New ethics rules warning: Attorneys need to watch what they say in court filings

A U.S. district judge's referral of an attorney to the State Bar over documents he filed to prove his client's fraudulent contract claim has surprised legal ethics experts because such referrals by federal jurists are rare.

The ruling, affirmed on appeal, might be a warning to California lawyers that professional rules adopted a year ago require them to take more care with what they write about an opposing party, the experts said.

"This is highly unusual. You rarely see sanctions for putting allegedly irrelevant or scandalous material into a pleading," commented Neville L. Johnson,of Johnson and Johnson LLP in Beverly Hills.

He had not read the complete file from the unpublished March 17 ruling by U.S. District Court Judge Vince Chhabria. In general, Johnson said, "On very rare occasions a court has sometimes struck material that was scandalous or unnecessary to a pleading." Even in a case in which the pleading contained "scandalous sex stuff," Johnson said the state court of appeal in Malin v. Singer, 217 Cal.App.4th 1283 (2013), ruled it was "subject to the litigation privilege because it was close enough related."

Johnson said the filing by attorney Jeffrey B. Neustadt of San Francisco, a member of the California bar for 46 years with no record of public discipline, "isn't a demand for money or I'm going to reveal acts. That would be extortion. But no, this is a very unusual holding." Tetyana Dorsaneo v. Edward Dorsaneo, CV-00765 (N.D. Cal., filed Feb. 16, 2017).

In the underlying case, Neustadt represented Edward Dorsaneo signed a contract with the U.S. government to support his Ukrainian bride, so she could gain permanent residence. They divorced in less than 90 days, agreeing to no spousal support from either one. Four years later, the ex-wife, represented by Jody L. Winter of LloydWinter PC in Fresno, sued for an eventual $94,000 plus attorney fees and for lifetime support.

Dorsaneo said in a court declaration a private investigator determined his ex-wife had been a prostitute in Ukraine, and she had lied about that on her residence application.

Neustadt filed a settlement conference statement detailing his client's reasons for believing the plaintiff committed federal immigration crimes, and including the private investigator's report with web page copies showing the plaintiff on a prostitution site.

Chhabria issued a summary judgment for the plaintiff, sanctioned Neustadt and his client, and referred the attorney to the bar for investigation because of scandalous and irrelevant material about the plaintiff in the court filing.

Neustadt argued it was his duty under federal rules to notify the court of crimes committed by the plaintiff, that those crimes were relevant to the dispute at hand, and that he did not threaten but actually had presented the evidence to law enforcement without any demand for monetary gain.

A panel of 9th U.S. Circuit Court of Appeal judges, Ferdinand F. Fernandez, William A. Fletcher and Richard A. Paez, on Oct. 18 affirmed Chhabria, saying, "The irrelevant nature of the presentation at the summary judgment hearing, including its scandalous and not well supported attack on Tetyana's character, strongly suggested that it was being used for an improper purpose. That sufficed to justify the referral, especially in light of the further exacerbation of the attack in the sanction proceeding itself." Dorsaneo v. Dorsaneo, 18-15487 (9th Cir. Oct. 18, 2019).

Legal ethics expert Heather Rosing, a Klinedinst PC shareholder in San Diego, said in her experience, "It is fairly uncommon for a judge to turn somebody in to the State Bar based on what they have put in their papers that they've submitted to the court." She added it is uncommon for federal judges to refer attorneys to the bar.

"So I think this is actually a warning to California attorneys to take the new Rules 3.1 and 3.4 seriously," she said, referring to sections of the Rules of Professional Conduct concerning meritorious claims and candor toward the court that were revamped a year ago.

"I think attorneys need to know that there are consequences in terms of what you put in your papers that you submit to the court. ... It's a good lesson for all California attorneys to take care in what you put in your papers."

Ellen A. Pansky of Pansky Markle Attorneys at Law, who specializes in legal profession cases, said the judge's referral does not necessarily mean the bar will conclude Neustadt violated the ethical rules. "Keep in mind that the burden in a State Bar disciplinary proceeding is higher than the burden in a civil dispute. ... And sometimes the State Bar will decline to prosecute a lawyer because the State Bar concludes that it can't meet that higher burden."

Regarding the facts of the Neustadt case, she said, "To advance facts that are prejudicial to the honor or reputation of a party or witness unless it's required by the justice of the matter" has always been a violation.

Now, she said, "There is a new rule of professional conduct ... that requires a lawyer explicitly not to undertake action that is unfair to the opposing party or counsel. That's Rule 3.4."

Pansky also added, "What I don't know about this case is whether the attorney acted in good faith in concluding that the information that was communicated to the court was required in order to obtain justice in the matter. Apparently that was this lawyer's argument. The trial court did not accept that."

At the same time, she noted, Chhabria did not opine that Neustadt had actually engaged in an ethical breach, just that referral to the bar for further investigation was proper. Also, she pointed out, "The vast majority of State Bar investigations do not result in public discipline."

Further, Pansky said, "While the 9th Circuit Court of Appeals upheld the referral to the State Bar, it may not have concluded that the conduct was so bad as to make an example of this lawyer because they did not certify this opinion for publication."