Editor's Note:
State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
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May an attorney offer or accept a provision as a condition of settlement which would preclude plaintiff's attorney from subsequently suing the settling defendant?
An attorney may neither offer nor accept such a provision.
Rule 2-109 of the Rules of Professional Conduct of the State Bar of California.
Actions were brought against several financial institutions alleging unfair business practices in violation of specific provisions of the Business and Professions Code. A proposed settlement agreement, prepared by defendant's attorney, precluded plaintiff's attorney from representing "any person or entity in any litigation or arbitration proceeding against [defendant] or its affiliated entities; . . ." Plaintiff's attorney signed the agreement. An opinion on the propriety of this provision has been requested from the Committee. California Rule of Professional Conduct 2-109(A) provides:
A member of the State Bar shall not be a party to or participate in an agreement, whether in connection with the settlement of a law suit or otherwise, if the agreement restricts the right of a member of the State Bar to practice law."1
It is the opinion of the Committee that the provision being considered places in the hands of opposing party the ability to control the attorney's representation of subsequent clients. Thus, it denies a potential client access to an attorney of their choice. This is especially important where the attorney has previous experience in pursuing a matter against the particular defendant. Indeed, it is this previous experience which may make the attorney more attractive to the potential client.
Because the provision limits the autonomy of attorneys and the ability of clients to freely choose an attorney, it is the opinion of the Committee that the inclusion of the provision in the settlement agreement restricts the right of the attorney to practice law.
The Committee acknowledges that plaintiff's attorney may find him or herself in an uncomfortable position if faced with a settlement offer that is in the best interests of the client but which includes the provision being considered. However, ethics opinions interpreting American Bar Association Model Code of Professional Conduct DR 2-108(B),2 which is substantially similar to California rule 2-109(A), have uniformly held that defendant's attorney may not directly (District of Columbia Bar Association Opinion 130 (1983)) or indirectly (Maryland State Bar Opinion 82-53 (1982); Oregon State Bar Opinion 258 (1974)) propose such a provision, nor may plaintiff's attorney accept it (State Bar of Ohio Opinion 81-10 (1981); Virginia State Bar Opinion 649 (1985)). Thus, both attorneys will be in violation of rule 2-109.
The cited ethics opinions support the opinion of this Committee that rule 2-109 clearly prohibits both plaintiff's and defendant's attorney from offering or accepting a provision as a condition of settlement which would preclude plaintiff's attorney from subsequently suing the settling defendant because such a provision restricts plaintiff attorney's right to practice law.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of the State Bar of California. It is advisory only. It is not binding upon the courts, the State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibility or any member of the State Bar.
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