Ethical Challenges of Aggregate Settlement Agreements
by Cathy Yanni
Aggregate settlements pose several ethical challenges, primarily because they involve lawyers representing the interests of more than one client. Care must be taken at all times to ensure the interests of all clients are respected and fully served. This article examines the ethical issues raised by aggregate settlements and the responsibilities of counsel.
Every state has ethical rules governing aggregate settlements, with most modeled on Rule 1.8(g) of the ABA’s Model Rules of Professional Conduct. Those that have varied from this Rule do so primarily by way of exclusion, such as Louisiana and North Dakota, which specifically exclude class actions from their aggregate settlement rules, and Ohio and New York, which exclude court-approved settlements altogether.
Rule 1.8(g) states the following:
“A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients…unless each client gives informed consent, in a writing signed by the client. The lawyer's disclosure shall include the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.”Rule 1.8(g) therefore imposes two requirements on lawyers representing multiple clients. The first is that the terms of the settlement agreement must be disclosed to each client. The second is that after the terms of the settlement are known, each client must agree to the settlement.
The ABA Section of Litigation’s Ethical Guidelines for Settlement Negotiations has recognized that
“[e]ven when the lawyer’s initial conclusion that multiple clients can be represented was well-founded…consideration later of possible settlement options can generate circumstances where interests emerge as potentially divergent, if not actually conflicting. Conflicts can arise from differences among clients in the strength of their positions or the level of their interests in settlement, or from proposals to treat clients in different ways or to treat differently positioned clients in the same way.”These conflicts can be found in all types of aggregate settlement agreements but are particularly prevalent in settlements that involve allocations. Whether the allocation involves either the development of a case matrix or a set of criteria for allocating a lump sum settlement, procedural and ethical questions abound with respect to a lawyer’s concurrent representation and duty to disclose.
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