Third District Affirms Sanctions Order of $43,678.42 Against Attorney and Her Clients.
Our fellow blawg “The Complex Litigator” has an excellent November 25, 2008 post on Wallis v. PHL Associates, Inc., Case No. C056200 (3d Dist. Nov. 25, 2008) (certified for publication). We will not review the facts in-depth, because “The Complex Litigator” post is complete. In essence, both the trial and appellate courts frowned on conduct by an attorney and her clients by which they made sure confidentially-filed court documents with trade secrets were viewed by third parties and copied so as to make an attempt to defeat the opposing party’s claim that the information was protected trade secrets.
The sanctions order was made pursuant to Code of Civil Procedure section 128.5 because the action was filed before December 31, 1994. (Long-running litigation, to say the least.) Although substantial evidence supported the sanctions against both attorney and her clients, attorney made an interesting argument that her conduct was not frivolous and taken in bad faith given that she contacted the California State Bar’s ethics hotline for guidance on the ethical implications of the appearance of the confidential information in the public court file. Supposedly, the ethics hotline person told attorney that she had a “paramount duty” to do what she did with respect to the trade secrets in order to further her clients’ interests. The Court of Appeal did not find this argument persuasive.
First, attorney failed to disclose to the ethics hotline the nature of the protective order that might have led to different guidance. This omission bolstered the trial court’s finding of bad faith.
Second, the “ethics hotline” defense was weak in light of the hotline’s limited nature: the hotline is a “confidential research service,” not a source of legal advice. Besides, the order under review involved section 128.5 sanctions, not the ethical implications arising from attorney’s conduct. Wallis cautions that the “ethics hotline” defense may not shield an attorney from exposure to sanctions for certain conduct during the course of litigation, whether it is ethical or unethical in nature.
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