Ethics Byte

APRIL 2013

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Lawyers increasingly exposed to Unfair

Competition Law liability
By Diane Karpman
There is a new case out from the California Appeal Court, First District,

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People ex rel. Herrera v. Stender (2013) that is chock-a-block with

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remarkable ethics concepts. The Los Angeles County Bar Association

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sought depublication or review, and both were denied. The problem

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with Stender is that it was engendered by lawyers in immigration law,

who were very possibly preying upon their vulnerable clients. Far too much predatory

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lawyering seems to occur in this area of practice. According to many studies,

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immigration law is in a state of crisis with overburdened judges, stressed-out

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prosecutors, and terribly stressed-out lawyers.

Martin Resendez Guajardo, who resigned from the California State Bar in 2008,
allegedly continued to prey on unsuspecting clients. Guajardo changed the name of
his firm to Immigration Practice Group, P.C. That entity was registered as a law
corporation, and Christopher Stender, an out-of-state lawyer, became the sole
shareholder. In 2010, People v. Stender was filed alleging violations of the Unfair
Competition Law, (UCL), Business and Professions Code 17200 based upon
Guajardos unauthorized practice of law. The prosecutors sought disgorgement of all
profits and restitution, in conjunction with several different charges, including aiding
and abetting the unlawful practice of law and fraud. Basically, they tossed in the entire
kitchen sink.
Rules of Professional Conduct, Rule 1-100, maintains that the rules cannot be
employed to create newfangled causes of action against lawyers. Unfair competition
allegations must be supported by the violation of a rule, which permits the UCL
statute to borrow. Using UCL jurisprudence opens up a whole new panorama of
liability. Remember, this is not an action by a client against their lawyer. These claims
are being asserted by attorneys acting for the people against a California law
corporation and an out-of-state lawyer, not a California-admitted lawyer.
There are a handful of out-of-state cases where a state bar will impose discipline on a
non-admitted lawyer. In the Matter of John P. Coale and Phillip B. Allen (2002) No.
98S00-9303-DI-309, Indiana disciplined Greta Van Susterens spouse, a member of
the firm, for sending advertising materials to widows, widowers and surviving parents
of airplane crash victims. The court found misconduct, but since he was not admitted
to practice law in Indiana, the court found it could not impinge his law license and
barred him soliciting in Indiana for a period of time.
Stender is not an admitted California lawyer. However, the court found that the law
corporation was a member, pursuant to becoming a registered California law
corporation pursuant to Business and Professions Code 6167. The court relied upon
a 1975 Opinion of the Attorney General, 58 Ops. Cal Atty Gen. 665, that a law
corporation is a member of the State Bar.

http://www.calbarjournal.com/April2013/EthicsByte.aspx[9/3/2013 9:15:53 AM]

Ethics Byte

Some have speculated that could mean that law corporations can be expected to attend
MCLE programs, pay dues, and comply with a host of other privileges (echoing the
old American Express ad slogan, membership has its privileges ).
Privileges also means there are liabilities. University of Arizona College of Law
Professor Ted Schneyer, author of the seminal law review article about law firm
discipline, and I agree that this case can stand for the proposition that a law
corporation is subject to discipline. This is a nationally controversial issue. New York
and New Jersey permit law firm discipline. The Commission for the Revision of the
Rules of Professional Conduct soundly rejected this concept here in California, where
the basis of our discipline is personal accountability.
Generally, lawyers are not subject to UCL liability. Well, maybe in one or two
unpublished cases from a decade ago involving a website. Also, the basis would not
have been a rule of professional conduct but the Business and Professions Code
section on advertising.
Stender is one of those cases that just keeps on giving. The law corporation attempted
to protect the clients identities based on privilege and privacy concerns, because many
of their clients could face deportation. In a flat response to that argument, the court
rejected this, saying, It is not necessarily the case, however, that all of appellants
clients are present in the United States illegally. . . (pg. 40, emphasis in original).
Who knew there was a sort of 100 percent rule about attorney-client privilege? And
wouldnt you think it would be prudent to err on the side of people who could be
deported?
But wait, the entire UCL trend gets better. Sacramento Assemblyman Roger Dickinson
has introduced a new bill, AB 888, that would allow the State Bar to prosecute some
of the fly-by-night rogue paralegal operations, pursuant to UCL or 17200. The State
Bar would become one of the approved UCL prosecutors. Lots of lawyers I know
would love to see these illegal paralegal operations shut down.
However, the proposed bill would require the State Bar to disclose in confidence the
information from their investigation to an agency responsible for the criminal
enforcement of those provisions. The bill would also allow for the recovery of
monetary fines and enforcement costs.
Its my experience that the more people who have information, the less confidential it
is. If you have a chance, take a look at the bill, and let me know what you think.
Sometimes you can see clear trends developing in legal ethics. We are seeing an
explosion of unfair competition law claims against lawyers, by lawyers, and against
online legal service providers. By the way, according to insurance mavens, your
coverage should include UCL claims, since they are incurred in the performance of
legal services.
Legal ethics expert Diane Karpman can be contacted at 310-887-3900 or
karpethics@aol.com.

2012 The State Bar of California

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