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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In representing a plaintiff in a federal civil rights action or similar "private attorney general" actions, is an attorney obligated to inform the client that statutory attorney's fees are the client's property which the client may waive as a condition of settlement?
The attorney must disclose this information to his client, although it may well result in the attorney not being paid for services performed.
Rules 3-300, 3-310, 3-500, and 3-510 of the Rules of Professional Conduct of the State Bar of California.
Business and Professions Code section 6068, subdivision (m).
The Civil Rights Attorney's Fees Awards Act allows for the court to grant attorney's fees to the prevailing party in specified actions. (42 United States Code section 1988.) The United States Supreme Court has held that the trial court may approve a settlement in such an action by which the plaintiff receives substantially all of the nonpecuniary relief sought in exchange for a waiver of an attorney's fee award. (Evans v. Jeff D. (1986) 475 U.S. 717 [106 S.Ct. 1531, 89 L.Ed.2d 747].) Attorneys, who frequently accept representation in such cases solely on the contingency of the expected fee award, are often left uncompensated by such settlements.
The Evans court mentions that its holding is in accord with the view of a majority of the Courts of Appeal, which have ruled that "... it is the prevailing party rather than the lawyer who is entitled to attorney's fees." (Evans v. Jeff D., supra, 475 U.S. at p. 730, fn. 19, quoting from Brown v. General Motors Corp. (2nd Cir., 1983) 722 F.2d 1009, 1011.) Evans is now cited as authority for that proposition. (See Willard v. City of Los Angeles (9th Cir., 1986) 803 F.2d 526; Panola Land Buying Association v. Clark (11th Cir., 1988) 844 F.2d 1506.) Presumably that principal holds true for actions under California Code of Civil Procedure section 11021.5 and the panoply of other state and federal "private attorney general" statutes as well.
This Committee has been asked whether an attorney representing a plaintiff in such a suit must tell his or her client that he may be able effectively to win his lawsuit by waiving his attorney's fees.1
The Committee believes that the attorney must disclose this information to his client, although it may well result in the attorney not being paid for services performed.
Since Evans held that a prospective award of fees is the client's property, not the attorney's, the Committee does not believe that acceptance of employment on the hope of receiving court-awarded attorney's fees gives the attorney an interest adverse to the client, which would require the client's informed consent under rule 3-300, Rules of Professional Conduct. The Discussion section following that rule states that the rule does not apply to retainer agreements unless they confer on the attorney an "ownership, possessory, security, or other pecuniary interest adverse to the client." Likewise, rule 3-310(A) applies only where the attorney has an interest in the subject matter of the representation. Under current case law the attorney does not acquire an interest in the litigation and need not get the client's informed consent to proceed.
However, rule 3-500, Rules of Professional Conduct, provides: "A member shall keep a client reasonably informed about significant developments relating to the employment or representation, and promptly reply with reasonable requests for information." Similarly, Business and Professions Code section 6068, subdivision (m), includes among the duties of an attorney ". . . to keep clients reasonably informed of significant developments in matters with regard to which the attorney has agreed to provide legal services."
Under these principles, an attorney who has been retained to achieve a particular result obviously must inform his client if there appears to be a way to prevail. This is no less true where pursuit of that course might be detrimental to the attorney.
This information should be imparted as early in the representation as it appears to have a bearing on the particular case. Clearly if a written settlement offer is received which provides for a waiver of attorney's fees, rule 3-510 requires that "all amounts, terms and conditions" thereof must be communicated to the client promptly. The Discussion section following rule 3-510 makes it clear that the same policy should be followed upon receipt of an oral settlement offer, if it is "significant" within the meaning of rule 3-500.
Even absent such an offer, however, the attorney may be obligated to discuss such a settlement with the client if, for example, there is reason to believe that the defense would agree to such a disposition. Failure to recognize such a situation, or use it to the client's advantage, could well be seen as a violation of the attorney's duty to act competently under rule 3-110. Thus, the prudent attorney is well-advised to discuss the possibility of a fee-waiver settlement with the client at the outset of the representation.
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 responsibilities, or any member of the State Bar.
On August 27, 1988 the Board of Governors forwarded proposed Rule of Professional Conduct 2-400 to the Supreme Court for approval. That proposed rule provided as follows:
A member shall not make or present a settlement offer in any case involving a request by the opposing party for attorney's fees pursuant to private attorney general statutes which is conditioned on opposing counsel waiving all or substantially all fees. This rule does not preclude a member from making or presenting an offer of a lump sum to settle all claims including attorneys fees.
The Supreme Court rejected proposed Rule 2-400.
Nonetheless, various panels which have considered the question have concluded that the practice violates existing ethical strictures. (See Los Angeles County Bar Association Formal Opinion No. 445 (1987); Association of the Bar of the City of New York, Committee on Professional and Judicial Ethics, Opinion No. 1980-94 (1980) [withdrawn in light of the opinion in Evans v. Jeff D., supra, 475 U.S. at p. 717, Opinion No. 1987-4]; District of Columbia Bar Legal Ethics Committee Opinion 147 (1985); Maryland State Bar Association Committee on Ethics, Final Opinion 85-74 (1985).)
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