Which Laws Apply to Broker-Dealers? Federal Laws? State Laws? Both? General Principles Leading to an Answer

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel explains the law of preemption as it pertains to broker-dealers and their investor clients. She predicts, among other things, that either the clients will demand that broker-dealers adhere to a fiduciary duty, or else that states will impose that duty on them.

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Siry Investment, LP v. Farkhondehpour

Court: California Courts of Appeal

Docket: B277750(Second Appellate District)

Opinion Date: March 3, 2020

Judge: Brian M. Hoffstadt

Areas of Law: Civil Procedure, Legal Ethics

This appeal arose from challenges to a $7 million default judgment entered after the trial court issued terminating sanctions. The Court of Appeal affirmed the entry of terminating sanctions, modifying the judgment to eliminate the awards of treble damages and attorney fees. The court held that a trial court is not foreclosed from issuing terminating sanctions just because the underlying discovery encompasses only a subset of the issues in the case; a party against whom a default has been entered may file a motion for new trial attacking the default judgment as containing errors in law; and Penal Code section 496, subdivision (c) only authorizes an award of treble damages or attorney fees when the underlying conduct involves trafficking in stolen goods and thus the court parted ways with Switzer v. Wood, (2019) 35 Cal.App.5th 116.

Hill, Kertscher & Wharton, LLP v. Moody et al.

Court: Supreme Court of Georgia

Docket: S18G1436

Opinion Date: February 28, 2020

Judge: Boggs

Areas of Law: Legal Ethics, Professional Malpractice & Ethics

“Under longstanding Georgia law,” when a client sues his former attorney for legal malpractice, the client impliedly waives the attorney-client privilege with respect to the underlying matter or matters to the extent necessary for the attorney to defend against the legal malpractice claim. The issue this case presented for the Georgia Supreme Court’s review was whether the implied waiver extended to the client’s communications with other attorneys who represented the client with respect to the same underlying matter, but whom the client chose not to sue. The trial court held that the waiver did not extend to such other counsel and therefore denied a motion for a protective order in this legal malpractice case. The Court of Appeals reversed. The issue presented was a matter of first impression for the Supreme Court, which held that when a client sues his former attorney for legal malpractice, the implied waiver of the attorney-client privilege extends to the client’s communications who represented the client with respect to the same underlying transaction or litigation.

In re Partington

Court: Supreme Court of Hawaii

Docket: SCWC-18-0000301

Opinion Date: March 5, 2020

Judge: Sabrina S. McKenna

Areas of Law: Legal Ethics

The Supreme Court held that the intermediate court of appeals (ICA) did not abuse its discretion by imposing sanctions on two attorneys (together, Counsel) and denying Counsel's motion to reconsider the sanctions orders but that the Office of Disciplinary Counsel (ODC) was not authorized to treat the sanctions orders as administrative dispositions that might be used in any future disciplinary proceedings as evidence of aggravation. In a criminal matter, the ICA sanctioned counsel each in the amount of $50 based on Haw. R. App. P. 51. Counsel filed a motion for reconsideration of the sanctions order, which the ICA denied. The Supreme Court affirmed the ICA's sanctions orders against Counsel but ordered that the clerk of court transmit this opinion to the ODC for appropriate action consistent with this opinion, holding (1) the ICA did not abuse its discretion by imposing sanctions pursuant to Rule 51 and denying the motion for reconsideration; and (2) the ODC was without authority to treat the sanctions orders as administrative dispositions that might be used in the future as evidence of a pattern of conduct in aggravation.

In re Stone

Court: North Carolina Supreme Court

Docket: 242A19

Opinion Date: February 28, 2020

Judge: Per Curiam

Areas of Law: Legal Ethics, Professional Malpractice & Ethics

The Supreme Court ordered that Respondent Michael A. Stone, a judge of the General Court of Justice, District Court Division 16A, be censured for conduct in violation of Canons 1, 2A, and 2B of the North Carolina Code of Judicial Conduct and for conduct prejudicial to the administration of justice that brings the judicial office into disrepute in violation of N.C. Gen. Laws 7A-376, holding that the Judicial Standards Commission's findings were adequately supported by clear and convincing evidence and supported the Commission's conclusions of law. The Commission filed a statement of charges against Respondent alleging that he had engaged in conduct inappropriate to his judicial office by, among other things, demonstrating a lack of respect for the office and by making a number of misleading and grossly negligent assertions regarding his representation of a former client. Based on its findings of fact and conclusions of law, the Commission recommended that the Supreme Court censure Respondent. After weighing the severity of Respondent's misconduct against his candor and cooperation, the Supreme Court concluded that the Commission's recommended censure was appropriate.