BILL ANALYSIS
AB 2713
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Date of Hearing: May 4, 2004
ASSEMBLY COMMITTEE ON JUDICIARY
Ellen M. Corbett, Chair
AB 2713 (Pavley) - As Introduced: February 20, 2004
SUBJECT : PUBLIC AGENCY ATTORNEYS: CONCOMITANT DUTIES TO CLIENTS
AND TO PUBLIC
KEY ISSUES :
1)UNDER WHAT CIRCUMSTANCES SHOULD A PUBLIC ATTORNEY BE ABLE TO
PROTECT THE PUBLIC INTEREST, EVEN IF THAT MEANS DISCLOSING
ATTORNEY-CLIENT CONFIDENCES?
2)SHOULD A LIMITED EXCEPTION TO AN ATTORNEY'S ETHICAL DUTY OF
CONFIDENTIALITY BE ESTABLISHED WHICH PERMITS, BUT DOES NOT
REQUIRE, AN ATTORNEY WHO LEARNS OF IMPROPER GOVERNMENTAL
ACTIVITY IN THE COURSE OF REPRESENTING A GOVERNMENTAL
ORGANIZATION TO DIRECTLY REFER THAT MATTER TO THE LAW
ENFORCEMENT AGENCY OR OFFICIAL CHARGED WITH OVERSIGHT OF THE
GOVERNMENTAL ORGANIZATION?
SYNOPSIS
This bill addresses a vexing issue facing public sector
attorneys throughout California: under what circumstances may
such lawyers strive to protect the public interest even at the
risk of disclosing client confidences. This issue was
highlighted in 2002 in the case of Department of Insurance
attorney Cindy Ossias. As was well publicized at that time, Ms.
Ossias courageously came forward and disclosed wrongdoing on the
part of former Insurance Commissioner Chuck Quackenbush and
other Department of Insurance employees. Her disclosures
ultimately helped lead to the resignation of Mr. Quackenbush and
to the Legislature's investigation of this important matter --
but she took these courageous actions at the risk of losing her
livelihood. Subsequently Assemblyman Steinberg carried AB 363,
which as presented to the Governor was identical to this bill.
Governor Davis vetoed that bill, and this legislation once again
seeks to establish a limited exception to an attorney's ethical
duty of confidentiality. It does so by permitting, but not
requiring, an attorney who learns of improper governmental
activity in the course of representing a governmental
organization to directly refer that matter to the law
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enforcement agency or official charged with oversight of the
governmental organization. The bill is supported by those
representing government lawyers as well as others, and it is
opposed by the State Bar Board of Governors absent specified
narrowing amendments.
SUMMARY : Establishes a limited exception to an attorney's
ethical duty of confidentiality by permitting, but not
requiring, an attorney who learns of improper governmental
activity in the course of representing a governmental
organization to directly refer that matter to the law
enforcement agency or official charged with oversight of the
governmental organization. Specifically, this bill :
1)Expresses legislative findings and declarations that,
notwithstanding the importance of protecting attorney-client
confidential information, in the representation of
governmental organizations, circumstances may arise where the
interests of the public may justify an attorney reporting
client information that is otherwise confidential. Provides a
list of the types of crimes that may justify such reporting.
2)Defines "improper governmental activity" for purposes of the
bill as conduct by the governmental organization or by its
agent that comes within one or more of the following:
a) Constitutes the use of the organization's official
authority or influence by the agent to commit a crime or to
perpetrate fraud.
b) Involves the agent's willful misuse of public funds,
willful breach of fiduciary duty, or willful or corrupt
misconduct in office.
c) Involves the agent's willful omission to perform his or
her official duty.
3)Clarifies that any discovered improper activities need not be
within the scope of the services for which the attorney has
been engaged.
4)Establishes that a upon discovery of improper governmental
activity, the attorney's first option is to urge
reconsideration of the matter or to refer the matter to a
higher authority in the organization, including, if warranted
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by the seriousness of the matter, referral to the highest
internal authority that can act on behalf of the organization.
5)Provides that if the matter is not resolved by taking these
steps, the attorney may consider referring the matter to a law
enforcement agency or other governmental agency possessing
oversight or regulatory responsibilities over the matter,
notwithstanding the duty of confidentiality (Business &
Professions Code Section 6068(e)), provided that the following
criteria are met:
a) The attorney must take both of the specified internal
steps of urging reconsideration and referring the matter to
up the chain of command to the highest authority; or,
b) The attorney must reasonably believe that the highest
internal authority that can act on behalf of the
organization has directly or indirectly participated in the
improper governmental activity; or,
c) The attorney must reasonably believe that taking the
specified internal steps are futile.
6)If the above threshold is satisfied, the attorney then must
also determine that the referral is:
a) Warranted by the seriousness of the circumstances and
not otherwise prohibited by law;
b) The improper governmental activity constitutes the use
of the organization's official authority or influence to
commit a crime or to perpetrate fraud; and,
c) Further action is required in order to prevent or
rectify substantial harm to the public interest or to the
governmental organization resulting from the improper
governmental activity.
7)If all of the above criteria are met, the attorney may proceed
to take the extraordinary option of referring the improper
governmental activity to a law enforcement agency or other
governmental agency charged with overseeing or regulating the
matter.
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8)Establishes a "safe harbor" from State Bar discipline provided
the attorney has acted reasonably and in good faith to
identify the right agency for receiving the attorney's report.
This "safe harbor" also extends to the attorney's cooperation
with the reporting agencies execution of its oversight or
regulatory responsibilities, but is strictly limited to the
actions permitted by the bill. An attorney who initiates
other affirmative action after having made the referral to an
appropriate reporting agency would be subject to discipline.
EXISTING LAW :
1)Establishes a duty for an attorney "to maintain inviolate the
confidence, and at every peril to himself or herself to
preserve the secrets, of his or her client." (Business and
Professions Code Section 6068(e).)
2)Provides, in part, that "(B) If the member acting on behalf of
an organization knows that an actual or apparent agency of the
organization acts or intends or refuses to act in a manner
that is or may be a violation of law reasonably imputable to
the organization, or in a manner which is likely to result in
substantial injury to the organization, the member shall not
violate his or her duty of protecting all confidential
information as provided in Business and Professions Code
section 6068, subdivision (e). Subject to (that subdivision),
the member may take such actions as appear to the member to be
in the best lawful interest of the organization." The rule
goes on to list three specific, but not exclusive, options,
including urging reconsideration of the matter, referring the
matter to the next higher authority in the organization, or
resigning. None of the options listed expresses or implies an
option for the attorney to report the improper activity to an
outside agency. (Rule of Professional Conduct 3-600.)
3)Provides, through the above, that existing laws may be
interpreted to prohibit an attorney representing a
governmental organization from acting as a "whistleblower."
Violation of the duty of confidentiality as set forth in
statute or as incorporated in the rules of professional
conduct subjects an attorney to discipline. Accordingly,
under existing law if an attorney exhausts the internal chain
of command without resolution of the improper governmental
activity, the attorney is left only with the option of
withdrawing from the representation.
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FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
COMMENTS : This bill is essentially identical to a measure
carried in 2002 by Assemblyman Steinberg that was approved by
this Committee and the Legislature, but was subsequently vetoed
by Governor Davis. According to the author, the earlier
measure, AB 363, was originally introduced in response to the
uncertainty surrounding the fate of Department of Insurance
attorney Cindy Ossias who "blew the whistle" on then
Commissioner Chuck Quackenbush. Although Ms. Ossias was
eventually fully exonerated by the State Bar (no disciplinary
action was taken by the Bar, though charges were filed and
hearings were held), it still remains unclear whether other
government attorneys in similar circumstances would have the
same fate. In the legal community, the author states there is
growing consensus that state law and the Rules of Professional
Conduct do not offer government attorneys a clear path when
faced with improper governmental activity within the
organization.
The author notes in support of the measure that the original
version of this legislation was modeled after the Hawaii Rules
of Professional Conduct and would have simply allowed attorneys
to report "improper governmental activity" when the attorney had
a "reasonable belief" that the report was necessary to prevent
or rectify the "improper governmental activity."
In April 2001, the State Bar embarked on a rule-making process
for a new rule of professional conduct so that attorneys
representing governmental organizations may report improper
governmental activity without fear of disciplinary action. In
January 2002, the State Bar Board of Governors adopted proposed
amendments to the California Rules of Professional Conduct and
petitioned the Supreme Court to adopt the amendments. The
Supreme Court denied the request on May 10, 2002, stating that
the proposed amendments conflicted with Business and Professions
Code Section 6068(e), which states, "It is the duty of an
attorney . . .(e) to maintain inviolate the confidence, and at
every peril to himself or herself to preserve the secrets, of
his or her client."
Like its predecessor, this bill essentially seeks to codify the
amendments to the Rules of Professional Conduct proposed by the
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State Bar to the Supreme Court by making a conforming exception
to Section 6068(e). Supporters of the bill contend that by
codifying the changes into a new statute that would apply only
to attorneys representing governmental organizations, the
conflict identified by the Supreme Court would be avoided. This
is so because California regulates its lawyers under both
statutes enacted by the Legislature and disciplinary Rules of
Professional Conduct issued by the Supreme Court. The rules are
issued as an order binding on all members of the State Bar and
on lawyers from other jurisdictions while engaged in certain
activities in California.
Governor's veto message of the predecessor bill, AB 363 in 2002 :
As noted above, Governor Davis vetoed the predecessor to this
measure with the following explanation:
While this bill is well intended, it chips away at the
attorney-client relationship which is intended to foster
candor between an attorney and client. It is critical that
clients know they can disclose in confidence so they can
receive appropriate advice from counsel... The effective
operation of our legal system depends on the fundamental
duty of confidentiality owed by lawyers to their clients...
ARGUMENTS IN SUPPORT : Public Employees for Environmental
Responsibility (PEER) strongly supports this bill arguing that
the bill "addresses an anomalous situation for public agency
lawyers who, on one hand as civil servants, are explicitly
protected by whistleblower protection laws, such as Cal.
Government Code 8547 et seq., from occupational reprisal for
disclosing improper governmental activity but, on the other
hand, are vulnerable to loss of their license or other
professional discipline for that same disclosure if the
disclosure arises from their role as attorneys within the
agency." PEER also emphasizes that AB 2713 addresses a common
problem, not isolated to one case, citing the number of
attorneys facing ethical dilemmas similar to those faced by
Cindy Ossias. In addition PEER identifies the problem of ever
knowing with any certainty the extent of the problem: most
attorneys will not come forward because they do not want to risk
their ability to practice law. PEER also states that concerns
about disruptive impact or "chilling effect" are misplaced,
citing the many states with more generous disclosure rules than
California as well as the fact that state agency employees have
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had the right to disclose "improper governmental activity" for
over 20 years, and California government is still operating.
California Attorneys, Administrative Law Judges and Hearing
Officers in State Employment (CASE) also strongly supports the
bill stating that "this bill is necessary to lift the heavy
burden of potential sanctions by the State Bar from the minds of
State attorneys who fulfill their duty to serve the public by
disclosing official misconduct." CASE states that "[t]his burden
is not only grossly unfair to the State attorney; it is harmful
to the citizens of this State. The chilling effect this burden
has on State attorneys works to deprive the people of the State
of California of vital information regarding improper conduct by
officials in State government."
Proposed Amendments from the Bar : Although the Bar supported
the identical measure carried by Assemblyman Steinberg two years
ago, it has taken an "oppose unless amended" position on this
measure, arguing for two amendments to the bill. These
amendments would:
1)Delete the so-called "futility exemption" currently contained
in the bill which would permit an attorney to refer an
otherwise confidential matter relating to improper
governmental activity to law enforcement or another
governmental agency without having to make an attempt to
resolve the issue internally "if the attorney reasonably
believes that taking the actions described in subdivision (a)
are futile."
2)Delete the language that proposes to extend the definition of
"improper governmental activity" to include using the
organization's official authority or influence by the agent to
commit an "other serious and willful violation of law" (beyond
the commission of a crime or fraud). The Bar noted this
language was not in the final version of AB 363 in 2002.
Thus, the Bar's proposed amendments to the bill are as follows:
Amendment 1 : On page 3, lines 15 to 17, strike out "or if the
attorney reasonably believes that taking the actions described
in subdivision (a) are futile,"
Amendment 2 : On page 4, lines 8 and 9, strike out ", fraud, or
other serious and willful violation of law" and insert: "or
fraud"
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The author's office states the author is considering these
proposed amendments and, should this legislation move forward,
is committed to working closely with the Bar to determine
whether these amendments should be adopted.
REGISTERED SUPPORT / OPPOSITION :
Support
California Attorneys, Administrative Law Judges, Deputy Labor
Commissioners and Hearing
Officers in State Employment (CASE)
City of Bellflower
City of San Luis Obispo
Consumer Attorneys of California
Public Employees for Environmental Responsibility (PEER)
League of California Cities
Sierra Club
Opposition
State Bar of California (unless amended)
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334