officer of Bank, Bank's attorney-client privilege would extend to communications made by Officer. Since Bank is a corporation, a party with the authority to represent Bank would be the one entitled to waive the attorney-client privilege on Bank's behalf. Normally, this would be Boss. However, since Boss's interests are adverse to Bank, it would need to be another representative. Ultimately, it would be the responsibility of the Board of Directors to waive the privilege.
If Officer was found to have an attorney-client relationship with Bank, Officer would hold the privilege as to his own confidential communications.
4. Ethical obligations?
Duty of confidentiality
Duty of confidentiality: L shall not reveal information relating to the representation of a client.
Duty of loyalty: L owes a duty of loyalty to the client.
Conflict of interest: Where there is a conflict. L may represent both clients only if L reasonably believes there will not be an adverse effect on the client, and each client consents after consultation. California only requires written consent.
Here, Where a lawyer represented a client in the past and now represents a client where those matters are in dispute, the lawyer is disqualified. Here, the issue does not involve the incorporation of XYZ, which was the subject of the prior representation, so Lawyer is not disqualified outright.
July 1990, Question 3 [Community Property]
General Presumptions
Community property
CP is property, other than separate property acquired by either spouse during marriage. All assets acquired during marriage are presumptively CP.
Separate property
All property acquired before or after marriage or after permanent separation, or by gift, devise, or bequest, is presumed to be SP.
1.a The house
SP- see supra.
House is presumed to be SP because H purchased it prior to marriage.
CP pays off SP (Moore)
When CP pays off the purchase price of SP the community is entitled to reimbursement as follows: Amount principal reduced/Original amount = CP interest. The court can deviate from this and award entire house to one of the parties and give the other spouse other community assets to compensate for their share.
Here, the community helped to pay off H's house which is his SP because H had a 30-yr. mortgage to pay down $30,000 of the house, and he paid all mortgage payments from his ABDO earnings, which are CP. Since it has been more than 30 years and his earnings paid off "all" mortgage payments, the community should be compensated for its interest as follows:
30000/40000 = 3/4 CP interest: the SP paid 10,000/40,000 = 1/4 SP interest.
Since the house is now worth $500,000, 1/4 of it ($125,000) will be H's SP and 3/4 of it will be CP ($375,000).
H gets $125k + 1/2 of $375; W gets 1/2 of $375k.
1b. Flora, Inc.
SP see supra.
Since W started Flora, Inc. with money she inherited from her father, it is a SP business.
SP enhanced by CP.
Pereira: tends to favor community; use when spouse's management and skills are primary reason for growth of business.
Van Camp: tends to favor separate estate; use when character of business is the primary reason for the growth.
Here, if W's expertise in landscaping is the reason for the growth of the business, the court will use Pereira. This is likely the case since assets are only worth $50k, meaning goodwill likely responsible for other $550k- W's efforts thus community labor. Court likely to use Pereira with H receiving $260k and W $340k.
1c. Corp Stocks
CP See above.
Since the stocks were acquired during marriage they are presumptively CP unless a special classification alters this.
Personal injury
If COA arose during marriage; if COA arose before or after marriage: SP.
On divorce: injured spouse's SP unless the interests of justice require otherwise, but community entitled to reimbursement.
Here, the injury seems to have occurred during marriage, making the settlement CP. Since H and W are getting divorced, the settlement (traceable to the stocks) will become his SP, but the community is entitled to reimbursement for any expenses it paid for his injury.
H gets stocks worth $600k but community may be reimbursed if it spent money on injury.
1d. ABDO Disability
CP
See above.
Disability during marriage so CP unless special classification.
Disability pay
Classification as SP or CP depends on what it is intended to replace (it does not matter when it is earned)
Here, the disability pay is intended to replace earnings since H was totally and permanently disabled and can no longer work and the disability provides 2/3 of his monthly pre-injury salary; thus, payments during marriage are CP and alter divorce are H's SP. During marriage, CP; after marriage, H's SP.
1e. Future ABDO Retirement
CP and SP
See above
Total pension/stock X # years of marriage while pension earned/Total # years pension earned = CP
The court can retain jx until 1995 and distribute the retirement then or deviate from the time rule and assign the entire pension to the earnings spouse and another community asset of equal value to the other spouse.
H worked for ABDO for all 33 years of marriage (assuming dissolution in 1990) making this entire amount CP, but if he continues to accrue the benefits from 1990 to 1995 then this portion will be his SP.
Total retirement x 33/38 = CP and then /38 would be H's SP.
Mostly CP but part SP if still accrues after marriage but before 1995.
2. W's education
Education
Education is never CP. The community is entitled to reimbursement if it paid for the education and the education substantially enhanced the earning capacity of the educated spouse.
Defenses to reimbursement could be denied or simply reduced.
1. Community already substantially benefited from the education (presumed if >10 years since education obtained)
2. Other spouse also received a community funded education/training, or
3. Education reduced the need for spousal support for the educated spouse
Here, W's professional credential is landscaping and is her Sp.
The community may be entitled to reimbursement because it paid for the education from H's ABDO earnings and the education likely enhanced her earning capacity since she was a homemaker previously and now is able to earn money by opening her own landscaping business.
Defenses:
1. If 1990 is year of dissolution, the education was only obtained 7 years ago but the community may have already substantially benefited because her business shaw been successful over the pas 6 years, as indicated by the $600,000 offer.
2. Not applicable.
3. Need for spousal support likely reduced since she can now support herself with her successful business.
W's SP but community may be reimbursed, but unlikely since strong defenses for reimbursement.