Opinion ID: 2209446
Heading Depth: 2
Heading Rank: 3

Heading: Proper Conduct During Settlements

Text: The Board found that respondent's participation in the Settlement Agreement violated two rules of professional conduct specific to settlements, Rule 1.2(a), which states in part, [a] lawyer shall abide by a client's decision whether to accept an offer of settlement of a matter, and Rule 5.6(b), [a] lawyer shall not participate in offering or making: [a]n agreement in which a restriction on the lawyer's right to practice is part of the settlement of a controversy between parties. For purposes of these Rules, we focus on the following facets of the Settlement Agreement: 1) respondent agreed not to represent current or future clients in any Nix-related claims against Warner-Lambert; 2) Warner-Lambert agreed that the consumers' claims would not be released; and 3) respondent (and Traficonte) signed the Settlement Agreement in their individual capacities and not on behalf of their clients. Respondent argues that the last two provisions mean that no violations occurred, because the agreement is not a settlement within the meaning of Rules 1.2(a) (settlement of a matter) and 5.6(b) (settlement of a controversy between parties). See also R. 5.6(b) cmt. 2 ([This Rule] prohibits a lawyer from agreeing not to represent other persons in connection with settling a claim on behalf of a client.). While at first blush it seems incongruous for respondent to argue that a Settlement Agreement is not a settlement, the agreement's particular nature raises a meaningful question as to whether these two rules are implicated. As the Board observed, case law is scarce if nonexistent on this issue. The Board concluded that while the clients did not technically waive their rights to sue in the Settlement Agreement (a long-established form of consideration, see, e.g., 4934, Inc. v. District of Columbia Dep't of Empl. Servs., 605 A.2d 50, 54 (D.C.1992)), they did lose their attorneys, their attorney's work product and the names of potential class members, which the Board believed was close to the equivalent of a release of their claims. It noted that respondent had also failed to divulge the continuing viability of their claims in the August 26, 1997 letter. Consequently, the Board believed that the Rules governing settlement were implicated by respondent's conduct. We concur with the Board's reasoning. This conclusion is strengthened by the weighty reasons behind Rule 5.6(b) in particular: First, permitting such agreements restricts the access of the public to lawyers, who by virtue of their background and experience, might be the very best available talent to represent these individuals. Second, the use of such agreements may provide clients with rewards that bear less relationship to the merits of their claims than they do to the desire of the defendant to buy off plaintiff's counsel. Third, the offering of such restrictive agreements places the plaintiff's lawyer in a situation where there is conflict between the interests of present clients and those of potential future clients. ABA Formal Opinion 93-371 (1993). Given this rationale, we would be reluctant to permit evasion of the strictures of Rule 5.6(b) (or 1.2(a)) by the creation of documents such as the Settlement Agreement, which we reiterate resulted in the clients losing both their lawyers and the work done on their behalf. We are also persuaded by how other bodies have dealt with scenarios arguably outside the scope of Rule 5.6(b). The Illinois State Bar Association has examined whether a lawyer could agree that an accounting firm would disclose a tax reduction scheme to the lawyer and a client on condition that the lawyer not divulge this information to other clients who would also benefit. The state bar association stated that while such an agreement would not fall squarely within Rule 5.6 . . . [n]one-theless, the restrictions placed on Lawyer's ability to represent other clients similar to Client A in the future without facing a conflict of interest may go to the spirit of Rule 5.6. Illinois State Bar Association, Advisory Opinion 00-01 (2000). [17] Similarly, the ABA has evaluated whether Model Rule 5.6(b), which speaks of settlement of a controversy between private parties (emphasis added), would still apply if one of the parties was a government entity. Despite the explicit language of the rule, the ABA did not hesitate to find it applicable even when the government was a party. We conclude, then, that the phrase in question is sensibly to be read as merely descriptive rather than prescriptive: i.e., as referring to the circumstances where such a provision, as a condition of settlement, is most likely to be proposed; rather than as limiting the kinds of settlements to which the prohibition is applicable. ABA Formal Opinion 95-394 (1995). Like the Illinois State Bar Association and the ABA, we believe the protections of Rules 1.2(a) and 5.6(b) are sufficiently important to envelop agreements at the outer fringes of what constitutes a settlement, and we decline to read our Rules as limiting the kinds of settlements such that the Settlement Agreement is beyond their reach. Apart from this threshold inquiry of applicability vel non, the analysis of whether respondent violated these rules is quite straightforward. [Rule 1.2(a) ] is designed to preserve the client's right to accept or reject a settlement offer, and it requires that a client be able to exercise his or her judgment at the time a settlement offer is communicated . . . . [A] client's right to accept or reject a settlement offer is absolute . . . . D.C. Bar Opinion 289. Respondent's agreement to terms to be kept secret from his clients and his failure to inform his clients of the terms of the settlement until they were a fait accompli, and even then to withhold several material aspects, resulted in his clients never exercising their right to be aware of and to entertain and evaluate the settlement offer. Moreover, the settlement contained a provision directly contravening Rule 5.6(b). An agreement by the lawyer that he will not represent anyone who has a claim against the settling defendant is clearly a restriction of the lawyer's right to practice law. D.C. Bar Opinion 35; see also D.C. Bar Opinion 130 ([I]t is clear that an attorney, absent special circumstances, cannot ethically accept an arrangement restricting . . . his future representation of clients . . . .). [18] We therefore concur with the Board's conclusion that respondent violated Rules 1.2(a) and 5.6(b). [19]