COUNSEL: ETHICS TRAINING
IS FOR YOU, TOO!
Presentation to the SACRS Attorney Breakout
November 12, 2008
Harvey L. Leiderman & Jeffrey R. Rieger
SPECIAL ETHICAL CONSIDERATIONS
FOR PUBLIC PENSION ATTORNEYS
 Public money involved
 Client owes fiduciary duties to members and the system
 Open meetings, public records and transparency
 Client is a diverse board
 Board delegates day to day administration to staff
 Inside counsel are often employed by plan sponsor and are
members of the client retirement system
 Outside counsel may represent more than one system
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SPECIAL ETHICAL CONSIDERATIONS
FOR PUBLIC PENSION ATTORNEYS
 Weighing the attorney-client privilege against the policy of
governmental transparency
 Striking a balance between staff’s need to administer the
system and the board’s governing authority over the system
 Helping the board navigate multiples sets of laws that often
conflict
 Recognizing “conflicts” and “bias” – real or perceived – that
arise because of relationship to other parties
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ATTORNEY-CLIENT PRIVILEGE
 The Rule: Applies to communications made in confidence
between a client and his or her attorney for the purpose of
obtaining legal advice
 Privilege and authority to waive it held by the client
 Can be waived intentionally or inadvertently
 Rule of Professional Conduct 3-100. Can only reveal
confidential information if you “reasonably believe[ ] the
disclosure is necessary to prevent a criminal act that [you]
reasonably believe[ ] is likely to result in death of, or
substantial bodily harm to, an individual”
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ATTORNEY-CLIENT PRIVILEGE
 Best Practice: Utilize privilege to obtain information and
provide advice confidentially, but assume that no
communication is privileged and that it may later appear in
somebody else’s hands
 Waived by board
 Inadvertent waiver
 Litigation waiver
 Investigation waiver
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ATTORNEY-CLIENT PRIVILEGE
 Best Practice: Do all you can to avoid inadvertent waiver
 Separate legal advice from business advice -- “predominant
purpose” and “because of” tests
 Labeling communications as privileged
 Advise recipient regarding further distribution
 Think about next steps that result from your advice – further
legal input, staff processes, board processes, etc.
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PUBLIC PENSION FUND
COMPLICATIONS
 Absent limited exceptions, the board (the client) must have all
discussions and vote in open session
 Complete analysis may require input from third parties
(actuaries, plan sponsors, member organizations, etc.)
 CA Evidence Code 952 – privilege is not defeated by disclosure to
persons “who are present to further the interests of the client in
the consultation or those to whom disclosure is reasonably
necessary for…the accomplishment of the purpose for which the
lawyer is consulted.”
 Staff may make decisions based on your advice, without
further board input
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SCENARIO FOR DISCUSSION
Based on your best analysis, you believe a system’s current
practice (perhaps long standing) is inconsistent with the
governing statutory scheme, but you also believe the issue is
not a “slam dunk” if the issue went to court
 How do you advise the board of the “error,” without inviting
litigation in the event the board does not follow your advice?
 How do you advise the board of any uncertainty in your analysis
without inviting litigation in the event the board does follow your
advice?
 Can closed session be used and, if so, how?
 Can privileged letters to the board be used and, if so, how?
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WHO IS THE CLIENT?
 Rule of Professional Conduct 3-500
“A member shall keep a client reasonably informed about
significant developments relating to the employment or
representation …”
 Who is the “client”?
 What are “significant developments”?
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WHO IS THE CLIENT?
Rule of Professional Conduct 3-600
(A) “[A] member shall conform his or her representation to the
concept that the client is the organization itself, acting through
its highest authorized officer, employee, body, or constituent
overseeing the particular engagement”
(B) If staff or board member is acting against system’s interests:
 (1) Urge reconsideration of the matter while explaining its
likely consequences to the organization; and/or
 (2) Refer the matter up the chain – possibly all the way to
the board “if warranted by the seriousness of the matter”
 (3) Cannot breach privileges absent potential for death or
substantial bodily harm
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WHO IS THE CLIENT?
Rule 3-600 Cont.
(C) If taking it up the chain of command does not work “the
member's response is limited to the member's right, and,
where appropriate, duty to resign”
(D) Must inform staff and board members that you represent the
board and may not lead them into believing that they may
communicate confidential information to you “in a way that will
not be used in the organization’s interest if that is or becomes
adverse” to staff member or board member
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PUBLIC PENSION FUND
COMPLICATIONS
 Administrator and staff run the system on a day-to-day basis
 Administrator and staff are primary points of contact for both
inside and outside counsel
 Board meets only once or twice a month
 Brown Act requires open meeting for discussion with more
than a quorum
 Different board members may have different views on what is
in the system’s interest
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SCENARIO FOR DISCUSSION
Based on your best analysis, you believe a system’s current
practice (perhaps long standing) is inconsistent with the
governing statutory scheme, but the Administrator with whom
you have been discussing the issue does not want to bring it to
the board for discussion and potential corrective action
 Has the board delegated its relationship with counsel to the
Administrator? Can you accept that under the Rules of
Professional Conduct? Is the answer different for inside
and outside counsel?
 Do you circumvent the Administrator and go straight to the
board?
 If so, how do you do this without violating the Brown Act?
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FOLLOWING THE LAW
Rule of Professional Conduct 3-210
An attorney “shall not advise the violation of any law, rule, or
ruling of a tribunal unless the member believes in good faith
that such law, rule, or ruling is invalid … [and] may take
appropriate steps in good faith to test the validity of any law,
rule, or ruling of a tribunal.”
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PUBLIC PENSION FUND
COMPLICATIONS
“The Law”
 Governing statues and the Constitution
 IRS Code and Regulations
 Conflict of Interest Laws
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SCENARIO FOR DISCUSSION
You read the governing statutes, the IRS Code and
Regulations and California’s conflict of interest laws, and they
say different things.
 Hmmmmm …
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CONFLICTS OF INTEREST
AND BIAS
Rule of Professional Conduct 3-310
Must have informed written consent to:
 Accept representation of more than one client in a matter in
which the interests of the clients potentially conflict
 Accept or continue representation of more than one client in
a matter in which the interests of the clients actually conflict
 Represent clients in different matters whose interests conflict
in one of those matters
 Enter into an aggregate settlement against two or more
clients
 Note: this rule does not apply to class action settlements
subject to court approval
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CONFLICTS OF INTEREST
AND BIAS
 Political Reform Act, Government Code section 1090 and other
conflict of interest laws
 Generally preclude “officials” from participating in
governmental decisions that impact their own “interests”
Q: Are counsel “officials”?
 Many exceptions may apply depending upon circumstances
 Criminal penalties
 Civil penalties
 Voiding of contracts
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PUBLIC PENSION FUND
COMPLICATIONS
 County counsel (and inside counsel) are likely members of the
retirement system and may be personally impacted by
decisions for which they provide legal advice
 County counsel is employed (and paid by) a plan sponsor,
which may have different interests than the board
 Outside counsel may represent multiple retirement boards,
which may have different views on controversial issues and the
outcome of litigation
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SCENARIO FOR DISCUSSION
Retiree and active members initiate litigation against almost
every retirement system in the state alleging that a failure of
boards to follow governing law has denied them their full
retirement benefits. Settlement discussions are about to begin.
 You are county counsel regularly assigned to advise the
board of retirement. Should you participate in the settlement
discussions on behalf of the board of retirement? On behalf
of the board of supervisors? Both?
 You are outside counsel to more than one retirement system.
Two of your clients have completely different views regarding
the merits of the claims against them and the positions they
should take in response. Can you represent both clients in
the litigation? Either?
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