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Commonwealth of Massachusetts

July 2006

Aggregate Settlements

Nancy Kaufman, First Assistant Bar Counsel

Multiple clients with consistent goals at the beginning of the representation may very well part company when a global settlement is proposed. Perhaps only some of the clients want to settle; or there may be a dispute over the apportionment of the settlement or the responsibility of each client for contribution; or, in a criminal case, one or more of the co-defendants will insist on a trial while others want to take a plea. Each client has the ultimate authority under Mass. R. Prof. C. 1.2(a) to decide whether to settle a case, or, in a criminal matter, whether to plead guilty. Lawyers who represent more than one client have a special obligation to each client when making an aggregate settlement or an aggregated agreement.

When a lawyer undertakes to represent or defend more than one client in a civil or criminal case, the lawyer is subject both to the general conflict-of-interest rules (see Mass. Rule of Prof. C. 1.7, comment [12E]) as well as Rule 1.8(g) governing the making of aggregate settlements or aggregated agreements. Mass. Rule of Prof. C. 1.8(g) provides:

A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients, or in a criminal case an aggregated agreement as to guilty or nolo contendere pleas, unless each client consents after consultation, including disclosure of the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.

Massachusetts adopted the correlate Model Rule in effect up to 2002, and both are substantially similar to Canon Five, DR 5-106, which was in effect until January 1, 1998. The purpose of the rule is “to prevent an attorney from ‘sacrificing the interests of one client to gain an advantage for the other….’” Matter of an Anonymous Member of the South Carolina Bar, 297 S.C. 517, 518; 377 S.E.2d 567 (S.C. 1989). (Citation omitted.)

Like the Model Rule then in existence, Mass. Rule of Prof. C. 1.8(g) is not amplified by a comment. In 2002, the ABA amended Model Rule 1.8(g) to add the requirement that each client give “informed consent, in a writing signed by the client” to the settlement or agreement.

The ABA also added comment [13], which advises that the risk of “[d]ifferences in willingness to make or accept an offer of settlement” is common enough that the lawyer ought to discuss those risks with the clients at the outset in obtaining informed consent to the joint representation. When making an aggregate settlement or aggregated agreement, “the lawyer must inform each [client] about all the material terms of the settlement, including what the other clients will receive or pay if the settlement or plea offer is accepted.” Finally, comment [13] addresses the application of the rule to class actions, suggesting that the rule applies only to those members of the class who enjoy a “full client-lawyer relationship” and reminding lawyers that they must otherwise abide by “applicable rules regulating notification of class members and other procedural requirements designed to ensure adequate protection of the entire class.” But see Matter of an Anonymous Member of the South Carolina Bar, supra, holding that a lawyer must abide by the requirements of DR 5-106(A) for each member of a class, and comment [14A] to Mass. Rule of Prof. C. 1.7, which provides additional guidance on the obligations of lawyers representing a class.

On February 10, 2006, the ABA issued Formal Opinion 06-438 (“ABA Op.”) to provide further guidance on the application of Model Rule 1.8(g). The opinion clarifies that the rule applies whenever two or more clients “consent to have their matters resolved together,” even when other affected clients decline to participate. In addition, the rule applies not only to “common representation” of parties in the same action but also to representation of parties in separate but related cases. For example, “the rule would apply to 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 lawsuit and arises with respect to a different home, a different breach, and even a different subdivision.”

The ABA opinion also identifies the information that the lawyer must communicate to each client in order to obtain authorization to settle. The minimum requirements include:

Providing sufficient information to each client in order to obtain consent raises yet another concern. Clients represented by the same lawyer waive the attorney-client privilege as to each other, and clients should be forewarned about this at the outset. See comment [12B] to Mass. Rule of Prof. C. 1.7. Still, the lawyer is constrained by obligations of confidentiality imposed by Rule 1.6. If the client objects to making sufficient disclosure concerning the aggregate settlement or agreement to obtain consent from the others, then settlement is not possible and it may even be necessary for the lawyer to withdraw. The more disparate the claims, the more difficult it is likely to be to obtain consent. ABA Op. n. 5.

Lawyers sometimes employ advance waivers of confidentiality in the retainer agreement (see comments [12C and D] to Rule 1.7), and the ABA opinion strongly recommends doing so. Enforcement of those waivers may be difficult, however, especially if the settlement terms could not have been anticipated.

Failure to get consent to a settlement can have serious consequences. The most obvious is that the settlement offer will be withdrawn. The lawyer may also be disqualified or otherwise required to withdraw from representing any of the clients due to ensuing conflicts of interest engendered by the settlement offer. See Fiandaca v. Cunningham, 827 F.2d 825 (1st Cir. 1987) (New Hampshire Legal Aid (NHLA) disqualified from representing women inmates due to conflict created when New Hampshire offered a resolution that impinged on the rights of NHLA’s other clients). Lawyers cannot avoid the problems created by aggregate settlement by asking multiple clients to agree in advance that a majority vote will determine whether or not to accept a settlement offer. This solution, along with other methods for avoiding unanimous consent, violates Rule 1.8(g) and is not enforced by the courts. ABA Op. n. 9.

As can be seen, a lawyer’s failure to anticipate problems that might arise from aggregate settlements can result in substantial problems for the client and for the lawyer. In some instances, anticipating the problems of settlement will demonstrate that each client needs his or her own lawyer at the outset of the case. At the very least, the lawyer needs to advise the clients adequately of potential difficulties and lay a proper foundation for securing consent to an aggregate settlement. For further guidance on aggregate settlements, the ABA/BNA Lawyers’ Manual on Professional Conduct at 51:375-386 contains a helpful practice guide for Rule 1.8(g) prior to the 2002 amendments.

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