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A lawyer may negotiate an aggregate outcome in related cases on behalf of several different clients, the ABA Standing Committee on Ethics and Professional Responsibility states in a recently issued opinion.
The ethics committee cautions, however, that an aggregate settlement agreement in a civil matter or an aggregate plea agreement in a criminal matter involves potential ethics pitfalls that the lawyer must be careful to avoid.
In ABA Formal Ethics Opinion 06-438 (Feb. 10), the committee provides detailed guidance to help lawyers avoid conflicts of interest in reaching aggregate settlements in civil cases or plea agreements in criminal cases.
According to the opinion, examples of appropriate aggregate settlements include, for example, a civil case in which passengers are suing the owner of a bus that rolled over. On the criminal side, aggregated pleas might be offered by defendants alleged to be members of a drug ring.
In a footnote, the committee states that the opinion does not apply to certified class action cases or derivative actions. The opinion also notes that as claims become more disparate, the likelier it is that an aggregate settlement proposal would run afoul of various provisions in the ABA Model Rules of Professional Conduct. (The Model Rules are the basis for most state codes of professional conduct for lawyers.)
ABA Model Rule 1.8 sets forth specific rules for conflicts of interest involving a lawyer’s current clients. Paragraph (g) of the rule states that an aggregate settlement or plea agreement requires the informed written consent of each client after the lawyer has disclosed information about all the claims or pleas involved and the participation of each client involved in the settlement.
The opinion points out that the requirements of Model Rule 1.8(g) reinforce other rules that assert a client’s final say in deciding the resolution of a case (Rule 1.2); impose a duty on the lawyer to provide information that will permit a client to decide whether to engage in a proposed aggregate settlement or agreement (Rule 1.4); require the client’s permission before the lawyer may reveal information about a case to other clients (Rule 1.6); and direct the lawyer to avoid conflicts of interest (Rule 1.7).
“Rule 1.8(g) deters lawyers from favoring one client over another in settlement negotiations by requiring that lawyers reveal to all clients information relevant to the proposed settlement,” states the ethics committee’s opinion. “That information empowers each client to withhold consent and thus prevent the lawyer from subordinating the interests of the client to those of another client or to those of the lawyer.”
A FORMULA FOR INFORMED CONSENT
The opinion states that a lawyer should disclose the following information, “at a minimum,” to assure that clients give valid and informed consent to an aggregate settlement or plea agreement:
• The total amount of the aggregate settlement or the result of the aggregated agreement.
• The existence and nature of all of claims, defenses, or pleas involved in the settlement or aggregated agreement.
• The details of every other client’s participation in the settlement or agreement.
• The total fees and costs to be paid to the lawyer if they are to be paid from the proceeds of the settlement or by an opposing party.
• The method by which costs are to be apportioned.
A lawyer also should advise the clients that the refusal of one or more of them to consent to the settlement offer may lead to its withdrawal. In addition, the lawyer should tell clients when seeking their informed consent that if a dispute arises among them, the attorney-client privilege may not be available to any of them against the others on issues of common advice from the lawyer.
The opinion concludes that a lawyer, by complying with Rule 1.8(g) and other ethics obligations arising out of it, “protects his clients and himself, and helps assure the finality and enforceability of the aggregate settlement or agreement into which those clients have chosen to enter.”
Eileen Libby is associate ethics counsel for the ABA Center for Professional Responsibility.
