Can jointly represented clients agree in advance to let their lawyer accept an aggregate settlement without each client's approval?

Plain-English summary

The committee addressed whether a client may waive her right to approve the terms of an aggregate settlement negotiated on her behalf by counsel jointly representing multiple clients. It explained that Rule 1.8(g) of the New York Rules of Professional Conduct bars a lawyer who represents two or more clients from participating in an aggregate settlement of their claims, absent court approval, unless each client gives informed consent in a writing signed by the client, with disclosure of the existence and nature of all claims and each person's participation. Drawing on ABA Formal Opinion 06-438, the committee described the disclosures required, including the total settlement amount, the claims covered, each client's participation and consideration, the total fees and costs, and the method for apportioning fees and costs among clients.

The committee concluded the informed-consent requirement cannot be waived. It rejected the argument that clients should be able to grant counsel advance authority to conclude an aggregate settlement, or to be bound if a specified number or percentage of clients consents. Several factors supported the conclusion: neither the text of Rule 1.8(g) nor its comments provide for waiver; the protection against inadequate settlements and unfair allocations outweighs the logistical burden of obtaining each client's consent; and Rule 1.8(g) is consistent with other Rules creating non-waivable client protections, such as Rule 1.2(c) (reasonable limits on scope) and Rule 1.5(a) (no excessive fees). The committee also reasoned that "informed consent" to an advance waiver is virtually a contradiction in terms, because, as Comment 22 to Rule 1.7 indicates, the required disclosures must be made in the context of a specific settlement offer or demand, which does not exist at the outset of the engagement.

The committee read Rule 1.8(g) as supplementing Rule 1.7's general requirements for concurrent representation: before undertaking joint representation, a lawyer must disclose the risks and potential conflicts, including those that can emerge when settlement options are considered, and the two rules work in tandem to keep clients informed. It concluded that to bind multiple jointly represented clients, an aggregate settlement requires the informed written consent of each and every client, and that requirement may not be waived by any of them.

In practice

Under this opinion, a lawyer jointly representing multiple clients may not, under Rule 1.8(g) as the committee read it, conclude an aggregate settlement binding those clients without each client's informed written consent given after disclosure of the specific terms, and absent court approval. The opinion holds that an engagement-letter provision purporting to waive that right in advance, or to bind clients by a majority or supermajority vote, is not effective; the committee identified the disclosure as one that must be made in the context of an actual offer or demand.

Common questions

Q: What is an aggregate settlement?

A: Quoting ABA Formal Op. 06-438, the opinion describes it as occurring when two or more clients represented by the same lawyer resolve their claims, defenses, or pleas together; it applies whenever two or more clients consent to have their matters resolved together.

Q: Can clients waive the Rule 1.8(g) consent requirement at the start of the case?

A: The committee concluded no; neither the text nor the comments provide for waiver, and "informed consent" to an advance waiver is virtually a contradiction in terms because the required disclosures depend on a specific settlement offer.

Q: Can jointly represented clients agree to be bound by a majority vote on settlement?

A: The committee concluded no; each client retains an individual, non-waivable right to approve the terms of a proposed aggregate settlement that would bind her along with the others.

Q: What must the lawyer disclose to obtain informed consent?

A: The opinion lists, following ABA Formal Op. 06-438, the total settlement amount, the claims covered, each client's participation and consideration, the total fees and costs paid from proceeds, and the method for apportioning fees and costs among clients.

Background and rules framework

The opinion interprets New York Rule of Professional Conduct 1.8(g) (aggregate settlements), read together with Rule 1.7 (concurrent conflicts) and Rule 1.2(a) (abiding by the client's decision whether to settle), and references Rules 1.2(c) and 1.5(a) as other non-waivable client protections. These track ABA Model Rule 1.8(g), Model Rule 1.7, and Model Rule 1.2, and the committee relied heavily on ABA Formal Op. 06-438 and the ABA's Ethical Guidelines for Settlement Negotiations.

Citations and references

Rules of Professional Conduct:

• New York RPC 1.8(g), 1.7 (incl. Comment 22), 1.2(a), 1.2(c), 1.5(a) (applied in the opinion)
• MR 1.8(g) (aggregate settlements); MR 1.7 (conflicts); MR 1.2 (scope and settlement authority)

Other opinions cited:

• ABA Formal Op. 06-438 (2006): aggregate settlements and required disclosures
• ABA, Ethical Guidelines for Settlement Negotiations (2002): non-waivability of the right to approve a settlement

See also

• NYC Bar Formal Op. 1999-07: Joint Representation, Duty of Loyalty, and Client Confidences
• NYC Bar Formal Op. 1986-2: Partnership Lawyer Disclosing a General Partner's Wrongdoing

Source

• Landing page: https://www.nycbar.org/reports/aggregate-settlements-formal-opinion-2009-06/
• Original PDF: https://www.nycbar.org/wp-content/uploads/2023/05/20071788-FormalOpinion2009-6.pdf