From the Ethics Committee
Client settlements that restrict lawyers from taking new cases — comments sought
The Ethics Committee is seeking comments from the profession on this question: Should the Professional Conduct Handbook prevent BC lawyers from participating in, offering or making — as part of the settlement of a current client’s matter — an agreement to restrict a lawyer’s right to practise in the future?
The issue arises when a litigant (usually a defendant) makes an offer for settlement that contains, as one of its terms, that the opposing party’s lawyer not represent future clients in other similar actions against the litigant.
The Ethics Committee has been asked on a number of occasions to give opinions on the propriety of lawyers making or accepting such offers. The Committee would appreciate any information that BC lawyers can offer on the prevalence of such agreements, and their views.
In these scenarios, a lawyer is usually asked to agree to a restriction in exchange for receiving a payment (which is in addition to the settlement funds offered to the lawyer’s client). However, a simple offer to a client to settle a matter on the condition that the client’s lawyer agrees to refuse to act for other litigants in similar matters raises the same issues.
Rule 5.6(b) of the American Bar Association Model Rules of Professional Conduct provides:
A lawyer shall not participate in offering or making…
(b) an agreement in which a restriction on a lawyer’s right to practice is part of the settlement of a client controversy.
The American Bar Association Committee on Ethics and Professional Responsibility in Formal Opinion 93-371 made the following comments about settlement agreements that restrict the lawyer’s right to take on future clients:
Permitting such agreements restricts the access of the public to lawyers who, by virtue of their background and experience, might be the very best available talent to represent these individuals. Second, the use of such agreements may provide clients with rewards that bear less relationship to the merits of their claims than they do to the desire of the defendant to “buy off” plaintiff’s counsel. Third, the offering of these restrictive agreements creates a conflict between the interests of present clients and those of potential future clients. While the Model Rules generally require that the client’s interests be put first, forcing a lawyer to give up future representations may be asking too much. This is particularly so in light of the strong countervailing policy that favours the public’s unfettered choice of counsel.
Some of the arguments raised in favour of having a rule in the Professional Conduct Handbook are the following:
- Making such an offer inevitably raises an issue between the client and the client’s lawyer: Will the lawyer agree to accept a limitation on future work to benefit the client? Many clients would readily understand that it may be unreasonable to expect their lawyers to agree to this kind of restriction. However, a few clients may not accept that the restriction is unreasonable, or that their lawyers are entitled to refuse it.
A lawyer who assists a party in making such an offer creates discord in the relationship between the opposing lawyer and his or her client.
- The absence of a rule permits wealthy clients to buy off lawyers who have represented similar clients in the past and may be the most knowledgeable and effective advocates for a potential new client’s cause. The effect is to permit defendants to avoid fully compensating those they injure and to undercut the deterrent value of law.
- The absence of a rule allows a disproportionate share of settlement benefits to go to a plaintiff whose lawyer agrees to a restriction on future representation (compared to future plaintiffs who are unable to retain that lawyer).
- The absence of a rule increases the possibility that counsel for defendants and plaintiffs will collude to restrict damages available to potential plaintiffs.
Some of the arguments raised in opposition to having a rule are these:
- The absence of a rule increases the chances that matters will be settled.
- Although the absence of a rule will keep some able and knowledgeable lawyers from being available to provide representation in some matters, this is only one of the factors affecting lawyer availability, and the market will ensure that other lawyers come forward to act.
- Any conflicts created by permitting lawyers to enter into practice restrictions can be dealt with adequately by requiring the clients of those lawyers to obtain independent legal advice.
- The absence of a rule does not require any lawyer to accept an offer that includes a restriction on future practice. Lawyers are free to reject offers that require they restrict their practice and can guard against any conflict with clients by advising those clients at the commencement of the retainer that they will reject any such offers.
The Ethics Committee welcomes your comments on this issue. Please contact Jack Olsen, Staff Lawyer – Ethics, at:
Law Society of British Columbia
845 Cambie Street
Vancouver, BC V6B 4Z9
Tel.: 604 443-5711
Fax: 604 646-5902