By Thomas Spahn
The Daily Record
The ethics rules recognize that clients decide on the objectives of their attorney’s representation.
However, lawyers usually decide on the means of meeting those objectives, and can also take actions that are “impliedly authorized” to meet the client’s objectives.
Significantly, the same ABA Model Rule flatly states that lawyers “shall abide by a client’s decision whether to settle a matter.” (ABA Model Rule 1.2(a).)
In the heat of litigation, lawyers might forget this central tenet of the ethics rules — which can play out in at least two contexts.
First, a specific ethics rule governs what are called “aggregate settlements” — which generally involve a settlement combining two or more clients’ claims in a “take it or leave it” setting.
For example, a defendant’s offer to pay $200,000 to a group of plaintiffs on the condition that all of them settle would be an “aggregate settlement.” However, a defendant’s offer to pay $10,000 each to any of the plaintiffs who were interested in taking that offer normally would not amount to an “aggregate settlement.”
Under ABA Model Rule 1.8(g), lawyers representing more than one client may not participate in an aggregate settlement unless each client gives written consent after the lawyer discloses “the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.”
As a 2006 ABA legal ethics opinion noted, this rule prevents clients from agreeing in advance to be bound by a majority vote of their fellow clients. (ABA Legal Ethics Opinion 438)
There are real consequences to skirting this rule. In 2009, the Mississippi Supreme Court reversed a lower court’s grant of summary judgment to a plaintiff’s lawyer accused by a former client of not having provided sufficient information under the aggregate settlement rule.
The lawsuit against the lawyer stemmed from an April 2001 settlement of 31 plaintiffs’ claims against American Home Products Corp. for over $73,000,000. (Waggoner v. Williamson, No. 2007-IA-00565-SCT.)
The decision to let a malpractice case proceed so many years after the settlement highlights the strict nature of the aggregate settlement rule.
Even when dealing with only a single client, lawyers must remember that the client has ultimate power over any settlement.
The Restatement (Third) of Law Governing Lawyers contains a provision prohibiting “an irrevocable contract that the lawyer will decide on the terms of settlement.” (§ 22 (2000) cmt. c.) That provision also indicates that “[a] contract that the lawyer as well as the client must approve any settlement is ... invalid." This means that a lawyer cannot exercise a “veto power” over the client’s decision to settle a case.
A lawyer handling a matter on a contingent fee basis might find this rule particularly upsetting - if the client decides to settle a case for much less than the lawyer thinks it is worth, for example. But in that situation, there really is nothing that the lawyer can do.
As with the aggregate settlement rule, the case law should frighten lawyers who are not careful. In 1995, the Georgia Supreme Court suspended for 18 months a lawyer who arranged for a client to sign a retainer giving the lawyer “full power and authority to settle, compromise, or take such action as he might deem proper for the best interest of the client.” (In re Lewis, 463 S.E.2d 862.)
And in 2009, the Missouri Supreme Court suspended for one year a lawyer who attempted to secure that authority in a retainer agreement. In the agreement, the client agreed that the lawyer “‘shall have the exclusive right to determine when and for how much to settle this case,’” because the lawyer is “‘more familiar with the legal trends relative to judgments, settlements and summary depositions’” and did not want to be “‘held hostage to any agreement I disagree with.’” (In re Coleman, 295 S.W.3d 857.)
These cases highlight the basic principle that lawyers can exercise day-to-day decisions about litigation — and sometimes rely on the client’s implied authorization to take certain steps — but all lawyers should remember that the client ultimately controls settlement decisions.
Tom Spahn practices as a commercial litigator at McGuireWoods in McLean, Va. He regularly advises a number of Fortune 500 companies on issues involving ethics, conflicts of interest, the attorney-client privilege and corporate investigations.
