Deposition Outline: Breach of Attorney’s Fiduciary Duty

This deposition outline suggests lines of inquiry to establish a breach of fiduciary duties by dependent counsel. [Footnotes refer to legal authority supporting the question.]

Following is a list of code words to conveniently customize this outline by using the “find and replace” function of a wordprocessor.

&Client& means the defendant/policyholder/client. &ClmAgt& means the insurer’s claims agent. &Date& means that the Model documents needs to be supplemented with a date. &DependentCounsel& means insurer appointed defense counsel who was selected by and represents the interests of the liability insurance company. &InsCo& means the client’s insurance company. &Plaintiff& means the plaintiff who sued the defendant/policyholder/client.

“The elements of a cause of action for breach of fiduciary duty are: 1) existence of a fiduciary duty; 2) breach of the fiduciary duty; and 3) damage proximately caused by the breach.”[1] “The standards governing an attorney’s ethical duties are conclusively established by the Rules of Professional Conduct. . . . If an expert testifies contrary to the Rules of Professional Conduct, the standards established by the rules govern and the expert testimony is disregarded.”[2]

  1. Identity of Witness:

Are you licensed to practice law in California?

Does this CV from the firm’s website accurately describe your professional credentials?

  1. Ethics:

Do you consider yourself to be an ethical lawyer?

Do you think that it is important for a lawyer to be ethical? Why?

Describe to me the training, education, or experience you have regarding the California Rules of Professional Conduct governing the representation of multiple clients?

Which Rule is it? Why don’t you know?

Will you please summarize what it says?

Does Rule 3-310 imposed on attorneys any duties?

What are they?

Describe the requirements imposed on attorneys by the Rule?

Is it your understanding that when an attorney represents more than one client that the attorney has a duty to analyze “the relevant circumstances and . . . the reasonably foreseeable adverse consequences”?

What does that mean to you?

Is it your understanding that when an attorney represents more than one client that the attorney has a duty to make written disclosure to the client of potential conflicts of interest?

Is it your understanding that when an attorney represents more than one client that the attorney has a duty to make written disclosure to the client of actual conflicts of interest?

Do you know the difference between potential and actual conflicts of interest? Will you please describe the difference to me?[3]

Is it your understanding that when an attorney represents more than one client that the attorney has a duty to obtain the informed written consent of all clients to potential conflicts of interest prior to starting work?

By your understanding, as between the attorney and the client, which one has the burden of analyzing potential conflicts of interest? Why?

By your understanding, as between the attorney and the client, which one has the burden of making disclosure regarding conflicts of interest? Why?

By your understanding, as between the attorney and the client, which one has the burden to obtain informed written consent for an attorney to represent multiple clients with conflicts of interest? Why?

  1. Representation of &InsCo&:

Was &DependentCounsel& hired by &InsCo& to represent &Client& in the &Plaintiff& lawsuit? When?

What were the terms of the engagement?

Did &InsCo& agree to pay &DependentCounsel& to defend &Client&?

Did &DependentCounsel& agree to adhere to any guidelines imposed upon it by &InsCo& to defend &Client&?

Does &DependentCounsel& adhere to &InsCo&’s litigation guidelines in the &Plaintiff& lawsuit?

Does &DependentCounsel& have an attorney-client relationship with &InsCo&?

Does &DependentCounsel& have a legal, business, financial, or professional relationship with &InsCo&?

Does anyone at &DependentCounsel& have a personal relationship with anyone at &InsCo&?

Does &DependentCounsel& know that &InsCo& would be affected substantially by resolution of the &Plaintiff& lawsuit? Explain your answer. Do you understand that the policy is a contract of indemnity that renders &InsCo& liable to pay when a judgment is entered against &Client&? Does that fact necessarily mean &InsCo& would be affected substantially by resolution of the &Plaintiff& lawsuit?

Should it reasonably have known? What did you do to find out? Who will have to pay for the defense? Who will have to pay a judgment? Who will have to pay a settlement?

Was &DependentCounsel& hired to protect the interests of &InsCo& in the &Plaintiff& lawsuit?

Does &DependentCounsel& believe that &InsCo& is its client in the &Plaintiff& lawsuit?

  1. Limited Scope:

Is the scope of &DependentCounsel& representation of &Client& limited? How? Did &DependentCounsel& advise &Client& that its representation was limited? In writing? May I see it? Did &DependentCounsel& obtain &Client&’s informed written consent that its representation may be limited? May I see it?

  1. Representation of &Client&:

Does &DependentCounsel& have an attorney-client relationship with &Client&? Was the attorney-client relationship between DependentCounsel& and &Client& established by contract? Who negotiated the contract? What are the terms? Have you even spoken to &Client&? Did you first speak to &Client& before making an appearance in the &Plaintiff& lawsuit? Does &DependentCounsel& have a fiduciary relationship with &Client&? Was &DependentCounsel& hired to protect the interests of &Client& in the &Plaintiff& lawsuit? Does &DependentCounsel& believe that &Client& is its client in the &Plaintiff& lawsuit? Has &DependentCounsel& ever represented itself to be counsel for &Client&? Has &DependentCounsel& ever made an appearance in the &Plaintiff& lawsuit as attorneys for &Client&? Did it have &Client&’s authority to do so? How do you know?

  1. Fiduciary Duties:

Does &DependentCounsel& have a fiduciary relationship with &Client&? Does &DependentCounsel& have fiduciary duties to &Client&? In your own words, will you please describe all of those duties? Does &DependentCounsel& have a fiduciary duty to &Client& to act competently [of confidentiality; of disclosure; of undivided loyalty]? Describe that duty. Does &DependentCounsel& have a fiduciary duty to advise &Client& [to analyze conflicts of interest; to comply with Rule 3-310; to respond to inquiry; to advise that the scope of representation was limited; to advise regarding settlement]? Describe each duty in your own words. (Repeat duty questions substituting &InsCo& for &Client&)

  1. Consent of &Client&:

Does &DependentCounsel& have &Client&’s consent to represent &Client&? How was &Client&’s consent communicated to you? Does &DependentCounsel& have &Client&’s consent to represent &InsCo&? How was &Client&’s consent communicated to you? Does &DependentCounsel& have &Client&’s authority to represent &Client& in court? How was &Client&’s authority communicated to you? Does &DependentCounsel& have the authority to bind &Client& in court? How was &Client&’s authority communicated to you?

  1. Breach of Duties: What did &DependentCounsel& do to fulfill each of these duties?

Duty to act competently? (If there have been acts of incompetence other than failing to fulfill other duties, explore them.) Does &DependentCounsel& owe to &Client& to act competently?

Duty of confidentiality? Does &DependentCounsel& owe to &Client& of confidentiality?Have &DependentCounsel& and &Client& had any confidential communications? When? How? Any in writing? Has &DependentCounsel& shared any of these confidential communications with anyone else? Who? Has &DependentCounsel& shared any of these confidential communications with anyone at &InsCo&? Have these confidential communications been oral, written, electronic, or communicated by any other means? Do you recall the substance of any of these communications? Do you have any writing (as defined by Ev. Cd. §250) evidencing such communications? May I see them? Will you give copies of them to &Client&? Have you given copies of them to &InsCo&? Has &DependentCounsel& preserved &Client&’s secrets from &InsCo&?

Duty to analyze conflicts of interest?

Does &DependentCounsel& owe to &Client& to analyze conflicts of interest? When &InsCo& hired &DependentCounsel& to represent &Client& in the &Plaintiff& lawsuit, did &DependentCounsel& conduct any analysis of potential conflicts of interest between &InsCo& and &Client&? Before starting work, did &DependentCounsel& ask &InsCo& whether it had reserved its rights to deny coverage to &Client& in the &Plaintiff& lawsuit? Why not? At any time was &DependentCounsel& aware that &InsCo& had reserved its rights to deny coverage to &Client& in the &Plaintiff& lawsuit? When? Upon becoming aware of the reservation of rights between &InsCo& and &Client&, did &DependentCounsel& do anything to analyze potential conflicts of interest between &InsCo& and &Client&? What facts did &DependentCounsel& consider in analyzing potential conflicts of interest? What relevant circumstances did &DependentCounsel& consider in analyzing potential conflicts of interest? What actual adverse consequences did &DependentCounsel& consider in analyzing potential conflicts of interest? What reasonably foreseeable adverse consequences did &DependentCounsel& consider in analyzing potential conflicts of interest? What law did &DependentCounsel& consider in analyzing potential conflicts of interest? What conclusion did &DependentCounsel& reach regarding potential conflicts of interest between &InsCo& and &Client&?

Duty of disclosure?

Does &DependentCounsel& owe to &Client& a duty of disclosure to &Client&? Did &DependentCounsel& disclose to &Client& any analysis of potential conflicts of interest? In writing? Why not? Did &DependentCounsel& disclose this conclusion to &InsCo&? In writing? Why not?

Related Issue?

Has &InsCo& raised any coverage question that is logically related to any issues in the &Plaintiff& lawsuit?[4] Do all factual or legal disputes in the &Plaintiff& lawsuit have anything to do with any coverage question raised by &InsCo&?[5] Are all factual or legal disputes in the &Plaintiff& lawsuit irrelevant to all coverage questions raised by &InsCo&?[6] Are all factual or legal disputes in the &Plaintiff& lawsuit independent of all coverage questions raised by &InsCo&?[7] Are all factual or legal disputes in the &Plaintiff& lawsuit extrinsic to all coverage questions raised by &InsCo&?[8] Do any factual or legal disputes in the &Plaintiff& lawsuit overlap any coverage questions raised by &InsCo&?[9] Is it possible that any coverage dispute could prejudice the policyholder’s defense?[10] How? Is it possible that &DependentCounsel& could control the outcome of any coverage issue reserved by &InsCo&?[11] How do you know?

If you have not analyzed potential conflicts arising from &InsCo&’s reservations of rights, how can you possibly know whether your conduct of &Client&’s defense may affect coverage?

Does &InsCo& insure both the &Plaintiff& and &Client&?[12] Have you ever asked? Why not?

Has &Insco& sued &Client&?[13] Will you give copies of them to &Client&?

Has &Insco& pursued settlement in excess of policy limits without the insured’s consent?[14] Has &Insco& pursued settlement so as to leave &Client& exposed to claims by third parties?[15]

Is &DependentCounsel&’s representation of &Client& rendered less effective by reason of its representation of &InsCo&?[16] How do you know? Are you willing to guarantee it? How can you guarantee it? Does &InsCo& have any incentive to attach liability to &Client&?[17] Does &DependentCounsel& have any incentive to attach liability to &Client&?[18]

Duty to advise regarding settlement?

Does &DependentCounsel& owe to &Client& a duty to advise &Client& regarding settlement? Have there been any settlement negotiations in the &Plaintiff& lawsuit? Why not? Has the &Plaintiff& made any offer to settle with &Client&? What were the terms? Was it written? May I see it? Has &DependentCounsel& advised &InsCo& of this offer? Has &DependentCounsel& advised &Client& of this offer? Why Not? Has &Client& made any offer to settle with &Plaintiff&? What were the terms? Was it written? May I see it? Has &DependentCounsel& advised &InsCo& of this offer? Has &DependentCounsel& advised &Client& of this offer? Why Not?

Duty to respond to inquiry?

Does &DependentCounsel& owe to &Client& a duty to respond to &Client&’s inquiry? I am handing you Ethical Compliance Questionnaire. Did you receive this? Did acknowledge receipt of it as requested? Why not? After you received Ethical Compliance Questionnaire, did you read it? Did you do any legal research into the subject matters addressed in the Questionnaire? What did you learn? Did you complete the Questionnaire? Did you return the Questionnaire to &Client&? Did you explain your answers?

Let’s go through the Questionnaire. [Ask all of the questions on the Questionnaire. Complete it as you go by checking the Yes or No box. As for explanations of each question.]

Did you discuss Ethical Compliance Questionnaire with anyone? Who? Did you advise &InsCo& that you received Ethical Compliance Questionnaire? Did you discuss Ethical Compliance Questionnaire with anyone at &InsCo&? After you received Ethical Compliance Questionnaire, did you analyze potential conflicts of interest between &InsCo& and &Client&? Why not? After you received Ethical Compliance Questionnaire, did you make any written disclosure to &InsCo& and/or &Client&? Why not? After you received Ethical Compliance Questionnaire, did you obtain the informed written consent of &InsCo& and/or &Client& to be their attorney? Why not? After you received Ethical Compliance Questionnaire, did you continue to represent &Client& in the &Plaintiff& lawsuit? Why? Did you do so knowing that you did not have &Client&’s consent to be represented?

Did you do any legal research into the subject matters addressed in the Questionnaire? Did you go to DutytoDefend.com? Did you read the Annotated version of the Questionnaire? What did you learn? Do you agree that &DependentCounsel& has a fiduciary duties to &Client&? Why not? Do you agree that &DependentCounsel& has a duty of disclosure to &Client&? Why not? Do you agree that a material concealment from &Client& amounts to fraud? Why not? Do you agree that &DependentCounsel& has a duty to protect &Client& in every possible way? Why not? Do you agree that &DependentCounsel& has a duty not to assume a position adverse or antagonistic to his client? Why not? Do you agree that &DependentCounsel& has a duty not to devote his entire energies to his client’s interests? Why not? Do you agree that an honest practitioner should not put himself in a position where he may be required to choose between conflicting duties? Why not? Do you agree that &DependentCounsel& has a duty of undivided loyalty to &Client&? Why not? Did &DependentCounsel& accept representation of &Client& without providing written disclosure? May I see it? Did &DependentCounsel& continue representation of &Client& without providing written disclosure?

Did &DependentCounsel& volunteer any opinions to &Client& to further &Client&’s objectives. Did &DependentCounsel& respond promptly to reasonable status inquiries of &Client&? Did &DependentCounsel& keep &Client& reasonably informed of significant developments in matters with regard to which the attorney has agreed to provide legal services? Did &DependentCounsel& explain to &Client& the full implications of joint representation in this case where &InsCo& reserved its rights to deny coverage? Do you agree that the potential for conflict requires a careful analysis of the parties’ respective interests to determine whether they can be reconciled?

Did &DependentCounsel& analyze what is the exact nature of the claims asserted in the &Plaintiff& lawsuit? What conclusions did you reach as a result? Did &DependentCounsel& analyze what defenses to coverage are asserted by &InsCo&? Did &DependentCounsel& analyze to what extent, if at all, the defenses to coverage are logically related to the liability issues raised in the &Plaintiff& lawsuit? Did &DependentCounsel& analyze what factual questions have to be resolved in order to sustain or defeat such coverage defenses? Did &DependentCounsel& analyze what is the likely nature of the available evidence relating to coverage defenses? Do you agree that the existence of a conflict of interest should be identified early in the proceedings so it can be treated effectively before prejudice has occurred to either party? Did &DependentCounsel& accept compensation for representing &Client& from &InsCo& &Client&’s informed written consent? Why not? Does &DependentCounsel& agree that it should disgorge compensation it accepted from &Insco& for representing &Client& without &Client&’s informed written consent? Why not?

At any time, did &DependentCounsel& read any of &InsCo&’s reservation of rights letter(s)?

At any time, has &DependentCounsel& analyzed the relevant circumstances and the actual and reasonably foreseeable adverse consequences to &Client& of &InsCo&’s reservation of rights letter(s)?

At any time, has &DependentCounsel& make written disclosure to &Client& pursuant to Rule 3-310?

Are there any potential or actual conflicts of interest between &InsCo& and &Client&? Did &DependentCounsel& ever follow &InsCo& directions in conducting &Client&’s defense?

Did &DependentCounsel& ever follow &Client&’s directions in conducting &Client&’s defense? Did &DependentCounsel& ever follow &InsCo&’s directions over &Client&’s directions? Did &DependentCounsel& ever assure &Client& that &InsCo& will not interfere with &DependentCounsel&’s independence of professional judgment?

Does &DependentCounsel& have a personal financial interest to advance by &Client& not hiring independent counsel?

Is &DependentCounsel& now willing to analyze potential conflicts of interest between &Client& and &InsCo& pursuant to Rule 3-310? Is &DependentCounsel& now willing to make written disclosure to &Client& and &InsCo& pursuant to Rule 3-310? Does &DependentCounsel& have &InsCo&’s informed written consent pursuant to Rule 3-310?

Duty to Explain Implications

Does &DependentCounsel& owe to &Client& a duty to explain the full implications of joint representation in situations where the insurer has reserved its rights to deny coverage? (See, San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 375 (Cumis).) Explain this duty. Has&DependentCounsel& fulfilled this duty to &Client&? How?

Duty to Analyze Conflicts

Does &DependentCounsel& owe to &Client& a duty to analyze potential conflicts of interest? Actual conflicts of interest? Do you know the difference between potential and actual conflicts of interest? What is it? Explain this duty to analyze. Has&DependentCounsel& fulfilled this duty to &Client&? How?

(“There is no talismanic rule that allows a facile determination of whether a disqualifying conflict of interest exists. Instead, ‘[t]he potential for conflict requires a careful analysis of the parties’ respective interests to determine whether they can be reconciled.’” (Gulf Ins. Co. v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2000) 79 Cal.App.4th 114, 131, quoting Dynamic Concepts, Inc. v. Truck Ins. Exchange (1998) 61 Cal.App.4th 999, 1007-1008.) A proper conflict of interest analysis should include: “(1) what is the exact nature of the claims asserted in the underlying action, (2) what defenses to coverage are asserted by the insurers, and to what extent, if at all, are they logically related to the liability issues raised in the underlying action, (3) what factual questions have to be resolved in order to sustain or defeat such defenses, (4) what is the likely nature of the available evidence. . . .” (Haskel, Inc. v. Superior Court (1995) 33 Cal.App.4th 963, 980.) “[T]he existence of a conflict of interest should be identified early in the proceedings so it can be treated effectively before prejudice has occurred to either party.” (Cumis, supra, 162 Cal.App.3d at 371, fn. 7).)

Duty to Obtain Informed Written Consent

Does &DependentCounsel& owe to &Client& a duty to obtain &Client&’s informed written consent? Explain this duty. Has&DependentCounsel& fulfilled this duty to &Client&? How? (“A [lawyer] shall not, without the informed written consent of each client: (1) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or . . . actually conflict. “ (Rule 3-310(C).)

Duty to Not Accept Compensation

Does &DependentCounsel& owe to &Client& a duty to not accept compensation from &InsCo& without &Client&’s informed written consent? Explain this duty. Has&DependentCounsel& fulfilled this duty to &Client&? How? (“A member shall not accept compensation for representing a [policyholder] from [an insurer] unless . . . The member obtains the client’s informed written consent.” (Rule 3-310(F).) Has &DependentCounsel& accepted compensation from &InsCo& without &Client&’s informed written consent? Has &InsCo& reserved the right under the Buss decision to recover reimbursement of defense costs? Do you believe that if &Insco& recovers reimbursement of defense costs from &Client& that &DependentCounsel& has a duty to disgorge its compensation to &Client&.

Consequences of Breach of Duty

Do you believe that if you have violated any duties to &Client& that you may be disbarred or suspended from the practice of law? (“[A]ny violation of . . . duties as such attorney, constitute causes for disbarment or suspension.” (Bus.& Prof. Cd. §6103).)

[1] Pierce v. Lyman (1991) 1 Cal. App.4th 1093, 1101; Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086; Mosier v. S. Cal. Physicians Ins. Exch. (1998) 63 Cal. App. 4th 1022, 1044.

[2] Day v. Rosenthal (1985) 170 Cal.App.3d 1125, 1147 (emphasis added) (“[T]he trial court was compelled to notice” “violations of professional standards.” (See also, Evid. Code § 451(c) “Judicial notice shall be taken of . . . Rules of professional conduct.”)

[3] “A conflict of interest is potential if there is no present actual conflict of interest, but there is a possibility of an actual conflict arising in the future, resulting from developments that have not yet occurred or facts that have not yet become known.” In re Jaeger 213 B.R. 578 (Bkrtcy. C.D. Cal. 1997).

[4] Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 302 (Montrose I).

[5] See, Long v. Century Indemnity Co. (2008) 163 Cal.App.4th 1460, 1470: “[W]hen the reservation of rights is based on coverage disputes that have nothing to do with the issues being litigated in the underlying action . . . there is no conflict of interest.”

[6] See Montrose Chemical Corp. v. Superior Court (Canadian Universal Ins. Co.) (1994) 25 Cal.App.4th 902, 909 (Montrose II) “Accordingly, the question before us is whether the coverage questions are logically unrelated (that is, irrelevant) to the issues of consequence in the (third party litigation which might) prejudice [the insured] in the underlying actions”.

[7] See, Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1422 (Gafcon). No prejudice “where the coverage issue is ‘independent of, or extrinsic to, the issues in the underlying action’”.

[8] See, Gafcon, supra, 98 Cal.App.4th at 1422. No prejudice “where the coverage issue is ‘independent of, or extrinsic to, the issues in the underlying action’”.

[9] See, United Enterprises, Inc. v. Superior Court (2010) 183 Cal. App. 4th 1004, 1010, (“[B]ecause factual issues to be resolved in the declaratory relief action overlap factual issues to be resolved in the underlying actions, the court was required to issue the stay.”)

[10] See, Montrose II, supra, 25 Cal.App.4th at 909 [“Accordingly, the question before us is whether the coverage questions are logically unrelated (that is, irrelevant) to the issues of consequence in the (third party litigation which might) prejudice [the insured] in the underlying actions”]; Haskel, Inc. v. Superior Court (1995) 33 Cal.App.4th 963, 980 (ellipses omitted) [“The trial court should determine: . . . (5) to what extent, if at all, will [the policyholder] suffer prejudice by evidence which tends to support or defeat its claim of coverage or the defenses raised by the insurers.”]

[11] James 3 Corp. v. Truck Ins. Exchange (2001) 91 Cal.App.4th 1093, 1101.

[12] Ibid.

[13] Ibid.

[14] Ibid.

[15] Ibid.

[16] Ibid.

[17] Gulf Ins. Co. v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2000) 79 Cal.App.4th 114, 131.

[18] Ibid.

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