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Commonwealth of Massachusetts


July-August 2001

Oh Please Release Me, Let Me Go

by
Jane Rabe

Your worst nightmare becomes a reality. You are working on a case and miss the statute of limitations. The case is only worth $3,000, and you would like to settle the matter with the client without involving your malpractice carrier. What can you do and, more importantly, what can’t you do.

The lawyer must first disclose to the client the lawyer’s error in missing the statute of limitations. Massachusetts Rule of Professional Conduct 1.4 requires that the client be "reasonably informed about the status of a matter...." Missing the statute of limitations is certainly relevant to the status of the case.

Having disclosed the problem, Massachusetts Rule of Professional Conduct 1.8(h) provides that a lawyer may not settle a claim for malpractice "with an unrepresented client without first advising that person in writing that independent representation is appropriate in connection therewith." Written notice to the client that she or he should retain independent counsel is, therefore, the next order of business.

Attempts by lawyers to secure releases from liability are subject to close scrutiny. Obviously, the bigger the case, the more problematic it is to settle with an unrepresented client. At a minimum, even if the client wishes to settle without retaining an attorney, the lawyer should provide the client with a copy of the proposed release so that it can be reviewed by independent counsel. See Conflicts of Interest, Agreements to Limit Liability, Law. Man. Prof. Conduct 51:1101 (1998).

Moreover, the settlement constitutes a business transaction with the client and is governed by Massachusetts Rule of Professional Conduct 1.8(a). This rule requires that the terms of the settlement be fair and reasonable and fully disclosed in writing to the client "in a manner which can be reasonably understood by the client." The rule also requires that the client be afforded a "reasonable opportunity" to consult independent counsel and that the client consent in writing to the transaction.

A lawyer may not ask for or include as part of the settlement an agreement by the client to refrain from filing a complaint or to impede bar counsel’s investigation of case. S.J.C. Rule 4:01, § 10, specifically provides: "A lawyer shall not, as a condition of settlement, compromise or restitution, require the complainant to refrain from filing a complaint, to withdraw a complaint, or to fail to cooperate with the bar counsel." Attempting to obtain a release under these circumstances interferes with the disciplinary process designed to protect the public by ensuring that misconduct is detected and disciplined and therefore violates Rule 8.4(d) (engaging in conduct that is prejudicial to the administration of justice). See Matter of Sherman, 11 Mass. Att’y Disc. R 254, 256 (1995); Matter of Mahoney, 9 Mass. Att’y Disc. R 209, 210 (1993); The Florida Bar v. Fredrick, 756 So. 2d 79 (Fla. 2000).

Rule 1.8(h) also prohibits a lawyer from making "an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement...." The rationale for this provision is that such prospective agreements violate public policy by undermining competent representation and the disciplinary process. In addition, it is virtually impossible for clients to evaluate the merits of such an agreement before a dispute actually arises. See 84 Iowa L. Rev. 827 (1999); Ohio Board of Commissioners on Grievances and Disciplines, Op. 96-9 (1996) (recommends that lawyers should not include in their fee agreements clauses which require the arbitration of all fee disputes, and suggests that these agreements are most appropriately made after a dispute has arisen).

Other jurisdictions have held that inserting arbitration clauses in a retainer agreement does not constitute an attempt to limit liability but simply identify a procedure by which liability and damages may be determined. See McGuire, Cornwell & Blakey v. Grider, 765 F. Supp. 1048 (D. Colo. 1991); Monahan v. Paine Webber Group, Inc., 724 F. Supp. 224 (S.D.N.Y. 1989); Haynes v. Kuder, 591 A.2d 1286 (DC 1991). Even those jurisdictions, however, require that the clause be clearly phrased, that the client have adequate notice of the implications of such an agreement, including the loss of valuable rights such as the right to a jury trial, and that the client have the opportunity to consult with independent counsel. See e.g. State Bar of California Standing Committee on Professional Responsibility and Conduct, Formal Op. 1989-116 (lawyer must fully disclose all terms and legal consequences of an arbitration agreement); New York County Lawyers' Association Committee on Professional Ethics, Op. 723 (1997) (consent cannot be knowing without disclosure of the material differences between arbitration and litigation); North Carolina State Bar, Op. 107 (1991) (arbitration clause may be binding if lawyer fully discloses and explains alternative dispute resolution procedures to the client and the client is given the opportunity to consult independent counsel); Philadelphia Bar Association, Op. 88-2 (1988) (lawyer must disclose in writing the impact that an arbitration agreement will have on client's rights and advise the client to seek independent counsel); Virginia State Bar Standing Committee on Legal Ethics, Op. 1586 (1994) (lawyer must make a full and adequate disclosure of the possible consequences of agreeing to arbitrate future disputes); Michigan State Bar Standing Committee on Professional and Judicial Ethics, Op. RI-257 (1996) (lawyer may enter into an agreement with a client that disputes arising out of the representation will be resolved in a named alternative dispute resolution program, "provided the client obtains independent counsel concerning the advisability of entering into the agreement").

In sum, attempts to resolve liability disputes with clients involve conflicts of interest that must be taken into account. Independent counsel advising the client is the surest way to avoid ethical impropriety.



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