Saleeby v. State Bar

Decision Date25 July 1985
Docket NumberS.F. 24695
Citation216 Cal.Rptr. 367,702 P.2d 525,39 Cal.3d 547
CourtCalifornia Supreme Court
Parties, 702 P.2d 525 Charles SALEEBY, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent.

LUCAS, Justice.

In this original proceeding petitioner Charles Saleeby seeks an order requiring the State Bar (bar) to adopt rules governing its exercise of discretion in administering the Client Security Fund (Bus. & Prof.Code, § 6140.5, hereinafter CSF) and to set aside its order granting petitioner less than the full amount of reimbursement which he requested. We will conclude that the procedures followed by the bar are insufficient because they fail to provide a record upon which judicial review may be had and deny due process and that the bar therefore must formulate new rules. We will also conclude that decisions relating to applications for reimbursement from the CSF are reviewable by a writ of mandamus heard in the first instance in the superior court. Finally, as to attorney fees, we will hold that the wholesale prohibition against payment of such fees in CSF matters is impermissible, and that petitioner's attorney is entitled under private attorney general principles to fees in an amount to be hereafter fixed.

THE CLAIM

Petitioner was represented by Robert A. Tarver in an age discrimination action. (Tarver's misconduct in this case formed part of the basis for disciplinary proceedings leading to his disbarment [Tarver v. State Bar (1984) 37 Cal.3d 122, 207 Cal.Rptr. 302, 688 P.2d 911].) Their fee agreement contemplated payment of 40 percent of "sums recovered" after trial. Following trial in 1976, petitioner was awarded $31,243.24 in damages and reinstatement to his former position. On November 19, 1976, Tarver was also awarded $20,600 by the court as attorney fees for his services. On December 3, after holding the $31,243.24 check for petitioner's damages for almost one month, Tarver met with petitioner and asked him to endorse the check, claiming that the entire amount was owed to him as fees. Tarver did not inform petitioner of the court's attorney fee award. Petitioner first refused to endorse the check and Tarver then threatened to take it all, asserting he could cash the check without petitioner's endorsement. Finally, petitioner agreed to sign the check when Tarver agreed to give him a check for $8,500. Tarver then took the endorsed draft and used a substantial part of the money to cure a default and prevent the foreclosure sale of his office building which was calendared for that same afternoon.

Petitioner consulted other attorneys about the legality of the division of the award. Tarver thereafter billed petitioner for additional fees of $24,240.24 based on the value of the future income he projected petitioner would receive following reinstatement to his job. Petitioner reported this conduct to the bar which commenced disciplinary proceedings. Petitioner also applied for reimbursement from the CSF in the sum of $22,743.24, the difference between the total damages awarded in the trial, and the $8,500 which he received. The CSF application originally was consolidated with the disciplinary proceedings. Although petitioner appeared as a witness during those proceedings, he was not given an opportunity independently to present evidence in support of his reimbursement application or to make arguments in favor thereof. The bar's hearing panel filed its findings and conclusions on February 22, 1983, recommending that Tarver be disbarred. As to the CSF application, the panel recommended, without making separate findings, that petitioner be granted reimbursement in the sum of $10,246. 1

Both the disciplinary proceeding and CSF application were heard before the bar's review department (Rules Proc. of State Bar, rules 450-452, 680) before which the bar examiner unsuccessfully requested separate findings of fact and conclusions of law regarding the CSF claim. The examiner also recommended full reimbursement in the sum requested by petitioner. The review department rendered its decision in the disciplinary matter recommending disbarment, but severed consideration of the CSF application. It adopted the hearing panel's conclusions in the disciplinary matter with certain additions, and concluded that Tarver was "guilty of overreaching in his negotiations with his client in persuading him to take substantially less than the client believed he was entitled to receive by making statements that he was not entitled to receive anything." Observing that "A substantial question has been raised as to the legality of any attorney's fees in addition to the amount awarded by the court," the review department found the bar examiner's authorities supported a conclusion of illegality but "this conclusion is not clearly established by case law, and there is no evidence that [Tarver] was aware that such additional fee might be illegal." Finally, the review department concluded that "The fee collected by [Tarver] was unconscionable."

Petitioner thereafter was separately informed by letter of the bar's "final" decision that his CSF application had been denied on the ground that he had "not suffered a reimbursable loss as defined by the Rules of Procedure of the State Bar." The letter specifically noted that while the "reviewing body" had found the fee taken to be unconscionable, petitioner's loss did not arise from "dishonest conduct by the lawyer as defined by Rule 671C...." After commenting that the review department was divided on the appropriate action, the letter invited petitioner to consider requesting reconsideration.

On September 1, 1983, petitioner accepted the invitation and submitted a written request for reconsideration. He ultimately was notified by letter dated December 27, 1983, that his request had been approved in part and that reimbursement in the sum of $10,246 was being ordered to cover the portion of his loss deemed reimbursable.

Because this represented only a portion of the reimbursement he requested, petitioner through counsel filed a petition for writ of review or mandamus directly in this court. We issued an alternative writ of mandate.

THE CLIENT SECURITY FUND

The concept of a fund established by attorneys to compensate clients injured by the misconduct of members of the legal profession was first translated into practice in New Zealand in 1929. (Sterling, The Argument for A Clients' Security Fund (1961) 36 State Bar J. 957, 961.) In 1958, the Vermont and Oregon bars became the first associations in the United States to vote to establish such funds. California, where the propriety of a CSF was the subject of debate, did not join the growing number of states providing such protection until 1971. (See Sterling, supra [arguing that the bar should establish a CSF as a matter of moral principle, as well as to improve public relations]; McKnight, The Argument Against Clients' Security Fund (1961) 36 State Bar J. 963 [adoption of a CSF will demean the profession in the public eye and encourage claims].) By the time the bar successfully sought legislation empowering it to create a CSF, it was "a relative latecomer" following in the footsteps of over 30 state and 20 local bar associations. (Outcault & Peterson, Lawyer Discipline & Professional Standards in California: Progress and Problems (1973) 24 Hastings L.J. 675, 686.)

In 1971, the Legislature enacted Business and Professions Code section 6140.5 authorizing the creation of the CSF. That provision states that the bar "may establish and administer a Client Security Fund to relieve or mitigate pecuniary losses caused by the dishonest conduct of those active members of the bar. Any payments from the fund shall be discretionary and shall be subject to such regulation and conditions as the board shall prescribe." The Board of Governors of the bar is also authorized to delegate the fund's administration to the existing disciplinary board or any other board or committee which it might create. (Id., subd. (a).) Subdivision (b) of the section allows the collection of up to $10 from each member of the bar for the purpose of funding the CSF.

The next year, the bar established and promulgated rules for the administration of the CSF. (Resolution by the Bd. of Governors of the State Bar of Cal. Establishing a Client Security Fund (June 17, 1971); see Rules Proc. of State Bar, rules 670-688.) Under the procedures set forth, an applicant must file an application for reimbursement on a form which includes in bold face type a statement that the bar "has no legal responsibility for the acts of individual lawyers. Payments from the [CSF] shall be made in the sole discretion" of the bar. (Rule 672 C.) After an application has been filed, it may be rejected by the review department of the bar disciplinary arm if the responsible staff attorney so recommends and forwards a report to the review department briefly stating the reason for the opinion. (Rule 673 A, B.) The report may rely on information outside that supplied in the application. (Id., subd. B.) If a majority of the review department concurs, no further hearing or other proceeding is required and the decision is final. (Ibid.; rule 685.)

"In all other cases" the matter is referred (apparently by the staff attorney) to a hearing panel or referee or to the review department. (Rule 673 C.) The reviewer may take and hear evidence, administer oaths, and compel the presence of witnesses through the use of a subpoena. (Rule 674.) A hearing panel or referee is entitled to conduct investigations and hold hearings as deemed necessary. (Rule 678 A.) After affording the application such consideration as it finds fit, the panel or referee must transmit "to the appropriate office of the State Bar" its report describing the proceedings, which...

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