Can a lawyer agree to a settlement confidentiality clause that bars the lawyer from referring to the incident, the product, or the defendants' identity in other cases?

Plain-English summary

The Board addressed a settlement confidentiality clause demanded by a defendant in products liability cases: the clause prohibited plaintiff's counsel from discussing any facet of the settlement with anyone, and barred counsel from referencing the incident at the center of the case, the year, make, and model of the subject vehicle, or the identity of the defendants. The opinion concludes that it is improper for a lawyer to propose or accept such a clause if it requires the lawyer to keep confidential information that is publicly available, or that would be available through discovery in other cases, where the clause will restrict the lawyer's representation of other clients.

The opinion grounds the holding in RPC 5.6(b), which prohibits a lawyer from making an agreement that restricts the lawyer's right to practice as part of the settlement of a client controversy. Drawing on D.C. Bar Opinion 335 and ABA Formal Opinion 93-371, the opinion reasons that a clause barring counsel from disclosing public information (the defendant's identity, the allegations, the fact of settlement) operates to prevent the lawyer from informing potential clients of the lawyer's experience and from representing other claimants against the settling party, accomplishing indirectly what the defendant cannot do directly. The opinion also notes that, as to existing clients, such a clause could amount to settling one client's case to the detriment of another, implicating RPC 1.7's bar on representing differing interests.

The opinion is careful to mark what remains permissible. It states that the most common confidentiality provisions, which keep confidential the terms and amount of a specific settlement that are not publicly known, are not prohibited. The line the opinion draws is between non-public settlement terms (which may be kept confidential) and public information about the case (which a settlement may not require the lawyer to suppress).

In practice

The opinion holds that, under the Tennessee rule as it stood at the time, a lawyer may not propose or accept a settlement confidentiality clause that requires the lawyer to keep confidential publicly available information, or information that would be available through discovery in other cases, where the clause restricts the lawyer's representation of other clients; the opinion treats such a term as an impermissible restriction on the right to practice under RPC 5.6(b). The opinion holds that confidentiality clauses limited to the non-public terms and amount of the settlement remain permissible. It identifies the relevant distinction as public versus non-public information, not the presence of a confidentiality clause as such.

Common questions

Q: Can a settlement require a lawyer to keep the defendant's identity and the basic facts confidential?

A: Per Opinion 2018-F-166, no, where that restricts the lawyer's representation of other clients. The opinion treats a clause barring disclosure of public information (the incident, the product, the defendants' identity) as an impermissible restriction on the right to practice under RPC 5.6(b).

Q: Are confidentiality clauses in settlements ever permissible?

A: Yes. The opinion states there is no ethical prohibition against the most common confidentiality provisions, which keep confidential the terms of a specific settlement, including the amount of the payment, where that information is not publicly known.

Q: Why does a confidentiality clause implicate the lawyer's other cases?

A: The opinion explains that suppressing public information prevents the lawyer from informing potential clients of the lawyer's experience and expertise and from representing other claimants against the settling party, which is the kind of indirect restriction on practice RPC 5.6(b) prohibits.

Q: Does such a clause raise a conflict among the lawyer's clients?

A: The opinion notes that, as to existing clients, including such a clause in a release could be construed as settling one client's case to the detriment of another, which would be representation of differing interests in violation of RPC 1.7.

Background and rules framework

The opinion interprets Tennessee RPC 5.6(b) (Model Rule 5.6(b)), which bars a lawyer from making an agreement restricting the lawyer's right to practice as part of the settlement of a client controversy, reading it (consistent with ABA Formal Opinions 93-371 and 00-417 and opinions from several other jurisdictions) to reach indirect restrictions such as suppression of public case information. It also references RPC 1.7 (Model Rule 1.7) on conflicts arising from representing differing interests. The opinion distinguishes non-public settlement terms, which may be kept confidential, from public information, which a settlement may not require the lawyer to conceal.

Citations and references

Rules of Professional Conduct:

• Model Rule 5.6(b) / Tennessee RPC 5.6(b) (restrictions on the right to practice in settlements)
• Model Rule 1.7 / Tennessee RPC 1.7 (concurrent conflicts of interest)

Other opinions cited:

• ABA Formal Op. 93-371 (1993): restrictions on representing future claimants
• ABA Formal Op. 00-417 (2000): settlement terms limiting use of information
• D.C. Bar Legal Ethics Op. 335 (2006)
• Pennsylvania Bar Formal Op. 2016-300; N.Y. State Bar Op. 730 (2000); New Mexico Op. 1985-5
• Tennessee Formal Ethics Opinion 98-F-141 (1998)

See also

• Tennessee Op. 2019-F-167: Settlement Term Destroying Evidence
• ABA Formal Op. 00-417: Settlement Terms Limiting Use of Information
• ABA Formal Op. 93-371: Restrictions on Representing Future Clients
• Tennessee Op. 2025-F-171: Non-Disparagement in Settlements

Source

• Landing page: https://www.tbpr.org/ethic_opinions/2018-f-166-confidentiality-provisions-in-settlement-agreements

Original opinion text

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

2018-F-166 Confidentiality Provisions in Settlement Agreements

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 2018-F-166

The Board of Professional Responsibility has been requested to issue a Formal Ethics Opinion on the ethical propriety of a settlement agreement which contains a confidentiality provision that prohibits any discussion of any facet of the settlement agreement with any other person or entity, regardless of the circumstances; and which prohibits the requesting attorney from referencing the incident central to the plaintiff’s case, the year, make, and model of the subject vehicle or the identity of the Defendants.

OPINION

It is improper for an attorney to propose or accept a provision in a settlement agreement that requires the attorney to be bound by a confidentiality clause that prohibits a lawyer from future use of information learned during the representation or disclosure of information that is publicly available or that would be available through discovery in other cases as part of the settlement, if that action will restrict the attorney’s representation of other clients.

DISCUSSION

The inquiring lawyer has encountered a condition to settlement, in product liability cases against a certain defendant, which prohibits plaintiff’s counsel from discussing any facet of the settlement agreement with any other person or entity, regardless of the circumstances; and which prohibits the requesting attorney from referencing the incident central to the plaintiff’s case, the year, make, and model of the subject vehicle or the identity of the Defendants.

The parties agreed on a settlement amount, and the requirement of the confidentiality clause was only brought up after the Plaintiff agreed to settle. The client simply wanted to be paid their settlement monies and the lawyer’s objections to such clauses were discarded because the client is the ultimate decision-maker to accepting settlement which creates a conflict between the lawyer and the client. Such provisions actively restrict the lawyer’s ability to advise other current or future clients with similar claims against the Defendants.

RPC 5.6 (b) states “A lawyer shall not participate in offering or making: (b) an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a client controversy.”[1]

“As to existing clients, inclusion of such a clause in a release could be construed as the settlement of one client’s case to the detriment of another client’s case. Such a clause would constitute representation of differing interests in violation of RPC 1.7.”[2]

ABA Formal Opinion 93-371 articulates the three policy considerations underlying this rule. First, there is a risk that the public’s access to the best attorney for a particular case will be curtailed. Second, such a restraint could be motivated by an effort to “buy off” counsel rather than to resolve the dispute. Third, a restriction on an attorney’s right to practice may place him or her in a position where the interests of the current client are in conflict with those of potential future clients.

It is not uncommon for there to be settlement conditions of nondisclosure of the amount and terms of the settlement. “A settlement condition providing for nondisclosure of the amount and terms of a settlement is not only proper, but should be recognized where the details are not a matter of public record.”[3]

“Many jurisdictions concur with the ABA that settlement agreements containing indirect restrictions on the lawyer’s right to practice violate those jurisdictions’ respective equivalents of Rule 5.6(b). Examples of similar provisions found to constitute unethical restrictions under the rule include those that require counsel to keep confidential public information concerning the case, such as the identity of the defendant, the allegations of the complaint, and the fact of settlement.”[4]

“Such conditions have the purpose and effect of preventing counsel from informing potential clients of their experience and expertise, thereby making it difficult for future clients to identify well-qualified counsel and employ them to bring similar cases.”[5] Such conditions violate RPC 5.6(b) which prohibits lawyers from offering or making a settlement agreement that restricts the lawyer’s right to practice. “A settlement agreement may provide that the terms of the settlement and other non-public information may be kept confidential, but it may not require that public information be confidential.”[6]

“Some ethics committees have interpreted RPC 5.6(b) to prohibit settlement clauses that restrict a lawyer from publicly naming the particular parties against whom their client has settled.”[7]

Other ethics committees have interpreted RPC 5.6(b) to prohibit settlement provisions that restrict a lawyer from disclosing publicly available information, or that would be available through discovery in other cases.[8]

“The underlying rationale for all these opinions is that the prohibited provisions restrict the lawyer’s right to practice by effectively preventing him or his firm from representing clients in certain kinds of cases against the settling party.”[9]

If an attorney is bound by a confidentiality clause that prohibits him or her from discussing any facet of the settlement agreement with any other person or entity, regardless of the circumstances; and which prohibits the attorney from referencing the incident central to the plaintiff’s case, the year, make, and model of the subject vehicle or the identity of the Defendants, defense counsel would accomplish indirectly what they cannot accomplish directly by precluding the attorney from representing other plaintiffs with similar claims.

There is also a public policy consideration. A confidentiality agreement in long-running personal injury litigation “does not create a ‘compelling interest’ that overcomes the strong presumption” in favor of public access to the data.[10] The ability for plaintiffs’ firms to act as industry watchdogs is both good public policy and was specifically addressed as a vested responsibility during Congress’s enactment of the Federal Motor Vehicle Safety Standards.[11]

This does not mean that all confidentiality clauses are prohibited. Most ethics opinions conclude that negotiating for, agreeing to, and, ultimately, including a confidentiality provision precluding the dissemination of the fact of or terms of the settlement agreement (provided that information is not publicly known) is not prohibited under the applicable Rules of Professional Conduct.[12]

There is no ethical prohibition under the Tennessee Rules of Professional Conduct against the most common confidentiality provisions, which prohibit disclosure of the terms of a specific settlement, including the amount of the payment.

CONCLUSION

To the extent settlement provisions which contain confidentiality agreements which prohibit attorneys from discussing any facet of the settlement agreement with any other person or entity, regardless of the circumstances; and which prohibits the requesting attorney from referencing the incident central to the plaintiff’s case, the year, make, and model of the subject vehicle or the identity of the Defendants, such provisions are prohibited by Tennessee Rules of Professional Conduct 5.6(b), if such confidentiality agreements will restrict the attorney’s representation of other clients.

It is improper for an attorney to propose or accept a provision in a settlement agreement that requires the attorney to bound by a confidentiality clause that prohibits a lawyer from future use of information learned during the representation or disclosure of information that is publicly available or that would be available through discovery in other cases as part of the settlement, if that action will restrict the attorney’s representation of other clients.

This 8th day of June, 2018.

ETHICS COMMITTEE:

Bridget J. Willhite

Ruth T. Ellis

Joe M. Looney

APPROVED AND ADOPTED BY THE BOARD

[1] Tennessee Rules of Professional Conduct 5.6(b).

[2] Tennessee Formal Ethics Opinion 98-F-141, (Feb. 4, 1998) citing ABA Formal Ethics Opinion 93-371.

[3] State Bar of New Mexico Advisory Opinions Committee Advisory Opinion 1985-5 (Oct. 23, 1985).

[4] See D.C. Bar Legal Ethics Comm., Op. 335 (2006).

[5] D.C. Bar Legal Ethics Committee, Opinion 335 (2006).

[6] D.C. Bar Legal Ethics Committee, Opinion 335 (2006).

[7] Pennsylvania Bar Association, Formal Opinion 2016-300 (November 2016); S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 10-04 (2010); Bar Ass’n of San Francisco Ethics Comm., Op. 2012-1 (2012); D.C. Bar Legal Ethics Committee, Opinion 335 (2006).

[8] D.C. Bar Legal Ethics Committee, Opinion 335 (2006); N.Y. State Bar Ass’n Comm. On Prof’l Ethics, Op 730 (2000); State Bar Ass’n of N.D. Ethics Comm. Op. 1997-05 (1997).

[9] D.C. Bar Legal Ethics Committee, Opinion 335 (2006).

[10] Estate of Haeger v. Goodyear Tire & Rubber Co., Ariz. Super. Ct., No. CV 2013-052753, 4/4/18.

[11] 49 U.S.C. Ch.301; 49 U.S.C. section 30103(e)(2010).

[12] Pennsylvania Bar Association, Formal Opinion 2016-300 (November 2016); N.Y. State Bar Ass’n Comm. On Prof’l Ethics, Op 730 (2000); ABA Formal Op. 00-417 (2000); Colo. Bar Ass’n Ethics Comm. Op.92 (1993); N.M. Eth. Op. 1985-5 (1985).