Can a defense lawyer require the opposing lawyer to sign and approve a settlement release, and can a lawyer ethically sign one that obligates the lawyer to indemnify or hold harmless?

Plain-English summary

The Committee was asked whether a lawyer representing the party being released (the Releasee) can require the opposing lawyer (counsel for the Releasor) to sign a release to "approve" or "agree to" its terms, where those releases typically include hold-harmless and indemnification obligations tied to subrogation or lien claims. The common Mississippi scenario the opinion describes is a personal-injury settlement where the defense sends a release requiring plaintiff's counsel to agree to indemnify the defendant against a third-party payer's subrogation claim.

The opinion grounds its analysis in Crowley v. Germany, 268 So.3d 1277 (Miss. 2018), where the Mississippi Supreme Court held that a court could not force plaintiffs' lawyers to sign a release stating they "agreed to" or "approved" the settlement, because doing so could make them parties subject to personal liability or indemnity obligations, and a judgment cannot be enforced against non-parties.

The opinion concludes that requiring a lawyer to sign such a release conflicts with several rules. It puts the lawyer at odds with the client's settlement decision under MRPC 1.2(a); it threatens the lawyer's independent professional judgment under MRPC 2.1; it creates a conflict between the lawyer's own interests and the client's under MRPC 1.7(b); and the lawyer's agreement to indemnify the Releasee for unknown amounts would be prohibited "financial assistance" to the client under MRPC 1.8(e). A defense lawyer's insistence on such a release would violate MRPC 8.4(a).

In practice

Under this opinion, a Mississippi lawyer should not sign a settlement release that "approves" or "agrees to" terms obligating the lawyer, such as indemnification or hold-harmless provisions for subrogation or lien claims, unless the lawyer is actually a party to the matter. The opinion also holds that a lawyer who demands that opposing counsel sign such a release violates MRPC 8.4(a). The opinion notes a Rule 1.7(b) conflict could in theory be waived with the client's informed written consent, but MRPC 1.8(e) would still bar the lawyer's indemnification agreement.

Common questions

Q: Can a defense lawyer require the plaintiff's lawyer to sign the settlement release?

A: No. The opinion concludes that demanding another lawyer "approve" or "agree to" the release violates MRPC 8.4(a), because it asks that lawyer to act contrary to MRPC 1.2(a) and 2.1.

Q: Can a plaintiff's lawyer agree to indemnify the defendant for unpaid liens as part of settlement?

A: No. The opinion concludes that a lawyer's agreement to indemnify the Releasee for unknown amounts is prohibited "financial assistance" to the client under MRPC 1.8(e).

Q: Why is signing the release a conflict of interest?

A: The opinion concludes that obligating the lawyer under the release creates a conflict between the lawyer's own interests and the client's under MRPC 1.7(b), for example a future dispute over who must pay an indemnity claim.

Q: What if the lawyer is actually a party to the matter?

A: The opinion's holding is limited to lawyers who are not parties; it states the violation arises when terms would obligate the lawyer "unless they are a party to the matter."

Background and rules framework

The opinion interprets MRPC 1.2(a) (a lawyer abides by the client's decision whether to settle), 1.7(b) (conflicts with the lawyer's own interests), 1.8(e) (prohibition on financial assistance to a client in litigation), 2.1 (independent professional judgment), and 8.4(a) (misconduct, including inducing another to violate the rules), corresponding to the same-numbered Model Rules. The analysis relies on Crowley v. Germany, 268 So.3d 1277 (Miss. 2018).

Citations and references

Rules of Professional Conduct (Mississippi; cf. Model Rules):

• MRPC 1.2(a) (client's decision to settle) (cf. Model Rule 1.2)
• MRPC 1.7(b) (conflict with lawyer's own interests) (cf. Model Rule 1.7)
• MRPC 1.8(e) (financial assistance to a client) (cf. Model Rule 1.8)
• MRPC 2.1 (independent professional judgment) (cf. Model Rule 2.1)
• MRPC 8.4(a) (misconduct) (cf. Model Rule 8.4)

Cases:

• Crowley v. Germany, 268 So.3d 1277 (Miss. 2018), lawyers cannot be forced to sign a release as parties
• Commercial Bank of Magee v. Evans, 145 Miss. 643, 112 So. 482 (1927), a judgment cannot be enforced against non-parties
• A1 Fire Sprinkler Contractors, LLC v. B.W. Sullivan Bldg. Contractor, Inc., 217 So.3d 731 (Miss. Ct. App. 2017)

See also

• GA Ethics Op. 13-2: Lawyer Settlement Indemnity
• AL Ethics Op. 2011-01: Lawyer Indemnification for Unpaid Liens

Source

• Landing page: https://www.msbar.org/ethics-discipline/ethics-opinions/formal-opinions/266/
• Original PDF: https://www.msbar.org/media/5009/ethics-opinion-266.pdf

Original opinion text

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

ETHICS OPINION NO. 266

OF THE MISSISSIPPI BAR

RENDERED November 03, 2022

CAVEAT: This Opinion is limited strictly to the facts as presented for analysis under Mississippi’s Rules of Professional Conduct. The facts and questions outlined below and the opinion rendered is limited to ethical issues only.

The Ethics Committee of The Mississippi Bar has been asked to render an opinion on the following question and hypothetical:

When settlement of a case requires a release to be signed by a party (“Releasor”), can the attorney representing the Releasee require the signature of the Releasor's attorney to “approve” or “agree to” the release?

This request referenced releases that the attorney was presumably being asked to sign that included obligations required of the Releasors, such as holding the Releasee harmless, requiring indemnification, reimbursement for claims, etc. The attorney clearly anticipates additional such requests in the future and seeks to determine whether such conduct is a violation of the Mississippi Rules of Professional Conduct.

Applicable Rules

The following Rules of Professional Conduct are applicable to this opinion. The relevant portions of those Rules provide:

Rule 1.2(a)

A lawyer shall abide by a client’s decisions concerning the objections of representation, subject to paragraphs (c), (d), (e) and shall consult with the client as to the means by which they are to be pursued. A lawyer shall abide by a client’s decision whether to accept an offer of settlement of a matter…

Rule 1.7(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…

Rule 1.8(e)

A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, or administrative proceedings, …

Rule 2.1

In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors that may be relevant to the client’s situation.

Rule 8.4(a)

It is professional misconduct for a lawyer to violate or attempt to violate the rules of professional conduct, knowingly assist or induce another to do so, or do so through the acts of another.

Analysis

The common scenario in Mississippi is:

Plaintiff’s lawyer represents Plaintiff against Defendant in a personal injury lawsuit. Plaintiff has received third party benefits to pay for their medical care. The third-party benefit provider is making a subrogation claim against Plaintiff for reimbursement of amounts paid from a settlement or judgment.

In order to settle Plaintiff’s case, Defendant sends a release that requires Plaintiff’s lawyer to sign. The release contains a provision that Plaintiff and Plaintiff’s lawyer agree to indemnify Defendant, and his/her insurers, agents, and lawyers, for any failure to reimburse, or set aside sufficient funds to reimburse, the third-party payer for medical expenses already paid and to hold Defendant harmless for any future liability.

In Crowley v. Germany, the Mississippi Supreme Court ruled that the circuit court abused its discretion by forcing lawyers representing the plaintiffs to sign a release of liability after a settlement of a case that stated the attorneys “agreed to” or “approved” the settlement. 268 So.3d 1277, 1278 (Miss. 2018). The Court ruled that if the attorneys representing the plaintiffs signed the release then it could be interpreted as making them a party to the contract, which could subject them to personal liability and/or indemnity obligations. Id. at 1279. The Court went on to state that a judgement cannot be enforced “against persons who are not parties to an action.” Id. at 1280 citing Commercial Bank of Magee v. Evans, 145 Miss. 643, 112 So. 482, 483 (1927). See also A1 Fire Sprinkler Contractors, LLC v. B.W. Sullivan Bldg. Contractor, Inc., 217 So.3d 731 (Miss. Ct. App. 2017).

Given this legal background, the Committee examines the ethical implications of the Requestor’s question. Requiring a lawyer to sign a release for “approval” or “agreement” of the terms can put that lawyer in direct conflict with the desires or wishes of their client. Rule 1.2(a) requires a lawyer to “abide by a client’s decisions…” If the client wants to settle their case, but their lawyer does not want to sign the release to “approve” or “agree to” the terms because of fears of being bound by any of the terms of the release then the attorney cannot abide by Rule 1.2(a).

Generally, in Mississippi the “approval” or “agreement” sought by the Releasee and their counsel from the Releasor's lawyer is an agreement for indemnification and hold harmless agreements for subrogation interests.

“Agreeing to” or “approving” a release by a lawyer would also make it difficult for said lawyer to abide by Rule 2.1, which requires lawyers to “exercise independent professional judgment and render candid advice.” If lawyers in Mississippi have to be concerned with whether they could face the threat of litigation for “approving” or “agreeing to” a release then it is likely the advice they give their clients could be affected, which could be to the detriment of the client. A lawyer prosecuting a case should not be asked to indemnify the other party if a subrogation claim is brought – the lawyer is not a party, and the responsibility should fall on the parties only. Any settlement agreement/release that makes settlement conditioned on the lawyer signing the release is asking said lawyer to violate Rules 1.2(a) and 2.1 of the Mississippi Rules of Professional Conduct. Defense counsel’s insistence on such a release would be a violation of Rule 8.4(a).

Lawyers signing releases would also create a clear conflict of interest between the attorney and their client pursuant to Rules 1.7(b) as the lawyer’s own interests could be affected. Lawyers should not be in the business of having to decide whether a release is going to negatively affect his relationship with his client in the future.

If a release were entered into by a client (Releasor) and his lawyer that required the lawyer and client to indemnify the Releasee, and a future claim is brought against the Releasee then the Releasor and his lawyer could be contractually obligated to indemnify the Releasee. Since the client (Releasor) actually received the benefit of the settlement then the lawyer and client would likely have a conflict about who should pay or indemnify – the client or the lawyer. This dispute could easily rise to the level of litigation.

A conflict under Rule 1.7(b) between the lawyer and his client could be waived with the client’s informed consent in writing. However, Rule 1.8(e) would also prevent a lawyer from entering into a release with his client because his agreement to indemnify the Releasee for unknown amounts would qualify as “financial assistance” to the client that is contemplated under the rule. Even though the Releasee would be who would be seeking the indemnification, the Releasor, the lawyer’s client, is the one that would receive the benefit.

There are 23 state and local bar associations in the United States that have issued ethics opinions stating that it is a violation of their ethical rules for a lawyer to sign a release that calls for the lawyer to agree or approve an indemnification agreement. These include Tennessee, Georgia, South Carolina, Virginia, and Florida.

Conclusion

After a thorough analysis by the Ethics Committee of the Mississippi Bar, we find that it is a violation of the Mississippi Rules of Professional Conduct for an attorney to sign a release that in any way “approved” or “agreed to” terms that would obligate them unless they are a party to the matter.

We further find that it is a violation of the Mississippi Rules of Professional Conduct for a lawyer to ask another lawyer to sign a release that would require them to “approve” or “agree to” any of the terms of the settlement.