Can a lawyer propose or agree to a settlement that requires the lawyer to personally indemnify and hold the other side harmless against unknown lien claims on the settlement?
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This page answers the general question as of 1987. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.
Plain-English summary
Opinion E-87-11 asked whether any standards of professional conduct preclude attorneys from proposing, demanding, or entering into settlement agreements that include indemnification and hold-harmless provisions binding an attorney to personally satisfy any unknown lien claims against the settlement funds or property. The committee concluded that, under both the former Code of Professional Responsibility (repealed effective January 1, 1988) and the new Rules of Professional Conduct, inclusion of such provisions is improper, so lawyers may not propose, demand, or enter into such agreements.
The committee explained that the primary ethical problem with conditioning a settlement on a lawyer's becoming a guarantor against lien claims is that the lawyer's interests are placed clearly at odds with the client's. It acknowledged that the U.S. Supreme Court's holding in Evans v. Jeff D. suggested settlement proposals may sometimes legally and ethically drive such a wedge between attorney and client, but it concurred with other bar ethics committees (citing District of Columbia Opinion 147 and New York City Opinion 82-080) that entering into or proposing such agreements is unprofessional conduct, at least outside the 1976 Civil Rights Attorney's Fees Act context at issue in Evans. The committee added that both the Code and the Rules narrowly circumscribe a lawyer's acquisition of a financial interest in a representation (citing SCR 20.26 and SCR 20:1.8), and concluded that participating in such settlement agreements would constitute a prohibited acquisition of a financial (though potentially negative) interest in the cause of action and an improper advance of financial assistance to a client under SCR 20:1.8(e) and (j).
Currency note
This opinion was issued in 1987, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update), and it analyzes the transition from the former Code to the 1988 Rules. The conflict rule SCR 20:1.8, including the financial-assistance and financial-interest provisions, was later revised. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.
Common questions
Q: Can a lawyer agree to personally cover unknown liens to close a settlement?
A: No. The committee concluded that proposing, demanding, or entering into such indemnification and hold-harmless provisions is improper under both the former Code and the Rules.
Q: Why is it prohibited?
A: The committee reasoned that it places the lawyer's interests at odds with the client and constitutes a prohibited financial interest in the litigation and an improper advance of financial assistance under SCR 20:1.8(e) and (j).
Q: Did Evans v. Jeff D. change the answer?
A: Not generally. The committee read Evans as limited to the Civil Rights Attorney's Fees Act context and concluded the conduct remains unprofessional outside that setting.
Background and rules framework
The opinion interpreted SCR 20:1.8 / Model Rule 1.8 (specific conflicts), particularly the financial-assistance limit in SCR 20:1.8(e) and the financial-interest limit in SCR 20:1.8(j), alongside the former Code provision SCR 20.26, as applied to settlement indemnification by lawyers.
Citations and references
Rules of Professional Conduct:
- Wis. SCR 20:1.8(e), (j) / Model Rule 1.8 (financial assistance; financial interest in litigation)
- Wis. SCR 20.26 (former Code of Professional Responsibility)
Cases:
- Evans v. Jeff D., 475 U.S. 717, 106 S. Ct. 1531 (1986)
Other opinions cited:
- District of Columbia Op. 147 (1985); New York City Op. 82-080
See also
- WI Ethics Op. E-87-10: Recovering Costs From Client
- WI Ethics Op. E-96-1: Attorneys Posting Bail
- WI Ethics Op. E-95-4: Self-Help to Collect a Fee
Source
- Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
- Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/E-87-11.pdf
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