In a federal civil rights or other private-attorney-general case, must a California lawyer tell the client that the client can settle by waiving the statutory attorney's fees, even though doing so will leave the lawyer unpaid?

Currency note

This opinion was issued in 1989, under the former California Rules of Professional Conduct and before the State Bar of California's adoption of the November 1, 2018 revisions. The opinion interprets former California Rules 3-300, 3-310, 3-500, and 3-510, and Business and Professions Code section 6068(m). The substance is now distributed across current California Rules 1.4, 1.7, and 1.8.1. 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 Treat this page as historical context, not current guidance.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.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the State Bar of California's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.

View original opinion

Plain-English summary

The Civil Rights Attorney's Fees Awards Act, 42 U.S.C. section 1988, allows a court to award attorney's fees to the prevailing party in specified actions. The U.S. Supreme Court held in Evans v. Jeff D., 475 U.S. 717 (1986), that a trial court could approve a settlement in such an action under which the plaintiff received substantially all the nonpecuniary relief sought in exchange for a waiver of attorney's fees. Evans characterized the prospective fee award as the prevailing party's, not the lawyer's, property (citing Brown v. General Motors Corp., 722 F.2d 1009 (2d Cir. 1983)). The committee opined that the holding extends to California Code of Civil Procedure section 1021.5 and the panoply of other private-attorney-general statutes.

On former Rule 3-300, the committee opined that because the prospective fee award is the client's property and not the attorney's, taking the representation on the hope of receiving a court-awarded fee did not give the attorney an interest adverse to the client. The committee read the Discussion to Rule 3-300 to confirm 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, former 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 such an interest and need not obtain informed consent on that ground.

On former Rule 3-500 and Business and Professions Code section 6068(m), the committee opined that the lawyer must keep the client reasonably informed about significant developments in the matter. An attorney retained to achieve a particular result must inform the client if there appears to be a way to prevail, even if pursuit of that course might be detrimental to the attorney. The committee opined that the disclosure should be made as early as it appears to bear on the case. Where a written settlement offer is received that conditions the offer on a fee waiver, former Rule 3-510 required prompt communication of all amounts, terms, and conditions. The Discussion to Rule 3-510 stated that the same policy applied to an oral settlement offer if it was "significant" within the meaning of Rule 3-500. Even absent an offer, the committee opined that the attorney may be required to discuss such a settlement if there is reason to believe the defense would agree, with failure to recognize such a situation potentially implicating the duty of competent representation under former Rule 3-110.

The committee declined to address the separate question whether an opposing attorney violates ethical rules by conditioning a settlement offer on a statutory fee waiver, noting in a footnote that the Board of Governors had forwarded a proposed Rule 2-400 prohibiting that practice and that the Supreme Court of California had rejected the proposal.

Common questions

Q: Whose property is a section 1988 fee award?

A: Per the opinion (relying on Evans v. Jeff D., 475 U.S. 717 (1986)), the prospective fee award is the client's, not the attorney's, property. The committee opined that this is why a contingent fee arrangement based on the expected fee award does not create an interest adverse to the client under former Rule 3-300.

Q: Must the lawyer disclose the fee-waiver settlement option before any offer arrives?

A: Per the opinion, yes, where it appears to bear on the case. The committee opined that the attorney must keep the client reasonably informed of significant developments under former Rule 3-500 and Business and Professions Code section 6068(m), and that failure to recognize an available fee-waiver settlement could implicate the duty of competent representation under former Rule 3-110.

Q: When a written fee-waiver offer arrives, what is the disclosure obligation?

A: Per the opinion, former Rule 3-510 required prompt communication of all amounts, terms, and conditions of the written offer. The Discussion to Rule 3-510 made the same policy applicable to a "significant" oral offer within the meaning of Rule 3-500.

Q: Did the committee address whether opposing counsel may condition settlement on a fee waiver?

A: The committee declined to opine on that separate question. In a footnote, the committee noted that proposed Rule 2-400, which would have prohibited the practice, had been rejected by the Supreme Court of California, and listed prior opinions from other bars (LACBA Op. 445 (1987); ABCNY Op. 1980-94 (withdrawn 1987); D.C. Bar Op. 147 (1985); Md. State Bar Op. 85-74 (1985)) that had reached differing views.

Background and rules framework

The opinion interpreted former California Rules 3-300 (avoiding interests adverse to a client), 3-310 (conflicts of interest), 3-500 (duty to keep a client informed of significant developments), and 3-510 (prompt communication of settlement offers), together with Business and Professions Code section 6068(m). The federal statute analyzed was 42 U.S.C. section 1988 (Civil Rights Attorney's Fees Awards Act); the committee also referenced California Code of Civil Procedure section 1021.5 (the state private-attorney-general fee statute).

Citations and references

Rules of Professional Conduct (former, in effect at time of opinion):

• Former California Rule 3-300 (and its Discussion)
• Former California Rule 3-310(A)
• Former California Rule 3-500
• Former California Rule 3-510 (and its Discussion)
• Former California Rule 3-110 (competence, referenced)

Statutes:

• 42 U.S.C. section 1988 (federal fee-shifting)
• Cal. Bus. & Prof. Code section 6068(m)
• Cal. Code Civ. Proc. section 1021.5 (state private-attorney-general fees)

Cases:

• Evans v. Jeff D., 475 U.S. 717 (1986), fee waiver as condition of settlement
• Brown v. General Motors Corp., 722 F.2d 1009 (2d Cir. 1983), fee award belongs to prevailing party
• Willard v. City of Los Angeles, 803 F.2d 526 (9th Cir. 1986)
• Panola Land Buying Association v. Clark, 844 F.2d 1506 (11th Cir. 1988)

Other opinions cited:

• LACBA Formal Op. 445 (1987)
• Association of the Bar of the City of New York Formal Op. 1980-94 (withdrawn by Op. 1987-4)
• D.C. Bar Legal Ethics Op. 147 (1985)
• Maryland State Bar Op. 85-74 (1985)

See also

• CA Ethics Op. 1994-135: Structured Settlements and Fee Timing

Source

• Landing page: https://www.calbar.ca.gov/legal-professionals/ethics-compliance-practice-resources/ethics/ethics-opinions
• Source HTML: https://www.calbar.org/ethics/Opinions/1989-114.htm

Original opinion text

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

Ethics Opinions - FORMAL OPINION NO. 1989-114

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.

THE STATE BAR OF CALIFORNIA

STANDING COMMITTEE ON

PROFESSIONAL RESPONSIBILITY AND CONDUCT
FORMAL OPINION NO. 1989-114

ISSUE:

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?

DIGEST:

The attorney must disclose this information to his client, although it may well result in the attorney not being paid for services performed.

AUTHORITIES INTERPRETED:

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).

DISCUSSION

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.

1 We do not deal here with the larger question of whether an attorney violates any ethical restrictions by making a settlement offer which is conditioned on the plaintiff's attorney's agreement to waive statutory fees. We note in passing, however, that that issue has been considered by the organized bar without ever having been finally resolved in the negative.

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).)