Shaffer v. Superior Court

• Decision Date: 30 March 1995
• Docket Number: No. B087115,B087115
• Citation: Shaffer v. Superior Court, 33 Cal.App.4th 993, 39 Cal.Rptr.2d 506 (Cal. App. 1995)
• Court: California Court of Appeals
• Parties: Marcy A. SHAFFER, Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent; Jeremy SIMMS, Real Party in Interest.

Page 506

39 Cal.Rptr.2d 506

33 Cal.App.4th 993

Marcy A. SHAFFER, Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent Jeremy SIMMS, Real Party in Interest.

No. B087115.

Court of Appeal, Second District, Division 3, California.

March 30, 1995.

Review Denied June 15, 1995.

Gibson, Dunn & Crutcher, Charles S. Battles, Jr., Howard A. Jacobson, Bradley E. Pomerance, Lewis, D'Amato, Brisbois & Bisgaard, David B. Parker and Jayesh Patel, Los Angeles, for petitioner.

Gradstein, Luskin & Van Dalsem and Henry D. Gradstein, Los Angeles, for real party in interest.

CROSKEY, District Judge.

Petitioner Marcy Shaffer ("Shaffer"), who is not a party to the underlying malpractice action, petitions this court for a writ of mandate directing the respondent trial court to vacate its order of August 12, 1994 ordering Shaffer to disclose the hourly rate she was paid as a contract staff attorney by the law firm of Gibson, Dunn & Crutcher ("defendant") while working on defendant's representation of the real party in interest, Jeremy Simms ("Simms"). ¹

The question of the hourly rate paid to Shaffer arose during her deposition taken by Simms in connection with his malpractice action against defendant in which he alleges, inter alia, that he was charged unconscionable attorney's fees. Defendant had objected to Simms's questions seeking to determine the hourly rate defendant had paid Shaffer. When Shaffer, relying on such objection, refused to divulge the information during the deposition, Simms filed a motion to compel her to answer. The trial court referred the matter to a referee who recommended that Shaffer be ordered to answer the question. The trial court accepted the referee's recommendation and Shaffer petitioned this court for writ of mandamus.

We issued an alternative writ and heard arguments on the matter. Later, we vacated our submission of the matter and requested additional briefing from the parties. Having considered all of the parties' arguments, we find that (1) we need not consider Shaffer's claim that disclosure of the hourly rate paid to her would be an improper infringement on her constitutional right to privacy because (2) disclosure is unwarranted since the hourly rate at which defendant compensated Shaffer is simply a part of defendant's costs and is not relevant to the question of whether plaintiff was charged an unconscionable fee by defendant. We therefore grant Shaffer's petition for the requested writ.

BACKGROUND OF THE CASE ²

On June 13, 1989, Simms signed a retainer agreement with defendant for representation in connection with his personal and business dealings with a Mr. Alan Robbins ("Robbins"). Specifically, Simms sought advice regarding a partial settlement of disputes he had with Robbins. The retainer agreement reflects the understanding between Simms and the defendant that defendant might be called upon to represent Simms in litigation with Robbins. ³ In fact, litigation did ensue and defendant represented Simms into 1991 in connection with his dealings with Robbins ("the Robbins matters"). Litigation between Simms and Robbins continued thereafter.

In January 1993, Simms filed this action against defendant. The operative complaint ("complaint") alleges causes of action for breach of contract, fraud, breach of fiduciary duties, and professional negligence. In his extensive complaint, Simms alleged that during an 18-month period (July 1989 through December 1990) defendant billed him $2,018,067.63 which he paid. Approximately $51,000 of that amount was for "other work"; the rest was billed to Simms in connection with the Robbins matters. Thereafter, although litigation was stayed, defendant billed Simms additional monies, in the approximate amount of $250,700. Shaffer's work on the Robbins matters was billed to Simms at rates ranging from $215 to $250 per hour.

While taking Shaffer's deposition, Simms sought to discover how much money defendant had paid her for her work on his file. When he asked her to disclose that amount, defendant's attorney, who was also representing Shaffer at her deposition, objected on the ground that the information sought was irrelevant and might be an invasion of Shaffer's privacy. He instructed Shaffer not to answer the question and she obeyed the instruction. Thereafter, Simms brought a motion to compel her answer to the question, charging that the information was relevant because he is entitled to know if the rate he was charged for her services "was unconscionable under the circumstances." ⁴ He also contended that whatever privacy right she had in that information is outweighed by his right to know the hourly rate since he was paying for her time. He noted he was only seeking her hourly rate, not her total salary, her net worth, or other private financial information. Simms requested sanctions against Shaffer and her attorney, arguing that the refusal to answer the question was without substantial justification.

At her deposition, Shaffer testified that she did not have her own office or secretary while working on Simms's matters. Rather, she used offices which were empty until someone else needed them, and at one point worked in the library. To get her time entered and to get "things copied," Shaffer used the secretaries who were available, but apparently did most of her own typing. Shaffer stated that from 1980 to some part of 1983, she had worked as a full time associate for defendant. When she returned to work for defendant as a contract staff attorney, it was agreed that she would do research, analysis and writing because she enjoyed those tasks. Simms was charged for approximately 1,800 hours of Shaffer's time for work on the Robbins matters. (Apparently, this was about 19 percent of all time billed by defendant on those matters.)

The trial court sent Simms's motion to compel to a discovery referee who recommended that Shaffer be ordered to answer the question regarding the hourly rate defendant paid her and to answer follow-up questions dealing with the compensation rate, noting that Shaffer's responses could be subject to a protective order. The referee also recommended sanctions be imposed in favor of Simms in the amount he requested ($1,100), saying Shaffer's refusal to answer was without substantial justification and the matter could have been resolved without the necessity of the motion.

Shaffer and defendant filed written objections to the referee's report. A hearing was had on the objections and by minute order dated August 12, 1994, the trial court approved the referee's report, with the exception that it lowered the sanctions to $900. By minute order dated October 21, 1994, the trial court modified its August 12 order by adding the following language: "The court has found that, under the operative pleadings, the need to determine whether or not unconscionable charges as to fees and hours was [sic] passed on to and billed to Plaintiff for Shaffer's work for Gibson, Dunn & Crutcher (G, D & C) on balance outweighs Shaffer's interest in privacy. Shaffer had acted as fiduciary to G, D & C. [p] Information sought pertains solely to Shaffer's hourly charge--not financial records--in considering the nature of the intrusion."

ISSUE RAISED BY THE PETITION

In this proceeding, Shaffer asks us to determine whether her constitutional right to privacy has been violated by the trial court's order requiring disclosure of the hourly rate she was paid by the defendant law firm. That issue necessarily presents the threshold question of relevancy and requires us to first consider whether a law firm's costs or margin of profit is in fact relevant to a claim that the firm has charged an unconscionable attorney's fee. This appears to be an issue of first impression in California.

DISCUSSION

1. The Interrelation of Privacy Rights and Discovery

A party may obtain discovery regarding unprivileged matters "that [are] relevant to the subject matter involved in the pending action ... if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence." (Code Civ.Proc., § 2017, subd. (a).) However, when evidence sought to be discovered impacts on a person's constitutional right to privacy (Cal. Const., art. 1, § 1), limited protections come into play for that person. (Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 656, 125 Cal.Rptr. 553, 542 P.2d 977.) The protections extend both to a person's personal and financial matters. (Ibid.) In ruling on discovery motions, the court must balance competing rights--the right of a litigant to discover relevant facts and the right of an individual to "maintain reasonable privacy." (Id. at p. 657, 125 Cal.Rptr. 553, 542 P.2d 977.)

Here, Shaffer contends that the amount of money paid to her by defendant is not relevant to the subject matter of this case. Because we can resolve this case on the issue of relevancy we have no need to consider Shaffer's privacy claim.

In his complaint, Simms alleged that the defendant had breached "The obligation of an attorney, under California Rules of Professional Conduct [of the State Bar], Rule 4-200, not to 'charge or collect an ... unconscionable fee.' " He further alleged that the defendant had breached a promise to represent Simms "competently." Simms asserts that in order to prove such allegations he is entitled to learn what hourly rate was paid to Shaffer by the defendant. In other words, it is his position that the issue of whether an attorney has charged an unconscionable fee justifies an inquiry into the attorney's cost of doing business and margin of profit. We disagree.

2. Unconscionability of Fees for Legal Services

In the context of the enforcement of contracts generally, the "unconscionable" agreement is condemned by Civil Code section 1670.5 ⁵ and usually involves a contractual provision which operates in a harsh and one-sided manner without any justification. That code...