California Court of Appeal, Falcon Brands, Inc. v. Mousavi & Lee, LLP, Docket No. G059477

 

Legal Ethics

 

Professional Malpractice

 

Attorneys

 

Litigation Privilege

 

Anti-SLAPP Law

 

Illegal Attempts to Force into Settling

 

Extortion

 

“Flatley Rule.”

 

California Law

 

 

 

Lawyers argue for a living.  Some do more than argue.  They lace their settlement demands with threats.  When does such activity cross the line and become professional misconduct?  That is the fundamental question presented in this case.

 

 

Falcon Brands, Inc. and Coastal Harvest II, LLC (collectively Falcon) appeal here from an order granting respondent’s special motion to strike both causes of action in Falcon’s cross-complaint pursuant to Code of Civil Procedure section 425.16 (the anti-SLAPP law). The cross-complaint alleges extortion and intentional interference with a contract against attorney Amy Mousavi and her law firm, Mousavi & Lee, LLP (collectively Mousavi). Falcon argues Mousavi’s e-mail settlement demands, described in detail below, which are the focus of Falcon’s cross-complaint, were not entitled to protection under the anti-SLAPP law because they constituted illegal attempts to force Falcon into settling the underlying matter. The trial court rejected this argument and granted Mousavi’s anti-SLAPP motion.

 

We reverse as to the first cause of action for extortion because we conclude Mousavi’s e-mail settlement demands, when considered in context, were not protected speech in light of the Supreme Court’s ruling in Flatley v. Mauro (2006) 39 Cal.4th 299 (Flatley). Rather, Mousavi’s escalating series of threats ultimately transformed what had been legitimate demands into something else: extortion. We therefore conclude Falcon’s first cause of action is not protected by the anti-SLAPP law as a result of the well-established “Flatley rule.”

 

We affirm as to the second cause of action, intentional interference with a contract. That cause of action arises out of Mousavi’s actual revelation of damaging information about Falcon to Falcon’s merger partner. Falcon does not contend the revelations were illegal as a matter of law. The revelations were made in furtherance of Mousavi’s contemplated litigation. The trial court correctly concluded the revelations were protected by the litigation privilege. Consequently, they are also protected by the anti-SLAPP statute.

 

(…) The parties failed to reach a settlement; Mousavi thereafter sent Harvest copies of the various settlement demands she had made to Falcon. Harvest subsequently sued to rescind its merger agreement with Falcon, apparently based on the claims of illegal conduct it received from Mousavi.

 

(…) While Honard did allege in his complaint that Falcon engaged in specific illegal activities, he did not affirmatively link those acts to either his wrongful termination or the non-payment of his commissions, salary, or expenses.

 

(…) Mousavi moved to strike the cross-complaint pursuant to the anti-SLAPP law. In support of the motion, Mousavi declared that, after she learned Falcon was involved in a merger with Harvest, she had a good faith reason to inform Harvest about Honard’s claims against Falcon because the Corporations Code states the surviving corporation in a merger remains liable for any judgment entered against the disappearing corporation. (Corp. Code, § 1108.) She denied threatening to report Falcon to the Bureau of Cannabis Control, to other law enforcement agencies, or to the media.

 

The Anti-SLAPP Law

We begin our analysis with another quote from Flatley: “Our opinion should not be read to imply that rude, aggressive, or even belligerent prelitigation negotiations, whether verbal or written, that may include threats to file a lawsuit, report criminal behavior to authorities or publicize allegations of wrongdoing, necessarily constitute extortion.” (Flatley, supra, 39 Cal.4th at p. 332, fn. 16.) We concur in this observation. The presence or absence of extortion necessarily depends on the facts in a particular case. Having said that, we turn to the difficult issue presented here.

 

The anti-SLAPP law provides a summary mechanism to test the merit of any claim arising out of a defendant’s protected speech or petitioning activities. The law authorizes courts to strike any cause of action which falls within the statute’s purview, if the plaintiff cannot demonstrate a probability of prevailing on it. (Code Civ. Proc.,
§ 425.16.) “Attempting to protect against ‘lawsuits brought primarily to chill’ the exercise of speech and petition rights, the Legislature embedded context into the statutory preamble, ‘declaring that it is in the public interest to encourage continued participation in matters of public significance.’” (FilmOn.com Inc. v. DoubleVerify Inc. (2019) 7 Cal.5th 133, 143 (FilmOn.com).)

 

“Because our ‘primary goal is to determine and give effect to the underlying purpose of’ the anti-SLAPP statute,” we will “liberally extend the protection of the anti-SLAPP statute where doing so would ‘encourage continued participation in matters of public significance,’ but withhold that protection otherwise.” (FilmOn.com, supra, 7 Cal.5th at p. 154.)

 

When a party moves to strike a complaint on the basis of the anti-SLAPP law, the trial court must engage in a two-step process. “First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains were taken ‘in furtherance of the defendant’s right of petition or free speech under the United States or California Constitution in connection with a public issue,’ as defined in the statute.” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon).)

 

If the court finds the defendant has made that required showing, the burden shifts to the plaintiff to demonstrate “there is a probability that the plaintiff will prevail on the claim.” (Code Civ. Proc., § 425.16, subd. (b)(1); DuPont Merck Pharmaceutical Co. v. Superior Court (2000) 78 Cal.App.4th 562, 567-568.)

 

“An order granting or denying a special motion to strike shall be
appealable . . . .” (Code Civ. Proc., § 425.16, subd. (i).) We review either ruling on a de novo basis. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999 [“Whether section 425.16 applies and whether the plaintiff has shown a probability of prevailing are both reviewed independently on appeal”].) “While we are required to construe the statute broadly, we must also adhere to its express words and remain mindful of its purpose.” (Paul v. Friedman (2002) 95 Cal.App.4th 853, 864, fn. omitted.)

 

The Protected Activity Prong
A cross-defendant who files an anti-SLAPP motion to strike bears the initial burden of demonstrating that the challenged cause of action arises from protected activity. (Equilon, supra, 29 Cal.4th at p. 67.) “In deciding whether the ‘arising from’ requirement is met, a court considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 79.)

 

In Flatley, the Supreme Court created an addendum to the standard anti-SLAPP analysis. We believe application of the so-called “Flatley rule” is dispositive here. Because the facts in Flatley bear such a remarkable similarity to those now before us, we quote liberally from the Supreme Court’s opinion:

“Plaintiff Michael Flatley, a well-known entertainer, sued defendant
D. Dean Mauro, an attorney, for civil extortion, intentional infliction of emotional distress and wrongful interference with economic advantage. Flatley’s action was based on a demand letter Mauro sent to Flatley on behalf of Tyna Marie Robertson, a woman who claimed that Flatley had raped her, and on subsequent telephone calls Mauro made to Flatley’s attorneys, demanding a seven-figure payment to settle Robertson’s claims. Mauro filed a motion to strike Flatley’s complaint under the anti-SLAPP statute.
[Fn. omitted.] . . . The Court of Appeal held that, because Mauro’s letter and subsequent telephone calls constituted criminal extortion as a matter of law, and extortionate speech is not constitutionally protected, the anti-SLAPP statute did not apply.” (Flatley, supra, 39 Cal.4th at p. 305.)

 

The Supreme Court affirmed the judgment of the Court of Appeal: “We conclude that, consistent with the legislative intent underlying the anti-SLAPP statute as revealed by the statutory language, and consistent with our existing anti-SLAPP jurisprudence, a defendant whose assertedly protected speech or petitioning activity was illegal as a matter of law, and therefore unprotected by constitutional guarantees of free speech and petition, cannot use the anti-SLAPP statute to strike the plaintiff’s complaint.” (Flatley, supra, 39 Cal.4th at p. 305.)

 

Mousavi argued in the trial court that Flatley is distinguishable despite the fact that, much like in Flatley, Falcon sued Mousavi for extortion and intentional interference with a contract based on the content of a series of increasingly strident demand letters it received from her. Mousavi echoes the argument made by counsel in Flatley that her demands “amounted to no more than the kind of permissible settlement negotiations that are attendant upon any legal dispute . . . .” (Flatley, supra, 39 Cal.4th at p. 328.) During oral argument before us, Mousavi’s appellate counsel vigorously agreed.

We are not persuaded.

 

Extortion
“Extortion is the obtaining of property . . . from another, with his or her consent . . . induced by a wrongful use of force or fear.” (Pen. Code, § 518, subd. (a).) Fear, for purposes of extortion “may be induced by a threat of any of the following:
1. To do an unlawful injury to the person or property of the individual threatened or of a third person. 2. To accuse the individual threatened . . . of a crime. 3. To expose, or to impute to him . . . a deformity, disgrace or crime. 4. To expose a secret affecting him, her, or them. 5. To report his, her, or their immigration status or suspected immigration status.” (Pen. Code, § 519, italics added; Flatley, supra, 39 Cal.4th at p. 326.)
Attempted extortion is also a crime. (Pen. Code, § 524; see People v. Umana (2006) 138 Cal.App.4th 625 (Umana) [affirming conviction for attempted extortion under Penal Code section 524].)

 

As the Supreme Court explained in Flatley, “extortion has been characterized as a paradoxical crime in that it criminalizes the making of threats that, in and of themselves, may not be illegal. ‘In many blackmail cases the threat is to do something in itself perfectly legal, but that threat nevertheless becomes illegal when coupled with a demand for money.’ [Citation.] The extortion statutes ‘all adopted at the same time and relating to the same subject matter, clearly indicate that the legislature in denouncing the wrongful use of fear as a means of obtaining property from another had in mind threats to do the acts specified in Penal Code section 519, the making of which for the purpose stated is declared to be a wrongful use of fear induced thereby.’” (Flatley, supra, 39 Cal.4th at p. 326, fn. omitted.). “Attorneys are not exempt from these principles in their professional conduct.” (Id. at p. 327.)

 

The Supreme Court addressed a pivotal argument tendered by Mousavi both in the trial court and before us—that her conduct did not constitute extortion since she threatened no direct disclosure of Falcon’s alleged criminal misconduct to either law enforcement or the media. We recognize at this point that this argument will strike a familiar chord with many lawyers who might ask, isn’t this type of posturing standard operating procedure for aggressive litigators? Don’t lawyers regularly link settlement demands to threatened consequences?

 

In response, we concur with the answers provided by the Supreme Court in Flatley: “threats to do the acts that constitute extortion under Penal Code section 519 are extortionate whether or not the victim committed the crime or indiscretion upon which the threat is based and whether or not the person making the threat could have reported the victim to the authorities or arrested the victim. [Citations.] Furthermore, the crime with which the extortionist threatens his or her victim need not be a specific crime.” (Flatley, supra, 39 Cal.4th at p. 327.)

 

In other words, it is the threat to reveal damaging information, not any subsequent revelation, that makes the conduct illegal when the threat is linked to a monetary demand. Many, perhaps most, extortionate threats may never actually be conveyed to either law enforcement or the media. The reason for this is obvious enough: the threat had its desired effect. “The accusations need only be such as to put the intended victim of the extortion in fear of being accused of some crime. The more vague and general the terms of the accusation the better it would subserve the purpose of the accuser in magnifying the fears of his victim, and the better also it would serve to protect him in the event of the failure to accomplish his extortion and of a prosecution for his attempted crime.” (People v. Sanders (1922) 188 Cal. 744, at pp. 749-750; cited with approval in Flatley, supra, 39 Cal.4th at p. 327.)

 

Again, it is the fact that the threat is directly linked to the monetary demand that is the critical factor. “‘It is the means employed to obtain the money which the law denounces, and though the purpose may be to collect a just indebtedness arising from and created by the criminal act for which the threat is to prosecute the wrongdoer, it is nevertheless within the statutory inhibition.’” (Flatley, supra, 39 Cal.4th at p. 326, italics added.)

 

Applying these rules to the current facts, we believe Mousavi’s initial communication with Falcon on September 6, 2019, as described above, was innocent. Her next e-mail sent on October 8, 2019, is a closer call when considered by itself. That e-mail contained at least an implicit threat, as Mousavi specified the crimes Falcon had allegedly committed, though she never directly linked her settlement demands to them. Instead, she explained how she had calculated her client’s damages without making any direct reference to the alleged criminal misconduct. A skeptical observer might reasonably wonder why Mousavi referenced the “BBC Violations” at all within that demand. Indeed, we share that curiosity. We nonetheless conclude the October 8 correspondence standing alone may not have crossed the line into misconduct.

 

But the October 8 e-mail must be considered in context along with the October 11, 2019 e-mail. In that e-mail Mousavi informed Falcon’s counsel she had already “put the attorneys for Harvest Health & Recreation Inc. (‘Harvest’) on notice about Mr. Honard’s claim for wages, without disclosing other issues mentioned in my letter of October 8, 2019.” There can be no doubt that bribing a deputy district attorney (as alleged in the October 8 e-email) involves criminal misconduct. Mousavi then added, “Harvest has requested that I forward the demand letters I have sent you. I am planning to e-mail those letters on Tuesday.” The implication is clear: settle the case now or Harvest will become aware of Falcon’s alleged criminal misconduct next week.

 

“It is not necessary that a threat should be apparent from the face of the letter, nor even necessary that it should be implied therefrom. The statute says if the language used is adapted to imply a threat, then the writing is sufficient. Parties guilty of the offense here alleged seldom possess the hardihood to speak out boldly and plainly, but deal in mysterious and ambiguous phrases . . . .” (People v. Choynski (1892) 95 Cal. 640, 641–642; Umana, supra, 138 Cal.App.4th at p. 640.)

 

Mousavi’s $490,000 settlement demand, as explained in her October 8 e-mail correspondence, was for unpaid wages, commissions, and related expenses. The demand was unrelated to any alleged criminal conduct. Thus, to paraphrase Flatley, Mousavi’s threat to disclose criminal activity entirely unrelated to her client’s damage claim “‘exceeded the limits of respondent’s representation of his client’ . . . . (State v. Harrington, supra, 260 A.2d at p. 699 [attorney’s veiled threat to have his client in a divorce action inform on her husband to the Internal Revenue Service and Bureau of Immigration and Naturalization supports attorney’s conviction of extortion].)” (Flatley, supra, 39 Cal.4th at pp. 330-331.)

 

Although statements made in connection with litigation are generally protected under the terms of the anti-SLAPP law, the Supreme Court made it clear in Flatley that settlement demands which contain threats may not be afforded protection: “not all speech or petition activity is protected by [Code of Civil Procedure] section 425.16.” (Flatley, supra, 39 Cal.4th at p. 313.) “The law does not contemplate the use of criminal process as a means of collecting a debt.” (People v. Beggs (1918) 178 Cal. 79, 84.)

 

 

(California Court of Appeal, Jan. 27, 2022, Falcon Brands, Inc. v. Mousavi & Lee, LLP, Docket No. G059477, Certified for Publication)

Kiobel v. Cravath, Swain & Moore, LLP, Docket No. 17-424-cv

Discovery (foreign company): Evidence (foreign court): 28 U.S.C. § 1782: Trade secret: Attorney: Ethics (client’s documents):

Section 1782 “provides federal‐court assistance in gathering evidence for use in foreign tribunals.” Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004).

Petitioner‐Appellee Kiobel seeks documents belonging to Royal Dutch Shell (a foreign company) from Shell’s United States counsel, Respondent‐Appellant Cravath, Swaine & Moore LLP. The documents were transferred to Cravath for the purpose of responding to discovery requests in a prior case over which the court was ultimately found to lack jurisdiction. The United States District Court for the Southern District of New York (Hellerstein, J.) granted Kiobel’s petition seeking leave to subpoena Cravath. We reverse: it is an abuse of discretion for a district court to grant a 28 U.S.C. § 1782 petition where the documents sought from a foreign company’s U.S. counsel would be “unreachable in a foreign country,” because this threatens to jeopardize “the policy of promoting open communications between lawyers and their clients.” Application of Sarrio, S.A., 119 F.3d 143, 146 (2d Cir. 1997).

For the purpose of pretrial discovery, the district court consolidated Kiobel’s case with other Alien Tort Statute cases arising out of the same events in Nigeria, the Wiwa cases. See Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88 (2d Cir. 2000). The consolidated cases generated a large volume of discovery, including depositions and documents. The discovery materials were subject to a stipulated confidentiality order entered into in the Wiwa cases, and signed by Kiobel. Most of the documents produced by Shell were marked “confidential,” meaning that they were to be used “solely for purposes” of the then‐pending Kiobel and Wiwa litigations. The parties agreed to destroy or return each other’s confidential material not later than thirty days after the respective cases’ conclusions, and that the order would survive the end of litigation. Any de‐designation of confidential documents or modification of the confidentiality order required agreement by the parties to the confidentiality order, or could be ordered by the district court. Cravath attorneys signed the stipulation in their capacity as Shell’s counsel.

Years after (…), Kiobel prepared to file suit against Shell in the Netherlands, advancing the same allegations made in her Alien Tort Statute suit. Kiobel now wants to deploy the discovery from her American litigation in her Dutch lawsuit, but is impeded by the confidentiality order which limits its use to only the U.S. Kiobel and Wiwa Alien Tort Statute cases. On October 12, 2016, Kiobel filed the pending 28 U.S.C. Section 1782 petition to subpoeana Cravath and obtain “all deposition transcripts from the Kiobel and Wiwa cases,” as well as “all discovery documents and communications produced to the plaintiffs by Shell and other defendants in Kiobel and the Wiwa cases.”

(…) Therefore, although our Court in Ratliff held that Davis Polk was subject to appellant’s subpoena, Ratliff did not disturb Sarrio’s suggestion that a district court should not exercise its discretion to grant a Section 1782 petition for documents held by a U.S. law firm in its role as counsel for a foreign client if the documents are undiscoverable from the client abroad, because this would disturb attorney‐client communications and relations. Sarrio, 119 F.3d at 146; Ratliff, 354 F.3d at 170.

(…) The decision to alter the confidentiality order without Shell’s participation, and without considering the costs of disclosure to Shell, makes this case exceptional, and mandates reversal. See Mees, 793 F.3d at 302 (explaining that under Intel, district courts should apply the standard from Federal Rule of Civil Procedure 26 to assess when a discovery request is unduly burdensome); see also In re Catalyst Managerial Servs., DMCC, 680 Fed. App’x 37, 39 & n.1 (2d Cir. 2017) (discussing a party’s argument about the burdens of discovery on a third‐party putative foreign defendant in the context of the fourth Intel factor).

(…) As amicus the New York City Bar Association notes, its Ethics Opinion 780 states that law firms have an interest in retaining documents where needed to protect themselves from accusations of wrongful conduct. So U.S. law firms may be harmed if they must destroy or return a foreign client’s documents as soon as possible once a proceeding is completed.

(U.S. Court of Appeals for the Second Circuit, July 10, 2018, Kiobel v. Cravath, Swain & Moore, LLP, Docket No. 17-424-cv, J. Jacobs)

28 U.S.C. § 1782 prévoit l’assistance des cours fédérales dans le processus de production de moyens de preuve à l’intention de Tribunaux étrangers.

En conformité avec sa jurisprudence Sarrio rendue en 1997 (analysant 28 U.S.C. § 1782), le 2è Circuit fédéral juge en l’espèce qu’une cour de district fédérale ne peut pas ordonner d’une étude d’avocats sur territoire U.S. la production de moyens de preuve appartenant à un client étranger de l’étude quand le but de cette procédure est la production de ces moyens de preuve dans le cadre d’une autre procédure hors U.S., laquelle procédure ne permettant pas (encore) la production desdits moyens de preuve (même s’ils peuvent être produits ultérieurement). De la sorte, ces moyens de preuve ne peuvent pas être obtenus si la procédure hors U.S. n’a pas encore débuté et que dite procédure (typiquement des systèmes de droit civil) ne connaît pas l’institution de « discovery » antérieure au procès proprement dit (typiquement des systèmes de Common law).

En juger autrement reviendrait à porter atteinte au principe de libre et complète communication entre le client et son avocat.

Il est à noter que la partie requérante ne sollicitait la production qu’à l’encontre de l’étude d’avocats, et non à l’encontre de son client.

Par ailleurs, en l’espèce, les moyens de preuve recherchés avaient antérieurement été produits dans une procédure, terminée, devant les cours U.S. Les parties à cette procédure avaient convenu de leur caractère confidentiel, ces moyens devant être détruits ou retournés après la fin de la procédure. Les parties avaient convenu que la confidentialité ne pouvait être levée que de leur mutuel consentement, ou par ordre de la cour de district fédérale. Dès lors, sans l’intervention de la cour de district, les moyens de preuve ne pouvaient pas être produits hors U.S. considérant la confidentialité promise. D’où la présente procédure en production fondée sur 28 U.S.C. § 1782. Le 2è Circuit juge donc ici que requérir et obtenir ces documents contreviendrait au principe de libre communication entre le client et l’avocat.

Cette affaire est considérée comme exceptionnelle par la cour. Dans des affaires plus « ordinaires » n’impliquant ni clauses de confidentialité ni principe de libre communication entre client et avocat, les cours fédérales examinent une requête en production fondée sur 28 U.S.C. § 1782 sous l’angle des quatre facteurs établis par la jurisprudence Intel rendue par la Cour Suprême fédérale en 2004 (542 U.S. 241).

(La présente décision cite aussi l’ « Ethics Opinion 780 » de l’association du barreau de la ville de New York, qui dispose que les études d’avocats ont un intérêt à la conservation des documents, pour pouvoir faire face cas échéant à des reproches de violations d’obligations professionnelles).

Heller Ehrman LLP v. Davis Wright Tremaine LLP, S236208

Law partnerships: Partnership (dissolution): Property interest: Vested rights: Fees (contingency basis): Fees (hourly basis): Jewel Waiver: Chapter 11: Common law:

(…) Does a dissolved law firm retains a property interest in (…) legal matters (matters on an hourly basis) that are in progress –– but not completed –– at the time of dissolution?

(…) Under California law, a dissolved law firm has no property interest in legal matters handled on an hourly basis, and therefore, no property interest in the profits generated by its former partners’ work on hourly fee matters pending at the time of the firm’s dissolution. The partnership has no more than an expectation that it may continue to work on such matters, and that expectation may be dashed at any time by a client’s choice to remove its business. As such, the firm’s expectation — a mere possibility of unearned, prospective fees — cannot constitute a property interest. To the extent the law firm has a claim, its claim is limited to the work necessary for preserving legal matters so they can be transferred to new counsel of the client’s choice (or the client itself), effectuating such a transfer, or collecting on work done pretransfer.

Heller’s dissolution plan included a provision known as a Jewel waiver. Named after the case of Jewel v. Boxer (1984) 156 Cal.App.3d 171 (Jewel), the provision purported to waive any rights and claims Heller may have had “to seek payment of legal fees generated after the departure date of any lawyer or group of lawyers with respect to non-contingency/non-success fee matters only.” The waiver was intended as “an inducement to encourage Shareholders to move their clients to other law firms and to move Associates and Staff with them, the effect of which will be to reduce expenses to the Firm-in-Dissolution.” By its express terms, the waiver governed only those matters billed on a non-contingency –– that is continual, or hourly –– basis.

(…) In the meantime, Heller filed for bankruptcy under chapter 11 of the United States Bankruptcy Code. When Heller’s plan of liquidation was approved, the bankruptcy court appointed a plan administrator who became responsible for pursuing claims to recover assets for the benefit of Heller’s creditors.

(…) We granted the Ninth Circuit’s request that we resolve the question of what property interest, if any, a dissolved law firm has in the legal matters, and therefore the profits, of cases that are in progress but not completed at the time of dissolution.

(…) Our policy of encouraging labor mobility while minimizing firm instability. It accomplishes the former by making the pending matters, and those that work on them, attractive additions to new firms; it manages the latter by placing partners who depart after a firm’s dissolution at no disadvantage to those who leave earlier.

(…) In Osment v. McElrath (1886) 68 Cal. 466 and Little v. Caldwell (1894) 101 Cal. 553, we confronted situations in which law firms dissolved with contingency matters pending. In both cases, we held that the fees generated by one partner in completing the matters were to be shared equally with the former partner (or his estate). (Osment, supra, 68 Cal. at p. 470; Little, supra, 101 Cal. at p. 561.) We thus rejected the argument that the lawyers who personally completed the matters were entitled to a greater share of the fees than stipulated to in the partnership agreements.

California partnership law was codified in 1929 when the Legislature adopted the Uniform Partnership Act (UPA). The UPA preserved many common-law principles, including the rules elucidated in Osment and Little. (See Jacobson v. Wikholm (1946) 29 Cal.2d 24, 27–28 (Jacobson).) The First District Court of Appeal then added further gloss when it interpreted UPA in the case of Jewel v. Boxer, supra. In Jewel, partners of a dissolved law firm sued their former partners who had been handling “most of the active personal injury and workers’ compensation cases.” (Jewel, supra, 156 Cal.App.3d at p. 175.) The suing partners sought their shares of the fees from these cases, arguing that they were entitled to the same fees as prevailed during the partnership.

The Jewel court ruled in favor of the plaintiffs. It reasoned that the former partners were not entitled “to extra compensation for services rendered in completing unfinished business,” where “extra compensation” was compensation “which is greater than would have been received as the former partner’s share of the dissolved partnership.” (Jewel, supra, 156 Cal.App.3d at p. 176 & fn. 2.) Accordingly, without an agreement to the contrary, any attorney fees generated from matters pending when the law firm dissolved were “to be shared by the former partners according to their right to fees in the former partnership, regardless of which former partner provides legal services in the case after the dissolution.” (Id. at p. 174.)

Subsequent Court of Appeal decisions consistently applied Jewel’s holding to contingency fee cases. (See, e.g., Fox v. Abrams (1985) 163 Cal.App.3d 610, 612–613; Rosenfeld, Meyer & Susman v. Cohen (1987) 191 Cal.App.3d 1035, 1063.) Such widespread application of Jewel was confined to the contingency fee context, however. Only in 1993 did a Court of Appeal expressly interpret Jewel to encompass matters the dissolved law firm had been handling on an hourly basis. (See Rothman v. Dolin (1993) 20 Cal.App.4th 755, 757–759.) To this day, Rothman remains the only published California opinion to apply Jewel to the hourly fee context, and it did so before UPA was revised. Three years after Rothman, the Legislature again revised partnership law by replacing UPA with RUPA. (See Corp. Code, § 16100 et. seq.) RUPA made several changes to the default rules of California partnership law.

(…) Since the enactment of RUPA, no California court has, in a published opinion, resolved whether there remains a basis for holding that a partnership has a property interest in legal matters pending at a firm’s dissolution. The last time we took up the issue was in Osment and Little. More recent is the intermediate appellate decision in Jewel, although that, too, was issued before the passage of RUPA and implicated only contingency fee matters. We thus consider with fresh eyes the question posed to us by the Ninth Circuit.

(…) The circumstances giving rise to a property interest, in turn, include not only familiar arm’s-length transactions but also certain sufficiently reliable expectations, such as unvested retirement benefits. (E.g., In re Marriage of Green (2013) 56 Cal.4th 1130, 1140– 1141 [“Nonvested retirement benefits are certainly contingent on various events occurring — such as continued employment — but this does not prevent them from being a property right for these purposes.”].) In this case, we consider the question of whether a sufficiently strong expectation exists in the context of a law firm partnership performing hourly work on legal matters. We find that it does not. A property interest grounded in such an expectation requires a legitimate, objectively reasonable assurance rather than a mere unilaterally-held presumption (See Bd. of Regents v. Roth (1972) 408 U.S. 564, 577).

(…) (See, e.g., General Dynamics Corp. v. Superior Court (1994) 7 Cal.4th 1164, 1174–1175, 1172 (General Dynamics) [stating that it is “bedrock law” that a client has the right “to sever the professional relationship [with its attorney] at any time and for any reason,” although carving out a limited exception for in-house counsel whose relationship with the client is not a “ ‘one shot’ undertaking”].)

While Heller was a viable, ongoing business, it no doubt hoped to continue working on the unfinished hourly fee matters and expected to receive compensation for its future work. But such hopes were speculative, given the client’s right to terminate counsel at any time, with or without cause. As such, they do not amount to a property interest. (Civ. Code, § 700; In re Thelen LLP (2014) 20 N.E.3d 264, 270–271 [“no law firm has a property interest in future hourly legal fees because they are ‘too contingent in nature and speculative to create a present or future property interest’ ”].) Dissolution does not change that fact, as dissolving does not place a firm in the position to claim a property interest in work it has not performed — work that would not give rise to a property interest if the firm were still a going concern. A dissolved law firm therefore has no property interest in the fees or profits associated with unfinished hourly fee matters. The firm never owned such matters, and upon dissolution, cannot claim a property interest in the income streams that they generate. This is true even when it is the dissolved firm’s former partners who continue to work on these matters and earn the income — as is consistent with our partnership law.

So, with the exception of fees paid for work fitting the narrow category of winding up activities that a former partner might perform after a firm’s dissolution, a dissolved law firm’s property interest in hourly fee matters is limited to the right to be paid for the work it performs before dissolution. Consistent with our statutory partnership law, winding up includes only tasks necessary to preserve the hourly fee matters so that they can be transferred to new counsel of the client’s choice (or the client itself), to effectuate such a transfer, and to collect on the pretransfer work. Beyond this, the partnership’s interest, like the partnership itself, dissolves.

(Cal. S.C., March 5, 2018, Heller Ehrman LLP v. Davis Wright Tremaine LLP, S236208)

Une étude d'avocats est-elle titulaire, après sa dissolution, d'un "property interest" portant sur les affaires en cours (facturées selon un tarif horaire), et sur les honoraires qu'elles génèrent après dissolution ?

En droit californien, une étude d'avocats dissoute, en phase de liquidation, n'est pas titulaire d'un "property interest" s'agissant des affaires traitées à un tarif horaire. De la sorte, elle n'est pas non plus titulaire d'un tel intérêt sur les honoraires générés après dissolution, dans ces dossiers, par les anciens associés. Même avant dissolution, l'étude n'a que l'expectative de pouvoir continuer à travailler dans les affaires en cours, et cette expectative peut être contrariée en tout temps par le choix du client de résilier le mandat. Dite expectative ne saurait constituer un "property interest" : elle ne permet, après dissolution, que d'entreprendre contre rémunération le travail nécessaire au bon transfert du dossier et de procéder au recouvrement des honoraires dus avant le transfert.

Dans deux décisions anciennes, Osment v. McElrath (1886) 68 Cal. 466 et Little v. Caldwell (1894) 101 Cal. 553, la Cour Suprême de Californie a jugé que dans des dossiers rémunérés autrement que selon le système du tarif horaire, l'avocat qui continuait de traiter le dossier après dissolution de l'ancienne étude devait partager ses honoraires avec l'avocat (ou sa succession) qui le traitait avant dissolution. Les honoraires devaient ainsi être partagés comme si l'étude n'avait pas été dissoute, en conformité avec le contrat de collaboration des anciens associés de l'étude dissoute. Cela sauf accord contraire entre les anciens associés (cf. Jewel v. Boxer (1984) 156 Cal.App.3d 171 (Jewel)).

Le "partnership law" californien a été codifié en 1929, et a conservé de nombreux principes de la Common law, y compris les principes énoncés par les deux décisions précitées Osment et Little.

La décision Jewel a été reprise de manière réitérée par les cours d'appel, mais seulement dans le contexte d'honoraires calculés autrement que selon le tarif horaire. Une seule décision d'une seule cour d'appel a repris Jewel dans le cadre du tarif horaire (Rothman v. Dolin (1993) 20 Cal.App.4th 755, 757–759). Trois ans après Rothman, le législateur a révisé le droit du "partnership", remplaçant UPA par RUPA.

Depuis l'entrée en vigueur de ce nouveau droit, aucune décision publiée des cours de Californie n'a jugé si le droit révisé permettait de retenir l'existence d'un "property interest" en faveur d'une étude dissoute et portant, après dissolution, sur les affaires en cours et sur les honoraires générés après dissolution.

La Cour juge en l'espère qu'un "property interest" peut être reconnu si l'expectative du droit qui lui est lié est suffisamment solide. Tel est le cas par exemple d'un droit futur reconnu par un contrat bilatéral, ou de rentes de retraite dont les montants ne sont pas encore certains. Mais tel n'est pas le cas s'agissant d'honoraires d'avocats à verser selon un tarif horaire. Des honoraires futurs pour un travail qui n'a pas encore été accompli ne sont en rien acquis. Le client peut en effet résilier le mandat en tout temps, avec ou sans motif (est citée la fameuse décision Bd. of Regents v. Roth (1972) 408 U.S. 564, 577). Dès lors, une étude en dissolution n'est pas titulaire d'un "property interest" s'agissant des honoraires portant sur du travail effectué après dissolution. Elle n'était déjà pas titulaire d'un tel intérêt avant dissolution, et la dissolution ne change pas cet absence d'intérêt. Cela même si le travail après dissolution est entrepris par un ancien associé du "partnership" en dissolution. Le "partnership" en dissolution a tout de même droit au paiement de ses honoraires pour le travail, après dissolution, lié au transfert du dossier au nouveau conseil ou au client lui-même. Les honoraires liés au travail accompli avant la dissolution sont également dus.