Can a lawyer in a products liability case agree to a settlement term that requires the allegedly defective product to be destroyed?

Plain-English summary

The Board addressed a settlement condition that a defendant in products liability cases demanded: as a material term of settlement, the plaintiff had to destroy the vehicle alleged to be defective within 180 days and certify the destruction to defense counsel. The inquiring lawyer's firm routinely acquires, catalogues, and preserves allegedly defective vehicles to build a physical evidence base for use in later cases involving the same or similar vehicles or components. The opinion concludes that it is improper for a lawyer to propose or accept such a destruction term if it will restrict the lawyer's representation of other clients.

The opinion rests on RPC 5.6(b), which prohibits a lawyer from participating in offering or making "an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a client controversy." Because the physical product is often the single most important piece of evidence in a defect case, and because evidence of similar incidents in comparable products is the most compelling proof of a defect, a term forcing destruction of that product indirectly restricts the lawyer's ability to represent future claimants against the same defendant. The opinion characterizes the demand as an attempt to accomplish indirectly what the defendant cannot do directly: preclude the lawyer from representing other plaintiffs with similar claims.

The opinion draws on ABA Formal Opinion 93-371, which it says articulates three policy concerns behind RPC 5.6(b): curtailing the public's access to the best attorney for a case, the risk that the restraint is meant to "buy off" counsel rather than resolve the dispute, and the conflict it creates between the current client's interests and those of potential future clients. The opinion also notes RPC 3.4(a) (a lawyer shall not unlawfully obstruct access to or destroy material with potential evidentiary value) and observes that, because the client is the ultimate decision-maker on settlement under RPC 1.2(a), the destruction demand created a conflict between the lawyer's duties to the current client and to current and future clients.

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 provision in a products liability case requiring destruction of the allegedly defective product where that destruction will restrict the lawyer's representation of other clients; the opinion treats such a term as an impermissible indirect restriction on the right to practice under RPC 5.6(b). The opinion frames the prohibition around the effect on the lawyer's future representations, not the settlement of the present case as such, and notes the related concern under RPC 3.4(a) about destroying evidence with potential value in other matters.

Common questions

Q: Can a defendant condition a products liability settlement on destroying the allegedly defective product?

A: Per Opinion 2019-F-167, a lawyer may not propose or accept such a condition if destroying the product will restrict the lawyer's representation of other clients. The opinion treats it as a restriction on the right to practice prohibited by RPC 5.6(b).

Q: Why does destroying one product implicate the lawyer's other cases?

A: The opinion explains that the physical product is often the most important evidence in a defect case, and evidence of similar incidents in comparable products is the most compelling proof of a defect; destroying the product undercuts the lawyer's ability to prosecute future claims against the same defendant.

Q: Is this treated as a direct or an indirect restriction on practice?

A: As an indirect one. The opinion says RPC 5.6(b) reaches not only explicit limits on a lawyer's practice but also terms that indirectly restrict it, and that the destruction demand would accomplish indirectly what the defendant could not do directly.

Q: What rules besides RPC 5.6(b) does the opinion mention?

A: It cites RPC 3.4(a) on not unlawfully destroying material with potential evidentiary value, and RPC 1.2(a) on the client being the ultimate decision-maker on settlement, which is what created the conflict the lawyer faced.

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 that restricts the lawyer's right to practice as part of the settlement of a client controversy. It reads that rule, consistent with ABA Formal Opinions 93-371 and 00-417, to cover restrictions that operate indirectly. The opinion also references RPC 3.4(a) (Model Rule 3.4(a)) on obstructing access to or destroying evidence, citing Comment [2] and Tennessee spoliation case law (Tatham v. Bridgestone Americas Holding, Inc., 473 S.W.3d 734 (Tenn. 2015)), and RPC 1.2(a) (Model Rule 1.2(a)) on the allocation of settlement authority to the client.

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 3.4(a) / Tennessee RPC 3.4(a) (fairness; obstructing or destroying evidence)
• Model Rule 1.2(a) / Tennessee RPC 1.2(a) (client's authority over settlement)

Statutes:

• 49 U.S.C. ch. 301; 49 U.S.C. § 30103(e) (2010) (Federal Motor Vehicle Safety Standards)

Cases:

• Tatham v. Bridgestone Americas Holding, Inc., 473 S.W.3d 734 (Tenn. 2015), intentional-misconduct prerequisite for spoliation

Other opinions cited:

• ABA Formal Op. 93-371 (1993): restrictions on representing future claimants
• ABA Formal Op. 00-417 (2000): indirect restrictions on a lawyer's right to practice
• Tennessee Formal Ethics Opinion 98-F-141 (1998)
• Tennessee Formal Ethics Opinion 2018-F-166 (2018)

See also

• ABA Formal Op. 93-371: Restrictions on Representing Future Clients
• ABA Formal Op. 00-417: Settlement Terms Limiting Use of Information
• ABA Formal Op. 95-394: Settlement Restricting Practice Against a Government Entity
• Tennessee Op. 2025-F-171: Non-Disparagement in Settlements

Source

• Landing page: https://www.tbpr.org/ethic_opinions/2019-f-167-ethical-propriety-of-a-settlement-agreement

Original opinion text

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

2019-F-167 Ethical propriety of settlement agreement requiring destruction of product in a products liability case

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 2019-F-167

The Board of Professional Responsibility has been requested to issue a Formal Ethics Opinion regarding the ethical propriety of a settlement agreement, in a products liability case, which contains as a material condition of the settlement that the subject vehicle alleged to be defective be destroyed within 180 days with certification to defendant’s counsel of record of the destruction.

OPINION

It is improper for an attorney to propose or accept a provision in a settlement agreement, in a products liability case, that requires destruction of the subject vehicle alleged to be defective 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 requires plaintiff to destroy the vehicle that was the subject of the claim.

The parties agreed on a settlement amount, and the requirement of the destruction of the vehicle 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 the requirement were discarded because the client is the ultimate decision-maker to accepting settlement.[1] This created a conflict between the lawyer and the client as well as other current and future clients. Such a provision indirectly restricts the lawyer’s ability to fully and competently represent 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.”[2]

In complex product liability cases involving an allegedly defective vehicle, the physical vehicle itself is the most important piece of evidence in the case. The most compelling evidence when establishing the existence of a defect in a vehicle is the existence of other similar incidents. That is, instances in which a comparable vehicle or vehicle component has displayed evidence of the same failure or defect that is the basis of the present claim. The ability to review and re-inspect a similar vehicle, which had previously exhibited a similar defect, is extremely valuable in prosecuting a potential future case.

Vehicles, such as the one involved in the instant case, are routinely used in subsequent cases involving the same or similar vehicles or the same or similar components (such as seatbelts, airbags, seats, etc.) in otherwise dissimilar vehicles. The inquiring lawyer’s firm catalogues and preserves defective vehicles in order to establish a physical information base to be used in subsequent cases.

The firm has a policy of acquiring possession of the subject vehicle as part of its initial investigation into the case. This is normally done by purchasing the vehicle directly from an insurance company that has possession of the vehicle post-accident. In the rare case that the firm’s client has possession of the vehicle (and title), the firm requests that the client allow the firm to retrieve the vehicle from them. If the client is not in possession of the vehicle, and the firm is unable to purchase the vehicle directly from an insurer, the firm purchases the vehicle at auction if possible.

The firm covers the expense of securing the vehicle, and said expense is treated like any other case expense at that point. During the pendency of the case, the firm and the expert witnesses for the case or for any other case turning on the same defect/vehicle model inspect the vehicle, dissemble parts if need be, and catalogue the vehicle. It is the firm’s practice at the end of the case to request from the client that the firm be allowed to retain ownership and possession of the vehicle.

RPC 3.4 (a) states: “A lawyer shall not obstruct another party’s access to evidence or unlawfully alter, destroy or conceal a document or other material having potential evidentiary value. A lawyer shall not counsel or assist another person to do any such act…” “Applicable law in many jurisdictions makes it an offense to destroy material for the purpose of impairing its availability in a pending proceeding or one whose commencement can be foreseen.”[3] “Tennessee Courts have long applied a prerequisite of intentional misconduct in the context of spoliation of evidence. This prerequisite originated with the common law “doctrine of spoliation” which allowed a trial court to draw a negative inference against a party who destroys evidence.”[4] Clearly, in the context of a product liability case, the alleged defective product is key evidence in other current or subsequent cases of a similar defect.

The firm has assured Defendant that the vehicle will not be placed back on the road, and that when the firm decides no longer to retain the vehicle, it will provide a certificate of destruction to Defendant, which should satisfy any safety concerns of Defendant. Given the nature of the Defendant’s business and the practice area of the inquiring lawyer, demanding the destruction of key evidence can only be viewed as an attempt by the Defendant to disadvantage the firm in other current or future litigation. “Any type of restriction of a plaintiff’s attorney on representing future claimants against the same defendant are ethically inappropriate and violates RPC 5.6(b) which pertains to impermissible restrictions on a lawyer’s practice.”[5]

ABA Formal Opinion 93-371 articulates the three policy considerations underlying RPC 5.6(b). 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.

The American Bar Association has opined that the rule applies not only to such an explicit limitation, [6] but also to other limitations that indirectly restricts a lawyer’s right to practice.[7]

By requiring destruction of the alleged defective product after settlement in a products liability case, defense counsel would accomplish indirectly what they cannot accomplish directly by precluding the attorney from representing other plaintiffs with similar claims.

Further, the firm’s file retention policy includes retaining material pieces of evidence as part of the file because it may be evidence in any subsequent malpractice suit against the firm. Without the ability to review the most important piece of evidence in the underlying products liability suit, the law firm would be left essentially defenseless if a former client brought a professional malpractice claim.

There is also a public policy consideration. 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.[8]

CONCLUSION

Settlement conditions are prohibited by Tennessee Rules of Professional Conduct 5.6(b), if such conditions 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 an attorney in a products liability lawsuit to destroy the product alleged to be defective, as a material condition of settlement, if that action will restrict the attorney’s representation of other clients.

This 15th day of April, 2019.

ETHICS COMMITTEE

Dana Dye, chair

John D. Kitch

Joe M. Looney

APPROVED AND ADOPTED BY THE BOARD

[1] Tennessee Rules of Professional Conduct, Rule 1.2 (a).

[2] Tennessee Rules of Professional Conduct, Rule 5.6 (b).

[3] Tennessee Rules of Professional Conduct, Rule 3.4 Comment [2].

[4] Lea Ann Tatham v. Bridgestone Americas Holding, Inc., ET Al., 473 S.W.3d 734, 738 (Tenn. 2015).

[5] Tennessee Formal Ethics Opinion 98-F-141 (Feb. 4, 1998) citing ABA Formal Ethics Opinion 93-371 (1993).

[6] ABA Comm. On Ethics and Prof’l Responsibility, Formal Op. 93-371 (1993).

[7] ABA Comm. On Ethics and Prof’l Responsibility, Formal Op. 00-417 (2000).

[8] 49 U.S.C. Ch.301; 49 U.S.C. section 30103(e) (2010); TN Formal Ethics Opinion 2018-F-166 (2018).