After a lawyer settles a creditor's claim under a confidentiality agreement, can the lawyer later represent a different creditor against the same debtor?

Plain-English summary

The Committee was asked whether a lawyer who had represented a creditor, settled the claim, and whose client had signed a confidentiality agreement with the debtor (agreeing not to disclose information about the settlement) could later represent a different creditor against the same debtor. The Committee concluded the lawyer was not precluded from the later representation, on the facts presented, so long as the lawyer abided by the confidentiality requirements of Rule 1.6, and added that an attempt to use the settlement agreement to preclude such representation might violate Rule 5.6.

On confidentiality, the opinion explained that the information about the prior settlement was a client "secret" under Rule 1.6, which the lawyer could not disclose to the second creditor or anyone else, because disclosure could breach the original settlement agreement and expose the first creditor to legal action. The opinion rejected the debtor's lawyer's assumption that representing the second creditor would necessarily compel disclosure of the prior settlement terms.

On conflicts, the opinion analyzed Rules 1.7 and 1.9, assuming no continuing obligations were owed by the debtor to the first creditor when the new representation began. On that assumption, the second creditor was not "directly adverse" to the first creditor, and the lawyer's representation of the second creditor would not be "materially limited" by responsibilities to the former client, so Rule 1.7 did not bar it; and because the second creditor's interests were not materially adverse to the first creditor's, Rule 1.9 did not bar it either. Finally, the opinion observed that Rule 5.6 prohibits a lawyer from offering or making an agreement that restricts a lawyer's right to practice as part of settling a controversy between private parties, so if the debtor's lawyer construed the confidential settlement as precluding the creditor's counsel from later representation, the debtor's lawyer might have violated Rule 5.6 in drafting or negotiating it.

Currency note

This opinion was issued in 2000, before Alaska's adoption of the 2009 revisions to the Alaska Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Did a confidential settlement stop the lawyer from suing the same debtor for another creditor?

A: The opinion concluded it did not, on the facts presented, so long as the lawyer abided by Rule 1.6 and did not disclose the prior settlement's terms.

Q: Could the lawyer reveal the earlier settlement terms to the new client?

A: No. The opinion treated the prior settlement information as a client "secret" under Rule 1.6 that could not be disclosed, since disclosure could breach the agreement and expose the first creditor to liability.

Q: Was the new representation a conflict under Rule 1.7 or 1.9?

A: Per the opinion, assuming no continuing obligations were owed to the first creditor, the second creditor was not directly or materially adverse to the first creditor, so neither Rule 1.7 nor Rule 1.9 barred the representation.

Q: Could the debtor's lawyer get in trouble for invoking the settlement?

A: The opinion noted that using a settlement to restrict the creditor's counsel from later representation might violate Rule 5.6's bar on agreements restricting a lawyer's right to practice.

Background and rules framework

The opinion interpreted Alaska Rules of Professional Conduct 1.6 (confidentiality; Model Rule 1.6), 1.7 (concurrent conflicts; Model Rule 1.7), 1.9 (duties to former clients; Model Rule 1.9), and 5.6 (restrictions on a lawyer's right to practice; Model Rule 5.6). Its conflicts analysis rested on the stated assumption that no continuing obligations were owed by the debtor to the first creditor when the new representation began.

Citations and references

Rules of Professional Conduct:

• Alaska RPC 1.6 (confidentiality of information)
• Alaska RPC 1.7 (concurrent conflicts of interest)
• Alaska RPC 1.9 (duties to former clients)
• Alaska RPC 5.6 (restrictions on right to practice)

See also

• ABA Formal Op. 00-417: Settlement Limits on Lawyers
• ABA Formal Op. 93-371: Settlements Limiting Practice
• ABA Formal Op. 94-381: Restrictions on Right to Practice

Source

• Landing page: https://alaskabar.org/ethics-discipline/ethics-opinions/adopted-ethics-opinions-chronological/
• Original PDF: https://alaskabar.org/wp-content/uploads/2000-02.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

ALASKA BAR ASSOCIATION
ETHICS COMMITTEE
OPINION NO. 2000-2
The Effect of Confidential Settlement Agreements on Precluding
Further Representation for Subsequent Clients
The Ethics Committee has been asked to determine whether a lawyer
who has represented a creditor, settled the claim, and whose creditor-client has
signed a confidentiality agreement with the debtor agreeing not to disclose
information from the settlement, may subsequently represent another creditor
against the same debtor. It is the opinion of the Ethics Committee that a
lawyer is not precluded from representing a subsequent client against the
debtor in the circumstances outlined below so long as the attorney abides by
the confidentiality requirements of Alaska Rule of Professional Conduct 1.6.
Additionally, it is the opinion of the Ethics Committee that an attempt to use a
settlement agreement to preclude an attorney from representing subsequent
creditors might violate Alaska Rule of Professional Conduct 5.6.
RELEVANT FACTS
The specific fact scenario presented to the Ethics Committee involves an
attorney who has represented a creditor against a particular debtor in the past.
As a part of the original settlement agreement between the parties, the creditor
and debtor “agree not to divulge any information contained in or concerning
the terms of this agreement to third parties, except as may be necessary for the
execution of this agreement or as required by law.” Thereafter, the terms of the
settlement are complied with between the parties.
Later, the creditor’s attorney is retained by another creditor in
proceedings against the same debtor. The creditor attorney’s demand letter is
met with a response that the attorney must withdraw based upon the
confidentiality clause of the original settlement agreement. The letter from the
debtor’s attorney in essence states that this new representation by the
creditor’s attorney would necessarily require the disclosure, at least implicitly,
of the settlement negotiations with the debtor. This disclosure, the letter
continues, breaches the confidentiality provisions of the settlement agreement,
subjecting the first creditor to legal action. The debtor’s attorney also alleges
that this representation would violate Rules of Professional Conduct 1.7 and/or
1.9.

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ANALYSIS
1.

Rule of Professional Conduct 1.6 Precludes the Creditor’s
Attorney From Revealing the Discussions and Terms of the
Prior Settlement to the Second Creditor.

Although the debtor’s attorney’s letter assumes that the creditor’s
attorney will necessarily be compelled, in the course of his representation of
the second creditor, to disclose settlement results from prior negotiations with
the first creditor, it is not clear that this assumption is correct or proper.
Under Alaska Rule of Professional Conduct 1.6, the principle of confidentiality
is set forth. This rule states:
(a) A lawyer shall not reveal a confidence or secret
relating to representation of a client unless the client
consents after consultation, except for disclosures that
are impliedly authorized in order to carry out the
representation, and except as stated in paragraph (b)
or Rule 3.33(a)(2).
For purposes of this rule,
“confidence” means information protected by the
attorney-client privilege under applicable law, and
“secret” means other information gained in the
professional relationship if the client has requested it
be held confidential or if it is reasonably foreseeable
that disclosures of the information would be
embarrassing or detrimental to the client.
In
determining
whether
information
relating
to
representation of a client is protected from disclosure
under this rule, the lawyer shall resolve any
uncertainty about whether such information can be
revealed against revealing the information. (Emphasis
added.)
This rule prohibits the disclosure of client “secrets” including information
gained through a professional relationship with a client when it is reasonably
foreseeable that disclosures would be “detrimental to the client.” In this case,
the information covered by the confidential settlement agreement would
constitute a client “secret” which could not later be disclosed to another client
or anyone else for that matter without violating this rule, since its disclosure
could result in breach of the original settlement agreement and possibly legal
action against the first creditor.

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Any further limitations on the attorney’s representation are thereafter
governed by Alaska Rule of Professional Conduct 1.7 and 1.9 as set forth in the
analysis below.
2.
Rule of Professional Conduct 1.7 Does Not Preclude the
Attorney From Representing the Second Creditor.
The debtor’s attorney claims that representation of the second creditor by
the attorney violates Rule of Professional Conduct 1.7. The Ethics Committee
disagrees. This rule states in pertinent part:
(a) A lawyer shall not represent a client if the
representation of that client will be directly adverse to
another client, unless:
(1) the lawyer reasonably believes the
representation will not adversely affect the
relationship with the other client; and
(2) each client consents after consultation.
(b) A lawyer shall not represent a client if the
representation of that client may be materially limited
by the lawyer’s responsibilities to another client or to a
third person or by the lawyer’s own interests, unless:
(1) the lawyer reasonably believes the
representation will not be adversely
affected; and
(2) the client consents after consultation...
The facts of this scenario are not clear regarding the terms of the original
settlement and whether there are ongoing obligations owed by the debtor to the
first creditor at the time the attorney begins his representation of the second
client. For purposes of this opinion, it is assumed that no such continuing
obligations exist. Under these circumstances, the second creditor will not be
“directly adverse” to the first creditor because there are no ongoing obligations
owed by the debtor to the first creditor which might be impacted by the second
creditor’s claim. Additionally, since the lawyer is no longer working for the first
creditor, the lawyer’s representation of the second creditor should not be

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“materially limited” by the lawyer’s responsibilities to the first creditor. This is
a decision that must of course be analyzed by the attorney with regard the
facts and circumstances of each individual case.
If these circumstances are then met, the Ethics Committee does not
believe that representation of the second creditor by the attorney violates Rule
of Professional Responsibility 1.7.
3.

Rule of Professional Conduct 1.9 Does not Preclude the
Attorney From Representing the Second Creditor.

Again, the debtor’s attorney claims that representation of the second
creditor by the attorney will violate Rule of Professional Conduct 1.9. The only
relevant provision of this rule states as follows:
(a) A lawyer who has formerly represented a client in a
matter shall not thereafter represent another person in
the same or a substantially related matter in which
that person’s interests are materially adverse to the
interests of the former client unless the former client
consents after consultation.
This rule is designed to ensure that a lawyer’s duties of loyalty and
confidentiality as to the matter in which the lawyer represented a client
continue after the termination of the attorney-client relationship. Under the
facts of this case, however, the attorney’s representation of the second creditor
does not violate the Rule of Professional Conduct 1.9 because the second
creditor’s interests are not materially adverse to the first creditor’s interest.
Again it is assumed for the purposes of this opinion that there are no ongoing
obligations owed by the debtor to the first creditor at the time the attorney
begins his representation of the second client.
4.

Rule of Professional Conduct 5.6 Precludes an Attempt by a
Party From Restricting an Attorney’s Right to Practice.

The Ethics Committee believes it is important to note that an attempt by
the debtor’s attorney to preclude an attorney from representing subsequent
creditors under these circumstances might be construed as a violation of Rule
of Professional Conduct 5.6. This rule states in part that a lawyer shall not
participate in offering or making “an agreement in which a restriction on the
lawyer’s right to practice is part of the settlement of a controversy between

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private parties.” If the debtor’s attorney construes the confidential settlement
as precluding further representation by the creditor’s counsel, then the
debtor’s attorney may have violated this rule by drafting or negotiating this
contractual arrangement.
CONCLUSION
In summary, it is the opinion of the Ethics Committee that the terms of
the confidential settlement agreement do not preclude the attorney from
representing the second creditor. The attorney is precluded under Rule of
Professional Conduct 1.6 from disclosing the discussions or the terms of the
settlement agreement between the first creditor and the debtor with the second
creditor.
Approved by the Alaska Bar Association Ethics Committee on February 3, 2000.
Adopted by the Board of Governors on March 10, 2000.

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