Monday, June 20, 2016
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Arbitrator Revives Dunn Claims Against State Bar, Holden
By KENNETH OFGANG, Staff Writer
An arbitrator Friday revived claims brought against the State Bar by its former executive director, Joseph L. Dunn.
Edward L. Infante, who dismissed all of Dunn’s claims in April but granted leave to amend with respect to three of them, overruled demurrers to two of the three amended claims.
The arbitrator, a former chief magistrate judge of the Northern District of California who now works for JAMS, ruled that Dunn has now sufficiently alleged that the State Bar terminated him in violation of the Labor Code whistleblower provision, and that it breached the covenant of good faith and fair dealing implied in his employment contract.
He also overruled demurrers by former State Bar President Craig Holden and Beth J. Jay, former principal attorney to Chief Justice Tani Cantil-Sakauye, to an amended claim that they intentionally interfered with his contractual relationship with the State Bar.
Infante, however, rejected Dunn’s breach-of-fiduciary duty claim against the State Bar, which was dismissed without leave to amend. The arbitrator had previously dismissed, without leave to amend, breach-of-fiduciary-duty claims against Holden and the Board of Trustees.
Right to Terminate
Dunn, a former trial lawyer, state senator, and chief executive of the California Medical Association, was the State Bar’s top administrator from September 2010 to November 2014, when the organization announced it had exercised a clause in his contract giving it the right to end his employment on 30 days’ notice.
He was a Democratic candidate for the Orange County-based U.S. House seat that Rep. Loretta Sanchez is giving up to run for the U.S. Senate in the June 7 primary, apparently finishing fourth. The count of provisional and late vote-by-mail ballots is continuing, but as of late Friday, Dunn trailed Garden Grove Mayor Bao Nguyen by nearly 2,000 votes for the right to face former state Sen. Lou Correa, the clear frontrunner, in November.
Nguyen and Correa are also Democrats. Republican Bob Peterson was in third place, 856 votes ahead of Dunn.
Dunn sued the State Bar almost immediately after he was terminated, claiming that he was fired in retaliation for complaints about various improprieties at the State Bar. Those included the falsification of statistics purporting to show that a backlog in disciplinary complaints had been cleared up, as well as wasteful spending and an alleged conflict of interest on the part of Munger Tolles & Olsen, the law firm hired to investigate an internal complaint brought against Dunn by Chief Trial Counsel Jayne Kim.
Dunn alleged that Kim had brought the claim in retaliation for his identifying her as the person responsible for falsifying the backlog statistics.
A Los Angeles Superior Court ordered the case to arbitration based on a clause in Dunn’s contract.
Whistleblower Claim
In his ruling Friday, Infante said Dunn has now pled a whistleblower claim against the State Bar and Holden under Labor Code §1102.5, by alleging that he reasonably believed that the conduct he reported to the State Bar may have violated two sections of the State Bar Act, along with a Government Code section dealing with misuse of public resources.
The State Bar Act provisions are §6106, which provides for suspension or disbarment of attorneys who engage in “moral turpitude, dishonesty, or corruption,” and §6068(a), which demands that lawyers “support the Constitution and laws of the United States and of this state.”
If Dunn reasonably believed that Kim was violating those sections by falsifying the backlog statistics, Infante said, and was fired for reporting the alleged violations, the whistleblower statute applies, even though they are not criminal statutes and there is no remedy other than State Bar discipline.
“There is no requirement [under §1102.5] that the statute, rule, or regulation impose a particular type of remedy or punishment,” he explained.
In addition, if Dunn reasonably believed that “internal reports were altered to unlawfully remove cases from the statutory backlog,” as he alleges, his alleged report of such conduct amounted to a claim of violation of Government Code §8314, Infante said. The statute makes it unlawful for a public employee “to use or permit others to use public resources for…personal or other purposes which are not authorized by law.”
Bad-Faith Claim
Dunn’s amended claim for bad-faith termination also survives demurrer, Infante said, because he has now alleged that his firing was a pretext to deny him some contractual benefit beyond continued employment. He contends that as a result of the Munger Tolles report, which he claims is false, as well as tainted by a conflict of interest, the Board of Trustees used a contractual morals clause to deny him severance pay.
He also claims that he lost an annual performance bonus and retirement benefits as a result of the bad-faith termination.
Infante rejected the amended claim that the State Bar breached fiduciary duties by leaking portions of the Munger Tolles report to the press, and by inadequately investigating the leak. He concluded that the State Bar has sovereign immunity because there is no statute that specifically authorizes such a claim.
As for the tortious interference claim against Holden and Jay, Infante rejected Jay’s and Holden’s reliance on the litigation privilege. The amended allegations, including that Jay had “regular secret meetings with Jayne Kim and [Trustee] Jim Fox to set in motion plans to” fire Dunn, do not describe privileged conduct because the alleged meetings did not relate “to a proceeding that was actually contemplated or to a lawsuit that was anticipated,” he said.
Infante also rejected Holden’s claim of sovereign immunity to that claim, saying Dunn has now adequately alleged that Holden participated in the claimed meetings before he became president.
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