Can a retainer or fee agreement give the lawyer full authority to settle the client's case without the client's approval?

Plain-English summary

The question arose at a Committee CLE presentation. A defense lawyer described negotiating a settlement with plaintiff's counsel, who directed that the settlement check be made payable solely to him and the release prepared for his signature on the plaintiff's behalf. When the defense lawyer questioned this, plaintiff's counsel produced a retainer agreement giving him full power and authority to settle the case, execute all instruments in the plaintiff's name, and receive all settlement proceeds; the defense lawyer also doubted the plaintiff spoke or understood English. The Committee was asked whether a fee agreement may grant the attorney full and absolute discretion to settle on terms the attorney chooses.

The Committee answered no. NRPC 1.2(a) provides that a lawyer shall abide by a client's decision whether to settle a matter. The opinion describes the cases and authorities interpreting that language as unanimous: the decision to settle belongs to the client and may not be abrogated to the attorney in a retainer agreement. It collects examples, including In re Lansky (Indiana), In re Grievance Proceeding (D. Conn.), and In re Lewis (Georgia, where such a clause merited an 18-month suspension), all striking down agreements that purported to transfer settlement authority to the lawyer.

The opinion gives three reasons the authorities reach this result: the decision belongs to the client; the attorney has a duty under Rule 1.4 to consult with the client and explain the matter so the client can make an informed decision; and a general relinquishment of the right in favor of the lawyer creates a conflict that violates the lawyer's fiduciary duty to the client. The opinion limits its scope to the wholesale assumption of settlement authority in the retainer agreement; it does not address attorney fraud in settling without authority, or a lawyer settling within a range of terms the client previously authorized.

In practice

The opinion holds that, under the Nevada rule as it stood at the time, a lawyer may not use a retainer or fee agreement to take over the client's right to decide whether to settle. The lawyer's duty to abide by the client's settlement decision (NRPC 1.2(a)) carries with it a duty to consult and explain under Rule 1.4 so the client's decision is informed, and that duty cannot be contracted away. The opinion does not reach a lawyer's authority to settle within parameters the client has already approved.

Common questions

Q: Can a client agree in the retainer to let the lawyer decide whether to settle?

A: No. The opinion concluded a provision delegating full and absolute settlement authority to the attorney violates NRPC 1.2(a), because the decision whether to settle belongs to the client and cannot be abrogated in the retainer agreement.

Q: Why is such a clause an ethics problem and not just a contract term?

A: The opinion gives three reasons: the settlement decision is the client's; the lawyer must consult and explain under Rule 1.4 so the client can decide; and a general relinquishment of that right creates a conflict that breaches the lawyer's fiduciary duty.

Q: Does the opinion bar a lawyer from settling within limits the client set?

A: No. The opinion expressly limits itself to a wholesale assumption of settlement authority, and does not address a lawyer's decision to settle within a range of terms the client previously authorized.

Background and rules framework

The opinion interprets Nevada Rule of Professional Conduct 1.2(a) (a lawyer shall abide by a client's decision whether to settle a matter) together with Rule 1.4 (communication and the duty to explain a matter so the client can make informed decisions). It notes that NRPC 1.2(a) reflects the 2002 amendment to Model Rule 1.2, which broadened the client's authority from accepting settlement offers to both making and accepting them.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.2 / Nev. RPC 1.2(a) (scope of representation; client's decision to settle)
• Model Rule 1.4 / Nev. RPC 1.4 (communication)

Cases:

• Williams v. Waldman, 108 Nev. 466, 836 P.2d 614 (1992), lawyer's fiduciary duty to the client
• In re Lansky, 678 N.E.2d 1114 (Ind. 1997), clause authorizing lawyer to settle held improper
• In re Grievance Proceeding, 171 F. Supp. 2d 81 (D. Conn. 2001), delegating settlement authority improper
• In re Lewis, 463 S.E.2d 862 (Ga. 1995), settlement-authority clause merited suspension

See also

• NY State Bar Op. 760: power of attorney to settle and endorse a settlement check
• CA COPRAC Op. 2002-160: a missing client, settlement authority, and fees

Source

• Landing page: https://nvbar.org/for-lawyers/ethics-discipline/ethics-opinions/
• Original PDF: https://nvbar.org/wp-content/uploads/opinion_35.pdf