You have asked this Committee for guidance regarding the terms of a settlement offer. The facts you presented are as follows.
You represent several plaintiffs in a product liability case. Plaintiffs allegedly contracted a serious disease from exposure to chemicals used in the Factory where they work. Defendants are twenty manufacturers of the chemicals. Your expert is Dr. B., the foremost scientist writing on the toxicological effects of the chemical. Dr. B. has written a report opining that plaintiffs' illnesses were caused by their exposure to the chemicals. Defendants have filed a motion to preclude Dr. B. as a witness, contending that Dr. B. received confidential information from defendants during a different litigation. Dr. B. denies this and you believe that the pending motion is meritless and will be denied.
Defense counsel have conveyed a significant settlement offer, which contains two nonnegotiable conditions:
1. You must agree to the merits of the defense motion regarding Dr. B., thus assuring an adjudication that Dr. B. received confidential information from defendants.
2. You must accept a payment to your firm of $50,000 allocated to reimbursement of fees and costs. You must agree to return $50,000 to defendants in the event directly or indirectly you represent another worker from the Factory, on claims similar to those in the present case.
Although a lawyer must abide by the client's decision to accept a settlement offer, Rule 1.2(a), (e), the lawyer is not permitted to accept an offer that requires the lawyer to violate the Rules of Professional Conduct or other law. Rule 8.4. You may not accept this settlement offer, because each of the conditions violates the Rules of Professional Conduct. In addition, you must consider whether you have an obligation to report defense counsel to the Disciplinary Board of the Supreme Court of Pennsylvania, for their conduct in making the offer.
I. Condition Regarding the Pending Motion
The first settlement condition, regarding the motion to preclude Dr. B., violates Rules 3.3, 3.4 and 4.4. Rule 3.3 provides in relevant part:
Rule 3.3 Candor Toward the Tribunal
(a) A lawyer shall not knowingly:
(1) Make a false statement of material fact or law to a tribunal;
(4) offer evidence that the lawyer knows to be false . . ..
Because Dr. B. says he did not receive confidential information from the defendants, and you believe the motion is meritless, you are precluded from offering evidence or making statements to the court that you agree with defendants' claims that Dr. B. received confidential information. Thus, you may not file a response to the motion indicating that you agree to the merits.
There is also a concern about the impact on future cases in which Dr. B.'s testimony may be valuable or critical. By insuring an adjudication that Dr. B. received confidential information from defendants in another case, you may be obstructing another party's access to this witness and his testimony in violation of Rule 3.4(a), which provides:
Rule 3.4 Fairness to Opposing Party and Counsel
A lawyer shall not:
(a) Unlawfully obstruct another party's access to evidence or unlawfully alter, destroy or conceal a document or other material having potential evidentiary value or assist another person to do any such act.
More seriously, you may be violating the rights of Dr. B., and may even subject him to disciplinary action by a medical or other professional or state agency, based on the unfounded adjudication in your case that he is misusing confidential information that he received. Rule 4.4 prohibits this:
Rule 4.4 Respect for Rights of Third Persons
In representing a client, a lawyer shall not use methods of obtaining evidence that violate the legal rights of a third person.
II. Restriction on Practice
The second condition prevents you from representing any other Factory workers in a similar toxic tort claim. This is prohibited by Rule 5.6(b), which provides:
Rule 5.6 Restrictions on Right to Practice
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 American Bar Association considered a similar restriction on the right of represent future clients in toxic tort litigation. ABA Formal Opinion 93-371. The ABA specifically determined that the lawyer's obligation under Model Rule 1.2, to abide by a client's decision to accept a settlement offer, is not dispositive of this issue, Model Rule 5.6(b) must also be considered.1 The ABA explained the rationale of Model Rule 5.6(b). First, such agreements restrict the access of the public to lawyers who are experienced in such litigation. Second, the settlement offer may provide clients with rewards that bear less relationship to the merits of the claim than to the defendants' desire to buy off plaintiff's counsel. Third, the offering of such restrictive agreements places plaintiff's attorney in conflict with present clients, forcing the attorney to give up future representation. While the Model Rules generally require that the client's interests be put first, forcing a lawyer to give up future representations may be asking too much, particularly in light of the strong countervailing policy favoring the public's unfettered choice of counsel. ABA Formal Opinion 93-371 (April 16, 1993).
This Committee agrees with the American Bar Association that the injunction of Rule 1.2, to abide by the client's decision regarding settlement, must be read as limited by Rule 5.6(b), given the important public policies reflected in Rule 5.6. Accordingly, a lawyer cannot agree to refrain from representing other clients as a condition of settlement of present cases. The fact that the buy-off in the present case is disguised as a reimbursement of fees and costs does not eliminate the effect of the second condition, to limit your involvement on behalf of future clients. 2
III. Reporting Requirement.
You must also determine whether you have an obligation to report defense counsel to the Disciplinary Board.
Rule 8.3 requires a lawyer to report the professional misconduct of another lawyer in the following circumstances:
Rule 8.3 Reporting Professional Misconduct
(a) A lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority.
You must determine whether, in making these non-negotiable conditions part of the settlement offer, defense counsel violated Rules 5.6(b) and 8.4. The mandate of Rule 5.6(b) applies equally to defense counsel in this situation. A lawyer may not offer a settlement agreement that obligates opposing counsel to limit the representation of future claimants. Accord, ABA Formal Opinion 93-371. In addition, defense counsel may have violated Rule 8.4, which provides in relevant part:
Rule 8.4 Misconduct
It is professional misconduct for a lawyer to:
(a) Violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another; . . ..
You must also determine if defense counsel also attempted to induce you to violate the various rules discussed above. If you believe that defense counsels' conduct raises a substantial question as to their fitness as lawyers to practice, you are obligated by Rule 8.3(a) to inform the Disciplinary Board of the Supreme Court of Pennsylvania of this misconduct.
This obligation, however, is subject to your clients' waiver of confidentiality. Rule 1.6., which deals with confidentiality, requires that you first disclose the circumstances to your clients, including the potential for delay in the litigation and/or settlement, and obtain your clients' waiver of confidentiality before making a report to the Disciplinary Board.
1. The language of Model Rules 1.2 and 5.6(b) are identical to Pennsylvania Rules 1.2 and 5.6(b).
2. The Committee notes that Rule 1.8(f) prevents you from accepting compensation for representing a client from anyone other than the client, unless your client consents after full disclosure and consultation; there is not interference with your independence of professional judgment or with the client-lawyer relationship; and information relating to representation of your client is protected as required by Rule 1.6, dealing with confidentiality.