January 27, 2009; see amended opinion filed March 18, 2009
Appeal from the United States District Court for the Central District of California, Florence-Marie Cooper, District Judge, Presiding, D.C. No. CV-07-00838-FMC.
The opinion of the court was delivered by: Graber, Circuit Judge
Argued and Submitted November 17, 2008 -- Pasadena, California.
Before: Susan P. Graber and Richard R. Clifton, Circuit Judges, and Edward C. Reed,*fn1 District Judge.
Opinion by Judge Graber; Partial Concurrence and Partial Dissent by Judge Clifton.
Plaintiffs Paula Lauren Gibson and Annette D. Goode-Parker work for the Office of the Attorney General of the State of California ("OAG") as a lawyer and a paralegal, respectively. In violation of an internal policy of the OAG, Gibson represented Goode-Parker in a private legal malpractice case without first having obtained permission from the OAG. The OAG informed Gibson that she would be fired if she continued the private representation. Plaintiffs then filed this action against the OAG and individual decision-makers, alleging a violation of their First Amendment rights and a breach of contract. We hold that the district court properly dismissed the action under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, but erred in awarding attorney fees to Defendants.
Gibson works as a Deputy Attorney General in the Antitrust Law Section of the OAG. Goode-Parker is employed as a Senior Legal Analyst in the same section. On June 25, 2003, Gibson filed a private legal malpractice action on behalf of Goode-Parker against a California divorce lawyer in the Los Angeles Superior Court. The malpractice claim related to the divorce lawyer's representation of Goode-Parker in a divorce proceeding. Although the OAG requires its lawyers to obtain permission in advance to engage in the private practice of law, Gibson did not seek permission to represent Goode-Parker until nearly a year after filing the malpractice case. Defendant Kathleen Foote, Senior Assistant Attorney General for the Antitrust Law Section, ultimately denied Gibson's request on the ground that the existence of a separate, pending claim by the divorce lawyer against Gibson with the State Board of Control created a conflict of interest.
Gibson filed a grievance concerning the denial of her request to represent Goode-Parker. Gibson argued that the OAG's policy of requiring advance permission for engaging in the private practice of law violates the First Amendment. Four months later, without any formal action in response to Gibson's grievance, Gibson was informed that she would be terminated from her employment with the OAG if she did not withdraw from representing Goode-Parker in the malpractice action.
Immediately thereafter, Defendant James Thomas Greene, the Chief Assistant Attorney General for the Public Rights Division, reviewed and denied Gibson's grievance. He noted in his denial that it is difficult for a deputy attorney general to engage in the private practice of law and not come into conflict with the OAG's interests or those of a client. He also noted that the prior-approval process is necessary to prevent conflicts between a public employee's official duties and his or her outside activities, and he opined that the process is not an unconstitutional prior restraint.
Gibson appealed the denial of her grievance, and Defendant Richard M. Frank, Chief Deputy Attorney General, upheld the denial. He agreed with Greene's conclusions that the OAG's pre-approval requirement is not an unconstitutional prior restraint and that Gibson's involvement in the malpractice action created a conflict of interest. Gibson appealed Frank's decision to the Department of Personnel Administration. Her appeal was denied.
Around the same time that Gibson submitted her grievance and appeals, she requested and received permission to represent herself in connection with two additional legal matters related to the underlying malpractice case involving the divorce lawyer. First, she received permission to appeal a sanctions order that had been issued against her in that action, subject to certain limitations, including that (1) the representation be confined to specific issues, (2) OAG resources not be used and Gibson's affiliation with the OAG not be invoked, and (3) any criticisms of Gibson's performance by the appellate court made in the course of the appeal be reported promptly to the OAG.
Gibson also was given permission to file a malicious prosecution action against the divorce lawyer. The conditions placed on Gibson by the OAG were that (1) she would not disparage the OAG or its policies; (2) she would not use office time, materials, staff, or equipment; (3) she would not invoke the OAG or her title in her representation, and (4) she would report to Greene any criticisms or concerns expressed by the court during the case.
In July 2001, Gibson entered into a written agreement with the OAG, which provided that Gibson would transfer to the Antitrust Law Section from the Health, Education, and Welfare Section. The agreement was a response to Gibson's complaints of disability discrimination and denial of reasonable accommodations, which she had made to the State Personnel Board and Department of Fair Employment and Housing. Goode-Parker provided many of the reasonable accommodation services ...