Legal Question in Legal Ethics in California

I assume that you personally have no attorney involved in this matter.

Based on this assumption, it is entirely appropriate for an attorney to get involved on behalf of your opponent and discuss settlement with you. It is impossible to evaluate the merits of what the attorney said, without knowing all about your claim and any surrounding issues.

An attorney can contact you as long as you do not have counsel. Attorneys will someties threaten lawsuits that my or may not have any validity.

Attorneys cannot appear at the small claims hearing at the initial trial. Other than that, they can negotiate claims, advise the litigants, and even represent the small claims parties on appeal. As I pointed out yesterday and as hinted at by Mr. Selik, a future lawsuit for malicious prosecution would not be legally valid and would be subject to a motion to dismiss, assuming that you acted timely on your rights.