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Magistrate Judge Rules SEC's Attorney-Conduct Rules Preempt State Law

Last December, Chief Magistrate Judge Joseph C. Spero ruled that the SEC's attorney-conduct rules preempt California's statutory and professional rules requiring attorneys to maintain inviolate the confidences.  Wadler v. Bio-Rad Laboratories, Inc., 2016 U.S. Dist. LEXIS 176166  (N.D. Cal. Dec. 20, 2016).  This is a topic that I and other members of the Corporations Committee of the California State Bar tackled 13 years ago in a law review article - Conflicting Currents: The Obligation to Maintain Inviolate Client Confidences and the New SEC Attorney Conduct Rules.  The article emphasizes California's strong commitment to the principle that lawyers should not reveal their client confidences:

California attorneys have an obligation to maintain their clients’ secrets. This obligation springs from several independent sources: the State Bar Act, the California Evidence Code, and the California Rules of Professional Conduct as approved by the California Supreme Court.  The State Bar Act requires attorneys “[t]o maintain inviolate the confidence[s], and at every peril . . . to preserve the secrets, of his or her client[s].” [Cal. Bus. & Prof. Code § 6068(e)]  Similarly, the Evidence Code requires an attorney to assert the attorney-client privilege whenever a party seeks disclosure of a privileged communication.  [Cal. Evid. Code § 955]  The obligation to maintain client confidences and preserve client secrets embedded in these statutes reflects the long-standing recognition that society benefits when clients receive advice informed by full and frank communication with their legal counsel. The obligation also reflects a policy that attorneys should avoid conflicts of interest with their clients.

(footnotes omitted).  As Congress revisits the Sarbanes-Oxley Act, it should clarify that undermining the effective representation of clients was never its intent.

Some readers may recall that I previously disagreed with Magistrate Judge Spero's ruling that directors are agents.  See Court Rules Directors Are Agents.

Can Delaware Be Dethroned?

That will be the question at a symposium of sponsored by the Lowell Milken Institute for Business Law and Policy and the UCLA School of Law on February 17 -18.  I will be moderating a panel on Saturday.

Delaware Dethroned

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Part 205 Rules, preemption, attorney-client privilege, Attorney-Client Privilege/Work Product, Section 6068(e), Wadler v. Bio-Rad

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