Robert Sallander and Kim Noble, Vice President at Applied Financial Lines, spoke on Liability Insurer’s Duty and Right to Settle. The session addressed the basics of the duty to settle, what settlements are considered “reasonable,” and how to recognize good faith versus bad faith settlements. The panel had a robust discussion on the “Hammer Clauses” for insurance carriers, which give insurance companies a right to settle in specific situations.

Joshua Gilliland spoke on Preserving Evidence – The Intent to Deprive. The other speakers on the panel included James Daley from Consilio and W. Brett Mason, Esq., from Degan, Blanchard & Nash. The seminar covered the Intent to Deprive under Federal Rule of Civil Procedure Rule Rule 37 and related case law. The session addressed the duty to preserve electronic evidence, strategies and technology for collecting electronically stored information, and the six-factor analysis to show the Intend to Deprive under Rule 37.

The seminar’s featured speakers included Santa Clara County Superior Court Judge Julia Alloggiamento, Judge Socrates Manoukian, and Judge Lori Pegg. The Judges shared their insight during the evidence overview, offered best practices, and “presided” over the breakout sessions.

The seminar was hosted at McManis Faulkner in downtown San Jose. A huge thank you to the Judges, the SCCBA, and McManis Faulkner for making the seminar a success.

Jim started private practice at the San Francisco based firm Cooper, White & Cooper (now a part of Womble Bond Dickinson), where he served as co-chair of the litigation department, a member of the management committee, and the founder and managing partner of the Walnut Creek office.  Jim then co-founded Greenan, Peffer, Sallander & Lally, in San Ramon.

Jim was a highly skilled and successful commercial litigator and trial attorney, as well as a peerless rainmaker.  Jim especially excelled in his favored field of employment law, for which he was selected as a Super Lawyer for many years.  Indeed, legend has it that Jim successfully litigated what may have been the very first wrongful termination case to proceed to trial in California.  Throughout his career, Jim represented numerous prominent and national clients such as Safeway Inc., Ross Stores, Federated Department Stores, The Chronicle Group, Farmers Insurance, and Allstate Insurance.  Jim always treated his clients as more than clients but also as friends, which engendered long-term loyalty and friendships that can be rare in the business world.    

Jim is survived by his wonderful wife, Pam, with whom he raised eight great children.  Jim deeply loved his family, and took a lot of pride watching his children and 26 grandchildren perform in theater and sports as they grew.  An active member of The Church of Jesus Christ of Latter-day Saints, Jim stayed heavily involved in the church and his community even after his retirement in 2017, generously volunteering his time and resources to numerous causes, especially for those in need.  Jim was very gregarious and kind-hearted by nature, and could make friends with anyone he met.  Jim will be much missed by everyone here as a partner, colleague, mentor, role model, and most of all, friend.

City of Whittier addressed a dispute regarding coverage for the settlement of a California statutory claim for employer retaliation.  Plaintiffs in the underlying action asserted the Whittier Police Department instituted an unlawful citation and arrest quota in violation of California Vehicle Code sections 41600 et seq.  Plaintiffs alleged the police department retaliated against those who refused to participate in and/or reported the unlawful citation and arrest quota, as proscribed by Cal. Labor Code section 1102.5.  The insured settled the claims for $3 million and sought indemnity from its insurers.

The insurers argued California Ins. Code section 533 barred coverage for the settlement.  Section 533 bars coverage for “a loss caused by the wilful act of the insured.”

The court reviewed prior decisions that considered the application of section 533 to claims for sexual molestation, physical assault, wrongful termination, and employer retaliation for complaints and testimony confirming sexual harassment.  The court found that in those cases, the insured’s alleged conduct were affirmative acts that were inherently harmful or intended the alleged harm.

In City of Whittier, in contrast, plaintiffs’ claim included the allegation that the police department retaliated against plaintiffs who would not participate in an unlawful citation or arrest quota.  The court found this conduct only violated Cal. Labor Code section 1102.5(c) if the citation or arrest quota were actually illegal.  A good faith dispute about the legality of the quota would mean the insured’s conduct was not inherently harmful nor intended the alleged harm.  Under section 1102.5(c) an employer may be found liable to an employee who refuses to participate in an unlawful activity “even if the employer honestly believes the activity is lawful and acts not to punish, but to mitigate the harm to the employer’s business from what it believes is an insubordinate employee.”  The City of Whittier court contrasted this alleged misconduct with the alleged retaliation in B&E Convalescent Center in which the employer wrongfully terminated an employee with the intent to interfere with protected labor union rights, which could not be the result of negligence.  The City of Whittier court found the police department’s alleged misconduct was more like disparate impact discrimination, which does not necessarily intend the alleged discrimination and which courts have found is not subject to section 533.

The dispositive question appears to be whether an insured may be liable if the insured’s acts were not inherently harmful or intentionally wrongful.  Cal. Ins. Code section 533 only bars indemnity for damages because of inherently harmful or intentionally wrongful acts.

These events are a reminder of what is protected under the Attorney-Client Privilege and how to identify those records on a privilege log.

Federal Courts look to state law for claims of privilege pursuant to Federal Rule of Evidence Rule 501. California Rules of Evidence 950 to 962 fully define the Attorney-Client Privilege. Cutting to the meat of the question, Rule 952 states: 

“[C]onfidential communication between client and lawyer” means information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted, and includes a legal opinion formed and the advice given by the lawyer in the course of that relationship.”

The Attorney-Client Privilege requires a client confidentially asking a lawyer for legal advice OR a lawyer providing to the client legal advice in a confidential manner. A lawyer and client cannot have a confidential communication at a party surrounded by people, because there are individuals who are not in privity to the lawyer or client who would breach the privilege. Moreover, the questions being asked must be for legal advice, not what the lawyer thought of a movie or sporting event.

Protecting Attorney-Client Communications in a lawsuit requires thoughtful “Privilege Review.” Privilege review requires lawyers to identify privileged information contained in communications and attachments. Attorneys first need strategies to search for potentially confidential information. These can include identifying corporate attorneys, paralegals, or legal assistants by email address. Another strategy is to search for a law firm’s domain name. Advance search features such as predive coding and data clustering can also be helpful for identifying privileged communications. The issue is to develop a plan and test it to see if it identifies protected information.

After finding potentially privileged information, the next step is to prepare an adequate privilege log. Federal Rule of Civil Procedure Rule 26(b)(5) requires a privilege log to “describe the nature of the documents, communications, or tangible things not produced or disclosed—and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.”

Privilege review asks the fundamental question, is there a confidential communication between a lawyer and client regarding legal advice? If the answer is no, then there is no privileged communication. Moreover, simply labeling a record Attorney-Client Privilege does not make it privileged.

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On October 31, 2023, in Burnett v. National Association of Realtors, et al., a federal court ordered the National Association of Realtors (“NAR”) and its co-defendants––the parent companies of some of the country’s largest real estate brokerages––to pay $1.8 billion in damages for “price fixing”.

The Western District of Missouri lawsuit alleged that home sellers were induced to pay inflated commissions to buyer’s agents through their own agent’s listing agreements. Put simply, the defendants’ standard listing agreement required sellers to pay buyer’s agent commissions after the sale; but sellers had little to no ability to negotiate the amount of the commission.

Under federal law, “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce,” is prohibited. The plaintiffs claimed that, because the majority of homes sold in the United States utilize Multiple Listing Services (“MLS”) controlled by local realtor associations, the NAR’s rules requiring sellers to make a blanket, unilateral offer to sellers agents as a condition of using an MLS created restrained commerce by inflating the buyer’s agents’ commissions.

The NAR and its codefendants have already declared their intent to appeal the decision. Moreover, brokerages across the country are adjusting their forms and policies to avoid similar lawsuits. However, beyond the sizable sum owed, it is unclear what effect this decision will have on the real estate industry.

Agents’ commissions are typically paid by the seller out of the purchase price and split between the agents. But the Burnett decision puts buyer’s agents in a precarious position.

If sellers are no longer willing to pay the buyer’s agents, the most obvious avenue for compensation is the buyers. But if you are already spending hundreds of thousands on a home––a luxury many struggle to afford––you do not want to spend thousands more to pay for what was a “free” service.

In response, some real estate professionals believe that buyers will need to finance their agents’ commission. But aren’t they doing that already?

If Jill buys Jack’s home for $100,000 (what a steal!) at 20% down, she will take out an $80,000 loan. At the close of escrow, Jack will take usually 5-6% from the purchase price and give it to the agents to split. While to Jack, it might feel like he just paid the agents $3,000 each, those funds are ultimately coming from the amount Jill financed; and Jill is paying the interest on that money.

If post-Burnett buyers are independently required to finance the buyer’s agent commission, then, for Jack’s $100,000 home, Jill will need to take out $80,000 plus whatever money she owes her agent, say 3%. Ultimately, Jack ends up better off with $97,000 after paying his agent $3,000, Jill’s agent gets her $3,000 and Jill is left in $83,000 of debt instead of the $80,000 from before.

Alternatively, others believe that this verdict spells the end of buyer’s agents as a whole. Instead, leaving seller’s agents to “double end” the transaction and leaving buyer’s without their own unbiased representation.

There are undoubtedly more nuanced, middle-ground paths forward, but if either of these theories came to fruition, it leaves buyers on the short end of an already short stick.