These summaries were prepared by McGuireWoods LLP lawyer Thomas E. Spahn. They are based on the letter opinions issued by the Virginia State Bar. Any editorial comments reflect Mr. Spahn's current personal views, and not the opinions of the Virginia State Bar, McGuireWoods or its clients. 
 
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  Topic: 37 - Settlements
LEO NumTopicsSummaryDate
1854

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27-Litigation Tactics (Including Misrepresentations, Tape Recordings)

37-Settlements

48-Criminal Defense Lawyers

51-Government Attorneys

A Commonwealth's Attorney cannot offer a plea agreement to a criminal defendant based on the testimony of a witness whose identity the Commonwealth Attorney insists that the defense lawyer refrain from sharing with the criminal client (because the ethics rules prohibit lawyers from requesting anyone other than clients and certain specified others to refrain from voluntarily providing information to an adversary). On the other hand, the Commonwealth's Attorney may offer a plea agreement based on a "nameless confidential informant." In discussing the defense lawyer's duties, the Bar explains that the defendant's lawyer might be able to withhold the confidential witness's identity and involvement if the defense lawyer "believes that the defendant has enough relevant information about the pertinent facts to make an informed decision" about accepting the plea agreement.10/5/2010
ABA-397

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27-Litigation Tactics (Including Misrepresentations, Tape Recordings)

31-Protecting and Disclosing Confidences and Secrets

37-Settlements

A lawyer has a duty to inform opposing counsel of the client's death in the midst of settlement negotiations (silence is "tantamount to making a false statement of material fact"). 9/18/1995
1858

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37-Settlements

54-Insurance Defense Lawyers

A lawyer representing an insurance company cannot "draft, propose or participate in," and a personal injury plaintiff's lawyer cannot agree to, a settlement provision requiring the plaintiff's lawyer "to agree to indemnify the insurer against liens in the event that they are not paid from the settlement proceeds or the plaintiff." Citing several other states' ethics opinions, the Bar held that such a provision amounts to "improper financial assistance to the client," and creates a conflict of interest between the plaintiff and the plaintiff's lawyer (who "cannot reasonably be expected to provide an objective evaluation" of the settlement because it involves the lawyer's possible personal liability). Under the trust account rules, the plaintiff's lawyer must protect any third party's claim on the settlement proceeds when the lawyer possesses the proceeds. However, the lawyer does not have any duty, and cannot assume any duty, to pay the client's debts if the lawyer disburses the settlement proceeds and the client fails to pay those debts.7/27/2011
0649

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16-Lawyer's Personal Interests

27-Litigation Tactics (Including Misrepresentations, Tape Recordings)

37-Settlements

A plaintiff's lawyer may not enter into settlement in which the lawyer agrees not to take similar cases against same defendant. [Rule 5.6(b) would permit such an agreement if a court or government agency approved it.]1/7/1985
ABA-438

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37-Settlements

43-Conflicts of Interest - Miscellaneous

48-Criminal Defense Lawyers

ABA Model Rule 1.8(g) provides specific rules for aggregate settlements. Such settlements are not defined in the Model Rules, but do not include certified class actions or derivative actions. Aggregate settlements occur "when two or more clients who are represented by the same lawyer together resolve their claims or defenses or pleas," even if all of the lawyer's clients do not face criminal charges, have the same claims or defenses, or "participate in the matter's resolution." Aggregate settlements may arise in connection with a joint representation in the same matter, but "they also may arise in separate cases" -- as with "claims for breach of warranties against a home builder brought by several home purchasers represented by the same lawyer, even though each claim is filed as a separate law suit and arises with respect to a different home, a different breach, and even a different subdivision." Similarly, aggregate settlements may "take a variety of forms." For instance, "a settlement offer may consist of a sum of money offered to or demanded by multiple clients with or without specifying the amount to be paid to or by each client," when "a claimant makes an offer to settle a claim for damages with two or more defendants," or when "a prosecutor accepts pleas from two or more criminal defendants as part of one agreement." Model 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." Among other things, lawyers may not enter into agreements "that allow[] for a settlement based upon a 'majority vote' of the clients" the lawyer represents. "[B]est practices would include the details of the necessary disclosures in . . . writings signed by the clients." Information required to be disclosed under Model Rule 1.8(g) might be protected by Model Rule 1.6, which requires the clients' consent for disclosure to the other clients. "The best practice would be to obtain this consent at the outset of representation if possible, or at least to alert the clients that disclosure of confidential information might be necessary in order to effectuate an aggregate settlement or aggregated agreement." Lawyers should also advise their clients "of the risk that if the offer or demand requires the consent of all commonly represented litigants, the failure of one or a few members of the group to consent to the settlement may result in the withdrawal of the offer or demand."2/10/2006
1788

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37-Settlements

Addressing a 25-year old agreement by three plaintiffs' law firms not to represent asbestos plaintiffs in lawsuits against a large manufacturer (except for workers' compensation claims), the Bar holds that: (1) it will not decide whether the restriction "broadly" restricts a lawyer's right to practice law, because that is a fact-intensive decision involving a number of factors; and (2) the three law firms' requirement that all future partners and associates sign a copy of the agreement violates the prohibition on lawyers entering into partnership or employment agreements that restrict their right to practice law (although the Bar declines to decide whether the restrictions are "void and of no effect," because that is a question of law).2/17/2004
0781

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37-Settlements

54-Insurance Defense Lawyers

An insurance company's lawyer may tender offers to co-plaintiffs conditioned on both accepting the offer. The co-plaintiffs' lawyer must be careful to abide by DR 5-107.4/22/1986
1069

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37-Settlements

As long as both clients consent after full disclosure, a lawyer representing two employees may structure a proposed settlement in any way the lawyer deems appropriate. 4/18/1988
1857

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27-Litigation Tactics (Including Misrepresentations, Tape Recordings)

37-Settlements

39-Miscellaneous

43-Conflicts of Interest - Miscellaneous

48-Criminal Defense Lawyers

Because of the inherent conflict, a criminal defense lawyer may not ethically advise a client to accept a plea agreement provision that "operates as a waiver of the client's right to claim ineffective assistance of counsel." Some states do not ever allow defense lawyers to advise clients about the issue, but here the defense lawyer was reacting to the prosecutor's proposed plea agreement. Prosecutors may not offer a plea agreement "containing a provision that has the intent and legal effect of waiving the defendant's right to claim ineffective assistance of counsel.7/21/2011
1715

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16-Lawyer's Personal Interests

27-Litigation Tactics (Including Misrepresentations, Tape Recordings)

37-Settlements

Defendants in an employment discrimination case may arrange a settlement under which the plaintiff's lawyers will represent the defendants (thereby implicitly prohibiting the lawyers from representing other plaintiffs against the same defendants without their consent). Although such an arrangement could be seen as "merely a ruse" to circumvent the Code's ban on settlements that "broadly restrict" a lawyer's right to practice law, the lawyers here "have not represented any other clients adverse to defendants and do not have a present expectation of such representation in the future," and could "provide valuable advice to defendants" on employment discrimination law. Furthermore, the facts did not suggest that the defendants were trying to "buy off" plaintiff's counsel or "conflict out" plaintiff's counsel by hiring him or her.Determining if such a settlement agreement "broadly restricts" the lawyers' practice requires a factual determination, but a settlement agreement like this entered into by a large firm with many practice areas might survive, while the Code might prohibit a similar arrangement entered into by a small "boutique" firm giving up a substantial portion of its practice. Here, the settlement agreement did not completely restrict the lawyers' right to practice, since they could take cases against the defendants with consent. [Rule 5.6(b) would permit such a restriction if "approved by a tribunal or governmental entity."]2/24/1998
ABA-439

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27-Litigation Tactics (Including Misrepresentations, Tape Recordings)

37-Settlements

48-Criminal Defense Lawyers

68-Lawyers Acting as Mediators

Parties and their lawyers often make statements in negotiations that are "less than entirely forthcoming," such as: "understate[ing] their willingness to make concessions to resolve the dispute"; "insist[ing] that it will not agree to resolve a dispute for less than $200, when, in reality, it is willing to accept as little as $150 to put an end to the matter"; overstating confidence in obtaining alternative sources of supply, etc. These statements are considered "posturing" or "puffing," and "must be distinguished from false statements of material fact." For instance, the employer in labor negotiation cannot advise the union negotiator that certain benefits will cost $100 per employee when the lawyer knows that the benefits will only cost $20 per employee. Similarly, a litigant cannot state that documentary evidence will be submitted at trial in support of a defense if the lawyer knows that the documents do not exist. Prosecutors and criminal defense lawyers cannot state that they are aware of an eye witness if that is not true. Lawyers must be careful not to convert statements of position into "false factual representations." For instance, a lawyer can state "that the client does not wish to settle for more than $50," but could not state that a corporation's board has "formally disapproved any settlement in excess of $50" if that were not true. The general Model Rule 8.4(c) ban on dishonest conduct cannot be read to prohibit any misrepresentation, "regardless of the lawyer's state of mind or the triviality of the false statement in question" (or else it would render Model Rule 4.1 superfluous). State bars have punished lawyers for engaging in such misrepresentation as lying about insurance coverage limits, or settling a case without disclosing that lawyer's client has died. In contrast, "statements regarding negotiating goals or willingness to compromise, whether in a civil or criminal context, ordinarily are not considered statements of material fact." The same rules apply to caucused mediation as to other forms of negotiation. A lawyer-mediator is subject to ABA Model Rule 8.4's general prohibition on deceptions, but not to ABA Model Rule 4.1 -- which applies to lawyers' conduct "in the course of representing a client."4/12/2006
ABA-371

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37-Settlements

The Model Rules prohibit the demand for or acceptance of a lawyer's agreement not to represent future claimants against a settling defendant as part of a global settlement of mass tort litigation. 4/16/1993
ABA-394

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2-Adversity to Former Clients

37-Settlements

The prohibition on a lawyer's participating in offering or making an agreement limiting his right to practice applies to government lawyers too. 7/24/1995

Copyright 2000, Thomas E. Spahn