Freivogel on Conflicts
 
 
 
 
Settlement Agreements

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This page originally dealt only with agreements to limit a lawyer's practice.  A number of conflicts issues also arise with aggregate settlements.  We have started to add cases and opinions on aggregate settlements near the end of this page.  Finally, we have added a catch-all category, “Other . . . “

Agreements Restricting a Lawyer's Right to Practice

        ABA Model Rule 5.6(b) provides as follows:

A lawyer shall not participate in offering or making: . . . . (b) an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a controversy between private parties.

        The ABA House of Delegates accepted the "Ethics 2000" Commission recommendation not to change the substance of Rule 5.6(b).

        DR 2-108(B) of the ABA Model Code is nearly identical to Rule 5.6(b).  Virtually every state has adopted one or the other (as to New York, see below).  In Jarvis v. Jarvis, 758 P.2d 244 (Kan. App. 1988), the court held that Kansas' version 5.6(b) means what it says.  The court held that a provision in a divorce settlement prohibiting the wife from ever using a certain lawyer against her husband was void.  But, in Lee v. Florida Dept. of Ins., 586 So. 2d 1185 (Fla. App. 1991), the court enforced such an agreement by disqualifying a lawyer who had entered into one.  The court said that whether the agreement violated Florida's version of Rule 5.6(b) was a disciplinary matter.

        A lawyer was disciplined for violating the rule in In re Mark M. Hager, 812 A.2d 904 (D.C. App. 2002).

        ABA Op. 00-417 (2000) held that a lawyer may not agree to a confidentiality agreement if that meant the lawyer could not ever oppose the other party.  To the same effect, see Hu-Friedy Mfg. Co. v. General Electric Co., 1999 U.S. Dist. LEXIS 11213 (N.D. Ill. July 19, 1999).

        According to one article, Milo Geyelin, Some Lawyers Promise Not to Sue In Exchange for Cash From Firms, Wall St. J., May 16, 2001, a law professor was suspended from practice for three years for entering into such an agreement.  The article states that the defendant required the professor to keep elements of the settlement secret.  It is not clear whether the agreement itself or the failure to disclose it was viewed as the serious.

        Not just the plaintiffs' lawyers are at risk.  Model Rule 8.4(a) provides that it is unethical for a lawyer to induce another lawyer to violate a rule.  According to the Geyelin article cited in the preceding paragraph, two BellSouth lawyers were sanctioned by a federal judge in Miami for participating in such an agreement.  They were ordered to take five hours of ethics instruction.  Adams v. BellSouth Telecomms., Inc., 2001 WL 34032759 (S.D. Fla. Jan. 29, 2001). 

        Ethics Opinions.  The following opinions provide further explanation of the rule: ABA Ops. 95-394 (1995) & 93-371 (1993); Ala. Op. 02-05 (2002) (discusses in-house lawyer arrangement); Ala. Op. 92-01 (1992); Ariz. Op. 90-6 (1990); Cal. Op. 1988-104 (1988) (reaching same conclusion with regard to California DR 2-109(A), now Cal. Rule 1-500); Col. Op. 92 (1993) (parties may agree that lawyer must turn over file to other party, unless doing so will restrict the lawyer in representing other parties); D.C. Ops. 335 (May 2006) (settlement agreement may not prohibit lawyer from advertising public information from case), 93-371 (1993); 130 (1983) & 35 (1972); Fla. Op. 04-2 (2005); Ind. Op. 1 of 2014 (2014) (in context of a non-disparagement provision); L.A. County Op. 468 (1992); Ill. Op. 00-01 (2000); Md. Op. 82-53 (1982); Mich. Op. CI-1165; N.H. Op. 2009-10/6 (2011) (confidentiality agreement could be a violation); N.M. Op. 1985-5 (1985) (parties may agree that lawyer must keep certain information about the other party confidential); N.Y. Op. 730 (2000); N.Y. City Op. 99-03 (1999); N.C. Ops. 179 & 2003-9; Tex. Op. 505 (1994); Ore. Op. 1991-47 (1991); S.C. Op. 16-2 (2016) (lawyer may agree to keeping terms confidential, but not to not use information in other matters); S.C. Op. 10-04 (2010) (lawyer may not agree to keep identity of other party confidential in marketing materials); Tenn. Op. 97-F-141; Phila. Ops. 86-121 (1986) & 95-13 (1995).  ABA Op. 94-381 (1994) deals in part with retainer agreements between corporations and outside lawyers.  It says that it would be unethical for an in-house lawyer to request outside counsel to agree never to oppose the corporation in the future on matters unrelated to the current representation.  Also see ABA/BNA Lawyers’ Man. p. 51:1201.

        Restatement.  Section 13(2) is very similar to Rule 5.6(b).  However, cmt. c to § 13 does a few things that the cmt. to Rule 5.6 does not.  First, it explains the reason for the rule:

Proposing such an agreement would tend to create conflicts of interest between the lawyer, who would normally be expected to oppose such a limitation, and the lawyer's present client, who may wish to achieve a favorable settlement at the terms offered.  The agreement would also obviously restrict the freedom of future clients to choose counsel skilled in a particular area of practice.

Then, it "resolves" the split in Jarvis and Lee above by concluding, "such agreements are void and unenforceable."

        Treatises.  Hazard, Hodes, & Jarvis § 47.6; Rotunda & Dzienkowski § 5.6-2.

        Articles.  Gillers & Painter, Free the Lawyers: A Proposal to Permit No-Sue Promises in Settlement Agreements, Geo. J. Legal Ethics 291 (Spring 2005); Gillers, A Rule without a Reason: Let the Market, not the Bar, Regulate Settlements that Restrict Practice, 79 A.B.A.J. 118 (Oct. 1993).

        How about an Agreement to Retain Opposing Counsel After Settlement? Two lawyers tried that, and then became the respondents in In re Brandt, 10 P.3d 906 (Ore. 2000), a disciplinary proceeding.  Two plaintiffs' lawyers entered into a settlement agreement that provided that the defendant would retain them after the settlements were final.  This would have the effect of preventing the lawyers from taking on any new cases against the defendant.  This was an attempt to avoid violating Ore. DR 2-108(B), Oregon's version of Rule 5.6(b).  The court held that the settlement violated DR 2-108(B), and that it created a conflict of interest in violation of Ore. DR 5-101(A)(1).  As part of its conversion of its ethics rules to the Model Rules format, in 2005, Oregon adopted Rule 5.6(b), which appears to have the same effect as DR 2-108(B).

        The lawyers were suspended for one year.  In The Florida Bar v. Rodriguez, 959 So. 2d 150 (Fla. 2007), and The Florida Bar v. St. Louis, 967 So. 2d 108 (Fla. 2007), one plaintiff's lawyer was disbarred and another suspended for two years for agreeing with settling defendant to be "retained" by the defendant after the settlement.  They also forfeited millions in fees from the defendant for that agreement.

        Basis for Cause of Action.  Franklin v. Fasack, 2002 Cal. App. Unpub. LEXIS 56 (Cal. App. April 17, 2002).  The case is procedurally too complex to warrant a complete description of it here.  A key point was that when plaintiffs' lawyers negotiated a settlement for their clients, they simultaneously negotiated a two-year consulting agreement with the defendant for themselves.  The consulting agreement was in lieu of an earlier request by the defendant that the plaintiffs' lawyers agree not to sue defendant for two years.  The court held that plaintiffs' later malpractice complaint against their lawyers stated a cause of action.  The court based its finding on the lawyers' failure to comply with California Rule 3-300, California's version of Model Rule 1.8(a) (doing business with a client).  California Rule 1-500, the counterpart of Model Rule 5.6(b) (agreeing on restriction of practice) was not mentioned.

        In an interesting twist on Brandt, a defendant in Kaplan v. Emerson Radio Corp., 1991 U.S. Dist. LEXIS 3520 (E.D.N.Y. 1991), agreed to retain a plaintiff's lawyer as part of a settlement.  At the conclusion of the retainer period the lawyer attempted to sue the defendant on behalf of new plaintiffs.  The court held that the matters were substantially related and disqualified the lawyer.

        The New York Cases.  In Feldman v. Minars, 658 N.Y.S.2d 614 (N.Y. App. 1997), the court held that an agreement not to solicit clients for actions against a settling defendant is not against public policy and is enforceable.  The court noted that the commentary to the New York rule is more liberal than that in other states.  A similar result obtained in Blue Cross & Blue Shield of N.J., Inc. v. Philip Morris, Inc., 53 F. Supp. 2d 338 (E.D.N.Y. 1999).   However, N.Y. City Op. 99-03 (1999) holds that such an agreement violated New York's version of DR 2-108(B).  As to a restriction on the use of information in future actions, see N.Y. Op. 730 (2000).  In Johnson v. Nextel Communications, Inc., 2011 U.S. App. LEXIS 19624 (2d Cir. Sept. 26, 2011), the court held that clients/plaintiffs had a cause of action against a law firm, which had agreed with the defendant, among other things, not to represent new plaintiffs against the defendant, and agreed to represent the defendant for two years at $1 million per year.  To read more, see the write-up of the case under “Aggregate Settlements,” below.  As part of its conversion of its ethics rules to the Model Rules format, in 2009, New York adopted Rule 5.6(b), which is nearly identical to Model Rule 5.6(b).

        Bassman v. Blackstone Associates, 718 N.Y.S.2d 826 (N.Y. App. 2001).  This is a fraud action.  The opinion is very brief, so we are making several assumptions.  Lawyers for the plaintiffs had earlier settled a similar, and evidently related, case on behalf of other plaintiffs.  The settlement agreement provided that the lawyers could not reveal the amount of the settlement or the amounts offered during settlement negotiations.  The defendants in this action moved to disqualify plaintiffs' counsel.  The court ruled that the confidentiality provisions of the earlier settlement agreement had the effect of preventing the lawyers from handling this case and ordered the lawyers disqualified.  To the same effect, see Verizon W. Va., Inc. v. Hon. James Matish, 2013 W. Va. LEXIS 193 (W. Va. March 7, 2013) (good research tool on this point); Eschel v. Fleet Bank, 718 N.Y.S.2d 825 (N.Y. App. 2001); and Gilbert v. Nat. Corp. for Housing Partnerships, 84 Cal. Rptr. 2d 204 (Cal. App. 1999).

        Although Possibly Unethical, Agreement Did not Invalidate Class Action Settlement.  The court in Shebay v. Davis, 717 S.W.2d 678 (Tex. App. 1986), held that although an agreement not to sue the defendant for future plaintiffs might subject the lawyer to discipline, the provision did not invalidate the settlement of a class action.

        More from Texas.  The Texas Supreme Court in In re Mitcham, 133 S.W.3d 274 (Tex. 2004), held that an agreement not to represent plaintiffs against the other side was grounds for disqualifying the lawyer who tried to bring such a case.  The court did not mention Texas Rule 5.06(b), Texas' version of Model Rule 5.6(b).

        Cardillo v. Bloomfield 206 Corp., 2010 N.J. Super. LEXIS 26 (N.J. App. Feb. 18, 2010).  Lawyer simultaneously negotiated agreements settling two different matters.  The settlements purported to have the effect of preventing Lawyer from being adverse to several of the parties in the future.  In this suit Lawyer sought a declaration that the agreement was void as violating New Jersey's version of Model Rule 5.6(b).  The trial court so held.  In this opinion the Appellate Division affirmed.

        Disciplinary Case Arising out of Cardillo, Just Above.  In re Gormally, N.J. LEXIS 1264 (N.J. Dec. 19, 2012).  In this brief opinion the court found that two lawyers should be reprimanded and one admonished for violation of N.J. Rule 5.6(b).  In settlement of a suit against a landlord, the plaintiff's lawyer, at the request of the defendants' lawyers, agreed not to represent tenants against that landlord in the future.  The facts are in the decision of the New Jersey Disciplinary Review Board at In re Gormally, Docket No. DRB 11-160 (Nov. 23, 2011) (easily Googled).  Thus, the lawyers on both sides of the case were disciplined, not just the lawyer agreeing to limit her practice. In In re Cardillo, 2014 N.Y. App. Div. LEXIS 6902 (N.Y. App. Div. Oct. 14, 2013), the New York Appellate Division adopted the same discipline.

        Not Quite an Agreement.  DeSantis v. Snap-On Tools Co., 2006 U.S. Dist. LEXIS 78362 (D.N.J. Oct. 27, 2006).  In this class action certain parties objected to the fee award to class counsel because the settlement agreement provided that class counsel had "no present intention of representing any persons who are not Class Members with respect to defendants."  Evidently the objectors claimed that this violated the Rule 5.6(b) (rule not cited in the opinion) proscription against lawyers’ agreeing to limit their practices.  The court’s response:

This is not an agreement but mere attempt by one negotiating party to achieve finality through the settlement. The Settlement Agreement does not restrict Class Counsel's right to represent any future clients and therefore does not create any impermissible conflict of interest.

        Alan B. Garfinkel, P.A. v. Mager, 2010 Fla. App. LEXIS 19773 (Fla. App. Dec. 23, 2010).  Lawyer worked for Law Firm.  Law Firm terminated Lawyer.  Lawyer sued Law Firm.  The suit settled with the payment of money to Lawyer.  As part of the settlement Lawyer agreed not to assist, in the future, anyone pursuing a claim against Law Firm.  After the settlement, Law Firm sued Lawyer for breaching the agreement.  The trial court granted Lawyer's motion to dismiss because the agreement violated Florida's version of MR 5.6, and was, thus, a violation of public policy.  In this opinion the appellate court reversed holding the settlement could be enforced.  [Note: this opinion seems to be the minority view.  We are not sure the reasoning holds together.  In any event anyone with a Rule 5.6 issue in Florida needs to know about this opinion.]

        Conn. Informal Op. 2013-10 (Dec. 18, 2013).  This opinion addresses whether a plaintiff’s lawyer, in a settlement agreement, may agree to a non-disparagement provision.  The court said maybe.  If the agreement prevents the lawyer from making allegations against the defendant in a new case, then the agreement violates Conn. Rule 5.6(b).

Aggregate Settlements

ABA Op. 06-438 (February 10, 2006).  This opinion deals with aggregate settlements.  It is very disclosure oriented, but contains no surprises.  Here is the Committee’s summary:

In seeking to obtain the informed consent of multiple clients to make or accept an offer of an aggregate settlement or aggregated agreement of their claims as required under Model Rule 1.8(g), a lawyer must advise each client of the total amount or result of the settlement or agreement, the amount and nature of every client’s participation in the settlement or agreement, the fees and costs to be paid to the lawyer from the proceeds or by an opposing party or parties, and the method by which the costs are to be apportioned to each client.

        New York City Op. 2009-6 (undated) basically follows the ABA opinion above. 

        Law Reviews.  Nancy J. Moore, Ethical Issues in Mass Tort Plaintiffs’ Representation: Beyond the Aggregate Settlement Rule, 81 Fordham L. Rev. 3231 (2013); Richard Zitrin, Regulating the Behavior of Lawyers in Mass Individual Representations: A Call for Reform, 3 St. Mary's J. of Legal Malpractice & Ethics 86 (2013); Nancy J. Moore, The Absence of Legal Ethics in the ALI’s Principles of the Law of Aggregate Litigation: a Missed Opportunity -- and More, 79 Geo. Wash. L. Rev. 717 (2011); Morgan, Client Representation v. Case Administration: The ALI Looks at Legal Ethics Issues in Aggregate Settlements, 79 Geo. Wash. L. Rev. 734 (2011);   Cramton, Lawyer Ethics on the Lunar Landscape of Asbestos Litigation, 31 Pepp. L. Rev. 175 (2003);  Erichson, A Typology of Aggregate Settlements, 8 Notre Dame L. Rev. 1769 (2005); Erichson, Beyond the Class Action: Lawyer Loyalty and Client Autonomy in Non-Class Collective Representation, 2003 U. Chi. Legal F. 519, 575; Garretson, A Practical Approach to Proactive Client-Counseling and Avoiding Conflicts of Interest in Aggregate Settlements, 6 Loy. J. Pub. Int. L. 19 (2004); Gelb, Common Ethical Problems, 79 Mass. L. Rev. 167 (1994); Jensen, Like Lemonade, Ethics Comes Best When It's Old-Fashioned: A Response to Professor Moore, 41 S. Tex. L. Rev. 215 (1999); Jiru & Spanhel, Report of the Working Group on Aggregate Settlements, 41 S. Tex. L. Rev. 57 (1999); Menkel-Meadow, Ethics and the Settlements of Mass Torts: When the Rules Meet the Road, 80 Cornell L. Rev. 1159 (1995); Moore, The Case Against Changing the Aggregate Settlement Rule in Mass Tort Lawsuits, 41 S. Tex. L. Rev. 149, 169-171 (1999); Rheingold, Ethical Constraints on Aggregated Settlements of Mass-Tort Cases, 31 Loy. L.A. L. Rev. 395 (1998); Robinson & Abraham, Collective Justice in Tort Law, 78 Va. L. Rev. 1481 (1992); Silver & Baker, Mass Lawsuits and the Aggregate Settlement Rule, 32 Wake Forest L. Rev. 733, 758-59 (1997); Silver, Merging Roles: Mass Tort Lawyers as Agents and Trustees, 31 Pepp. L. Rev. 301 (2003); Baker & Silver, The Aggregate Settlement Rule and Ideals of Client Service, 41 S. Tex. L. Rev. 227 (1999); Silver & Baker, Mass Lawsuits and the Aggregate Settlement Rule, 32 Wake Forest L. Rev. 733 (1999); Silver & Baker, I Cut, You Choose: The Role of Plaintiffs' Counsel in Allocating Settlement Proceeds, 84 Va. L. Rev. 1465 (1998);  Weinstein, Ethical Dilemmas in Mass Tort Litigation, 88 Nw. U. L. Rev. 469, 521 (1994).

        Howard Erichson & Benjamin Zipursky, Consent Versus Closure.  This is an excellent article on aggregate settlements to be published in the Cornell Law Review, and which currently appears at SSRN.  In discusses in detail the Vioxx settlement as well as the settlement provisions of ALI's Principals of the Law of Aggregate Litigation.  The authors find ethical flaws in both approaches and suggest that the players' desires for closure perhaps should not trump adherence to existing ethics rules.

        Hayes v. Eagle-Picher Indus., Inc., 513 F.2d 892 (10th Cir. 1975).  The requirement in Rule 1.8(g) that each party give consent to the agreement after being informed of its terms cannot be waived.

          Burrow v. Arce, 997 S.W.2d 229 (Tex. 1998).  Lawyer entered into an aggregate settlement without the approval of their clients.  In this opinion the court ruled that the clients could sue for forfeiture of the lawyers’ fees even without proving actual damages.

       "Majority-Rule" Settlements Don't Cut It.  The Tax Authority, Inc. v. Jackson Hewitt, Inc., 898 A.2d 512 (N.J. 2006).  The New Jersey Superior Court, Appellate Division, had held that an engagement letter signed by 154 joint plaintiffs that provided that a majority could bind all to a settlement violated New Jersey's version of Model Rule 1.8(g) (the aggregate settlement rule).  In this opinion, the New Jersey Supreme Court agreed, but reversed the appellate court, holding that the prohibition should be prospective and that the agreement in this case should be honored.  A similar decision rejecting a settlement is Abbott v. Kidder Peabody & Co., Inc., 42 F. Supp. 2d 1046 (D. Colo. 1999).

       In re New York Diet Drug Lit., 839 N.Y.S.2d 434 (N.Y. Misc. 2007).  Law Firm had filed this action on behalf of about 5,000 users of a diet drug against the manufacturer.  The court approved a settlement in 2001.  Questions have been raised about the way Law Firm conducted itself in connection with the settlement, and the court has ordered a trial on that conduct.  Many of the facts are contested, so a detailed discussion of this case would be premature.  The opinion contains a lengthy discussion of aggregate settlements and the ethics rules in connection with them.  The settlement agreement is under seal.  Evidently, the manufacturer agreed to pay one amount for all the claims, but interveners claim that Law Firm misrepresented to its clients the process by which their respective shares were determined.

        Cunningham v. Abbott, 2011 Ky. App. LEXIS 24 (Ky. App. Feb. 4, 2011).  Abusive distribution of $200 million Fen-Phen aggregate settlement results in disbarment of the lawyers, removal of the judge approving the settlement, and malpractice suit against the lawyers.  Lawyers took too much of the settlement fund and told 431 individual clients nothing about how the settlement was arrived at.  Two lawyers went to jail, and the judge was disbarred.  Kenneth Feinberg initially blessed the settlement, then disowned his opinion.  In Ky. Bar Ass'n v. Chesley, 2013 Ky. LEXIS 44 (Ky. March 21, 2013), the court upheld the permanent disbarment of Stan Chesley for his role.

        Feinberg IndependenceIn re Oil Spill by the Oil Rig "Deepwater Horizon," 2011 U.S. Dist. LEXIS 10497 (E.D. La. Feb. 2, 2011).  In this opinion the court found that "the hybrid role" played by Kenneth Feinberg in administering a $20 billion settlement fund "has led to confusion and misunderstanding by claimants."  Thus, the court ordered Feinberg, among other things, not to tell claimants they don't need a lawyer or to claim he is "neutral" or "completely independent." (Feinberg was hired by BP and is being paid by BP, pursuant to a contract with BP.)  The court also ordered Feinberg to tell claimants they have a right to a lawyer and to expand upon their rights under the relevant law.  The court gave no indication how Feinberg's communications with claimants might affect settlements already reached.

        Waggoner v. Williamson, 2009 Miss. LEXIS 88 (Miss. Feb. 26, 2009).  This is a suit by Barthel and Jacquiline Waggoner against their former lawyers ("Lawyers").  Lawyers had represented the Waggoners in their claims that they were injured by diet drugs manufactured by American Home Products ("AHP").  In 2001, on short notice, Lawyers summoned the Waggoners to a brief meeting at an airport.  Lawyers presented the Waggoners with a settlement agreement, which provided that the settlement totaled $3 million, with the Waggoners netting $1.47 million.  What Lawyers did not tell the Waggoners was that Lawyers represented 31 Mississippi claimants and 14 Virginia claimants and that AHP had made an aggregate offer of $73.5 million, with $55 million for the Mississippi claimants and $18.5 million for the Virginia claimants.  The trial judge in this case granted summary judgment to Lawyers as to the bulk of the settlement.  In this opinion the Mississippi Supreme Court reversed.  There were two dissenters, who were disturbed that the case was, in part, based upon a violation of Rule 1.8(g), because, as everybody knows, violation of an ethics rule cannot be the basis of a cause of action.  According to the majority, one of the things that saved the Waggoners was that the settlement agreement signed by Lawyers and AHP provided that Lawyers would comply with Rule 1.8.

        In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., MDL No. 05-1708, 2009 WL 5195841 (D. Minn. Dec. 15, 2009).  In this opinion the court ordered a plaintiffs' lawyer sanctioned for not disclosing to his clients enough information about their settlements before getting them to sign releases.  The court said that while the lawyer might have violated Minn. Rules 1.4 and 1.8(g), the sanction was entered pursuant to the court's inherent power.

        Booth v. Davis, 2010 U.S. Dist. LEXIS 90377 (D. Kan. Aug. 31, 2010).  In this opinion the court denied a Rule 12(b)(6) motion to dismiss a legal malpractice complaint.  The case arises out of a settlement of a claim against a pharmacist who had, in hundreds of cases, sold diluted chemotherapy drugs.  The plaintiffs claim that the settlement was aggregate and that the defendant lawyers, among other things, violated Missouri Rule 1.8(g).  The court held that the complaint adequately stated a fraud claim.  It is not clear what other causes of action were being upheld.  The case points out that a lawyer's violation of aggregate settlement rules can support a malpractice claim.

        Johnson v. Nextel Communications, Inc., 2011 U.S. App. LEXIS 19624 (2d Cir. Sept. 26, 2011).  Law Firm represented 587 persons who had discrimination claims against Nextel.  Before any suit was filed, Law Firm entered into an agreement with Nextel, which provided that Nextel would pay Law Firm several million dollars if Law Firm could, within a short time frame, persuade all the claimants to enter into ADR agreements with Nextel.  The agreement also provided that, after the settlement, Nextel would retain Law Firm for two years at $1 million per year.  It also contained provisions preventing Law Firm from taking on new claimants against Nextel.  Later, several of the clients filed this class action against Law Firm and Nextel.  The principal allegation against Law Firm was breach of fiduciary duty.  The principal allegation against Nextel was aiding and abetting Law Firm's breach of fiduciary duty.  The trial court granted a Rule 12(b)(6) motion to dismiss.  In this opinion the appellate court reversed, finding that the arrangement between Law Firm and Nextel was an abject, un-waivable, conflict of interest.

        In re World Trade Center Disaster Site Litig., 2011 U.S. Dist. LEXIS 147754 (S.D.N.Y. Dec. 20, 2011).  This is a collection of some 9,000 suits by clean-up workers, firemen, and policemen, among others, involved with the collapse of the World Trade Center.  This opinion deals with whether certain plaintiffs were entitled to certain "bonuses" pursuant to the terms of a settlement agreement.  Because the decision is pursuant to special federal legislation and contract law regarding the settlement agreement, the decision itself appears to be of little, if any, precedential value.  What might be of value to this audience is the extent to which a court can, or should, exercise supervisory authority over the conduct of the lawyers representing so many plaintiffs.  This is because the representations are rife with conflicts of interest.  The court correctly characterized these actions as something other than class actions or individual actions. Same litigation and similar approach to aggregate settlements, In re World Trade Ctr. Lower Manhattan Disaster Site Litig., 2015 WL 1262283 (S.D.N.Y. March 19, 2015).

        In re Ross, No. 49S00-0904-DI-193 (Ind. Feb. 12, 2013).  Company's factory exploded.  Some sixty nearby homeowners hired Lawyer to bring claims against Company.  Company paid a fixed sum into an account controlled by Lawyer.  Lawyer then devised a formula for distributing the fund to the homeowners, explaining to them how the formula worked.  Lawyer did not disclose the terms of the settlement or the total amount paid by Company.  In this opinion the the court upheld a public reprimand of Lawyer.

        G.H. v. Eli Lilly & Co., 2013 Mo. App. LEXIS 931 (Mo. App. Aug. 13, 2013).  Suit by patients against drug companies arising out of a pharmacist's dilution of chemotherapy drugs.  The plaintiffs agreed to a settlement about ten years ago.  Part of the settlement consisted of special masters' allocating the settlement among the plaintiffs.  In 2012 some of the plaintiffs sought an order voiding the "judgment."  In this opinion the appellate court affirmed the trial court's denial of relief, because there never was a judgment below, just a settlement and dismissal.  The court did discuss Rule 1.8(g) to an extent, suggesting that the procedure in this case complied with the rule because the plaintiffs' lawyers did not know who was getting what until the masters' reported.  The court also said that Rule 1.8(g) was a disciplinary rule, not a provision that could have the effect of voiding a settlement agreement.

        In re Gatti, 2014 Ore. LEXIS 1087 (Ore. Aug. 21, 2014). This disciplinary matter involves Lawyer, who attempted to represent some fifteen different males, who were allegedly abused sexually while in the care of the Archdiocese of Portland and the State of Oregon. In this opinion the court found violations of Oregon’s versions of MRs 1.7(a)(1) and 1.8(g) and ordered a 90-day suspension. The clients were not harmed.

        Prakashpalan v. Engstrom, Lipscomb and Lack, 2014 Cal. App. LEXIS 135 (Cal. App. Feb. 11, 2014). This opinion is largely about malpractice and fraud principles and statutes of limitations. However, it contained an interesting discussion of aggregate settlements in California, including the interrelationship of ABA Model Rule 1.8(g) and California Rules 3-310(D) & 4-100(B).

        In
Florida Bar v. Kane, 2016 WL 5853004 (Fla. Oct. 6, 2016), the court upheld disbarment for three lawyers who entered into an aggregate settlement in which the lawyers had complete discretion as to which client got what.

        An excellent discussion of these issues is at ABA/BNA Lawyers’ Manual on Professional Conduct.  In the online edition in the list of subjects go to “Conflicts of Interest,” then to the sub-heading “Aggregate Settlements.”  That article discusses a number of additional cases.  They are: Abbott v. Kidder Peabody & Co., 42 F. Supp.2d 1046 (D. Colo. 1999); In re Sonnier, 157 B.R. 976 (E.D. La. 1993); In re Central Ice Cream Co., 114 B.R. 956, 964 (N.D. Ill. 1989); Williams v. St. Paul Cos., 492 S.E.2d 560 (Ga. App. 1997); Knisley v. Jacksonville, 497 N.E.2d 883 (Ill. App. 1986); Baugh v. Baugh, 973 P.2d 202 (Kan. App. 1999); In re Hoffman, 883 So. 2d 425 (La. 2004); In re Faucheux, 818 So. 2d 734 (La. 2002); Scamardella v. Illiano, 727 A.2d 421 (Md. App. 1999); Williamson v. Edmonds, 880 So. 2d 310 (Miss. 2004); Butler County Bar Ass'n v. Barr, 591 N.E.2d 1200 (Ohio 1992); Cleveland Bar Ass'n v. Kaigler, 566 N.E.2d 673 (Ohio 1991); Black v. Bell, 484 N.E.2d 739 (Ohio App. 1984); State ex rel. Oklahoma Bar Ass'n v. Watson, 897 P.2d 246 (Okla. 1994); In re Anonymous Member of South Carolina Bar, 377 S.E.2d 567, 568 (S.C. 1989); Scrivner v. Hobson, 854 S.W.2d 148 (Tex. App. 1993); Quintero v. Jim Walter Homes Inc., 709 S.W.2d 225 (Tex. App. 1985); In re Guardianship of Lauderdale, 549 P.2d 42, 45 (Wash. App. 1976); Peissig v. Wisconsin Gas Co., 456 N.W.2d 348 (Wis. 1990); D'Huyvetter v. A.O. Smith Harvestore Prods., 475 N.W.2d 587 (Wis. App. 1991).

Other Settlement Situations

        Cal. Op. 2009-178 (undated).  Outlines what a lawyer must do when settling a malpractice claim with a client.  This includes dealing with California Civil Code section 1542 and California Rule 3-400.

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