Jill Cakebread et al v. Berkeley Millwork and Furniture Co., Inc.

Filing 48

ORDER by Magistrate Judge Donna M. Ryu denying 39 Motion for Sanctions. (dmrlc2, COURT STAFF) (Filed on 11/21/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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STEVE CAKEBREAD, et al.,
Plaintiffs,

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v.
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BERKELEY MILLWORK AND
FURNITURE CO., INC.,

Case No. 16-cv-00083-RS (DMR)
ORDER DENYING PLAINTIFFS’
MOTION FOR SANCTIONS FOR
BREACH OF PROFESSIONAL
RESPONSIBILITIES
Re: Dkt. No. 39

Defendant.

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United States District Court
Northern District of California

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Plaintiffs Jill Cakebread and Steve Cakebread (“Plaintiffs”) filed a Motion for Sanctions

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for Breach of Professional Responsibilities against Defendant Berkeley Millwork and Furniture

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Co., Inc. (“Defendant”) and its attorney, Melvin D. Honowitz, Esq. [Docket No. 39]. The court

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held a hearing on October 27, 2016. For the following reasons, Plaintiffs’ motion is DENIED.

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I.

FACTS & PROCEDURAL HISTORY

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Plaintiffs entered into an agreement with Defendant to design and build custom

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furniture and cabinetry for Plaintiffs’ home in Wyoming. [Docket No. 1 (Compl.), ¶¶ 10-12].

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Plaintiffs contend that they cancelled their order before Defendant began any work, which entitled

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them to a refund of their partial payment under the terms of the agreement. [Id., ¶¶ 14-15].

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Defendant denies these allegations, and counterclaims that Plaintiffs breached the agreement by

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failing to return copies of Defendant’s designs and using Defendant’s designs in building certain

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furniture in their home. [Docket No. 8 (Answer and Counterclaim), at pp. 7-11].

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Plaintiffs now move for sanctions. They assert that Honowitz breached his ethical duties

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when he contacted Pamela Renner, the real estate broker who is handling the listing of Plaintiffs’

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Wyoming property. Specifically, Plaintiffs contend that Honowitz acted unethically by
misleading Renner into believing that he represented a potential buyer in order to acquire pictures
and plans for use in this case.
The court now sets out the relevant facts, making note of the slight variations between

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Honowitz’s and Renner’s accounts. According to Honowitz, he had been following the online

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public auction of Plaintiffs’ Wyoming ranch property, which includes the home at issue in this

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case. He emailed Caitlin Keys, the Marketing Director for Concierge Auctions, the website that

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listed Plaintiffs’ property. His email inquired about the status of the auction. Keys responded,

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stating that the auction was not going forward and that Plaintiffs’ property was currently listed

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with the Jackson Hole Sotheby’s office. Keys volunteered to put Honowitz in touch with Pamela

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Renner, who was Plaintiffs’ real estate broker. Honowitz responded: “Please make the contact for

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me. I have a client who has an interest.” Honowitz Decl., ¶ 5 and Ex. 3. Keys put Honowitz in

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touch with Renner, who emailed Honowitz that she would “love to talk to [him] about the

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United States District Court
Northern District of California

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Cakebread Ranch.” Honowitz Decl., ¶¶ 6-7 and Exs. 4-5. Honowitz then telephoned Ms. Renner.
According to Renner, her call with Honowitz lasted approximately 21 minutes. During
the call, Honowitz told her that he “was working with a confidential buyer who was very
interested in knowing more about [Plaintiffs’] home, in part as a place to go fishing, as the
property is near several waterways.” Renner Decl. at 2. In response to Renner’s question about
the buyer’s ability to pay for the home, Honowitz assured her that the buyer was more than
qualified. Renner understood from these statements that the buyer represented by Honowitz had
an interest in purchasing Plaintiffs’ property. Honowitz asked Renner for “anything and
everything [she] could send about [Plaintiffs’] property,” and specifically requested “as-built
drawings.” Id. Renner thought that Honowitz’s request was odd, and told him that she would not

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send any inventories or as-built drawings. Renner did, however, send Honowitz other materials
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including photographs of Plaintiffs’ property and its waterways, as well as basic information about
the property. Had Renner known that Honowitz was an attorney representing someone suing her
clients, Renner declares that she would not have discussed the details of Plaintiffs’ property
without Plaintiffs’ authorization or a court order.
According to Honowitz, he introduced himself to Renner as a San Francisco attorney who
“had a client interested in [Plaintiffs’] ranch.” Honowitz Decl., ¶ 9. When asked by Renner,
Honowitz did not disclose the identity of his client, but confirmed that his client was qualified to
purchase the property. During the course of the call, Honowitz engaged in general conversation

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with Renner about Plaintiffs’ ranch and Wagyu cattle. Renner asked Honowitz whether his client

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wanted to operate Plaintiff’s ranch, and Honowitz responded that he did not believe so, but that his

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client “might be interested in fishing.” Honowitz Decl., ¶ 14.

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Honowitz admits that he asked Renner for a variety of materials, including copies of the

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plans, specifications, and as-built drawings, as well as specifics about who built the cabinetry in

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Plaintiffs’ home. Renner sent Honowitz pictures and printed literature about Plaintiffs’ home, but

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was unwilling to release the plans and drawings absent Honowitz’s client’s willingness to make an

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offer. As far as Honowitz could tell, the pictures and materials sent by Renner were duplicates of

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what had already been provided by Plaintiffs in discovery or what Honowitz was able to access

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United States District Court
Northern District of California

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online.
Plaintiffs’ counsel subsequently learned of Honowitz’s call to Renner and sent him a
letter, asserting that Honowitz had violated his ethical duties as an attorney by misrepresenting the
identity of his client to Renner in an attempt to obtain unauthorized discovery. Honowitz
responded by confirming his call with Renner, but otherwise disputing the assertion that he had
violated his ethical duties.
Plaintiffs then filed the instant motion for sanctions, requesting an order “1) admonishing
Mr. Honowitz for breaching his professional responsibilities, and requiring Berkeley Millwork and
Mr. Honowitz to jointly and severally pay [Plaintiffs’] attorneys’ fees and reasonable costs
incurred in investigating Mr. Honowitz’s conduct and pursuing this Motion; 2) directing Berkeley

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Millwork to return all information it obtained from Ms. Renner, ordering Berkeley Millwork for
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the Court’s and [Plaintiffs’] inspection all evidence it has obtained through this or any other
misrepresentations, and precluding Berkeley Millwork from using any evidence gained through its
counsel’s misrepresentations in this litigation; 3) requiring Berkeley Millwork and Mr. Honowitz
to issue a written letter of apology to Ms. Renner; and 4) deciding [Plaintiffs’] pending discovery
dispute in their favor.” [Docket No. 39 at 6-7].
After Plaintiffs filed their motion, Honowitz contacted Plaintiffs’ counsel. Honowitz

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stated that, “without admission and in an attempt to resolve your claims,” he was sending

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Plaintiffs’ counsel the emails and attachments he had received from Renner. He further stated “I

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am also prepared to delete them from my computer, agree not to utilize the emails provided in the

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pending litigation or for any purpose and apologize to Ms. Renner for any misunderstanding

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provided you agree to dismiss your Sanctions Motion.” Honowitz Decl., Ex. 6. Plaintiffs’

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counsel declined Honowitz’s offer. At the hearing, Honowitz volunteered to issue a written

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apology to Renner and delete any materials received from Renner from his server, and further

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promised not to rely on any of the materials received from Renner in this litigation.

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II.

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After reviewing Honowitz and Renner’s accounts of their phone call, the court concludes

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United States District Court
Northern District of California

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DISCUSSION

that Honowitz misled Renner by holding himself out as an attorney representing a prospective
buyer with an interest in purchasing Plaintiffs’ home. At the hearing, Honowitz conceded that the
court could reach no other reasonable conclusion.
Plaintiffs contend that Honowitz and Defendant should be sanctioned for Honowitz’s
breach of his professional responsibilities pursuant to the California Rules of Professional
Conduct, which are incorporated into this court’s local rules. Plaintiffs also point to the court’s
inherent power and the American Bar Association’s Model Rules of Professional Conduct
(“Model Rules”) as sources of authority for issuing the requested sanctions.
Defendant and Honowitz counter that there is no specific case or rule of professional
conduct which Honowitz violated. They submit that Honowitz’s conduct fell into a “gray area.”
Opp’n to Mot. at 4-6. As such, they argue that Honowitz did not engage in sanctionable behavior.

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A. The California Rules of Professional Conduct and the Local Rules
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A district court may discipline an attorney for conduct that violates a California Rule of
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Professional Conduct by way of its local rules of professional conduct. See United States v.
Wunsch, 84 F.3d 1110, 1114 (9th Cir. 1996) (citing Standing Comm. on Discipline v. Ross, 735
F.3d 1168, 1170 (9th Cir. 1984, appeal dism'd & cert. denied sub nom.); see also Civ. L.R. 1-4
(“Failure by counsel or a party to comply with any duly promulgated local rule or any Federal
Rule may be a ground for imposition of any authorized sanction.”); Chin v. Wal-Mart Stores, Inc.,
No. 14-cv-02538-TEH, 2014 WL 5465768, at *1-2 (N.D. Cal. Oct. 27, 2014) (citing Civ. L.R. 14) (imposing sanctions on attorney for violations of local rules).

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Civil Local Rule 11-4(a) sets forth the “Standards for Professional Conduct” for attorneys
permitted to practice before this court. It provides that attorneys must:
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(3)
(4)

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(5)
(6)

Be familiar and comply with the standards of professional conduct required of
members of the State Bar of California;
Comply with the Local Rules of this Court;
Maintain respect due to courts of justice and judicial officers;
Practice with the honesty, care, and decorum required for the fair and efficient
administration of justice;
Discharge his or her obligations to his or her client and the Court; and
Assist those in need of counsel when requested by the Court.

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Id. Rule 11-4 incorporates “the State Bar Act, the Rules of Professional Conduct of the State Bar

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of California, and decisions of any court applicable thereto” as its standard for professional
conduct. See Commentary to Civ. L.R. 11-4; see also United States v. Lopez, 4 F.3d 1455, 1459

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United States District Court
Northern District of California

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(9th Cir. 1993) (explaining that decisions of California state courts are binding on attorneys

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practicing in the Northern District of California through its local rules).

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Although Local Rule 11-4 provides authority to sanction behavior that breaches

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California’s standards of professional conduct, the court was unable to identify any case in which

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a court applied California law to sanction an attorney for misrepresentations made to third parties.

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Indeed, the California State Bar Compendium on Professional Responsibility, (see

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http://ethics.calbar.ca.gov/Publications/CompendiumonProfessionalResponsibilityIndex.aspx)

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(last accessed on Nov. 21, 2016) (the “Compendium”), does not list any ethical or advisory

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opinions or California cases in which a court imposed sanctions for misrepresentations made to

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third parties in the course of representing a client. The closest citations in the Compendium are

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still quite tangential, as they discuss an attorney’s potential liability to third parties for specific

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torts such as legal malpractice or negligent misrepresentation. Compare Home Budget Loans, Inc.
v. Jacoby & Meyers Law Offices, 255 Cal. Rptr. 483, 486-87 (Cal. App. Ct. 1989) (finding an
attorney owed duty to third-party broker for misrepresentations which induced third-party broker
to close the loan transaction and disburse loan to attorney’s client) with Schick v. Lerner, 238 Cal.
Rptr. 902, 907-09 (Cal. App. Ct. 1987) (finding an attorney owed no duty to psychologist’s patient
since patient was “a potential adverse party whose interest could not be represented by [the
psychologist’s] chosen counsel”).
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California imposes numerous rules and statutes governing an attorney’s duty of honesty to

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clients, opposing counsel, and the court.1 However, relatively few rules govern an attorney’s

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professional responsibility toward unrepresented third parties. The few that address such conduct

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do so in fact-specific contexts which are unlike those here. See, e.g., Cal. R. Prof’l Conduct 5-

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310(A), (B) (prohibiting attorneys from advising a witness to make him or herself unavailable as a

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witness and from compensating or offering to compensate a witness for his or her testimony); Cal.

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Bus. & Prof. Code § 6077.5 (outlining an attorney’s duties toward debtors in collection of a

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consumer’s debt).
Plaintiffs invoke California Business and Professions Code Section 6068(d), but only cite

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United States District Court
Northern District of California

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the fragment that appears to support their argument. That fragment says that an attorney must
“employ, for the purpose of maintaining the causes confided to him or her those means only that
are as consistent with truth . . . .” Mot. at 4. However, the full statute goes on to state “and never
to seek to mislead the judge or any judicial officer by an artifice or false statement of fact or law,”
which suggests that section 6068(d) addresses a California attorney’s duty of candor toward the
court. Indeed, courts have only applied section 6068(d) to an attorney’s communications with the
court. See, e.g., In re Aguilar, 97 P.3d 815, 819-20 (Cal. 2004), rehrg’ denied, (citing section
6068(d); finding attorney in contempt of court and imposing monetary sanction for failing to
notify the court that he would not appear for oral argument, where evidence showed attorney knew

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or had reason to know of the hearing date); Mendez v. Superior Court, 76 Cal. Rptr. 3d 538, 544
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(Cal. Ct. App. 2008) (citing section 6068(d); no misrepresentation to the court where prosecutor
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was not aware that her colleague had known about a police officer’s unavailability two calendar
days earlier than the date the prosecutor represented to the court).

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Plaintiffs did not identify any cases applying California law which come close to stating

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See, e.g., Cal. R. Prof’l Conduct 5-200 (“In presenting a matter to a tribunal, a member . . . (B)
shall not seek to mislead the judge, judicial officer, or jury by an artifice or false statement of fact
or law”); 5-220 (“A member shall not suppress any evidence that the member or the member's
client has a legal obligation to reveal or to produce.”); 1 Witkin, Cal. Proc. 5th Attys § 484 (2008)
(“Deliberately false representations to a client about the condition of the case or the performance
of the attorney's duties are acts involving moral turpitude,” and may subject an attorney to
discipline).
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that an attorney owes a general duty of candor to third parties, nor did the court find any. In fact,

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at least one case concluded that no such general duty exists. See Schick, 238 Cal. Rptr. at 907-908

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(explaining that “[a]n attorney generally will not be held liable to a third party not in privity of

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contract with him since he owes no duty to anyone other than his client . . . . The imposition of a

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duty of “professional care toward third parties has generally been limited to those situations

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wherein the nonclient was an intended beneficiary of the attorney’s services to the client, or where

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the foreseeability of harm to the nonclient as a consequence of professional negligence was not

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outweighed by other policy considerations.”).
At the hearing, when asked to cite any case in which a court sanctioned an attorney under

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United States District Court
Northern District of California

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California law for misrepresentations made to a third party, Plaintiffs’ counsel directed the court to
Allen v. State Bar, 570 P.2d 1226 (Cal. 1977), and conceded that it is the only such case. Allen is
far from apposite, for in that case, the California Supreme Court disbarred an attorney who
engaged in blatantly outrageous behavior which included defrauding his client and
misappropriating her funds, deceiving the same client while pursuing a scheme to transfer her real
property to defraud a creditor, and, while representing his own sister, deceiving a bank officer into
obtaining an intrabank transfer of funds held in the name of his sister’s deceased husband. 570 P.
2d at 1226-30. Although the attorney’s deceitful conduct toward the third party bank officer
contributed to his disbarment, it was but a small part of a much larger pattern of unethical

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behavior.
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Plaintiffs’ counsel also points to section 6106 of the California Business and Professions
Code. But section 6106 concerns an attorney’s general duty of candor. See Cal. Bus. & Prof.
Code § 6106 (“The commission of any act involving moral turpitude, dishonesty or corruption,
whether the act is committed in the course of his relations as an attorney or otherwise, and whether
the act is a felony or misdemeanor or not, constitutes a cause for disbarment or suspension.”).
Outside of Allen, section 6101 has not been applied to an attorney’s communications with third
parties.
In short, although Honowitz admittedly misled Renner, his conduct did not clearly violate
the local rules of this court by contravening the California standards for professional conduct. As

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such, his conduct cannot support an award of sanctions for violation of the local rules.

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B. The Court’s Inherent Power to Sanction

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Under “its inherent powers,” a district court “may impose sanctions where a party has

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willfully disobeyed a court order, or where the party has acted in bad faith, vexatiously, or for

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oppressive reasons.” Lofton v. Verizon Wireless (VAW) LLC, 308 F.R.D. 276, 285 (N.D. Cal.

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2015) (citation and internal quotations omitted). Such inherent power, however, “is not a broad

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reservoir, ready at an imperial hand, but a limited source; an implied power squeezed from the

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need to make the court function.” Chambers v. NASCO, Inc., 501 U.S. 32, 42 (1991). A district

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court must make a specific finding of “bad faith.” Lofton, 308 F.3d at 285.
The bad faith requirement is a “high threshold.” Lofton, 308 F.R.D. at 285. It

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United States District Court
Northern District of California

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encompasses more than mere negligence or even recklessness. See, e.g., Mendez v. Cty. of San

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Bernardino, 540 F.3d 1109, 1131-32 (9th Cir. 2008), overruled on other grounds by Arizona v.

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ASARCO LLC, 773 F.3d 1050 (9th Cir. 2014) (en banc) (explaining that even when a district court

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has described a litigant’s behavior as “totally frivolous,” “outrageous,” and “appalling,” the court

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“nonetheless has refused to equate this characterization of conduct as synonymous with a finding

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of bad faith” (citation and internal quotation marks omitted)); Moore v. Chase, No. 1:14-cv-

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01178-SKO, 2016 WL 521320, at *4 (E.D. Cal. Feb. 10, 2016) (“Even where counsel repeatedly

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errs - even after admonition to abide by the Rules - such conduct as a vigorous advocate still does

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not rise to the level of intentional bad faith misconduct” warranting sanctions under the court’s

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inherent powers (citation and internal quotation marks omitted)). The requirement contemplates

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“willful misconduct or recklessness that is coupled with an improper purpose,” or conduct

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“tantamount to bad faith.” Lofton, 308 F.R.D. at 285; Fink v. Gomez, 239 F.3d 989, 994 (9th Cir.

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2001).

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Given the lack of guidance from the standards governing California attorneys’ professional

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conduct to address the issue at hand, the court cannot conclude that Honowitz’ behavior amounted

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to a clear ethical violation, much less one made in bad faith.

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C. Model Rules

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In their motion, Plaintiffs also cite to Model Rules 4.1(a) and 8.4(c) as a basis for their
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sanctions request. Model Rule 4.1 provides in relevant part that an attorney must not “knowingly:

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(a) make a false statement of material fact or law to a third person; or (b) fail to disclose a material

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fact to a third person, when disclosure is necessary to avoid assisting a criminal or fraudulent act

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by a client, unless disclosure is prohibited by Rule 1.6.” Model Rule 8.4(c) states that it is

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“professional misconduct for a lawyer to: (c) engage in conduct involving dishonesty, fraud,

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deceit, or misrepresentation.”
Model Rule 4.1 addresses Honowitz’s conduct more specifically. However, it is not

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binding on Honowitz, since California did not adopt the Model Rules. See

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http://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_prof

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United States District Court
Northern District of California

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essional_conduct/alpha_list_state_adopting_model_rules.html (last accessed on Nov. 21, 2016).
California instead follows its own Rules of Professional Conduct and other statutes governing
professional conduct of attorneys. See, e.g., Gen. Dynamics Corp. v. Superior Court, 876 P.2d
487, 503, n.6 (Cal. 1994). In General Dynamics Corp., the California Supreme Court concluded
that an in-house attorney may state a retaliatory discharge claim in certain limited circumstances.
Id. However, it explained that such claims must be rooted in “explicit and unequivocal ethical
norms embodied in the Rules of Professional Responsibility and statutes,” among other things, and
“expressly decline[d ] to adopt as a predicate for retaliatory discharge claims by in-house counsel
either the Model Rules of Professional Conduct or the Model Code of Professional Responsibility,

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both of which have no legal force of their own.” Id. (citation and internal quotation marks omitted)

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(emphasis in original omitted).
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While this court may look to the Model Rules for guidance on acceptable conduct, the
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court cannot enforce them. See United States v. Nosal, No. C 08-00237 MHP, 2009 WL 482236,
at *2 (N.D. Cal. Feb. 25, 2009) (Model Rules provided guidance to the court on the issue of
whether personal conflicts are imputed to others in a government office) 2; see also State Comp.

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Some federal district courts within California have a local rule of professional conduct which
explicitly lists the Model Rules as providing “guidance.” See, e.g., E.D. Cal. R. 180(e) (“In the
absence of an applicable standard therein, the Model Code of Professional Responsibility of the
American Bar Association may be considered guidance.”); C.D. Cal. R. 83-3.1.2 (explaining that
the “Model Rules of Professional Conduct of the American Bar Association may be considered as
guidance” for standards of professional conduct). The Northern District of California’s local rules
do not make reference to the Model Rules.
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Ins. Fund v. WPS, Inc., 82 Cal. Rptr. 2d 799, 806-07 (Cal. App. Ct. 1999) (concluding that counsel

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“should have not been sanctioned for engaging in conduct condemned by an ABA formal opinion,

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but which has not been condemned by any decision, statute, or Rule of Professional Conduct

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applicable in this state” and reversing sanctions order).

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As an aside, although not cited by either party, in Paul E. Iacono Structural Eng’r, Inc. v.

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Humphrey (“Iacono”), 722 F.2d 435, 440 (9th Cir. 1983), the Ninth Circuit concluded that the

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district court did not commit reversible error by relying on the Model Code (which predated the

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Model Rules) as a basis to disqualify a law firm. However, Iacono appears to be limited to its

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facts. It has been cited primarily in the context of attorney or law firm disqualification motions for

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United States District Court
Northern District of California

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the general proposition that a court may look to the Model Rules for guidance in addressing issues
not fully addressed by the California rules. See, e.g., Loops Al Labs, Inc. v. Gatti, No. 15-cv00798-HSG, 2016 WL 344874, at *1 (N.D. Cal. Jan. 28, 2016).
As conceded by Plaintiffs’ counsel at the hearing, there are no state or federal cases
applying California standards in which a court has sanctioned an attorney solely for violating
Model Rule 4.1 or 8.4 for misrepresentations made to a third party. At most, some cases mention
those rules in dicta or in factual contexts that are different from the one presented here. See, e.g.,
United States v. Sierra Pac. Indus., 759 F. Supp. 2d 1215, 1218 (E.D. Cal. 2011) (affirming
magistrate judge’s finding a violation of California Rule of Professional Conduct 2-100; in dicta,
district court noted that it was “troubled” by defendant’s attorney’s behavior toward employees of

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the U.S. Forest Service, citing Model Rules 4.1 and 8.4); Molski v. Evergreen Dynasty Corp., 500
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F.3d 1047, 1064 (9th Cir. 2007) (explaining in dicta that information sent by law firm to
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unrepresented parties whose interest conflicted with those of the law firm might have violated
Model Rule 4.1(a), but affirming sanctions on other grounds); In re Hubbard, No. 12-cv-1975-L
(WMc), 2013 WL 435945, at *1-5 (S.D. Cal. Feb. 4, 2013) (sanctioning an attorney for
intentionally deceptive and misleading conduct toward opposing counsel and the court as a
violation of the California Rules of Professional Conduct, the State Bar Act, and various Model
Rules including 4.1(a) and 8.4); In Re Boyd, 243 B.R. 756, 760, n.2 (N.D. Cal. 2000) (citing

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Model Rule 4.1 (1999 ed.) in a footnote discussing an attorney’s duty of candor to adverse party,

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no discussion of the Rule).

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In sum, the Model Rules do not provide a basis for sanctioning Honowitz.

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III.

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Honowitz’s conduct is troubling. In creative pursuit of informal discovery, he misled

CONCLUSION

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Renner, who was simply doing her job as a real estate broker to her clients. He placed her in a

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potentially precarious situation, as she could have been tricked into violating her own professional

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duties to her clients. Although Honowitz’s conduct was questionable and misguided, the court

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cannot conclude that it rose to the level of bad faith as required for this court to issue sanctions

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any information he received from Ms. Renner from his server, and to not rely on any information
he received from Ms. Renner in this litigation. Thus, Honowitz has taken it upon himself to
remedy the harm caused by his actions.
In light of the above, having considered the papers and the oral argument, Plaintiffs’
motion is DENIED.

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IT IS SO ORDERED.
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Dated: November 21, 2016
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I

______________________________________
Donna M. Ryu
United States Magistrateu
a M. Ry Judge

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ERED

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T IS SO

NO

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R NIA

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Honowitz volunteered in open court to make a written apology to Ms. Renner, to delete

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Judge D

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issue a sanction for violation of this district’s local rules.

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California Rule of Professional Conduct under which this court could exercise its discretion to

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United States District Court
Northern District of California

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under its inherent authority. Nor can it conclude that Honowitz clearly violated an applicable

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