In what might be a scene from film noir,
a dark-haired, somewhat rumpled Los Angeles lawyer drives a rental car through the piney woods of Northeast Texas. It's autumn, and he's headed 170 miles east from the Dallas-Fort Worth airport to the small town of Marshall. In the trunk are four cardboard boxes filled with confidential documents he believes expose wrongdoing by his former employer that put at risk the lives of millions of motorists.
When the lawyer arrives in Marshall, he pulls up in front of the Sam B. Hall Jr. Federal Building, an imposing brick courthouse with Ionic columns that straddle the entrance. The lawyer retrieves the boxes from the car trunk one at a time, delivering them to the clerk of the court. They are marked for the attention of T. John Ward, a federal judge who sits inside.
Dimitrios P. Biller made this journey in October 2009 - about two years after he resigned as a top in-house lawyer for the U.S. sales division of Toyota Motor Corp. In the movies, Biller's desperate mission would be depicted as a high-minded act of heroism, in which a principled individual stands up for the public interest. It's the kind of stand Jeffrey Wigand (played onscreen by Russell Crowe in The Insider
) took in the fight against Big Tobacco. Now, Biller would do the same for the cause of auto safety.
"I took the documents to Judge Ward because Toyota committed fraud in that courthouse and denied people who sustained horrific injuries a fair and level playing field," Biller alleges. "In California, thank God, in-house lawyers who are put in the position I was put in have an absolute right to sue their corporate client for constructive discharge and for retaliation. I'm the only lawyer in the United States who has done this."
But real life is a lot messier than the movies. Biller was not hailed as a hero for his actions - far from it. In January 2011 a JAMS arbitrator in Orange County ordered him to pay Toyota damages of $2.6 million, finding that he repeatedly disclosed confidential information and documents in violation of contractual, statutory, and ethical duties. The award included $100,000 in punitive damages. "Mr. Biller did the professionally unthinkable: he betrayed the confidences of his client," ruled Hon. Gary L. Taylor (Ret.). (In the Matter of the Arbitration Between Toyota Motor Sales, U.S.A., Inc. and Dimitrios P. Biller
, JAMS No. 1220040045 final award dated Jan. 4, 2011).)
Biller's delivery of documents to Judge Ward in Texas was one of ten separate disclosure violations identified by the arbitrator. "Thousands of confidential documents were sent to a Texas court without a request, subpoena or legal compulsion," Taylor noted.
Biller had argued that his disclosures were protected by the Evidence Code's crime-fraud exception, which trumps attorney-client privilege if the attorney's services were used to further a crime or fraud. In particular, he alleged that Toyota committed frauds upon the court in 2005 by concealing evidence in a wave of SUV-rollover lawsuits defended by the division he managed.
But Taylor brusquely dismissed that argument. "[E]ven if Toyota's attorney-client privilege protection were to be lost under [the crime-fraud] exception," he wrote, "Mr. Biller is still bound by a greater rule: the attorney's underlying fundamental duty to safeguard his client's confidences, attorney-client privileged or not. Mr. Biller has no justification to breach that duty."
Biller appealed the arbitrator's decision to a federal district court, which confirmed the award. In February, a three-judge panel of the Ninth U.S. Circuit Court of Appeals affirmed. (Biller v. Toyota Motor Corp.
, 668 F.3d 655 (9th Cir. 2012).)
During oral arguments, however, one member of the Ninth Circuit panel took Biller's side. "I never heard of this 'fundamental' rule" to protect a client's confidences, said Senior Judge John T. Noonan Jr., an expert on legal ethics. "This seems to be saying a client can plot a crime with the help of his lawyer, and the lawyer is bound to keep his mouth shut." In a startling comment, he added that the JAMS arbitrator "grossly misstates" the law.
The conditions of employment for corporate counsel
require them to walk an ethical tightrope. As the California Supreme Court has observed, in-house lawyers may face "unusual pressures to conform to organizational goals, pressures that are qualitatively different from those imposed on the outside lawyer. Even the most dedicated professionals, their economic and professional fate allied with that of the business organizations they serve, may be irresistibly tempted to cut corners by bending the ethical norms that regulate an attorney's professional conduct." (General Dynamics Corp. v. Superior Court
, 7 Cal. 4th 1164, 1172 (1994).)
In General Dynamics
, the justices permitted in-house lawyers to sue a former employer for retaliatory discharge, "provided [the claim] can be established without breaching the attorney-client privilege or unduly endangering the values lying at the heart of the professional relationship." (7 Cal. 4th at 1169.)
Writing for a unanimous court, Justice Armand Arabian added that matters involving the commission of a crime or fraud are well-recognized exceptions to the attorney-client privilege. He concluded that "a concern for protecting the fiduciary aspects of the relationship in the case of a client who confides in counsel for the purpose of planning a crime or practicing a fraud is misplaced." (7 Cal. 4th at 1191.)
Even so, in-house lawyers remain in a "very challenging position," says Nicholas P. Connon of Connon Wood Scheidemantle in Pasadena, who has represented corporate lawyers in employment litigation. "Ethical rules require one to stop representing the client if the client is doing something you believe is wrong. You do not want to commit fraud on behalf of the client. But you don't have a license to go off disclosing information about the client."
Connon adds, "Sometimes there are gray areas. You have to decide on what side of the gray area you are on. And if you take a stand, there are consequences."
In Biller's view, many judges are philosophically uncomfortable with retaliatory discharge cases, seeing them as an intrusion into the attorney-client relationship. "Not a single court has ruled on the crime-fraud exception," Biller says of his litigation. "They've skipped the issue. They haven't addressed it. Do you think our judges should shy away from political hot potatoes?"
A tall man with a mane of thick black hair, Biller, 49, is not cut from the usual corporate cloth. During the years he managed rollover cases for Toyota, he recalls in a series of interviews, he walked out of trials crying. "I felt so bad for the plaintiffs because their lawyers really gave them poor advice," he says. "They could have recovered real money, moved on with their lives instead of shooting for multiple millions of dollars when the cases really weren't very good."
Biller admits, "I wore my heart on my sleeve and just called it the way I saw it." He struggles with mental illness: "I've suffered from depression my whole life," he says.
Recently he joined two friends as a name partner in the Beverly Hills law firm of Biller, Fadlon & Rozio. He lives with his wife, Janice, and their two children in a small house near the one he bought for his mother in Pacific Palisades. But he spends much of his time in a garage he's converted into an office, furnished with a conference table and stacks of boxes that contain the voluminous documents from the Toyota cases. A career that was once on the fast track has slowed to a slog.
Biller was born in Los Angeles to Greek immigrants who divorced when he was nine. Dimitrios didn't see his father again until he was out of college. But he "heard a lot of stories" about his father, a detective with the Los Angeles Police Department. "He, too, was somewhat of an outcast," Biller says. "He marched to his own drummer."
On one occasion, Biller remembers, his father's partner on the force "was going to commit suicide. He was told to come back to the station with his partner, and my dad said, 'No.' The two drove around for hours until his partner got himself together. Then he took him to the hospital. But he wasn't going to bring him [to the station] when he was in this state. He disobeyed his captain's orders."
After the divorce, Biller's mother worked three jobs to support him and his brother. "We barely made it," he says. "So the biggest fear in my life has always been to not have enough money to take care of myself and my family."
The legal profession offered Biller a passport to financial security. After graduating from UCLA, he earned a law degree at Loyola Law School and was admitted to the State Bar in 1989. At the firm of Lillick, McHose & Charles - which merged with Pillsbury Madison & Sutro in 1991 - he defended Fortune 500 companies, including Ford Motor Company and Chrysler Group. By the time he made partner at Pillsbury in 1998, he was representing plaintiffs in class actions against life insurance companies. Fadlon & Rozio brought him in as an associate counsel for one bad faith case against Prudential Financial.
"Dimitrios is a bulldog," says partner Zacky P. Rozio. "He is extremely tenacious. He's very committed. For other attorneys, toughness is a persona they adopt. ... For Dimitrios, it's a style that works. But it's not an act for him."
Rozio suggests that Biller's tenacity might sometimes get the better of him when "the prudent thing for a client is some sort of compromise. But at a law firm, [other attorneys] can balance you out."
After 14 years at Pillsbury, Biller felt he was burning out. "What I needed was a vacation," he says. Instead, in April 2003 he went in-house at Toyota Motor Sales in Torrance. It was a high-stakes, high-pressure job: The automaker faced potential liability for hundreds of millions of dollars. "I was brought in to ... send a message to the plaintiffs bar that Toyota is not a company to be messed around with," he says.
On his desk at Toyota, Biller says, he kept a framed copy
of the principles of "Continuous Improvement" and "Respect for People" that form the core of The Toyota Way. "Every day I looked at that," he recalls. "These are concepts I believe in."
But in Biller's eyes, Toyota didn't live up to those ideals. Around August 2005, Biller stated in court documents, he discovered that Toyota had systematically withheld discoverable electronically stored information from plaintiffs in product liability cases. He tried to ensure the company's compliance with discovery requests and to preserve evidence, but his supervisor undermined him, he recounted, at one point allegedly telling him that the "Golden Rule" was to "do anything necessary to protect the client, including a criminal act or violation of law."
Biller became increasingly depressed, and he suffered an emotional breakdown in early 2007. "I realized that I wasn't going to stop anything," he says. "I was one man against a conglomerate. Toyota wasn't going to change its ways. I had to resign." He sought a medical leave from Toyota and was placed on mental disability status.
Biller insists his actions were guided by California's ethics rules requiring an attorney not to suppress evidence that a client has a legal obligation to produce, and permitting withdrawal if a client insists that an attorney pursue a course of conduct that is illegal. (See Cal. Rules Prof. Conduct 5-220; 3-700(C)(1)(b).)
In-house lawyers, however, have only one client, so sometimes complying with the rules of professional conduct means unemployment. In the fall of 2007, Biller and Toyota reached a severance agreement in which the company would pay him $3.7 million to settle a claim for constructive discharge. Biller also agreed to return confidential documents and to not disclose Toyota's confidential information.
A year later, however, Toyota brought suit against Biller, alleging that he violated the severance agreement by posting information about rollover settlements and other confidential matters on the website of a consulting business he had started. (Toyota Motor Sales, U.S.A., Inc. v. Biller
, SC 100501 (L.A. Super. Ct. filed Nov. 7, 2008).)
Biller filed a cross-complaint in the state court proceedings, followed by a federal racketeering lawsuit against Toyota in the summer of 2009 that alleged violation of the civil RICO act, constructive wrongful termination, intentional infliction of emotional distress, and defamation per se. The complaint identified specific cases in which Toyota allegedly had withheld damaging evidence, and it claimed that the automaker had subjected Biller to intimidation and harassment that led to "a complete mental and physical breakdown." (Biller v. Toyota Motor Corp.
, No. 09-5429 (C.D. Cal. filed July 24, 2009)).
For Toyota, Biller's allegations could have opened something of a Pandora's box. More than 300 rollover suits had been filed against the company. "The [complaint] alleges conduct by Toyota that would cause every case ever resolved by Toyota in the past ten years to be reopened," one plaintiffs lawyer in Texas told Bloomberg.
Biller says he took his boxes of documents to Texas three months later because it was Judge Ward who had presided there over many of the rollover cases he tried himself. As for his severance agreement, he says he chose to ignore the conditions because he didn't "feel it was right to turn over documents to a company that was going to destroy them."
Until the Texas trip, Toyota hadn't been aware that its former in-house counsel still had confidential documents. "I was so pissed off that Toyota was once again trying to get away with murder," Biller explains. "I felt at that point [my] case didn't belong to me. I felt the case belonged to the people."
Judge Ward ordered the boxes of documents to be electronically scanned and made available for Toyota lawyers and counsel of record to review on a computer.
Toyota denied concealing evidence, accused Biller of "meritless attacks," and twice tried unsuccessfully to have his federal complaint sealed. In November 2009 the California trial judge sent the case to arbitration because it included challenges to provisions of his severance agreement, which included an arbitration clause. The federal case was then consolidated with the state court proceedings before Taylor, the JAMS arbitrator.
Although Taylor did rule that privileged documents were admissible in the arbitration under the crime-fraud exception, he didn't see anything heroic about Biller. "His claimed public-spirited motive is undermined by his actions," Taylor wrote in his final award. "He accepted $3.7 million to not
make disclosures, and waited almost two years before making disclosures until Toyota sued him. ... A lawyer acting as a 'whistleblower' cannot simply decide to reveal a client's confidential information."
Taylor found Biller liable for breach of contract and conversion, saying he converted confidential documents "to his own use by retaining them, and using or distributing them as he determined."
The arbitrator's award, Toyota General Counsel Christopher P. Reynolds stated in a press release, "reaffirms the critical importance of attorney-client privilege as a cornerstone of our legal system."
But for Biller the final award was devastating, both emotionally and financially. "I could not believe it," he recalls. He had to sell a second house he owned in Pacific Palisades and, within months, filed for personal bankruptcy protection. (In re Biller
, No. 11-BK-35532 (Bankr. C.D. Cal. filed June 13, 2011).)
This spring Toyota's lawyers quoted liberally from Taylor's ruling to argue in bankruptcy court that the $2.6 million arbitration award is not dischargeable. Taylor's findings establish that Biller "committed intentional acts which were wrongful and caused substantial injury to Toyota," the filing stated. "He had no legitimate just cause or excuse for his actions." (In re Biller
, No. 11-BK-35532 (Bankr. C.D. Cal. [Toyota Motor Sales, U.S.A., Inc. v. Biller
, Adv. Case No. 11-2774 motion filed April 10, 2012]).)
Biller's explanations about what transpired can be confusing. At one point, he says, "I never figured I would have released" the documents. At another, he says, "I thought there was going to be a day the evidence would be needed." But whether he is a champion of legal integrity or a betrayer of client confidences, one thing is certain: He took a risk by cloaking himself in the crime-fraud exception to attorney-client privilege and the attorney's duty of confidentiality.
The U.S. Supreme Court recognized a common-law crime-fraud exception nearly 80 years ago. "There is a privilege protecting communications between attorney and client," stated Justice Benjamin N. Cardozo. "The privilege takes flight if the relation is abused. A client who consults an attorney for advice that will serve him in the commission of a fraud will have no help from the law. He must let the truth be told." (Clark v. United States
, 289 U.S. 1, 15 (1933).)
For the exception to apply, Cardozo continued, there must be "prima facie
evidence that it has some foundation in fact. ... When that evidence is supplied, the seal of secrecy is broken." (289 U.S. at 15 (citing to a series of English law precedents including O'Rourke v. Darbishire
, (1920) A.C. 581, 604).)
California codified the exception in its Evidence Code, which states there is no attorney-client privilege if "the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit a crime or a fraud." (Cal. Evid. Code § 956.)
"It's a basic concept," Biller says. "You cannot help a client commit crimes and frauds."
But California courts have stressed that the exception is very limited. "This exception is invoked only when a client seeks or obtains legal assistance 'to enable or aid' one to commit a crime or fraud," one appellate panel stated. "The quoted language clearly requires an intention on the part of the client to abuse the attorney-client relationship." (Glade v. Superior Court
, 76 Cal. App. 3d 738, 746 (1978).)
State lawyers also are bound by a statutory and ethical duty of confidentiality. The Business and Professions Code requires an attorney to "maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client." (Cal. Bus. & Prof. Code § 6068(e)(1).) A breach of that duty is permitted only to the extent "the attorney reasonably believes the disclosure is necessary to prevent a criminal act that the attorney reasonably believes is likely to result in the death of, or substantial bodily harm to, an individual." (Cal. Bus. & Prof. Code § 6068(e)(2).)
The California Rules of Professional Conduct echo these statutory commands, requiring that before an attorney reveals a client confidence to prevent a criminal act, he or she must "make a good faith effort to persuade the client ... not to commit or to continue the criminal act, or ... pursue a course of conduct that will prevent the threatened death or substantial bodily harm ... or do both." (Cal. Rule Prof. Conduct 3-100 (C)(1).) In addition, the rule requires members of the State Bar to "inform the client, at an appropriate time" of his or her ability or decision to reveal the confidential information. (Cal. Rule Prof. Conduct 3-100 (C)(2).)
Taken together, these are formidable barriers to disclosing alleged client wrongdoing. The court's opinion in General Dynamics
suggested that in-house counsel have three options in retaliatory discharge cases: They can disclose relevant confidences and risk State Bar disciplinary action should their suit be unsuccessful; rely on the judge to aggressively control confidences; or abandon the suit in order to preserve the client's privilege. (General Dynamics
, 7 Cal. 4th at 1190-1191.)
In a 2001 retaliatory discharge case, Pasadena attorney Connon won an appellate ruling that "former in-house counsel may disclose to her attorney all facts relevant to the termination, including employer confidences and privileged communications." But the court continued, "[W]e are not faced with, and do not decide, whether the former in-house counsel or her attorney can be held liable to the employer for the public disclosure of those confidences and communications." (Fox Searchlight Pictures v. Paladino
, 89 Cal. App. 4th 294, 308 (2001).)
Biller contends, "Fox Searchlight
states that Business Code section 6068(e) is trumped by the exceptions to the privilege. A lawyer can disclose confidential information if it's going to save somebody's life."
But in 2009 Los Angeles Superior Court Judge John L. Segal, presiding in Toyota's lawsuit against Biller, ruled that revelation of the confidential documents would cause the company "irreparable harm"; he then referred Biller to the State Bar for possible discipline. (The State Bar's Office of Trial Counsel declined to take action.)
During the arbitration proceeding a year later, Taylor ruled that Biller had made a prima facie showing under the crime-fraud exception and could therefore use otherwise-privileged materials in the JAMS proceedings. But he emphasized, "The Arbitrator does not rule that a crime or fraud has taken place."
In the final award - and without adjudicating the Evidence Code exception - Taylor found that Biller was still bound by a "greater rule" to safeguard his client's confidences. Then on appeal Judge Noonan stated during oral argument that an attorney has a "fundamental obligation" to reveal a crime. But the Ninth Circuit panel affirmed the lower court's confirmation of the award for Toyota because, although the arbitrator may have "misunderstood the law and misapplied it," he did not exhibit a "manifest disregard" of the governing legal principles. (Biller
, 668 F.3d at 668 & n.7.)
"Unfortunately, the district court judge and the Ninth Circuit are too concerned that if they determine I was retained to commit crimes and frauds for Toyota ... it would open the floodgates for lots of lawyers to [bring] this type of claim," Biller says. "They were looking at the larger picture as opposed to the documents and the evidence."
How could this "basic concept" have gotten so muddled? According to Deborah L. Rhode, a professor at Stanford Law School who specializes in legal ethics, the law is still "evolving" with regard to what lawyers should do "if their services are used to commit crimes or frauds."
Rhode says she is concerned about what happened to Biller. "You don't want to punish lawyers who are acting out of non-self-serving motives to expose what they reasonably believe is crime or fraud," she says.
And even if the lawyer's motives are mixed, Rhode adds, "You don't want to discourage [him or her] from acting in the public interest. You don't want to close the door to [disclosure] of frauds against the judicial process."
But one attorney who defends lawyers before the State Bar Court believes that the crime-fraud exception isn't evolving so much as it is dormant. "The courts have been reducing to virtual nonexistence the protections that would allow whistleblowers, including those who happen to be attorneys, to perform their vital role," says Arthur Margolis of Margolis & Margolis in Los Angeles. "The message from the courts is clear - 'Don't even try it. You'll be destroyed.' "
In Biller's bankruptcy petition, he listed approximately $1.4 million in assets and $3.8 million in liabilities. By far his largest debt is the $2.6 million award owed to Toyota. He says he spent $300,000 of his own money during a single year of the arbitration proceeding. "I got here even though my entire life I worked hard to avoid poverty," he laments. "But I got here."
Biller continues to practice law. At his new firm, he represents clothing designer Glenn Shelhamer in a $22.6 million intellectual property suit. Biller may have baggage, Rozio says, but "[h]e's an honest guy. What he puts out there is what he is. ... We feel he is a strong asset for us."
Meanwhile, Biller's battle with Toyota goes on. He hopes to convince U.S. Bankruptcy Judge Ernest M. Robles in Los Angeles that, under the crime-fraud exception to the Evidence Code, he performed an ethical duty when he took those boxes of documents to Texas - making his debt to the company dischargeable.
In a recent court filing, he stated, "I believe that if allowed to testify on these issues, my testimony will clearly establish all the facts and evidence that is required to prove Toyota hired me to assist Toyota to plan and commit crimes and frauds in the discovery process in the United States." Those crimes and frauds, he alleges, include perjury, concealment and destruction of evidence, obstruction of justice, mail fraud, wire fraud, and conspiracy. (In re Biller
, No. 11-BK-35332 (Bankr. C.D. Cal.) [Toyota Motor Sales, U.S.A., Inc. v. Biller
(Adv. Case No. 11-2774 declaration filed May 25, 2012)].)
"I have not given up on this mission," Biller insists. "I'll tell you this right now: I'm not finished." -
Matthew Heller is a Los Angeles-based freelance writer and the editor of
On Point, a legal news website.