Ezel / Ethics Opinions / LACBA
LACBA 2004-02-23

May a California lawyer agree to a settlement provision that bars the lawyer from disclosing the fact and amount of the settlement to the lawyer's other current or future clients?

Short answer: Yes. The opinion concludes that a confidentiality clause limited to the fact and amount of the settlement does not violate former Rule 1-500(A) because it restricts disclosure of settlement terms, not the lawyer's right to practice; the opinion distinguishes provisions that restrict use of information learned during the case or the lawyer's representation of future clients, which would be prohibited.
Currency note: this opinion is from 2004
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.
View original ethics opinion (PDF)

LACBA Ethics Opinion 512: Settlement Confidentiality Binding the Lawyer

Short answer: Under former California Rule 1-500(A) as analyzed in this opinion, a settlement provision that prohibits the plaintiff's lawyer from disclosing the fact and amount of the settlement to the lawyer's other current or future clients does not restrict the lawyer's right to practice and is permitted. The committee distinguishes provisions that would restrict the lawyer's representation of other clients in similar litigation, or the lawyer's use of information learned during the case, which would be prohibited.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Los Angeles County Bar Association's view 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. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.

View original opinion

Plain-English summary

The committee considers a settlement in which the defendant seeks a confidentiality clause prohibiting the plaintiff (and the plaintiff's lawyer) from disclosing the fact and amount of the settlement, including to the lawyer's other present or future clients. The plaintiff does not object. The question is whether former Rule 1-500(A), which prohibits agreements that restrict a member's right to practice law, bars the lawyer from agreeing.

The committee distinguishes three categories of settlement restrictions. First, restrictions on the lawyer's right to represent other clients in similar litigation (LACBA Opinion 468, COPRAC Opinion 1988-104) are barred by Rule 1-500(A) and Model Rule 5.6(b), regardless of which side proposes the restriction. Second, restrictions on the lawyer's use of information learned during the representation in any future representation against the opposing party are barred under ABA Formal Opinion 00-417, because they effectively bar future representation by materially limiting the lawyer. Third, restrictions limited to disclosure of the fact and amount of the settlement do not restrict the lawyer's right to practice and are permitted, consistent with ABA Formal Opinion 00-417's express carve-out for nondisclosure provisions.

The committee anchors its conclusion in California public policy favoring settlement and the recognition that confidentiality is a valuable tool in facilitating settlements (Cho v. Superior Court (1995); Philippine Export & Foreign Loan Guarantee Corp. v. Chuidian (1990); Foxgate Homeowners' Association (2001)). The committee notes that the client, not the lawyer, controls settlement under People v. Davis (1957) and Calvert v. Stoner (1948), so a clause binding the lawyer cannot override the client's settlement authority under Rule 3-510.

The committee addresses a counter-argument that a settlement-confidentiality clause might create a conflict between the settling client and other current or potential clients with similar claims against the same opposing party. The committee rejects this framing: if treated as a conflict, the lawyer could not cure it with informed written consent because the confidentiality clause would still bind, and the same supposed conflict would arise from any confidential settlement regardless of whether it bound the lawyer. The committee notes the divided California case law on the question (Gilbert v. National Corp. for Housing Partnerships (1999) affirming disqualification where a former client risked forfeiting her settlement by testifying for the lawyer's current client; McPhearson v. The Michaels Company (2002) reversing disqualification on similar facts).

The committee also notes that LACBA Opinion 505 (2000) approves engagement-agreement terms that reduce the lawyer's fee to induce the client to decline settlement confidentiality, so long as the client retains the ability to settle without the lawyer's consent and without any penalty that would amount to an unconscionable fee. The committee in 512 sees no reason to revisit Opinion 505's premise that confidentiality clauses are permitted.

The footnote 1 acknowledges that settlement confidentiality is not always possible (multi-party cases on the same side, class-action notice, court approval).

In practice

The opinion holds that, under former California Rule 1-500(A) as it stood in 2004, the lawyer may participate in a settlement that bars disclosure of the fact and amount of the settlement. The committee identifies the disqualifying features of settlement restrictions: restricting the lawyer's right to represent other clients in similar matters, and restricting use of information learned in the representation. The committee treats confidentiality of settlement terms alone as permitted.

California's professional-conduct rules were revised effective November 1, 2018; former Rule 1-500(A) corresponds substantially to current Rule 5.6, and former Rule 3-510 corresponds to current Rule 1.4.1 (settlement-offer communication). The committee's analysis has not been re-examined under the new rule numbering by the committee.

Common questions

Q: Can a California lawyer agree to a settlement provision keeping the fact and amount of the settlement confidential?

A: Per the opinion, yes. A nondisclosure provision limited to the fact and amount of the settlement does not restrict the lawyer's right to practice and is permitted under former Rule 1-500(A).

Q: What about a provision restricting the lawyer's future representation of clients with similar claims?

A: Per the opinion, that is prohibited. Following LACBA Opinion 468 and COPRAC Opinion 1988-104, a settlement provision restricting the lawyer from representing other clients against the same defendant is barred regardless of which side proposes it.

Q: What about a provision barring the lawyer from using information from the case in future representations?

A: Per the opinion, that is also prohibited. Following ABA Formal Opinion 00-417, a ban on use of information learned during the representation effectively bars future representation and violates Rule 1-500(A).

Q: Does a settlement-confidentiality clause create a conflict between the settling client and the lawyer's other clients?

A: Per the opinion, no. The committee rejects framing nondisclosure of settlement terms as a conflict of interest, both because such a "conflict" would not be curable by informed consent and because the conflict (if any) would arise from the settlement's confidentiality whether or not it bound the lawyer.

Q: Who decides whether the client accepts a confidentiality clause?

A: Per the opinion, the client. Under former Rule 3-510 and People v. Davis (1957) / Calvert v. Stoner (1948), settlement authority rests with the client; the lawyer must promptly communicate written and significant oral settlement offers, and any agreement requiring the client to obtain the lawyer's consent before settling is void.

Q: Can the lawyer charge a reduced fee to encourage the client to reject settlement confidentiality?

A: Per the opinion's reference to LACBA Opinion 505, yes, so long as the engagement-agreement term does not penalize the client's right to settle without the lawyer's consent and does not amount to an unconscionable fee.

Background and rules framework

The opinion interprets former California Rules of Professional Conduct 1-500 (agreements restricting practice), 3-110 (competence), and 3-510 (communication of settlement offers); ABA Model Rule 5.6 and ABA Formal Opinions 93-371, 95-394, and 00-417; and Bus. & Prof. Code sections 6092.5(i) and 6093. The opinion anchors settlement-confidentiality policy in Evidence Code sections 1119 (mediation confidentiality), 1123 (mediated settlement disclosure), and 1152 (offers of compromise), and Fed. R. Evid. 408, along with the public-policy cases on settlement (Cho; Philippine Export; Foxgate).

Citations and references

Rules of Professional Conduct:

  • Former California Rule 1-500 (agreements restricting practice)
  • Former California Rule 3-110 (competence)
  • Former California Rule 3-510 (communication of settlement offers)
  • ABA Model Rule 5.6

Statutes:

  • Bus. & Prof. Code section 6092.5(i)
  • Bus. & Prof. Code section 6093
  • Evidence Code section 1119 (mediation confidentiality)
  • Evidence Code section 1123 (mediated settlement disclosure)
  • Evidence Code section 1152 (offers of compromise)
  • Fed. R. Evid. 408

Cases:

  • Anderson v. Eaton, 211 Cal. 113 (Cal. 1930), client controls representation
  • Calvert v. Stoner, 33 Cal.2d 97 (Cal. 1948), client retains settlement authority
  • Cho v. Superior Court, 39 Cal.App.4th 113 (1995), public policy favors settlement confidentiality
  • Foxgate Homeowners' Association, Inc. v. Bramalea California, Inc., 26 Cal.4th 1 (Cal. 2001), mediation confidentiality
  • Gilbert v. National Corp. for Housing Partnerships, 71 Cal.App.4th 1240 (1999), disqualification where confidentiality penalty bound former client
  • McPhearson v. The Michaels Company, 96 Cal.App.4th 843 (2002), reversing disqualification on similar facts
  • People v. Davis, 48 Cal.2d 241 (Cal. 1957), client's exclusive settlement authority
  • Philippine Export & Foreign Loan Guarantee Corp. v. Chuidian, 218 Cal.App.3d 1058 (1990), public policy favoring settlement
  • State Compensation Ins. Fund v. WPS, Inc., 70 Cal.App.4th 644 (1999), Model Rules as guidance

Other opinions cited:

  • Cal. State Bar Formal Opinion 1988-104: settlement restriction barring future representation prohibited
  • LACBA Formal Opinion 468 (1993): same, plaintiff cannot propose restriction either
  • LACBA Formal Opinion 505 (2000): engagement-agreement term reducing fee to discourage settlement confidentiality is permitted within limits
  • ABA Formal Opinion 00-417: ban on use of case information equates to bar on future representation
  • ABA Formal Opinion 93-371: lawyer may not offer or accept settlement restricting future representation
  • ABA Formal Opinion 95-394: government lawyer cannot condition settlement on opposing lawyer's agreement not to represent others against agency

See also

Source